CMA Inter Suggested Answers | Jun 25 Paper 6 Financial Accounting (FA)

Table of contents

1. MCQs
2. 2 (a) : (i) As per AS-10, the amount of depreciation charged 
3. 2 (b) : (i) State briefly the difference between Purchase Day
4. 3 (a) : On 30th March, 2025, fire occurred in the premises 
5. 3 (b) : Sumon Ltd. invoices goods to its branch at cost plus
6. 4 : The following information relates to the business of ABC
7. 5 : A and B are partners in a firm sharing profits and losses
8. 6 (a) :Ram of Patna consigns goods to Shyam of Delhi for
9. 6 (b) : Y purchased a machine under the hire purchase system
10. 7 (a) : What is the basic difference between Accounting
11. 7 (b) : List out the comparative provisions between Ind AS 
12. 8 (a) : (i) Explain, in short, the relevant disclosure of Acc
13. 8 (b) : (i)“Profit and Loss is a Point Statement, whereas a
14. 8 (c) : A and B were partners sharing profits in the ratio of

CMA Inter Jun 25 Suggested Answer Other Subjects Blogs :

1. Suggested Answer Jun 25 Paper 5 : Business Laws and Ethics
2. Suggested Answer Jun 25 Paper 7 : Direct and Indirect Taxation
3. Suggested Answer Jun 25 Paper 8 : Cost Accounting (CA)
4. Suggested Answer Jun 25 Paper 9 : Operations Management and Strategic Management
5. Suggested Answer Jun 25 Paper 10 : Corporate Accounting and Auditing
6. Suggested Answer Jun 25 Paper 11 : Financial Management and Business Data Analytics
7. Suggested Answer Jun 25 Paper 12 : Management Accounting
8. CMA Inter Syllabus (New Updates)
9. CMA Intermediate Online Classes

Section A

MCQs

(i) Which of the following statements is correct?
(A) Financial accounts of an enterprise are treated as evidence in the court of law.
(B) Financial statements prepared by two different accountants will always show identical results.
(C) Financial statements need not take into consideration any statutory requirements.
(D) Only credit transactions are recorded in the books of accounts.

Solution: (A) Financial accounts of an enterprise are treated as evidence in the court of law. 

Financial accounts, when properly maintained according to statutory requirements and accounting standards, can serve as legal evidence in courts. They help in establishing the financial position and transactions of a business and are often relied upon in legal disputes, tax assessments, or fraud investigations.

(ii) When the closing stock is shown in the trial balance, then at the end of the accounting year, closing entry for it will be required:
(A) Closing Stock A/c Dr. To Trading A/c
(B) Trading A/c Dr. To Closing Stock A/c
(C) Either (A) or (B)
(D) Entry not required

Solution:

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(iii) State which of the following transactions can be classified as foreign currency transactions:

(A) Buying or selling the goods or services priced in foreign currency.

(B) Lending or borrowing when the amount are denominated in a foreign currency.

(C) Acquisition or disposition of fixed assets denominated in foreign currency.

(D) All of the above

Solution: (D) All of the above

Description:

All the listed transactions involve amounts denominated in a foreign currency, which makes them foreign currency transactions as per accounting standards. These include:

• Buying/selling goods or services in foreign currency.
• Lending/borrowing in foreign currency.
• Acquiring/disposing of fixed assets in foreign currency.

(iv) Which of the following is not an accounting convention?
(A) Business entity
(B) Disclosure
C) Conservatism
(D) Materiality

Solution:

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(v) The following information is given in the trial balance of Rupa Dresses on 31st March, 2025:

• Bad Debts – ₹12,200
• Provision for Bad and Doubtful Debts on 1.4.2024 – ₹7,500
• Debtors – ₹2,00,000

If further bad debt is ₹1,800 and Rupa Dresses makes a provision for bad & doubtful debts @ 5% on Debtors, the amount of such provision to be shown in Balance Sheet as at 31st March, 2025 will be:

(A) ₹9,910
(B) ₹4,210
(C) ₹12,000
(D) None of the above

Solution: (A) ₹9,910

1. Adjusted Debtors = ₹2,00,000 – ₹1,800 (further bad debts only) = ₹1,98,200

2. New Provision @ 5% = 5% of ₹1,98,200 = ₹9,910

Note: The ₹12,200 already in the trial balance is not deducted again from debtors as it’s already written off.

(vi) If capital at the end of the year is ₹80,000, capital introduced during the year is ₹60,000, drawings for the year are ₹40,000, and loss for the year is ₹1,20,000, then the capital at the beginning of the year was:
(A) ₹1,80,000
(B) ₹1,60,000
(C) ₹1,40,000
(D) ₹20,000

Solution: (A) ₹1,80,000

Opening Capital = Closing Capital – Capital Introduced + Drawings + Loss
= ₹80,000 – ₹60,000 + ₹40,000 + ₹1,20,000
= ₹1,80,000

Explanation: We adjust the closing capital by reversing the capital changes during the year: subtract capital introduced, add back drawings, and add back the loss to find the opening capital.

(vii) State which of the following statements is true.
(A) A joint venture has a definite life.
(B) Financial statements are not comparable.
(C) Sales book is a part of ledger.
(D) Owners Equity = Assets + Liabilities

Solution: (A) A joint venture has a definite life

• A joint venture is a temporary business arrangement between two or more parties for a specific project or purpose.
• It dissolves once the project is completed, meaning it has a definite life.

(viii) On January 1, 2025, goods costing ₹1,32,000 were consigned by Mr. Rana of Chennai to his agent Mr. Dhana in Amritsar at a proforma invoice price of 20% above cost. Mr. Rana paid freight charges ₹4,000. The consignee was paid ₹2,000 per annum towards establishment cost. Mr. Dhana paid ₹1,000 as godown rent for 3 months ended 31st March 2025. ¾th of goods were sold at 33⅓% profit on cost.

The value of unsold stock (invoice price) as on 31st March, 2025 is:
(A) ₹66,000 
(B) ₹162,400
(C) ₹154,400
(D) ₹40,600

Solution: (D) ₹40,600

1. Cost of Goods = ₹1,32,000
2. Loading (20% above cost) = 20% of ₹1,32,000 = ₹26,400
3. Total Invoice Price = ₹1,32,000 + ₹26,400 = ₹1,58,400
4. Unsold Goods (¼ of total) = ¼ × ₹1,58,400 = ₹39,600
5. Non-recurring Expenses (Freight) = ₹4,000; ¼ share = ₹1,000
6. Total Value of Unsold Stock = ₹39,600 + ₹1,000 = ₹40,600

Note: Establishment cost and godown rent are recurring expenses and are not included in stock valuation.

(ix) Rekha draws a BOE on Reba ₹20,000 payable in 3 months. On the due date Reba could not make the payment and Reba got it notified from the notary public on payment of noting charges ₹100. Reba requested Rekha to draw a fresh bill for another three months at 12% interest. The amount of fresh bill be:

(A) ₹20,700
(B) ₹20,703 
(C) ₹20,600
(D) ₹21,000

Solution:

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(x) State which of the following statements is not true relating to AS 10:
(A) Excludes the accounting for real estate developers.
(B) No recognition criteria for fixed assets are laid out.
(C) Recognises the revaluation of fixed assets.
(D) Does not deal with jointly owned assets.

Solution:

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Solution: (A) ₹15,000 ; ₹80,000

Part 1: Calculate Ranabir's Capital for ¼ Share

Old partners' capital (¾ share) = ₹45,000

Total capital = ₹45,000 ÷ (¾) = ₹60,000

Ranabir's capital (¼ of ₹60,000) = ₹15,000

Part 2: If Ranabir brings ₹20,000 for ¼ share

Total capital = ₹20,000 × 4 = ₹80,000

Explanation: Based on the agreed profit-sharing ratio, Ranabir should contribute proportionate capital. If he brings more than the proportional share, it increases the overall capital of the firm.

Section B

Question 2 (A):

(i) As per AS-10, the amount of depreciation charged to the Statement of Profit and Loss depends on certain factors. List out those factors with brief explanation.

(ii) ABC Ltd. purchased a motor vehicle costing ₹70 lakh on 1st April, 2024. The major components of the motor vehicle consist of Main Body costing ₹20 lakh, Seating Arrangement and Furnishing costing ₹30 lakh, and Engine costing ₹20 lakh. The expected useful life of these components is: Main Body – 5 years, Seating Unit – 6 years and Engine – 10 years. Compute the depreciation for the year ending 31st March, 2025.

Solution:

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Question 2 (B):

(i) State briefly the difference between Purchase Day Book and Purchase Account.

(ii) Rectify the following errors:

1. Credit sales to Barun ₹7,000 were recorded as ₹7,200.
2. Credit purchase from Raman ₹9,000 was recorded as ₹9,900.
3. Goods returned to Chaya ₹4,000 were recorded as ₹4,040.
4. Goods returned from Paresh ₹1,000 were recorded as ₹1,400.

Solution:

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Question 3 (A):

On 30th March, 2025, fire occurred in the premises of M/S Rajesh & Co. The concern had taken an insurance policy of ₹1,20,000 subject to the average clause. From the books of accounts, the following particulars are available relating to the period 1st January to 30th March, 2025:

(i) Stock as per Balance Sheet at 31st December, 2024: ₹1,91,200
(ii) Purchases (including purchase of machinery costing ₹60,000): ₹3,40,000
(iii) Wages (including ₹6,000 for installation of machinery): ₹1,00,000
(iv) Sales (including goods sold on approval basis amounting to ₹99,000): ₹5,50,000 (No approval has been received in respect of 2/3rd of the goods sold on approval.)
(v) Average rate of gross profit is 20% of sales
(vi) Value of salvaged goods: ₹24,600

You are required to compute the amount of the claim to be lodged to the insurance company.

Solution:

Computation of claim for loss of stock

A claim of ₹ 96,422 (approx.) should be lodged by M/s Rajesh & Co. to the insurance company.

Working Notes:

1. Calculation of closing stock as on 30th March, 2025

Memorandum Trading Account for

(from 1st January, 2025 to 30th March, 2025)

* For financial statement purposes, this would form part of closing stock (since there is no sale). However, this has been shown separately for computation of claim for loss of stock since the goods were physically not with the concern and, hence, there was no loss of such stock.

2. Calculation of goods with customers

Since no approval for sale has been received for the goods of ₹ 66,000 (i.e. 2/3 of ₹ 99,000) hence, these should be valued at cost i.e. ₹ 66,000 – 20% of ₹ 66,000 = ₹ 52,800.

3. Calculation of actual sales

Total sales – Sale of goods on approval (2/3rd) = ₹ 5,50,000 – ₹ 66,000 = ₹ 4,84,000.

(This Question is a part of konceptca.com question bank)

Question 3 (B):

Sumon Ltd. invoices goods to its branch at cost plus 33⅓%. From the following particulars, prepare Branch Stock Account, Branch Stock Adjustment Account and Branch Profit and Loss Account in the books of the Head Office:

• Stock at commencement at Branch (Invoice Price): ₹3,60,000
• Stock at close at Branch (Invoice Price): ₹2,88,000
• Goods sent to Branch during the year (at invoice price, including goods invoiced at ₹48,000 but not yet received by Branch before closing of the year): ₹24,00,000
• Return of goods to Head Office (Invoice Price): ₹1,20,000
• Credit Sales at Branch: ₹1,20,000
• Invoice value of goods pilfered: ₹24,000
• Normal loss at Branch (at Invoice Price): ₹36,000
• Cash Sales at Branch: ₹21,60,000

Sumon Ltd. closes its book on 31.03.2025.

Solution:

IN THE BOOKS OF HEAD OFFICE BRANCH STOCK ACCOUNT

Particulars	₹	Particulars	₹
To Balance b/d	3,60,000	By Bank A/c (cash Sales)	21,60,000
To Goods sent to Branch A/c	24,00,000	By Branch Debtors A/c (Credit Sales)	1,20,000
To Branch Adjustment A/c-balancing fig (Surplus) [Note 3]	36,000	To Goods sent to Branch A/c (Returns to H.O)	1,20,000
		By Branch Adjustment A/c (24,000  25/100) [Note 1]	6,000
		By Branch P&L A/c [Note 1] (cost of abnormal loss)	18,000
		By Branch Adjustment A/c [Note 2] (Invoice price of normal loss)	36,000
		In transit	48,000
		By Balance c/d: In hand	2,88,000
	27,96,000		27,96,000

Notes: 

1. Alternatively, combined posting for the amount of ₹ 24,000 may be passed through goods pilfered account.
2. Alternatively, it May first be transferred to normal Loss account which may ultimately be closed by transfer to Branch Adjustment account. The final amount of net profit will, however, remain the same.
3. It has been considered that the surplus may be due to the sale of goods by the branch at a price higher than the invoice price.

BRANCH STOCK ADJUSTMENT ACCOUNT

BRANCH PROFIT AND LOSS ACCOUNT

Working Note:

1. Stock Reserve A/c    = (₹ 3,60,000 X 25/100)1

                                          = 90,000

       2. Goods Sent to Branch A/c = (₹  24,00,000 - ₹ 1,20,000) X 25/100)

                                          = 5,70,000

       3. Stock Reserve A/c = (₹ 3,36,000 X 25/100)

                                          = 84,000

Question 4 :

The following information relates to the business of ABC Enterprises. Prepare a Trading and Profit & Loss Account for the year ended 31st March, 2025 and a Balance Sheet as on that date.

(a) Assets and Liabilities as on

(b) Cash transactions during the year:

1. Collection from Debtors after allowing discount of ₹15,000 amounted to ₹5,85,000.
2. Collection on discounting Bills of Exchange, after deduction of discount ₹1,250 by bank totalled ₹61,250.
3. Creditors of ₹4,00,000 were paid ₹3,92,000 in full settlement.
4. Freight Inward paid: ₹30,000.
5. Drawings: ₹70,000.
6. Payment for Office Furniture: ₹10,000.
7. Investment carrying annual interest of 6% were purchased at ₹95 (200 shares, face value ₹100 each) on 1st October 2024 and payment made thereof.
8. Expenses including salaries paid: ₹95,000
9. Miscellaneous Receipts: ₹5,000

(c) Additional Information:

• Bills drawn ₹1,00,000, of these ₹20,000 endorsed to creditors and an endorsed bill of exchange of ₹4,000 was dishonoured.
• Goods worth ₹9,000 used as advertising material.
• Gross Profit is always 20% on Sales.
• Cash Book difference treated as Drawing/Capital introduced.
• Provide 2% for Doubtful Debts on closing Debtors.

Solution:

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Question 5 :

A and B are partners in a firm sharing profits and losses in the ratio of 3:2. Their financial position as at 31st March, 2025 was as follows:

On 1st April, 2025, C is admitted under the following terms:

1. New profit-sharing ratio A:B:C = 5:3:2

2. Goodwill is valued at ₹ 16,000; C brings in cash for goodwill (half retained in business).

3. ₹ 4,000 bad debts are to be written off; Provision for Bad Debts to be raised to 10%.

4. Stock-in-trade is revalued at ₹ 28,000.

5. Fixtures and fittings are to be reduced to ₹ 300.

6. C is to bring cash to make his capital equal to 1/5th of combined adjusted capitals of A and B.

Prepare: Revaluation Account, Partners' Capital Accounts, and New Balance Sheet of the firm as on 1st April, 2025.

Solution:

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Question 6 (A):

Ram of Patna consigns goods to Shyam of Delhi for sale at invoice price or above.
Terms are:

• Commission to Shyam: 5% on Invoice Price + 25% on any surplus realized.
• Ram draws a bill on Shyam at 90 days sight for 80% of invoice price as security money.
• Shyam remits balance proceeds after sales, deducting commission by sight draft.
• Goods costing ₹20,900 (including freight) invoiced at ₹28,400.
• Sales made by Shyam: ₹26,760.
• Unsold goods (invoice price): ₹6,920 (original cost including freight ₹5,220).
• Sight draft received up to 31st December: ₹6,280 (others in transit).

Prepare Consignment Account, Shyam Accounts in Ram’s books.

Solution:

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Question 6 (B):

Y purchased a machine under the hire purchase system. As per the agreement, ₹40,000 was to be paid on signing the contract. The balance was to be paid in four instalments of ₹25,000 each plus interest. The cash price was ₹1,40,000. Interest is chargeable on outstanding balance at 20% per annum. Find interest for each year and the instalment amount.

Solution:

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Question 7 (A):

What is the basic difference between Accounting Standards (AS) and Indian Accounting Standards (Ind AS)?

Solution:

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Question 7 (B):

List out the comparative provisions between Ind AS 23 and AS 16.

Solution:

Question 8 (A):

(i) Explain, in short, the relevant disclosure of Accounting Policies as per AS 1.

(ii) Kanan Ltd. has provided the following information:

There is adequate evidence of future profit sufficiency. How much deferred tax Assets / Liability should be recognised as transition adjustment where the tax rate is 50%?

Solution:

(i) 

As per AS 1, the Disclosures of Accounting Policies are: All significant accounting policies adopted in the preparation and presentation of financial statements should be disclosed.

The disclosure of the significant accounting policies as such should form part of the financial statements and the significant accounting policies should normally be disclosed in one place.

Any change in the accounting policies which has a material effect in the current period or which is reasonably expected to have a material effect in later periods should be disclosed. In the case of a change in accounting policies which has a material effect in the current period, the amount by which any item in the financial statements is affected by such change should also be disclosed to the extent ascertainable. Where such amount is not ascertainable, wholly or in part, the fact should be indicated.

If the fundamental accounting assumptions, viz, Going Concern, Consistency and Accruals, are followed in financial statements, specific disclosure is not required. If a fundamental accounting assumption is not followed, the fact should be disclosed.

(ii) 

able showing calculation of deferred tax asset / liability

Net deferred tax liability amounting ₹ 1,30,000 should be recognized as transition adjustment.

Question 8 (B):

(i)“Profit and Loss is a Point Statement, whereas a Balance Sheet is a Period Statement.” Do you agree? Give reasons.

(ii) From the following particulars, compute how the subscription item will appear in the Income and Expenditure Account for the year 2024-25:

Solution:

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Question 8 (C):

A and B were partners sharing profits in the ratio of 5:3. On 1st April, 2023, the firm was dissolved. Assets (other than cash) and liabilities were transferred to Realisation Account.

Information:

1. Creditor for ₹1,80,000 accepted Debtors of ₹1,50,000 at 4% discount; balance paid by cheque.
2. Another creditor for ₹1,20,000 took over Stock (Book Value ₹50,000) at ₹40,000 and Investments of ₹76,000.
3. Another creditor for ₹3,00,000 accepted Land & Building at ₹5,00,000 and paid balance to the firm by cheque.
4. Loss on dissolution was ₹24,000.

Pass necessary Journal Entries in the books of the Firm.

Solution:

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