UDESH REGULAR SEP 2025 (GROUP-1) 30/03/2025

Marks : 50 Time : 90 Min

Master Test – 1
Question No. 1 is compulsory.
Answer any four questions from the remaining five questions.
Wherever necessary suitable assumptions may be made and disclosed by way of a note.
Working Notes should form part of the answer
Question 1 (i to v) (2 Mark × 5 = 10 Marks)

1. Venus Limited received a parcel of land at no cost from the government for the purpose of developing a factory in
an outlying area. The land is valued at ₹ 75 lakhs, while the nominal value is ₹ 10 lakhs. Additionally, the company
received a government grant of ₹ 30 lakhs, which represents 25% of the total investment needed for the factory
development. Furthermore, the company received ₹ 15 lakhs with the stipulation that it be used to purchase
machinery. There is no expectation from the government for the repayment of these grants.
Answer the following questions based on the above information:

(i). The land received from Government, free of cost should be presented at:
(a) ₹ 75 Lakhs
(b) ₹ 30 Lakhs
(c) ₹ 10 Lakhs
(d) ₹ 45 Lakhs

(ii). As per AS 12, how the Government Grant of ₹ 30 Lakhs should be presented:
(a) It should be recognised in the profit and loss statement as per the related cost
(b) It will be treated as capital reserve
(c) It will be treated as deferred income
(d) It will not be recognised in the financial statements

(iii). As per AS 12, how the Government Grant of ₹ 15 Lakhs with a condition to purchase machinery may be presented
as:
(a) Capital Reserve
(b) Shareholders Fund
(c) Deferred Income
(d) Income in statement of profit and loss as received.

(iv). Which of the above grants are required to be recognised in the statement of profit and loss on a systematic and
rational basis over the useful life of the asset:
(a) Land received as Grant
(b) Government Grant of ₹ 30 Lakhs
(c) Government Grant of ₹ 15 Lakhs with a condition to purchase machinery
(d) None of the above

(v). Which AS Deals with govt grants?

(a) AS 12
(b) AS 11
(c) AS 16
(d) AS 19
2. The following balances are extracted from the books of Travese Limited as on 31st March 2023:
Particular Amount ₹
Debit Credit
7% Debentures 48,45,000
Plant & Machinery (at cost) 37,43,400
Trade Receivables 35,70,000
Land 97,37,000
Debenture Interest 3,39,150
Bank Interest 13,260
Sales 47,22,600
Transfer Fees 38,250
Discount received 66,300
Purchases 28,86,600
Inventories 1.04.2022 4,97,250
Factory Expenses 2,58,060
Rates, Taxes and Insurance 65,025
Repairs 1,49,685
Sundry Expenses 1,27,500
Selling Expenses 26,520
Directors Fees 38,250
Interest on Investment for the year 2022-2023 55,000
Provision for depreciation 5,96,700
Miscellaneous receipts 1,42,800
Additional information:
(i) Closing inventory on 31.03.2023 is ₹ 4,76,850.
(ii) Miscellaneous receipts represent cash received from the sale of the Plant on 01.04.2022. The cost of the Plant
was ₹ 1,65,750 and the accumulated depreciation thereon is ₹ 24,865.
(iii) The Land is re-valued at ₹ 1,08,63,000.
(iv) Depreciation is to be provided on Plant & Machinery at 10% p.a. on cost.
(v) Make a provision for income tax @ 25%.
(vi) The Board of Directors declared a dividend of 10% on Equity shares on 4th April, 2023.
You are required to prepare a Statement of Profit and Loss as per Schedule III of the Companies Act, 2013 for the
year ended 31.03.2023. (Ignore previous year figures)
(10 Marks)

3(a). Prepare cash flow statement of Gama Limited for the year ended 31st March, 2021 in accordance with AS-3 from
the following cash account summary:
Cash summary Account
Inflows ₹ ('000) Outflows ₹ ('000)
Opening Balance 945 Payment to suppliers 54,918
Receipts from Customers 74,682 Purchase of Investments 351
 Sale of Investments (Cost 4,05,000) 459 Property, plant & equipment acquired 6,210
Issue of Shares 8,100 Wages and salaries 1,863
Sale of Property, Plant & equipment 3,456 Payment of Overheads 3,105
Taxation 6,561
Dividends 2,160
Repayment of Bank Overdraft 6,750
Interest paid on Bank Overdraft 1,350
Closing Balance 4,374
87,642 87,642
(5 Marks)

3(b). As at 1st April, 2019 a company had 6,00,000 equity shares of ₹ 10 each ( ₹ 5 paid up by all shareholders). On 1st
September, 2019 the remaining ₹ 5 was called up and paid by all shareholders except one shareholder having
60,000 equity shares. The net profit for the year ended 31st March, 2020 was ₹ 21,96,000 after considering
dividend on preference shares totalling to ₹ 3,40,000. Compute Basic EPS for the year ended 31st March, 2020 as
per Accounting Standard 20 "Earnings Per Share"
(5 Marks)

4. P Ltd. had 8,000 equity shares of K Ltd., at a book value of ₹ 15 per share (face value of ₹ 10 each) on 1st April,
2021. On 1st September, 2021, P Ltd. acquired another 2,000 equity shares of K Ltd. at a premium of ₹ 4 per share.
K Ltd. announced a bonus and right issue for existing shareholders.
The term of bonus and right issue were:
(i) Bonus was declared at the rate of two equity shares for every five shares held on 30th September, 2021.
(ii) Right shares are to be issued to the existing shareholders on 1st December, 2021. The Company had issued
two right shares for every seven shares held at 25% premium on face value. No dividend was payable on
these shares. The whole sum being payable by 31st December, 2021.
(iii) Existing shareholders were entitled to transfer their rights to outsiders either wholly or in part.
(iv) P Ltd. exercised its option under the issue for 50% of its entitlements and sold the remaining rights for ₹ 8
per share.
(v) Dividend for the year ended 31st March, 2021 at the rate of 20% was declared by K Ltd. and received by P
Ltd. on 20th January, 2022.
(vi) On 1st February, 2022, P Ltd. sold half of its shareholdings at a premium of ₹ 4 per share.
(vii) The market price of share on 31st March, 2022 was ₹ 13 per share.
You are required to prepare the Investment account of P Ltd. for the year ended 31st March, 2022 and determine
the value of shares held on that date, assuming the investment as current investment. Consider average cost basis
for ascertainment of cost for equity share sold.
(10 Marks)

5(a). Ridgeway Limited, a Non-Financial company has the following activities:

a) Dividend paid for the year.
b) TDS on interest income earned on investments made.
c) Loans and advances given to suppliers and interest earned from them.
d) Deposit with bank for a term of two years.
e) Highly liquid Marketable Securities (without risk of change in value).
f) Investments made and dividends earned on them.
g) Insurance claims received against loss of stock or loss of profits.
h) Loans and advances given to subsidiaries and interest earned from them.
i) Issue of Bonus Shares.
j) Term loan repaid.
You are required to classify the above activities in Cash Flow Statement as per ‘AS-3’.
(5 Marks)
5(b). A specific government grant of ₹ 15 lakhs was received by USB Ltd. for acquiring the Hi-Tech Diary plant of ₹ 95
lakhs during the year 2018-19. Plant has useful life of 10 years. The grant received was credited to deferred income
in the balance sheet. During 2021-22, due to noncompliance of conditions laid down for the grant, the company had
to refund the whole grant to the Government. Balance in the deferred income on that date was ₹ 10.50 lakhs and
written down value of plant was ₹ 66.50 lakhs.
(i) What should be the treatment of the refund of the grant and the effect on cost of plant and the amount of
depreciation to be charged during the year 2021-22 in P&L Account?
(ii) What should be the treatment of the refund, if grant was deducted from cost of the plant during 2018-19
assuming plant account showed the balance of ₹ 56 lakhs as on 1.4.2021?
You are required to explain in the line with provisions of AS 12.
(4 Marks)

5(c). A company was classified as Non-SMC in 2021-22. In 2022-23 it has been classified as SMC. The management
desires to avail the exemption or relaxations available for SMCs in 2022-23. However, the accountant of the
company does not agree with the same. Comment
(1 Mark)

Attempt any two out of following three Questions.

6(a). State whether the following statements are 'True' or 'False'. Also give reason for your answer.
(i) Certain fundamental accounting assumptions underline the preparation and presentation of financial
statements. They are usually specifically stated because their acceptance and use are not assumed.
(ii) If fundamental accounting assumptions are not followed in presentation and preparation of financial
statements, a specific disclosure is not required.
(iii) All significant accounting policies adopted in the preparation & presentation of financial statements should
form part of the financial statements.
(iv) Any change in an accounting policy, which has a material effect should be disclosed. Where the amount by
which any item in the financial statements is affected by such change is not ascertainable, wholly or in part,
the facts need not to be indicated.
(v) There is no single list of accounting policies which are applicable to all circumstances
(5 Marks)

6(b). Wooden Plywood Limited has a normal wastage of 5% in the production process. During the year 2021-22, the
Company used 16,000 MT of Raw material costing ₹ 190 per MT. At the end of the year, 950 MT of wastage was
in stock. The accountant wants to know how this wastage is to be treated in the books. You are required to:
(1) Calculate the amount of abnormal loss.
(2) Explain the treatment of normal loss and abnormal loss. [In the context of AS-2 (Revised)]
(5 Marks)

6(c). “At the time calculating diluted earnings per share, effect is given to all dilutive potential equity shares that are
outstanding during the period”. Comment and also calculate the basic and diluted earnings per share for the year
2020-21 from the following information
Net profit after tax for the year 64,12,500
No. of equity shares outstanding 15,00,000
No. of 9% convertible debentures of ₹ 100 each issued on 1st July, 2020 75,000
Each debenture is convertible into 8 equity shares
Tax relating to interest expense 35%
(5 Marks)

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