CA Foundation / Accounts
Mock Test -1
Date:-31-07-2025 Total Marks: 50
Duration: 2Hrs Key Answer
I. STATE TRUE OR FALSE FOR THE FOLLOWING WITH REASONS 7X2=14
1. Transactions and events are guided by generally accepted accounting principles subject to laws of
land.
Ans.: True
For Example, Companies Act has prescribed the format of Financial Statement of Companies. All
transaction with Suppliers and Customers are governed by The Contract Act, The Sale of Goods Act,
The Negotiable Instruments Act, etc.
2. Equity + LTL – CL = FA + CA
Ans.: False
Equity + LTL = FA + CA – CL
3. The economic life is an Enterprise is artificially split into periodic intervals in accordance with the
Going Concern Assumptions.
Ans.: False
The economic life of an Enterprise is artificially split into periodic intervals in accordance with the
Accounting Period Assumption / Periodicity Concept. The Going Concern Assumption assumes that an
Enterprise will continue in operation for indefinite period of time.
4. Depreciation is an Amortised expenditure.
Ans.: True
Depreciation is charged on value of Fixed Assets over their useful life. By way of Depreciation, Capital
Expenditure is amortised over the useful life of Depreciable Asset.
Note: The term "Depreciation" is used for Tangible Assets will be the term "Amortisation" is used for
Intangible Assets.
5. Reducing Balance Method of Depreciation is followed to have a uniform charge for Depreciation and
Repairs and Maintenance together.
Ans.: True
In the early periods, Repairs and Maintenance Expenses are relatively low because the asset is new.
Whereas in later periods, as the Asset becomes old, R & M increases continuously. Under WDV Method,
Depreciation is high in the initial period and reduces continuously in the later periods.
6. Providing Depreciation ensures sufficient Cash for Asset Replacement.
Ans.: True
Depreciation ensures sufficient Cash for Asset Replacement. However, it is also question able whether
amount set aside by way of Depreciation will always be sufficient to replace an Asset, because of price
rise and other economic reasons.
7. Depreciation cannot be provided in case of loss, in a Financial Year.
Ans.: False
Depreciation is charge against Profit and not an appropriation of profit. Therefore, Depreciation has to
be provided for, even in case of loss in a Financial Year.
CA Foundation / BRICS Academy pg. 1
II. THEORY TYPE OF QUESTIONS 2X5=10M
8. Difference between Book keeping & Accounting
Ans.:
Basis Book-Keeping Accounting
1 Scope Book-keeping involves- In addition to book-keeping, Accounting
a) Identifying the transactions, involves-
b) Measuring the identified a) Summarizing the classified
transactions, transactions,
c) Recording the measured b) Analyzing the summarized results,
transactions, c) Interpreting the analysed results, and
d) Classifying the recorded d) Communicating the information to
transactions. interested parties.
2 Stage Book-keeping is the primary stage. (i.e. Accounting is the secondary
record-keeping phase) (summarizing) stage. It starts where
book-keeping ends.
3 Basic Objective To maintain systematic records of To ascertain net results of operations and
financial transactions. financial position and to communicate
information to the interested parties.
4 Person Book-Keeping is done by Junior Staff. Accounting work is performed by Senior
Staff.
5 Knowledge Book-keeping is not required to have Accountant is required to have higher
level higher level of knowledge than an level of knowledge than that of Book-
accountant. Keeper.
6 Analytical Book-Keeper may or may not possess Accountant is required to possess
skills analytical skills. analytical skills.
7 Nature of job The job of a Book-Keeper is often routine The job of an Accountant is analytical in
and clerical in nature. nature.
8 Designing of It does not cover designing of accounts It covers designing of accounting system.
System system.
9 Supervision The Book-Keeper does not supervise An Accountant supervises and checks the
and check the work of an Accountant. work of a Book-Keeper.
10 Financial Financial position of the business cannot Financial position of the business is
position be ascertained through book-keeping. ascertained based on the accounting
reports.
11 Financial Financial Statements do not from a part Financial Statements are part of the
Statements of the book-keeping process. accounting process. These Statements are
prepared based on book-keeping records.
12 Managerial Managerial decision cannot be taken Management can take decision on the
decision with the help of book-keeping records basis of accounting records and
alone. statements.
13 Sub-fields There are no sub-fields for Book- It has several sub-fields such as Financial
Keeping. Accounting, Management Accounting,
etc.
Note: Can answer any five of the above
CA Foundation / BRICS Academy pg. 2
9. Limitations of Accounts
Ans.: Limitations of Accounting
(1) Accounting involves different assumptions and conventions on which it is based. These assumptions,
by themselves, become a limitation for accounting. Hence, Accounting is considered only as an art and
not as pure science.
(2) There are different accounting policies for the treatment of the same item, e.g. Depreciation, Valuation
of Stocks, etc. This may not ensure comparability among Financial Statements of various Firms.
(3) Certain accounting estimates are based on the personal judgement of the Accountant, e.g. provision
for doubtful debts, capital vs revenue expenditure, writing off intangible assets, etc. This may lead to
the possibility of manipulations.
(4) The Financial Position of the business as depicted by accounts is static and not dynamic. i.e it gives the
position on a particular day on which it is prepared and does not predict future position.
(5) Inflation effect is not considered in the general purpose Financial Statements.
(6) The worth of an Entity may be assessed by various factors, but all cannot be measured in terms of
money.
(7) Accounting ignores the real assets which cannot be measured in terms of money, i.e. Employees. There
is no generally accepted formula for the valuation of Human Resources in terms of money.
III. ANSWER THE FOLLOWING QUESTIONS
10. On 01.04.2020, a firm purchased a machinery for ₹2,00,000. On 01.10.2020 in the same accounting year,
additional machinery costing ₹1,00,000 was purchased. On 01.10.2021, the machinery purchased on
01.04.2020, having become obsolete was sold off for ₹90,000. On 01.10.2022, new machinery was
purchased for ₹2,50,000 while the machinery purchased on 01.10.2020, was sold for ₹85,000 on the same
day. The firm provides depreciation on its Machinery @ 10% per annum on original cost on March 31
every year. Show Machinery Account, Provision for Depreciation Account and Depreciation Account
for the period of three accounting years ending 31.03.2023. 7X1=7M
Ans.:
1. Machinery A/c
Date Particulars ₹ Date Particulars ₹
01.04.2020 To Bank A/c 2,00,000 31.03.2021 By Balance c/d 3,00,000
01.10.2020 To Bank A/c 1,00,000
Total 3,00,000 Total 3,00,000
01.04.2021 To Balance b/d 3,00,000 01.10.2021 By Bank A/c 90,000
01.10.2021 By Provision for Depreciation A/c 30,000
01.10.2021 By Profit and Loss A/c 80,000
31.03.2022 By Balance c/d 1,00,000
Total 3,00,000 Total 3,00,000
01.04.2022 To Balance b/d 1,00,000 01.10.2022 By Bank A/c 85,000
01.10.2022 To Bank A/c 2,50,000 01.10.2022 By Provision for Depreciation A/c 20,000
01.10.2022 To Profit and Loss A/c 5,000 31.03.2023 By Balance c/d 2,50,000
Total 3,55,000 Total 3,55,000
2. Machinery A/c
Date Particulars ₹ Date Particulars ₹
31.03.2021 To Provision for Depreciation A/c 25,000 31.03.2021 By Profit and Loss A/c 25,000
Total 25,000 Total 25,000
01.10.2021 To Provision for Depreciation A/c 10,000 31.03.2022 By Profit and Loss A/c 20,000
31.03.2022 To Provision for Depreciation A/c 10,000
Total 20,000 Total 20,000
CA Foundation / BRICS Academy pg. 3
01.10.2022 To Provision for Depreciation A/c 5,000 31.03.2023 By Profit and Loss A/c 17,500
31.03.2023 To Provision for Depreciation A/c 12,500
Total 17,500 Total 17,500
3. Provision for Depreciation A/c
Date Particulars ₹ Date Particulars ₹
31.03.2021 To Balance c/d 25,000 31.03.2021 By Depreciation A/c 25,000
(₹ 20,000+₹ 5,000)
Total 25,000 Total 25,000
01.12.2021 To Machinery A/c 30,000 01.04.2021 By Balance b/d 25,000
(₹ 20,000 + ₹ 10,000) 01.10.2021 By Depreciation A/c 10,000
31.03.2022 To Balance c/d 15,000 31.03.2022 By Deprecation A/c 10,000
Total 45,000 Total 45,000
01.10.2022 To Machinery A/c 20,000 01.04.2022 By Balance b/d 15,000
31.03.2023 (₹ 5,000 + ₹ 10,000+₹ 5,000) 01.10.2022 By Depreciation A/c 5,000
To Balance c/d 12,500 31.03.2023 By Deprecation A/c 12,500
Total 32,500 Total 32,500
11. LG company purchased 10 trucks at ₹45,00,000 each on 01.04.2020. On 01.10.2022, one of the trucks is
involved in an accident and is completely destroyed and ₹27,00,000 is received from the insurance in full
settlement. On the same date another truck is purchased by the company for the sum of ₹50,00,000. It
write off 20% on the original cost per annum. The company observe the calendar year as its financial
year. Give the Motor Truck A/c for two year ending 31.12.2023. 4X1=4M
Ans.:
1. Profit on settlement of truck
Particulars Amount
Original cost as on 1.4.2020 45,00,000
Less: Depreciation for 2020 (6,75,000)
WDV at the end of Year 1 8,25,000
Less: Depreciation 2021 (9,00,000)
WDV at the end of Year 2 29,25,000
Less: Depreciation 2022 (9 months) (6,75,000)
WDV at the time of disposal 22,50,000
Less: Amount received from Insurance company (27,00,000)
Profit on disposal 4,50,000
2. Truck A/c
Date Particulars Amount Date Particulars ₹
01.01.2022 To balance b/d 2,92,50,000 01.10.2022 By Bank A/c 27,00,000
01.10.2022 To Profit & Loss A/c 4,50,000 01.10.2022 By Depn. on lost assets 6,75,000
01.10.2000 To Bank A/c 50,00,000 01.10.2022 By Depreciation A/c 83,50,000
Total 3,47,00,000 Total 3,47,00,000
01.10.2021 To balance b/d 2,29,75,000 31.12.2023 By Depreciation A/c 91,00,000
31.03.2022 31.12.2023 By balance c/d 1,38,75,000
Total 2,29,75,0000 Total 2,29,75,000
CA Foundation / BRICS Academy pg. 4
12. X purchased a machinery on 1st January 2022 for ₹4,80,000 and spent ₹20,000 on its installation. On July
1, 2022 another machinery costing ₹2,00,000 was purchased. On 1st July, 2023 the machinery purchased
on 1st January, 2022 having become scrapped and was sold for ₹2,90,000 and on the same date fresh
machinery was purchased for ₹5,00,000. Depreciation is provided annually on 31st December at the rate
of 10% p.a. on written down value. Prepare Machinery account for the years 2022 and 2023. 5X1=5M
Ans.:
Date Particulars Amount Date Particulars Amount
01.01.2022 To Bank A/c (Purchase Price) 4,80,000 31.12.2022 By Depreciation A/c (WN 1) 60,000
01.01.2022 To Bank A/c (Erection) 20,000 31.12.2022 By Balance c/d 6,40,000
01.07.2022 To Bank A/c (Purchase Price) 2,00,000
7,00,000 7,00,000
01.01.2023 To balance b/d 6,40,000 01.07.2023 By Bank A/c (Sale) 2,90,000
01.07.2023 To Bank A/c 5,00,000 31.12.2023 By P&L A/c (Loss) 1,37,500
31.12.2023 By Depreciation A/c 66,500
31.12.2023 By Balance c/d 6,46,000
11,40,000 11,40,000
Working Notes: 1. Computation of Depreciation
Machine purchased on – 01.01.2022 01.07.2022 01.07.2023 Total
Cost 4,80,000 + 20,000 =5,00,000 2,00,000 5,00,000
Less: Depreciation for 2022 12 Months = 50,000 6 Months = 10,000 NA 60,000
WDV 4,50,000 1,90,000 NA 6,40,000
Less: Depreciation for 2023 6 Months = 22,500 12 Months = 19,000 6 Months = 25,000 66,500
Written Down Value NA 1,71,000 4,75,000 6,46,000
2. Loss on Sale of Machinery
Particulars Amount
Original cost (including Erection Charges) 5,00,000
Less: Total Depreciation (on machinery I = 50,000 + 22500) 72,500
WDV on the date of Sale 4,27,500
Less: Sale Proceeds 2,90,000
Loss on Sale of Machinery 1,37,500
13. A Plant & Machinery costing ₹10,00,000 is depreciated on Straight Line assuming 10 years working
life and zero Residual Value, for four years. At the end of the fourth year, the Machinery was revalued
upwards by ₹40,000. The remaining useful life was re-assessed at 8 years. Calculate Depreciation for
the fifth year. 4X1=4M
Ans.:
(1) Depreciable Value = Original Cost - Residual Value = ₹ 10,00 000 - Nil = ₹ 10,00,000
(2) Depreciation amount per annum = ₹ 10,00,000 ÷ 10 years = ₹ 1,00,000
(3) Present Book Value (i.e. after four years) = ₹ 10,00,000 – (₹ 1,00,000 × 4 yrs) = ₹ 6,00,000
(4) Revised Book Value (i.e. after Revaluation) = ₹ 6,00,000 + ₹ 40,000 = ₹ 6,40,000
(5) Revised Useful Life = Given = 8 years
(6) Revised Depreciation amount per annum = ₹ 6,40,000 ÷ 8 years = ₹ 80,000
14. A firm purchased an old Machinery for ₹37,000 on 1st January, 2020 and spent ₹3,000 on its overhauling.
On 1st July 2020, another machine was purchased for ₹10,000. On 1st July 2022, the machinery which
was purchased on 1st January 2020, was sold for ₹28,000 and the same day a new machinery costing
₹25,000 was purchased. On 1st July, 2023, the machine which was purchased on 1st July, 2020 was sold
CA Foundation / BRICS Academy pg. 5
for ₹2,000. Depreciation is charged @ 10% per annum on straight line method. The firm changed the
method and adopted diminishing balance method with effect from 1st January, 2021 and the rate was
increased to 15% per annum. The books are closed on 31st December every year. Prepare Machinery
account for four years from 1st January, 2020. 6X1=6M
Ans.:
Date Particulars Amount Date Particulars ₹
01.01.2020 To Bank (Cost + Overhauling) 40,000 31.12.2020 By Depreciation (WN 1) 4,500
01.07.2020 To Bank 10,000 31.12.2020 By Balance c/d 45,500
Total 50,000 Total 50,000
01.01.2021 To balance b/d 45,500 31.12.2021 By Depreciation
31.12.2021 (45,500×15%) (WN 2) 6,825
By balance c/d 38,675
45,500 45,500
01.01.2022 To Balance b/d 38,675 01.07.2022 By Bank A/c (Sale Proceeds) 28,000
01.07.2022 To Bank 25,000 31.12.2022 By Depreciation (WN 3) 5,381
31.12.2022 By Profit & Loss A/c (WN 4) 305
31.12.2022 By Balance c/d 29,989
63,675 63,675
01.01.2023 To Balance b/d 29,989 31.12.2023 By Bank 2,000
31.12.2023 By Profit & Loss (WN 5) 4,349
31.12.2023 By Depreciation (WN 3) 3,984
31.12.2023 By Balance c/d 19,656
29,989 29,989
Working Notes:
1
(1) Full Year Depn. for 50,000(i.e. 40,000 × 10%) + Half Year Depn. for 25,000 (i.e. 10,000 × 10% × ) = 4,500
2
(2) Any changes in Depreciation Method should be accounted for as a change in an Accounting Estimate
and hence depreciated prospectively.
(3) Depreciation Computation for all the years
Purchase on Purchase on Purchase on Total
01.01.2020 01.07.2020 01.07.2022
Cost of Machinery on date of 40,000 10,000 25,000
Purchase
Less: Depreciation for 2020 4,000 10,000 × 10%× ½ NA 4,500
=500
WDV on 31.12.2020 36,000 9,500 NA 45,500
Less: Depreciation for 2021 at 15% 5,400 1,425 NA 6,825
WDV on 31.12.2021 30,600 8,075 NA 38,675
Depreciation for 2022 at 15% 30,600×15% × ½ 8,075× 15% 25,000×15%× ½ 5,381
= 2,295 =1,211 =1,875
WDV on 31.12.2022 WN 1 Sold 6,864 23,125 29,989
Depreciation for 2023 at 15% NA 6,864 × 15%× ½ 23,125×15%
= 515 =3,469
WDV on 31.12.2023 NA WN 2 Sold 19,656
Working Note:
(1) WDV of Machinery sold as on 01.07.2022 ₹ 28,305 – Sale Proceeds ₹ 28,000 = Loss on Sale ₹ 305
(2) WDV of Machinery sold as on 01.07.2023 ₹ 6,349 – Sale Proceeds ₹ 2,000 = Loss on Sale ₹ 4,349
*****
CA Foundation / BRICS Academy pg. 6
