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© All rights reserved Price : ` 645 Eighteenth Edition : September 2026 Published by : Taxmann Publications (P.) Ltd. Sales & Marketing : 59/32, New Rohtak Road, New Delhi-110 005 India Phone : +91-11-45562222 Website : www.taxmann.com E-mail : sales@taxmann.com Regd. Office : 21/35, West Punjabi Bagh, New Delhi-110 026 India Printed at : Tan Prints (India) Pvt. Ltd. 44 Km. Mile Stone, National Highway, Rohtak Road Village Rohad, Distt. Jhajjar (Haryana) India E-mail : sales@tanprints.com Disclaimer Every effort has been made to avoid errors or omissions in this publication. In spite of this, errors may creep in. Any mistake, error or discrepancy noted may be brought to our notice which shall be taken care of in the next edition. It is notified that neither the publisher nor the author or seller will be responsible for any damage or loss of action to any one, of any kind, in any manner, therefrom. No part of this book may be reproduced or copied in any form or by any means [graphic, electronic or mechanical, including photocopying, recording, taping, or information retrieval systems] or reproduced on any disc, tape, perforated media or other information storage device, etc., without the written permission of the publishers. Breach of this condition is liable for legal action. For binding mistake, misprints or for missing pages, etc., the publisher’s liability is limited to replacement within seven days of purchase by similar edition. All expenses in this connection are to be borne by the purchaser. All disputes are subject to Delhi jurisdiction only.
Contents PAGE
A note to the Students
I-5
Chapter-wise Marks Distribution of Past Examinations
I-7
Chapter-wise Comparison with Study Material
I-11
CHAPTER 1 MEANING & SCOPE OF ACCOUNTING
1.1
CHAPTER 2 ACCOUNTING CONCEPTS, PRINCIPLES & CONVENTIONS
2.1
ACCOUNTING STANDARDS
3.1
CHAPTER 4 ACCOUNTING POLICIES
4.1
CHAPTER 5 ACCOUNTING AS A MEASUREMENT DISCIPLINE - VALUATION PRINCIPLES,
ACCOUNTING ESTIMATES
5.1
CHAPTER 6 CAPITAL AND REVENUE EXPENDITURE
6.1
CHAPTER 7 CONTINGENT ASSETS AND CONTINGENT LIABILITIES
7.1
CHAPTER 8 ACCOUNTING PROCESS (JOURNAL, LEDGER, TRIAL BALANCE, CASH BOOK,
SUBSIDIARY BOOKS)
8.1
CHAPTER 9 BANK RECONCILIATION STATEMENT
9.1
CHAPTER 10 BILLS OF EXCHANGE
10.1
I-13
TAXMANN®
CHAPTER 3
I-14
CONTENTS PAGE
CHAPTER 11 RECTIFICATION OF ERRORS
11.1
CHAPTER 12 INVENTORY VALUATION
12.1
CHAPTER 13 DEPRECIATION
13.1
CHAPTER 14 FINAL ACCOUNTS
14.1
CHAPTER 15 PARTNERSHIP
15.1
CHAPTER 16 ACCOUNTING FROM INCOMPLETE RECORDS
16.1
TAXMANN®
CHAPTER 17 NOT FOR PROFIT ORGANIZATION
17.1
CHAPTER 18 SHARES
18.1
CHAPTER 19 DEBENTURES
19.1
CHAPTER 20 FINANCIAL STATEMENT OF COMPANIES [SCHEDULE III]
20.1
CHAPTER 21 ACCOUNTING FOR BONUS ISSUE & RIGHT ISSUE
21.1
CHAPTER 22 REDEMPTION OF PREFERENCE SHARES
22.1
CHAPTER 23 REDEMPTION OF DEBENTURES
SOLVED PAPER: SEPTEMBER 2026 (SUGGESTED ANSWERS)
23.1
P.1
14
58=0; 022>D=CB
CHAPTER DESCRIPTIVE QUESTION Q.1 Discuss the limitations which must be kept in mind while evaluating the [Nov. 2018, 4 Marks]; [MTP Jan. 2026]; Financial Statements. [RTP Jan. 2026] Ans. Limitations of Financial Statements 4HE FOLLOWING ARE THE LIMITATIONS OF lNANCIAL STATEMENTS 1. Historical Cost
2. Perpetual Continuity & Periodical Account &INANCIAL STATEMENTS ARE PREPARED AT THE END OF THE YEAR BUT THE ACCOUNTING RECORDS ARE MAINTAINED ON THE GOING CONCERN ASSUMPTION i.e THE BUSINESS SHALL CONTINUE TO EXIST FOREVER !S A RESULT MANY ITEMS OF CAPITAL EXPENDITURE ARE DISTRIBUTED OVER A NUMBER OF BENElCIAL YEARS ARBITRARILY WHICH MAY LEAD TO INCORRECT PREPARATION OF lNANCIAL STATEMENTS 3. Strengths & Weaknesses 4HE ASSETS WHICH CAN BE EXPRESSED IN TERMS OF MONEY ARE RECORDED IN THE lNANCIAL STATEMENTS OF A COMPANY 4HE STRENGTHS WEAKNESSES OF THE BUSINESS ARE NOT TAKEN INTO CONSIDERATION WHILE PREPARING THE "ALANCE 3HEET &OR EXAMPLE SERVICES SKILLS LOYALTY OF THE EMPLOYEES ARE ALSO IMPORTANT FOR THE BUSINESS BUT THESE ARE NOT SHOWN IN THE "ALANCE 3HEET 4HUS IT SHOULD BE KEPT IN MIND WHILE JUDGING THE COMPANY S lNANCIAL POSITION THAT MANY NON MONETARY STRENGTHS WILL NOT BE REmECTED IN THE "ALANCE 3HEET 14.1
TAXMANN®
4HE lNANCIAL STATEMENTS ARE PREPARED ON THE BASIS OF HISTORICAL COST i.e. CURRENT MARKET VALUE OF THE lXED ASSET IS NOT TAKEN INTO CONSIDERATION 4HE VALUE OF THE lXED ASSET CONTINUES TO DECREASE WITH THE PASSAGE OF TIME BUT THE EFFECT OF THESE SUBSEQUENT CHANGES IN PRICE IS NOT TAKEN INTO ACCOUNT 4HE "ALANCE 3HEET LOSES ITS SIGNIlCANCE SINCE IT DOES NOT TAKE INTO CONSIDERATION THE ECONOMIC REALITIES OF THE BUSINESS ORGANIZATION 4HUS HEAVY RELIANCE ON HISTORICAL COST MAKES THE lNANCIAL STATEMENTS MISLEADING IRRELEVANT FOR DECISION MAKING
14.2
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4. Intangible assets ! COMPANY MAY HAVE A NUMBER OF INTANGIBLE ASSETS THAT ARE NOT RECORDED IN ITS lNANCIAL STATEMENTS BUT THE EXPENDITURE MADE IN REGARD TO THOSE ASSETS ARE CHARGED TO EXPENSE 4HIS POLICY CAN DRASTICALLY AFFECT THE RELIABILITY OF THE lNANCIAL STATEMENTS OF A COMPANY 5. Window Dressing 4HERE IS A POSSIBILITY OF FABRICATION OF THE lNANCIAL STATEMENTS BY THE MANAGEMENT OF THE COMPANY )N SUCH A CASE lNANCIAL STATEMENTS MAY NOT PROVIDE TRUE FAIR VIEW OF THE lNANCIAL POSITION OF THE COMPANY 6. Different Accounting Policies 4HE lNANCIAL STATEMENTS OF DIFFERENT COMPANIES ARE NOT ALWAYS COMPARABLE BECAUSE THE ENTITIES USE DIFFERENT ACCOUNTING POLICIES &OR EXAMPLE /NE COMPANY MAY CHARGE DEPRECIATION ON STRAIGHT LINE METHOD ANOTHER ON WRITTEN DOWN VALUE METHOD 7HEN DIFFERENT METHODS ARE ADOPTED BY DIFFERENT COMPANIES FOR THE TREATMENT OF A PARTICULAR ITEM THE RESULTS OF COMPARISON BETWEEN SUCH ENTERPRISES SHALL BE MISLEADING TAXMANN®
SHORT NOTES Q.1 Trading account Ans. Trading account 4RADING ACCOUNT SHOWS THE PROlT LOSS MADE ON A GROSS BASIS THAT IS INCLUDING ONLY THE DIRECT COST OF THE GOODS )N TRADING A C WE CREDIT THE TRADING INCOME LIKE SALE AND $EBIT THE COST OF GOODS SOLD OPENING STOCK PURCHASES CLOSING STOCK !LTERNATIVELY /PENING 3TOCK PURCHASES IS DEBITED #LOSING STOCK IS CREDITED TO TRADING ACCOUNT /THER DIRECT EXPENSES RELATED TO PURCHASE OR MANUFACTURE OF GOODS LIKE CARRIAGE INWARD WAGES ETC ARE ALSO DEBITED HERE 0URCHASE RETURN 3ALES RETURNS WILL BE DEDUCTED ADJUSTED FROM THE PURCHASES SALES RESPECTIVELY 4HE BALANCE IS KNOWN AS THE GROSS PROlT OR GROSS LOSS WHICH IS TRANSFERRED TO PROlT AND LOSS ! C .ON CORPORATE ENTITIES USUALLY PREPARES TRADING ! C SO AS TO KNOW THE GROSS MARGIN AVAILABLE IN ITS SALE "UT AT CORPORATE LEVEL USUALLY IT IS NOT PREPARED )N THOSE CASES THE ITEMS OF TRADING ACCOUNT GETS INCORPORATED IN PROlT LOSS ACCOUNT Q.2 Profit and loss account Ans. Profit and loss account: )T SHOWS THE PERFORMANCE OF THE ENTITY i.e PROlT EARNED OR LOSS SUFFERED CONSIDERING ALL INDIRECT EXPENSES AND INCOMES
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14.3
'ROSS PROlT OR GROSS LOSS FROM TRADING ACCOUNT IS TRANSFERRED TO 0 ,
A C /THER INCOMES LIKE DISCOUNT INTEREST ETC ARE CREDITED !DMINISTRATIVE EXPENSE SELLING AND DISTRIBUTION EXPENSE lNANCIAL EXPENSE INCOME TAX LOSSES ETC ARE DEBITED TO IT 4HE NET PROlT NET LOSS IS TRANSFERRED TO 0 , APPROPRIATION ! C IF MADE OTHERWISE TO CAPITAL ! C )F TRADING ! C IS NOT PREPARED THEN IN PLACE OF GROSS PROlT GROSS LOSS ALL ITEMS OF TRADING ! C WILL COME IN 0 , ! C ITSELF !LTHOUGH NOT NECESSARY BUT USUALLY FULL PROlT LOSS IS TRANSFERRED TO PROPRIETOR PARTNERS CAPITAL ACCOUNT HENCE PROlT LOSS ACCOUNT DOES NOT APPEAR IN BALANCE SHEET Q.3 Balance sheet
TAXMANN®
Ans. Balance sheet: "ALANCE SHEET SHOWS THE lNANCIAL POSITION OF THE ENTITY AS AT A PARTICULAR POINT OF TIME )T SHOWS WHAT AND HOW MUCH ENTITY OWNS i.e ITS ASSETS AND HOW MUCH IT OWES TO OTHERS i.e ITS LIABILITIES THE BALANCE i.e ASSET LIABILITY IS THE OWNERS EQUITY )T IS NOT AN ACCOUNT HENCE DOES NOT HAVE DEBIT AND CREDIT SIDE /N ONE SIDE ASSETS LIKE lXED ASSETS BUILDING MACHINERY FURNITURE ETC CURRENT ASSETS LIKE STOCK DEBTORS CASH BANK BALANCE ADVANCES PREPAID AND INVESTMENTS IF ANY ARE SHOWN /N THE OTHER SIDE IN ADDITION TO OWNER S CAPITAL AND RESERVES THE OUTSIDE LIABILITIES LIKE LOANS TAKEN CREDITORS EXPENSES PAYABLE ETC ARE SHOWN 4HE TWO SIDES TOTAL MUST BE SAME /N THE ASSET SIDE OF BALANCE SHEET WE START WITH MOST PERMANENT TO LEAST PERMANENT i.e lXED ASSETS INVESTMENTS AND THEN CURRENT ASSETS )T IS KNOWN AS PERMANENCY PREFERENCE )N CASE OF MANUFACTURER TRADER THIS SEQUENCE IS FOLLOWED HENCE STUDENT WILL SEE THIS IN ALL THE CHAPTERS 7HEN ASSET SIDE STARTS WITH MOST LIQUID ASSET TO LEAST LIQUID LIKE CASH BANK BALANCE AND ENDS WITH lXED ASSETS IS KNOWN AS LIQUIDITY PREFERENCE GENERALLY FOLLOWED BY INSTITUTIONS LIKE BANKS ,IABILITY SIDE IS MOSTLY SAME IN ALL CASES WE HAVE lRST OWNER CAPITAL AND RESERVES THEN LOANS AND THEREAFTER CURRENT LIABILITIES AND PROVISIONS "ALANCE SHEET IS A POINT OF TIME STATEMENT WHEN STATED AS AT IT MEANS AS AT CLOSE OF THAT DATE i.e AFTER CONSIDERING ALL TRANSACTIONS OF THAT DAY %VEN THOUGH BALANCE SHEET DOES NOT HAVE DEBIT AND CREDIT SIDE STUDENT SHOULD REMEMBER THAT ASSET SIDE REPRESENT DEBIT AND CAPITAL AND LIABILITY SIDE REPRESENT CREDIT )T WILL HELP IN CORRECTLY PREPARING lNAL ACCOUNTS 'ENERALLY -ERCANTILE ACCRUAL SYSTEM IS FOLLOWED AS IT IS THE PROPER AND COMPLETE SYSTEM TO MEASURE THE PERFORMANCE OF ENTITY )N YOUR SYLLABUS EVERY
14.4
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WHERE THIS IS CONSIDERED 5NDER THIS SYSTEM INCOMES ARE RECOGNIZED WHEN THESE ARE EARNED IRRESPECTIVE OF WHETHER AMOUNT IS RECEIVED OR NOT 3IMILARLY EXPENSES ARE RECOGNIZED WHEN THESE ARE INCURRED OR ACCRUED IRRESPECTIVE OF WHETHER AMOUNT IS PAID OR NOT !S A RESULT WE HAVE TO MAKE ADJUSTMENT FOR EXPENSES OUTSTANDING PAYABLE PREPAID INCOME OUTSTANDING RECEIVABLE AND ADVANCE RECEIVED ETC Q.4 Manufacturing A/c Ans. Manufacturing account:
TAXMANN®
! MANUFACTURING CONCERN MAY PREPARE -ANUFACTURING ! C TO ASCERTAIN
COST OF GOODS MANUFACTURED 2AW MATERIAL CONSUMED /P STOCK 0URCHASES #LOSING STOCK CARRIAGE INWARD WAGES POWER DEPRECIATION OF FACTORY BUILDING MACHINERY ETC AND OTHER MANUFACTURING FACTORY EXPENSE ARE DEBITED TO IT /PENING 7)0 STOCK IS DEBITED AND CLOSING 7)0 STOCK CREDITED "ALANCE IS THE COST OF GOODS MANUFACTURED AND IS THEN TRANSFERRED TO TRADING ACCOUNT 7HEN MANUFACTURING ! C IS NOT PREPARED THESE ITEMS WILL COME IN TRADING ! C 3OMETIMES DEPRECIATION ! C MAY BE DIRECTLY TAKEN TO 0 , ! C INSTEAD OF TRADING ! C -ANUFACTURING ! C IS ALSO A PERIOD STATEMENT
! MANUFACTURER IS ONE WHO PURCHASES RAW MATERIAL AND PROCESS IT INTO lNISHED GOODS WITH THE HELP OF LABOUR AND MACHINES AT HIS FACTORY AND SELLS THE lNISHED GOODS 7HEREAS A TRADER PURCHASES GOODS AND SELLS IT AS IT IS Q.5 Trial balance Ans. Trial balance:
4RIAL BALANCE IS A STATEMENT CONTAINING THE BALANCES OF ALL ACCOUNTS AS
AT THE END OF CERTAIN PERIOD USUALLY CLASSIlED INTO DEBIT AND CREDIT 4HE TOTAL OF DEBIT AND CREDIT SIDE MUST TALLY BECAUSE WHOLE ACCOUNTING IS DONE BY DOUBLE ENTRY PRINCIPLE OTHERWISE IT INDICATES ARITHMETICAL INACCURACIES )T HAS BALANCE OF EXPENSES INCOMES ASSETS AND LIABILITIES 7ITH THE HELP OF TRIAL BALANCE AND ADJUSTMENTS THE lNAL ACCOUNTS ARE PREPARED !LL EXPENSES AND INCOMES WILL GO INTO -ANUFACTURING 4RADING 0 , AND 0 , APP A C DEPENDING UPON ITS NATURE AND ALL ASSETS AND LIABILITIES WILL GO INTO BALANCE SHEET
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14.5
DIFFERENCES Q.1 Provision & Reserve
Q.2 Capital reserve & Revenue reserve Ans. Capital reserve and Revenue reserve: #APITAL RESERVE IS ANY RESERVE WHICH IS NOT FREE FOR DISTRIBUTION AS DIVIDEND 2EVENUE RESERVE SHALL MEAN ANY RESERVE OTHER THAN CAPITAL RESERVE &OLLOWING ARE THE EXAMPLES OF CAPITAL RESERVE 0ROlT 2ESERVE WHICH ARE CREDITED TO CAPITAL RESERVE ACCOUNT 0ROlT PRIOR TO INCORPORATION AS PER '!!0 0ROlT ON RE ISSUE OF FORFEITED SHARES $EBENTURE PREMIUM AS PER '!!0 0ROlT ON REDEMPTION OF DEBENTURE SHARES AS PER '!!0 0ROlT ON BUYBACK OF SHARES AS PER '!!0 0ROlT ON ACQUISITION OF BUSINESS AS PER !3 "ALANCE OF RECONSTRUCTION ACCOUNT AS PER '!!0
TAXMANN®
Ans. Provision and Reserve: 0ROVISION MEANS hANY AMOUNT WRITTEN OFF OR RETAINED BY WAY OF PROVIDING FOR DEPRECIATION RENEWAL OR DIMINUTION IN VALUE OF ASSETS OR RETAINED BY WAY OF PROVIDING FOR ANY KNOWN LIABILITY OF WHICH THE AMOUNT CANNOT BE DETERMINED WITH SUBSTANTIAL ACCURACYv 0ROVISION IS A PRESENT LIABILITY WHICH BY ITS NATURE REQUIRES A SIGNIlCANT AMOUNT OF ESTIMATION 4HE FOLLOWING ARE EXAMPLES OF AMOUNT RETAINED IN THE BUSINESS OUT OF EARNING FOR DIFFERENT PURPOSES THAT ARE DESCRIBED AS PROVISIONS !MOUNT PROVIDED FOR MEETING CLAIMS LIABILITIES WHICH ARE ADMISSIBLE IN PRINCIPLE BUT THE AMOUNT WHEREOF HAS NOT BEEN ASCERTAINED !MOUNT PROVIDED FOR PAYMENT OF TAXES STILL TO BE ASSESSED !MOUNT SET ASIDE FOR WRITING OFF BAD DEBTS OR FOR DISCOUNTS 4HE TERM @RESERVE IS NOT DElNED IN 0ART ))) OF 3CHEDULE ))) EXCEPT NEGATIVELY IN THE SENSE THAT PROlT RETAINED IN THE BUSINESS NOT HAVING ANY OF THE ATTRIBUTES OF A @PROVISION IS TO BE TREATED AS A RESERVE !LSO PROVISIONS IN EXCESS OF THE AMOUNT CONSIDERED NECESSARY FOR THE PURPOSES THESE WERE ORIGINALLY MADE ARE TO BE CONSIDERED AS RESERVES )T IS THUS EVIDENT THAT PROVISIONS ARE A CHARGE AGAINST PROlTS WHILE RESERVE IS AN APPROPRIATION OF PROlTS 2ESERVE ARE ACCUMULATED PROlTS HENCE PART OF OWNERS EQUITY PROVISION ARE IN THE NATURE OF LIABILITY DUE TO OUTSIDERS 0ROVISION WILL BE DEBITED TO 0 , ! C AND RESERVE TO 0 , APPROPRIATION ! C WHEN CREATED
14.6
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0ROlT OF CAPITAL NATURE NOT DISTRIBUTABLE BUT KEPT IN SEPARATE ACCOUNTS
3HARE PREMIUM 3ECURITIES PREMIUM ! C
#APITAL REDEMPTION RESERVE SHARE BUYBACK RESERVE ! C
2EVALUATION RESERVE AS PER !3
TAXMANN®
2ESERVE WHICH ARE NOT DISTRIBUTABLE FOR THE TIME BEING #REATED UNDER THE PROVISIONS OF )NCOME TAX !CT )NVESTMENT ALLOWANCE RESERVE %XPORT ALLOWANCE RESERVE 3HIPPING RESERVE %XPORT PROJECT RESERVE &REE RESERVES 2EVENUE RESERVE IS A RESERVE WHICH IS AVAILABLE FOR DISTRIBUTION AS DIVIDEND LIKE 0ROlT LOSS ACCOUNT BALANCE 'ENERAL RESERVE $IVIDEND EQUALISATION RESERVE 0ROlT ON DISPOSAL OF lXED ASSETS INVESTMENTS
TRUE OR FALSE Q.1 Profit and loss account shows the financial position of the concern. Ans. False: 0ROlT AND LOSS ACCOUNT SHOWS THE PROlT OR LOSS OF A CONCERN FOR A PARTICULAR ACCOUNTING PERIOD Q.2 Profit and loss account is a point statement whereas a balance sheet is a period statement. Ans. False: ! PROlT AND LOSS ACCOUNT IS A PERIOD STATEMENT AND A BALANCE SHEET IS A POINT STATEMENT Q.3 The provision for discount on debtors is calculated before deducting the provision for doubtful debts from debtors. [RTP Sep. 2025] Ans. False: 4HE PROVISION FOR DISCOUNT ON DEBTORS IS CALCULATED AFTER DEDUCTING THE PROVISION FOR DOUBTFUL DEBTS FROM DEBTORS Q.4 The gain from sale of capital assets need not be added to revenue to ascertain the net operating profit of a business. Ans. True: 4HE PROlT ON SALE OF CAPITAL ASSETS SHOULD NOT BE ADDED TO ASCERTAIN THE NET OPERATING PROlT OF A BUSINESS Q.5 Under the ‘liquidity approach’ assets which are most liquid are presented at the bottom of the balance sheet. Ans. False: 5NDER THE @LIQUIDITY APPROACH ASSETS WHICH ARE MOST LIQUID ARE PRESENTED lRST LIKE CASH CASH EQUIVALENTS Q.6 The proprietor of a shop feels that he has made a loss due to closing stock being zero. Ans. False: /NLY CLOSING STOCK IS NOT TAKEN IN THE CALCULATION OF THE PROlTS OF A BUSINESS
14.7
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Q.7 Closing stock will never appear in the trial balance. Ans. False: #LOSING STOCK MAY APPEAR IN THE TRIAL BALANCE IF AN ADJUSTING ENTRY RELATING TO CLOSING STOCK HAS ALREADY BEEN PASSED AND ADJUSTED PURCHASES ARE GIVEN IN TRIAL BALANCE Q.8 If Closing Stock appears in the Trial Balance: [Nov. 2018, 2 Marks; June 2024, 2 Marks]; [MTP Jan. 2025] The closing inventory is then not entered in Trading Account. It is shown only in the balance sheet. Ans. True: )F CLOSING STOCK APPEARS IN THE 4RIAL BALANCE IT INDICATES THAT IT IS ALREADY BEEN ADJUSTED WITH THE PURCHASE AND WILL BE SHOWN IN THE "ALANCE 3HEET ONLY Q.9 The provision for bad debts is debited to sundry debtors account. [Dec. 2021, 2 Marks]; [RTP May 2026]; [RTP Jan. 2026] Ans. False: 0ROVISION FOR "AD DEBTS IS CREATED ON 3UNDRY DEBTORS BUT IT IS DEBITED TO 0ROlT ,OSS ! C ONLY
Ans. True: 4HE GAIN FROM SALE OF CAPITAL ASSETS IS ADDED TO REVENUE TO ASCERTAIN THE NET PROlT BUT IT SHOULD NOT BE ADDED TO REVENUE TO ASCERTAIN NET OPERATING PROlT OF BUSINESS Q.12 Outstanding salaries for the previous year shall be shown as liability in the current year balance sheet. [RTP Jan. 2025] Ans. False: )T SHALL BE DISCLOSED AS A CURRENT LIABILITY IN THE OPENING BALANCE SHEET Q.13 The results and position disclosed by final accounts are not exact. [RTP Jan. 2025] Ans. True: 4HEY ARE PREPARED ON THE BASIS OF ASSUMPTIONS CONVENTIONS CONCEPTS AND PERSONAL JUDGEMENTS OF THE PERSON WHO PREPARE THEM
PRACTICAL QUESTIONS Q.1 Particulars Bad Debts Discount Allowed Discount Received Debtors Creditors
(Dr.) Balance 2,100 1,100
(Cr.) Balance
900 53,000 40,000
TAXMANN®
Q.10 Overhead is defined as the total cost of direct material, direct wages and direct expenses. [June 2023, 2 Marks] Ans. False: /VERHEAD IS DElNED AS THE TOTAL OF INDIRECT MATERIAL INDIRECT WAGES AND INDIRECT EXPENSES Q.11 The gain from sale of capital assets is added to revenue to ascertain the net profit of the business. [Dec. 2023, 2 Marks]
14.8
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Particulars Provision for Bad Debts Provision for Discount allowed Provision for Discount received
(Dr.) Balance
(Cr.) Balance 2,500 1,500
1,000
Additional information a. There was a further bad debt of ` 1,000. b. During the year sales of ` 8,000 omitted to be recorded. c. Make a Provision for bad debts @ 5% on debtors. d. Make a Provision for discount @ 2%. Show the extract of Profit & Loss Account & Balance Sheet for the above adjustments. Solution: Profit and Loss Account (Extract) Particulars 4O "AD $EBTS &URTHER "AD DEBTS
Amount
TAXMANN®
Amount
"Y $ISCOUNT RECEIVED
.EW 0ROVISION
/LD 0ROVISION
.EW 0ROVISION
Particulars
/LD 0ROVISION
4O $ISCOUNT ALLOWED
.EW 0ROVISION
/LD 0ROVISION
Balance Sheet (Extract) Liabilities #REDITORS .EW 0ROVISION
Amount
Assets
Amount
$EBTORS
&URTHER "AD DEBTS
3ALES NOT RECORDED
.EW 0ROVISION OF "AD DEBTS
.EW 0ROVISION FOR DIS ALLOWED
Q.2 Below is the trial balance of Shah as on December 31, 2015: Debit Balance Drawings Adjusted purchases Salaries
` 1,500 6,99,200 4,500
Credit Balance Capital Account Loan from Desai @ 9% (taken on 1st July, 2014)
` 50,000 20,000
14.9
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Debit Balance Carriage on Purchases Carriage on sales Rates and Insurance Buildings Furniture Sundry Debtors Cash on Hand Cash at Bank Stock (31st December, 2015)
`
Credit Balance
400 500 400 27,000 6,000 8,000 250 1,500 61,250 8,10,500
Sales Discount Sundry Creditors
` 7,20,000 500 20,000
8,10,500
Additional information: 1. Rates have been prepaid to the extent of ` 175. 2. Bad debts ` 500 have to written off. A provision for doubtful debts @ 5% on debtors is necessary. 3. Building has to be depreciated at 2% and Furniture @ 10%. 4. The manager is entitled to a commission of 5% of net profits before charging such commission. Trading and Profit and Loss Account of Shah for the Year ended on December 31, 2015 Particulars
`
4O !DJUSTED 0URCHASES
4O #ARRIAGE ON 0URCHASES
4O 0ROVISION FOR $OUBTFUL $EBTS OF ` 4O $EPRECIATION "UILDINGS &URNITURE 4O )NTEREST 4O #OMMISSION PAYABLE TO MANAGER OF ` 4O .ET 0ROlT
`
"Y 3ALES
"Y 'ROSS 0ROlT B D "Y $ISCOUNT
4O 'ROSS 0ROlT C D 4O 3ALARIES 4O #ARRIAGE ON 3ALES 4O 2ATES )NSURANCE 0AID Less: 0REPAID 4O "AD $EBTS WRITTEN OFF
Particulars
20,900
20,900
TAXMANN®
Solution:
Accounting (Accounts) | CRACKER AUTHOR : PUBLISHER : DATE OF PUBLICATION : EDITION : ISBN NO : No. of Pages : BINDING TYPE :
S.K. Agrawal, Manmeet Kaur Taxmann September 2026 18th Edition 9788167011794 768 Paperback
Rs. 645 DESCRIPTION Accounting – CRACKER is a book of questions and answers. No theory to read, no notes to revise. Every page carries a question or the answer to one. The book holds 739 questions across 23 chapters, each printed with its full answer worked out. The questions come from four places, and the book names each source. Most are past CA Foundation papers, tagged with the sitting and the marks. Others are the Revision Test Papers and Mock Test Papers issued by ICAI. A few are CA Intermediate questions, used on chapters the two courses share. The rest, about four in ten, were written by the authors to cover ground the other three leave thin. The answers are written the way an answer should look on paper. Practical answers are set out as proper accounts and statements, with the workings below them. Theory answers state the point, then explain it. True or false answers give the verdict, then the reason. The book ends with the September 2026 paper, printed in full with answers. The Present Publication is the 18th Edition, authored by Dr S.K. Agrawal & CA. Manmeet Kaur, with the following noteworthy features: • [Every Question is Answered] Nothing is left for you to work out on your own • [Each Question Carries its Source] The sitting and the marks, or the RTP or MTP, are printed at the end of the question • [Repeats are Printed Once] A question asked more than once appears once, with every place it appeared listed against it • [Changed Questions are Marked] Reworked questions and altered figures are flagged in the tag • [Extra Questions from the Authors] Around four in ten are the authors’ own, added where the past papers fall short • [Workings Shown Separately] Derived figures are cross-referred to numbered working notes set out below the answer • [Notes on the Answers] Short notes explain why an item was left out or how something was treated • [Second Method Given Where One Exists] Where another presentation is acceptable, the book shows that one too • [Assumptions Written Down] Where a question is silent or incomplete, the book states what it assumed • [Proper Formats Throughout] Journals, ledgers, cash books, trial balances, trading and profit and loss accounts and balance sheets are drawn out in full • [Marks Distribution Chart] A chart at the front shows what each chapter carried in the last ten sittings, and whether the question was practical, theory or true or false • [Mapped to the ICAI Study Material] Every chapter is matched to its chapter and unit in the ICAI module • [September 2026 Paper Solved in Full] The whole paper is given at the end with answers to every part
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