Test Series: March 2023 Mock Test Paper 1 Intermediate: Group - I Paper - 1: Accounting

Test Series: March 2023
MOCK TEST PAPER 1

INTERMEDIATE: GROUP – I
PAPER – 1: ACCOUNTING
Question No. 1 is compulsory.
Answer any four questions from the remaining five questions.
Wherever necessary suitable assumptions may be made and disclosed b y way of a note.
Working Notes should form part of the answer.
(Time allowed: Three hours) (Maximum Marks: 100)
1. (a) How will you disclose following items while preparing Cash Flow Statement of Gagan Ltd. as per
AS-3 for the year ended 31st March, 2022?
(i) 10% Debentures issued: As on 01-04-2021 ` 1,10,000
As on 31-03-2022 ` 77,000
(ii) Debentures were redeemed at 5% premium at the end of the year. Premium was charged
to the Profit & Loss Account for the year.
(iii) Unpaid Interest on Debentures: As on 01-04-2021 ` 275
As on 31-03-2022 ` 1,175
(iv) Debtors of ` 36,000 were written off against the Provision for Doubtful Debts A/c during the
year.
(v) 10% Bonds (Investments): As on 01-04-2021 ` 3,50,000
As on 31-03-2022 ` 3,50,000
(vi) Accrued Interest on Investments: As on 31-03-2022 ` 10,500
(b) D Ltd. acquired a machine on 01-04-2017 for ` 20,00,000. The useful life is 5 years. The
company had applied on 01-04-2017, for a subsidy to the tune of 80% of the cost. The sanction
letter for subsidy was received in November 2020. The Company’s Fixed Assets Account for the
financial year 2020-21 shows a credit balance as under:
Particulars `
Machine (Original Cost) 20,00,000
Less: Accumulated Depreciation (from 2017-18- to 2019-20 on
Straight Line Method) 12,00,000
8,00,000
Less: Grant received (16,00,000)
Balance (8,00,000)
You are required to explain how should the company deal with this asset in its accounts for
2020-21?
(c)
Particulars Kg. `
Opening Inventory: Finished Goods 1,000 25,000
Raw Materials 1,100 11,000
Purchases 10,000 1,00,000
© The Institute of Chartered Accountants of India

Labour 76,500
Overheads (Fixed) 75,000
Sales 10,000 2,80,000
Closing Inventory: Raw Materials 900
Finished Goods 1200
The expected production for the year was 15,000 kg of the finished product. Due to fall in market
demand the sales price for the finished goods was ` 20 per kg and the replacement cost for the
raw material was ` 9.50 per kg on the closing day. You are required to calculate the closing
inventory as on that date.
(d) ABC Ltd. was making provision for non-moving inventories based on no issues for the last 12
months up to 31.3.2021.
The company wants to provide during the year ending 31.3.2022 based on technical evaluation:
Total value of inventory ` 100 lakhs
Provision required based on 12 months issue ` 3.5 lakhs
Provision required based on technical evaluation ` 2.5 lakhs
Does this amount to change in Accounting Policy? Can the company change the method of
provision? (4 parts x 5 Marks = 20 Marks)
2. (a) Sanket had 50,000 Equity shares of XYZ Ltd. on 01.01.2022 at a book value of ` 25 per share
(face value ` 10). On 01.06.2022, he purchased another 10,000 shares of the company at ` 20
per share.
The director of XYZ Ltd. announces a bonus and right issue. No dividend was payable on these
issues. The terms of the issue were as follows:
• Bonus basis 1:6 (Date: 16.08.2022)
• Right basis 3: 7 (Date: 31.08.2022) price `15 per share
• Due date for payment 30.09.2022
• Shareholders can transfer their rights in full or in part.
Accordingly, Sanket sold 33 1/3% of his entitlement in the market for consideration of ` 4 per
share on 31.08.2022 & he procured other entitlement by payment.
Dividends for the year ended 31.03.2022 at the rate of 20% were declared by XYZ Ltd. and
received by Sanket on 31.10.2022. Dividend amount for shares acquired by him on 01.06.2022
are to be adjusted against the cost of purchase.
On 15.11.2022, Sanket sold 25,000 equity shares at premium ` 12 per share.
You are required to prepare in books of Sanket.
(i) Investment Account
(ii) Profit & Loss Account (Extract for Investment)
Books of accounts are closed by Sanket on 31.12.2022 and market price of shares on that date is
` 20 per share.
(b) A fire occurred in the premises of M/s. Raxby & Co. on 30-06-2022. From the salvaged
accounting records, the following particulars were ascertained
`
Stock at cost as on 01-04-2021 1,20,000
2

Stock at cost as on 31-03-2022 1,30,000
Purchases less return during 2021-22 5,25,000
Sales less return during 2021-2022 6,00,000
Purchases from 01-04-2022 to 30-06-2022 97,000
Purchases upto 30-06-2022 did not include ` 35,000 for which
purchase invoices had not been received from suppliers, though
goods have been received in godown.
Sales from 1.4.2022 to 30.6.2022 1,66,000
In valuing the stock for the Balance Sheet at 31st March, 2022, ` 5,000 had been written off on
certain stock which was a poor selling line having the cost of ` 8,000. A portion of these goods
were sold in May, 2022 at a loss of ` 1,000 on original cost of ` 7,000. The remainder of the
stock was now estimated to be worth its original cost. Subject to that exception, gross profit had
remained at a uniform rate throughout the year.
The value of the salvaged stock was ` 10,000. M/s. Raxby & Co. had insured their stock for
` 1,00,000 subject to average clause.
Compute the amount of claim to be lodged to the insurance company. (10 + 10 = 20 Marks)
3. (a) On 31st March, 2022 Chennai Branch submits the following Trial Balance to its Head Office at
Lucknow:
Debit Balances ` in lacs
Furniture and Equipment 18
Depreciation on furniture 2
Salaries 25
Rent 10
Advertising 6
Telephone, Postage and Stationery 3
Sundry Office Expenses 1
Stock on 1st April, 2021 60
Goods Received from Head Office 288
Debtors 20
Cash at bank and in hand 8
Carriage Inwards 7
448
Credit Balances
Outstanding Expenses 3
Goods Returned to Head Office 5
Sales 360
Head Office 80
448
Additional Information:
Stock on 31st March, 2022 was valued at ` 62 lacs. On 29th March, 2022 the Head Office
dispatched goods costing ` 10 lacs to its branch. Branch did not receive these goods before 1st

April, 2022. Hence, the figure of goods received from Head Office does not include these goods.
Also the head office has charged the branch ` 1 lac for centralized services for which the branch
has not passed the entry.
You are required to :(i) pass Journal Entries in the books of the Branch to make the necessary
adjustments and (ii) prepare Final Accounts of the Branch including Balance Sheet.
(b) M/s P have 2 Departments - X and Y. From the following information, prepare departmental
Trading A/c and General Profit & Loss Account for the year ended on 31st March 2022.
Amount (`)
Department X Department Y
Opening stock as on 1-04-2021 (at cost) 2,45,000 2,43,000
Purchases 13,72,000 13,41,000
Carriage Inward 21,000 40,500
Wages 1,89,000 1,62,000
Sales 20,02,000 20,70,000
Purchased Goods Transferred:
By Department Y to X 2,25,000
By Department X to Y 1,26,000
Finished Goods Transferred:
Return of Finished Goods:
Closing Stock:
Purchased Goods 84,000 1,35,000
Finished Goods 3,57,000 2,79,000
Purchased goods have been transferred mutually at their respective departmental purchase cost
and finished goods at departmental market price and 30% of the closing finished stock with each
department represents finished goods received from the other department. (12+ 8 = 20 Marks)
4 (a) Lucky does not maintain proper books of accounts. However, he maintains a record of his bank
transactions and also is able to give the following information from which you are requested to
prepare his final accounts for the year 2021-22:
1.4.2021 31.3.2022
` `
Debtors 1,02,500 −
Creditors − 46,000
Inventory 50,000 62,500
Bank Balance − 50,000
Fixed Assets 7,500 9,000
Details of his bank transactions were as follows:
`
Received from debtors 3,40,000
4

Additional capital brought in 5,000
Sale of fixed assets (book value ` 2,500) 1,750
Paid to creditors 2,80,000
Expenses paid 49,250
Personal drawings 25,000
Purchase of fixed assets 5,000
No cash transactions took place during the year. Goods are sold at cost plus 25%. Cost of
goods sold was ` 2,60,000.
(b) The following are the extracts from the Balance Sheet of Alfa Ltd. as on 31st March, 2022:
Share capital: 1,12,500 Equity shares of `10 each fully paid – ` 11,25,000; 3,375 10%
Redeemable preference shares of `100 each fully paid – ` 3,37,500.
Reserve & Surplus: Capital reserve – `2,25,000; General reserve –` 2,25,000; Profit and Loss
Account – `1,68,750.
On 1st April 2022, the Board of Directors decided to redeem the preference shares at premium of
10% by utilization of reserves.
You are required to prepare necessary Journal Entries including cash transactions in the books
of the company. (15+5 = 20 Marks)
5. (a) The following information of Harry Ltd. for the year ending 31 st March, 2022 and 31st March, 2021
is provided as:
2022 2021
` `
Equity share capital 1,20,000 1,00,000
Reserves:
Profit and Loss Account 9,000 8,000
Current Liabilities:
Trade Payables 8,000 5,000
Income tax payable 3,000 2,000
Dividends payable 4,000 2,000
Fixed Assets (at W.D.V)
Building 19,000 20,000
Furniture & Fixture 34,000 22,000
Cars 25,000 16,000
Long Term Investments 32,000 28,000
Current Assets:
Inventory 14,000 8,000
Trade Receivables 8,000 6,000
Cash & Bank 12,000 17,000

The Profit and Loss account for the year ended 31 st March, 2022 disclosed:
`
Profit before tax 8,000
Income Tax (3,000)
Profit after tax 5,000
Further Information is available:

1. Depreciation on Building ` 1,000
2. Depreciation on Furniture & Fixtures for the year ` 2,000
3. Depreciation on Cars for the year ` 5,000. One car was disposed during the year for `
3,400 whose written down value was ` 2,000.
4. Purchase investments for ` 6,000.
5. Sold investments for ` 10,000, these investments cost ` 2,000.
6. Dividend payable at 31.3.2021 has been paid during the current year.
Prepare Cash Flow Statements as per AS-3 (revised) using indirect method.
(b) Omega Limited (listed company) issued ` 4,50,000 5% Debentures on 30th September 2020 on
which interest is payable half yearly on 31st March and 30th September. The company has power
to purchase debentures in the open market for cancellation thereof. On 31 December 2020,
investments made for the purpose of redemption were ` 67,500. The following purchases were
made during the year ended 31st December, 2022 and the cancellation were made on the same
date
1st March 2022 - ` 75,000 nominal value purchased for ` 74,175 ex-interest.
1st September 2022 - ` 60,000 nominal value purchased for ` 60,375 cum-interest.
You are required to draw up the following accounts up to the date of cancellation:
(i) Debentures Account; and
(ii) Own Debenture (Investment) Account. Ignore taxation. (15+5=20 Marks)
6. (a) Preet Ltd. is installing a new plant at its production facility. It has incurred these costs:
Cost of the plant (cost per supplier’s invoice plus taxes) ` 10,00,000
Initial delivery and handling costs ` 80,000
Cost of site preparation ` 2,40,000
Consultants used for advice on the acquisition of the plant ` 2,80,000
Estimated dismantling costs to be incurred after 7 years ` 1,20,000
Operating losses before commercial production ` 1,60,000
Please advise Preet Ltd. on the costs that can be capitalised in accordance with AS 10
(Revised).
(b) Kartik Ltd. is a non-investment company and has been incurring losses for the past few years.
The company provides the following information for the current year:
(` in lakhs)
Paid up equity share capital 270
Paid up Preference share capital 45
Reserves (including Revaluation reserve ` 22.5 lakhs) 337.5
Securities premium 90

Long term loans 90
Deposits repayable after one year 45
Application money pending allotment 1620
Accumulated losses not written off 45
Investments 405
Kartik Ltd. has only one whole-time director, Mr. Kumar. You are required to calculate the
amount of maximum remuneration that can be paid to him as per provisions of the Companies
Act, 2013, if no special resolution is passed at the general meeting of the company in respect of
payment of remuneration.
OR
Following is the extract of the Balance Sheet of Madhu Ltd.as at 31 st March, 2022
`
Authorized capital:
45,000 12% Preference shares of ` 10 each 4,50,000
6,00,000 Equity shares of ` 10 each 60,00,000
64,50,000
Issued and Subscribed capital:
36,000 12% Preference shares of ` 10 each fully paid 3,60,000
4,05,000 Equity shares of ` 10 each, ` 8 paid up 32,40,000
Reserves and surplus:
General Reserve 5,40,000
Capital Redemption Reserve 1,80,000
Securities premium (collected in cash) 1,12,500
Profit and Loss Account 9,00,000
On 1st April, 2022, the Company has made final call @ ` 2 each on 4,05,000 equity shares. The
call money was received by 20 th April, 2022. Thereafter, the company decided to capitalize its
reserves by way of bonus at the rate of one share for every four shares held by utilizing the
balance of profit and loss account to the minimum extent.
You are required to prepare necessary journal entries in the books of the company and prepare
the relevant extract of the balance sheet as on 30th April, 2022 after bonus issue.
(c) Vital Limited borrowed an amount of `150 crores on 1.4.2021 for construction of boiler plant @
10% p.a. The plant is expected to be completed in 4 years. Since the weighted average c ost of
capital is 13% p.a., the accountant of Vital Ltd. capitalized ` 19.50 crores for the accounting
period ending on 31.3.2022. Due to surplus fund out of `150 crores, an income of ` 1.50 crores
was earned and credited to profit and loss account. Comment on the above treatment of
accountant with reference to relevant accounting standard.
(d) (i) With regard to financial statements name any four.
(1) Users
(2) Qualitative characteristics
(3) Elements
(ii) What are fundamental accounting assumptions? (4 Parts x 5 Marks = 20 Marks)

MOCK TEST PAPER 1
INTERMEDIATE:-GROUP – I
1. (a) Cash Flow Statement of Gagan Ltd. for the year ended March 31, 2022
A Cash Flow from Operating Activities
Net Profit as per Profit & Loss A/c --------
Add: Premium on Redemption of Debentures 1,650
Add: Interest on 10% Debentures 11,000
Less: Interest on 10% Investments (35,000)
B Cash Flow from Investing Activities
Interest on Investments [35,000-10,500] 24,500
C Cash Flow from Financing Activities
Interest on Debentures paid [11,000 - (1,175 - 275)] (10,100)
Redemption of Debentures [(1,10,000 - 77,000) at 5% premium] (34,650)
Note: Debtors written off against provision for doubtful debts does not require any further
adjustment in Cash Flow Statement.
(b) From the above account, it is inferred that the Company has deducted grant from the book value
of asset for accounting of Government Grants. Accordingly, out of the ` 16,00,000 that has been
received, ` 8,00,000 (being the balance in Machinery A/c) should be credited to the machinery
A/c.
The balance ` 8,00,000 may be credited to P&L A/c, since already the cost of the asset to the
tune of ` 12,00,000 had been debited to P&L A/c in the earlier years by way of depreciation
charge, and ` 8,00,000 transferred to P&L A/c now would be partial recovery of that cost.
There is no need to provide depreciation for 2020-21 or 2021-22 as the depreciable amount is
now Nil.
(c) Calculation of cost for closing inventory
Particulars `
Cost of Purchase (10,200 x 10) 1,02,000
Direct Labour 76,500
75,000 x 10,200
Fixed Overhead 51,000
15,000
Cost of Production 2,29,500

Cost of closing inventory per unit (2,29,500/10,200) ` 22.50
Net Realisable Value per unit ` 20.00
Since net realisable value is less than cost, closing inventory will be valued at ` 20.
As NRV of the finished goods is less than its cost, relevant raw materials will be valued at
replacement cost i.e. ` 9.50.
Therefore, value of closing inventory: Finished Goods (1,200 x 20) ` 24,000
Raw Materials (900 x 9.50) ` 8,550
` 32,550

(d) The decision of making provision for non-moving inventories on the basis of technical evaluation
does not amount to change in accounting policy. Accounting policy of a company may require
that provision for non-moving inventories should be made. The method of estimating the
amount of provision may be changed in case a more prudent estimate can be ma de. In the
given case, considering the total value of inventory, the change in the amount of required
provision of non-moving inventory from ` 3.5 lakhs to ` 2.5 lakhs is also not material. The
disclosure can be made for such change in the following lines by way of notes to the accounts
in the annual accounts of ABC Ltd. for the year 2021-22:
“The company has provided for non-moving inventories on the basis of technical evaluation
unlike preceding years. Had the same method been followed as in the previo us year, the profit
for the year and the corresponding effect on the year end net assets would have been lower by `
1 lakh.”.
2. (a) Books of Sanket
Investment Account
(Scrip: Equity Shares in XYZ Ltd.)
No. Amount No. Amount
` `
1.1.2022 To Bal b/d 50,000 12,50,000 31.10.2022 By Bank (dividend — 20,000
1.6.2022 To Bank 10,000 2,00,000
16.8.2022 To Bonus 10,000 — on shares
(W.N.1) acquired on
30.9.2022 To Bank 20,000 3,00,000 1.6.2022) (W.N.4)
(Rights
Shares)
(W.N.3)
15.11.2022 To Profit (on sale 69,444 15.11.2022 By Bank 25,000 5,50,000
of shares) (Sale of shares)
31.12.2022 By Bal. c/d 65,000 12,49,444
(W.N.6)
90,000 18,19,444 90,000 18,19,444
Profit and Loss Account (An extract for investment)

31.12.2022 To Balance c/d (profit) 2,09,444 31.8.22 By Sale of rights (W.N.3) 40,000
31.10.22 By Dividend (W.N.4) 1,00,000
15.11.22 By Profit transferred 69,444
2,09,444 2,09,444
Working Notes:
(1) Bonus Shares = = 10,000 shares
(2) Right Shares = = 30,000 shares × 2/3 = 20,000 shares
(3) Right shares renounced = 30,000×1/3 = 10,000 shares

Sale of right shares = 10,000 x 4 = ` 40,000
Right shares subscribed = 20,000 shares
Amount paid for subscription of right shares = 20,000 x 15 = ` 3,00,000
2

(4) Dividend received = 50,000 (shares as on 1st April 2022) × 10 × 20% = ` 1,00,000
Dividend on shares purchased on 1.6.2022 = 10,000×10×20% = ` 20,000 is adjusted to
Investment A/c
(5) Profit on sale of 25,000 shares
= Sales proceeds – Average cost
Sales proceeds = ` 5,50,000
Average cost = = ` 4,80,556
Profit = ` 5,50,000 – ` 4,80,556 = ` 69,444.

(6) Cost of shares on 31.12.2022 = ` 12,49,444
Market value of share = 65,000 shares × ` 20 = 13,00,000

Shares will be valued at ` 12,49,444 as market value is more than cost.
(b) M/s Raxby & Co.
Trading Account for 2021-22
(to determine the rate of gross profit)
` ` `
To Opening Stock 1,20,000 By Sales A/c 6,00,000
To Purchases 5,25,000 By Closing Stock :
To Gross Profit 90,000 As valued 1,30,000
Add: Amount written off
to restore stock to
full cost 5,000 1,35,000
7,35,000 7,35,000
90,000
The normal rate of gross profit to sales is =  100 = 15%
6,00,000
Memorandum Trading Account up to June 30, 2022
Normal Abnormal Total Normal Abnormal Total
items items items items
` ` ` ` ` `
To Opening 1,27,000 8,000* 1,35,000 By Sales 1,60,000 6,000 1,66,000
Aktie
To Purchases By Loss — 1,000 1,000
(97,000+35,000) 1,32,000 — 1,32,000
To Gross Profit By Closing
(15% on Stock
` 1,60,000) 24,000 — 24,000 (bal. fig.) 1,23,000 1,000 1,24,000
2,83,000 8,000 2,91,000 2,83,000 8,000 2,91,000
* at cost.
Calculation of Insurance Claim
`
Value of stock on June 30, 2022 1,24,000
Less: Salvage (10,000)
Loss of stock 1,14,000
3

Claim subject to average clause:
Amount of Policy
× Actual Loss of Stock = 1,00,000 / 1,24,000 X 1,14,000
Value of stock
= ` 91,935 (approx.)
Therefore, insurance claim will be limited to ` 91,935 (approx.)
3. (a) (i) Books of Branch
Journal Entries
(` in lacs)
Dr. Cr.
Goods in Transit A/c Dr. 10
To Head Office A/c 10
(Goods dispatched by head office but not
received by branch before 1st April, 2022)
Expenses A/c Dr. 1
To Head Office A/c 1
(Amount charged by head office for centralised
services)
(ii) Trading and Profit & Loss Account of the Branch
for the year ended 31st March, 2022
` in lacs ` in lacs
To Opening Stock 60 By Sales 360
To Goods received from By Closing Stock 62
Head Office 288
Less : Returns (5) 283
To Carriage Inwards 7
To Gross Profit c/d 72
422 422
To Salaries 25 By Gross Profit b/d 72
To Depreciation on Furniture 2
To Rent 10
To Advertising 6
To Telephone, Postage & Stationery 3
To Sundry Office Expenses 1
To Head Office Expenses 1
To Net Profit Transferred to
Head Office A/c 24
72 72

Balance Sheet as on 31st March, 2022
Liabilities ` in lacs Assets ` in lacs
Head Office 80 Furniture & Equipment 20
Add : Goods in transit 10 Less : Depreciation (2) 18
Head Office Expenses 1 Stock in hand 62
Net Profit 24 Goods in Transit 10
115 Debtors 20
Outstanding Expenses 3 Cash at bank and in
hand 8
118 118
(b) Departmental Trading Account in the books of M/s P
for the year ended 31 st March 2022
Particulars Department Department Particulars Department Department
X Y X Y
` ` ` `
To Opening 2,45,000 2,43,000 By Sales 20,02,000 20,70,000
stock
To Purchases 13,72,000 13,41,000 By Transfers:
To Carriage 21,000 40,500 Purchased 1,26,000 2,25,000
inward goods
To Wages 1,89,000 1,62,000 Finished 4,55,000 5,31,000*
To Transfers goods (net of
returns)
Purchased 2,25,000 1,26,000 By Closing
goods stock:
Finished 5,31,000 4,55,000 Purchased 84,000 1,35,000
goods goods
(net of returns)
To Gross profit 4,41,000 8,72,500 Finished 3,57,000 2,79,000
c/d goods
30,24,000 32,40,000 30,24,000 32,40,000
General Profit and Loss A/c
for the year ended 31 st March, 2022
Particulars ` Particulars `
To Provision for By Gross profit b/d
unrealized profit
included in closing
stock
Department X (W.N. 3) 35,921 Department X 4,41,000

Net transfers of finished goods by
Department X to Y = ` 6,12,500 – ` 1,57,500 = ` 4,55,000
Department Y to X = ` 6,75,000 – ` 1,44,000= ` 5,31,000
5

Department Y (W.N. 3) 15,024 Department Y 8,72,500
To Net profit 12,62,555
13,13,500 13,13,500
Working Notes:
1. Calculation of rates of gross profit margin on sales
` `
Sales 20,02,000 20,70,000
Add: Transfer of finished goods 6,12,500 6,75,000
26,14,500 27,45,000
Less: Return of finished goods (1,57,500) (1,44,000)
24,57,000 26,01,000
Gross Profit 4,41,000 8,72,500
Gross profit margin = (4,41,000/24,57,000) x 100 (8,72,500/26,01,000) x 100
= 17.95% = 33.54%
2. Finished goods from other department included in the closing stock
` `
Stock of finished goods 3,57,000 2,79,000
Stock related to other department
(30% of finished goods) 1,07,100 83,700
3. Unrealized profit included in the closing stock
Department X = 33.54% of ` 1,07,100 = ` 35,921
Department Y = 17.95% of ` 83,700 = ` 15,024
4. (a) Trading and Profit and Loss Account
Amount Amount
` `
To Opening Inventory 50,000 By Sales (` 2,60,000  3,25,000
125/100)
To Purchases (balancing figure) 2,72,500 By Closing Inventory 62,500
To Gross profit c/d
(` 2,60,000  25/100) 65,000 _______
3,87,500 3,87,500
To Expenses 49,250 By Gross profit b/d 65,000
To Loss on sale of fixed assets 750
To Depreciation on fixed assets
(W.N.1) 1,000
To Net profit 14,000 ______
65,000 65,000

Balance Sheet as on 31st March, 2022
Amount Amount
Liabilities ` Assets `
Capital (W.N. 5) 1,69,000 Fixed assets 9,000
Add: Additional capital 5,000 Debtors (W.N. 3) 87,500
Net profit 14,000 Inventory 62,500
1,88,000 Bank balance 50,000
Less: Drawings (25,000) 1,63,000
Creditors 46,000 _______
2,09,000 2,09,000
Working Notes:
1. Fixed assets account
` `
To Balance b/d 7,500 By Bank (sale) 1,750
To Bank 5,000 By Loss on sale of fixed asset(2,500- 750
1,750)
By Depreciation (balancing figure) 1,000
_____ By Balance c/d 9,000
12,500 12,500
2. Bank account
` `
To Balance b/d (balancing figure) 62,500 By Creditors 2,80,000
To Debtors 3,40,000 By Expenses 49,250
To Capital 5,000 By Drawings 25,000
To Sale of fixed assets 1,750 By Fixed assets 5,000
_______ By Balance c/d 50,000
4,09,250 4,09,250
3. Debtors account
` `
To Balance b/d 1,02,500 By Bank 3,40,000
To Sales 3,25,000 By Balance c/d 87,500
125 (balancing figure)
(` 2,60,000  )
100 _______ _______
4,27,500 4,27,500
4. Creditors account
` `
To Bank 2,80,000 By Balance b/d (balancing figure) 53,500
To Balance c/d 46,000 By Purchases (from trading account) 2,72,500
3,26,000 3,26,000
7

5. Balance Sheet as on 1st April, 2021
Liabilities ` Assets `
Creditors (W.N. 4) 53,500 Fixed assets 7,500
Capital (balancing figure) 1,69,000 Debtors 1,02,500
Stock 50,000
_______ Bank balance (W.N. 2) 62,500
2,22,500 2,22,500
4 (b) In the books of Alfa Limited
Journal Entries
Date Particulars Dr. (`) Cr. (`)
2022
April 10% Redeemable Preference Share Capital A/c Dr. 3,37,500
1
Premium on Redemption of Preference Shares Dr. 33,750
To Preference Shareholders A/c 3,71,750
(Being the amount payable on redemption
transferred to Preference Shareholders Account)
Preference Shareholders A/c Dr. 3,71,750
To Bank A/c 3,71,750
(Being the amount paid on redemption of
preference shares)
General Reserve A/c Dr. 2,25,000
Profit & Loss A/c Dr. 1,12,500
To Capital Redemption Reserve A/c 3,37,500
(Being the amount transferred to Capital
Redemption Reserve Account as per the
requirement of the Act)
Profit & Loss A/c Dr. 33,750
To Premium on Redemption of Preference 33,750
Shares A/c
(Being premium on redemption charged to Profit
and Loss A/c)
Note: Capital reserve cannot be utilized for transfer to Capital Redemption Reserve.
5 (a) Harry Ltd.
Cash Flow Statement
(`) (`)
Cash flows from operating activities
Net Profit before taxation 8,000
Adjustments for:
Depreciation ` (1,000 + 2,000 +5,000) 8,000
Profit on sale of Investment (8,000)
8

Profit on sale of car (1,400)
Operating profit before working capital changes 6,600
Increase in Trade receivables (2,000)
Increase in inventories (6,000)
Increase in Trade payables 3,000
Cash generated from operations 1,600
Income taxes paid (2,000)
Net cash generated from operating activities (A) (400)
Cash flows from investing activities
Sale of car 3,400
Purchase of car (16,000)
Sale of Investment 10,000
Purchase of Investment (6,000)
Purchase of Furniture & fixtures (14,000)
Net cash used in investing activities (B) (22,600)
Cash flows from financing activities
Issue of shares for cash 20,000
Dividends paid (2,000)
Net cash from financing activities(C) 18,000
Net decrease in cash and cash equivalents (A + B +C) (5,000)
Cash and cash equivalents at beginning of period 17,000
Cash and cash equivalents at end of period 12,000
Working Notes:
1. Calculation of Income taxes paid
`
Income tax expense for the year 3,000
Add: Income tax liability at the beginning of the year 2,000
5,000
Less: Income tax liability at the end of the year (3,000)
2,000
2. Calculation of Fixed assets acquisitions
Furniture & Fixtures (`) Car (`)
W.D.V. at 31.3.2022 34,000 25,000
Add back: Depreciation for the year 2,000 5,000
Disposals — 2,000
36,000 32,000
Less: W.D.V. at 31. 3. 2021 (22,000) (16,000)
Acquisitions during 2021-22 14,000 16,000

(b) Omega Limited
Debenture Account
2022 ` 2022 `
Mar 1 To Own Debentures 74,175 Jan 1 By Balance b/d 4,50,000
Mar 1 To Profit on cancellation
(25,000-24,725) 825
Sep 1 To Own Debentures
(Note 3) 59,124
Sep 1 To Profit on cancellation
(20,000-19,708) 876
Dec 31 Balance c/d 3,15,000
4,50,000 4,50,000
Own Debenture (Investment) Account
Nominal Interest Cost Nominal Interest Cost
Cost Cost
` ` ` ` ` `
2022 2022
Mar 1 To Bank Mar 1 By Debentures A/c -
(W.N. 1) 75000 1563 74,175 75,000 74,175
Sep 1 To Bank Sep 1 By Debentures A/c -
(W.N. 2
& 3) 60,000 1,251 59,124 60,000 59,124
Dec. 31 By P&L A/c
- - 2,814 -
1,33,29 1,35,00
1,35,000 2,814 9 0 2,814 1,33,299
Working notes:
1. 75,000 x 5% x 5/12 = 1,563
2. 60,000 x 5% x 5/12 = 1,251
3. 60,375 – 1,251= 59,124
6 (a) According to AS 10 (Revised), these costs can be capitalised:
1. Cost of the plant ` 10,00,000
2. Initial delivery and handling costs ` 80,000
3. Cost of site preparation ` 2,40,000
4. Consultants’ fees `2,80,000
5. Estimated dismantling costs to be incurred after 7 years ` 1,20,000
` 17,20,000
Note: Operating losses before commercial production amounting to ` 1,60,000 are not
regarded as directly attributable costs and thus cannot be capitalized. They should be written
off to the Statement of Profit and Loss in the period they are incurred.
10

(b) Calculation of effective capital and maximum amount of monthly remuneration
(` in lakhs)
Paid up equity share capital 270
Paid up Preference share capital 45
Reserve excluding Revaluation reserve (337.5- 22.5) 315
Securities premium 90
Long term loans 90
Deposits repayable after one year 45
855
Less: Accumulated losses not written off (45)
Investments (405)
Effective capital for the purpose of managerial remuneration 405
Since Kartik Ltd. is incurring losses and no special resolution has been passed by the company
for payment of remuneration. Effective capital of the company is less than 5 crores, maximum
remuneration payable to the Managing Director should be @ ` 60,00,000 per annum.
Note: Revaluation reserve and application money pending allotment are not included while
computing effective capital of Kartik Ltd.
OR
Bonus
Journal Entries in the books of Madhu Ltd.
` `
1-4-2022 Equity share final call A/c Dr. 8,10,000
To Equity share capital A/c 8,10,000
(For final calls of ` 2 per share on 4,05,000 equity
shares due as per Board’s Resolution dated….)
20-4-2022 Bank A/c Dr. 8,10,000
To Equity share final call A/c 8,10,000
(For final call money on 4,05,000 equity shares
received)
Securities Premium A/c Dr. 1,12,500
Capital redemption reserve A/c Dr. 1,80,000
General Reserve A/c Dr. 5,40,000
Profit and Loss A/c (b.f.) Dr. 1,80,000
To Bonus to shareholders A/c 10,12,500
(For making provision for bonus issue of one share
for every four shares held)
Bonus to shareholders A/c Dr. 10,12,500
To Equity share capital A/c 10,12,500
(For issue of bonus shares)
Extract of Balance Sheet as at 30th April, 2022 (after bonus issue)
`
Authorized Capital
45,000 12% Preference shares of ` 10 each 4,50,000
6,00,000 Equity shares of ` 10 each 60,00,000
11

Issued and subscribed capital
36,000 12% Preference shares of `10 each, fully paid 3,60,000
5,06,250 Equity shares of ` 10 each, fully paid 50,62,500
(Out of the above, 1,01,250 equity shares @ ` 10 each were issued by way of bonus
shares)
Reserves and surplus
Profit and Loss Account 7,20,000
(c) Para 10 of AS 16 ‘Borrowing Costs’ states that to the extent the funds are borrowed specifically
for the purpose of obtaining a qualifying asset, the amount of borrowing costs eligible for
capitalization on that asset should be determined as the actual borrowing costs incurred on that
borrowing during the period less any income on the temporary investment of those borrowings.
The capitalization rate should be the weighted average of the borrowing costs applicable to the
borrowings of the enterprise that are outstanding during the period, other than borrowings made
specifically for the purpose of obtaining a qualifying asset. Hence, in the above case, treatmen t
of accountant of Vital Ltd. is incorrect. The amount of borrowing costs capitalized for the
financial year 2021-22 should be calculated as follows:
Actual interest for 2021-22 (10% of ` 150 crores) ` 15.00 crores
Less: Income on temporary investment from specific borrowings (` 1.50 crores)
Borrowing costs to be capitalized during year 2021-22 ` 13.50 crores
(d) (i) (1) Users of financial statements: Investors, Employees, Lenders, Supplies/Creditors,
Customers, Government & Public
(2) Qualitative Characteristics of Financial Statements:
Understandability, Relevance, Comparability, Reliability & Faithful Representation
(3) Elements of Financial Statements:
Asset, Liability, Equity, Income/Gain and Expense/Loss
(ii) Fundamental Accounting Assumptions:
Accrual, Going Concern and Consistency
12

Test Series: March-2023
MOCK TEST PAPER-1
PAPER – 2: CORPORATE AND OTHER LAWS
Division A is compulsory
In Division B, Question No.1 is compulsory
Attempt any Three questions out of the remaining Four questions
Time Allowed – 3 Hours Maximum Marks – 100
Division A (30 Marks)
I. Shiv IT Solutions Ltd. is a company engaged in the business of providing customised software to its
clients. These software’s are usually related to the employee’s attendance, leave management, salary
preparation, tax calculation and other matters incidental to HR.
The company is having its own building and other infrastructure in Bengaluru and also at Brussels,
Belgium. The company have patent rights over few of its software’s and also have the trade mark right
over the company’s logo.
The company got sanctioned term loan facility of ` 10 crores from Best Bank Ltd on 1 st January, 2022
by creating a charge on the assets of the company which includes the company’s own buildings and
intangible assets. The charge should have been created by the company within the time prescribed
under the Companies Act, 2013 with the Registrar, however, the company could not get registration of
charges within the prescribed time line.
During the course of Secretarial Audit of the company, for the year ended March 2022, it came in the
knowledge of the Company Secretary in Practice, that charge was not registered with the Registrar. He
mentioned it in the report and advised the company to get it registered. However, the Action Ta ken
Report (ATR) on the audit objection made by the Company Secretary was not apprised to the Board and
no follow up was made by the company thereafter.
Bank’s concurrent auditor and statutory auditor also pointed out this issue and narrated that since charge
was not created by the company, hence this advance be treated as clean advance and interest rate of
clean / unsecured advance, which is 22% (as against the normal rate of 11%) should be applied from
the date of disbursement on the outstanding amount till date. Bank also asked a professional, whether
it can get the charge registered, at its own, to satisfy the audit objection.
The Bank applied for registration of charge which was considered by the Registrar and registration of
creation of charge was granted. The Bank in order to address the audit objections, applied the interest
@ 22% on the outstanding amount in the loan account of the company. The co mpany aggrieved with
the decision of the Bank, managed to liquidate the term loans account by raising funds from other
sources and filed the ‘Satisfaction of Charge’ with the Registrar.
Multiple Choice Questions [2 MCQs of 2 Marks each: Total 4 Marks]
1. The company can create charge in favour of the lender on the the assets which are:
(a) Tangible Assets and situated in India only
(b) Intangible Assets and situated in India only
(c) Assets that are tangible or otherwise and situated in India or Brussels (Belgium)
(d) Assets that are tangible or otherwise and situated in India only

2. Where the company fails to get the registration of charge, whether the Best Bank Ltd, in whose
favour the charge was to be created, can move the application for creation of charge:
(a) No. It is the responsibility of the borrower company only to get the charge registered in favour
of the lender.
(b) If the company do not get the charge registered in favour of the lender, the lender suo-moto
cannot move application for registration of charge in its favour.
(c) The borrower company can be held liable to pay the penalty only.
(d) Yes. The lender company can move the application for registration of charge in its favour, if
the borrower do not get the charge registered with the prescribed time.
3. Pratham Limited has decided to spend ` 40 lakhs on project of CSR. The average net profit of the
company is ` 10 crores. But due to some reasons, company was able to spend only ` 30 lakhs.
Now what will be the option for the company for the rest ` 10 lakhs.
(a) Penal provision will be applicable for unspent amount of ` 10 lakhs.
(b) No penal provision but explanation is required in Board report for not spending ` 10 lakhs
(c) No penal provision
(d) The company is required to transfer the amount to separate fund. (2 Marks)
4. The company X plans to cover its skilled as well as semi-skilled workers of its units under medical
health insurance plan, for which the company X will bear the expenses. Will this expenditure be
permissible under CSR activities as per the provisions of the Companies Act, 2013:
(a) only expenditure on skilled workers is allowed
(b) expenditure on both skilled and semi- skilled workers is allowed
(c) Resolution to be passed in board meeting before incurring this expenditure and in the board
report it must be mentioned, so that the same will be permissible under CSR activities
(d) such expenditure is not permissible under eligible CSR activities (2 Marks)
5. Which among the following companies is not required to provide its members the facility to exercise
right to vote by electronic mode under the provisions of the Companies Act, 2013?
(a) B Limited, whose equity shares (the company is having both equity as well as preference
shares) are listed on a recognised stock exchange.
(b) A Limited, whose equity shares (only type of share the company is having) are listed on a
recognised stock exchange
(c) C Limited, whose preference shares (the company is having both equity as well as preference
shares) are listed on a recognised stock exchange
(d) D Limited, whose equity shares as well as preference shares are listed on a recognised stock
exchange. (2 Marks)
6. The Corporate Social Responsibility Committee of the board shall consist of:
(a) Three or more directors out of which at two directors shall be Independent Director
(b) Three or more directors out of which at least one director shall be Independent Director.
2

(c) Three or more directors and all should be Independent Directors
(d) Three or more directors with condition of not a single director should be Independent Director
(1 Mark)
7. New Ltd. is incorporated on 3 rd January, 2022. As per the Companies Act, 2013, what will be the
financial year for the company:
(a) 31st March, 2022
(b) 31st December, 2022
(c) 31st March, 2023
(d) 30th September, 2023 (2 Marks)
8. “Associate company”, in relation to another company, means a company in which that
other company has a significant influence, but which is not a subsidiary company of
the company having such influence and includes a joint venture company. Here, the words
‘significant influence’ means:
(a) Control of at least 10% of total voting power
(b) Control of at least 15% of total voting power
(c) Control of at least 20% of total voting power
(d) Control of at least 25% of total voting power (1 Mark)
9. First annual general meeting of the company should be held within ……… from the closing of the
first financial year.
(a) 6 months
(b) 9 months
(c) 12 months
(d) 18 months (1 Mark)
10. Victory Limited was incorporated in January 2015. How much expenditure Victory Limited shall
ensure to spend in pursuance of its Corporate Social Responsibility Policy:
(a) The company shall ensure to spend in every financial year, at least 2% of the average gross
profits of the company made during the 2 immediately preceding financial years.
(b) The company shall ensure to spend in every financial year, at least 2% of the average net
(c) The company shall ensure to spend in every financial year, at least 1% of the average net
(d) The company shall ensure to spend in every financial year, at least 1% of the average net
(1 Mark)

11. Birthday Card Limited, a listed company can appoint or re-appoint, Mishra & Associates (a firm of
Chartered Accountants), as their statutory auditors for:
(a) One year only
(b) One term of 3 consecutive years only
(c) One term of 4 consecutive years only
(d) Two terms of 5 consecutive years (1 Mark)
12. Which of the following is a prohibited service to be rendered by the auditor of a company?
(a) Design and implementation of any financial information system
(b) Making report to the members of the company on the accounts examined by him
(c) Compliance with the auditing standards
(d) Reporting of fraud against the company by officers or employees to the Central Government
(1 Mark)
13. Which among the following will not be considered as a “Foreign Instrument” under the provisions
of the Negotiable Instruments Act, 1881?
(a) A bill drawn on a person residing outside India but payable in India or outside India
(b) A bill drawn on a person resident outside India but payable outside India
(c) A bill drawn on a person residing outside India but payable in India
(d) A bill drawn on a person resident in India but payable outside India (2 Marks)
14. A substituted agent acts on behalf of …………
(a) Principal
(b) Sub-agent
(c) Agent
(d) anyone, as decided by the agent only (1 Mark)
15. As per the provisions of the Indian Contract Act, 1872, the finder of lost goods:
(a) cannot sue and also cannot retain the goods so found
(b) can sue but cannot retain the goods so found
(c) cannot sue but retain the goods so found
(d) can sue and also retain the goods so found (1 Mark)
16. X, a shareholder of a company lost his share certificate. He applied for the duplicate. The company
agreed to issue the same on the term that X will compensate the company against the loss where
any holder produces the original certificate. This is called:
(a) Contract of indemnity
(b) Contract of Guarantee
(c) Quasi Contract
(d) Bailment (2 Marks)

17. As per Rule of Literal Construction, Technical words are to understood in:
(a) Normal sense
(b) Ordinary sense
(c) Technical sense
(d) Legal sense (1 Mark)
18. A clause that begins with the words ‘Notwithstanding anything contained’ is called:
(a) An obstacle clause
(b) A non- obstante clause
(c) An objectionable clause
(d) A superior clause (1 Mark)
19. Pick the odd one out of the following aids to interpretation—
(a) Preamble
(b) Marginal Notes
(c) Proviso
(d) Usage (1 Mark)
20. In all Central Acts and Regulations, unless there is anything repugnant in the subject or context,
words importing the masculine gender shall be taken:
(a) To exclude females
(b) To exclude girl child
(c) To include females
(d) To exclude boy child (1 Mark)
21. An instrument which is vague and cannot be clearly identified either as a bill of exchange, or as a
promissory note……..
(a) is called an ambiguous instrument
(b) can be classified only as a promissory note
(c) can be classified only as a bill of exchange
(d) has to be categorised as an invalid instrument (2 Marks)
Division B (70 Marks)
1. (a) The Board of Directors of Stamp Limited, a listed company appointed Mr. Chatterjee, Chartered
Accountant as its first auditor within 30 days of the date of registration of the company to hold office
from the date of incorporation to conclusion of the first Annual General Meeting (AGM). At the first
AGM, Mr. Chatterjee was re-appointed to hold office from the conclusion of its first AGM till the
conclusion of 6th AGM. In the light of the provisions of the Companies Act, 2013, examine the
validity of appointment/ reappointment in the following cases:
(i) Appointment of Mr. Chatterjee by the Board of Directors.

(ii) Re-appointment of Mr. Chatterjee at the first AGM in the above situation. (6 Marks)
(b) Virjesh Limited is a company in which Hrishkesh Limited is holding 60% of its paid up share capital.
One of the shareholders of Hrishkesh Limited made a charitable trust and donated his 10% shares
in Hrishkesh Limited and ` 50 crores to the trust. He appoints Virjesh Limited as the trustee. All
the assets of the trust are held in the name of Virjesh Limited. Can a subsidiary company hold
shares in its holding company in this way? (6 Marks)
(c) Masoom owns a residential property at Kailash Colony, Delhi. Masoom has given his residential
property on rent amounting to ` 50,000 per month to Kamal. Pankaj became the surety for payment
of rent by Kamal. Subsequently, without Pankaj’s consent, Kamal agreed to pay higher rent to
Masoom. After a few months of this, Kamal defaulted in paying the rent. Evaluate the position of
Pankaj in this regard as per the provisions of the Indian Contract Act, 1872. (4 Marks)
(d) On a Bill of Exchange for ` 1 lakh, X’s acceptance to the Bill is forged. ‘A’ takes the Bill from his
customer for value and in good faith before the Bill becomes payable. State with reasons whether ‘A’
can be considered as a ‘Holder in due course’ and whether he (A) can receive the amount of the Bill
from ‘X’. Answer as per the provisions of the Negotiable Instruments Act, 1881. (3 Marks)
2. (a) Happy Limited received a proxy form 54 hours before the time fixed for the start of the meeting.
The company refused to accept the proxy form on the ground that the Articles of the company
provided that a proxy form must be filed 60 hours before the start of the meeting. Define proxy and
decide under the provisions of the Companies Act, 2013, whether the proxy holder can compel the
company to admit the proxy in this case? (4 Marks)
(b) Explain the following as per the provisions of the Companies Act, 2013:
(i) Who shall sign Board’s Report
(ii) Filing of financial statements with the Registrar when AGM is not held (6 Marks)
(c) Examine whether the following constitute a contract of ‘Bailment’ under the provisions of the Indian
Contract Act, 1872:
(i) Golu parks his car at a parking lot, locks it, and keeps the keys with himself.
(ii) Seizure of goods by customs authorities. (4 Marks)
(d) What are the parties to promissory note and a bill of exchange. (3 Marks)
3. (a) Shilpi Developers India Limited owed to Sunil ` 10,000. On becoming this debt payable, the
company offered Sunil 100 shares of ` 100 each in full settlement of the debt. The said shares
were allotted to Sunil as fully paid-up in lieu of his debt. Examine the validity of this allotment in
the light of the provisions of the Companies Act, 2013. (5 Marks)
(b) The Annual General Meeting of Angels Limited held on 30th May, 2022, declared a dividend at the
rate of 30% payable on its paid-up equity share capital as recommended by Board of Directors.
However, the Company was unable to post the dividend warrant to Mr. A, an equity shareholder,
up to 25th July, 2022. Mr. A filed a suit against the Company for the payment of dividend along
with interest at the rate of 20 percent per annum for the period of default. Decide in the light of
provisions of the Companies Act, 2013, whether Mr. A would succeed? Also, state the directors’
liability in this regard under the Act. (5 Marks)
(c) A promissory note was made without mentioning any time for payment. The holder added the words
‘on demand’ on the face of the instrument. Whether this may be treated as material alteration in
the instrument? Give answer referring to the provisions of the Negotiable Instruments Act, 1881.
(4 Marks)

(d) Viraj, a director of the company, not being personally concerned or interested, financially or
otherwise, in a matter of a proposed motion placed before the Board Meeting, did not disclose his
interest although he has knowledge that his sister is interested in that proposal. He res trains from
making any disclosure of his interest on the presumption that he is not required by law to disclose
any interest as he is not personally interested or concerned in the proposal. He made his
presumption relying on the 'Rule of Literal Construction'. Explaining the scope of interpretation
under this rule in the given situation, decide whether the decision of Viraj is correct? (3 Marks)
4. (a) State the purposes for which the securities premium account can be utilized? (6 Marks)
(b) Examine the validity of the following different decisions/proposals regarding change of office by A
Limited under the provisions of the Companies Act, 2013:
(i) The Registered office is shifted from Thane (Local Limit of Thane District) to Dadar (Local
limit of Mumbai District), both places falling within the jurisdiction of the Registrar of Mumbai,
by passing a special resolution but without obtaining the approval of the Regional Director.
(ii) The registered office situated in certain place of a city is proposed to be shifted to another
place within the local limits of the same city under the authority of Board Resolution.
(4 Marks)
(c) Yellow and Pink had a long dispute regarding the ownership of a land for which a legal suit was
pending in the court. The court fixed the date of hearing on 29.04.2022, which was announced to
be a holiday subsequently by the Government. What will be the computation of time of the hearing
in this case under the General Clauses Act, 1897? (4 Marks)
(d) Explain the following in context of use of definitional sections in Interpretation of Statutes:
(i) Definitions subject to a contrary context
(ii) Ambiguous definitions (3 Marks)
5. (a) With a view to transact some urgent business, Ratna, Rimpi and Ratnesh, the three directors of
Shilpkaar Constructions Limited are desirous of calling a general meeting of shareholders by giving
shorter notice than 21 days’ clear notice. The fourth director, Nilesh is of the opinion that such an
action will attract penalty provisions since there is contravention. The paid-up share capital of the
company is ` 30 crores divided into 3 crores shares of ` 10 each. Keeping in view the applicable
provisions of the Companies Act, 2013, discuss the possibility of calling a general meeting by giving
shorter notice. (6 Marks)
(b) Enumerate the amounts which when received by a company in the ordinary course of business are
not to be considered as deposits. (Write any three) (4 Marks)
(c) Explain the following as per the provisions of the Indian Contract Act, 1872
(i) What is the meaning of ‘Agent’ and ‘Principal’?
(ii) Who can appoint an agent. (4 Marks)
(d) The Income Tax Act, 1961 provides that the gratuity paid by the government to its employees is
fully exempt from tax. You are required to explain the scope of the term 'government' and clarify
whether the exemption from gratuity income will be available to the State Government Employees?
Give your answer in accordance with the provisions of the General Clauses Act, 1897. (3 Marks)

Test Series: March-2023
MOCK TEST PAPER 1
INTERMEDIATE GROUP – I
PAPER – 2: CORPORATE AND OTHER LAWS
ANSWERS
Division A
I. 1. (c)
2. (d)
3. (c)
4. (d)
5. (c)
6. (b)
7. (c)
8. (c)
9. (b)
10. (b)
11. (d)
12. (a)
13. (b)
14. (a)
15. (c)
16. (a)
17. (c)
18. (b)
19. (d)
20. (c)
21. (a)
Division B
1. (a) As per section 139(6) of the Companies Act, 2013, the first auditor of a company, other than a
Government company, shall be appointed by the Board of Directors within thirty days from the
date of registration of the company and such auditor shall hold office till the conclusion of the first
annual general meeting.
Whereas section 139(1) of the Companies Act, 2013 states that every company shall, at the first
annual general meeting (AGM), appoint an individual or a firm as an auditor of the company who
shall hold office from the conclusion of 1 st AGM till the conclusion of its
6th AGM and thereafter till the conclusion of every sixth AGM.
As per section 139(2), no listed company or a company belonging to such class or classes of
companies as may be prescribed, shall appoint or re-appoint an individual as auditor for more
than one term of five consecutive years.
1

As per the given provisions following are the answers:
(i) Appointment of Mr. Chatterjee by the Board of Directors is valid as per the provisions of
section 139(6).
(ii) Appointment of Mr. Chatterjee at the first Annual General Meeting is valid due to the fact
that the appointment of the first auditor made by the Board of Directors is a sepa rate
appointment and the period of such appointment is not to be considered, while Mr.
Chatterjee is appointed in the first Annual General Meeting, which is for the period from the
conclusion of the first Annual General Meeting to the conclusion of the six th Annual General
Meeting.
(b) According to section 19 of the Companies Act, 2013 a company shall not hold any shares in its
holding company either by itself or through its nominees. Also, holding company shall not allot or
transfer its shares to any of its subsidiary companies and any such allotment or transfer of shares
of a company to its subsidiary company shall be void.
Following are the exceptions to the above rule;
a. Where the subsidiary company holds such shares as the legal representative of a deceased
member of the holding company; or
b. Where the subsidiary company holds such shares as a trustee; or
c. Where the subsidiary company is a shareholder even before it became a subsidiary
company of the holding company, but in this case, it will not have a right to vote in the
meeting of holding company.
In the given case, one of the shareholders of holding company has transferred his shares in the
holding company to a trust where the shares will be held by subsidiary company. It means now
subsidiary will hold shares in the holding company. But it will hold shares in the capacity of a
trustee. Therefore, we can conclude that in the given situation Vrijesh Limited can hold shares in
Hrishkesh Limited.
(c) According to the provisions of section 133 of the Indian Contract Act, 1872, where there is any
variance in the terms of contract between the principal debtor and creditor without surety’s
consent, it would discharge the surety in respect of all transactions taking place subsequent to
such variance.
In the instant case, Masoom (Creditor) cannot sue Pankaj (Surety), because Pankaj is
discharged from liability when, without his consent, Kamal (Principal debtor) has changed the
terms of his contract with Masoom (creditor).
(d) According to section 9 of the Negotiable Instruments Act, 1881, ‘holder in due course’ means any
person who for consideration becomes the possessor of a promissory note, bill of exchange or
cheque if payable to bearer or the payee or indorsee thereof, if payable to order, before the
amount in it became payable and without having sufficient cause to believe that any defect
existed in the title of the person from whom he derived his title.
As ‘A’ in this case prima facie became a possessor of the bill for value and in good faith before
the bill became payable, he can be considered as a holder in due course.
But where a signature on the negotiable instrument is forged, it becomes a nullity. The holder of
a forged instrument cannot enforce payment thereon. In the event of the holder being able to
obtain payment in spite of forgery, he cannot retain the money. The true owner may sue on tort
the person who had received. This principle is universal in character, by reason wher e of even a
holder in due course is not exempt from it. A holder in due course is protected when there is

defect in the title. But he derives no title when there is entire absence of title as in the case of
forgery. Hence ‘A’ cannot receive the amount on the bill.
2. (a) Section 105(1) of the Companies Act, 2013, provides that any member of a company entitled to
attend and vote at a meeting of the company shall be entitled to appoint another person as a
proxy to attend and vote at the meeting on his behalf.
Further, section 105(4) of the Act provides that a proxy received 48 hours before the meeting will
be valid even if the articles provide for a longer period.
In the given case, the company received a proxy form 54 hours before the time fixed for start of
the meeting. Happy Limited refused to accept proxy on the ground that articles of the company
provides filing of proxy before 60 hours of the meeting. In the said case, in line with requirement
of the above stated legal provision, a proxy received 48 hours before t he meeting will be valid
even if the articles provide for a longer period. Accordingly, the proxy holder can compel the
company to admit the proxy.
(b) (i) Signing of Board’s Report [Section 134(6)]: The Board’s report and any annexures thereto
under section 134(3) shall be signed by its chairperson of the company if he is authorised
by the Board and where he is not so authorised, shall be signed by at least two directors,
one of whom shall be a managing director, or by the director where there is one director.
(ii) Annual General meeting not held [Section 137(2)]: Where the AGM of a company for any
year has not been held, the financial statements along with the documents required to be
attached, duly signed along with the statement of facts and reasons for not holding the AGM
shall be filed with the Registrar within thirty days of the last date before which the AGM
should have been held and in such manner, with such fees or additional fees as may be
prescribed.
(c) As per Section 148 of the Act, bailment is the delivery of goods by one person to another for
some purpose, upon a contract, that the goods shall, when the purpose is accomplished, be
returned or otherwise disposed of according to the directions of the person delivering the m.
For a bailment to exist the bailor must give possession of the bailed property and the bailee must
accept it. There must be a transfer in ownership of the goods.
(i) Mere custody of goods does not mean possession. In the given case, since the keys of the
car are with Golu, section 148, of the Indian Contract Act, 1872 shall not applicable. Hence,
it is not bailment.
(ii) Yes, the possession of the goods is transferred to the custom authorities. Therefore ,
bailment exists and section 148 is applicable.
(d) 1. In a promissory note, there are only 2 parties namely:
i. the maker and
ii. the payee
2. In a bill of exchange, there are 3 parties which are as under:
i. the drawer
ii. the drawee
ii. the payee
3. (a) Under Section 62 (1) (c) of the Companies Act, 2013 where at any time, a company having a
share capital proposes to increase its subscribed capital by the issue of further shares, either for
cash or for a consideration other than cash, such shares may be offered to any persons, if it is

authorised by a special resolution and if the price of such shares is determined by the valuation
report of a registered valuer (valuation report of a registered valuer, subject to the compliance
with the applicable provisions of Chapter III and any other conditions as may be prescribed).
In the present case, Shilpi Developers India Limited’s allotment, to be classified as shares issued
for consideration other than cash, must be approved by the members by a special resolution.
Further, the valuation of the shares must be done by a registered valuer, subject to the
compliance with the applicable provisions of Chapter III and any other conditions as may be
prescribed.
(b) Section 127 of the Companies Act, 2013 lays down the penalty for non -payment of dividend
within the prescribed time period of 30 days. According to this section where a dividend has been
declared by a company but has not been paid or the warrant in respect thereof has not been
posted within 30 days from the date of declaration of dividend to any shareholder entitled to the
payment of dividend:
(a) every director of the company shall, if he is knowingly a party to the default, be punishable
with imprisonment maximum up to two years and with minimum fine of rupees one thousand
for every day during which such default continues; and
(b) the company shall be liable to pay simple interest at the rate of 18% per annum during the
period for which such default continues.
Therefore, in the given case Mr. A will not succeed if he claims interest at 20% interest as the
limit under section 127 is 18% per annum.
(c) Material alteration: An alteration is material which in any way alters the operation of the
instrument and affects the liability of parties thereto.
Any alteration is material:
(a) which alters the business effect of the instrument if used for any business purpose;
(b) which causes it to speak a different language in legal effect form that which it originally
spoke or which changes the legal identity or character of the instrument.
The following alteration are specifically declared to be material: any al teration of (i) the date, (ii)
the sum payable, (iii) the time of payment, (iv) the place of payment, or the addition of a place of
payment.
A promissory note was made without mentioning any time for payment. The holder added the
words “on demand” on the face of the instrument. As per the above provision of the Negotiable
Instruments Act, 1881 this is not a material alteration as a promissory note where no date of
payment is specified will be treated as payable on demand. Hence, adding the words “on
demand” does not alter the business effect of the instrument.
(d) Rule of Literal Construction
Normally, where the words of a statute are in themselves clear and unambiguous, then these
words should be construed in their natural and ordinary sense and it is not open to the court to
adopt any other hypothetical construction. This is called the rule of literal construction.
This principle is contained in the Latin maxim “absoluta sententia expositore non indeget” which
literally means “an absolute sentence or preposition needs not an expositor”. In other words,
plain words require no explanation.
Sometimes, occasions may arise when a choice has to be made between two interpretations –
one narrower and the other wider or bolder. In such a situation, if the na rrower interpretation
4

would fail to achieve the manifest purpose of the legislation, one should rather adopt the wider
one.
When we talk of disclosure of ‘the nature of concern or interest, financial or otherwise’ of a
director or the manager of a company in the subject-matter of a proposed motion (as referred to
in section 102 of the Companies Act, 2013), we have to interpret in its broader sense of referring
to any concern or interest containing any information and facts that may enable members to
understand the meaning, scope and implications of the items of business and to take decisions
thereon. What is required is a full and frank disclosure without reservation or suppression, as, for
instance where a son or daughter or father or mother or brother or sister is concerned in any
contract or matter, the shareholders ought fairly to be informed of it and the material facts
disclosed to them. Here a restricted narrow interpretation would defeat the very purpose of the
disclosure.
In the given question, Viraj (a director) did not disclose his interest in a matter placed before the
Board Meeting (in which his sister has interest), as he is not personally interested or concerned
in the proposal.
Here, he ought to have considered broader meaning of the provision of law; and therefore, even
though he was personally not interested or concerned in the proposal, he should have disclosed
the interest.
4. (a) Application of Securities Premium Account: As per the provisions of sub-section (2) of section
52 of the Companies Act, 2013, the securities premium account may be applied by the
company—
(a) towards the issue of unissued shares of the company to the members of the company as
fully paid bonus shares;
(b) in writing off the preliminary expenses of the company;
(c) in writing off the expenses of, or the commission paid or discount allowed on, any issue of
shares or debentures of the company;
(d) in providing for the premium payable on the redemption of any redeemable preference
shares or of any debentures of the company; or
(e) for the purchase of its own shares or other securities under section 68.
(b) Regarding the validity of Proposals w.r.t change of registered office by A Limited in the light of
section 12 of the Companies Act, 2013:
(i) In the first case, the Registered office is shifted from Thane to Dadar (one District to another
District) falling under jurisdiction of same ROC i.e. Registrar of Mumbai.
As per Section 12 (5) of the Act which deals with the change in registered office outside the
local limit from one town or city to another in the same state, may take place by virtue of a
special resolution passed by the company. No approval of regional director is required.
Accordingly, said proposal is valid.
(ii) In the second case, change of registered office within the local limits of the same city.
Said proposal is valid in terms it has been passed under the authority of Board resolution.
(c) According to section 10 of the General Clauses Act, 1897, where by any legislation or regulation,
any act or proceeding is directed or allowed to be done or taken in any court or office on a certain
day or within a prescribed period then, if the Court or office is c losed on that day or last day of
the prescribed period, the act or proceeding shall be considered as done or taken in due time if it
is done or taken on the next day afterwards on which the Court or office is open.
5

In the given question, the court fixed the date of hearing of dispute between Yellow and Pink, on
29.04.2022, which was subsequently announced to be a holiday.
Applying the above provisions we can conclude that the hearing date of 29.04.2022, shall be
extended to the next working day.
(d) (i) Definitions subject to a contrary context: When a word is defined to bear a number of
inclusive meanings, the sense in which the word is used in a particular provision must be
ascertained from the context of the scheme of the Act, the language of the p rovision and the
object intended to be served thereby.
(ii) Ambiguous definitions: Sometime, we may find that the definition section may itself be
ambiguous, and so it may have to be interpreted in the light of the other provisions of the
Act and having regard to the ordinary meaning of the word defined. Such type of definition is
not to be read in isolation. It must be read in the context of the phrase which it defines,
realising that the function of a definition is to give accuracy and certainty to a wor d or
phrase which would otherwise be vague and uncertain but not to contradict it or depose it
altogether.
5. (a) Normally, general meetings are to be called by giving at least 21 clear days’ notice as required by
section 101 (1) of the Companies Act, 2013.
As an exception, first proviso to Section 101 (1) states that a general meeting may be called after
giving shorter notice than that specified in sub-section (1) of section 101, if consent, in writing or
by electronic mode, is accorded thereto—
in the case of any other general meeting (i.e. other than annual general meeting), by members of
the company—
(a) holding, if the company has a share capital, majority in number of members entitled to vote
and who represent not less than ninety-five per cent. of such part of the paid-up share
capital of the company as gives a right to vote at the meeting; or
(b) having, if the company has no share capital, not less than ninety-five per cent. of the total
voting power exercisable at that meeting.
Second proviso to section 101 (1) clarifies that where any member of a company is entitled to
vote only on some resolution or resolutions to be moved at a meeting and not on the others,
those members shall be taken into account for the purposes of sub section (1) of section 101 in
respect of the former resolution or resolutions and not in respect of the latter.
In view of the above provisions, Shilpkaar Constructions Limited is permitted to call the requisite
general meeting by giving a shorter notice. However, the members holding at least ninety-five per
cent of the paid-up share capital of the company which gives them a right to vote at the meeting
must consent to the shorter notice.
Thus, if the meeting is called after obtaining the consent from members holding at least ninety-
five per cent of the paid-up share capital of the company, the meeting can be validly called at
shorter notice.
(b) According to Rule 2 (1) (c) (xii) of the Companies (Acceptance of Deposits) Rules, 2014,
following amounts if received by a company in the course of, or for the purposes of, the business
of the company, shall not be considered as deposits:
(a) any amount received as an advance for the supply of goods or provision of services
accounted for in any manner whatsoever to be appropriated within a period of three hundred
and sixty-five days from the date of acceptance of such advance:
However, in case any advance is subject matter of any legal proceedings before any court
6

of law, the time limit of three hundred and sixty-five days shall not apply.
(b) any amount received as advance in connection with consideration for an immovable
property under an agreement or arrangement. However, such advance is required to be
adjusted against such property in accordance with the terms of agreement or arrangement;
(c) any amount received as security deposit for the performance of the contract for supply of
goods or provision of services;
(d) any amount received as advance under long term projects for supply of capital goods
except those covered under item (b) above;
(e) any amount received as an advance towards consideration for providing future services in
the form of a warranty or maintenance contract as per written agreement or arrangement, if
the period for providing such services does not exceed the period prevalent as per common
business practice or five years, from the date of acceptance of such service whichever is
less;
(f) any amount received as an advance and as allowed by any sectoral regulator or in
accordance with directions of Central or State Government;
(g) any amount received as an advance for subscription towards publication, whether in print or
in electronic to be adjusted against receipt of such publications;
However, if the amount received under items (a), (b) and (d) above becomes refundable (with or
without interest) due to the reasons that the company accepting the money does not have
necessary permission or approval, wherever required, to deal in the goods or properties or
services for which the money is taken, then the amount received shall be deemed to be a deposit
under these rules.
Further, for the purposes of this sub-clause the amount shall be deemed to be deposits on the
expiry of fifteen days from the date it became due for refund.
(c) (i) Agent: means a person employed to do any act for another or to represent another in
dealing with the third persons
Principal: means a person for whom such act is done or who is so represented.
(ii) Who may appoint an agent: According to section 183 of the Indian Contract Act, 1872, any
person who has attained majority according to the law to which he is subject, and who is of
sound mind, may employ an agent.
(d) According to section 3(23) of the General Clauses Act, 1897, ‘Government’ or ‘the Governmen t’
shall include both the Central Government and State Government.
Hence, wherever, the word ‘Government’ is used, it will include Central Government and State
Government both.
Thus, when the Income Tax Act, 1961, provides that gratuity paid by the governm ent to its
employees is fully exempt from tax, the exemption from gratuity income will be available to the
State Government employees also.

Test Series: March, 2023
MOCK TEST PAPER –1
PAPER – 3: COST AND MANAGEMENT ACCOUNTING
Answers are to be given only in English except in the case of the candidates who have opted for Hindi
medium. If a candidate has not opted for Hindi medium his/ her answer in Hindi will not be valued.
Attempt any four questions from the remaining five questions.
Working notes should form part of the answer.
1. Answer the following:
(a) Joy Toy Limited deals in trading of ‘superhero’ toy figure. The annual demand for the toy car is
14,400 units. The company incurs fixed order placement and transportation cost of `212 each time
an order is placed. Each toy costs ` 450 and the trader has a carrying cost of 25 percent p.a. The
company has been offered a quantity discount of 8% on the purchase of ‘superhero’ toy figure
provided the order size is 5,000 units at a time.
Required:
(i) COMPUTE the economic order quantity
(ii) STATE whether the quantity discount offer can be accepted.
(b) CALCULATE (i) Efficiency ratio (ii) Activity Ratio (iii) Capacity Ratio. The relevant data is as below:
Budgeted Production 1,44,000 units
Standard Hours per unit 12
Actual Production 1,20,000 units
Actual Working Hours 12,00,000
(c) Mithi Treat (MT) owns a confectionary store which sells items like sweets, cake, chocolates. MT
use to produce at most 40 units of any item at a time. It has received an order for 800 chocolates
from a customer. To process a batch of 40 chocolates, the following cost would be incurred:
Direct materials- ` 600
Direct wages- ` 55
Oven set- up cost ` 175
MT absorbs production overheads at a rate of 25% of direct wages cost. 15% is added to the total
production cost of each batch to allow for selling, distribution and administration overheads.
MT requires a profit margin of 25% of cost.
DETERMINE the selling price for 800 Chocolates.

(d) Secure lifeline Ltd. operates in life insurance business. It launched a new insurance policy 'Total
secure'. The company has incurred the following expenditures during the last year for the policy:
`
Cost of marketing of the policy 74,58,000
Sales support expenses 18,89,250
Policy issuance cost 16,59,735
Claims management cost 2,07,240
Policy development cost 18,56,250
Postage and logistics 16,91,250
Facilities cost 25,14,600
Policy servicing cost 58,09,155
Employees cost 9,24,000
IT cost 1,22,62,800
Office administration cost 26,73,660
Number of policies sold- 844.
Total insured value of policies - ` 1,640 crore.
Required:
(i) CALCULATE total cost for Professionals Protection Plus’ policy segregating the costs into
four main activities namely (a) Marketing and Sales support, (b) Operations, (c) IT and (d)
Support functions.
(ii) CALCULATE cost per policy.
(iii) CALCULATE cost per rupee of insured value. (4 × 5 Marks = 20 Marks)
2. (a) Following information obtained from the records of a Manufacturing Company for the month of
March:
Direct labour cost ` 25,000 being 150% of works overheads.
Cost of goods sold excluding administrative expenses ` 75,000.
Inventory accounts showed the following opening and closing balances:
March 1 (`) March 31 (`)
Raw materials 11,600 15,370
Work-in-progress 15,225 21,025
Finished goods 25,520 27,550
Other information is as follows:

(`)
Selling expenses 6,125
General and administration expenses 4,375
Sales for the month 1,05,250
Required to:
(i) FIND out the value of materials purchased.

(ii) PREPARE a cost statement showing the various elements of cost and also the profit earned.
(10 Marks)
(b) Following data is extracted from the books of RAMZY Ltd. for the month of March:
(i) Estimation-
Particulars Quantity (kg.) Price (`) Amount (`)
Material-A 1320 ? --
Material-B 990 50 49500
--
Normal loss was expected to be 5% of total input materials.
(ii) Actuals- 2,500 kg of output produced.
Particulars Quantity (kg.) Price (`) Amount (`)
Material-A 1500 ? --
Material-B ? 53 --
98,000
(iii) Other Information-

Material Cost Variance = ` 5,500 (F)
Material Price Variance = ` 300 (F)
You are required to CALCULATE:
(i) Standard Price of Material-A;
(ii) Actual Quantity of Material-B;
(iii) Actual Price of Material-A;
(iv) Revised standard quantity of Material-A and Material-B; and
(v) Material Mix Variance. (10 Marks)
3. (a) SoyaB Limited is presently operating at 50% capacity and producing 50,000 units. The entire output
is sold at a price of Rs. 180 per unit. The cost structure at the 50% level of activity is as under:
(`)
Direct Material 60 per unit
Direct Wages 20 per unit
Variable Overheads 20 per unit
Direct Expenses 12 per unit
Factory Expenses (30% fixed) 16 per unit
Selling and Distribution Exp. (85% variable) 10 per unit
Office and Administrative Exp. (100% fixed) 6 per unit
The company anticipates that the variable costs will go up by 20% and fixed costs will go up by
10%.
You are required to prepare an Expense budget, based on marginal cost for the company at
50%,75% and 100% level of activity and find out the profits at respective levels. (10 Marks)
3

(b) LNP Ltd. and MNT Ltd. are engaged in manufacturing of identical products. Existing revenue and
cost data is as follows:
LNP Ltd. (`) MNT Ltd. (`)
Sales 13,60,000 17,00,000
Variable Cost 10,88,000 10,20,000
Fixed Cost 1,72,000 5,80,000
You are required to calculate:
(i) Break-even point (in Value) for each company
Sales at which each company will earn a profit of ` 5,00,000.
Sales at which both companies will have same profits. (10 Marks)
4. (a) SM Pvt. Ltd. manufactures their products in three consecutive processes. The details are as below:
Process X Process Y Process Z
Transferred to next Process 60% 50%
Transferred to warehouse for sale 40% 50% 100%
In each process, there is a weight loss of 2% and scrap of 4% of input of each process. The
realizable value of scrap of each process is as below:
Process X @ ` 3 per ton
Process Y @ ` 5 per ton
Process Z @ ` 7 per ton.
The following particulars relate to January 2023:
Process X Process Y Process Z
Materials used (in Tons) 1,500 454 189
Rate per ton ` 21.5 ` 14 ` 12
Direct Wages ` 5,000 ` 3,260 ` 2,540
Direct Expenses ` 3,820 ` 2,775 ` 1,900
PREPARE Process Accounts- X, Y and Z & calculate cost per ton at each process. (10 Marks)
.
(b) Ultra Builders Ltd. has started a contract on 1st April 2021. The Trial balance as on 31st March
2022 showed the following balances:
Particulars Dr. (`) Cr. (`)
Paid up share capital 2,05,75,000
Land and buildings 50,60,000
Machinery at cost (85% at site) 39,60,000
Cash and bank 33,000
Materials at cost 27,78,600
Creditors for materials 11,33,660
Direct wages 14,60,800
4

Site expenses 10,56,000
Vehicles 40,00,000
Furniture 7,00,000
Office equipment 12,00,000
Postage and Stationery 32,560
Office expenses 6,88,600
Rates and taxes 28,160
Fuel and power 9,30,600
Outstanding wages 2,21,200
Advance rates and taxes 1,540
2,19,29,860 2,19,29,860
The contract price is ` 2,00,00,000 and work certified is `80,00,000. The cost of work uncertified
is ` 9,60,000. Machinery costing ` 1,60,000 was returned to stores at the end of the year. Stock
of material at site on 31st March 2022 was of the value of `40,000. Depreciation on Machinery,
Vehicles and furniture are 10%, 15% and 10% respectively. You are required to calculate the profit
from the contract. (10 Marks)
5. (a) Bopanna Ltd. produces three products Zm, Rm and Pm using the same plant and resources.
It has given the following information for the year ended on 31st March 2022:
Zm Rm Pm
Production Quantity (units) 6000 7200 9840
Cost per unit:
Direct Material (`) 450 420 880
Direct Labour (`) 80 150 200
Budgeted direct labour rate was `40 per hour and the production overheads, shown in table below,
were absorbed to products using direct labour hour rate.
Company followed Absorption Costing Method. However, the company is now considering adopting
Activity Based Costing Method.
Budgeted Cost Driver Remarks
Overheads (`)
Material Procurement 2,50,000 No. of orders No. of orders was 30 units
for each product.
Set-up 1,50,000 No. of production All the three products are
Runs produced in production
runs of 50 units.
Quality Control 1,00,000 No. of Done for each production
Inspections run.
Maintenance 3,00,000 Maintenance Total maintenance hours
hours were 10,000 and was
allocated in the ratio of
2:1:2 between X, Y & Z.
Required:
(i) CALCULATE the total cost per unit of each product using the Absorption Costing Method.

(ii) CALCULATE the total cost per unit of each product using the Activity Based Costing Method.
(10 Marks)
(b) Nero Chemicals Ltd. operates a simple chemical process to convert material RV into three separate
items, such as T, U and V. All three end products are separated simultaneously at a single split-off
point, at which time Product T and Product U are ready for sale without additional costs. Product
V, however, is processed further before being sold. There is no available market price for V at the
split-off point.
The selling prices quoted here are expected to remain the same in the coming year.
During 2021-22, the selling prices of the items and the total units sold were:
T – 1,000 tons sold for ` 6,000 per ton
U – 2500 tons sold for ` 5,000 per ton
V – 3000 tons sold for ` 6,500 per ton
The total joint manufacturing costs for the year were `62,50,000. An additional `9,00,000 was
spent to finish product V.
There were no opening inventories of T, U or V at the end of the year. The following inventories of
complete units were on hand.
T - 900 tons
U - 300 Tons
V - 125 tons
There was no opening or closing work-in-progress.
Required:
COMPUTE the cost of inventories of T, U and V and cost of goods sold for year ended
March 31,2022, using Net realizable value (NRV) method of joint cost allocation. (10 Marks)
6. Answer any four of the following:
(a) STATE the advantages of Zero-based budgeting.
(b) DIFFERENTIATE between Cost Accounting and Management Accounting.
(c) “Is reconciliation of cost accounts and financial accounts necessary in case of integrated
accounting system?” EXPLAIN.
(d) DEFINE cost units? WRITE the cost unit basis against each of the following Industry/Product-
Automobile, Steel, Cement, Chemicals, Power and Transport.
(e) DISTINGUISH clearly between Bin cards and Stores Ledger. (4 × 5 =20 Marks)

MOCK TEST PAPER – 1
PAPER – 3: COST AND MANAGEMENT ACCOUNTING
SUGGESTED ANSWERS/HINTS
2AO
1. (a) (i) Calculation of Economic Order Quantity (EOQ) =
C
2 x14,400 units x `212
= = 233 units
`450 x 25%
(ii) Evaluation of Profitability of Different Options of Order Quantity
(A) When EOQ is ordered (`)
Purchase Cost (14,400 units x Rs. 450) 64,80,000
Ordering Cost [(14,400 units/233 units) x Rs. 212] 13,102
Carrying Cost (233 units x 1/2 x 450 x 25%) 13,106
Total Cost 65,06,208
(B) When Quantity Discount of 8% is accepted
(`)
Purchase Cost (14,400 units x Rs. 414) 59,61,600
Ordering Cost [(14,400 units/5,000 units) x Rs212] 611
Carrying Cost (5,000 units x 1/2 x Rs.414 x 25%) 2,58,750
Total Cost 62,20,961
Advise – The total cost of inventory is lower if quantity discount is accepted.
The company would save Rs. 2,85,247 (Rs. 65,06,208 - Rs. 62,20,961).
Note: Figures may change slightly because of approximation and decimals)
Stardard hour (for actual production)
(b) (i) Efficiency Ratio = x 100
Actual hour works
1,20,000 units x12 hrs
= x 100 = 120%
12,00,000 hrs
Stardard Hour (for actual production)
(ii) Activity Ratio = x 100
Budgeted Hours
14,40,000
= x 100 = = 83.34%
1,44,000 units x12 hours
Actual Hours (worked)
(iii) Capacity Ratio = x100
Budgeted Hours
12,00,000 hrs
= x 100 = 69.45%
1,44,000 units x12 hours

(c) Statement of cost per batch and per order
No. of batch = 800 units ÷ 40 units = 20 batches
Particulars Cost per batch (`) Total Cost (`)
Direct Material Cost 600 12,000
Direct Wages 55 1100
Oven set-up cost 175 3500
Add: Production Overheads (25% of Direct 13.75 275
wages)
Total Production cost 843.75 16875
Add: S&D and Administration overheads 126.56 2531.25
Total Cost 970.31 19406.25
Add: Profit (25% of total cost) 242.58 4851.56
Selling price 1,212.89 24,257.81
Selling Price per unit = 1,212.89÷40[0r 30.32 30.32
24,257.81÷800]
(d) (i) Calculation of total cost for ‘Professionals Protection Plus’ policy
Particulars Amount (`) Amount (`)
1 Marketing and Sales support:
- Policy development cost 18,56,250
- Cost of marketing 74,58,000
- Sales support expenses 18,89,250 1,12,03,500
2 Operations:
- Policy issuance cost 16,59,735
- Policy servicing cost 58,09,155
- Claims management cost 2,07,240 76,76,130
3 IT Cost 1,22,62,800
4 Support functions
- Postage and logistics 16,91,250
- Facilities cost 25,14,600
- Employees cost 9,24,000
- Office administration cost 26,73,660 78,03,510
Total Cost 3,89,45,940
Total cost 3,89,45,940
(ii) Calculation of cost per policy =
Number of policies 844
= ` 46,144.48
Total cost 3,89,45,940
(iii) Cost per rupee of insured value =
Total insured value 1,640 crore
= ` 0.0024

2. (a) (i) Computation of the value of materials purchased
To find out the value of materials purchased, reverse calculations from the given data can be
presented as below:
Particulars (`)
Cost of goods sold 75,000
Add: Closing stock of finished goods 27,550
Less: Opening stock of finished goods (25,520)
Cost of production 77,030
Add: Closing stock of work-in-progress 21,025
Less: Opening stock of work-in-progress (15,225)
Works cost 82,830
Less: Factory overheads: (16,667)
[`25,000×100/150]
Prime cost 66,163
Less: Direct labour (25,000)
Raw material consumed 41,163
Add: Closing stock of raw materials 15,370
Raw materials available 56,533
Less: Opening stock of raw materials (11,600)
Value of materials purchased 44,933
(ii) Cost statement
(`)
Raw material consumed [Refer to statement (i) above] 41,163
Add: Direct labour cost 25,000
Prime cost 66,163
Add: Factory overheads 16,667
Works cost 82,830
Add: Opening work-in-progress 15,225
Less: Closing work-in-progress (21,025)
Cost of production 77,030
Add: Opening stock of finished goods 25,520
Less: Closing stock of finished goods (27,550)
Cost of goods sold 75,000
Add: General and administration expenses 4,375
Add: Selling expenses 6,125
Cost of sales 85,500
Profit (sales i.e `1,05,250 – Cost of sales i.e ` 85,500) 19,750
Sales 1,05,250

(b)
(i) Material Cost Variance (A + B) = {(SQ × SP) – (AQ × AP)}
Or `5,500 = (SQ × SP) – `98,000
Or (SQ × SP) = `1,03,500
Or (SQA × SPA) + (SQB × SPB) = ` 1,03,500
Or (1,503.8 kg × SPA) + (1,127.8 kg ×`50) = ` 1,03,500
Or (1,503.8 kg × SPA) + `56,390 = `1,03,500
Or (1,503.8 kg × SPA) = ` 47,110
Or SPA 47,110
=
1503.80 kg
= `31.33
(ii) Material Price Variance (A + B) = {(AQ × SP) – (AQ × AP)}
Or `300 = (AQ × SP) – ` 98,000
Or (AQ × SP) = ` 98,300
Or (AQA × SPA) + (AQB × SPB) = `98,300
Or (1,500 kg × `31.33 (from (i) above)) + AQB x `50 = `98,300
Or ` 46,995 + (AQB × ` 50) = ` 98,300
Or (AQB × ` 50) = ` 51,305
Or AQB = 1,026kg
Actual Quantity of Material B = 1,026 kg.
(iii) (AQ × AP) = `98,000
Or (AQA × APA) + (AQB × APB) = ` 98,000
Or (1,500 kg × APA) + (1,026 kg (from (ii) above) × `53) = ` 98,000
Or (1,500 kg × APA) + ` 54,378 = ` 98,000
Or (1,500 kg APA) = ` 43,622
43,622
Or APA = = ` 29.10
1,500
Actual Price of Material A = ` 29.10
(iv) Total Actual Quantity of Material-A and Material-B = AQA + AQB
Or 1,500 kg + 1,026 kg (from (ii) above) = 2,526 kg
1320 kg
Revised SQA = x 2,526 kg = 1,443 kg
(1,320 + 990)
990 kg
Revised SQB = x 2,526 kg = 1,083 kg
(1,320 + 990)
(v) Material Mix Variance (A + B) ={(RSQ × SP) – (AQ × SP)}
= {(RSQA × SPA) + (RSQB × SPB) – `98,300} = (1,443 kg (from (iv) above) × ` 31.33 (from
(i) above)) + (1,083 kg (from (iv) above) × `50) - `98,300
= (`45,209 + `54,150) – `98,300 = ` 1059 (F)

3. (a) Expense Budget of SoyaB Ltd. for the period
50,000 units 75,000 units 1,00,000 units
Per unit
(`) Amount (`) Amount (`) Amount (`)
Sales (A) 180 90,00,000 1,35,00,000 1,80,00,000

Less: Variable Costs:
- Direct Material 72 36,00,000 54,00,000 72,00,000
- Direct Wages 24 12,00,000 18,00,000 24,00,000
- Variable Overheads 24 12,00,000 18,00,000 24,00,000
- Direct Expenses 14.4 7,20,000 10,80,000 14,40,000
- Variable factory expenses
13.44 6,72,000 10,08,000 13,44,000
(70% of Rs 16 p.u.)x 120%
- Variable Selling & Dist. exp.
10.2 5,10,000 7,65,000 10,20,000
(85% of Rs 10 p.u.)x120%
Total Variable Cost (B) 158.04 79,02,000 1,18,53,000 1,58,04,000
Contribution (C) = (A – B) 21.96 10,98,000 16,47,000 21,96,000
Less: Fixed Costs:
- Office and Admin. exp.
-- 3,30,000 3,30,000 3,30,000
(100%)
- Fixed factory exp. (30%) -- 2,64,000 2,64,000 2,64,000
- Fixed Selling & Dist. exp.
-- 82,500 82,500 82,500
(15%)
Total Fixed Costs (D) -- 6,76,500 6,76,500 6,76,500
Profit (C – D) -- 4,21,500 9,70,500 15,19,500
(b) Income Statement
LNP Ltd. (`) MNT Ltd. (`)
Sales (Rs.) 13,60,000 17,00,000
Less: Variable Cost 10,88,000 10,20,000
Contribution 2,72,000 6,80,000
𝐶𝑜𝑛𝑡𝑟𝑖𝑏𝑢𝑡𝑖𝑜𝑛
P.V. Ratio ( 𝑆𝑎𝑙𝑒𝑠 × 100)
20% 40%
Fixed Cost (`) 1,72,000 5,80,000

Profit (`) 1,00,000 1,00,000
Fixed Cost
(i) Break-Even Point =
P. V. Ratio
` 1,72,000
LNP Ltd. = = = ` 8,60,000
20%
` 5,80,000
MNT Ltd. = = = ` 14,50,000
40%

(ii) Sales value to earn a profit of ` 5,00,000
Fixed Cost + Desired Profit
Sales =
P. V. Ratio
1,72,000 + 5,00,000
LNP Ltd. = = ` 33,60,000
40%
5,80,000 + 5,00,000
MNT Ltd. = = ` 27,00,000
40%
(iii) Sales value at which both companies will earn same profit
Let S = Sales value and P = Profit
Sales – Variable cost = Fixed cost + Profit
or, Contribution = Fixed cost + Profit
LNP Ltd.:
20% S = `1,72,000 + P
or, 0.20S = ` 1,72,000 + P …………………………………….(i)
MNT Ltd.
40% S = `5,80,000 + P
or, 0.40S = ` 5,80,000 + P …………………………………(ii)
By solving these equations, we will get the value of ‘S’ and ‘P’
0.20S = 1,72,000 + P
0.40S = 5,80,000 + P
- - -
- 0.20S = -4,08,000
or, S = ` 20,40,000
Putting the value of ‘S’ in equation no. (i) we will get the value of ‘P’
0.20 × 20,40,000 = 1,72,000 + P
or, P = `2,36,000
Therefore, at Sale value of `20,40,000 both the companies will earn same profit of ` 2,36,000
4. (a) Process X Account
Particulars Tones Amount Particulars Tones Amount
(`) (`)
To Materials 1,500 32,250 By Weight Loss 30 ---
To Wages 5,000 By Scrap 60 180
To Direct Expenses 3,820 By Process Y 846 24,534
By Warehouse 564 16,356
Total 1,500 41,070 Total 1,500 41,070
Cost per Ton = (41,070 - 180)/(1,500-30-60) = ` 29 per ton

Process Y account
Amount Amount
Particulars Tones Particulars Tones
(`) (`)
To Process X 846 24,534 By Weight Loss 26 ---
To Materials 454 6,356 By Scrap 52 260
To Wages 3,260 By Process Z 611 18,332.5
To Direct Expenses 2,775 By Warehouse 611 18,332.5
Total 1300 36,925 Total 1300 36,925
Cost per Ton = (36,925-260)/(1,300-26-52)= `30 per ton
Process Z Accounts
Amount
Particulars Tones Particulars Tones Amount (`)
(`)
To Process Y 611 18332.5 By Weight Loss 16 ---
To Materials 189 2,268 By Scrap 32 224
To Wages 2,540 By Warehouse 752 24,817
To Direct Expenses 1,900
Total 800 25,041 Total 800 25041
Cost per Ton = (25,041-224)/(800-16-32) = ` 33 per ton
(b) Contract Account

Particulars Amount Amount Particulars Amount Amount
(`) (`) (`) (`)
To Materials 27,78,600 By material at site 40,000
To Direct wages 14,60,800 By Work in progress:
Add: outstanding 2,21,200 16,82,000 - Work certified 80,00,000
To Site expenses 10,56,000 - Work uncertified 9,60,000 89,60,000
To Office expenses 6,88,600
To Postage and 32,560
Stationery
To Rates and taxes 28,160
Less: Advance (1,540) 26,620
To Fuel and power 9,30,600
To Depreciation* 10,06,600
To Notional profit c/d 7,98,420
90,00,000 90,00,000
* Depreciation
(i) On Machinery = {10% on (`39,60,000 × 0.85)} = ` 3,36,600
(ii) On Vehicles = 15% on `40,00,000 = ` 6,00,000
7

(iii) On Furniture = 10% on `7,00,000 = ` 70,000
Total = ` 9,86,800
5. (a) (i) Traditional Absorption Costing
Zm Rm Pm Total
(a) Quantity (units) 6,000 7,200 9,840 23,040
(b) Direct labour per unit (`) 80 150 200 -
(c) Direct labour hours (a × b)/` 40 12,000 27,000 49,200 88,200
Overhead rate per direct labour hour = Budgeted overheads / Budgeted labour hours
= (`2,50,000 + `1,50,000 + ` 1,00,000 + `3,00,000) / 88,200 hours
= `8,00,000 / 88,200 hours
= `9 per direct labour hour(approx.)
Calculation of Cost per Unit
Zm Rm Pm
Direct Costs:
Direct Material 450 420 880
Direct Labour (`) 80 150 200
Production Overhead: (`) 18 33.75 45
(80× 9/40) (150× 9/40) (200× 9/40)
Total cost per unit (`) 548 603.75 1125
(ii) Calculation of Cost-Driver level under Activity Based Costing
Zm Rm Pm Total
Quantity (units) 6,000 7,200 9,840 -
No. of orders (to be 200 240 328
768
rounded off for fraction) (6,000 / 30) (7,200 / 30) (9,840 / 30)
120 144 197
No. of production runs 461
(6,000 / 50) (7,200 / 50) (9,840 / 50)
No. of Inspections (done
120 144 197 461
for each production run)
Maintenance hours 4,000 2,000 4,000 10,000
Calculation of Cost-Driver rate
Budgeted Cost (`) Cost-driver level Cost Driver rate (`)
Activity
(a) (b) (c) = (a) / (b)
Material procurement 2,50,000 768 325.5
Set-up 1,50,000 461 325.5
Quality control 1,00,000 461 217.0
Maintenance 3,00,000 10,000 30.0

Calculation of total cost of products using Activity Based Costing
Particulars Product
Zm (`) Rm (`) Pm (`)
Direct Material 450 420 880
Direct Labour 80 150 200
Prime Cost per unit (A) 530 570 1080
Material procurement 10.85 10.85 10.85
(325.5×200/6000) (325.5×240/7200) (325.5×328/9840)
Set-up 6.51 6.51 6.51
(325.5×120/6000) (325.5×144/7200) (325.5×196.8/9840)
Quality control 4.34 4.34 4.34
(217×120/6000) (217×144/7200) (217×196.8/9840)
Maintenance 20.0 8.3 12.2
(4000×30/6000) (2000×30/7200) (4000×30/9840)
Overhead Cost per unit (B) 41.7 30.0 33.9
Total Cost per unit (A + B) 571.7 600.0 1113.9
(b) (i) (a) Statement of Joint Cost allocation of inventories of X, Y and Z
(By using Net Realisable Value Method)
Products Total
T U V
(`) (`) (`) (`)
Final sales value of 1,14,00,000 1,40,00,000 2,03,12,500 4,57,12,500
total production (1,900 × ` 6,000) (2,800 × `5,000) (3,125 × `6,500)
(Working Note 1)
Less: Additional cost -- -- (9,00,000) (9,00,000)
Net realisable value 1,14,00,000 1,40,00,000 1,94,12,500 4,48,12,500
(at split-off point)
Joint cost allocated 15,89,958 19,52,580 27,07,462 62,50,000
(Working Note 2)
Cost of goods sold as on March 31, 2022
(By using Net Realisable Value Method)
Products Total
T U V
(`) (`) (`) (`)
Allocated joint cost 15,89,958 19,52,580 27,07,462 62,50,000
Additional costs -- -- 9,00,000 9,00,000
Cost of goods 15,89,958 19,52,580 36,07,462 71,50,000
available for sale
(CGAS)
Less: Cost of ending 7,53,138 2,09,205 1,44,298 11,06,642
inventory
9

(Working Note 1) (CGAS×47.37%) (CGAS × 10.71%) (CGAS × 4%)
Cost of goods sold 8,36,820 17,43,375 34,63,163 60,43,358
Working Note:
1. Total production of three products for the year 2021-2022
Products Quantity Quantity of ending Total Ending inventory
sold in tones inventory in tons production percentage (%)
1 2 3 (4) = [(2) + (3)} (5) = (3)/ (4)
T 1000 900 1900 47.37
U 2500 300 2800 10.71
V 3000 125 3125 4.00
2. Joint cost apportioned to each product:
Total Joint cost
× Net Realisable Value of each product
Total Net RealisableValue
62,50,000
Total cost of Product T = ×1,14,00,000 = 15,89,958
4,48,12,500
62,50,000
Total cost of Product U = × 1,40,00,000 = 19,52,580
4,48,12,500
62,50,000
Total cost of Product V = × 1,94,12,500 = 27,07,462
4,48,12,500
6. (a) The advantages of zero-based budgeting are as follows:
• It provides a systematic approach for the evaluation of different activities and ranks them in
order of preference for the allocation of scarce resources.
• It ensures that the various functions undertaken by the organization are critical for the
achievement of its objectives and are being performed in the best possible way.
• It provides an opportunity to the management to allocate resources for various activities only
after having a thorough cost-benefit-analysis. The chances of arbitrary cuts and enhancement
are thus avoided.
• The areas of wasteful expenditure can be easily identified and eliminated.
• Departmental budgets are closely linked with corporation objectives.
• The technique can also be used for the introduction and implementation of the system of
‘management by objective.’ Thus, it cannot only be used for fulfillment of the objectives of
traditional budgeting but it can also be used for a variety of other purposes.
(b) Difference between Cost Accounting and Management Accounting
Basis Cost Accounting Management Accounting
(i) Nature It records the quantitative It records both qualitative and
aspect only. quantitative aspect.
(ii) Objective It records the cost of producing a It Provides information to
product and providing a service. management for planning and co-
ordination.
(iii) Area It only deals with cost It is wider in scope as it includes
Ascertainment. financial accounting, budgeting,
taxation, planning etc.
10

(iv) Recording of data It uses both past and present It is focused with the projection of
figures. figures for future.
(v) Development Its development is related to It develops in accordance to the
industrial revolution. need of modern business world.
(vi) Rules and It follows certain principles and It does not follow any specific
Regulation procedures for recording costs rules and regulations.
of different products.
(c) In integrated accounting system cost and financial accounts are kept in the same set of books.
Such a system will have to afford full information required for Costing as well as for Financial
Accounts. In other words, information and data should be recorded in such a way so as to enable
the firm to ascertain the cost (together with the necessary analysis) of each product, job, process,
operation or any other identifiable activity. It also ensures the ascertainment of marginal cost,
variances, abnormal losses and gains. In fact all information that management requires from a
system of Costing for doing its work properly is made available. The integrated accounts give full
information in such a manner so that the profit and loss account and the balance sheet c an be
prepared according to the requirements of law and the management maintains full control over the
liabilities and assets of its business.
Since, only one set of books are kept for both cost accounting and financial accounting purpose so
there is no necessity of reconciliation of cost and financial accounts.
(d) Cost units are usually the units of physical measurement like number, weight, area, volume, length,
time and value.
Industry or Product Cost Unit Basis
Automobile Number
Steel Ton
Cement Ton/ per bag etc.
Chemicals Litre, gallon, kilogram, ton etc.
Power Kilo-watt hour (kWh)
Transport Passenger- kilometer
(e)
Bin Card Stores Ledger
It is maintained by the storekeeper in the It is maintained in cost accounting
store. department.
It contains only quantitative details of It contains information both in quantity and
material received, issued and returned to value.
stores.
Entries are made when transaction takes It is always posted after the transaction.
place.
Each transaction is individually posted. Transactions may be summarized and then
posted.
Inter-department transfers do not appear Material transfers from one job to another
in Bin Card. job are recorded for costing purposes.
11

MOCK TEST PAPER 1
INTERMEDIATE COURSE
PAPER – 4: TAXATION
SECTION – A: INCOME TAX LAW (60 MARKS)
Working Notes should form part of the answer. Wherever necessary, suitable assumptions may be made by
the candidates and disclosed by way of a note. However, in answers to Question s in Division A,
working notes are not required.
The relevant assessment year is A.Y.2023-24.
Division A – Multiple Choice Questions
Write the most appropriate answer to each of the following multiple choice questions by choosing
one of the four options given. All questions are compulsory.
1. Mr. Kamal, an Indian citizen, aged 61 years, has set-up his business in Canada and is residing in
Canada since 2010. He owns a house property in Canada, half of which is used by him for his
residence and half is given on rent (converted into INR is ` 12,00,000 p.a.).
He purchased a flat in Delhi on 13.10.2020 for ` 42,00,000. The stamp duty value of the flat was
` 35,00,000. He has taken a loan from Canara Bank in India of ` 34,00,000 for purchase of this flat.
The interest on such loan for the F.Y. 2022-23 was ` 3,14,000 and principal repayment was ` 80,000.
Mr. Kamal has given this flat on monthly rent of ` 32,500 since April, 2022. The annual property tax of
Delhi flat is ` 40,000 which is paid by Mr. Kamal, whenever he comes to India to meet his parents.
Mr. Kamal visited India for 124 days during the previous year 2022-23. Before that he visited India in
total for 366 days during the period 1.4.2018 to 31.3.2022.
He had a house in Ranchi which was sold in May 2019. In respect of this house, he received arrears
of rent of ` 2,96,000 in February 2023 (not taxed earlier).
He also derived some other incomes during the F.Y. 2022-23 which are as follows:
(i) Profit from business in Canada ` 2,75,000
(ii) Interest on bonds of a Canadian Co. ` 6,20,000 out of which 50% was received in India.
(iii) Income from Apple Orchid in Nepal given on contract and the yearly contract fee of ` 5,00,000
for F.Y. 2022-23, was received by Kamal in Nepal.
Mr. Kamal has sold 10,000 listed shares @ ` 480 per share of A Ltd., an Indian company, on
15.9.2022, which he acquired on 05-04-2017 @` 100 per share. STT was paid both at the time of
acquisition as well as at the time of transfer of such shares.
On 31-01-2018, the shares of A Ltd. were traded on a recognized stock exchange as under:
Highest price - ` 300 per share
Average price - ` 290 per share
Lowest price - ` 280 per share
Based on the facts of the case scenario given above, choose the most appropriate answer to the
following questions:-
(i) What would be the residential status of Mr. Kamal for the A.Y. 2023-24?

(a) Resident and ordinarily resident in India
(b) Resident but not ordinarily resident in India
(c) Non-resident
(d) Deemed resident
(ii) What would be the amount of income taxable under the head “Income from house property” in the
hands of Mr. Kamal for the A.Y. 2023-24?
(a) ` 2,52,200
(b) ` 1,38,200
(c) ` 9,78,200
(d) ` 10,92,200
(iii) What amount of capital gain would arise in the hands of Mr. Kamal on transfer of shares of A Ltd?
(a) ` 18,00,000
(b) ` 19,00,000
(c) ` 20,00,000
(d) ` 38,00,000
(iv) What would be the total income of Mr. Kamal for the A.Y. 2023-24, if he does not opt to pay tax
u/s 115BAC?
(a) ` 22,82,200
(b) ` 22,68,200
(c) ` 22,48,200
(d) ` 21,68,200
(v) What would be the tax liability (computed in the manner so as to minimise his tax liability) of
Mr. Kamal for the A.Y. 2023-24?
(a) ` 1,82,950
(b) ` 1,87,110
(c) ` 1,80,350
(d) ` 1,84,510 (5 x 2 = 10 Marks)
2. Mrs. Archana, wife of Mr. Raj, started a business of trading in beauty products on 15.5.2022. She
invested ` 5 lakhs in the business on 15.5.2022 out of gift received from her husband, Mr. Raj. She
further invested ` 4 lakhs from her own savings on 15.12.2022. She earned profits of ` 1,50,000 from
her business for the financial year 2022-23. Which of the following statements is correct?
(a) Share of profit of ` 1,50,000 is includible in the hands of Mrs. Archana.
(b) Share of profit of ` 66,667 is includible in the hands of Mr. Raj and share of profit of ` 83,333 is
includible in the hands of Mrs. Archana.
(c) Share of profit of ` 83,333 is includible in the hands of Mr. Raj and share of profit of ` 66,667 is
includible in the hands of Mrs. Archana.
(d) Share of profit of ` 1,50,000 is includible in the hands of Mr. Raj. (2 Marks)

3. An amount of ` 60,000 was paid to Mr. Samar on 1.7.2022 towards fees for professional services
without deduction of tax at source. Subsequently, another payment of ` 75,000 was due to Mr. Samar
on 28.02.2023, from which tax @10% (amounting to ` 13,500) on the entire amount of ` 1,35,000 was
deducted and the net amount was paid on the same day to Mr. Samar. However, this tax of ` 13,500
was deposited only on 22.6.2023. The interest chargeable under section 201(1A) would be:
(a) ` 480
(b) ` 1,290
(c) ` 1,260
(d) ` 810 (2 Marks)
4. Mr. C, aged 35 years, is a working partner in M/s BCD, a partnership firm, with equal profit sharing
ratio. During the P.Y. 2022-23, the firm has paid remuneration to Mr. B, Mr. C and Mr. D, being the
working partners of the firm, of ` 2,00,000 each. The firm has paid interest on capital of ` 1,20,000 in
toto to all the three partners and the same is within the prescribed limit of 12%. The firm had a loss of
` 1,12,000 after debiting remuneration and interest on capital.
Note – Remuneration and interest on capital is authorized by the partnership deed
You, being the CA of Mr. C, are in the process of computing his total income. What would be his
taxable remuneration from the firm?
(a) ` 2,00,000
(b) ` 1,51,600
(c) ` 1,27,600
(d) ` 1,50,000 (2 Marks)
5. Income derived from farm building situated in the immediate vicinity of an agricultural land (not
assessed to land revenue) would be treated as agricultural income if such land is situated in –
(a) an area at a distance of 3 kms from the local limits of a municipality and has a population of
80,000 as per last census
(b) an area within 1.5 kms from the local limits of a municipality and has a population of 12,000 as
per last census
(c) an area within 2 kms from the local limits of a municipality and has a population of 11,00,000 as
per last census
(d) an area within 8 kms from the local limits of a municipality and has a population of 10,50,000 as
per last census (1 Mark)
6. The Gupta HUF in Maharashtra comprises of Mr. Harsh Gupta, his wife Mrs. Nidhi Gupta, his son
Mr. Deepak Gupta, his daughter-in-law Mrs. Deepti Gupta, his daughter Miss Preeti Gupta. Which of the
members of the HUF are eligible for coparcenary rights?
(a) Only Mr. Harsh Gupta and Mr. Deepak Gupta
(b) Only Mr. Harsh Gupta, Mr. Deepak Gupta and Miss Preeti Gupta
(c) Only Mr. Harsh Gupta, Mr. Deepak Gupta, Mrs. Nidhi Gupta and Mrs. Deepti Gupta
(d) All the members are co-parceners (1 Mark)

Division B – Descriptive Questions
Question No. 1 is compulsory
Attempt any two questions from the remaining three questions
1. Mr. Samar, a resident individual, aged 43 years, provides professional services in the field of interior
decoration. His Income & Expenditure A/c for the year ended 31st March, 202 3 is as under:
Expenditure ` Income `
To Employees’ Remuneration & 13,66,000 By Consultancy Charges 58,80,000
Vorteile
To Office & Administrative Exp. 3,14,000 By Interest on Public Provident Fund 60,000
(PPF) Account
To General Expenses 75,000 By Interest on Savings Bank Account 20,000
To Electricity Expenses 65,000 By Interest on National Savings 21,000
Certificates VIII Issue (for 3rd year)
To Medical Expenses 80,000
To Purchase of Furniture 48,000
To Depreciation 90,000
To Excess of income over exp. 39,43,000
59,81,000 59,81,000
The following other information relates to financial year 2022-23:

(i) The expenses on Employees' Remuneration & Benefits includes:
(a) Family Planning expenditure of ` 20,000 incurred for the employees which was revenue in
nature. The same was paid through account payee cheque.
(b) Payment of salary of ` 25,000 per month to sister-in-law of Mr. Samar, who was in-charge
of the Accounts & Receivables department. However, in comparison to similar work profile,
the reasonable salary at market rates is ` 20,000 per month.
(ii) Amount received by Mr. Samar as Employees' Contribution to EPF for the month of February,
2023 - ` 10,000 was deposited after the due date under the relevant Act relating to EPF.
(iii) Medical Expenses of ` 80,000 as appearing in the Income & Expenditure A/c was expensed for
the treatment of father of Mr. Samar. His father was 72 years old and was not covered by any
health insurance policy. The said payment of ` 80,000 was made through account payee cheque.
(iv) General expenses as appearing in the Income & Expenditure A/c, includes a sum of ` 25,000
paid to Ms. Anjaleen on 5th January, 2023 as commission for securing work from new clients.
This payment was made to her without deduction of tax at source.
(v) Written down value of the depreciable assets as on 1st April, 2022 were as follows:
Professional Books ` 90,000
Computers ` 35,000
(vi) The new Furniture as appearing in the Income & Expenditure A/c was purchased on 31st August,
2022 and was put to use on the same day. The payment was made as under:
- ` 18,000 paid in cash at the time of purchase of new furniture on 31.08.2022.

- ` 19,000 paid by account payee cheque on 05.09.2022 as balance cost of new furniture and
- ` 11,000 paid in cash on 31.08.2022 to the transporter as freight charges for the new
furniture.
(vii) Mr. Samar purchased a car on 02.04.2021 for ` 3,35,000 for personal use. However, on
30.04.2022 he brought the said car for use in his profession. The fair market value of the car as
on 30.04.2022 was ` 2,50,000.
(viii) Mr. Samar made a contribution of ` 1,00,000 in his PPF A/c on 31.01.2023.
(ix) The Gross Professional Receipts of Mr. Samar for P.Y. 2021-22 was ` 52,00,000.
Compute the total income and tax liability of Mr. Samar for A.Y. 2023-24, assuming that he has not
opted for payment of tax under section 115BAC.
Ignore provisions under section 14A relating to disallowance of expenditure incurred in relation to
income not includible in total income. (14 Marks)
2. (a) Determine the residential status of Mrs. Rose and compute her gross total income chargeable to
tax for the A.Y. 2023-24 from the following information gathered from her documents:
Mrs. Rose is an Australian, got married to Mr. Ram of India in Australia on 2.01.2022 and came
to India for the first time on 18.02.2022. She left for Australia on 15.9.2022. She returned to India
again on 23.03.2023.
On 01.04.2022, she had purchased a Flat in Delhi, which was let out to Mr. Sahil on a rent of
` 25,000 p.m. from 1.5.2022. She had taken loan from an Indian bank for purchase of this flat on
which bank had charged interest of ` 1,85,500 upto 31.03.2023.
While in India, during the previous year 2022-23, she had received a gold chain from her in-laws
worth ` 1,50,000. (6 Marks)
(b) State in brief the applicability of provisions of tax deduction at source, the rate and amount of tax
deduction in the following cases for the financial year 2022-23 under Income-tax Act, 1961.
Assume that all payments are made to residents:
(i) Mr. Amar has paid ` 6,00,000 on 15.10.2022 to M/s Fresh Cold Storage Pvt. Ltd. for
preservation of fruits and vegetables. He is engaged in the wholesale business of fruits &
vegetable in India having turnover of ` 3 crores during the previous year 2022-23.
(ii) Mr. Ramu, a salaried individual, has paid rent of ` 60,000 per month to Mr. Shiv Kumar from
1st July, 2022 to 31st March, 2023. Mr. Shiv Kumar has not furnished his Permanent
Account Number. (4 Marks)
(c) Examine the following transactions with reference to applicability of the provision of tax collected
at source and the rate and amount of the TCS for the A.Y. 2023-24.
(i) Mr. Kalpit bought an overseas tour programme package for Singapore for himself and his
family of ` 5 lakhs on 01-11-2022 from an agent who is engaged in organising foreign tours
in course of his business. He made the payment by an account payee cheque and provided
the permanent account number to the seller. Assuming Kalpit is not liable to deduct tax at
source under any other provisions of the Act.
(ii) Mr. Anuj doing business of textile as a proprietor. His turnover in the business is ` 11 crores
in the previous year 2021-22. He received payment against sale of textile goods from
Mr. Ram of ` 75 lakhs against the sales made to him in the previous year 2022-23.
Mr. Ram’s turnover for the P.Y. 2021-22 was ` 5 crores. (Assuming all the sales are
domestic sales). (4 Marks)

3. (a) Mr. Shiva purchased a house property on February 15, 1979 for ` 3,24,000. In addition, he has
also paid stamp duty value @10% on the stamp duty value of ` 3,50,000.
In April, 2008, Mr. Shiva entered into an agreement with Mr. Mohan for sale of such property for
` 14,35,000 and received an amount of ` 1,11,000 as advance. However, the sale consideration
did not materialize and Mr. Shiva forfeited the advance. In May 2015, he again entered into an
agreement for sale of said house for ` 20,25,000 to Ms. Deepshikha and received ` 1,51,000 as
advance. However, as Ms. Deepshikha did not pay the balance amount, Mr. Shiva forfeited the
advance. In August, 2015, Mr. Shiva constructed the first floor by incurring a cost of ` 3,90,000.
On November 15, 2022, Mr. Shiva entered into an agreement with Mr. Manish for sale of such
house for ` 30,50,000 and received an amount of ` 1,50,000 as advance through an account
payee cheque. Mr. Manish paid the balance entire sum and Mr. Shiva transferred the house to
Mr. Manish on February 20, 2023. Mr. Shiva has paid the brokerage @1% of sale consideration
to the broker.
On April 1, 2001, fair market value of the house property was ` 11,85,000 and Stamp duty value
was ` 10,70,000. Further, the Valuation as per Stamp duty Authority of such house on
15th November, 2022 was ` 39,00,000 and on 20 th February, 2023 was ` 41,00,000.
Compute the capital gains in the hands of Mr. Shiva for A.Y.2023-24.
CII for F.Y. 2001-02: 100; F.Y. 2008-09: 137; F.Y. 2015-16: 254; F.Y. 2022-23: 331 (7 Marks)
(b) Mr. Sonu, General Manager of Akon Ltd., Delhi, furnishes the following particulars for the
financial year 2022-23:
(i) Salary ` 46,000 per month
(ii) Value of medical facility in a hospital maintained by the company ` 7,000
(iii) Rent free accommodation owned by the company
(iv) Housing loan of ` 6,00,000 given on 01.04.2018 at the interest rate of 6% p.a. (No
repayment made during the year). The rate of interest charged by State Bank of India (SBI)
as on 01.04.2022 in respect of housing loan is 10%.
(v) Gifts in kind made by the company on the occasion of wedding anniversary of
Mr. Sonu ` 4,750.
(vi) A four seater dining table was provided to Mr. Sonu at his residence. This was purchased by
the company on 1.5.2019 for ` 60,000 and sold to Mr. Sonu on 1.8.2022 for ` 30,000.
(vii) Personal purchases through credit card provided by the company amounting to ` 10,000
was paid by the company. No part of the amount was recovered from Mr. Sonu.
(viii) A Maruti Suzuki car which was purchased by the company on 16.7.2019 for ` 2,50,000 was
sold to Mr. Sonu on 14.7.2022 for ` 80,000.
Other income received by the assessee during the previous year 2022-23:
Particulars `
(a) Interest on Fixed Deposits with a company 5,000
(b) Income from specified mutual fund 3,000
(c) Interest on bank fixed deposits of a minor married daughter 3,000
(ix) Contribution to LIC towards premium under section 80CCC ` 1,00,000
6

(x) Deposit in PPF Account made during the year 2022-23 ` 40,000
Compute the taxable income of Mr. Sonu for the Assessment year 2023-24 assuming he is not
opting for section 115BAC. (7 Marks)
4. (a) Mr. Rakesh furnishes the following information for the financial year 2022-23.
Particulars `
Loss from speculation business-X 85,000
Profit from speculation business-Y 45,000
Interest on borrowings in respect of self-occupied house property 3,18,000
Income from let out house property 1,20,000
Presumptive Income from trading and manufacturing business under section 1,00,000
44AD
Salary from XYZ (P) Ltd. 5,25,000
Interest on PPF deposit 75,000
Long term capital gain on sale of Vacant site 1,25,000
Brought forward loss of business of assessment year 2018-19 1,00,000
Donation to a charitable trust registered under section 12AB and approved under 60,000
section 80G (payment made via credit card)
Compute total income of Mr. Rakesh for the assessment year 2023-24 also show the loss,
eligible to be carried forward. Assume that he does not opt for section 115BAC. (7 Marks)
(b) Mr. Om has gifted a house property valued at ` 50 lakhs to his wife, Mrs. Uma, who in turn has
gifted the same to Mrs. Pallavi, their daughter-in-law. The house was let out at ` 25,000 per
month throughout the year. Compute the total income of Mr. Om and Mrs. Pallavi.
Will your answer be different if the said property was gifted to his son, husband of Mrs. Pallavi?
(4 Marks)
(c) Mr. Ram furnished his return of income for the A.Y. 2023-24 on 20.07.2022. Due to missing
information for payment of taxes in the return of income, the Assessing Officer considers it
defective under section 139(9) of the Income-tax Act, 1961.
(i) What are the consequences if defect is not rectified within the time allowed?
(ii) Specify the remedies available if not rectified within time allowed by the Assessing Officer?
(3 Marks)

SECTION B - INDIRECT TAXES (40 MARKS)
QUESTIONS
(i) Working Notes should form part of the answers. However, in answers to Question in Division A, working
notes are not required.
(ii) Wherever necessary, suitable assumptions may be made by the candidates, and disclosed by way of
notes.
(iii) All questions should be answered on the basis of position of the CGST Act, 2017 and the IGST Act,
2017 as amended by the Finance Act, 2022, including significant notifications and circulars issued, up
to 31st October 2022.
Division A - Multiple Choice Questions (MCQs)
Write the most appropriate answer to each of the following multiple choice questions by choosing
one of the four options given. All questions are compulsory.
Total Marks: 12 Marks
Poorva Logistics, a Goods Transport Agency, is registered under GST. It did not exercise the option to itself
pay GST on the services supplied by it in the preceding financial year. It provided goods transport services
(taxable @ 5%) to the following persons in February of preceding financial year-
(a) Kunal Traders, an unregistered partnership firm
(b) Mr. Amar, who is not registered under GST
(c) Small Traders Co-Operative Society registered under Societies Registration Act
In a particular consignment in March of preceding financial year, Poorva Logistics transported the following-
(a) Defence Equipments
(b) Railway Equipments
(c) Organic Manure
Poorva Logistics exercises the option to itself pay GST on services supplied by it @ 12% from April, of the
current financial year. It provided goods transport services to Bama Steels Pvt. Ltd. on 1 st April and issued
an invoice dated 5 th May. Payment was received on 6 th May.
Based on the information provided above, choose the most appropriate answer for the following questions -
1. Which of the following persons are liable to pay GST under reverse charge in respect of the GTA
services provided by Poorva Logistics in February of the preceding financial year?
(i) Kunal Traders
(ii) Mr. Amar
(iii) Small Traders Co-operative society
(a) i & ii
(b) ii & iii
(c) i & iii
(d) i, ii & iii
2. Transportation of _________ by Poorva Logistics is exempt from GST.
(i) Defence Equipments
(ii) Railway Equipments
8

(iii) Organic Manure
(a) i
(b) i & ii
(c) i & iii
(d) i , ii & iii
3. What will be the time of supply in respect of the services provided by Poorva Logistics to Bama Steels
Pvt. Ltd.?
(a) 6th May
(b) 5th May
(c) 30th May
(d) 1st April (3 x 2 Marks = 6 Marks)
4. Determine which of the following independent transactions even if made without consideration in terms
of Schedule I of the CGST Act, 2017, will be deemed as supply?
(i) AB & Associates transfers stock of goods from its Mumbai branch to Kolkata depot for sale of such
goods at the depot.
(ii) Mr. Raghuveer, a dealer of air-conditioners permanently transfers the motor vehicle free of cost.
ITC on said motor vehicle was blocked and therefore, was not availed.
(iii) Mrs. Riddhi, an employee of Sun Ltd., received gift from her employer on the occasion of Diwali
worth ` 21,000.
(a) (i)
(b) (ii)
(c) (iii)
(d) Both (i) and (ii) (2 Marks)
5. PZY Ltd. is engaged in manufacturing of motor car. The company paid following amount of GST to its
suppliers against the invoices raised to it. Compute the amount of ineligible input tax credit under GST
law:-
S. No. Particulars GST Paid (`)
1. General insurance taken on cars manufactured by PZY Ltd. 1,00,00,000
2. Buses purchased for transportation of employees (Seating capacity 23) 25,00,000
3. Life and health insurance for employees under statutory obligation 6,00,000
4. Outdoor catering in Diwali Mela organized for employees 3,50,000
(a) ` 9,50,000
(b) ` 3,50,000
(c) ` 1,31,00,000
(d) ` 28,50,000 (2 Marks)
6. Ms. Pearl is a classical singer. She wants to organize a classical singing function, so she booked an
auditorium on 10th August for a total amount of ` 20,000. She paid ` 5,000 as advance on that day.
The classical singing function was organized on 10th October. The auditorium owner issued invoice to

Ms. Pearl on 25th November amounting to ` 20,000. Pearl made balance payment of ` 15,000 on 30th
November. Determine the time of supply in this case.
(a) Time of supply is 25th November for ` 20,000.
(b) Time of supply is 25th November for ` 5,000 & 30th November for ` 15,000.
(c) Time of supply is 10th August for ` 5,000 & 10th October for ` 15,000.
(d) Time of supply is 10th October for ` 20,000. (2 Marks)
Division B - Descriptive Questions

Attempt any two questions out of remaining three questions.
Total Marks: 28 Marks
1. M/s. Flow Pro, a registered supplier, is engaged in manufacturing heavy steel fabrication machine. The
details pertaining to pricing of each such machine is as follows:
S. No. Particulars Amount (`)
(i) Price of the machine [excluding taxes and other charges mentioned at 25,00,000
S. Nos. (ii) and (iii)]
(ii) Third party inspection charges 5,00,000
[Such charges were payable by M/s Flow Pro but the same have been
directly paid by BP Ltd. to the inspection agency. These charges were
not recorded in the invoice issued by M/s Flo Pro.]
(iii) Freight charges for delivery of the machine 2,00,000
[M/s Flow Pro has agreed to deliver the goods at BP Ltd.’s premises]
(iv) Subsidy received from the State Government on sale of machine under 5,00,000
Skill Development Programme
[Subsidy is directly linked to the price]
(v) Discount of 2% is offered to BP Ltd. on the price mentioned at S. No. (i)
above and recorded in the invoice
Note: Price of the machine is net of the subsidy received.
M/s. Flow Pro has supplied one such machine in the month of October. It also provided the following
details pertaining to the purchases made/services availed during said month:
S. No. Inward IGST (`) Remarks
supplies
(i) Inputs ‘A’ 1,00,000 One invoice on which IGST payable was ` 10,000, is
missing
(ii) Inputs ‘B’ 50,000 Inputs are to be received in two lots. First lot has been
received in October
(iii) Capital goods 1,20,000 M/s. Flow Pro has capitalised the capital goods at full
invoice value inclusive of GST as it will avail depreciation
on the full invoice value.
(iv) Input services 2,25,000 One invoice dated 20 th January of preceding financial year
on which GST payable was ` 50,000 was missing and has
been found in October
10

Compute the net GST payable in cash by M/s. Flow Pro for October assuming that all the inward supplies
are inter-State supplies and all outward supplies are intra-State supplies. Assume the rates of taxes to
be as under:
Particulars Rates of tax
Central tax (CGST) 9%
State Tax (SGST) 9%
Integrated tax (IGST) 18%
Make suitable assumptions, wherever necessary. All the conditions necessary for availing the ITC have
been fulfilled. Opening balance of the input tax credit for the relevant period is Nil. The annual return
for the previous financial year was filed on 15 th September of the current year. (8 Marks)
2. (a) State with reasons, whether GST is payable in the following independent cases: -
(i) Food supplied by the canteen run by a hospital to the in-patients as advised by the doctors.
(ii) An RWA in a housing society, registered under GST, collects the maintenance charges of
` 6,500 per month per member. (2 x 2 Marks = 4 Marks)
(b) M/s United Electronics, a registered dealer, is supplying all types of electronic appliances in the
State of Karnataka. Its aggregate turnover in the preceding financial year by way of supply of
appliances is ` 120 lakh.
The firm also expects to provide repair and maintenance service of such appliances from the
current financial year.
With reference to the provisions of the CGST Act, 2017, examine:
(i) Whether the firm can opt for the composition scheme, under section 10(1) and 10(2), for the
current financial year, as the turnover may include supply of both goods and services?
(ii) If yes, up to what amount, the services can be supplied? (6 Marks)
3. (a) Determine the effective date of registration in following cases:
(i) The aggregate turnover of Dhampur Footwear Industries of Delhi has exceeded the applicable
threshold limit of ` 40 lakh on 1 st September. It submits the application for registration on
20th September. Registration certificate is granted to it on 25 th September.
(ii) Mehta Teleservices is an architect in Lucknow. Its aggregate turnover exceeds ` 20 lakh on
25th October. It submits the application for registration on 27 th November. Registration
certificate is granted to it on 5 th December. (2 x 3 Marks = 6 Marks)
(b) Udai Singh, a registered supplier, has received advance payment with respect to services to be
supplied to Sujamal. His accountant asked him to issue the receipt voucher with respect to such
services to be supplied. However, he is apprehensive as to what would happen in case a receipt
voucher is issued, but subsequently no services are supplied. You are required to advise Udai
Singh regarding the same. (4 Marks)
4. (a) A registered person must pay to the supplier, the value of the goods and/or services along with the
tax within 180 days from the date of issue of invoice. State the exceptions to said rule. (3 Marks)
(b) The goods supplied on hire purchase basis will be treated as supply of services. Examine the
validity of the statement. (2 Marks)
(c) Briefly elaborate the provisions relating to nil GSTR-3B. (5 Marks)
11

MOCK TEST PAPER 1
INTERMEDIATE COURSE
PAPER – 4: TAXATION
SECTION – A: INCOME TAX LAW
SOLUTIONS
Division A – Multiple Choice Questions
MCQ Sub-part Most Appropriate Answer MCQ No. Most Appropriate Answer
No.
1. (i) (b) 2. (d)
(ii) (b) 3. (b)
(iii) (a) 4. (c)
(iv) (d) 5. (a)
(v) (c) 6. (b)
Division B – Descriptive Questions

1. Computation of total income of Mr. Samar for A.Y. 2023-24
18BParticulars ` ` `
20BI Income from business or profession
Excess of income over expenditure 39,43,000
Add: Items debited but not allowable while
computing business income
- Family planning expenditure incurred for 20,000
employees [not allowable as deduction since
expenditure on family planning for employees is
allowed only to a company assessee / not allowed
in case of individuals. Since the amount is
debited to Income and Expenditure Account, the
same has to be added back for computing
business income]
- Salary payment to sister-in-law in excess of Nil
market rate [Any expenditure incurred for which
payment is made to a relative, to the extent it is
considered unreasonable is disallowed. However,
sister-in-law is not included in the definition of
“relative”1 for the purpose of section 40A(2).
Therefore, no adjustment is required for excess
salary paid to Mr. Samar’s sister-in-law]
- Medical expenses for the treatment of father [Not 80,000
allowed as deduction since it is a personal
expenditure / not an expenditure incurred for the
purpose of business of Mr. Samar. Since the
amount is debited to Income and Expenditure
1
As per section 2(41)
1

Account, the same has to be added back for
computing business income]
- Commission to Ms. Anjaleen without deduction of 7,500
tax at source [Mr. Samar would be liable to
deduct tax at source on commission since his
gross receipts from profession exceeded ` 50
lakhs during F.Y.2021-22. Since commission has
been paid without deduction of tax at source,
hence 30% of ` 25,000, being commission paid
without deducting tax at source, would be
disallowed under section 40(a)(ia) while
computing the business income of A.Y.2023-24]
- Depreciation as per books of account 90,000
- Purchase of Furniture [not allowable, since it is a 48,000 2,45,500
capital expenditure]
41,88,500
Add: Employees’ Contribution to EPF [Sum received 10,000
by the assessee from his employees as
contribution to EPF is income of the employer.
Since the amount is not credited to Income and
Expenditure Account, the same has to be added
for computing business income. Deduction in
respect of such sum is allowed only if such
amount is credited to the employee’s account on
or before due date under the relevant Act. Since,
the employees contribution to EPF for February
2023 is deposited after the due date under the
relevant Act, no deduction would be available]
41,98,500
Less: Depreciation as per Income-tax Rules
- On Professional Books [` 90,000 x 40%] 36,000
- On Computers [` 35,000 x 40%] 14,000
- On Furniture [` 19,000 x 10%, since it has been 1,900
put to use for more than 180 days during the year]
[Any expenditure for acquisition of any asset in
respect of which payment or aggregate of
payment made to a person, otherwise than by an
A/c payee cheque/ bank draft or use of ECS or
through prescribed electronic mode, exceeds
` 10,000 in a day, such expenditure would not
form part of actual cost of such asset. Hence,
` 18,000 and ` 11,000 paid on 31.8.2022 in cash
would not be included in the actual cost of
furniture]
- On Car [` 3,35,000 x 15%] [Actual cost of car 50,250 1,02,150
would be the purchase price of the car to
Mr. Samar, i.e., ` 3,35,000]
40,96,350

Less: Items of income credited but not taxable or
taxable under any other head of income
- Interest on Public Provident Fund [Exempt] 60,000
- Interest on savings bank account [Taxable under 20,000
the head “Income from other sources”]
- Interest on National Savings Certificates VIII Issue 21,000 1,01,000
(3rd Year) [Taxable under the head “Income from
other sources”]
39,95,350
II Income from Other Sources
Interest on savings bank account 20,000
Interest on National Savings Certificates VIII Issue (3 rd 21,000 41,000
Year)
Gross Total Income 40,36,350
Less: Deduction under Chapter VI-A
Deduction under section 80C
Contribution to PPF 1,00,000
Interest on NSC (3 rd Year) (Reinvested) 21,000 1,21,000
Deduction under section 80D
Medical expenses for the treatment of father 50,000
[Since Mr. Samar’s father is a senior citizen and
not covered by any health insurance policy,
payment for medical expenditure by a mode
other than cash would be allowed as deduction
to the extent of ` 50,000]
Deduction under section 80TTA 10,000 1,81,000
Interest on savings bank account to the extent
of ` 10,000
Total Income 38,55,350
Computation of tax liability of Mr. Samar for A.Y.2023-24
Particulars ` `
Tax on total income of ` 38,55,350
Upto ` 2,50,000 Nil
` 2,50,001 – ` 5,00,000[@5% of ` 2.50 lakh] 12,500
` 5,00,001 – ` 10,00,000[@20% of ` 5 lakh] 1,00,000
` 10,00,001- ` 38,55,350 [@30% of ` 28,55,350] 8,56,605
9,69,105
Add: Health and education cess@4% 38,764
Tax liability 10,07,869
Tax liability (rounded off) 10,07,870

2. (a) Under section 6(1), an individual is said to be resident in India in any previous year, if he satisfies
any one of the following conditions:
(i) He has been in India during the previous year for a total period of 182 days or more, or
(ii) He has been in India during the 4 years immediately preceding the previous year for a total
period of 365 days or more and has been in India for at least 60 days in the previous year .
If an individual satisfies any one of the conditions mentioned above, he is a resident. If both the
above conditions are not satisfied, the individual is a non-resident.
Therefore, the residential status of Mrs. Rose, an Australian, for A.Y.2023-24 has to be
determined on the basis of her stay in India during the previous year relevant to A.Y. 20 23-24 i.e.
P.Y.2022-23 and in the preceding four previous years.
Her stay in India during the previous year 2022-23 and in the preceding four years are as under:
P.Y. 2022-23
01.04.2022 to 15.09.2022 - 168 days
23.03.2023 to 31.03.2023 - 9 days
Total 177 days
Four preceding previous years
P.Y.2021-22 [1.4.2021 to 31.3.2022] - 42 days
P.Y.2020-21 [1.4.2020 to 31.3.2021] - Nil
P.Y.2019-20 [1.4.2019 to 31.3.2020] - Nil
P.Y.2018-19 [1.4.2018 to 31.3.2019] - Nil
Total 42 days
The total stay of Mrs. Rose during the previous year in India was less than 182 days and during
the four years preceding this year was for 42 days. Therefore, due to non-fulfillment of any of the
two conditions for a resident, she would be treated as non-resident for the Assessment Year
2023-24.
Computation of gross total income of Mrs. Rose for the A.Y. 2023-24
Particulars ` `
Income from house property
Flat located in Delhi let-out from 01.05.2022 to 31.03.2023 @
` 25,000/- p.m.
Gross Annual Value [` 25,000 x 11]2 2,75,000
Less: Municipal taxes Nil
Net Annual Value (NAV) 2,75,000
Less: Deduction under section 24
30% of NAV 82,500
Interest on loan [fully allowable as deduction, since
property is let-out] 1,85,500 2,68,000 7,000
2Actual rent received has been taken as the gross annual the value in absence of other information (i.e. Municipal
value, fair rental value and standard rent) in the question.
4

Income from Other Sources
Gold chain worth ` 1,50,000 received from parents of husband Nil
would be exempt, since parents of husband fall within the
definition of relatives and gifts from a relative are not
chargeable to tax.
Gross Total income 7,000
(b) TDS implications

(i) The arrangement between Mr. Amar , the customer, and M/s. Fresh Cold Storage Pvt. Ltd.,
the cold storage owner, is basically contractual in nature and main object of the cold storage
is to preserve perishable goods by mechanical process and storage of such goods is only
incidental. Hence, the provisions of section 194C will be applicable to the amount of ` 6
lakh paid by Mr. Amar to the cold storage company 3.
Accordingly, tax has to be deducted@2% on ` 6 lakh.
TDS u/s 194C = 2% x ` 6 lakh = ` 12,000
(ii) Mr. Ramu, being a salaried individual, has to deduct tax at source @ 5% u/s 194-IB on the
annual rent paid by him from the last month’s rent (rent of March, 2023), since the rent paid
by him exceeds ` 50,000 p.m.
Since his landlord Mr. Shiv Kumar has not furnished his PAN to Mr. Ramu, tax has to be
deducted @ 20% instead of 5%. However, the same cannot exceed ` 60,000, being rent for
March, 2023.
TDS u/s 194-IB = ` 5,40,000 (` 60,000 x 9) x 20% = ` 1,08,000, but restricted to
` 60,000, being rent for March, 2023.
(c) TCS implications
(i) Tax @ 5% is required to be collected u/s 206C(1G) by the seller of an overseas tour
programme package from Mr. Kalpit, being the buyer of an overseas tour package, even if
payment is made by account payee cheque.
Accordingly, tax has to be collected@5% on ` 5 lakh.
TCS = 5% x ` 5 lakh = ` 25,000
(ii) Mr. Anuj is required to collect tax @0.1% u/s 206C(1H) from Mr. Ram, since his turnover in
the P.Y.2021-22 exceeds `10 crores, and the sales receipts from Mr. Ram in the
P.Y.2022-23 exceeds ` 50 lakhs. Tax has to be collected by Mr. Anuj on ` 25 lakhs, being
the amount exceeding ` 50 lakhs, at the time of receipt.
TCS = 0.1% x ` 25 lakhs = ` 2,500
3. (a) Computation of Capital gains in the hands of Mr. Shiva for A.Y. 2023-24
Actual sale consideration 30,50,000
Valuation as per Stamp duty Authority on the date of 39,00,000
agreement
(Where the actual sale consideration is less than the value
3 Circular No. 1/2008 dated 10.1.2008

5

adopted by the Stamp Valuation Authority for the purpose of
charging stamp duty, and such stamp duty value exceeds
110% of the actual sale consideration then, the value adopted
by the Stamp Valuation Authority shall be taken to be the full
value of consideration as per section 50C.
However, where the date of agreement is different from the date
of registration, stamp duty value on the date of agreement can
be considered, provided the whole or part of the consideration is
received by way of account payee cheque/bank draft or by way
of ECS through bank account or such other electronic mode as
may be prescribed on or before the date of agreement.
In the present case, since part of the payment is made by
account payee cheque on the date of agreement, the stamp
duty value on the date of agreement would be considered as
full value of consideration)
Deemed Full value of consideration [Since stamp duty 39,00,000
value on the date of agreement exceeds 110% of the actual
consideration, stamp duty value would be deemed as Full
Value of Consideration]
Less: Expenses on transfer (Brokerage @1% of 30,500
` 30,50,000)
Net sale consideration 38,69,500
Less: Indexed cost of acquisition (Note 1) 31,74,290
Less: Indexed cost of improvement (Note 2) 5,08,228 36,82,518
Long term capital gain 1,86,982
Notes:
(1) Computation of indexed cost of acquisition
Cost of acquisition, 10,70,000
Being the higher of
(i) lower of Fair market value i.e., ` 11,85,000 and 10,70,000
Stamp duty value i.e., ` 10,70,000, on April 1,
2001
(ii) Actual cost of acquisition (` 3,24,000 + ` 35,000, 3,59,000
being stamp duty @10% of ` 3,50,000
Less: Advance money taken from Mr. Mohan and
forfeited 1,11,000
Cost of acquisition for indexation 9,59,000
Indexed cost of acquisition (` 9,59,000 x 331/100) 31,74,290
(2) Computation of indexed cost of improvement

Particulars Amount (`)
Cost of construction of first floor in August, 2015 3,90,000
Indexed cost of improvement (` 3,90,000 x 331/254) 5,08,228

(3) Where advance money has been received by the assessee, and retained by him, as a result
of failure of the negotiations, section 51 will apply. The advance retained by the assessee
will go to reduce the cost of acquisition. Indexation is to be done on the c ost of acquisition
so arrived at after reducing the advance money forfeited [i.e. ` 10,70,000 ` 1,11,000 (being
the advance money forfeited during the P.Y.2008-09) = ` 9,59,000]. However, where the
advance money is forfeited during the previous year 2014-15 or thereafter, the amount
forfeited would be taxable under the head “Income from Other Sources” and such amount
will not be deducted from the cost of acquisition of such asset while calculating capital
gains. Hence, ` 1,51,000, being the advance received from Ms. Deepshikha and retained by
him, would have been taxable under the head “Income from other sources” in the hands of
Mr. Shiva in A.Y.2016-17.
(b) Computation of taxable income of Mr. Sonu for the A.Y. 2023-24
Particulars ` `
(a) Income from Salaries (See Working Note below) 7,12,800
(b) Income from Other Sources
(i) Interest on fixed deposit with a company 5,000
(ii) Income from specified mutual fund 3,000
(iii) Interest on Fixed Deposit received by minor daughter
(` 3,000 - ` 1500) 1,500 9,500
Gross total income 7,22,300
Less: Deductions under Chapter VI-A
Section 80C – PPF 40,000
Section 80CCC 1,00,000 1,40,000
Working Note:
Computation of salary income of Mr. Sonu for the A.Y. 2023-24
Particulars `
Salary [` 46,000 x 12] 5,52,000
Medical facility [in the hospital maintained by the company is exempt] _
Rent free accommodation
15% of salary is taxable (i.e. ` 5,52,000 × 15% as per Rule 3(1)) 82,800
Valuation of perquisite of interest on loan
[Rule 3(7)(i)] – Perquisite value would be 10% as reduced by actual rate of 24,000
interest charged i.e. [10% - 6% = 4% x ` 6,00,000]
Gift given on the occasion of wedding anniversary ` 4,750 is exempt, since its -
value is less than ` 5,000
Use of dining table for 4 months
[` 60,000 x 10 /100 x 4 /12] 2,000
Perquisite on sale of dining table
Cost 60,000
Less: Depreciation on straight line method @ 10% for 3 years 18,000
Written Down Value 42,000
Less: Amount paid by the assessee 30,000 12,000
7

Purchase through credit card – not being a privilege but covered by 10,000
section 17(2)(iv)
Perquisite on sale of car
Original cost of car 2,50,000
Less: Depreciation from 16.7.2019 to 15.7.2020 @ 20% 50,000
2,00,000
Less: Depreciation from 16.7.2020 to 15.7.2021 @ 20% 40,000
Value as on 14.07.2022- being the date of sale to employee 1,60,000
Less: Amount received from the assessee on 14.07.2022 80,000 80,000
Gross Salary 7,62,800
Less: Standard deduction under section 16(ia) 50,000
Taxable Salary 7,12,800
Note: Under Rule 3(7)(viii), while calculating the perquisite value of benefit to the employee arising
from the transfer of any movable asset, the normal wear and tear is to be calculated in respect of each
completed year during which the asset was put to use by the employer. In the given case the third
year of use of car is completed on 15.7.2022 whereas the car was sold to the employee on 14.7.2022.
The solution worked out above provides for wear and tear for only two years.
4. (a) Computation of total income of Mr. Rakesh for A.Y.2023-24
Particulars ` `
Salary from XYZ (P) Ltd. 5,25,000
Less: Standard Deduction u/s 16(ia) 50,000 4,75,000
Income from house property
Income from let out house property 1,20,000
Less: Loss from self-occupied house property to the extent of
` 2 lakhs, allowable as deduction u/s 24(b) in respect of interest on
borrowings 2,00,000
(80,000)
Profits and gains from business or profession
Profit from speculation business Y 45,000
Less: Loss of ` 85,000 from speculation business X set-off against
profit from speculation business Y to the extent of such profit (45,000) Nil
Presumptive Income from trading and manufacturing business 1,00,000

Less: Brought forward business loss of A.Y. 2018-19 set-off since the
period of eight assessment years has not expired (1,00,000) Nil
Capital Gains
Long term capital gain on sale of vacant site 1,25,000
Less: Loss from house property to be set-off (It is more beneficial for
Mr. Rakesh to set-off the loss from house property against the long-
term capital gains, since it is taxable @20%) (80,000) 45,000

Income from Other Sources
Interest on PPF deposit 75,000
Less: Exempt 75,000 Nil
Gross Total Income 5,20,000
Less: Deduction under Chapter VI-A
Deduction under section 80G
Donation to recognized and approved charitable trust [Donation of
` 60,000 to be first restricted to ` 47,500, being 10% of adjusted total
income of ` 4,75,000 (` 5,20,000 – ` 45,000). Thereafter, deduction
would be computed at 50% of ` 47,500. 23,750
Losses to be carried forward to A.Y.2024-25

Particulars `
Loss from speculation business X (` 85,000 - ` 45,000) 40,000
Loss from speculation business can be set-off only against profits of any other
speculation business. If loss cannot be so set-off, the same has to be carried
forward to the subsequent year for set off against income from speculation
business, if any, in that year.
(b) As per section 27(i), an individual who transfers otherwise than for adequate consideration any
house property to his spouse, not being a transfer in connection with an agreement to live apart,
shall be deemed to be the owner of the house property so transferred.
Therefore, in this case, Mr. Om would be the deemed owner of the house property transferred to
his wife Mrs. Uma without consideration.
As per section 64(1)(vi), income arising to the son’s wife from assets transferred, directly or
indirectly, to her by an individual otherwise than for adequate consideration would be included in
the total income of such individual.
Income from let-out property is ` 2,10,000 [i.e., ` 3,00,000, being the actual rent calculated at
` 25,000 per month less ` 90,000, being deduction under section 24@30% of ` 3,00,000]
In this case, income of ` 2,10,000 from let-out property arising to Mrs. Pallavi, being Mr. Om’s
son’s wife, would be included in the income of Mr. Om, applying the provisions of section 27(i)
and section 64(1)(vi). Such income would, therefore, not be taxable in the hands of Mrs. Pallavi.
In case the property was gifted to Mr. Om’s son, the clubbing provisions under section 64 would
not apply, since the son is not a minor child. Therefore, the income of ` 2,10,000 from letting out
of property gifted to the son would be taxable in the hands of the son.
It may be noted that the provisions of section 56(2)(x) would not be attracted in the hands of the
recipient of house property, since the receipt of property in each case was from a “relative” of
such individual. Therefore, the stamp duty value of house property would not be chargeable to
tax in the hands of the recipient of immovable property, even though the house property was
received by her or him without consideration.

Note - The first part of the question can also be answered by applying the provisions of section
64(1)(vi) directly to include the income of ` 2,10,000 arising to Mrs. Pallavi in the hands of Mr. Om.
[without first applying the provisions of section 27(i) to deem Mr. Om as the owner of the house
property transferred to his wife Mrs. Uma without consideration], since section 64(1)(vi) speaks of
clubbing of income arising to son’s wife from indirect transfer of assets to her by her husband’s
parent, without consideration. Gift of house property by Mr. Om to Mrs. Pallavi, via Mrs. Uma, can
be viewed as an indirect transfer by Mr. Om to Mrs. Pallavi.
(c) (i) If the defect is not rectified within the period of 15 days or such further extended period,
then, the return would be treated as an invalid return. The consequential effect would be the
same as if the assessee had failed to furnish the return.
(iii) The Assessing Officer has the power to condone the delay and treat the return as a valid
return, if the assessee has rectified the return after the expiry of 15 days or the further
extended period, but before the assessment is made.
10

SECTION B - INDIRECT TAXES (40 MARKS)
SUGGESTED ANSWERS
Division A - Multiple Choice Questions
Question Answer
No.
1 (c) i & iii
2 (c) i & iii
3 (d) 1st April
4 (a) (i)
5 (b) ` 3,50,000
6 (c) Time of supply is 10th August for ` 5,000 & 10th October for ` 15,000.
Division B - Descriptive Questions

1. Computation of net GST payable by Prithviraj Pvt. Ltd. for the month of July
Particulars CGST SGST
(`) (`)
GST payable on outward supplies (Refer Working note – 1) 2,83,500 2,83,500
Less: ITC (Refer Working note – 2) 1,12,500 1,12,500
[ITC of IGST can be utilised for payment of CGST and SGST in any
proportion and in any order.]
Net GST payable in cash 1,71,000 1,71,000
Note: ITC of IGST can be utilised towards payment of CGST and SGST in any proportion and in any
order. Therefore, there can be multiple ways of setting off of IGST credit against CGST and SGST
liability and accordingly, in the given case, amount of net GST payable in cash under the heads of CGST
and SGST will vary. However, total amount of net GST payable in cash will be ` 3,42,000 in each case
Working note – 1
Computation of GST payable on outward supply made by M/s. Flo Pro for the month of July
Particulars Amount (`)

Price of the machine 25,00,000
[Since the subsidy is received from the State Government, the same is not
includible in the value of supply in terms of section 15(2)(e)]
Third party inspection charges 5,00,000
[Any amount that the supplier is liable to pay in relation to the supply but has
been incurred by the recipient and not included in the price actually paid or
payable for the goods, is includible in the value of supply in terms of section
15(2)(b)]
Freight charges for delivery of the machine 2,00,000
[Since arranging freight is the liability of supplier, it is a case of composite supply
and thus, freight charges are added in the value of principal supply.]
Total 32,00,000
11

Less: Discount @ 2% on ` 25,00,000 being price charged to BP Ltd. 50,000
[Discount given before or at the time of supply if duly recorded in the invoice is
deductible from the value of supply in terms of section 15(3)(a)]
Value of taxable supply 31,50,000
GST payable on outward supplies
CGST @ 9% 2,83,500
SGST @ 9% 2,83,500
[Since all the outward supplies are intra-State supplies, CGST and SGST are
payable on the same.]
Working note – 2
Computation of ITC available with M/s Flow Pro for the month of July
S. Inward supplies ITC (`)
No.
(i) Inputs ‘A’ 90,000
[ITC cannot be taken on missing invoice. The registered person should have
the invoice in its possession to claim ITC.]
(ii) Inputs ‘B’ Nil
[When inputs are received in lots, ITC can be availed only on receipt of last
lot.]
(iii) Capital goods Nil
[Input tax paid on capital goods cannot be availed as ITC, if depreciation has
been claimed on such tax component.]
(iv) Input services 1,75,000
[ITC on an invoice cannot be availed after 30th November following the end of
financial year to which such invoice pertains or the date of filing annual return,
whichever is earlier.
Since the annual return for the previous financial year has been filed on 15 th
September, ITC on the invoice pertaining to previous financial year cannot be
availed after 15 th September.]
Total ITC (IGST) 2,65,000
Note - CGST @ 9% and SGST @ 9% are payable on the outward supplies since they are intra-State
supplies and IGST @ 18% is payable on the inward supplies since they are inter-State supplies.
2. (a) (i) Services by way of health care services by a clinical establishment, an authorised medical
practitioner or para-medics are exempt from GST. Food supplied to the in-patients by a
canteen run by the hospital, as advised by the doctor/nutritionists, is a par t of composite
supply of healthcare and not separately taxable. Thus, said services are exempt from GST.
(ii) Supply of service by a RWA (unincorporated body or a non-profit entity registered under any
law) to its own members by way of reimbursement of charges or share of contribution up to
an amount of ` 7500 per month per member for providing services and goods for the common
use of its members in a housing society/a residential complex are exempt from GST. Hence,
in the given case, services provided by the RWA are exempt from GST since the maintenance
charges collected per month per member do not exceed ` 7500.
12

(b) (i) The registered person, whose aggregate turnover in the preceding financial year does not
exceed ` 1.5 crore, may opt to pay tax under composition levy, under section 10(1) and 10(2).
The scheme can be availed by an intra-State supplier of goods and supplier of restaurant
service.
However, the composition scheme permits supply of marginal services (other than restaurant
services) for a specified value along with the supply of goods and restaurant service, as the
case may be.
Thus, M/s United Electronics can opt for composition scheme for the current financial year as
its aggregate turnover is less than ` 1.5 crore in the preceding financial year and it is not
engaged in inter-State outward supplies.
(ii) The registered person opting for composition scheme, under section 10(1) and 10(2), can
also supply services (other than restaurant services) for a value up to 10% of the turnover in
the preceding year or ` 5 lakh, whichever is higher, in the current financial year.
Thus, M/s United Electronics can supply repair and maintenance services up to a value of
` 12 lakh [10% of ` 120 lakh or ` 5 lakh, whichever is higher] in the current financial year.
3. (a) (a) Every supplier becomes liable to registration if his turnover exceeds the applicable threshold
limit [` 40 lakh in this case] in a finacial year. Since in the given case, the turnover of Dhampur
Industries exceeded ` 40 lakh on 1st September, it becomes liable to registration on said date.
Further, since the application for registration has been submitted within 30 days from such
date, the registration shall be effective from the date on which the person becomes liable to
registration. Therefore, the effective date of registration is 1 st September.
(b) Since in the given case, the turnover of Mehta Teleservices exceeds the applicable threshold
limit [` 20 lakh] on 25 th October, it becomes liable to registration on said date.
Further, since the application for registration has been submitted after 30 days from the date
such person becomes liable to registration, the registration shall be effective from the date of
grant of registration. Therefore, the effective date of registration is 5 th December.
(b) Udai Singh is required to issue a receipt voucher at the time of receipt of advance payment with
respect to services to be supplied to Sujamal. A receipt voucher is a document evidencing receipt
of advance money towards a supply of goods and/or services or both. A registered person, on
receipt of advance payment with respect to any supply of goods or services or both, shall issue a
receipt voucher or any other document, evidencing receipt of such payment.
Where, on receipt of advance payment with respect to any supply of goods or services or both the
registered person issues a receipt voucher, but subsequently no supply is made and no tax invoice
is issued in pursuance thereof, the said registered person may issue to the person who had made
the payment, a refund voucher against such payment. Therefore, in case subsequently no services
are supplied by Udai Singh, and no tax invoice is issued in pursuance thereof, Udai Singh may
issue a refund voucher against such payment to Sujamal.
4. (a) The condition of payment of value of supply plus tax within 180 days does not apply in the following
situations:
(a) Supplies on which tax is payable under reverse charge
(b) Deemed supplies without consideration
(c) Additions made to the value of supplies on account of supplier’s liability, in relation to such
13

supplies, being incurred by the recipient of the supply.
(b) The statement is not correct. Supply of goods on hire purchase shall be treated as supply of goods
as there is transfer of title, albeit at a future date.
(c) Filing of GSTR-3B is mandatory for all normal and casual taxpayers, even if there is no business
activity in any particular tax period. For such tax period(s), a Nil GSTR-3B is required to be filed.
A Nil GSTR-3B does not have any entry in any of its tables. For example, a Nil GSTR-3B for a tax
period cannot be filed, if the taxpayer has made any outward supply (including nil -rated, exempt or
non-GST supplies) or has received any supplies which are taxable under reverse charge or it
intends to take ITC etc.
A Nil GSTR-3B can be filed through an SMS using the registered mobile number of the taxpayer.
GSTR-3B submitted through SMS is verified by registered mobile number-based OTP facility.
A taxpayer may file Nil GSTR-3B, anytime on or after the 1st day of the subsequent month/quarter
for which the return is being filed for.
14

Test Series: March 2023 Mock Test Paper 1 Intermediate: Group - I Paper - 1: Accounting

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© The Institute of Chartered Accountants of India

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© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

Further Information is available:

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© The Institute of Chartered Accountants of India

Cost of Production 2,29,500

© The Institute of Chartered Accountants of India

Profit and Loss Account (An extract for investment)

(2) Right Shares = = 30,000 shares × 2/3 = 20,000 shares

(3) Right shares renounced = 30,000×1/3 = 10,000 shares

© The Institute of Chartered Accountants of India

Profit = ` 5,50,000 – ` 4,80,556 = ` 69,444.

Market value of share = 65,000 shares × ` 20 = 13,00,000

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

Other information is as follows:

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(iii) Other Information-

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

Sales (A) 180 90,00,000 1,35,00,000 1,80,00,000

Fixed Cost (`) 1,72,000 5,80,000

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

(b) Contract Account

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India

© The Institute of Chartered Accountants of India