MITTAL COMMERCE CLASSES
IPCC – MOCK TEST
BATCH : LI - 23
DATE: 19.10.2015
MAXIMUM MARKS: 50
TIMING: 3:00 PM to 4:30 PM
ADVANCE ACCOUNTING
Answer: 1 (12 Marks)
Realisation Account
Particulars
Rs.
Particulars
Rs.
To Building
1,90,000
By Trade creditors
80,000
To Stock
1,30,000
By Bills payable
30,000
To Investment
50,000
By Cash
To Debtors
70,000
Building
2,09,000
To Cash-creditors paid
(W.N.1)
To Cash-expenses
To Cash-bills payable
63,650
Stock
1,20,000
8,000
29,500
Investments (W.N.2)
Debtors (W.N. 3)
40,000
56,700
4,25,700
(30,000-500)
To Partners’ Capital A/cs
By R -Debtors-unrecorded
P
Q
R
4,183
4,183
2,789
S
1,395
By R- Investmentsunrecorded
12,550
5,53,700
5,53,700
Cash Account
Amount Particulars
Rs.
Particulars
To Balance b/d
30,000
To Realisation – assets realised
63,650
By Realisation-bills payable
29,500
2,09,000
By Realisation-expenses
Stock
1,20,000
By Capital account
40,000
Debtors
To R’s capital A/c
56,700
4,25,700
7,000
4,62,700
Particulars
To Balance b/d
To Realisation A/cDebtorsmisappropriation
To Realisation A/cInvestmentmisappropriation
To R's capital A/c
(W.N.4)
To Cash A/c
Amount
Rs.
By Realisation-creditors paid
Building
Investments
7,000
11,000
8,000
P
1,51,132
Q
S
1,51,132
59,286
4,62,700
Partners’ Capital Accounts
Q
R
S Particulars
P
Q
R
S
Rs.
Rs.
Rs.
Rs.
Rs.
Rs.
Rs.
40000
By Balance b/d
150000 150000
– 60000
By General res.
13333 13333 8889 4445
7000
By Realisation
profit
4183
4183 2789 1395
By Cash A/c
7000
By P's capital A/c
16384
11000
By Q's capital A/c
16384
By S's capital A/c
6554
16384 16384
6554
151132 151132
59286
167516 167516 58000 65840
167516 167516 58000 65840
P
Rs.
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MITTAL COMMERCE CLASSES
IPCC – MOCK TEST
Working Notes:
1. Amount paid to creditors in cash
Rs.
Book value
80,000
Less: Creditors taking over investments
(13,000)
67,000
Less: Discount @ 5%
(3,350)
63,650
2. Amount received from sale of investments
Rs.
Book value
50,000
Less: Misappropriated by R
(8,000)
42,000
Less: Taken over by a creditor
(9,000)
33,000
Add: Profit on sale of investments
7,000
Cash received from sale of remaining investment
3. Amount received from debtors
40,000
Rs.
Book value
70,000
Less: Unrecorded receipt
(7,000)
63,000
Less: Discount @ 10%
(6,300)
56,700
4. Deficiency of R
Rs.
40,000
7,000
11,000
58,000
31st
Balance of capital as on
March, 2014
Debtors-misappropriation
Investment-misappropriation
Less: Realisation Profit
(2,789)
General reserve
(8,889)
Contribution from private assets
(7,000)
Net deficiency of capital
39,322
This deficiency of Rs. 39,322 in R’s capital account will be shared by other partners P, Q and S in
their capital ratio of 15 : 15 : 6.
Accordingly,
P’s share of deficiency
= [39,322 x (15/36)] =
Rs. 16,384
Q’s share of deficiency
= [39,322 x (15/36)] =
Rs. 16,384
S’s share of deficiency
= [39,322 x (6/36)] =
Rs. 6,554
Answer: 2 (8 Marks)
When the benefit of firm underwriting is given to individual underwriters
(i) Total marked applications:
M
N
2,50,000 2,00,000
O
2,00,000
P
80,000
= 7,30,000
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MITTAL COMMERCE CLASSES
IPCC – MOCK TEST
(ii) Shares subscribed excluding firm underwriting
Total applications
8,00,000 shares
Less : Marked applications
(7,30,000) shares
Unmarked
70,000
(iii) Statement showing Liability of underwriters
M
3,50,000
N
3,00,000
O
2,50,000
P
1,00,000
Total
10,00,000
(2,50,000)
(2,00,000)
(2,00,000)
(80,000)
(7,30,000)
1,00,000
(24,500)
1,00,000
(21,000)
50,000
(17,500)
20,000
(7,000)
2,70,000
(70,000)
75,500
79,000
32,500
13,000
2,00,000
(30,000)
(50,000)
40,000
(18,500)
(1,38,500)
45,500
29,000
(7,500)
(5,500)
61,500
7,000
6,000
7,500
5,500
–
38,500
23,000
-
-
61,500
Gross liability
Less: Marked applications
Less: Unmarked
(in Gross Ratio)
Less: Firm underwriting
Less: Surplus of ‘O’ and ‘P’
allotted to
M,& N (35:30)
Net liability
(iv) Statement of underwriters’ liability
M
N
O
P
Total
Firm
Others
30,000
38,500
50,000
23,000
40,000
-
18,500
-
1,38,500
61,500
TOTAL
68,500
73,000
40,000
18,500
2,00,000
(v) Amounts due from underwriters
M
N
O
P
Total
Shares to be subscribed as per (iv)
above
68,500
73,000
40,000
18,500
2,00,000
Amount due @ Rs. 60 per share
41,10,000 43,80,000 24,00,000 11,10,000 1,20,00,000
Less: Commission due on shares
underwritten
(10,50,000) (9,00,000) (7,50,000) (3,00,000) (30,00,000)
30,60,000 34,80,000 16,50,000
8,10,000
90,00,000
(vi) Commission payable to underwriters
M
10,00,000 X 100 X 35% X 3% = 10,50,000
N
10,00,000 X 100 X 30% X 3% =
9,00,000
O
10,00,000 X 100 X 25% X 3% =
7,50,000
P
10,00,000 X 100 X 10% X 3% =
3,00,000
Journal Entry
Rs.
5,70,00,000
Bank A/c
Underwriting Commission A/c
To Equity share Application A/c
Dr.
Rs.
30,00,000
6,00,00,000
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MITTAL COMMERCE CLASSES
IPCC – MOCK TEST
AUDIT
Answer: 1 (4 Marks)
Self revealing errors
 Errors the existence of which becomes apparent in the process of compilation of accounts.
 Examples of self revealing errors are:
Examples
Revealing in Compilation
Wrong totaling of the purchase book.
Trial balance will not agree.
Omission to post a part of a journal entry to the Trial balance will not agree.
ledger.
Failure to record in the cash book amounts paid Bank reconciliation statement will show up error.
into or withdrawn from the bank.
A mistake in recording amount received from X in Statements of account of parties will reveal
the account of Y.
mistake.
Answer: 2 (5 Marks)
Areas in which different accounting policies may be encountered

Method of depreciation, depletion and amortization – Straight Line Method, Written Down
Value method.

Treatment of expenditure during construction i.e. write off, capitalization, deferment.

Conversion or translation of foreign currency items – average rate, buying rate, selling rate,
closing rate etc.

Valuation of inventories-FIFO, LIFO, weighted average etc.

Treatment of goodwill – write off, retain.

Valuation of investment- at cost, market or net realizable value etc.

Treatment of retirement benefits-Actuarial, funded through trust, insurance policy etc.

Recognition of profit on long term contracts- on full completion or % completion etc.

Valuation of fixed assets-historical cost, revaluation price, exchange fluctuation etc.

Treatment of contingent liabilities.
Answer: 3 (2 Marks Each)
(i) Statement is incorrect.

As per AS–1 “Disclosure of Accounting Policies” any change in the accounting policies which
has a material effect should be disclosed, along with its effect on F.S. to the extent
ascertainable.

If such change is disclosed appropriately in the Financial Statements, auditor is not required to
report in auditor’s report.
(ii) Statement is incorrect.

Section 129(1) of the Companies Act, 2013 states that every balance sheet of a company shall
give a true and fair view of the profit or loss of the company for the financial year.
(iii) Statement is incorrect.

AS-1 “Disclosure of Accounting Policies” requires that if the fundamental accounting
assumptions are followed in Financial Statements, specific disclosure is not required. If any of
the fundamental accounting assumption is not followed, then a disclosure is not required. If
any of the fundamental accounting assumption is not followed, then a disclosure is required.
SM
Answer: 1 (5 Marks)
Business Process Reengineering (BPR) is an approach to unusual improvement in operating
effectiveness through the redesigning of critical business processes and supporting business
systems. It is revolutionary redesign of key business processes that involves examination of
the basic process itself. It looks at the minute details of the process, such as why the work
is done, who does it, where is it done and when it is done. BPR refers to the analysis and
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MITTAL COMMERCE CLASSES
IPCC – MOCK TEST
redesign of workflows and processes both within the organization and between the
organization and the external entities like suppliers, distributors, and service providers.
The orientation of redesigning effort is basically radical. In other words, it is a total
deconstruction and rethinking of business process in its entirety, unconstrained by its
existing structure and pattern. Its objective is to obtain quantum jump in process
performance in terms of time, cost, output, quality, and responsiveness to customers. BPR
is a revolutionary redesigning of key business processes.
BPR involves the following steps:
1. Determining objectives and framework: Objectives are the desired end results of
the redesign process which the management and organization attempts to achieve. This
will provide the required focus, direction, and motivation for the redesign process. It
helps in building a comprehensive foundation for the reengineering process.
2. Identify customers and determine their needs: The designers have to understand
customers - their profile, their steps in acquiring, using and disposing a product. The
purpose is to redesign business process that clearly provides added value to the
customer.
3. Study the existing process: The existing processes will provide an important base for
the redesigners. The purpose is to gain an understanding of the 'what', and 'why' of the
targeted process. However, some companies go through the reengineering process with
clean perspective without laying emphasis on the past processes.
4. Formulate a redesign process plan: The information gained through the earlier steps
is translated into an ideal redesign process. Formulation of redesign plan is the real crux
of the reengineering efforts. Customer focused redesign concept are identified and
formulated. In this step alternative processes are considered and the best is selected.
5. Implement the redesign: It is easier to formulate new process than to implement
them. Implementation of the redesigned process and application of other knowledge
gained from the previous steps is key to achieve dramatic improvements. It is the joint
responsibility of the designers and management to operationalise the new process.
Answer: 2 (5 Marks)
A strategy manager has many different leadership roles to play: visionary, chief
entrepreneur and strategist, chief administrator, culture builder, resource acquirer and
allocator, capabilities builder, process integrator, crisis solver, spokesperson, negotiator,
motivator, arbitrator, policy maker, policy enforcer, and head cheerleader. Managers have
five leadership roles to play in pushing for good strategy execution :
1. Staying on top of what is happening, closely monitoring progress, working through
issues and obstacles.
2. Promoting a culture that mobilizes and energizes organizational members to execute
strategy and perform at a high level.
3. Keeping the organization responsive to changing conditions, alert for new opportunities
and remain ahead of rivals in developing competitively valuable competencies and
capabilities.
4. Ethical leadership and insisting that the organization conduct its affairs like a model
corporate citizen.
5. Pushing corrective actions to improve strategy execution and overall strategic
performance.
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MITTAL COMMERCE CLASSES
IPCC – MOCK TEST
Answer: 3 (5 Marks)
Functional structure is widely used because of its simplicity and low cost. A functional
structure groups tasks and activities by business function.
The functional structure consists of a chief executive officer or a managing director and
limited corporate staff with functional line managers in dominant functions such as product,
accounting, marketing, R&D, engineering, and human resources. Disadvantages of a
functional structure are that it forces accountability to the top, minimizes career
development opportunities, etc.
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