MITTAL COMMERCE CLASSES
IPCC – MOCK TEST
BATCH : LI - 23
DATE: 25.08.2015
MAXIMUM MARKS: 100
TIMING: 8 AM to 11 AM
ACCOUNTS
Answer 1 : (8 Marks)
Yahoo Ltd.
Journal Entries
Dr. Rs.
4,50,000
01.04.2011
Equity share Final Call A/c
Dr.
To Equity Share Capital A/c
(Final call of Rs. 2.50 per share on 1,80,000 equity shares due as
per Board’s Resolution dated……..
30.04.2011 Bank A/c
Dr.
To Equity Share Final Call A/c
(Call money on 90,000 equity shares received
30.04.2011 Capital Reserve A/c
Dr.
Securities Premium A/c
Dr.
General Reserve A/c
Dr.
Profit and Loss A/c
Dr.
To Bonus to Shareholders A/c
(Bonus issue @ one share for every three shares held by utilising
various reserves as par Board’s Resolution dated………
30.04.2011 Bonus to Shareholders A/c
Dr.
To Equity Share Capital A/c
(Capitalization of Profit)
Balance Sheet (Extract) As on 30th April, 20 × 1 (after bonus issue)
Particulars
Note
Equity & Capital
Shareholders Fund
Share Capital
Reserves and Surplus
4,50,000
4,50,000
4,50,000
90,000
30,000
2,40,000
2,40,000
6,00,000
6,00,000
6,00,000
Amount
1
2
Total
Share Capital
Note: 1
Authorized Capital:
5,00,000, 10% Preference shares of Rs. 10 each
2,40,000, Equity shares of Rs. 10 each
Issued and Subscribed Capital :
40,000, 10% Preference shares of Rs. 10 each, fully paid
2,40,000 Equity shares of Rs. 10 each, fully paid
(Out of above, 60,000 equity shares @ Rs. 10 each were issued by way of bonus)
Note: 2
Capital Reserve
Securities premium
Profit and Loss Account
Cr. Rs.
28,00,000
1,40,000
29,40,000
5,00,000
24,00,000
29,00,000
4,00,000
24,00,000
28,00,000
Reserve & Surplus
60,000
20,000
60,000
1,40,000
Notes:1.
Capital reserve realised in cash can be utilized for issue of fully paid bonus shares.
2.
As per SEBI guidelines, share premium collected in cash can only be utilised for bonus issue.
3.
It is assumed that the company will pass necessary resolution at its general body meeting for
increasing the authorized capital. In anticipation, the authorized capital has been suitably increased as
below:
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MITTAL COMMERCE CLASSES
IPCC – MOCK TEST
Existing number of equity shares as authorized
Add: Issue of bonus shares to equity shareholders
2,00,000
60,000
2,60,000
Answer 2 :(12 Marks)
2012
Apr. 1
Apr. 30
Apr. 30
Apr. 30
To
To
To
To
Apr. 30
To Balance c/d (R)
Balance b/d
Credit Sales
Bills Receivable A/c
Cash (Noting Charges)
2012
May 1
To Balance b/d
Working Notes:
Total Debtors Accounts
Rs.
2012
41,000
Apr. 1
By Balance b/d (Advance)
44,100 Apr. 30 By Cash
1,000 Apr. 30 By Discount Account
10 Apr. 30 By Bad Debts Account
(2100-450)
1,800 Apr. 30 By Returns Inwards A/c
(Om)
Apr. 30 By Bills Receivable A/c
Apr. 30 By Total Creditor A/c
(Transfer) (Sohan)
Apr. 30 By Balance c/d
87,910
2012
40,710
May 1
To Balance b/d
Rs.
(i)
Cash Received:
From Ram
From R (Advance)
Ex sales before April 1 (700)
Ex sales during April
(ii)
(iii)
Rs.
2,000
39,300
950
1,650
500
1,000
1,800
40,710
87,910
1,800
Rs.
450
1,800
2,250
27,300
9,750
37,050
39,300
Discount : Rs. 37,050 x 2½ / 97½ = Rs. 950
The creation of the Provision for Doubtful Debts will not affect the Total Debtors Account.
Answer 3: (5 Marks)
In Debtors Ledger
General Ledger Adjustment Account
Date
Particulars
Rs.
Date
Particulars
1.4.2008
To Balance b/d
3,400 1.4.2008
By Balance b/d
1.4.2008
To Debtors ledger adj.
1.4.2008
By Debtors ledger adj.
to
A/c:
to
A/c:
30.4.2008
Sales return
21,700 30.4.2008
Sales
Cash received
8,62,100 30.4.2008
B/R dishonoured
Discount Allowed
39,200
By Balance c/d
30.4.2008
B/R received
51,200
To Balance c/d (Bal. fig.)
2,52,200
12,29,800
In General Ledger
Debtors Ledger Adjustment A/c
Date
Particulars
Rs.
Date
Particulars
1.4.08
To Balance b/d
2,46,200 1.4.08
By Balance b/d
1.4.2008 To General ledger adj.
1.4.2008 By General ledger adj. A/c:
to
A/c:
to
Sales return
30.4.08
Sales
9,74,900 30.4.08
Cash received
B/R dishonoured
3,500
Discount allowed
Rs.
2,46,200
9,74,900
3,500
5,200
12,29,800
Rs.
3,400
21,700
8,62,100
39,200
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MITTAL COMMERCE CLASSES
30.4.08
To Balance c/d
IPCC – MOCK TEST
5,200
30.4.08
12,29,800
B/R received
By Balance c/d (Bal.fig.)
51,200
2,52,200
12,29,800
LAW
Answer : 1 (7 Marks)
Incorrect:
The concept of corporate personality is not absolute in nature because it can be disregard in following
cases:1. Protection of revenue: (To prevent evasion of taxation) The Courts may ignore the corporate
entity of a company where it is used for tax evasion. (Juggilal V. Commissioner of Income Tax,
B.F. Guzdar v. Commissioner of Income Tax Bombay).
2. Prevention of fraud or improper conduct: The legal personality of a company may also be
disregarded in the interest of justice where the machinery of incorporation has been used for some
fraudulent purpose like defrauding creditors or defeating or circumventing law. Professor Gower
has rightly observed in this regard that the veil of a corporate body will be lifted where the
'corporate personality is being blatantly used as a cloak for fraud or improper conduct'. Thus
where a company was incorporated as a device to conceal the identity of the perpetrator of the
fraud, the Court disregarded the corporate personality (Jones v. Lipman) (Gilford Motor Co. v.
Home).
3. Determination of character of a company whether it is enemy: A company may assume an
enemy character when persons in de facto control of its affairs are residents in an enemy country.
In such a case, the Court may examine the character of persons in real control of the company
and declare the company to be an enemy company. (Daimler co. Ltd. v. Continental Tyer &
Rubber co. Ltd).
4. Where the company is sham: The Courts also lift the veil or disregard the corporate personality
of a company where a company is a mere cloak or sham (hoax). (Gilford Motor Co. Ltd. v. Home).
5. Company avoiding legal obligation: Where the use of an incorporated company is being made
to avoid legal obligations, the Court may disregard the legal personality of the company and
proceed on the assumption as if no company existed.
6. Company acting as agent or trustee of the shareholders: Where a company is acting as
agent for its shareholders, the shareholders will be liable for the acts of the company (F.G. Films
Ltd., In re.)
7. Avoidance of welfare legislation: Where the courts find that there is avoidance of welfare
legislation, it will be free to lift the corporate veil. (Workmen of Associated Rubber Industry Ltd. v.
Associated Rubber Industry Ltd.).
8. Protecting public policy: The courts invariably lift the corporate veil or a disregard the corporate
personality of a company to protect the public policy and prevent transactions country to public
policy. (Connors v. Connors Ltd.).
9. In quasi-criminal cases: The courts pierce the corporate veil in quasi-criminal cases in order to
look behind the legal person and punish the real persons who have violated the law.
10. Trading with enemy country.
11. Evasion of taxes.
12. Forming a subsidiary company to act as its agent.
13. The benefit of limited liability is destroyed by reducing the number of members below 7 in the
case of public company and 2 in the case of private company for more than six months.
14. Under law relating to exchange control.
15. Device of incorporation is adopted to defraud creditors or to avoid legal obligations.
Answer : 2 (6 Marks)
Members who are aware of the fact are personally and severally liable for the whole of the
debts contracted after 6 months of such reduction.
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MITTAL COMMERCE CLASSES
IPCC – MOCK TEST
Answer : 3 (6 Marks)
According to Section 3 of the Payment Bonus Act, 1965, where an establishment consists of
departments or undertakings or has branches irrespective of whether they are situated in the same
place or in different places, all such departments or undertakings or branches are to be treated as part
of the same establishment for the purpose of computation of bonus under the Act. But proviso to the
section states that where for any accounting year a separate balance sheet and profit and loss account
are prepared and maintained in respect of any such department or undertaking or branch, then, such
department or undertaking or branch shall be treated as a separate establishment for the purpose of
computation of bonus under this Act for that year, unless such department or undertaking or branch
was, immediately before the commencement of that accounting year treated as part of the
establishment for the purpose of computation of bonus.
Referring to the provisions of Section 3, Company is engaged at three different units located at three
separate places in the country where separate balance sheet and profit & loss account are being
maintained for the three units separately and hence the proviso to Section 3 will be applicable in this
case. For the purpose of Bonus under the Act, the units will be treated as three separate
establishments and accordingly, the employees of the unit incurring losses cannot claim bonus on the
ground that the unit incurring loss is a part of one single establishment. However, the employees of
the loss making unit can claim the minimum bonus as per section 10 of the Payment of Bonus Act,
1965.
Answer : 4 (6 Marks)
(1) A probationer is an employee within the meaning under section 2(13) and as such is entitled to
bonus per Section 8 of the Payment of Bonus Act [Bank of Madura Ltd. vs. Employee's Union,
1970]. It is important to understand the difference between a probationer and an apprentice. A
probationer is an employee who is not yet permanent but is under the probation. If he performs
well, he will get to be permanent in his employment. On the other hand an apprentice is a person
who is a trainee in a factory learning work on a machine and he is excluded from the definition of
"employee".
(2) An apprentice, is not included in the definition of "employee" under section 2(13) and hence is not
entitled to bonus per Section 8 of the Payment of Bonus Act. [Wheel & RIM Co. v. Government of
T.N. (1971) 2 LLJ 299 40 FJR 18]
(3) According to Section 14, when an employee had been laid off under:
(i) an agreement; or
(ii) as permitted by the standing orders under the Industrial Employment (Standing Orders) Act;
or
(iii) under the Industrial Disputes Act, or
(iv) under any other applicable law
then the days on which he has been laid-off shall be deemed to be the lays on which the employee
has worked during the accounting year.
In the given case, the employee had been laid off for 20 days and had attended work for 22 days
in the entire accounting year equaling to 42 total working days. An employee is entitled to bonus
when he has worked in the establishment for not less than thirty working days in the year
(Section-13). So, in this case, the employee is entitled to get bonus provided his lay off is covered
in one of the above mentioned grounds.
COSTING
Answer : 1 (3 × 2 = 6 Marks)
(a)
Bills of material
1. It is document by the drawing office
2. It is a complete schedule of component
parts and raw materials required for a
particular job or work order.
Material Requisition Note
1. it is prepared by the foreman of the
consuming department
2. It is a document authorizing Store-keepr to
issue
Material
to
the
consuming
department.
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MITTAL COMMERCE CLASSES
IPCC – MOCK TEST
3. It often serves the purpose of a Store
Requisition as it shown the complete
schedule of materials required for a
particular job i.e. it can replace stores
requisition
4. It can be used for the purpose of quotation
5. It helps in keeping a quantitative control on
materials draw through stores Requisition.
3. It cannot replace a bill of material.
4. It is useful in arriving historical cost only.
5. It shows the materials actually drawn from
stores.
(b) Gantt Task and Bonus System: This system is a combination of time and piecework system.
According to this system a high standard or task is set and payment is made at time rate to a
worker for production below the set standard.
Wages payable to workers under the plan are calculated as under:
Output
Payment
(i)
Guaranteed time rate
Output below standard
(ii) Output at standard
(iii) Output over standard
Time rate plus bonus of 20% (usually) of time rate
High piece rate on worker’s output. (It is so fixed
so as to include a bonus of 20% of time rate)
Answer : 2 (6 Marks)
Std. time per piece
Efficiency of worker
Time taken before use of Jig.
Std time per piece offer use of Jig.
Time to be taken offer use of Jig.
Saving in time per piece
=
=
=
=
=
=
Saving in time (in Hrs.) on total output
=
15000  10
60
=
20 per hour
Wage rate per hour =
160
8
Total saving (in Amt.)
=
Award to employee (1½ month saving in labour cost)
80 minute
80%
100 minute
72 minute
90 minute
10 minute
= 2500 Hrs.
2500 × 20 = 50000
Answer : 3 (6 Marks):
Total Cost for
1250 kg.
25000.00
6250.00
2500.00
33750.00
(2500.00)
Cost per
kg.
20.00
5.00
2.00
27.00
(2.00)
Add: Delivery charges
Cost of container @ Rs. 60 for 50 kg.
31250.00
312.50
31561.50
250.00
1500.00
25.00
0.25
25.25
0.20
1.20
Less: Cost of material returned (33312 = 50 ÷ 1250) × 50
33312.50
(3132.50)
26.65
-
Add: Cost of handling @ 0.25%
31980.00
79.95
26.65
0.07
32059.95
26.72
Invoice Price
Add: Excise duty
Add: Sales tax
Less: Trade discount @ 10% on service price
Add: Insurance @ 1% on above
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MITTAL COMMERCE CLASSES
IPCC – MOCK TEST
Less: Credit for container returnable
Total Landed cost
(960.00)
(0.80)
31099.95
25.92
Credit for Containers = (40 ÷ 50) × 12 = 960.
Answer: 4 (7 Marks):
(a) output per worker
(b) No of workers
(c) Total output
(d) Selling Price
(e) variable cost/ unit
(f) contribution per unit
(g) Total contribution
(h) Increased contribution
(i) Increase n capital cost
Present
300
160
48000
12.5
7.5
5
240000
-
Proposed
480
120
57600
12
7.5+.30 (30% of 1) = 7.8
4.2
241920
1920
16000
IDT
Answer 1: (8 Marks)
‘Consideration’ means everything received or recoverable in return for a provision of service which
includes monetary payment and any consideration of non- monetary nature or deferred
consideration as well as recharges between establishments located in a non-taxable territory and
taxable territory. In the backdrop of this definition, given situations are examined hereunder:
(i) No, as the donation is not given in return for provision of any service.
(ii) No, as in this case also gifts are given out of free will and not in lieu of any provision of service.
(iii) Yes, as there is a direction to carry out a specific activity, i.e., a research in a particular field in
this case.
(iv) Yes. Though grants given for a research where the researcher is under no obligation to carry out
a particular research is not a consideration, grant given with counter obligation on the
researcher to provide IPR rights on the outcome of research undertaken with the help of such
grants is a consideration for the provision of service of research.
Answer 2: (8 Marks)
Computation of service tax payable by Big Agro Handlers for June, 2014
Sl.
Particulars
No.
(i)
Supply of farm labour
(ii)
Warehousing of biscuits
(iii)
Sale of rice on commission basis
(iv)
Training of farmers on use of new pesticides and fertilizers developed
through scientific research
(v)
Renting of vacant land to a stud farm
(vi)
Testing undertaken for soil of a farm land
(vii)
Leasing of vacant land to a dairy farm
Total
Service tax @ 14%
Amount
(Rs.)
1,65,000
68,000
1,31,500
3,64,500
51030
Answer 3: (9 Marks)
As per section 66D of Finance Act, 1994, service of transportation of passengers, with or without
accompanied belongings, by inter aliarailways in a class other than an air conditioned coach;
metro, monorail or tramway;
metered cabs or auto rickshaws.
are included in the negative list of services.
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MITTAL COMMERCE CLASSES
IPCC – MOCK TEST
Therefore in the given case, service tax leviability on the various passenger transportation services
used by Mr. A will be determined as under:
Rail travel in AC train – Not covered under negative list and thus, liable to service tax.
Travel in a car rented for the whole day on a lumpsum consideration – Since travel by only metered
cabs is covered in negative list, travel in a car rented for the whole day on a lumpsum consideration
will be liable to service tax.
Metro travel – Covered in negative list and hence, not taxable.
Air travel – Not covered under negative list and thus, liable to service tax.
Radio taxi travel – Not covered in negative list and thus, liable to service tax.
Rail travel in sleeper class - Covered in negative list and hence, not taxable.
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