FASA Mid-term Rubrics – PGDM and PGDM(BM) – Batch 2024-26:

A fresh graduate has been employed as an accountant in a small company. He wants to seek
help on the following issues:
1. Goods purchased from a supplier for Rs. 80,000 with GST @ 5% are still in transit and
has not yet been received. They are not yet paid for.
Should such a transaction be recorded in the books of the company? If No why? If yes, what
is the journal entry for the same? (Marks : 3)
Solution:
Yes, Following is the journal entry: - 1 mark
Goods in Transit / Purchases Dr. 80000 2 marks for journal entry
GST recoverable Dr. 4000
Creditors 84,000
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2. The company has made investments in Fixed Deposits of Rs. 5,00,000 @ of 8% interest
for 5 years. The interest will be received on when the Fixed Deposit matures after the 5th
year.
Should this interest be recorded in the books of the company? If No why? If yes, how do you
disclose it in the financial statements. Give the names of the accounts which are debited and
credited. (Marks : 3)
Solution:
Yes, It will be disclosed under ‘Non-current Assets’ as ‘Interest receivable’ in the Balance
sheet and Interest as income in the Profit and Loss statement of the company. – 1 mark
The journal entry is as follows. 2 marks for correct DR/CR accounts
Interest = 500000*8% = 40000 per annum
The journal entry for the same will be:
Interest Receivable A/c Dr. 40000
To Interest income A/c 40000
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3. Following is the disclosure of tax in the profit and loss statement of last year i.e. 2022 –
23.

This year’s profit before tax under Companies Act would be Rs. 35,000 and under Income
Tax Act would be Rs. 42,000. How will the disclosure be in the profit and loss statement of
2023 – 24 and how will Deferred tax be disclosed in the Balance sheet of 2024? (Assume tax
rate to be 30%) (Marks : 3)
Solution:
Computation of tax expense for 2023-24:
Tax expense as per Income tax Act = 12600 1 mark
Tax expense as per Companies’ Act = 10500
Deferred tax liability = 2100 1 mark
Disclosure in the Income statement for 2023-2024:
Profit before tax 35000
Tax Expense:
Current tax 12600
Deferred tax 2100 (14700)
Profit for the year 20300 0.5 marks
Disclosure of deferred tax in the balance sheet as on 2024:
Liabilities:
Deferred tax liabilities 2100 0.5 marks for DTL
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4. There are couple of items which he is not able to understand whether to be shown as Other
Income or Not an income or should be included in Other comprehensive income and they
are as follows: (Marks : 5)
a. Commission earned but not yet received ₹ 50000
b. Rent received in Advance ₹ 1,00,000
c. Revaluation Surplus ₹ 4,65,000
d. Unrealised gains or losses on investments held for sale ₹ 80,000
e. Amount recovered from customers who were written off as bad during earlier years
₹5,00,000
Solution: 1 mark each
 a. Commission earned but not yet received ₹ 50000 – Other Income
b. Rent received in Advance ₹ 1,00,000 – Not an Income
c. Revaluation Surplus ₹ 4,65,000 – Other Comprehensive Income
d. Unrealised gains or losses on investments held for sale ₹ 80,000 – Other Comprehensive
Income
e. Amount recovered from customers who were written off as bad during earlier years
₹5,00,000 –Not an Income / Other Income
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5. The company had purchased a machinery on 10th April 2023 for Rs. 8,00,000. Installation
expenses incurred but not yet paid was Rs. 50,000. Trial runs and testing expenses were Rs.
1,00,000. Insurance of the machine for next 5 years Rs. 25,000. The machine was available
for use from 1st October, 2023. The rate of depreciation on this machine is 20% SLM. He
wants to know the balances in all the relevant accounts at the end of the year 31st. March 2024.
(Marks : 5)
Solution: 2.5 marks for computing cost of asset and depreciation
Computation of Depreciation:
Cost of the asset = 950000
Annual Insurance expense = 5000 per annum
Depreciation per annum = 190000
Depreciation for 6 months (1st October 2023 to 31st March 2024) = 95000
Balances in relevant accounts as on 31st March 2024: 2.5 marks for balances in relevant
accounts
Machinery A/c = 950000
Accumulated Depreciation = 95000
Depreciation A/c = 95000
Pre-paid insurance A/c = 20000
Installation expense payable A/c = 50000
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6. The company maintains perpetual inventory system for high valued materials and periodic
system for low value items. All the inventory purchased before March 2024 are either sold or
consumed. He wants to know the value of inventory based on FIFO method in both the kind
of materials as per the following transactions which occurred in the month of March 2024.

Date Information for High Value items Quantity * Price per unit
12/3 Purchase 5000 * ₹ 8
18/3 Purchase 8000 * ₹ 9
26/3 Sale 7000
 29/3 Purchase 5000 * ₹ 9.50 (Marks: 5)
30/3 Sale 9000
31/3 Market price per unit ₹10
Date Information for Low Value items Quantity * Price per unit
12/3 Purchase 500 * ₹ 8
18/3 Purchase 800 * ₹ 9
29/3 Purchase 500 * ₹ 9.50
Consumption 900
31/3 Market price per unit ₹8

Solution:
High Value items:
Total units purchased = 5000+8000+5000 = 18000
Total units sold = 7000+9000 = 16000
Balance units as on March 31, 2024 = 18000-16000 = 2000 1.5 marks for computation
of closing units
Since, inventory is valued at lower of cost or market price, Inventory value for High value
items as at the end of March 31, 2024, = 2000*9.5 = 19000 1 mark for final value
Low Value items:
Total units purchased = 500+800+500 = 1800
Total units consumed = 900
Balance units as on March 31, 2024 = 1800-900 = 900 1.5 marks for computation
of closing units
Since, inventory is valued at lower of cost or market price, value of inventory for low value
items as at the end of March 31, 2024, = 900*8=7200 1 mark for final value
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7. He needs clarification in the following items as to where does he disclose them in the
Balance sheet (Owner’s Equity, Non-Current Liabilities, Current Liabilities, Non-Current
Assets, Current Assets, or Contra Assets )
Particulars Amount
(₹)
Equity Share Capital (75,000 shares of Rs. 1 Each, Issued) 75,000
Investment in Subsidiary Company 5,00,000
Provision For Taxes 1,00,000
Accumulated Depreciation 80,000
Capital Work in Progress 2,00,000
Provision for Bad debts 60,000
 (Marks : 6)
Solution: 1 mark each
Particulars Amount ( ₹ ) Disclosure
Equity Share Capital (75,000 75,000 Owner’s Equity
shares of Rs. 1 Each, Issued)
Investment in Subsidiary 5,00,000 Non-Current Assets
Company
Provision For Taxes 1,00,000 Current Liability
Accumulated Depreciation 80,000 Contra Asset
Capital Work in Progress 2,00,000 Non-Current Assets
Provision for Bad debts 60,000 Contra Asset

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