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Home » IAS Sample Papers » Commerce & Accountancy Sample Papers » COMMERCE AND ACCOUNTANCY - Sample Paper




Time Allowed: Three Hours Maximum Marks: 300
Answers must be written in the medium specified in the Admission Certificate issued to you, which must be
stated clearly on the cover of the answer-book in the space provided for the purpose. No marks will be given
for the answers written in a medium other than that specified in the Admission Certificate.
Candidates should attempt Questions 1 and 5 which are compulsory, and any three of the remaining
questions selecting at least one question from each Section.
Assume suitable data if considered necessary and indicate the same clearly.
All questions carry equal marks.
1. Write notes on any THREE of the following in about 200 words each:
(a) Explain Accounting Standard related to Depreciation Accounting. 20
(b) Distinguish between Cost Control and Cost Reduction. 20
(c) Discuss Agricultural Income. 20
(d) Discuss appointment of an auditor under Companies Act, 1956. 20
2. (a) What do you mean by Reconstruction of Company? State the essential features of internal
reconstruction of a company. Does it necessarily involve reduction of capital? 30
(b) The following particulars relate to Reliance Ltd.:
(i) Average capital employed in the company Rs. 5,00,000.
(ii) Net trading profits of the company for the past three years (after taxation) were Rs.
1,05,000, Rs. 94,000 and Rs. 1,10,000.
(iii) Rate of expected return 15% per annum.
(iv) Fair remuneration to the directors for their services Rs. 13,000 per annum.
Calculate the goodwill on the following basis:
(A) Five years' purchase of the annual average of super-profits,
(B) Capitalisation of the annual average of super-profits at the reasonable return of 15% and
(C) An annuity of super-profits, taking the present value of annuity of one rupee for five years
at 15% interest as Rs. 3.87. 30
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3. (a) Explain the term Budgetary Control. How does it operate as a tool of management control? 30
(b) The following informations relate to Good Luck Limited for the years 2005:
Variable Expenses (at 50% of capacity)
Materials Rs. 21,70,000
Labour Rs. 20,40,000
Other Expenses Rs. 7,90,000
Semi-variable Expenses (at 50% of capacity)
Repairs and Maintenance Rs. 3,70,000
Indirect Labour Rs. 7,50,000
Sales Department Salaries Rs. 4,00,000
Sundry Administrative Expenses Rs. 2,80,000
Fixed Expenses
Salaries Rs. 8,50,000
Wages Rs. 2,50,000
Rent and Rates Rs. 4,60,000
Insurance Rs. 3,50,000
Depreciation Rs. 5,40,000
Sundry Administrative Expenses Rs. 5,50,000
Assume that the fixed expenses remain constant for all levels of production, semi-variable
expenses remain constant between 45% and 65% of capacity, increase by 10% between 65%
and 80% of capacity and by 20% between 80% and 100% of capacity.
Sales at various levels are:
Rs. (lakhs)
50% capacity 100
60% capacity 120
75% capacity 150
90% capacity 180
100% capacity 200
Prepare a flexible budget for the year and forecast the profits at 60%, 75%, 90% and
100% of capacity. 30
4. (a) What do you understand by capital gains? What are the incomes included under the head capital
gains? 30
(b) Under what circumstances may an auditor be held liable criminally? Explain the provisions of
Companies Act, 1956 in this regard. 30
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5. Answer any three of the following is not more than 200 words each:
(a) Explain objectives of Financial Management. 20
(b) Discuss Capital Budgeting. 20
(c) Distinguish between Money Market and Capital Market. 20
(d) What are the causes of industrial sickness? 20
6. (a) What do you mean by financial leverage? Write the importance and limitations of it. 30
(b) The capital structure of Microsoft Ltd. is as follows:
Rs. (lakhs)
Equity Share Capital 400
12% Debentures 400
18% Term Loan 1200
(i) Determine the weighted average cost of capital of Microsoft Ltd. It has been paying
dividend at a consistent rate of 20% p.a.
(ii) What difference will it make in the weighted average cost of capital if the current market
price of the Rs. 100 equity share is Rs. 160? 30
7. (a) What do you understand by dividend policy? Explain the various factors which influence the
dividend decision of a company. 30
(b) The Progressive Corporation Ltd. currently has an equity share capital of Rs. 40 lakh consisting
of 40,000 equity shares of Rs. 100 each. The management of the company is planning to raise
further Rs. 30 lakh to finance a major expansion project through one of the four possible financial
plans. The options are
(i) Entirely through issue of equity shares.
(ii) Rs. 15 lakh from the issue of equity shares of Rs. 100 each and the balance from the
issue of 8% Debentures.
(iii) Rs. 10 lakh from the issue of equity shares of Rs. 100 each and the balance through long
term borrowings at 9% interest p.a.
(iv) Rs. 15 lakh from the issue of equity shares of Rs. 100 each and the balance through issue
of preference shares with 5% dividend per annum.
The corporation's expected earning before interest and taxes will be Rs. 15 lakh. Assuming tax
rate of 50%, you are required to determine the earning per share. Comment on the financial
leverage that will be authorised under each of the above schemes of financing. 30
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8. (a) Define capital structure. Discuss the factors which influence the planning of capital structure. 30
(b) The Birla Manufacturing buys and uses a component for its production at Rs. 10 per unit. Annual
requirement is 2000 units. Carrying cost of inventory is 10% p.a. and ordering cost is Rs. 40 per
order. The purchase manager proposes that as the ordering cost is very high, it is advantageous
to place a single order for the entire annual requirement. He also says that if we order 2000 units
at a time, we can get 2% discount from the supplier.
Evaluate the proposal and make your recommendations. 30

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