TS Inter 1st Year Commerce Previous Paper  2024

Time: 3 Hours) (Max. Marks: 100

Part I

SECTION A

Marks-50

Note: Answer ANY TWO of the following questions not exceeding 40 lines each:

1. Differentiate between a private company and a public company:

Criteria Private Company Public Company
Ownership Owned by a small group of individuals or entities. Ownership is distributed among the public or shareholders.
Shares Shares are not traded on public exchanges. Shares are traded on stock exchanges (e.g., NYSE, NASDAQ).
Number of Members Minimum: 2, Maximum: 200 shareholders. Minimum: 7, No upper limit for shareholders.
Disclosure Requirements Less stringent disclosure requirements. Stricter disclosure and transparency requirements, including financial statements and board meetings.
Raising Capital Limited ability to raise capital through share issuance. Can raise large amounts of capital through public offerings.
Management Typically, management is controlled by the owners. Managed by a board of directors elected by the shareholders.
Regulation Less regulated by government authorities. Highly regulated by government and financial authorities (e.g., Securities Exchange Commission).
Transfer of Shares Share transfer is restricted and subject to approval. Shares can be freely transferred or sold on the stock exchange.

2. Explain the steps involved in the incorporation of a company:

The process of incorporating a company generally involves the following steps:

  1. Choose a Company Name: Select a unique name for the company that complies with the legal requirements of the jurisdiction.
  2. Decide the Type of Company: Choose the type of company (e.g., private limited, public limited, etc.) based on the business requirements.
  3. Draft the Memorandum and Articles of Association: The Memorandum of Association (MOA) outlines the scope and objectives of the company, while the Articles of Association (AOA) details the rules and regulations governing the company’s internal operations.
  4. File Incorporation Documents: Submit necessary documents like MOA, AOA, and a copy of the company’s address to the relevant government authorities (e.g., Registrar of Companies).
  5. Appoint Directors: Appoint the company’s directors as required by the jurisdiction’s law. Generally, a minimum number of directors is required (e.g., 2 for a private limited company).
  6. Obtain Certification of Incorporation: Once the application is approved, the authorities issue the Certificate of Incorporation, officially recognizing the company as a legal entity.
  7. Register for Taxes: Apply for a Tax Identification Number (TIN) or Employer Identification Number (EIN) from tax authorities.
  8. Open a Corporate Bank Account: Open a separate bank account in the name of the company to manage finances.
  9. Comply with Post-Incorporation Requirements: File any post-incorporation documents as required, such as a register of directors, shareholders, and the company’s annual returns.

3. What is Equity Share? Explain the advantages and disadvantages of Equity Share Financing.

What is Equity Share?

An Equity Share (also known as ordinary shares) represents ownership in a company. Holders of equity shares are known as shareholders, and they have voting rights in the company. Equity shareholders share in the company’s profits and have the right to vote on important company decisions, such as the appointment of directors or approval of major transactions. In return for this ownership, equity shareholders may receive dividends, though this is not guaranteed.

Advantages of Equity Share Financing:

  1. No Fixed Obligation: Unlike debt financing, there is no obligation to pay fixed interest or principal, as dividends on equity shares are not mandatory.
  2. Shared Risk: Equity shareholders bear the company’s risk; thus, the business does not face financial strain during difficult times.
  3. Permanent Capital: Equity capital is permanent as long as the company continues to operate; there’s no requirement for repayment, unlike loans.
  4. Improved Creditworthiness: Equity capital improves the financial stability and creditworthiness of the company, as creditors perceive it as less risky.
  5. Dividend Flexibility: The company can decide on dividend payouts, making it more adaptable to changing financial conditions.
  6. Potential for Growth: Equity shareholders can benefit from capital gains as the value of their shares increases with the company’s growth.

Disadvantages of Equity Share Financing:

  1. Dilution of Control: Issuing more equity shares leads to a dilution of the ownership and control of existing shareholders.
  2. Higher Cost of Capital: Equity financing may be more expensive than debt financing due to higher expected returns demanded by investors.
  3. No Tax Benefits: Unlike debt, equity financing does not offer tax benefits (e.g., interest on debt is tax-deductible, but dividends are not).
  4. Dividends Not Guaranteed: Unlike debt financing, which comes with fixed interest payments, dividends on equity shares are not guaranteed and depend on the company’s profitability.
  5. Pressure for Profitability: Equity shareholders expect returns on their investment, putting pressure on the company to perform well consistently.
SECTION B

Answer ANY FOUR of the following questions not exceeding 20 lines each:

4. Explain any five types of industries with suitable examples.

Primary Industry involves extraction and collection of natural resources. Example: Agriculture, Mining, Fishing. Secondary Industry involves manufacturing and processing. Example: Automobile manufacturing, Construction. Tertiary Industry provides services rather than goods. Example: Banking, Retail, Healthcare. Quaternary Industry focuses on knowledge-based services. Example: IT services, Research and Development. Quinary Industry involves high-level decision-making and advanced services. Example: Education, Scientific research.

5. What are the features of Joint Hindu Family Business?

Family Ownership is managed by a family, usually passed down through generations. Membership is by birth. Karta is one person (Karta) who takes decisions for the family business. Limited Liability means the liability of members is limited to their share. Continuity refers to the business continuing even with changes in family members.

6. Write any five advantages of partnership.

Shared Responsibility means partners share the workload. Capital Contribution allows more capital to be raised due to multiple partners. Combined Skills and Expertise result in diverse skills brought by different partners. Flexibility makes it easier to make decisions compared to larger organizations. Profit Sharing means profits are shared according to the agreement.

7. What are the various types of capital required for business enterprises?

Fixed Capital is investment in long-term assets like machinery and buildings. Working Capital is money required for day-to-day operations. Owner’s Capital refers to funds invested by the owners or shareholders. Borrowed Capital is funds raised through loans or credit from external sources. Venture Capital is investment provided by investors to startups with high growth potential.

8. List out the features of MNCs not exceeding 5 lines each:

Global Presence means MNCs operate in multiple countries. Large Scale Operations engage in large-scale production and distribution. Control and Management refers to being headquartered in one country while managing operations globally. Advanced Technology refers to the use of innovation and technology. High Capital Investment requires substantial investment for growth and expansion.

9.List the features of Multinational Corporations (MNCs).

Answer:
The features of Multinational Corporations (MNCs) include:

  1. Global Presence – MNCs operate in multiple countries.
  2. Large Scale Operations – MNCs have extensive resources and workforce.
  3. Centralized Management – Decision-making is typically centralized at the headquarters.
  4. International Investment – MNCs invest in foreign markets through subsidiaries or joint ventures.
  5. Economies of Scale – MNCs benefit from cost reductions due to large-scale production.
  6. Diverse Product Portfolio – They offer a range of products tailored to different markets.
  7. Technology Transfer – MNCs transfer technologies between countries.
  8. Cultural Adaptability – They adapt their products and strategies to local cultures.
  9. Capital Mobility – MNCs have access to global financial markets.
  10. Foreign Direct Investment (FDI) – MNCs contribute significantly to FDI in host countries.
  11. Global Supply Chains – MNCs have a global network for sourcing and distributing goods.
  12. Tax Optimization – MNCs engage in tax planning to minimize global tax liabilities.
  13. Corporate Social Responsibility (CSR) – MNCs focus on environmental and social issues.
  14. Brand Recognition – MNCs often have globally recognized brands.
  15. Risk Diversification – By operating in multiple countries, MNCs diversify their busin

SECTION C

Answer ANY FIVE of the following questions not exceeding 5 lines each:

10. What is Profession?
A profession is a specialized occupation requiring specific skills, knowledge, and training, often governed by ethical standards and regulations. Examples include doctors, engineers, and lawyers. Professionals typically adhere to a code of conduct and are recognized by a governing body.

11. What is Innovation?
Innovation refers to the creation and application of new ideas, methods, or products that bring improvement or add value. It can involve technological advancements, new processes, or inventive solutions that meet market demands or solve problems.

12. Define Sole Proprietorship.
A sole proprietorship is a business owned and run by a single individual. The owner is responsible for all aspects of the business, including management, profits, and liabilities. It is the simplest and most common form of business structure.

13. What is Memorandum of Association?
The Memorandum of Association is a legal document that defines the company’s objectives, its scope of activities, and its relationship with the external world. It outlines the company’s purpose and the rights of shareholders. It is required for registering a company.

14. What is Minimum Subscription?
Minimum Subscription refers to the minimum amount of capital a company must raise through the issuance of shares before it can proceed with its operations. If this amount is not reached, the company cannot allot shares and must refund the money to subscribers.

15. What is GDRs?
Global Depositary Receipts (GDRs) are financial instruments issued by a bank to represent shares in a foreign company. GDRs allow investors to buy shares of companies listed in foreign countries without directly investing in them, facilitating international investment.

16. What is Commercial Paper?
Commercial Paper is an unsecured, short-term debt instrument issued by corporations to meet their short-term funding needs. It typically has maturities ranging from a few days to one year and is issued at a discount to face value.

17. What is B2B?
Business-to-Business (B2B) refers to transactions and business relationships that occur between two businesses, rather than between a business and a consumer. B2B transactions typically involve the sale of goods or services to other businesses for use in production or resale.

Part-II Marks-50

SECTION D

Answer the following question:

18.From the following Trial Balance, prepare Sai Sree Ram Trader’s Final Accounts for the year ended 31-03-2019:

Trial Balance

Particulars Debit (₹) Credit (₹)
Opening Stock 6,000
Purchases 4,700
Wages 1,000
Carriage 500
Rent 1,000
Salaries 1,200
Discount (Receivable) 400
Advertisement Expenses 800
Customs Duty 600
Factory Insurance 300
Machinery 12,000
Debtors 6,000
Furniture 9,000
Speed Post Charges 700
Bad Debts 800
45,000 45,000

Adjustments:

  1. Closing stock is ₹6,000.
  2. Prepaid wages of ₹500.
  3. Outstanding rent of ₹400.
  4. Depreciation:
    • Machinery: 5%
    • Furniture: 10%

Trading Account

Particulars Amount (₹)
Sales 10,200
Opening Stock 6,000
Purchases 4,700
Carriage 500
Closing Stock (6,000)
Gross Profit 5,000

Profit & Loss Account

Particulars Amount (₹)
Gross Profit 5,000
Wages (Net) 500
Salaries 1,200
Rent (Net) 1,400
Advertisement Expenses 800
Depreciation 1,500
Net Profit 3,500

Balance Sheet

Liabilities Amount (₹)
Capital 22,000
Net Profit 3,500
Creditors 3,000
Bills Payable 5,400
Assets Amount (₹)
Machinery 11,400
Furniture 8,100
Debtors 6,000
Closing Stock 6,000

Summary:

  1. Gross Profit: ₹5,000
  2. Net Profit: ₹3,500
  3. Balance Sheet: Assets and Liabilities = ₹25,500

SECTION E

Answer Any One of the following questions;

19.Prepare a Triple Column Cash Book from the following transactions:

2019 Transactions:

  1. Jan 1: Cash in hand ₹15,000 and Cash at bank ₹4,000.
  2. Jan 4: Purchased machinery and payment made by cheque ₹2,000.
  3. Jan 6: Deposited into bank ₹6,000.
  4. Jan 8: Bought goods for cash ₹3,000.
  5. Jan 10: Paid to Manoj ₹350 in full settlement of ₹400.
  6. Jan 14: Received ₹1,250 from David and allowed him a discount of ₹40.
  7. Jan 18: Paid through debit card to Sathish ₹1,750.
  8. Jan 20: Paid for purchases of goods ₹355.
  9. Jan 25: Used ‘Paytm’ for personal use ₹800.

Answer:

Triple Column Cash Book (For the month of January 2019)

Date Particulars Cash (₹) Bank (₹) Discount (₹)
Jan 1 Balance b/d 15,000 4,000
Jan 4 Machinery purchased (2,000) (2,000)
Jan 6 Bank deposit 6,000
Jan 8 Goods purchased for cash (3,000)
Jan 10 Paid to Manoj (settled) (350) 50
Jan 14 Received from David 1,250 40
Jan 18 Paid through debit card (1,750)
Jan 20 Paid for purchases (355)
Jan 25 Paid for personal use (800)

Balance Calculation:

  1. Cash Column:
    Opening Balance: ₹15,000
    Cash Payments: ₹(2,000 + 3,000 + 350 + 355 + 800) = ₹6,505
    Cash Receipts: ₹(1,250)
    Closing Cash Balance: ₹15,000 – ₹6,505 + ₹1,250 = ₹9,745

  2. Bank Column:
    Opening Balance: ₹4,000
    Bank Payments: ₹(2,000 + 1,750) = ₹3,750
    Bank Receipts: ₹6,000 + ₹1,250 = ₹7,250
    Closing Bank Balance: ₹4,000 – ₹3,750 + ₹7,250 = ₹7,500

  3. Discount Column:
    Total Discount Allowed: ₹50 (on Jan 10 for Manoj) + ₹40 (on Jan 14 for David)
    Total Discount: ₹90

Final Balances:

Particulars Cash (₹) Bank (₹) Discount (₹)
Balance c/d 9,745 7,500 90

20.Prepare a Bank Reconciliation Statement of Sruthi Stores as on 30th June, 2019 from the following particulars:

  1. Balance as per Pass Book: ₹1,20,000
  2. Two cheques for ₹4,500 and ₹1,500 issued on 25th June were presented for payment at the bank in July.
  3. A cheque for ₹1,100 sent to the bank for collection, was not entered in the pass book till 30th June.
  4. The bank allowed ₹100 as interest and charged ₹460 as bank commission but both were not entered in the cash book.

Answer:

Bank Reconciliation Statement as on 30th June, 2019

Particulars Amount (₹)
Balance as per Pass Book 1,20,000
Add: Cheque deposited but not yet entered in Pass Book 1,100
Less: Outstanding cheques
– Cheque of ₹4,500 (4,500)
– Cheque of ₹1,500 (1,500)
Less: Bank charges and interest not recorded in Cash Book
– Bank Commission (₹460) (460)
– Interest allowed (₹100) (100)
Adjusted Cash Book Balance 1,15,540

Explanation:

  1. Balance as per Pass Book: ₹1,20,000.
  2. Add: ₹1,100 (Cheque sent for collection not entered in pass book).
  3. Less: ₹4,500 and ₹1,500 (Outstanding cheques not yet presented for payment).
  4. Less: ₹460 (Bank commission) and ₹100 (Interest allowed) not entered in the cash book.

Thus, the adjusted cash book balance is ₹1,15,540.

SECTION F
Answer Any Two of the following questions;

21. Explain any five Accounting Concepts

  1. Business Entity Concept: This concept states that the business is considered separate from its owner. The transactions of the business are recorded separately from the personal transactions of the owner, ensuring clarity in financial reporting.

  2. Going Concern Concept: According to this concept, a business is assumed to continue its operations in the foreseeable future unless there is evidence to the contrary. It is the foundation for preparing financial statements on an ongoing basis rather than liquidating assets.

  3. Accrual Concept: This concept dictates that transactions should be recorded when they occur, not when the cash is exchanged. Revenues and expenses are recognized when earned or incurred, regardless of the cash flow.

  4. Matching Concept: The matching concept states that expenses should be matched with the revenues they help generate during the same accounting period. This ensures that the profit or loss for the period reflects the actual performance of the business.

  5. Conservatism Concept: This concept advises accountants to recognize potential losses as soon as they are anticipated but only recognize profits when they are actually realized. It ensures that financial statements are not overstated and provides a more cautious view of the business.

22. Prepare Swapna’s Account from the following:

Transactions:

  1. January 2: Amount due to Swapna ₹13,000
  2. January 8: Goods purchased from Swapna ₹15,000
  3. January 15: Goods returned to Swapna ₹5,000
  4. January 20: Cash paid to Swapna ₹16,000
  5. January 24: Goods purchased from Swapna ₹9,000
  6. January 30: Swapna’s Account settled by cheque with 10% discount.

Swapna’s Account

Date Particulars Debit (₹) Credit (₹)
January 2 To Amount Due (Opening Balance) 13,000
January 8 To Purchases 15,000
January 15 By Purchases Return 5,000
January 20 By Cash Payment 16,000
January 24 To Purchases 9,000
January 30 By Bank (Settlement with Discount) 21,300
Total 47,300 47,300

Explanation:

  • Goods Purchased: ₹15,000 + ₹9,000 = ₹24,000 (credited to Swapna’s account)
  • Goods Returned: ₹5,000 (debited from Swapna’s account)
  • Cash Paid: ₹16,000 (debited from Swapna’s account)
  • Settlement with Discount: Discount of 10% on ₹23,000 = ₹2,300, so the amount paid to Swapna is ₹23,000 – ₹2,300 = ₹21,300 (debited from Swapna’s account).

23. Record the following transactions in the Purchase Book and Purchase Returns Book:

Transactions:

  1. September 1: Purchased goods from Sruthi ₹8,000
  2. September 4: Purchased goods from Sai Sree Ram ₹3,600
  3. September 8: Goods returned to Sruthi ₹600
  4. September 13: Purchased goods from Naveen ₹2,000
  5. September 16: Goods returned to Sai Sree Ram ₹400

Purchase Book

Date Particulars Amount (₹)
September 1 Sruthi 8,000
September 4 Sai Sree Ram 3,600
September 13 Naveen 2,000
Total 13,600

Purchase Returns Book

Date Particulars Amount (₹)
September 8 Sruthi 600
September 16 Sai Sree Ram 400
Total 1,000

24. Explain any five types of Errors

  1. Error of Omission: This occurs when a transaction is completely omitted from the books of accounts. For example, if a sale or purchase is not recorded.

  2. Error of Commission: This occurs when an entry is made in the books of accounts, but it is posted to the wrong account. For instance, when a purchase is recorded in the wrong supplier’s account.

  3. Error of Principle: This happens when an entry is made in violation of accounting principles. For example, treating a capital expenditure as a revenue expense.

  4. Compensating Error: This occurs when one error is offset by another error. For example, if a sales entry is understated by ₹500 and a purchase entry is also understated by ₹500, the errors cancel each other out.

  5. Clerical Error: This is a simple mistake in calculation or posting, such as a typographical mistake in writing amounts or a mistake in totaling the columns. These errors are usually unintentional but can affect the accuracy of the accounts.

SECTION G

Answer Any Five of the following questions;

25. What is GAAP?

GAAP (Generally Accepted Accounting Principles) refers to a set of accounting standards, principles, and procedures used for financial reporting in a specific country or region. These standards ensure consistency, transparency, and comparability of financial statements. GAAP includes principles such as consistency, accrual accounting, and the matching principle, which guide how transactions are recorded and reported.

26. What is Voucher?

A voucher is a written document that serves as evidence of a transaction. It is used in accounting to verify the details of a financial transaction before recording it in the books. A voucher can be a receipt, invoice, or other supporting documents that justify a payment or receipt, ensuring accuracy in the accounting records.

27. Journalize the following transactions:

Transactions:

  1. March 1: Commenced business with cash ₹60,000
  2. March 7: Goods purchased from Shanker ₹4,000
  3. March 9: Cash paid ₹7,000
  4. March 12: Rent paid ₹1,000

Journal Entries:

Date Account Title Debit (₹) Credit (₹)
March 1 Cash 60,000
Capital 60,000
March 7 Purchases 4,000
Shanker (Creditor) 4,000
March 9 Cash 7,000
Bank 7,000
March 12 Rent Expense 1,000
Cash 1,000

28. What is Cash Discount?

A cash discount is a reduction in the amount due if the payment is made promptly, usually within a specified period. This discount is commonly offered to encourage early payment of invoices. For example, a seller might offer a 2% discount if the buyer pays within 10 days of receiving the invoice.

29. Record the Opening Entry from the following Assets and Liabilities as on 1st January, 2019:

Assets and Liabilities:

  • Cash at Bank: ₹12,000
  • Sundry Debtors: ₹20,000
  • Sundry Creditors: ₹12,000
  • Investments: ₹10,000
  • Buildings: ₹45,000
  • Bills Payable: ₹5,000

Opening Journal Entry:

Date Account Title Debit (₹) Credit (₹)
Jan 1, 2019 Cash at Bank 12,000
Sundry Debtors 20,000
Investments 10,000
Buildings 45,000
Sundry Creditors 12,000
Bills Payable 5,000
Capital 70,000

30. What is Suspense Account?

A suspense account is a temporary account used to record transactions when there is uncertainty about where to classify them in the accounting records. It is used to temporarily hold amounts that need further investigation. Once the correct classification is identified, the amount is transferred from the suspense account to the appropriate account.

31. Prepare Trial Balance of Sathish as on 31-12-2019:

Particulars Amount (₹) Particulars Amount (₹)
Cash 10,000 Capital 50,000
Sales 40,000 Purchases 40,000
Creditors 15,000 Debtors 35,000
Salaries 10,000

Trial Balance as on 31-12-2019:

Particulars Debit (₹) Credit (₹)
Cash 10,000
Purchases 40,000
Debtors 35,000
Salaries 10,000
Capital
Sales
Creditors
Total 95,000 95,000

32. Give the meaning of Bad Debts.

Bad Debts refer to amounts owed to a business by customers that are unlikely to be recovered. These debts are considered uncollectible and are written off as an expense in the financial statements. Bad debts usually arise due to customer insolvency or financial difficulties that prevent them from paying their outstanding balances.