UPSC Mains 2019 Commerce & Accountancy Optional Paper I questions

27 questions from the Civil Services (Main) Examination 2019. Official UPSC paper (PDF) · All Commerce & Accountancy Optional PYQs

1. Explain why the companies buy back their own shares. How is it different from issue of bonus shares?

2. "Recognition of revenue presents two basic problems, namely timing and measurement". Do you agree? How would you solve these two basic problems?

   10 marks

3. What do you understand by the term Annual Value of house property? How would you determine the annual value of let out house property which remained vacant for part of previous year?

4. Explain with suitable examples how 'Shut-down Cost' is different from 'Sunk Cost'.

   10 marks

5. Explain five major points that an auditor shall keep in mind while conducting audit of a Charitable Trust.

6. Sun Ltd and Moon Ltd were amalgamated on and from April 0l, 209. A new company called Black-Hole Ltd was formed to take over the business of the above two companies. The balance sheets of Sun Ltd and Moon Ltd as on March 3, 209 are given below: (% in lakhs): Particulars Sun Ltd Moon Ltd (A) Liabilities: (i) Share Capital: Equity shares of each 2,000,600 15% preference shares of each 800 600 (ii) Revaluation Reserve 200 60 (iii) General Reserve 400 300 (iv) Surplus Account 60 20 (v) 2% Debentures of 100 each 92 60 (vi) Current Liabilities 408 90 4,60 3,30 (B) Assets: (i) Fixed Assets 2,400 2,000 (ii) Current Assets, Loans and Advances,760 9300 4,60 3,]30 2 Additional Information: (l) Preference shareholders of Sun Ltd and Moon Ltd have received the same number of 5% preference shares of ¥00 each in the new company. (2) 2% Debentures of Sun Ltd and Moon Ltd are discharged by the new company by issuing adequate number of 6% Debentures of ¥00 each to ensure that they continue to receive the same amount of interest. (3) Black-Hole Ltd has issued -5 Equity shares for each Equity share of Sun Ltd and Equity share for each Equity share of Moon Ltd. The face value of shares issued by Black-Hole Ltd is ¥00 each. You are required to prepare the balance sheet of Black-Hole Ltd as on April 0, 209 after the amalgamation has been carried out using the "Pooling of Interest Method".

   20 marks

7. Two manufacturing companies which have the following operating details, decide to merge:: Particulars Company X Company Y Capacity Utilization 90% 60% Sales (₹ in lakh) 540 300 Variable Cost (₹ in lakh) 396 225 Fixed Cost (¥ in lakh) 80 50 Assuming that the proposal is implemented, calculate: (i) Break-even sales of the merged plants and capacity utilization at that stage. (ii) Profit of the merged plant at 80% capacity utilization. (iii) Sales of the merged plant to earn a profit of 75 lakh. (iv) When the merged plant is working at a capacity to earn a profit of 75 lakh, what percentage increase in selling price is required to sustain an increase of 5% in fixed overhead.

8. Discuss how the residential status of an assessee is determined for income tax purposes?

   5 marks

9. Mr. X is a Government employee at Ludhiana and is getting following emoluments: (i) Salary — ¥ 30,000 per month (ii) Dearness Allowance (enters) — 60% of salary (iii) Contribution in Notified Pension Scheme - ¥ 3,000 per month (iv). Employer's contribution to Pension Scheme — ¥ 3,000 per month (v) Transport Allowance for commuting between home and office — ¥ 2,800 p.m. (vi) Deputation Allowance (for 2 months) — ¥ 3,000 per month (vii) Entertainment Allowance - ¥ 2,000 per month (During the year, he spent ¥ [2,000 on entertainment of official guests) (viii) He has been provided with a rent-free accommodation. The licence fee for the - accommodation has been fixed at ¥ 2,000 per month. The government has also provided him with furniture items costing 4,00,000 (WDV — ₹ 75,000) ei for his personal use. (ix) He has been provided with the facility of a servant and watchman w.c.f. 0.0.208 and the government is paying ¥ 3,000 per month to each of these servants. (x) A laptop costing = 50,000 has been given to him for his official as well as personal purposes. (xi) On 0.0.208 he took a loan of ¥ 2,00,0C0 from his employer to buy a car at a concessional rate of interest of 6-25%. The repayment of loan started w.e.f. 0.0.209 @ ₹ 0,000 per month. SBI rate of interest as on 0.04.208 was 9-25%. (xii) During the year savings made by Mr. X were: i (a) LIC Premium:: For Self ¥ 0,500 (sum assured ¥ 2,00,000) For Spouse ¥ 2,000 (sum assured ₹,00,000) For Mother 8,000 (sum assured ₹,00,000) For Major Son ¥ 8,000 (not dependent on him but is suffering from disability) (sum assured ¥ 50,000) All life insurance policies were taken in the previous year 204-5. (b) PPF Deposits: ¥ 5000 (c) Tuition Fees of Second Son studying in a College ¥ 6,000 (6) Repayment of Housing Loan from LIC'(Principal Portion) — ¥ 36,000 Calculate: (i) Salary Income (ii) Qualifying amount for deduction U/S 80 C.

   20 marks

10. What do you understand by budgeting? What are the essentials of effective budgeting system? What are its limitations?

    5 marks

11. What is Activity Based Costing (ABC) system? How is it different from Traditional Costing System? Explain the Steps to implement ABC system.

    5 marks

12. Explain the nature and need for depreciation. Distinguish between straight line method and diminishing balance method of depreciation. What disclosures are required to be made in financial statements as per AS-6 on depreciation accounting?

    20 marks

13. What is Responsibility Accounting? Explain the prerequisites and the problems in its implementation.

    5 marks

14. Explain how investigation is different from that of Auditing. Under what. circumstances the Central Government can order for investigation of a company?

15. "Maximization of profits is regarded as the proper objective of investment decision, but it is not as exclusive as maximizing shareholders' wealth" — Comment.

16. "A firm should follow a policy of very high dividend pay-out". Do you agree? Why or why not?

17. Explain 'Indifference Point' (IP) in EBIT-EPS analysis.

    10 marks

18. Distinguish between Primary Market and Secondary Market.

    10 marks

19. "Investing in securities through Mutual Fund is a better choice than direct investment" — examine the statement.

20. A proforma cost sheet of a company provides the following particulars: Raw Material Cost per Unit - 70 Direct Labour Cost per Unit - © 35 Overhead Cost per Unit - 39 Total Cost per Unit - 60 Profit per Unit = 2 Selling price per Unit - 85 Additional Information: (0) Raw Materials are in stock on an average for month. (ii) Materials are in process on an average for 4 month.; (7) Finished goods are in stock on an average for month. (iv) Credit allowed by Suppliers is month. (v) Credit allowed to Debtors is 2 months. (vi) Lag in payment of wages is 4 weeks. (vii) Lag in payment of Overhead expenses is month. (viii) 4th of the output is sold against cash. (ix) Cash in hand and at bank is expected to be ₹ 2,50,000. You are required to prepare a statement showing the working capital needed to finance a level of activity of,04,000 Units of production. You may assume that production is carried on evenly throughout the year, wages and overheads accrue similarly and a time period of 52 weeks is equivalent to a year and 4 weeks is equivalent to a month.

    20 marks

21. Illustrate the Net Income Approach relating to capital structure decision making.

22. Akash Limited wishes to raise additional finance of ¥ 0 lakh for meeting its investment plans. It has ¥ 2,0,000 in the form of retained earnings available for investment purposes. The following are the further details: (i) Debt — Equity Mix — 30% - 70% j (iii) Cost of Debt beyond ¥,80,000 — 6% (before tax) (iv) Earnings per share — <4 (v) Dividend pay out — 50% of earnings (vi) Expected growth rate in dividend — 10% (vii) Current market price per share - 44.|. (viii) Tax Rate — 50% You are required to: ' (a) Determine the pattern for raising the additional finance. (b) Determine the post-tax average cost of additional debts. (c) Determine the cost of retained earnings and cost of equity. (d) Compute the overall weighted average after tax cost of additional finance.

    20 marks

23. From the following information, you are required to prepare the balance sheet of A Ltd as on March 3, 2019: Current Ratio - 60:i Liquid Ratio - 440:] Inventory Turnover — 6 times Gross Profit Ratio — 20% Debt Collection Period — |-92 months Fixed Assets Turnover — -25 times Reserves and Surplus to Capital - 0:25: ! Long Term Loan to Net worth —- 05:] Fixed Assets to Net worth — -20:I Sales for the year - 7,50,000

    15 marks

24. What is CAPM? What are the components cf CAPM equation? Explain the meaning of each component. What does it tell us about the required return on a risky investment?

    5 marks

25. What.do you mean by corporate restructuring? Outiie its objectives. Explain the. various techniques used for corporate restructuring.

    20 marks

26. What is 'Money Market'? Discuss its features and functions.

27. Discuss the various functions of a commercial bank.