UPSC Mains 2021 Commerce & Accountancy Optional Paper I questions

28 questions from the Civil Services (Main) Examination 2021. Official UPSC paper (PDF) · All Commerce & Accountancy Optional PYQs

1. Briefly explain the significance of Accounting Standard-3 (AS-3).

2. Discuss the importance of Employee Stock Option Plan (ESOP).

3. What are sunk cost opportunity cost? Explain with example.

4. What is the relationship between residential status and incidence of tax?

5. Discuss the key aspects in respect of audit of insurance company.

6. X Ltd. and Y Ltd. were in telecom business. Both the companies took a decision to amalgamate and a new company XY Ltd. is to be formed with an authorized capital of ®20,00,000 divided into 200000 equity shares of *0 each. The Balance Sheets of the companies as on 3.03.202] were as under: Particulars Y Ltd. () ®) I. Equity and Liabilities: l. Shareholders' Fund: (a) Share capital 2,80,000 5,00,000 (b) Reserves and Surplus (Profit and Loss A/c) 60,000 3,0,000 2. Non-current liabilities: 8% Secured Debentures 2,20,000 — 3. Current Liabilities: Trade Payables,08,000 2,80,000 Total 0,90,000 II. Assets: l. Non-current Assets: Property, Plant and Equipment 2,50,000 5,90,000 2. Current Assets: (a) Inventories 2,70,000,00,000 (b) Trade Receivables 88,000 2,84,000 (c) Cash at Bank 60,000,6,000 Total 0,90,000 The Assets and Liabilities of the existing companies are to be transferred at book value with the exception of some items detailed below: (3) The debentures of xX Ltd. are to be discharged by issue of 8% debentures of XY Ltd. at a premium of 0% (2) Property, Plant and Equipment of Y Ltd. was valued at *6,0,000 (3) The Trade Receivables of X Ltd. are realised fully and bank balance of X Ltd. are to be retained by the liquidator and the Trade Payables are to be paid of the proceeds thereof (4) Goodwill of X Ltd. was worth #,00,000 and Y Ltd. was worth % 3,00,000 You are required to— (i) compute the basis on which shares in XY Ltd. will be issued at par to the shareholders of the existing companies; (ii) draw up a Balance Sheet of XY Ltd. as at lst April, 202l, the date of completion of amalgamation; (iii) pass necessary Journal Entries including bank entries for closing the books of X Ltd.

   20 marks

7. Explain the principles and steps in setting up a good costing system in a manufacturing unit.

   5 marks

8. Define short-term capital assets and long-term capital assets. (i) How to compute tax on short- and long-term capital gains?

   5 marks

9. P.T.O. Mr. 8 (49 years), a resident individual, furnishes the following particulars pertaining to the year ending 31st March, 202]: Analysis of his bank account in his ledger reveals the under-mentioned data— €) — Rent received for a vacant plot of land 4,00,000 ¢ Amount received from X (P) Ltd. for a house at Pune for which he had been in negotiation for rent enhancement since last 4 years (this has not been taxed in any earlier year. However, this house is transferred during March, 2020) 3,00,000 ¢ Gift received from Alekhyo, his best friend,20,000 e Gift received from mother's father,60,000 ¢ Winning from a TV game show (net),40,000 ¢ Amount forfeited (initially paid by a buyer of his vacant plot, since the buyer could not finalise the deal as per agreement) 6,20,000 ¢ Amount received under Keyman Insurance Policy 4,40,000 Other information: (i) Donation given in cash to a charitable trust registered under (ii) Interest credited in the Public Provident Fund (PPF) account during the year 7,800 (ii) Public Provident Fund paid in the name of his minor daughter,50,000 (iv) He owns agricultural lands at Malaysia. He has derived agricultural income therefrom 3,60,000 Compute the taxable income of Mr. B for the assessment year 202-22.

   20 marks

10. What is right share? Explain its advantages.

    5 marks

11. In a factory, the product passes through two processes, A and B. Loss of 5% is allowed in process A and 2% in process B. Nothing being realised by disposal of the wastage. During July, 202l, 0000 units of material costing 6 each were introduced in process A. The other costs were as follows: Process A Process B ) ®) Materials 6,40 Labour 0,000 6,000 Overheads 6,000 4,600 The output was 9300 units from process A. The output of process B was 9200 units. Prepare Process Accounts and Abnormal Loss/Gain Accounts.

12. ABC company produces tables. An analysis of their accounting reveals— Fixed cost 00,000 for the year Variable cost %40 per table Selling price 7 40 per table Capacity 2000 tables per year (i) Find the break-even point (BEP). (ii) Find the number of tables to be sold to get a profit of ₹ 60,000. (iii) What will be the answer for (i) and (ii), if selling price changes to %20 per table? (iv) If the company can manufacture 600 tables more per year with an additional fixed cost of *4,000, what should be the selling price to maintain the profit per table as (ii) above?

    20 marks

13. "Accounting is an information system for decision making." Explain. State its characteristics.

14. What is tax audit? Explain its objectives. Who can be a tax auditor?

15. What is risk-return trade-off? Explain its significance in financial decision making.

16. Define optimum capital structure. Discuss its determinants.

17. What is capital rationing? Explain the principles of capital rationing.

18. Briefly explain any five innovative debt instruments.

19. Explain the importance of venture capital financing (VCF) in promoting start-up enterprises.

20. The Zenith Enterprises Ltd. has two investment proposals—project X and project Y. These are mutually exclusive. Project X requires an initial outlay of % 3-4 crores and project Y requires an initial outlay of 3:3 crores. The risk-free rate is 8% for both the projects. The risk premium rate for project X is 2% and project Yis 4%. The expected cash inflow and certainty equivalent coefficient for projects are given below: Project X Project Y Year ] ].8 crores "85 ₹ ].8 crores '90 2 2.0 crores yf 7 -8 crores '85 3 ₹ 2.0 crores '60 2-0 crores 'TS The PVF for 3 years: 73 Year2 Year 3 PVF @ 8% 926 '857 "794 PVF @ 0% '909 826 'TSi PVF @ 2% 893 '797 "fin From these details, determine which of the two projects should be accepted by using— (i) risk-adjusted discount rate method; (ii) certainty equivalent approach method.

    20 marks

21. What is credit policy? Explain the criteria involved in assessing the credit- worthiness of a customer.

22. Discuss the phases of operating procedures of monetary policy framework in India.

    5 marks

23. Co. is operating on 60% capacity, producing 48000 units per annum at the following cost price structure: Raw material 75 per unit Wages #3 per unit Overhead (variable). %2 per unit Overhead (fixed) 7 per unit Profit 72 per unit Selling Price ¥3 per unit The current assets and liabilities were as follows: ®) Raw material 4000 units at cost 20,000 Work-in-progress 000 units at cost 8,000 Finished goods 3000 units at cost 33,000 Sundry debtors 78,000 Creditors for goods 30,000 Liability for wages 3,000 Liability for expenses 6,000 In view of the increased demand for the product, it has been decided that from..202l the unit should operate at 80% capacity. You are required to ascertain the additional working capital as would be necessary in view of additional production. The price of materials, rates of wages and expenses and selling price per unit will not be changed. The period of credit allowed to customers, credit allowed by suppliers and also time lag in payment of wages and expenses shall remain the same as before.

    20 marks

24. Shasun Ltd. has the following capital structure: = each 0,00,000 08 The company is expected to declare 20% dividend on its equity share with a growth rate of 5%. The corporate tax rate is 30% and corporate dividend tax is 0%. Calculate Weighted Average Cost of Capital (WACC) of the company using— (i) book value as weight; (ii) market value as weight.

25. Discuss the role of IRDA in Indian insurance sector.

    5 marks

26. A company has a capital of ¥ |00 crores with shares of ¥ 00 each. The shares are currently quoted at par in the market. The company is planning to declare a dividend of ®6 per share at the end of current financial year which has just started. The rate of capitalisation for the risk class to which the company belongs is 0%. Using Modigliani-Miller (MM) model, answer the following: () Calculate the price of the shares at the end of the year, if ([7) dividend is declared and (2) dividend is not declared. (ti) Calculate the number of shares to be issued assuming the company pays dividend, has net income of *l0 crores and make new investment of?20 crores during the year. (iti) Find out the value of the firm, if (7) dividend is declared and (2) dividend is not declared.

    20 marks

27. Briefly explain the different techniques of inventory management in a manufacturing unit.

    5 marks

28. Discuss the key reforms in banking sector in line with BASEL norms.