UPSC Mains 2022 Commerce & Accountancy Optional Paper I questions

28 questions from the Civil Services (Main) Examination 2022. Official UPSC paper (PDF) · All Commerce & Accountancy Optional PYQs

1. What are Sweat Equity Shares? Under what conditions can these shares be issued by a company?

2. What is Activity-Based Costing (ABC)? How does ABC system support corporate strategy?

3. What is Interim Dividend? Specify the duties of an auditor in this regard.

4. Explain briefly the steps involved in preparing the budget for an industrial organization.

5. State the exceptions to the provision under the Income Tax Act regarding set-off of loss from one source against income from another source under the same head.

6. Balance Sheets of A Ltd. and B Ltd. as on March 3, 202] are as follows: ee I - Equity and Liabilities: l. Shareholder's Funds _(a) Share Capital Authorised Capital Share of = 00 each -5,00,000 i Share of = 0 each anv 0,00,000 Issued capital fully paid 5,00,000 4,00,000 (b) Reserve and Surplus Capital Reserve,00,000 a General Reserve 35,000 4,00,000 2. Non-Current Liabilities; Secured Loans — 2,50,000 Unsecured Loans,00,000 — 3. Current Liabilities Sundry Creditors,55,000,80,000 Total II - Assets: 2 l. Non-Current Assets =m Goodwill 40,000 — 2. Current Assets Stock —,00,000 Others 4,50,000 3,30,000 It. was proposed that A Ltd. should be amalgamated in B Ltd. Following arrangements were accepted by both the companies: (i) Goodwill of A Ltd. is considered as valueless. (ii) Arrears of depreciation in A Ltd. amounted to ₹ 20,000. (iii) The holder of every 2 shares in A Ltd. was to receive: () As fully paid at par, 0 shares in B Ltd.; and (2) So much cash as is necessary to adjust the right of the shareholders of both the companies in accordance with the intrinsic value of the shares as per their balance sheets subject to necessary adjustments with regard to goodwill and depreciation in A Ltd's Balance Sheet. You are required to: (I) Determine the composite of purchase consideration; and: (II) Show the balance sheet after amalgamation.

   20 marks

7. Great Ocean Ltd. is currently buying a component from a local supplier @ = 30 each. As the supply is irregular, the company is considering the following two proposals: (i) Buy and install a semi-automatic machine for manufacturing this component, which would involve an annual fixed cost of = 18,00,000 and variable cost of *12 per manufactured component. ' Gi) Buy and install an automatic machine for manufacturing this component, incurring an annual fixed cost of = 30,00,000 and variable cost of = 10 per manufactured component. The annual requirement of the company is expected to be 5,00,000 units and the volume is expected to increase to 6,00,000 units thereafter. Would you recommend the automatic or semi-automatic machine?: Justify your recommendation with necessary computations.

8. What is Annual Value? Illustrate the procedure of computing the annual value of a house property which is let out throughout the previous year.

9. X, an employee of a firm, furnished the following particulars of his income for the year ended March 3, 202]:: z: Basic Salary 2,88,000 Dearness Allowance 57,600 Own contribution to recognized Provident Fund 40,320 Employer's contribution to the above fund 40,320 Interest on balance in recognized Provident Fund 28,000 Bonus 24,000 Additional Information: (i) X was provided with a small car for which the employer paid all the running and maintenance costs. The car was used for official as well as personal purposes. (ii) He was also provided with rent-free accommodation at Kolkata for which the employer paid a rent of = 2,500 pm. He was allowed to use one refrigerator and an air-conditioner costing = 6,000 and = 24,000 respectively, while their written-down values as on 0.04.2020 were = 9,000 and = 4,000 respectively. (iii) Life insurance premium of = 24,000 was paid by his employer on: an Insurance Policy for = 4,80,000 on the life of X. Compute the taxable salary of X for the Assessment Year 202 — 22.

   20 marks

10. Explain the term 'Revenue' as per AS-9. State the items not included in the term 'Revenue'. When should revenue from sale of goods be recognized?

11. Explain the concept and features of Responsibility Accounting. Discuss the steps involved in implementing such an Accounting System.

12. The following details have been extracted from the cost records of a company: Material: 5 lbs @ = 5 — = 25 Labour: 4Hrs@ = 3-F 2 The production schedule for the month of January, 2022 required the completion of 7000 units; however 800 units were actually produced during the month. Purchase of materials of 40000 Ibs was made at a total invoice price of =,65,000. Production record for the month of January, 2022 revealed the following: Materials requisitioned and used — 35800 lbs, Direct labour — 7200 Hrs — = 59,400. Calculate the appropriate material and labour variances.

    20 marks

13. Discuss the impact of behavioural sciences on Accounting.

14. Discuss the major points to be considered by an auditor while conducting the audit. of charitable institutions.

    25 marks

15. Explain 'Capital Asset Pricing Model'..

    5 marks

16. Briefly explain any five risks faced by the financial institutions in India.

17. Discuss Walter's model of dividend decision.

18. Discuss the problem of multiple internal rates of return in relation to capital budgeting decision.

19. Explain the objective of maximising the wealth of shareholders.

20. From the following data, you are required to prepare a Balance Sheet and a Statement of Profit and Loss: 20 z= (a) Share Capital 9,60,000 (b) Working Capital 3,64,000 (c) Bank Overdraft 60,000 Additional information: (i) Current Ratio - 2 (ii) Quick Ratio - 4-5 (iii) Proprietary Ratio - 0°80 (Fixed Assets/ Proprietary Fund) (iv) Gross Profit Ratio - 0:20 (v) Inventory Turnover Ratio - 4 (vi) Trade Receivables Turnover - 36 days (vii) Net Profit to Paid-up Capital - 0% Assume there are no fictitious assets. In the case of current assets, there are no assets other than inventories, trade receivables and cash. Closing inventory is 20% higher than the opening inventory. Also assume 360 days in a year. rf Capital structure of a company consists of the following

21. Equity Share Capital: (Shares of =00 each) — 40,00,000 Retained Earning — 20,00,000 8% Preference Shares — 20,00,000 7% Debentures — 4,00,000 Total — 84,00,000 The company requires = 50,00,000 to finance the expansion programme for which the following alternatives are available: (i) Issue of 40,000 equity shares at a premium of = 25 per share (ii) Issue of 0% Preference Shares (iii) Issue of 8% Debentures It is estimated that in the case of equity shares, preference shares and debentures financing, the PE ratios would be 2-4, 7 and 5-7 respectively. Assume the company earns 2% on its capital with the income tax rate of 50%. You are required to evaluate the three financing alternatives and recommend the best alternative suitable for the company.

22. What is money market? Explain the features of a developed money market.

23. A company wishes to raise additional finance of = 20 lakh for meeting its investment plans. It has = 4,20,000 in the form of retained earnings available for investment purposes. Following are the additional details: (i) Debt/Equity mix — 30%/70% (ii) Cost of debt upto = 3,60,000 is 0% before tax; Beyond = 3,60,000 is 6% before tax; (iii) Earnings per share is = 8 2 (iv) Dividend payout is 50% of earnings (v) Expected growth rate in dividend is 0% (vi) Current market price per share is = 88 (vii) Tax rate is 50% You are required to determine the pattern for raising the additional finance, the post-tax average cost of additional debt, the cost of retained earnings and the cost of equity. Also compute the overall weighted average after-tax cost of additional finance.

    20 marks

24. From the following Summary Cash Account of Z Ltd., you are required to prepare Cash Flow Statement for the year ended March 31, 2022 in accordance with AS-3 using the Direct method. 15 Summary Cash Account (for the year ended March 31, 2022)

25. What is corporate restructuring? Explain the techniques of corporate restructuring.

26. From the following information as contained in the Trading and Profit & Loss Account and Balance Sheet of X Ltd., you are required to calculate the operating cycle period. 20 Trading and Profit & Loss Account (for the year ended March 3], 2022) (= in lakh) ia oe Ae ee To Opening Stock: By Sales 640 Raw Materials 28 By Closing Stock: Work-in-Process 60 Raw Materials 32 Finished Goods 40 Work-in-Process 80 To Purchases 480 Finished Goods 60 To Wages 50 To Manufacturing Expenses 30 To Gross Profit 24 To Office & Administrative Expenses 32 By Gross Profit 24 To Selling & Distribution Expenses 6 To Net Profit 76 ae a Balance Sheet (as on March 3, 2022) (= in lakh) Share Capital 600 Land & Buildings 300 Loans 320 Plant & Machinery 480 Profit & Loss Account 76 Stocks: Creditors 84 Raw Materials 32 Work-in-Process 80 Finished Goods 60 Debtors 04 Cash 24 Additional Information: (i) Closing balance of debtors is = 8 lakh more than the opening balance of debtors. (ii) Opening balance of creditors is 24 lakh. (iii) Purchases and sales are made on credit basis only.

27. Discuss the role of commercial banks in the economic development of a country.

28. Explain the Arbritrage process as per the M&M Model.