(Download) UPSC IAS Mains Exam Paper - 2017 : Commerce & Accountancy
COMMERCE AND ACCOUNTANCY
(Paper - I)
Time Allowed: Three Hours
Maximum Marks : 250
Question Paper Specific Instructions
Please read each of the following instructions carefully before attempting
questions :
There are EIGHT questions divided in TWO SECTIONS and printed
both in HINDI and in ENGLISH.
Candidate has also attempt FIVE questions in all. Questions no. 1 and
5 are compulsory and out of the remaining, any THREE are to be attempted
choosing at least ONE question from each section.
The number of marks carried by a question /part is indicated against it.
Answers must be written in the medium authorized in the Admission Certificate
which must be stated clearly on the cover of this Question-cum-Answer (QCA)
Booklet in the space provided. No marks will be given for answers written in a
medium other than the authorized one.
Word limit in questions, wherever specified, should be adhered to.
Assume suitable data, if considered necessary, and indicate the same clearly.
Attempts of questions shall be counted in sequential order. Unless struck
off, attempt of a question shall be counted even if attempted partly. Any page
or portion of the page left blank in the Question-c471-Armer Booklet bust be
clearly struck off
SECTION A
Q1. Answer the following in about 150 words each :
(a) State the provisions of Indian Accounting Standards regarding Foreign
Exchange Transactions,
(b) Distinguish between Internal Reconstruction and External Reconstruction of
Companies.
(c) Define Responsibility Centre”. Explain its various types.
(d) Write a note on 'Service Tax'.
(e) "Verification of Advances is an important function of an auditor of a Bank",
Explain.
Q2. (a) The Balance Sheets of Rakesh Ltd. and Lokesh Ltd. as at 31.12.2013
were as follows:
Rakesh Ltd. took over and absorbed Lokesh Ltd. as on 1.7.2014. No balance
sheet of Lokesh Ltd. was prepared on the date of takeover, but the following
information is made available to you:
(i) In the six months ended 30.6.2014 Lokesh Lud. made a net profit of 60,000
after providing for depreciation at 10% per annum on fixed assets.
(ii) Rakesh Ltd. during that period made a net profit of 1,45,000 after
providing for depreciation at 10% per annum on the fixed assets.
(iii) Both the companies had distributed dividends of 10% on 1.4.2014.
(iv) Goodwill of Lokesh Ltd. on the date of takeover was estimated at 25,000 and
it was agreed that the stocks of Lokesh Ltd. would be appreciated by 15,000 on
the date of takeover.
(v) Rakesh Ltd. to issue shares to Lokesh Ltd. on the basis of the intrinsic
value of the shares on the date of takcover.
Prepare the Balance Sheet of Rakosh Ltd, after absorption.
(b) How is Differential Cost Analysis helpful in decision-making ?
(c) "Residential status has its effect on computation of taxable income under
the Income Tax Act, 1961." Discuss.
Q3. (a) A company manufacturing two products furnishes the following data
for year :
The annual overheads are as under:
Volume Related activities costs - 5,50,000
Set-up related costs - 8,20,000
Purchased related costs - 6,18,000
You are required to calculate the cost per unit of each product ‘A’ and B*
based on
(i) Traditional method of charging overheads
(ii) Activity based costing method
(b) Discuss the provisions of Indian Accounting Standards on Accounting for
Depreciation.
(c) Mr. 'X' owns two house properties, 'A' and 'B'. Property 'A' is used by him
for his own residential purpose, whereas property 'B' is let out to a tenant for
a monthly rent of 15,000 throughout the financial year 2016 - 17. The other
particulars in respect of the properties are as under:
The following further information is available :
(i) Out of interest of 3 1,20,000 on home loan taken for construction of
property 'B', an amount of 30,000 was outstanding payable as at 31.3.2017
(ii) Mr. x was employed by ABC Ltd. on a monthly salary of 750,000 plus monthly
travelling allowance of 10,000.
(iii) He donated during the year * 1,50,000 to a charitable trust approved under
Section 80G of the Income Tax Act, 1961.
(iv) He spent 7,500 for his health check-up during the year.
You are required to compute Total Taxable Income of Mr. 'X' for the
Assessment Year 2017 - 18.
Q4. (a) A bank has received an application from a customer for a loan. You
have to investigate on behalf of the bank the accounts of the customer.
Highlight those points you would like to concentrate upon.
(b) Define 'Normal Wastage', 'Abnormal Wastage' and 'Abnormal
Effectiveness'. State how these are treated in Process Costing.
(c) Mr. 'A' inherited a residential house from his father in January 2015. His
father had bought the said house in the year 1979 at a cost of 370,000. Mr. 'A'
sold the house in June 2016 for a sale consideration of 17,00,000 and the
registered valuer has valued the said house at * 1,00,000 as at 1.4.1981. The
Cost Inflation Index (CII) is as under:
Financial Year CII
1981 - 82 100
2015-16 1000
2016-17 1200
You are required to compute the income from capital gains for the Assessment
Year 2017 - 18. Also suggest the actions, if any, that may be taken by Mr. 'A'
to avoid tax on capital gains.
SECTION B
Q5. Answer the following in about 150 words each;
(a) "Profit maximisation is the goal of Financial Management." Critically
examine.
(b) Discuss the Risk-Return Trade-off in financial decisions.
(c) Distinguish between Money Market and Capital Market.
(d) Discuss the various methods of deciding exchange ratio in merger of
companies.
(e) State the valuation formula put forward by James Walter. Also explain the
logic behind it.
Q6. (a) A company sells 2600 units of 'Mixer' at र2,000 cash, annually.
The details of cost per unit are as follows:
Raw and Packing Materials 800
Direct Wages
400
Overhead Expenses
400
Overhead expenses include 2-60 lakhs on depreciation. Production is evenly
maintained over the year, on a weekly basis. All sales are on credit. Materials
are introduced at the beginning of the process. The following additional
information is also available:
Raw Material and Packing Materials in stock - 4 weeks
Work-in-Progress (Material 100%, Labour overhead 50) - 1 week
Finished Goods - 1 week
Credit Allowed to Debtors - 6 week
Credit Allowed by Suppliers - 4 week
(Cash balance to the maintained is 60,000, Calculate the Net Working Capital
Requirements of the company.
(b) Discuss the role of SEBI in regulating the Capital Market.
(c) Define Capital Rationing. Explain the factors leading to Capital Rationing
and also state the situations of Capital Rationing.
Q7. (a) The following information is related to "Alpha Co. Ltd.' for the
year tended 31.3.2018:
Equity Share Capital ( 10 each) - 50 lakhs
12% Bonds of 1,000 each - 37 lakhs
Sales - 54 lakhs
Fixed Cost (excluding interest) - 6.96 lakhs
Financial Leverage - 1.49
Profit Volume Ratio - 27.55%
Income Tax Applicable - 40%
You are required to calculate
(i) Operating Leverage
(ii) Combined Leverage
(iii) Earning Per Share
(b) Explain the techniques used by the Credit Manager in monitoring the
status and the composition of Accounts Receivables.
(c) What is Commercial Paper ? Explain its significance and the pre-conditions
for the issue of Commercial Paper.
Q8.
(a)
The following additional information is available:
(i) During the financial year 2014 - 15, the company issued equity shares at
par.
(ii) Debentures were redeemed on 1.4.2014 at a premium of 10%.
(iii) Some investments were sold at a profit of 75,000 and the profit was
credited to General Reserve Account.
(iv) During the year, an old machine costing 23,50,000 was sold for 6,25,000.
Its written down value was 8,00,000. Depreciation is to be provided on plant and
machinery at 20% on the opening balance.
(vi) There was no purchase or sale of land and building,
(vii) Provision for tax made during the year was 4,50,000.
You are required to prepare a Cash Flow Statement for the year ended
31.3.2015
(b) Define 'Optimum Capital Structure. Discuss the major considerations in
the Optimum Capital Structure planning of a firm.
(c) Explain the significance of the following Accounting Ratios :
(i) Debt-Equity Ratio
(ii) Acid Test Ratio
(iii) Inventory Turnover Ratio
(iv) Operating Profit Ratio
(v) Current Ratio