KSLU Solved Question Papers
Financial Accounting
Previous Year Question Paper with Solution
B.Com. LL.B. (Five Years) · Sem 1
2023 Sep Examination
munotes.in
Mumbai
B.Com. LL.B. (Five Years) Sem 1 Financial Accounting 2023 Sep Question Paper with Solutions
First published on munotes.in on 21 October 2026.
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The question paper reproduced here is the paper as set by Karnataka State Law University at the 2023 Sep examination.
Contents
The questions below are the paper as Karnataka State Law University set it at the 2023 Sep examination, in the order it was set.
MarksPage
MarksPage
The Paper as Set
The questions in this volume are the questions asked at the 2023 Sep examination, reproduced as Karnataka State Law University set them, in the order it set them. Long reading passages are shortened to their first and last lines and our summary; the original paper prints them in full. Only the answers are ours. See the original question paper.
Duration 3 hours · Total marks 80 · 20 questions answered
Instructions printed on the paper
- N.B. (1) Answer all five Units. (2) One essay type question and short note/problem is compulsory from each Unit. (3) Figures to the right indicate marks. (4) Answer should be written in English only. (5) Use simple calculator only.
How to use this volume
Solve the paper first, under exam conditions and against the clock. Then read the answers here and mark your own. Reading a solution before attempting the question feels productive and teaches very little, because recognising an answer is not the same as being able to write one.
Q1
Unit I
(a)Define accounting standards. Discuss any four accounting standards.[10]
Answer
For full marks, cover: a definition of accounting standards and their purpose; who issues them in India and how they become binding; then four standards discussed, each with its scope and main rules and an example (AS 3 on cash flow statements, AS 4 on events after the balance sheet date, AS 13 on investments and AS 29 on provisions and contingencies); and a conclusion.
Definition
Accounting standards are authoritative written statements of the methods to be used for recognising, measuring, presenting and disclosing transactions in financial statements. They are issued by an expert accounting body. Their purpose is to remove or narrow the choice of methods, so that financial statements are reliable and can be compared across enterprises and years.
Who issues them in India
The Institute of Chartered Accountants of India (ICAI) frames the Accounting Standards through its Accounting Standards Board. For companies, they become binding when the Central Government notifies them under section 133 of the Companies Act, 2013. Companies that do not follow Ind AS apply the standards notified in the Companies (Accounting Standards) Rules, 2021. Other entities follow the AS issued by the ICAI. Larger companies follow the Indian Accounting Standards (Ind AS) notified under the Companies (Indian Accounting Standards) Rules, 2015.
1. AS 3: Cash Flow Statements
Scope. AS 3 deals with the statement that shows how cash and cash equivalents came in and went out during the period.
Main rules.
- Cash flows are classified under three heads:
- Operating activities, the main revenue-producing activities, such as receipts from customers and payments to suppliers and employees;
- Investing activities, the purchase and sale of long-term assets and investments;
- Financing activities, changes in owners' capital and borrowings, such as issuing shares or repaying loans.
- Operating cash flows may be shown by the direct method (gross receipts and payments), which the standard prefers. The indirect method starts from net profit and adjusts for non-cash items and working capital changes.
- Cash equivalents are short term, highly liquid investments readily convertible into known amounts of cash, normally maturing within three months.
Example. A firm earns a profit of ₹ 2,00,000 but its debtors rise sharply. The cash flow statement shows that operating cash inflow was much lower than the profit. The profit and loss account alone gives no such warning.
2. AS 4: Contingencies and Events Occurring After the Balance Sheet Date
Scope. AS 4 deals with events that occur between the balance sheet date and the date on which the accounts are approved.
Main rules.
- Adjusting events. If an event gives further evidence of a condition that existed on the balance sheet date, the assets and liabilities are adjusted. The standard says: "Assets and liabilities should be adjusted for events occurring after the balance sheet date" of that kind.
- Non-adjusting events. If the event relates to conditions arising after that date, the figures are not changed. A material event of this kind is disclosed.
Example. A customer who owed ₹ 50,000 on 31 March is declared insolvent in May. The insolvency confirms that the debt was already doubtful at 31 March, so a provision is made in that year's accounts. A fire that destroys stock in May, by contrast, is a later event: it is disclosed, not adjusted.
3. AS 13: Accounting for Investments
Scope. AS 13 deals with the accounting for investments in shares, debentures and other securities.
Main rules.
- Investments are classified as current (intended to be held for not more than a year, readily realisable) or long-term (all others).
- Current investments are carried at the lower of cost and fair value.
- Long-term investments are carried at cost. The carrying amount is reduced only for a decline in value that is "other than temporary".
- The cost includes acquisition charges such as brokerage, fees and duties.
- On disposal, the difference between the carrying amount and the net proceeds goes to the profit and loss account.
Example. Shares bought as a current investment for ₹ 60,000 are worth ₹ 52,000 at the year end. They are shown at ₹ 52,000, and the fall of ₹ 8,000 is charged to the year's profit.
4. AS 29: Provisions, Contingent Liabilities and Contingent Assets
Scope. AS 29 deals with liabilities of uncertain timing or amount.
Main rules.
- A provision is a liability that can be measured only by using a substantial degree of estimation. It is recognised in the accounts.
- A contingent liability is a possible obligation that arises from past events, whose existence depends on future events. It is not recognised in the accounts but is disclosed in the notes, unless the chance of payment is remote.
- A contingent asset is a possible asset arising from past events. It is not recognised and is not disclosed in the financial statements.
Example. A firm has guaranteed a loan taken by another business. It need pay only if the borrower defaults. The guarantee is a contingent liability, shown in a note, not in the balance sheet total. A provision for warranty repairs on goods sold, by contrast, is recognised as a liability.
The four standards at a glance
| Standard | Subject | Key rule |
|---|---|---|
| AS 3 | Cash flow statements | Operating, investing and financing activities |
| AS 4 | Events after the balance sheet date | Adjust for evidence of conditions at that date |
| Standard | Subject | Key rule |
|---|---|---|
| AS 13 | Investments | Current at lower of cost and fair value; long-term at cost |
| AS 29 | Provisions and contingencies | Provisions recognised; contingent liabilities disclosed |
Conclusion. Accounting standards are authoritative rules for recognising, measuring, presenting and disclosing transactions. In India the ICAI frames them, and section 133 of the Companies Act, 2013 makes them binding on companies. AS 3 classifies cash flows into operating, investing and financing activities. AS 4 adjusts the accounts for later evidence about year-end conditions. AS 13 values current investments at the lower of cost and fair value. AS 29 recognises provisions but only discloses contingent liabilities.
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