Assignment Set -1

Q1. From the following information, prepare Income Statement and Balance Sheet (Position statement) of Kumari Ltd. as at 31st March 2025.

Additional information:

1.Closing stock at 31-03-2025 = ₹25,000.

2. Depreciate Plant & Machine @ 5% p.a. and Delivery Vehicle @ 25% p.a.
3. Unpaid rent amounting to ₹6,000 (outstanding) is to be provided.

Provision for doubtful debts = 5% on sundry debtors (make provision).

Ans 1.

Kumari Ltd. – Income Statement & Balance Sheet as at 31-03-2025

Step 1: Depreciation (Adjustment)

• Plant & Machinery @ 5% on ₹2,60,000

• Delivery Vehicle @ 25% on ₹60,000

Step 2: Provision for Doubtful Debts (Adjustment)

Provision = 5% of Sundry Debtors ₹90,000

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Q2.(A). ABC Limited is in the process of preparing its financial statements for   the first time in accordance with the new accounting standards. As part of its preparations, the company is reviewing the conceptual framework of accounting, focusing on the qualitative characteristics of financial information.

Elaborate on the different levels of the conceptual framework of accounting as per qualitative characteristics and justify the necessity for ABC Limited to adopt these standards for accurate financial reporting.

(B). MNO Ltd., a newly established manufacturing company, is preparing its first set of financial statements. During the process, the accountant records machinery at its original purchase price but ignores the cost of installation and transportation. Additionally, the company delays finalizing its financial statements by three months, citing staff shortage.

Question:
i. Identify which qualitative characteristics of financial information are being violated in the above scenario.

1. Explain how MNO Ltd. can ensure faithful representation and timeliness in future reporting.

Ans 2.

(A) Conceptual Framework of Accounting and Qualitative Characteristics

The conceptual framework of accounting provides a structured foundation for the preparation and presentation of financial statements. It guides standard-setters, preparers, and users by defining the objective of financial reporting and the qualitative characteristics that make financial information useful. For ABC Limited, which is preparing financial statements for the first time under new accounting standards, understanding this framework is essential for accurate and reliable reporting.

At the first level, the conceptual framework defines the objective of financial reporting, which is to provide financial information that is useful to investors, lenders, and other stakeholders in making economic decisions. This objective focuses on providing information about the financial position, performance, and cash flows of the entity.

Q3. (A)  ABC Ltd. purchased machinery costing ₹9,60,000 on 1 April 2024. Useful life for accounting (Companies Act) = 8 years (straight-line).

For Income-tax Act purposes the machinery is allowed to be depreciated over 4 years (straight-line).

ABC Ltd. is in a 30% tax bracket.

Net profit before depreciation and tax (i.e., profit before charging any depreciation and before tax) for FY 2024-25 = ₹7,20,000.

Using the data above, answer:

25. Accounting income (as per Companies Act) and Taxable income (as per Income Tax Act) for FY 2024-25.
26. Amount of Timing difference (if any).

iii. Amount of Deferred Tax (DTA or DTL).

25. Where these amounts will appear in the Income Statement and Balance Sheet for FY 2024-25.

(B). MNO Ltd., a mid-sized manufacturing company listed on the stock exchange, has been under pressure from investors to show higher quarterly profits. In response, the finance team has been considering certain accounting practices that could boost short-term performance. During the review, the auditor noticed the following:

1. Sales worth ₹25,00,000 were recorded in March 2025 even though the goods were delivered in April 2025.
2. Certain repair and maintenance expenses of ₹5,00,000 were capitalized as fixed assets.
3. A provision for doubtful debts of ₹3,00,000 was intentionally omitted to improve reported profit.
4. Management hesitated to disclose pending litigation of ₹10,00,000 that could impact future profits.

Required:
i. Identify and explain the ethical issues involved in financial accounting as observed in the case of MNO Ltd.

1. Suggest the general procedure to resolve such ethical issues in financial reporting.

Ans 3.

(A). Deferred Tax due to different depreciation (FY 2024-25)

Cost of machinery = ₹9,60,000

Profit before depreciation & tax = ₹7,20,000

Tax rate = 30%

1. i) Accounting income & Taxable income

Book depreciation (Companies Act, SLM 8 yrs):

Accounting income (PBT):

Tax depreciation (Income-tax, SLM 4 yrs):

Taxable income:

Assignment Set 2

Q4. A. List out reporting areas that may be relevant to a particular company or organization when considering matters related to Corporate Social Responsibility (CSR) and Sustainability reporting in financial reporting.

1. XYZ Ltd. is a growing tech company that has decided to grant share-based payment in the form of stock options to its employees as part of their incentive program. The company grants 2,000 stock options to an employee, allowing the employee to purchase shares at a price of ₹100 per share. The stock options will vest over a period of 5 years, with 1/5 of the options vesting each year. The fair value of the stock options at the grant date is estimated at ₹250 per option. XYZ Ltd. must determine the accounting treatment for this stock option grant.

Explain how XYZ Ltd. should:

1. Measure the fair value of the stock options granted to employees.
2. Recognize the expense related to the stock options in the financial statements over the vesting period.

iii. Present the share-based payment transaction in its financial statements.

Ans 4.

(A). CSR & Sustainability reporting areas

CSR/sustainability reporting areas commonly include: environmental impacts (energy, emissions, water, waste), employee well-being and labour practices, health & safety, diversity and inclusion, supply-chain ethics, community development/CSR spend, product responsibility and customer privacy, governance and anti-corruption, compliance and legal matters, climate risk and ESG targets, and reporting metrics/assurance for sustainability

Q5. Write short note on:

• Equity and Cost method of valuation of Investments.
• Triple Bottom Line
• Integrated Reporting
• Impairment of Non-Current Assets
• Elements of Revenue Account of Banking Company.

Ans 5.

1. Equity and Cost Method of Valuation of Investments

• The cost method of valuation of investments records investments at their acquisition cost. Income is recognized only when dividends are received, and such income is treated as revenue. Any decline in value is recognized only if it is permanent in nature. This method is generally applied when the investor does not have significant influence over the investee company.
• The equity method, on the other hand, is used when the investor has significant influence over the investee, usually when shareholding is between 20% and 50%. Under this method, investments are initially recorded at cost and subsequently adjusted for the investor’s share of post-acquisition profits

Q6. On 31st March 2025 the balance sheets of Maanu ltd and its subsidiary Pooni Ltd. stood as follows

Draw a consolidated balance sheet as at 31/3/2025 after taking into consideration the following information

1. Maanu Ltd acquired shares on 31/7/2024 on that date Profit and loss A/c and General Reserve of Pooni Ltd stood at Rs. 30,000 and Rs 40,000 respectively.
2. Pooni Ltd earned a profit of Rs 45000 for the year ended 31/3/2025
3. On 1/1/2025 Maanu ltd sold Pooni ltd goods costing Rs 15000 for Rs 30000.
4. On 31/3/2025 , 50% of the above goods were lying unsold in the godowns of Pooni Ltd.

Ans 6.

Consolidated Balance Sheet of Maanu Ltd. and its Subsidiary Pooni Ltd. as at 31-03-2025

Maanu Ltd. holds 75% shares in Pooni Ltd.; therefore Pooni Ltd. is a subsidiary and consolidation is required as per standard consolidation principles.

1. Holding and Minority Interest

• Holding company (Maanu Ltd.) = 75%
• Minority interest = 25%

2. Net Assets of Pooni Ltd. on Date of Acquisition (31-07-2024)

Formula:

Set – 1

Q1. Discuss the duties of a bailor and bailee under the Indian Contract Act.     5+5     

Ans 1.

Duties of the Bailor

Under the Indian Contract Act, 1872, a bailor is the person who delivers goods to another person (the bailee) for a specific purpose upon a contract that the goods shall be returned or disposed of as per the bailor’s directions. The Act lays down several duties that the bailor must fulfill to ensure fairness and legal balance in a contract of bailment.

One of the primary duties of the bailor is to disclose all known faults in the goods bailed. Section 150 of the Act provides that the bailor is bound to disclose faults which materially

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Q2. Write a short note on:               

1. Sources of Indian Law 5
2. Capacity to Contract 5

Ans 2.

1. Sources of Indian Law

Indian law is derived from multiple sources that collectively shape the legal system of the country. The primary source of Indian law is the Constitution of India, which is the supreme law and provides the fundamental framework for governance, rights, duties, and powers of institutions. Any law inconsistent with the Constitution is considered void.

Legislation is another significant source of Indian law. Laws enacted by Parliament and State Legislatures govern various aspects of civil, criminal, commercial, and administrative

Q3. Describe the relations of the partners of a firm to one another under the Partnership Act, 1932. 10      

Ans 3.

General Principle of Mutual Rights and Duties

The Partnership Act, 1932 governs the internal relationship among partners of a firm. The relations of partners to one another are primarily based on mutual trust, good faith, and contractual understanding. Subject to any agreement between the partners, the rights and duties laid down in the Act apply uniformly. Section 9 of the Act emphasizes that partners must carry on the business of the firm to the greatest common advantage and must be just and

Set – 2

Q4. Explain the remedies available to the consumer under the Consumer Protection Act.       10

Ans 4.

Right to Seek Redressal Against Defective Goods and Deficient Services

The Consumer Protection Act provides consumers with the right to seek remedies against defective goods and deficient services. A consumer may file a complaint when goods suffer from defects or services fall short of promised standards. The Act ensures quick and effective redressal through a structured grievance mechanism.

Replacement of Goods

One of the key remedies available to consumers is the replacement of defective goods. If

Q5. Discuss the various types of meetings and their provisions under the Companies Act, 2013. 10   

Ans 5.

Meaning and Importance of Company Meetings

A meeting under the Companies Act, 2013 refers to a lawful assembly of members, directors, or stakeholders convened for discussing and deciding matters relating to the company. Meetings play a vital role in corporate governance as they provide a formal platform for decision-making, approval of policies, and protection of shareholder interests. The Act prescribes different types of meetings with specific provisions regarding notice, quorum,

Q6. Describe the meaning and civil remedies available for infringement of copyright. 3+7     

Ans 6.

Copyright Infringement

Copyright infringement refers to the unauthorized use, reproduction, distribution, communication, adaptation, or translation of a copyrighted work in violation of the exclusive rights granted to the copyright owner under the Copyright Act, 1957. When any person, without obtaining permission or license from the copyright holder, performs an act that is legally reserved for the owner, such action amounts to infringement. Copyright protects original literary, dramatic, musical, artistic works, cinematograph films, and sound

Set – 1

Q1. Briefly explain the following:

1. Contract Costing.
2. Operating Costing.

iii. Unit or Single Output Costing.

1. Process Costing.
2. Operation Costing.

Ans 1.

1. Contract Costing

Contract costing is a method of costing used where work is undertaken according to specific contracts, usually of long duration. It is commonly applied in industries such as construction, shipbuilding, civil engineering, and large-scale infrastructure projects. Under this method, each contract is treated as a separate cost unit, and all costs related to that particular contract are recorded separately. Direct costs such as materials, labor, and direct expenses are charged directly to the contract, while indirect costs are apportioned appropriately. Since contracts often extend over more than one accounting period, the concept of work-in-progress and

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Q2. Information on the overhead of different production and service departments is available as follows for July 2025:

In addition to the above, the following information is available:

Lighting Expenses                                                                               Rs.70,000

Power expenses                                                                                Rs.1,20,000

Rent and rates                                                                                    Rs.56,000

Insurance of assets                                                                            Rs.20,000

Canteen expenses                                                                             Rs.18,000

Depreciation rate on capital value of assets per annum                       12%

Find the overhead of each department.

Ans 2.

Departmental Overheads (Primary Distribution) for July 2025

Statement Showing Department-wise Data (July 2025)

Q3. Mention any five differences between Marginal and Absorption Costing.

Ans 3.

Differences between Marginal Costing and Absorption Costing

Marginal costing and absorption costing are two important techniques of cost accounting used for cost analysis, pricing, and managerial decision-making. Although both methods aim to ascertain product cost and profit, they differ significantly in treatment of costs, valuation of inventory, and usefulness for management decisions. The following discussion explains five major differences between marginal costing and absorption costing in a clear and exam-oriented manner.

1. Treatment of Fixed Manufacturing Overheads

The most fundamental difference lies in the treatment of fixed manufacturing overheads.

Set – 2

Q4. If the semi-variable cost for 2,000 units of output is Rs. 15,000 and for 3,000 units it is Rs. 20,000, find the variable cost per unit and total fixed cost for the period.

2. Selling Price is Rs. 200; Variable cost per unit is Rs. 120; Fixed Cost is Rs. 10,000.

The number of Units produced is 200.

 Calculate the following:

1. Contribution
2. P/V ratio

iii. BEP in Rs.

1. BEP in units.

Ans 4.

(A).

Semi-variable Cost (High–Low Method)

Given:

At 2,000 units → Cost = ₹15,000

At 3,000 units → Cost = ₹20,000

Variable Cost per Unit

Q5. The following data relates to two machines of KPS Ltd.

The existing machine has been working for 5 years. Its present resale value is Rs. 40,000. The scrap value of the machine may be taken as nil. Advise whether the old machine should be replaced by a new machine if the rate of interest is 10% per annum.

Ans 5.

Replace Old Machine? (NPV Decision @ 10%)

Step 1: Annual Cash Profit (Contribution – Fixed)

Existing machine:

Contribution/unit = 120 − 60 = ₹60

Annual contribution = 60 × 2,000 = ₹1,20,000

Annual profit = 1,20,000 − 48,000 = ₹72,000

New machine:

Q6. Define the concepts of Pricing Decisions. And explain its external and internal factors.

Ans 6.

Pricing Decisions: Meaning and Internal & External Factors

Pricing decisions refer to the process of determining the appropriate price at which a product or service should be offered to customers. Price is the only element of the marketing mix that generates revenue, while all other elements involve costs. Therefore, pricing decisions directly influence profitability, market position, and long-term sustainability of a business. An effective pricing decision aims to recover costs, earn a reasonable profit, and provide

Set – 1

Q1. Describe financial management. Also, illustrate various functions of financial management.  2 + 8

Ans 1.

Financial Management: Meaning and Functions

Financial management refers to the efficient planning, organizing, directing, and controlling of financial resources of an organization in order to achieve its overall objectives. It is primarily concerned with the procurement and effective utilization of funds to maximize the wealth of shareholders while ensuring financial stability and growth of the business. In modern business organizations, financial management plays a central role because every managerial decision has financial implications. Sound financial management ensures optimal

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Q2. A company is planning to start a new project of ₹ 2000 crores. For this purpose, the company has planned to raise ₹1600 crores of equity share capital and ₹400 crores of 10% debentures. If the company is paying constant dividend of ₹27 per share and current market price of equity share is ₹180 per share, estimate weighted average cost of capital of company, assuming corporate tax rate of 40%.

Ans 2.

Calculation of Weighted Average Cost of Capital (WACC)

Given

• Total Project Cost = ₹2,000 crores
• Equity Share Capital = ₹1,600 crores
• Debentures = ₹400 crores (10%)
• Dividend per share = ₹27
• Market price per share = ₹180
• Corporate tax rate = 40%

Step 1: Cost of Equity (Ke)

Q3. A firm’s sales, variable costs and fixed cost amount to ₹ 75,00,000, ₹ 42,00,000 and ₹ 6,00,000 respectively. It has borrowed ₹ 45,00,000 at 9% and its equity capital totals ₹ 55,00,000.

Estimate operating, financial and combined leverages of the firm based on abovementioned information. Also, show working notes.   (3*3) + 1

Ans 3.

Operating, Financial and Combined Leverage

Given

• Sales = ₹75,00,000
• Variable Cost = ₹42,00,000
• Fixed Cost = ₹6,00,000
• Debt = ₹45,00,000
• Interest Rate = 9%

Step 1: Contribution

Step 2: EBIT

Set – 2

Q4. Describe determinants of capital structure in detail.

Ans 4.

Determinants of Capital Structure

Capital structure refers to the mix of long-term sources of finance used by a firm, primarily equity and debt. Determining an optimal capital structure is a critical financial decision, as it directly affects a firm’s cost of capital, risk profile, and market value. Several internal and external factors influence a company’s capital structure decisions.

1. Cost of Capital

One of the most important determinants is the cost of capital. Debt is generally cheaper than

Q5. The following are two mutually exclusive projects:

Assuming 10% opportunity cost of capital, estimate net present value and payback period for project A and B. Which project should be recommended under each of these techniques?

The present value factor (PVF) @ 10% is as follows:

4+4+2

Ans 5.

NPV and Payback Period of Projects A and B

Given

PV Factors @ 10%

Year 1 = 0.909 | Year 2 = 0.826 | Year 3 = 0.751

Project A

Q6.  Describe in detail the Miller and Modigliani model of dividend policy.

Ans 6.

Miller and Modigliani (MM) Model of Dividend Policy

The Miller and Modigliani (MM) model of dividend policy, proposed by Merton Miller and Franco Modigliani in 1961, is one of the most influential theories in corporate finance. The model asserts that dividend policy is irrelevant to the value of a firm under certain idealized conditions. According to MM, the value of a firm depends solely on its earning power and investment decisions, not on how earnings are distributed between dividends and retained

Assignment Set – 1

Q1. Explain the law of demand with the demand function and the factors affecting demand. 4+3+4

Ans 1.

Law of Demand with the Demand Function and the Factors Affecting Demand

Law of Demand

The law of demand is one of the fundamental principles of managerial economics and consumer behaviour. It states that, other things remaining constant (ceteris paribus), the quantity demanded of a good varies inversely with its price. This means that when the price of a commodity rises, consumers tend to purchase a smaller quantity, and when the price falls, they are willing to purchase a larger quantity. The logic behind this law lies in the concepts of diminishing marginal utility and substitution effect. As price increases, the

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Q2. Discuss how market equilibrium is affected by changes in supply and demand. 10

Ans 2.

Market Equilibrium

Market equilibrium refers to a situation where the quantity demanded of a commodity is exactly equal to the quantity supplied at a particular price. At this equilibrium price, also known as the market-clearing price, there is neither excess demand nor excess supply. Market equilibrium is determined by the interaction of demand and supply forces and plays a crucial

Q3. Mention Baumol’s static and dynamic models of sales revenue maximization.        10

Ans 3.

Baumol’s Sales Revenue Maximization Theory

William J. Baumol proposed the sales revenue maximization model as an alternative to the traditional profit maximization theory. According to Baumol, modern managers of large corporations are more interested in maximizing sales revenue rather than profits. This preference arises because managerial salaries, prestige, job security, and market power are often more closely related to sales volume than to profit levels. However, Baumol also acknowledged that firms must earn a minimum acceptable level of profit to satisfy

Assignment Set – 2

Q4. Explain various pricing methods used in managerial decision-making. 10

Ans 4.

Pricing Methods Used in Managerial Decision-Making

Pricing is one of the most critical decisions in managerial economics as it directly affects revenue, profitability, and market position. Managers use various pricing methods depending on market structure, cost conditions, competition, and organizational objectives. Effective pricing strategies help firms achieve goals such as profit maximization, sales growth, market penetration, or survival in competitive markets.

Cost-Oriented Pricing Methods

Cost-oriented pricing methods are based primarily on production and operating costs. One widely used approach is cost-plus pricing, where a fixed percentage of profit is added to total

Q5. Elaborate on the concept of market and different types of market structures in the economy.     2+8     

Ans 5.

Concept of Market

In economics, a market refers to an arrangement or system where buyers and sellers interact to exchange goods and services at mutually agreed prices. A market does not necessarily mean a physical place; it includes all mechanisms through which demand and supply operate. The essential elements of a market are the existence of buyers and sellers, a commodity or service to be exchanged, and communication between buyers and sellers regarding price. Markets play a crucial role in resource allocation, price determination, and facilitating

Q6. Explain the key macroeconomic measures and their importance. 10           

Ans 6.

Key Macroeconomic Measures and Their Importance

Macroeconomic measures are indicators used to assess the overall performance and health of an economy. These measures help governments, businesses, and policymakers understand economic conditions, formulate policies, and plan future actions. They provide a comprehensive picture of growth, stability, and development at the national level.

Gross Domestic Product (GDP)

GDP measures the total value of all final goods and services produced within a country during a specific period. It is the most widely used indicator of economic growth. An increase

Set – 1

Q1. Differentiate between a formal organization and an informal organisation. 10              

Ans 1.

Differentiate Between a Formal Organization and an Informal Organization

An organization is a structured arrangement of people working together to achieve common objectives. Within any organization, two types of structures coexist: the formal organization and the informal organization. While the formal organization is deliberately designed by management, the informal organization emerges naturally from social interactions among employees. Both play an important role in influencing behaviour, communication, and performance within an organization.

Meaning of Formal Organization

A formal organization refers to the officially established structure of roles, responsibilities,

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Q2. Discuss why is controlling important in management functions. 10          

Ans 2.

Controlling Is Important in Management Functions

Controlling is one of the fundamental functions of management, along with planning, organizing, and directing. It refers to the process of ensuring that organizational activities are carried out as planned and that performance is aligned with predetermined objectives. Controlling involves setting standards, measuring actual performance, comparing it with standards, identifying deviations, and taking corrective actions. It plays a vital role in

Q3. Describe the steps involved in creative decision-making in an organisation. 10               

Ans 3.

Steps Involved in Creative Decision-Making in an Organisation

Creative decision-making is a systematic process through which managers generate innovative and effective solutions to organizational problems. Unlike routine decision-making, creative decision-making focuses on originality, flexibility, and the ability to think beyond conventional approaches. In a dynamic and competitive business environment, organizations increasingly rely on creative decisions to improve efficiency, solve complex

Set – 2

Q4. Describe the Trait Theory of Leadership. 10

Ans 4.

Trait Theory of Leadership

Trait Theory of Leadership is one of the earliest approaches to understanding leadership effectiveness. This theory focuses on identifying the personal traits and characteristics that distinguish successful leaders from non-leaders. It assumes that leadership qualities are inherent and that certain individuals are naturally predisposed to become effective leaders.

Meaning of Trait Theory

According to the Trait Theory, leadership is based on individual characteristics such as

Q5. Explain the main causes of Stress among individuals in an organisation. 10          

Ans 5.        

Main Causes of Stress among Individuals in an Organisation

Stress in an organization refers to the physical and psychological strain experienced by employees when job demands exceed their ability, resources, or comfort level. In today’s competitive and fast-changing work environment, stress has become a common phenomenon affecting employee performance, health, and overall organizational effectiveness. Understanding the causes of stress helps management design better work systems and

Q6. Discuss the two fundamental forces of change in an organization. 10                  

Ans 6.

Two Fundamental Forces of Change in an Organization

Change is an inevitable and continuous process in organizations. To survive and grow in a dynamic environment, organizations must adapt to various internal and external influences. The two fundamental forces of change in an organization are internal forces and external forces. These forces compel organizations to modify their strategies, structures, technologies,

Set – 1

Q 1.

(A) Specify with brief reason, whether the following acts can be considered as an act of (i) Tax management; or (ii)  Tax planning; or (iii) Tax evasion; or (iv) Tax avoidance:

1. To reduce tax payable, Sunil Varma an individual, paid ₹ 55,000 as of life insurance premium on the policy of his minor son.
2. A foreign company has an Indian subsidiary that is selling its product to the parent company at a price of

₹ 100 per unit while the same product is sold to another foreign company at ₹ 200 per unit.

3. A company is claiming depreciation on the motor car which is being used by the director for personal purposes.
4. Installation of Air Conditioner costing ₹ 75,000 at the residence of the Director as per terms of appointment but treating it as Plant installed in Quality Control Section in the factory.
5. Mr. D is a working partner in a firm, and he is entitled to a salary of ₹ 30,000 per month. He treats this as salary instead of business income.

(B) Explain the necessity of tax planning. Also explain the type of Tax Planning.

Ans 1.

1. Classification of Tax Practices with Justification

Taxation involves various strategies and practices that businesses and individuals adopt to either minimize tax liability or unlawfully evade taxes. The given cases can be categorized into Tax Management, Tax Planning, Tax Avoidance, or Tax Evasion based on their nature.

1. Payment of Life Insurance Premium for a Minor Son – Tax Planning

Sunil Varma’s decision to pay ₹ 55,000 as a life insurance premium on his minor son’s policy is an act of Tax Planning. Tax planning involves making legitimate financial decisions to reduce tax liability within the framework of the law. Under Section 80C of the Income Tax

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Q2A.   The taxable income of SGRCS Pvt ltd. computed as per the provisions of  Income-tax Act is Rs. 28,40,000. Book profit of the company computed as per the provisions  of section 115JB is Rs. 18,80,000. Determine what will the will be the tax liability of SGRCS Pvt ltd. (ignore cess and surcharge)?

1961. Explain the various reliefs available to the assesses to avoid double taxation under Sections 90 and 91 of the Income Tax Act 1961.

Ans 2.

(A) Tax Liability Calculation for SGRCS Pvt Ltd.

The tax liability of SGRCS Pvt Ltd. is determined based on two methods:

1. Normal Tax Calculation (as per Income Tax Act provisions)
   • Taxable Income = ₹ 28,40,000
   • Corporate Tax Rate (for domestic companies with turnover < ₹ 400 Cr) = 25%
   • Tax under normal provisions = ₹ 28,40,000 × 25% = ₹ 7,10,000
2. Minimum Alternate Tax (MAT) Calculation (as per Section 115JB)
   • Book Profit = ₹ 18,80,000

Q3. (A) A corporation is looking to raise Rs. 80 Lakhs to fund a project that will  result in pre-tax earnings equal to 30% of the total amount of capital utilized.  The corporation could raise debt financing at a rate of 15% per year. The company can raise funds through any one of the following three possible options:

1. Rs. 80 lakhs in equity capital,
2. Rs. 40 lakhs in loans, and Rs. 40 lakhs in equity capital
3. 15 lakhs rupees in equity capital and 65 lakhs rupees in loans.

Assume that the business will distribute all profits and dividends. The tax levy is 50%.  Determine which of the three options the corporation should choose to reduce its tax liability.

(B) What are areas of tax planning with reference to the Industrial Undertaking.

Ans 3.

(A) Best Financing Option to Reduce Tax Liability

When a corporation decides to raise capital, it must consider the tax implications of different financing options. Interest paid on debt is a deductible expense, reducing taxable income and ultimately lowering tax liability.

Given that the corporation needs to raise ₹80 lakhs and expects pre-tax earnings of 30% on the total capital, the calculations for tax liability under the three financing options are as follows:

Set – 2

4. Mr. Kumar (a resident) purchased a house in December 2006 for Rs. 8,56,200 and incurred a cost of improvement of Rs 2,00,000 in year 2010 and sold the same, in April 2024 for Rs. 76,20,000 (brokerage Rs. 20,000). He purchased another house for Rs 400,00,000 in Dec 2024.

Cost inflation index number:                    Previous year

117                                                           2005-06

122                                                           2006-07

167                                                           2010-11

301                                                           2023-24

317                                                           2024-25

Answer following questions:

(a) Determine the nature of capital gain?

(b) Determine the amount of capital gain?

(c) Determine the Capital gain tax liability in this transaction?

(d) Can he claim the option of not availing of the indexation and paying tax @ 10% on the capital gain?

(e) Specify the amount he can claim as exemption U/s 54.

Ans 4.

Capital Gain Computation for Mr. Kumar

Mr. Kumar sold a house property in April 2024, which he had purchased in December 2006. Since the holding period of the property is more than 24 months, it qualifies as a Long-Term Capital Asset, and the gain arising from the sale is a Long-Term Capital Gain (LTCG).

(A) Nature of Capital Gain

Since the property was held for more than 2 years (24 months) before the sale, the gain is categorized as a Long-Term Capital Gain (LTCG).

(B) Computation of Long-Term Capital Gain (LTCG)

Step 1: Compute Indexed Cost of Acquisition (ICOA)

Q5. Mr. Yadav is offered the post of director by SGRCS Ltd, with the following two options:

Ans 5.

Tax Planning Recommendation for Mr. Yadav

Tax planning plays a crucial role in optimizing salary structures to minimize tax liability while maximizing net income. Mr. Yadav has been offered the position of Director at SGRCS Ltd with two different salary structures. As a tax planner, it is important to analyze which option

Q6. A.  Write a short note on:

1. Applicability of Transfer Pricing
2. Advance Tax Payment

III.  Assessment procedure in Income tax

1. Advance Rulings
2. Explain the special tax Provisions and Incentives that allow for a business to receive a favorable tax treatment due to the location and nature of the business.

Ans 6.

(A) Short Notes on Key Tax Concepts

1. Applicability of Transfer Pricing

Transfer pricing applies to transactions between associated enterprises to ensure that goods, services, or intellectual property are exchanged at arm’s length price (ALP). In India, it is governed by Sections 92 to 92F of the Income Tax Act, 1961 and applies to international transactions and specified domestic transactions. The purpose is to prevent tax avoidance through profit shifting to low-tax jurisdictions. Compliance with OECD guidelines and maintaining transfer pricing documentation is mandatory for affected businesses.

1. Advance Tax Payment

Advance tax is the prepayment of income tax in installments rather than a lump sum at year-e

Assignment Set – 1

1. Global Energy Corp. provides the following expected returns and probabilities for five states of the economy:

• State P: Probability = 0.15, Return = 5%
• State Q: Probability = 0.25, Return = 15%
• State R: Probability = 0.3, Return = 10%
• State S: Probability = 0.2, Return = 8%
• State T: Probability = 0.1, Return = 20% Calculate the average expected return and risk.

Ans 1.

Expected Return and Risk Calculation for Global Energy Corp.

Security analysis and portfolio management involve evaluating risk and return for different investment opportunities. One of the key methods used to determine the performance of a stock or portfolio is by calculating the expected return and risk (standard deviation) based on different possible economic conditions.

In this case, Global Energy Corp. operates in five different states of the economy, each with a given probability and expected return. The data provided is as follows:

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2. a) Consider a bond with a face value of €500, a 9% annual coupon rate, and 8 years to maturity. If the annual interest rate is 8%, calculate the bond’s current value.
3. b) Discuss the concept of Moving Average Convergence Divergence (MACD)

Ans 2.

(a) Bond Valuation Calculation

A bond’s value is determined by the present value of its future cash flows, which include periodic coupon payments and the face value at maturity. Since the bondholder receives these payments over time, they must be discounted to their present value using the market interest rate.

The formula for bond valuation is:

Where:

• = Current price of the bond
• = Annual coupon payment (Coupon rate × Face value)
• = Market interest rate (discount rate)

 (b) Moving Average Convergence Divergence (MACD)

The Moving Average Convergence Divergence (MACD) is a popular technical indicator used in financial markets to analyze trends and momentum in stock prices. It helps traders identify potential buy and sell signals by comparing two different exponential moving averages (EMAs) of a stock’s price. The MACD is calculated by subtracting the 26-day EMA from the 12-day EMA, resulting in the MACD line, which represents the difference between short-term and long-term price movements.

3. a) Assuming a risk-free rate of 6% and an expected market risk premium of 9%, what is the expected return on a stock with a beta of 1.0?
4. b) Discuss the  principles  and  implications  of  the  Efficient  Market Hypothesis.     5+5     

Ans 3.

 (a) Expected Return Using CAPM

The Capital Asset Pricing Model (CAPM) determines the expected return on a stock based on its systematic risk (beta).

The formula is:

Where:

• = Expected return
• = Risk-free rate = 6%
• = Market risk premium = 9%
• = Beta of the stock = 0

Now, substituting the values:

The Efficient Market Hypothesis (EMH) is a financial theory that states that financial markets are

Assignment Set – 2

4. a) Analyze the role of Global Depository Receipts (GDRs) as a global investment avenue.
5. b) Nancy invested 60% of her portfolio in Stock X, which has a return of 15%, and the remaining 40% in Stock Y, which has a return of 10%. Calculate the expected return of Nancy’s portfolio.

Ans 4.

 (a) Role of Global Depository Receipts (GDRs) as a Global Investment Avenue

Global Depository Receipts (GDRs) play a crucial role in the international financial market by allowing companies to raise capital from foreign investors without directly listing on foreign stock exchanges. A GDR is a financial instrument issued by a depository bank and represents shares in a foreign company. These receipts are traded on international stock exchanges such as the London Stock Exchange (LSE), Luxembourg Stock Exchange, and Singapore Exchange (SGX), providing investors with access to equities from different countries. GDRs enable companies,

5. a) Describe the meaning and benefits of mutual funds.
6. b) Discuss the role of arbitrage in the Arbitrage Pricing Theory (APT).

Ans 5.

 (a) Meaning and Benefits of Mutual Funds

A mutual fund is a pooled investment vehicle where money from multiple investors is collected and invested in a diversified portfolio of stocks, bonds, or other assets. These funds are managed by professional fund managers who allocate capital strategically to generate returns while minimizing risks. Mutual funds are categorized based on their investment objectives, such as equity funds, debt funds, hybrid funds, and index funds. Investors purchase units of the mutual fund, and the fund’s Net Asset Value (NAV) determines the value of their investment. Since mutual funds offer diversification and professional management, they are a popular choice for both individual and

6. a) Distinguish between fundamental analysis and technical analysis.
7. b) What are the common mistakes made in investment management?

Ans 6.

(a) Distinction Between Fundamental Analysis and Technical Analysis

Investors use two primary approaches to evaluate stocks and make investment decisions: fundamental analysis and technical analysis. While both methods aim to predict price movements, they differ significantly in their approach, tools, and assumptions about market behavior.

Fundamental Analysis: Assessing Intrinsic Value

Fundamental analysis focuses on evaluating a company’s financial health, earnings potential, and economic position to determine its intrinsic value. Analysts examine factors such as revenue, profit margins, earnings growth, financial ratios (P/E ratio, debt-to-equity ratio), and industry trends. They also consider macroeconomic indicators like GDP growth, inflation, and interest rates to assess the broader economic impact on stock performance. The goal is to identify undervalued stocks that have strong long-term growth potential.

Technical Analysis: Studying Price Trends and Patterns

In contrast, technical analysis does not consider financial fundamentals but instead focuses on price movements, trading volume, and chart patterns to predict future price trends. Technical analysts use tools such as moving averages, Relative Strength Index (RSI), Bollinger Bands, and

Set – 1

1. What are the basic features of a modern organization?

Ans 1.

Basic Features of a Modern Organization

A modern organization is structured to adapt to the dynamic and complex business environment of today. It integrates advanced technologies, embraces innovation, and operates with efficiency to achieve competitive advantage. The following are the key features that define a modern organization:

1. Technological Integration

Modern organizations rely heavily on technology to streamline their operations. Digital transformation has become essential, with businesses leveraging artificial intelligence (AI),

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2. What do you understand by decision-making with communication technology?

Ans 2.

Decision-Making with Communication Technology

Decision-making is a crucial aspect of management, involving the selection of the best course of action from available alternatives. In the digital era, communication technology plays a significant role in enhancing decision-making processes by enabling swift information flow, collaboration, and data analysis.

1. Role of Communication Technology in Decision-Making

Communication technology refers to the tools and systems that facilitate information exchange, such as email, video conferencing, instant messaging, enterprise resource planning (ERP)

3. Briefly identify the main functions of the finance and accounting module of an ER

Ans 3.

Main Functions of the Finance and Accounting Module of an ERP

Enterprise Resource Planning (ERP) systems integrate various business functions to streamline operations and enhance efficiency. One of the most critical components of an ERP system is the Finance and Accounting module, which helps organizations manage their financial transactions, reporting, compliance, and overall financial planning. This module ensures that businesses maintain accurate financial records and make informed financial decisions.

1. General Ledger Management

The general ledger (GL) is the backbone of an organization’s financial system. The finance

Set – 2

4. What are the different ways of making online payments?

Ans 4.

Different Ways of Making Online Payments

With the rapid advancement of digital technology, online payments have become an integral part of modern financial transactions. Consumers and businesses now rely on various digital payment methods to make transactions quickly, securely, and conveniently. Below are the different ways to make online payments:

1. Credit and Debit Cards

Credit and debit cards remain one of the most widely used methods for online payments. Issued

5. What is a DSS and how can it help managers?

Ans 5.

Decision Support System (DSS) and Its Role in Managerial Decision-Making

A Decision Support System (DSS) is a specialized information system that helps managers and business executives make informed decisions by analyzing large volumes of data and generating useful insights. DSS combines data, analytical models, and user-friendly interfaces to assist decision-makers in solving complex business problems, improving efficiency, and enhancing strategic planning.

1. Components of a Decision Support System

A DSS typically consists of three main components:

• Data Management Component – Stores and processes relevant business data from

6. What are the different kinds of power that systems professionals exert over users?

Ans 6.

Different Kinds of Power That Systems Professionals Exert Over Users

Systems professionals, such as IT managers, software developers, and cybersecurity experts, play a crucial role in managing technological systems within an organization. Their expertise and control over IT infrastructure give them various forms of power over users. These powers can ensure efficiency and security but, if misused, may lead to ethical concerns and resistance from employees.

1. Expert Power

Expert power comes from specialized knowledge and technical skills. IT professionals

Assignment Set – 1

Q1. Elucidate the importance of preparation of financial statements of a company. With imaginary figures provide income statement as per schedule 3 of Companies Act 2013.

Ans 1.

Importance of Preparation of Financial Statements

Legal Requirement and Statutory Compliance

Under the Companies Act, 2013, every registered company is required to prepare financial statements annually. These statements include the Balance Sheet, Profit and Loss Statement, Cash Flow Statement, and Notes to Accounts. They ensure transparency and accountability in the company’s financial dealings and act as legal documents for tax and regulatory purposes.

Facilitates Decision-Making

Financial statements serve as a critical tool for management, investors, and stakeholders.

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Q2. The following particulars relate to a company:

Total assets Rs.18,50,000

External Liabilities Rs.2,50,000

Share capital:

14% Preference shares of Rs.10 each, fully paid Rs.15,00,000

40,000 Equity shares of Rs.10 each, fully paid Rs.4,00,000

60,000 Equity shares of Rs.10 each, Rs.7.50 paid Rs.4,50,000.

Calculate the value of each category of equity shares of the company based on a deemed liquidation 10      

Ans 2.

Calculation of Value of Equity Shares Based on Deemed Liquidation

In such a case, the available assets after paying off external liabilities and preference shareholders are distributed among the equity shareholders based on their paid-up value.

Step 1: Given Data

Step 2: Net Assets Available for Shareholders

Q3. Mr. Prasad purchased 500 equity shares of Rs.100 each of Mega Company Ltd. for Rs.62,500 inclusive of brokerage and stamp duty. Some years later the company resolved to capitalize its profits and to issue to the holders of equity shares, one equity bonus share for every share held by them. Prior to capitalization, the share of Mega Co. Ltd. were quoted at Rs.175 per share. After the capitalization, the shares were quoted at Rs.92.50 per share. Mr. Prasad sold the bonus shares and received Rs.90 per share. Prepare the Investment Account in the books of Mr. Prasad on Average Cost Basis.  10

Ans 3.

Investment Account of Mr. Prasad on Average Cost Basis

Step 1: Given Details

Assignment Set – 2

Q4. Explain the meaning of Issue of Shares and elucidate the methods of issue of shares in Listed Company as per Companies Act, 2013     2+8     

Ans 4.

Issue of Shares

The issue of shares refers to the process by which a company raises capital by offering ownership interests in the form of equity or preference shares to investors. These shares represent a portion of ownership in the company and entitle the shareholder to a share in profits, voting rights (in case of equity shares), and a claim on assets during winding up (after liabilities are paid). The Companies Act, 2013 governs the procedure and methods for issuing shares, especially for listed companies which must also comply with SEBI (Securities and Exchange Board of India) regulations. The share issue process helps companies mobilize

Q5. Pass necessary Journal Entries in the books of Ritika Ltd. for the redemption of 2,000 10% debentures of ₹100 each, issued at par, in the following cases:

1. i) Debentures redeemed at par by conversion into 9% Preference Shares of ₹100 each.
2. ii) Debentures redeemed at a premium of 10% by conversion into equity shares issued at a premium of 25% (Face value ₹100).

iii) Debentures redeemed at a premium of 15% by conversion into equity shares issued at a discount of 10% (Face value ₹100 each). 10   

Ans 5.

Journal Entries for Redemption of Debentures in the Books of Ritika Ltd.

There are three different redemption scenarios for 2,000 debentures of ₹100 each, and we need to pass the journal entries in each case.

Case i: Redemption at Par by Conversion into 9% Preference Shares (Face Value ₹100)

Given:

• 2,000 × ₹100 = ₹2,00,000 (Debentures)
• Redemption at par (no premium)

Q6. Elucidate the methods of Redemption of Debentures            10       

Ans 6.

Debenture Redemption

Debentures are long-term debt instruments issued by companies to raise funds from the public or institutions. These are repayable at a fixed future date along with interest. The process of repaying the debenture amount to the debenture holders is termed as redemption of debentures. The Companies Act, 2013 provides specific guidelines for such redemption, which must also be aligned with the terms mentioned at the time of issue. Redemption