Question Bank – Super 30 CA

If there is the factory and there is the fire in that factory and the machine was rendered un-useable and then we sold the machine for scrap, 100,000 was the original value and 50,000 was the written down value showing on the books and the scrap value is 10,000 and from insurance company we were able to recover 30,000, and we purchase another machine to replace the machine for 100,000. How to record the transaction?

Note: This is assuming all transactions are in the same period. If Fire is in Year 1 and Recovery is in Year 2, impairment will be done in Year 1…

Suppose we issued equity to purchase a machinery, how will it be affecting cash flow statement for the entire year?

Ther will be no direct impact in cash flow statement either in Investing activity or financing activity as there is no cash flow. However the tax sheid on depreciation which…

How much dividend should we declare? Is there an alternative?

Dividend should be declared based on future needs of the organisation. If the company has positive NPV projects available do not declare dividend, else do. Alternatives to distribution of dividend:…

Keys to effective controllership

It’s not enough to simply know the financial controller role. There are clear ways to be more efficient and effective in this position, and to move from simple data processing…

Difference between research and development?

Research is original and planned investigation undertaken with the prospect of gaining new scientific or technical knowledge and understanding. Development is the application of research findings or other knowledge to…

Controlling vs accounting

The controller is intricately involved in the company accounting process. And in many cases, they will do a lot of accounting day to day. But in larger finance teams, there’s…

Controller vs CFO

This is another interesting dynamic. In smaller finance teams, the controller and CFO may even be the same person.The CFO is both the leader of the finance team and a…

What does a Financial Controller do?

The FC is a senior leader in the finance team. For this reason, it’s usually expected that job applications show significant experience in accounting and tax issues, plus the ability…

Difference between broad money and narrow money?

The term "narrow money" typically covers the most liquid forms of money, i.e. currency (banknotes and coins) as well as bank-account balances that can immediately be converted into currency or…

What is a Controller in Finance? OR What is Finance Controller?

A financial controller essentially is a company’s lead accountant. They oversee accounting activities and ensure that ledgers accurately reflect money coming in and out of the company. Strategic controllers also…

What is the substantial period under Ins As for capitalizing borrowing cost w.r.t qualifying assets?

Generally, a period of 12 months is considered as a substantial period unless a shorter or longer period can be justified based on facts and circumstances of the case. Borrowing…

What SLR, CRR, REPO, Reverse Repo and rates?

CRR is a reserve maintained by banks with the RBI. It is a percentage of the banks' deposits maintained in cash form. SLR is an obligatory reserve that commercial banks…

IND AS 16 : What is the concept of Component accounting as per Ind AS 16 ? Why Component Accounting is used ?

Each major part of an item of PPE with cost being significant in relation to total cost of the item, should be depreciated separately, even though it may not have…

Ind AS 16 : What is the Deemed cost exemption as per Ind AS 16?

As per Ind AS 101, the deemed cost exemption is applicable to PPE as defined under Ind AS 16 and recognised as Fixed Assets in the financial statements at the…

Ind AS 40 : Definition of Investment property?

IAS 40 permits treatment of property interest held in an operating lease as investment property, if the definition of investment property is otherwise met and fair value model is applied.…

IND AS 19 (Employee Benefit) ?

The Indian Accounting Standard (Ind AS) 19 aims to prescribe accounting and disclosure for employee benefits. It requires recognition of the liability by an entity when an employee provides services…

Ind As 102 ( share based payment ) : how you will record share based payment in books, what other implications of shared based payment would be possible?

• Detailed guidance available for accounting and disclosures of equity-settled and cash-settled transactions in Ind AS 102 • Ind AS 102 also covers share based payment transactions with non-employees as…

What is window dressing?

What is Window Dressing? Window dressing is actions taken to improve the appearance of a company's financial statements. Window dressing is particularly common when a business has a large number…

How can a company inflate sales?

Sales to Related Parties Sale to fictitious entities Prepone booking of sales Recording Sales gross of massive discounts, and recording the discount as expense Sales done to uninterested parties asking…

Explain CSR in depth as per companies act.

Corporate Social Responsibility (CSR) implies a concept, whereby companies decide voluntarily to contribute to a better society and a cleaner environment – a concept, whereby the companies integrate social and…

IPO AND BOOK BUILDING PROCESS

An initial public offering (IPO) is the first time that the stock of a private company is offered to the public. (HDFC Standard life Insurance) (Biggest IPO – COAL INDIA…

Effect of change in valuation of inventory from FIFO to weighted average in an inflationary environment?

Let’s assume three months, the goods were purchased in January of rupees 5 and February of rupees 10, in March it was all sold. Suppose we are following FIFO and…

What all items are added in inventory cost?

Cost of Inventory includes:The costs of purchase of inventories include: 1. Cost of purchase 2. Cost of conversion 3. Other cost to bring the inventory to the present location and…

Difference between EBITDA and cash flow from operation?

The main difference between EBITDA and cash flow from operation is working capital changes and taxes. In EBITDA, it is before tax and in cash flow from operations, it is…

What is related party as per various laws? – Companies Act, Ind AS, GST, Income Tax

As per 2(76) of Companies Act: a. a director or his relative; b. a key managerial personnel or his relative; c. a firm, in which a director, manager or his…

Suppose the machine is destroyed in fire but the insurance exists, so what should be the treatment for the same?

Treatment in Final accounts: (i) Loss of goods due to fire, the theft or accident is known as an abnormal loss of goods. If such goods were insured by the…

What is segment reporting criteria?

An operating segment is a component of an entity: (a) that engages in business activities from which it may earn revenues and incur expenses (b) whose operating results are regularly…

How is a firm valued?

Financial analysts can evaluate a corporation in a variety of ways. The discounted cash flow (DCF) approach and the relative valuation method are the two most popular methods of valuation.…

How to calculate DCF

We take cash flows for each year and discount them with either cost of equity or WACC depending upon which cash flows we are using.

What is DCF and why do we calculate DCF?

A discounted cash flow (DCF) is a valuation method used to estimate the attractiveness of an investment opportunity. DCF analysis uses future free cash flow projections and discounts them to…

What is payback period and discounted payback period?

The payback period is the length of time required to recover the cost of an investment. The payback period of a given investment or project is an important determinant of…

How to evaluate investment in the concept of capital budgeting?

The most common capital investment evaluation tools are the Payback Period (PP), Return on Investment (ROI), Net Present Value (NPR), and Internal Rate of Return (IRR). Each method can provide…

What is Capital budgeting? Give an example of a capital budgeting decision.

Capital budgeting is the process a business undertakes to evaluate potential major projects or investments. Construction of a new plant or a big investment in an outside venture are examples…

Techniques of capital budgeting?

• Payback Period. • Discounted Payback Period. • Net Present Value • Internal Rate of Return.

What is securitization?

Securitization is the process of taking an illiquid asset, or group of assets, and through financial engineering, transforming it (or them) into a security. Securitization is the financial practice of…

WHAT IS THE DIFFERENCE BETWEEN NPV AND XNPV in Excel?

NPV assumes that the cash flows come in equal time intervals. XNPV assumes that the cash flows don’t come in equal time intervals.

What is loan syndication?

Loan syndication is the process of involving several different lenders in providing various portions of a loan. Loan syndication most often occurs in situations where a borrower requires a large…

What is minority interest?

Ind AS 110 defines Non Controlling Interest (earlier called Minority Interest) - NCI is Equity in a subsidiary not attributable, directly or indirectly, to a parent. Minority Interest also referred…

Explain NPV and IRR and how do you calculate the same?

Net Present Value (NPV) is the difference between the present value of cash inflows and the present value of cash outflows. NPV is used in capital budgeting to analyse the…

How will you calculate enterprise value? And how is it different from market capitalisation

Enterprise Value, or EV for short, is a measure of a company's total value, often used as a more comprehensive alternative to equity market capitalization. The market capitalization of a…

Slightly positive NPV question

Q If the project’s initial investment is of 100 crores and NPV of the same is ₹10 lakhs, will you go for the project or not? Suppose I am getting…

What is accretion and dilution?

Accretion is asset growth through addition or expansion. Accretion can occur through a company’s internal development or by way of mergers and acquisitions. Dilution is a reduction in earnings per…

What is book value?

The book value of a company is the net difference between that company's total assets and total liabilities, where book value reflects the total value of a company's assets that…

What is cost of debt and cost of equity?

Cost of Debt is the future interest rate application to the company, net of taxes. It is calculated using Yield to Maturity less taxes, where the bonds are listed. It…

Provision vs Contingent Liability

As per Ind AS 37, a provision is a liability of uncertain timing or amount. A liability is a present obligation of the entity arising from past events, the settlement…

Tell me some Liquidity and Coverage ratios?

Liquidity - Current ratio; Quick Ratio; Cash Ratios Liquidity Ratios A company with adequate liquidity will have enough cash available to pay its ongoing bills in the short run. Here…

Suppose there are two companies, how to compare them based on profitability?

The operating margin ratio uses operating income and revenue to determine the profit a company is getting from its operations. This ratio, along with net profit margin, can give investors…

Difference between solvency and liquidity?

Solvency is defined as the firm’s potential to carry on business activities in the foreseeable future, to expand and grow. It is the measure of the company’s capability to fulfil…

What are some Profitability and valuation ratios

Profitability Ratio 1. Gross Profit Margin 2. Net profit Margin 3. Return on equity 4. Return on assets 5. Return on capital employed 6. Gross Profit margin 7. Net Profit…

Meaning and formula of WACC

WACC – Weighted Average cost of capital - (E/E+D)*Ke + [D(1-t)/E+D]*Kd E – Market Value of Equity D – Market Value of Debt Ke – Cost of equity Kd –…

How to calculate FCFE and FCFF?

FCFE = Net Income + D&A + Net Borrowings - Net Capital Expenditure - Net Change in working capital FCFF = Net Income + D&A + Interest (1-T) - Net…

What is the difference between commercial and investment banking?

Commercial bank: accepts deposits from customers (retail depositors, commercial depositors etc. and makes consumer and commercial loans using these deposits. It may also offer anciliary services like credit cards Investment…

GST law wrt M&A, Demergers, effect of ITC on such case.

Section 18 (3) of the CGST Act as well as rule 41 of the CGST Rules stipulates that in case of change of constitution of a registered taxable person on…

How would you advise the client on whether to go in for Litigation or settle the matter?

I would advice the client for settlement or litigation based on what the matter is about. Does it really amount to non-compliance? Are there interpretation issues involved? I would refer…

What are some recent GST council decisions?

Application for Refund by Unregistered Persons CBIC has prescribed the manner of filing of application for refund by unregistered persons, i.e., manner in which an unregistered person, who has suffered…

Scope of Litigation Vs Advisory in GST in future

Being a new law, the scope for professional advice as well as litigation is vast. There are lot of avenues for tax planning under GST - which will involve the…

Why e-way bill was introduced? How will you check authenticity of a particular e-way bill? What is the validity of a e-way bill? Once a way bill generated can it be revised?

If there is no barrier on transportation of goods from one place to another tax will be easily evaded, so for blocking this E-way bill was introduced. Whenever goods moved…

How to file appeal before GST appellate tribunal and what is the pre deposit amount?

Submit application within 6 months of communication of order or decision in GST APL-03 along with relevant documents as follows:- 1. Grounds of Appeal 2. Form of verification 3. Certified…

Can a manufacturer of goods avail composition scheme? What are the penal consequences if a person opts for the composition scheme in violation of the conditions?

Yes, a manufacturer of goods can avail composition scheme provided he is not a manufacturer of goods notified by Govt. If a person opts for the composition scheme in violation…

Explain Section 122 (Penalties)

Section 122- Penalty for certain offences under the GST Act. Section 122. (1) Where a taxable person who––This section declares the offences that attract penalty as a consequence, apart from the requirement to…

Can an ISD distribute the input tax credit to all suppliers?

No. The input tax credit of input services shall be distributed only amongst those registered persons who have used the input services in the course or furtherance of business

What is the consequence of not filing the return within the prescribed date?

If return is not filed within the prescribed date, as per section 234A, a person is required to pay interest at the rate of 1% per month, or part of…

What do you understand by ISD? Whether the excess credit distributed could be recovered from ISD by the department?

An Input Service Distributor (ISD) is a taxpayer that receives invoices for services used by its branches. It distributes the tax paid known as the Input Tax Credit (ITC), to…

What would be input tax eligibility in cases where there is a change in the constitution of a registered person?

Where there is a change in the constitution of a registered person on account of sale, merger, demerger, amalgamation, lease or transfer of the business with the specific provisions for…

24. Sec 18 – ITC in special Circumstances.

Section 18 of CGST 2017 provides for availability of credit in special circumstances. Section 18(1): Subject to such conditions and restrictions as may be prescribed— a) a person who has…

What are the types of Refund? Is refund available on Capital goods?

Different types of refund includes refund due to zero rated supply, inverted duty structure, balance in E-cash ledger, tax wrongly collected and paid, to UN Bodies, to Tourist, Deemed Export.…

What are Rule 42 and 36(4) in GST

Rule 42 of Central Goods and Services Tax (CGST) Rules, 2017 relates to Manner of determination of input tax credit in respect of inputs or input services and reversal thereof.…

What do we provide at the time of refund application

Documents required at the time of refund filing: In case of Export of Goods • Print out of GSTR RFD-01A& ARN. • GSTR-3B/ GSTR-3/GSTR 1 of particular month • Undertaking…

Difference between SCN and Deficiency Memo

Show cause notice is a formal communication to a person, asking to explain his side for the issue mentioned in the notice. It is generally issued in case of a…

Whether it is advisable to file LUT for Zero rated supplies or pay tax on it?

With LUT, an exporter can export goods or services without paying the taxes. This prevents a blockage of working capital. So LUT is advisable. But this is only if it…

What is in inverted duty structure? How is refund taken in case of in inverted duty structure?

Wherein the rate of tax on procurements / inward supplies is higher than the rate of tax paid on outward supplies such case fall under inverted duty structure. A registered…

Discuss about the RCM applicability in case of Govt Services.

Any business entity located in the taxable territory is liable to pay RCM in case of Govt Services. Exceptions to this are - a) renting of immovable property; b) services…

What are the 3 Schedules of GST?

Schedule I deals with certain activities which are treated as supply even if made without consideration. Schedule II deals with activities or transaction to be treated as supply of goods…

When to charge IGST, SGST, and CGST?

If the supply of goods happens within the same state, CGST and SGST will be applied by the supplier. Similarly, if the supply happens between two different states, the supplier…

Define Deemed Distinct Person

Deemed Distinct persons (DDP) are persons with different GSTINs belong to one legal entity (single PAN) situated within the same State or in two different States. Different GSTIN is mandatory…

What is the impact of scrapping of GST audit on professionals & litigations in future?

With the scrapping of GST Audit, the professionals will have less work in GST. This will increase the frequency of audits and scrutiny by GST authorities since the middle layer…

What is the relevance of time of supply and last dates to issue invoices?

Time of supply decides when the supplier or recipient is liable to pay GST for goods or services or both. The time for issuing an invoice would depend on the…

Identify Place of supply

Place of supply of goods under GST defines whether the transaction will be counted as intrastate or interstate, and accordingly, levy of SGST, CGST & IGST will be determined. The…

What is the difference between zero rated, nil rated, exempt, wholly exempt, non taxable, non-supply? Discuss with the help of examples

As per Section 16 of Integrated Goods and Service Tax Act, zero-rated supplies mean: – Export of goods or services or both; or Supply of goods or services or both…

What is GSTR 2A & GSTR 2B? How would you reconcile ITC as per books and returns and last date of availing credit?

GSTR-2B is a new static month-wise auto-drafted statement which is generated for every normal tax payer on the basis of information furnished by his supplier in the respective GSTR. Form…

What are the due dates to file return?

GSTR 01 - 11th of the next month, GSTR 3B/5/5A - 20th of the next month, GSTR4 - 30th April of next F.Y., GSTR9/9A & 9C- 31st Dec. of the…

Where is the power to levy GST obtained from?

Article 246A of the Constitution, which was introduced by the Constitution (101st Amendment) Act, 2016 confers concurrent powers to both, Parliament and State Legislatures to make laws with respect to…

Is RCM applicable only on Services? Why there is a mechanism of RCM?

No, RCM is applicable on goods too and not just on services. The reason for having Reverse Charge Mechanism is that - it was observed that many unorganised sector suppliers…

What will be the GST Liability when a business is transferred? What about ITC available with you?

If a taxable person transfers his business, either wholly or partly, to another, then the taxable person (transferor) and the person to whom the business is transferred (transferee) will be…

Few cases on circumstances whether blocked credit rules are not applicable i.e. exceptions to blocked credit

Section 17(5) of CGST Act refers to a specific provision under GST covering blocked credits or ineligible ITC. The taxpayer cannot claim ITC while paying output tax when they make…

What is the procedure for Registration under GST? Cases when compulsory registration is required under GST.

The GST Registration process is a simple 2-stage process. The registration form comprises 2 parts – A and B. Part A of the GST registration form includes basic information of…

Latest amendments in GST relating to E-commerce operator, E-invoices, ITC rulings.

As per the latest notification, Zomato, Swiggy, etc. shall be responsible for charging, collecting, and paying GST at the rate of five percent on supply of “restaurant services” made by…

What do you know about the GST applicability on notice period recovery?

The Punjab Authority of Advance Ruling (AAR) has held that the GST is not payable on notice pay recovered from outgoing employees. The CBIC issued a circular dated August 3,…

What are the key points to be kept in mind while analysing the financial position of company from its financial statements?

Financial analysis, the process of accumulating, envisioning, controlling, deciphering, and anticipating financial data and following the aim to evaluate the financial accomplishment of a particular department inside a company or…

What are the Segment criteria as per IND AS?

As per Ind AS 108, Identification is based on 3 criteria. That is any operating segment should have 3 characteristics. Component of entity for which discrete financial information is available.…

What is the information you required from clients to file Income Tax returns and Form 3CA and 3CB?

1. Pan Card 2. Aadhar Card (linked with Pan) 3. Form 16 (Part-B) in case of Salaried Person 4. Bank Statement in case of Salaried Person 5. Books of Account…

What are the things to be kept in mind while Auditor’s appointment and Rotation?

The major factors that are considered in selecting and retaining an auditor include the size of the audit firm, the status of ongoing auditor engagements, the cost of the auditor…

What are the DTA creation criteria as per Ind AS and how they are different from AS?

As per IND AS 12, deferred tax asset is recognised for all deductible temporary differences to the extent that it is probable that taxable profit will be available against which…

What are the disclosure requirements of Disclosure note 1 of financial statements?

The notes shall: (a) present information about the basis of preparation of the financial statements and the specific accounting policies used in accordance with paragraphs 117–124; (b) disclose the information…

On what basis performance materiality is set and what are the criteria to set it or change it? If you want to change it what things are to be kept in mind?

“The amount set by the auditor at less than materiality for the financial statements as a whole to reduce to an appropriately low level the probability that the aggregate of…