Commerce & Accountancy

UPSC Commerce & Accountancy 2024 — Paper I

All 8 questions from UPSC Civil Services Mains Commerce & Accountancy 2024 Paper I (400 marks total). Every stem reproduced in full, with directive-word analysis, marks, word limits, and answer-approach pointers.

8Questions

400Total marks

2024Year

Paper IPaper

Topics covered

Accounting standards, company shares, banking audit, income tax, costing methods (1)Amalgamation, buyback of shares, capital gains computation (1)Process costing and cost accounting concepts (1)Income tax computation and depreciation (1)Corporate restructuring, financial markets and management (1)Capital budgeting, risk-return trade-off and leverage (1)Working capital and capital structure (1)Indian financial system and insurance (1)

A

50M 150w Compulsory explain Accounting standards, company shares, banking audit, income tax, costing methods

Answer the following questions in about 150 words each : (10×5=50) (a) Briefly explain the significance of Accounting Standard-7 (AS-7). (10 marks) (b) Explain why the companies issue right shares. How are right shares different from bonus shares ? (10 marks) (c) Discuss the main aspects of audit of a banking company in India. (10 marks) (d) Define fair rent and annual rent under income from house property as per Indian Income Tax Act, 1961. Explain it with an example. (10 marks) (e) What is job costing ? How is it different from process costing ? Explain. (10 marks)

हिंदी में पढ़ें

निम्नलिखित प्रश्नों में से प्रत्येक का उत्तर लगभग 150 शब्दों में दीजिए : (10×5=50) (क) लेखाकरण मानक-7 (ए एस-7) के महत्व को संक्षेप में स्पष्ट कीजिए। (10 अंक) (ख) स्पष्ट कीजिए कि किन कारणों से कंपनियाँ राइट शेयर निर्गमित करती हैं। राइट शेयर, बोनस शेयरों से किस प्रकार भिन्न होते हैं ? (10 अंक) (ग) भारत में बैंकिंग कंपनी की लेखापरीक्षा के मुख्य पहलुओं की विवेचना कीजिए। (10 अंक) (घ) भारतीय आयकर अधिनियम, 1961 के अनुसार मकान सम्पत्ति से आय के अंतर्गत उचित किराया और वार्षिक किराया को परिभाषित कीजिए। इसे एक उदाहरण द्वारा स्पष्ट कीजिए। (10 अंक) (ङ) जॉब लागत (कॉस्टिंग) क्या है ? यह प्रक्रिया लागत (प्रोसेस कॉस्टिंग) से किस प्रकार भिन्न है ? समझाइए। (10 अंक)

Answer approach & key points

Framework: UPSC Commerce Accountancy Paper 1. (a) explain: definition/context > points in order > small example > short close | (b) explain: definition/context > points in order > small example > short close | (c) discuss: intro > 3-4 dimensions > example > balanced close | (d) define: precise definition > the distinguishing feature > one example | (e) explain: definition/context > points in order > small example > short close Full marks: Precise definitions, correct statutory references, and clear examples.

AS-7 (revised) deals with Construction Contracts in the contractor's books (not segment reporting, which is AS-17)
Percentage-of-completion method: revenue and costs recognised by stage of completion when the outcome can be estimated reliably
Expected loss (total cost > total revenue) recognised immediately as an expense
Disclosures (contract revenue, costs incurred, recognised profit, advances, retentions, amounts due) and the resulting comparability
Right issue raises fresh capital from existing shareholders in proportion to holdings (Section 62(1)(a))
Preserves pre-emptive rights and control, avoids dilution, cheaper and quicker than a public issue
Right shares bring cash; bonus shares (Section 63) are issued free by capitalising free reserves/securities premium/CRR
Rights can be renounced and need not be taken up; bonus shares are allotted automatically and cannot be in lieu of dividend
Legal framework: Banking Regulation Act, 1949 (Sections 29–30; auditor appointed with RBI approval), Companies Act, 2013 and RBI directions
Advances: IRAC norms, asset classification (standard, sub-standard, doubtful, loss) and NPA provisioning
Income recognition on NPAs (no accrual), verification of cash, gold, investments and their valuation
CRR/SLR compliance, internal and concurrent audit, IT systems, fraud reporting and the Long Form Audit Report (LFAR)
Fair rent: rent a similar property in the same or similar locality would fetch; with municipal value it forms expected rent under Section 23(1)(a)
Annual/actual rent: rent actually received or receivable for the let-out period (Section 23(1)(b)), excluding unrealised rent
GAV = higher of expected rent (higher of municipal value and fair rent, capped at standard rent) and actual rent, subject to vacancy allowance
Worked example with each step (e.g., MV 1.2 lakh, FR 1.4 lakh, SR 1.3 lakh, actual 1.5 lakh gives GAV 1.5 lakh)
Job costing: specific order costing where each job is a separate cost unit, costs collected on a job cost sheet
Process costing: costs accumulated by process/department for continuous production of identical units
Contrast: discrete, customer-specific jobs vs continuous, standardised output; identifiable vs identical units
Contrast: cost per job on completion vs average cost per unit for the period; equivalent units, normal/abnormal loss and inter-process transfers only in process costing

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50M solve Amalgamation, buyback of shares, capital gains computation

(a) A Ltd. has acquired the business of B Ltd., whose Balance Sheet as at 31st March, 2024 is as under : I – Equity and Liabilities - Shareholders' Funds: Equity Share Capital (₹ 100 each) ₹ 16,00,000; 6% Preference Share Capital (₹ 100 each) ₹ 8,00,000; total ₹ 24,00,000 - Reserves and Surplus: Capital Reserve ₹ 2,00,000; Profit and Loss Account ₹ 1,00,000; Workmen Compensation Reserve (expected liability ₹ 10,000) ₹ 16,000; total ₹ 3,16,000 - Non-Current Liabilities: 6% Debentures ₹ 4,00,000 - Current Liabilities: Trade Payables ₹ 2,40,000; Other Current Liabilities (interest payable on debentures) ₹ 24,000; total ₹ 2,64,000 - Total ₹ 33,80,000 II – Assets - Property, Plant and Equipment: Land and Building ₹ 8,00,000; Plant and Machinery ₹ 12,00,000; total ₹ 20,00,000 - Intangible Assets: Goodwill ₹ 4,80,000; Patents ₹ 1,00,000; total ₹ 5,80,000 - Current Assets: Inventories ₹ 3,00,000; Trade receivables ₹ 3,60,000; Cash and cash equivalents ₹ 1,40,000; total ₹ 8,00,000 - Total ₹ 33,80,000 A Ltd. was to take over all assets (except cash) and liabilities (except for interest due on debentures) and to pay the following amounts : (i) ₹ 4,00,000, 7% Debentures (₹ 100 each) in A Ltd. for the existing debentures in B Ltd.; for the purpose, each debenture of A Ltd. is to be treated as worth ₹ 105. (ii) For each preference share in B Ltd. ₹ 10 in cash and 9% preference shares of ₹ 100 each in A Ltd. (iii) For each equity share in B Ltd. ₹ 20 in cash and one equity share in A Ltd. of ₹ 100 each having market value of ₹ 140. (iv) Expenses of liquidation of B Ltd. are to be reimbursed by A Ltd. to the extent of ₹ 20,000. Actual expenses amounted to ₹ 25,000. A Ltd. valued Land and Building at ₹ 11,00,000, Plant and Machinery at ₹ 13,00,000 and Patents at ₹ 40,000 of B Ltd. for the purpose of amalgamation. Pass necessary journal entries in the books of A Ltd. and B Ltd. (20 marks) (b) A Ltd. furnishes the following Balance Sheet as at 31st March, 2024 (₹ in thousands) : I – Equity and Liabilities - Share Capital: 6,00,000 equity shares of ₹ 10 each, fully paid up 6,000; 40,000 9% preference shares of ₹ 100 each 4,000; total 10,000 - Reserves and Surplus: Capital Reserve 20; Revenue Reserve 8,000; Securities Premium 1,000; Profit and Loss Account 3,600; total 12,620 - Non-Current Liabilities: 10% Debentures 800 - Current Liabilities: Trade Payables 80 - Total 23,500 II – Assets - Non-Current Assets: Property, Plant and Equipment 5,500; Non-current Investments (at cost) 10,000; total 15,500 - Current Assets: Stock 2,000; Trade Receivables 4,000; Cash and Cash Equivalents 2,000; total 8,000 - Total 23,500 The company passed a resolution to buy back 20% of its equity capital @ ₹ 15 per share. For this purpose, it sold its investments of ₹ 60 lakhs for ₹ 50 lakhs. You are required to pass necessary journal entries in the books of A Ltd. and prepare Balance Sheet after buyback of shares. (15 marks) (c) (i) State the methods of computation of Short-term and Long-term capital gains under Indian Income Tax Act, 1961. (ii) State the rules of capital gains in case of transfer of depreciable assets under Section 50 of the Indian Income Tax Act, 1961. (15 marks)

हिंदी में पढ़ें

(क) A लिमिटेड ने B लिमिटेड के व्यवसाय का अधिग्रहण किया है, जिसका तुलन-पत्र 31 मार्च, 2024 को इस प्रकार है : I – ईक्विटी एवं देयताएँ - शेयरधारक निधियाँ: ईक्विटी शेयर पूँजी (₹ 100 प्रति) ₹ 16,00,000; 6% अधिमान शेयर पूँजी (₹ 100 प्रति) ₹ 8,00,000; कुल ₹ 24,00,000 - आरक्षितियाँ एवं अधिशेष: पूँजीगत संचय ₹ 2,00,000; लाभ व हानि खाता ₹ 1,00,000; कर्मचारी क्षतिपूर्ति संचय (अपेक्षित देयता ₹ 10,000) ₹ 16,000; कुल ₹ 3,16,000 - अप्रचलित देयताएँ: 6% ऋणपत्र (डिबेंचर्स) ₹ 4,00,000 - चालू देयताएँ: व्यापारिक देय ₹ 2,40,000; अन्य चालू देयताएँ (ऋणपत्रों पर देय ब्याज) ₹ 24,000; कुल ₹ 2,64,000 - कुल ₹ 33,80,000 II – परिसम्पत्तियाँ - सम्पत्ति, संयंत्र एवं उपकरण: भूमि और भवन ₹ 8,00,000; संयंत्र एवं मशीनरी ₹ 12,00,000; कुल ₹ 20,00,000 - अमूर्त परिसम्पत्तियाँ: साख (ख्याति) ₹ 4,80,000; पेटेंट ₹ 1,00,000; कुल ₹ 5,80,000 - चालू परिसम्पत्तियाँ: स्टॉक ₹ 3,00,000; व्यापार प्राप्तियाँ ₹ 3,60,000; नकदी व नकदी समान ₹ 1,40,000; कुल ₹ 8,00,000 - कुल ₹ 33,80,000 A लिमिटेड को सभी परिसम्पत्तियों (नकदी को छोड़कर) और देयताओं (ऋणपत्रों पर देय ब्याज को छोड़कर) को अपने अधीन करना है और निम्नलिखित राशियों का भुगतान करना है : (i) ₹ 4,00,000, 7% ऋणपत्रों (प्रत्येक ₹ 100), जो A लिमिटेड में हैं, उन्हें B लिमिटेड में मौजूदा ऋणपत्रों के लिए; इस प्रयोजन के लिए, A लिमिटेड के प्रत्येक ऋणपत्र का मूल्य ₹ 105 प्रति माना जाएगा। (ii) B लिमिटेड में प्रत्येक अधिमान शेयर के लिए ₹ 10 प्रति शेयर नकदी तथा A लिमिटेड में 9% अधिमान शेयर ₹ 100 प्रति शेयर दिया जाएगा। (iii) B लिमिटेड में प्रत्येक ईक्विटी शेयर के लिए ₹ 20 प्रति शेयर नकद तथा A लिमिटेड में एक ईक्विटी शेयर ₹ 100 का, जिसका बाज़ार मूल्य ₹ 140 है, दिया जाएगा। (iv) B लिमिटेड के परिसमापन के खर्चों की पूर्ति A लिमिटेड द्वारा ₹ 20,000 तक की सीमा तक की जाएगी, जबकि वास्तविक खर्चे की राशि ₹ 25,000 है। A लिमिटेड ने समामेलन के उद्देश्य से, B लिमिटेड की भूमि व भवन का मूल्य ₹ 11,00,000, संयंत्र व मशीनरी का मूल्य ₹ 13,00,000 तथा पेटेंट का मूल्य ₹ 40,000 आँका है। A लिमिटेड तथा B लिमिटेड की पुस्तकों में आवश्यक रोज़नामचा प्रविष्टियाँ कीजिए। (20 अंक) (ख) A लिमिटेड 31 मार्च, 2024 को निम्नलिखित तुलन-पत्र प्रस्तुत करती है (₹ हज़ार में) : I – ईक्विटी एवं देयताएँ - शेयर पूँजी: ₹ 10 प्रति शेयर के 6,00,000 ईक्विटी शेयर, जो पूर्ण भुगतान हो चुके हैं 6,000; ₹ 100 प्रति शेयर वाले 40,000, 9% अधिमान शेयर 4,000; कुल 10,000 - आरक्षितियाँ तथा अधिशेष: पूँजीगत आरक्षिति 20; राजस्व आरक्षिति 8,000; प्रतिभूति प्रीमियम 1,000; लाभ व हानि खाता 3,600; कुल 12,620 - अप्रचलित देयताएँ: 10% ऋणपत्र 800 - चालू देयताएँ: व्यापारिक देय 80 - कुल 23,500 II – परिसम्पत्तियाँ - अप्रचलित परिसम्पत्तियाँ: सम्पत्ति, संयंत्र एवं उपकरण 5,500; अप्रचलित निवेश (लागत पर) 10,000; कुल 15,500 - चालू परिसम्पत्तियाँ: स्टॉक 2,000; व्यापार प्राप्तियाँ 4,000; नकदी व नकदी समान 2,000; कुल 8,000 - कुल 23,500 कंपनी ने ₹ 15 प्रति शेयर की दर से अपने ईक्विटी पूँजी के 20% शेयर वापस खरीदने का प्रस्ताव पारित किया। इस उद्देश्य के लिए, कंपनी ने अपने ₹ 60 लाख के निवेश को ₹ 50 लाख में बेच दिया। A लिमिटेड की पुस्तकों में आवश्यक रोज़नामचा प्रविष्टियाँ कीजिए तथा शेयरों की पुनर्खरीद के बाद तुलन-पत्र तैयार कीजिए। (15 अंक) (ग) (i) भारतीय आयकर अधिनियम, 1961 के अंतर्गत अल्पकालिक और दीर्घकालिक पूँजीगत लाभ के अभिकलन की विधियों का उल्लेख कीजिए। (ii) भारतीय आयकर अधिनियम, 1961 की धारा 50 के अंतर्गत मूल्यह्रास-योग्य परिसम्पत्तियों के हस्तांतरण के मामले में पूँजीगत लाभ के नियमों का उल्लेख कीजिए। (15 अंक)

Answer approach & key points

Framework: Amalgamation (Purchase Method) & Share Buyback. (a) calculate: given > formula > substitution > result with units > interpretation | (b) calculate: given > formula > substitution > result with units > interpretation | (c) explain: definition/context > points in order > small example > short close Full marks: Accurate journal entries with correct values; precise application of Section 50 and CRR rules.

Purchase consideration: preference 8,000 × ₹110 = ₹8,80,000 and equity 16,000 × ₹160 = ₹25,60,000, total ₹34,40,000 (debentures excluded)
A Ltd.: assets at agreed values (L&B 11,00,000; P&M 13,00,000; Patents 40,000; stock 3,00,000; receivables 3,60,000), liabilities taken over (payables 2,40,000; WC claim 10,000; debentures 4,20,000) and goodwill ₹10,10,000
A Ltd.: discharge of consideration (9% preference 8,00,000; equity 16,00,000 + premium 6,40,000; cash 4,00,000), debentures at ₹105 (premium 20,000) and ₹20,000 liquidation expenses debited to goodwill
B Ltd.: Realisation account entries, interest and expenses paid, reimbursement received, shareholders' accounts closed; realisation profit ₹7,65,000
Sale of investments (6,000 for 5,000, ₹ '000) with loss of 1,000 charged to Profit and Loss
Buy-back of 1,20,000 shares: capital 1,200 + premium 600 = 1,800 paid to shareholders
Transfer of 1,200 (nominal value) from free reserves to Capital Redemption Reserve under Section 69
Balance Sheet after buy-back: share capital 8,800, reserves 11,020, total 20,700; Section 68 limits checked
Holding periods under Section 2(42A): 12 months for listed securities, 24 months for others (transfers from 23 July 2024)
Computation (Section 48): full value of consideration less cost of acquisition, cost of improvement and transfer expenses; indexation only for pre-23 July 2024 LTCG (and the land/building option)
Rates: Section 111A 20%, Section 112 12.5%, Section 112A 12.5% above ₹1.25 lakh; exemptions under Sections 54/54EC/54F
Section 50: WDV replaces cost; excess over opening WDV plus additions and transfer expenses is deemed STCG; block ceasing gives STCG/STCL; always short-term, no indexation

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50M solve Process costing and cost accounting concepts

(a) During the month of May 2024, total 2000 units were introduced into Process-I. The normal loss was estimated at 5% on input. At the end of the month, 1400 units had been produced and transferred to the next process, 460 units were incomplete and 140 units had been scrapped. It was estimated that incomplete units had reached a stage in production as follows: Material 75% completed, Labour 50% completed, Overheads 50% completed. The cost of 2000 units introduced was ₹ 5,800. Direct material introduced during the process amounted to ₹ 1,440. Production Overheads incurred were ₹ 1,670 and Direct Labour was ₹ 3,340. Each unit scrapped was realized at ₹ 1 each unit. The units scrapped have passed through the process, so were 100% completed as regards material, labour and overheads. You are requested to prepare the following statements: (i) Statement of Equivalent Production; (ii) Statement of Cost and Evaluation; (iii) Process-I Account; and (iv) Abnormal Loss Account. (20 marks) (b) "Cost Accounting is a system of foresight and not a post-mortem, it turns losses into profits, speeds up activities and eliminates waste." Explain the statement along with your viewpoints. (15 marks) (c) What are the key differences between Special Audit and Accounts Investigation? Give your viewpoint along with examples. (15 marks)

हिंदी में पढ़ें

(क) मई 2024 के महीने के दौरान, कुल 2000 इकाइयों को प्रक्रिया-I में डाला गया। सामान्य हानि निविष्टि का 5% अनुमानित किया गया। महीने के अंत में, 1400 इकाइयों का उत्पादन किया गया और उन्हें अगली प्रक्रिया में अंतरण किया गया, जिनमें से 460 इकाइयाँ अधूरी थीं और 140 इकाइयों को निकाल (स्क्रैप) दिया गया। यह अनुमान था कि अधूरी इकाइयाँ, उत्पादन के निम्नलिखित स्तर तक पहुँची थीं: सामग्री 75% पूरा हो गया, श्रम 50% पूरा हो गया, उपरिव्यय 50% पूरा हो गया। पेश की गई 2000 इकाइयों की लागत ₹ 5,800 थी। प्रक्रिया के दौरान पेश की गई प्रत्यक्ष सामग्री की राशि ₹ 1,440 थी। उत्पादन उपरिव्यय ₹ 1,670 तथा प्रत्यक्ष श्रम ₹ 3,340 था। प्रत्येक निकाली गई (स्क्रैप) इकाई पर ₹ 1 प्रति इकाई वसूल किया गया। निकाली गई (स्क्रैप) इकाइयाँ, प्रक्रिया से गुजर चुकी थीं, इसलिए सामग्री, श्रम और उपरिव्यय के संबंध में 100% कार्य पूरा कर लिया गया था। आपको निम्नलिखित विवरण तैयार करने को कहा गया है: (i) समतुल्य उत्पादन का विवरण; (ii) लागत और मूल्यांकन का विवरण; (iii) प्रक्रिया-I खाता; और (iv) असामान्य हानि खाता। (20 अंक) (ख) "लागत लेखांकन दूरदर्शिता की एक प्रणाली है न कि शवपरीक्षा (पोस्ट-मॉर्टम), यह घाटे को मुनाफे में बदल देती है, गतिविधियों को गति देती है और अपशिष्ट को खत्म करती है।" अपने दृष्टिकोण के साथ इस कथन को समझाइए। (15 अंक) (ग) विशेष लेखापरीक्षा एवं लेखा जाँच में प्रमुख अंतर क्या हैं? उदाहरणों सहित अपना दृष्टिकोण स्पष्ट कीजिए। (15 अंक)

Answer approach & key points

Framework: Process Costing (Equivalent Production Method). (a) calculate: given > formula > substitution > result with units > interpretation | (b) explain: definition/context > points in order > small example > short close | (c) compare: paired headings or point-wise contrast > key differences > significance > conclusion Full marks: Part (a) has all 4 statements with correct workings; Parts (b) & (c) are well-structured with specific legal references and examples.

Normal loss 5% × 2,000 = 100 units; abnormal loss 140 − 100 = 40 units
Equivalent production: material 1,400 + 345 + 40 = 1,785; labour and overheads 1,400 + 230 + 40 = 1,670
Cost per EU: material (5,800 + 1,440 − 100)/1,785 = ₹4; labour 3,340/1,670 = ₹2; overheads 1,670/1,670 = ₹1; total ₹7
Evaluation: transfer 9,800; closing WIP 2,070; abnormal loss 280; Process-I account totals ₹12,250; abnormal loss account: scrap 40, P&L 240
Foresight: standard costing, budgetary control and marginal costing set costs before they are incurred
Turning losses into profits: identifying unprofitable products, processes and orders; variance analysis and corrective action
Speeding up activities and eliminating waste: bottlenecks, idle time, scrap and spoilage reporting, ABC, JIT, value analysis
Own viewpoint: largely true but depends on timely reliable data, management action and not cutting costs at the expense of quality
Special audit: audit ordered under a specific law/authority for a specific purpose (e.g., Section 142(2A) Income-tax Act; RBI/CAG special audit)
Investigation: fact-finding enquiry into suspected fraud or specific matters (e.g., Sections 210–213 Companies Act, SFIO, SEBI), possibly forensic
Differences in objective (opinion vs establishing facts/responsibility), scope, appointing authority, procedure and use of the report
Examples and a view that the two overlap: a special audit can trigger an investigation

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50M calculate Income tax computation and depreciation

(a) Mrs. Y (59 years) receives ₹ 7,90,000 as basic pay and ₹ 1,18,000 as bonus during the previous year 2023 – 24. Besides, she gets ₹ 52,000 as Dearness Allowance (forming part of salary) and 4 percent commission on turnover achieved by her. During the year, turnover achieved by her is ₹ 90 lakh. The employer contributes ₹ 2,24,240 towards recognised provident fund. The amount of interest credited to provident fund on 30 November, 2023 at the rate of 10 percent comes to ₹ 40,000. She also gets child education allowance of ₹ 450 per month (for daughter) and ₹ 80 per month (for son). Cost of education is approximately ₹ 1,80,000 for two children (out of which ₹ 1,10,000 is tuition fees paid by Mrs. Y). The employer company provides 1800 cc car to her for official and private purpose and incurs the entire expenditure on running and maintenance of the car. Personal use of the car as per log book is approximately 65 percent. With effect from 1 November, 2023, she gets a driver to whom the company pays ₹ 6,000 per month. Her income from house property is ₹ 1,65,000. During the year she makes the following contributions and investments: (i) Own contribution towards provident fund ₹ 3,36,360; (ii) Insurance premium on own life ₹ 9,000 (sum assured ₹ 80,000, policy taken in December 2018); (iii) Contribution towards NSC VIII issue ₹ 11,000; (iv) Insurance premium on the life of major son (not dependent on her) ₹ 4,000 (sum assured ₹ 1,00,000); (v) Insurance premium on the life of her mother (age 80 years) dependent on her ₹ 2,000; (vi) Repayment of loan taken to purchase house property ₹ 21,000. Determine the taxable income of Mrs. Y for the assessment year 2024 – 25 under regular tax regime. Also calculate Gross Qualifying amount under Section 80 C. (20 marks) (b) What are the conditions required for availing of additional depreciation as per the Indian Income Tax Act, 1961? Explain with a detailed example. (15 marks) (c) Discuss in detail the important checklist points for a smooth and effective audit of non-profit making organisations. How is it different from the audit of modern day business organisations? (15 marks)

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(क) श्रीमती Y (वाई) (59 वर्ष) को गत वर्ष 2023-24 के दौरान मूल वेतन के रूप में ₹ 7,90,000 और बोनस के रूप में ₹ 1,18,000 मिले हैं। इसके अलावा, महंगाई भत्ते के तौर पर (जो वेतन का हिस्सा है) ₹ 52,000 तथा उनके द्वारा हासिल कारोबार (टर्नओवर) पर 4 प्रतिशत कमीशन भी मिला है। वर्ष के दौरान, उन्होंने ₹ 90 लाख का कारोबार (टर्नओवर) हासिल किया है। नियोक्ता मान्यता प्राप्त भविष्य निधि (प्रोविडेंट फंड) में ₹ 2,24,240 का योगदान देता है। 30 नवंबर, 2023 को, 10 प्रतिशत की दर से, भविष्य निधि में ₹ 40,000 ब्याज के तौर पर जमा किया गया है। उन्हें ₹ 450 प्रति माह (बेटी के लिए) और ₹ 80 प्रति माह (बेटे के लिए) बाल शिक्षा भत्ता भी मिलता है। दोनों बच्चों के लिए शिक्षा की लागत लगभग ₹ 1,80,000 है (जिसमें ₹ 1,10,000 श्रीमती Y (वाई) द्वारा भुगतान की जाने वाली ट्यूशन फीस है)। नियोक्ता कंपनी उन्हें आधिकारिक और निजी उद्देश्य के लिए 1800 सीसी की कार उपलब्ध कराती है और कार का संचालन एवं रखरखाव का पूरा व्यय कंपनी वहन करती है। लॉग बुक के अनुसार, कार का निजी उपयोग लगभग 65 प्रतिशत है। 1 नवंबर, 2023, से उन्हें ड्राइवर मिल गया, जिसे कंपनी ₹ 6,000 प्रति माह भुगतान करती है। उनकी मकान संपत्ति से आय ₹ 1,65,000 है। वर्ष पर्यंत, वह निम्नलिखित योगदान और निवेश करती है: (i) भविष्य निधि में अपना योगदान ₹ 3,36,360; (ii) अपने जीवन बीमा प्रीमियम पर ₹ 9,000 (बीमित राशि ₹ 80,000, जिसकी पॉलिसी दिसंबर 2018 में ली गई थी); (iii) एन एस सी VIII में किया गया योगदान ₹ 11,000; (iv) वयस्क बेटे के जीवन बीमा प्रीमियम पर (जो उन पर आश्रित नहीं है) ₹ 4,000 का योगदान (बीमित राशि ₹ 1,00,000 है); (v) उनकी माताजी (जो 80 वर्ष की हैं) जो उन पर आश्रित हैं, के जीवन बीमा प्रीमियम पर ₹ 2,000 योगदान किया है; (vi) मकान संपत्ति खरीदने के लिए, लिए गए ऋण का पुनर्भुगतान ₹ 21,000 किया है। नियमित कर व्यवस्था के तहत आकलन वर्ष 2024 – 25 के लिए श्रीमती Y (वाई) की कर-योग्य आय का निर्धारण कीजिए। साथ ही धारा 80 सी के तहत आने वाली सकल योग्य राशि की गणना कीजिए। (20 अंक) (ख) भारतीय आयकर अधिनियम, 1961 के अनुसार, अतिरिक्त मूल्यह्रास का लाभ उठाने के लिए कौन-सी शर्तें आवश्यक हैं? एक विस्तृत उदाहरण द्वारा इसे समझाइए। (15 अंक) (ग) गैर-लाभकारी संगठनों के सुचारु और प्रभावी लेखापरीक्षा के लिए महत्वपूर्ण चेकलिस्ट बिन्दुओं की विस्तार से विवेचना कीजिए। यह आधुनिक युग के व्यावसायिक संगठनों की लेखापरीक्षा से कैसे भिन्न होती है? (15 अंक)

Answer approach & key points

Framework: UPSC Commerce Accountancy Paper 1. (a) calculate: given > formula > substitution > result with units > interpretation | (b) explain: definition/context > points in order > small example > short close | (c) discuss: intro > 3-4 dimensions > example > balanced close Full marks: Complete workings, correct statutory references, detailed examples, clear structure

Salary: basic 7,90,000 + bonus 1,18,000 + DA 52,000 + commission 3,60,000 (4% of ₹90 lakh)
RPF: employer's excess over 12% of 12,02,000 = 80,000 taxable; interest excess over 9.5% = 2,000; CEA taxable 4,200 (₹100 per child per month exempt)
Perquisites: car above 1.6 litres used partly for private purposes, expenses by employer, ₹2,400 × 12 = 28,800; driver ₹900 × 5 = 4,500; gross salary 14,39,500, less standard deduction 50,000
GTI 15,54,500; 80C GQA 4,90,360 (own PF, LIC self capped at 8,000, NSC, son's policy, housing principal, tuition 1,10,000; mother excluded) restricted to 1,50,000; taxable income 14,04,500
Assessee engaged in manufacture/production of an article or thing, or generation/transmission/distribution of power
New plant or machinery acquired and installed after 31 March 2005, owned and put to use for that business
Exclusions: ships, aircraft, second-hand machinery, office/residential installations, road transport vehicles, 100%-deduction assets; not under Sections 115BAA/115BAB/115BAC
Rate 20% of actual cost; if used < 180 days, 10% in year one and balance 10% next year; worked example with normal plus additional depreciation
Constitution and registrations: trust deed/MoA objects, 12A/12AB and 80G validity, FCRA registration where relevant
Receipts and funds: donations, grants, corpus and restricted funds traced to their use; anonymous donations; 85% application and accumulation
Payments, fixed assets, internal controls, bank reconciliation and audit report in Form 10B/10BB
Contrast with business audit: fund utilisation and compliance vs true and fair profit, fund balances vs shareholders' equity, different users

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B

50M 150w Compulsory discuss Corporate restructuring, financial markets and management

Answer the following questions in about 150 words each : (10×5=50) (a) Define corporate restructuring. Differentiate between mergers and acquisitions. Also give suitable examples. (10 marks) (b) Distinguish between money market and capital market. Explain the present state of RBI policy for the money market. (10 marks) (c) Discuss the objectives of financial management. Why is wealth-maximization the preferred objective ? (10 marks) (d) "Indian capital markets are sound and well-structured under SEBI's supervision." Explain this statement. (10 marks) (e) "Investment decisions are more important than financing and distribution decisions in financial management." Discuss this statement. (10 marks)

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निम्नलिखित प्रश्नों में से प्रत्येक का उत्तर लगभग 150 शब्दों में दीजिए : (क) निगमित (कॉर्पोरेट) पुनर्गठन को परिभाषित कीजिए। विलय और अधिग्रहण के बीच अंतर स्पष्ट कीजिए। साथ ही उपयुक्त उदाहरण प्रस्तुत कीजिए। (10 अंक) (ख) मुद्रा बाजार एवं पूँजी बाजार के बीच अंतर स्पष्ट कीजिए। मुद्रा बाजार के लिए आर बी आई नीति की वर्तमान स्थिति को समझाइए। (10 अंक) (ग) वित्तीय प्रबंधन के उद्देश्यों की विवेचना कीजिए। धन-अधिकतमीकरण क्यों पसंदीदा उद्देश्य है ? (10 अंक) (घ) "भारतीय पूँजी बाजार, सेबी के पर्यवेक्षण में, सुदृढ़ एवं सुव्यवस्थित है।" इस कथन की व्याख्या कीजिए। (10 अंक) (ङ) "वित्तीय प्रबंधन में निवेश संबंधी निर्णय वित्तपोषण और वितरण संबंधी निर्णयों से अधिक महत्त्वपूर्ण होते हैं।" इस कथन की विवेचना कीजिए। (10 अंक)

Answer approach & key points

(a) define: precise definition > the distinguishing feature > one example | (b) compare: paired headings or point-wise contrast > key differences > significance > conclusion | (c) discuss: intro > 3-4 dimensions > example > balanced close | (d) explain: definition/context > points in order > small example > short close | (e) discuss: intro > 3-4 dimensions > example > balanced close Full marks: Precise definitions, clear distinctions, specific examples, and logical reasoning.

Corporate restructuring: change in ownership, asset, capital or operating structure to improve value or resolve distress (merger, demerger, acquisition, buy-back, debt restructuring)
Merger/amalgamation: two or more companies combine into one, with the transferor's shareholders becoming shareholders of the combined entity (Sections 230–232, Companies Act, 2013)
Acquisition/takeover: one company buys control (shares or assets) of another, which may continue separately; may be friendly or hostile (SEBI SAST Regulations)
Relevant Indian examples (e.g., HDFC Ltd with HDFC Bank as a merger; Tata Sons' acquisition of Air India)
Maturity: up to one year (money market) vs over one year (capital market)
Instruments and participants: T-bills, CP, CD, call money, repo vs shares, debentures, bonds; regulators RBI vs SEBI
RBI operating framework: LAF corridor with SDF floor, MSF ceiling, WACR as operating target, VRR/VRRR operations
Current settings: repo 5.25%, SDF 5.00%, MSF 5.50%, CRR 3%, SLR 18%, neutral stance (August 2026), after the 2025 easing cycle
Objectives: profit maximisation, wealth (value) maximisation, liquidity, return and risk balance
Limitations of profit maximisation: vague, ignores time value, risk and quality of earnings
Wealth maximisation: maximising the market value of shares, i.e., NPV of future cash flows discounted at a risk-adjusted rate
Why preferred: considers time value, risk and long-term interests of shareholders and stakeholders
SEBI's statutory role under the SEBI Act, 1992: protecting investors, developing and regulating markets
Primary market reforms: disclosure (ICDR), book building, ASBA/UPI
Secondary market: dematerialisation, electronic trading, T+1 settlement, surveillance, margins
Balanced view: remaining challenges such as retail F&O losses, manipulation, and SEBI's responses
Investment decisions: capital budgeting and working capital; they determine asset base, risk and returns
Financing decision: capital structure and cost of capital
Dividend decision: payout vs retention; signalling
Balanced conclusion: investment is primary for value creation, but the three decisions are interdependent

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50M evaluate Capital budgeting, risk-return trade-off and leverage

(a) Six years ago, a machine was purchased for ₹ 3,00,000. It has been depreciated to a book value of ₹ 1,80,000. Its economic life was 15 years with no salvage value. If this machine is replaced by a new machine costing ₹ 4,50,000, the operating cost would be reduced by ₹ 60,000 for the next 10 years. The old machine could also be sold for ₹ 10,000. The cost of capital is 10%. The new machine will be depreciated on straight line basis over eight years life with ₹ 50,000 as salvage value. Assuming the company's tax rate to be 55% and using the NPV method, state whether the old machine should be replaced or not. The present value factors at 10% are : - Year 1: 0·909; Year 2: 0·826; Year 3: 0·751; Year 4: 0·683 - Year 5: 0·621; Year 6: 0·564; Year 7: 0·513; Year 8: 0·467 (20 marks) (b) Discuss the risk-return trade-off in financial decisions. Give examples. (15 marks) (c) How will you measure the degree of combined leverage ? Also describe the effects of combined leverage along with suitable examples. (15 marks)

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(क) छह वर्ष पूर्व, ₹ 3,00,000 में एक मशीन खरीदी गई। इसे ₹ 1,80,000 के पुस्तक मूल्य तक ह्रासित किया गया है। बिना किसी अवशेष मूल्य के, इसका आर्थिक जीवन 15 वर्ष था। यदि इस मशीन को ₹ 4,50,000 लागत की नई मशीन से पुनर्स्थापित किया जाता है, तो अगले 10 वर्षों के लिए संचालन लागत को ₹ 60,000 से कम किया जा सकता है। पुरानी मशीन को भी ₹ 10,000 में बेचा जा सकेगा। पूँजी की लागत 10% है। नई मशीन को आठ वर्ष के जीवन काल में ₹ 50,000 के अवशेष मूल्य के साथ सीधी रेखा आधार पर ह्रासित किया जाएगा। मान लिया जाए, कंपनी की कर दर 55% है और NPV (एन पी वी) विधि का प्रयोग करते हुए बताइए कि पुरानी मशीन पुनर्स्थापित होनी चाहिए या नहीं। वर्तमान मूल्य कारक 10% पर निम्नलिखित हैं : - वर्ष 1: 0·909; वर्ष 2: 0·826; वर्ष 3: 0·751; वर्ष 4: 0·683 - वर्ष 5: 0·621; वर्ष 6: 0·564; वर्ष 7: 0·513; वर्ष 8: 0·467 (20 अंक) (ख) वित्तीय निर्णयों में जोखिम-प्रत्याय के बीच संतुलन स्थापना (रिस्क-रिटर्न ट्रेड-ऑफ) की विवेचना कीजिए। उदाहरण दीजिए। (15 अंक) (ग) आप संयुक्त उत्तोलक (लिवरेज) की मात्रा का मापन कैसे करेंगे ? साथ ही संयुक्त उत्तोलक (लिवरेज) के प्रभावों का उपयुक्त उदाहरणों सहित वर्णन कीजिए। (15 अंक)

Answer approach & key points

(a) calculate: given > formula > substitution > result with units > interpretation | (b) discuss: intro > 3-4 dimensions > example > balanced close | (c) explain: definition/context > points in order > small example > short close Full marks: Complete workings, correct calculations, clear examples, precise terminology

Initial outlay: 4,50,000 − sale proceeds 10,000 − tax saving on loss (1,80,000 − 10,000) × 55% = 93,500 → ₹3,46,500
Depreciation: old ₹20,000 p.a., new (4,50,000 − 50,000)/8 = ₹50,000; incremental ₹30,000
CFAT = 60,000 × 0.45 + 30,000 × 0.55 = ₹43,500 for 8 years; PV = 43,500 × 5.334 = ₹2,32,029; salvage PV 50,000 × 0.467 = ₹23,350
NPV = 2,55,379 − 3,46,500 = −₹91,121, so do not replace
Concept: higher expected return requires bearing higher risk; decision seeks the best return for acceptable risk
Financing decision: debt raises EPS/ROE through leverage but adds financial risk
Working capital and investment decisions: aggressive vs conservative policies; project risk and hurdle rates
Examples (Indian or general) and the implication for value maximisation
DCL = DOL × DFL = % change in EPS ÷ % change in sales = contribution ÷ EBT (PBT)
DOL = contribution/EBIT (fixed operating costs); DFL = EBIT/EBT (fixed interest)
Numerical example (e.g., contribution 4,00,000, EBIT 2,50,000, EBT 2,00,000: DOL 1.6, DFL 1.25, DCL 2)
Effects: magnifies EPS changes both ways; high DOL should be paired with low DFL; business risk plus financial risk

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50M calculate Working capital and capital structure

(a) The Board of Directors of a company asks to prepare a statement showing working capital estimates for a level of activity of 15,600 units of production. The following information is available for calculation: (A) Per Unit Cost and Selling Price: Raw materials ₹ 90 Labour ₹ 40 Overheads ₹ 75 ₹ 205 Profit ₹ 60 Selling Price ₹ 265 (B) (i) Raw materials are in stock on an average for one month. (ii) Raw materials are in process on an average for two weeks. (iii) Finished goods are in stock on an average for one month. (iv) Credit allowed by suppliers – one month. (v) Credit allowed to debtors – two months. (vi) Lag in payment of wages – 1½ weeks. (vii) Lag in payment of overheads is one month. 20% of the production is sold against cash. Cash in hand is expected to be ₹ 60,000. It is to be assumed that production is carried on evenly, throughout the year, wages and overheads accrue similarly and the time period of 4 weeks is equivalent to one month. (20 marks) (b) A company has earnings of ₹ 1,00,000. The capital structure of the company contains debt as well as equity in which debt is of ₹ 4,00,000 borrowed at the rate of 10%. Presently, the cost of equity capital of the company is 12·50%. Find out the total value of the company and the overall cost of capital using Net Income approach. If debt is increased or reduced by ₹ 1,00,000, what will be the effect on the value of the company and on overall cost of capital as per the Net Income approach? (15 marks) (c) Discuss the leading financial market instruments and innovative debt instruments in the Indian financial system. Also give suitable examples. (15 marks)

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(क) एक कंपनी के संचालक मंडल ने उत्पादन की 15,600 इकाइयों के कार्य-स्तर के लिए कार्यशील पूँजी के अनुमान का विवरण तैयार करने का अनुरोध किया है। निम्नलिखित सूचनाएँ गणना हेतु उपलब्ध हैं: (अ) प्रति इकाई लागत व विक्रय मूल्य: कच्चा माल ₹ 90 श्रम ₹ 40 उपरिव्यय ₹ 75 ₹ 205 लाभ ₹ 60 विक्रय मूल्य ₹ 265 (ब) (i) कच्चा माल औसतन एक माह हेतु स्टॉक में रहता है। (ii) कच्चा माल निर्माणावस्था में औसतन दो सप्ताह रहता है। (iii) तैयार माल औसतन एक माह हेतु स्टॉक में रहता है। (iv) आपूर्तिकर्ताओं द्वारा प्रदत्त साख एक माह की है। (v) देनदारों को दी गई साख दो माह की है। (vi) मजदूरी भुगतान में विलम्ब 1½ सप्ताह का है। (vii) उपरिव्यय के भुगतान में विलम्ब एक माह का है। उत्पादन का 20% नकद बेचा जाता है। हस्तगत रोकड़ ₹ 60,000 अनुमानित है। यह माना जाता है कि उत्पादन वर्ष पर्यंत समान रूप से चलता है, मजदूरी व उपरिव्यय भी उसी प्रकार से देय होते हैं और 4 सप्ताह, एक माह के बराबर है। (20 अंक) (ख) एक कंपनी की कुल आय ₹ 1,00,000 है। कंपनी के पूँजी ढाँचे में ऋण तथा इक्विटी दोनों हैं, जिसमें ऋण की राशि ₹ 4,00,000, 10% ब्याज की दर पर उधारी के रूप में है। वर्तमान में कंपनी की समता अंश पूँजी की लागत 12·50% है। कंपनी का कुल मूल्य और पूँजी की कुल लागत, शुद्ध आय उपागम के अंतर्गत ज्ञात कीजिए। यदि ऋण को ₹ 1,00,000 से बढ़ा दिया जाए या कम कर दिया जाए, तो कंपनी के मूल्य पर और पूँजी की कुल लागत पर शुद्ध आय उपागम के अनुसार क्या प्रभाव पड़ेगा? (15 अंक) (ग) भारतीय वित्तीय प्रणाली में अग्रणी वित्तीय बाजार उपकरणों तथा नूतन ऋण उपकरणों की विवेचना कीजिए। साथ ही उपयुक्त उदाहरण दीजिए। (15 अंक)

Answer approach & key points

Framework: Net Income Approach (Dixit-Moody). (a) calculate: given > formula > substitution > result with units > interpretation | (b) calculate: given > formula > substitution > result with units > interpretation | (c) discuss: intro > 3-4 dimensions > example > balanced close Full marks: Accurate calculations with clear working notes; correct application of Net Income approach; comprehensive discussion with specific examples.

Monthly output 1,300 units; 2 weeks = ½ month, 1½ weeks = 3/8 month
Raw material stock 1,17,000; WIP ½ month (RM full, labour and overheads 50%) = 95,875; finished goods at cost 2,66,500
Debtors: 2 months of credit sales (80%) = 5,51,200 at selling price (or 4,26,400 at cost, if stated); cash 60,000
Current liabilities: creditors 1,17,000, wages 19,500, overheads 97,500; net working capital ₹8,56,575
States NI approach assumptions: Kd and Ke constant, no taxes; capital structure relevant
Treating ₹1,00,000 as EBIT: S = 60,000/0.125 = 4,80,000; V = 8,80,000; Ko = 11.36%
Debt 5,00,000: V = 9,00,000, Ko = 11.11%; debt 3,00,000: V = 8,60,000, Ko = 11.63%
Conclusion: more debt raises V and lowers Ko under NI approach (either interpretation of 'earnings' accepted if stated: V 12,00,000/12,20,000/11,80,000)
Money market instruments: T-bills, CP, CD, call/notice money, repo, TREPS
Capital market instruments: equity, preference shares, debentures/bonds, G-secs; hybrids
Innovative debt instruments: green/sovereign green bonds, masala bonds, municipal bonds, InvIT/REIT debt, AT-1 bonds, securitised debt, inflation-indexed bonds
Examples and role in deepening the debt market and financing infrastructure/green projects

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50M explain Indian financial system and insurance

(a) Explain the key classification of the Indian financial system. Make a diagram that depicts the entire financial system and its key components. (20 marks) (b) "The insurance industry in India is growing very fast under the direction and control of IRDA." In the light of this statement, discuss the emerging trends in life and health insurance. Also explain the government policy initiatives in this regard. (15 marks) (c) Define working capital management in a manufacturing firm. What are the key components of working capital? How does inventory management hold importance over cash management in modern business organisations? (15 marks)

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(क) भारतीय वित्तीय प्रणाली के प्रमुख वर्गीकरण की व्याख्या कीजिए। एक आरेख बनाइए जो संपूर्ण वित्तीय प्रणाली और इसके प्रमुख अवयवों को दर्शाता है। (20 अंक) (ख) "आई आर डी ए के निर्देशन एवं नियंत्रण में भारत में बीमा उद्योग बहुत तेजी से बढ़ रहा है।" इस कथन के आलोक में, जीवन एवं स्वास्थ्य बीमा के उभरते रुझानों की विवेचना कीजिए। साथ ही इस संबंध में सरकारी नीतिगत पहलों को समझाइए। (15 अंक) (ग) एक विनिर्माण फर्म में कार्यशील पूँजी प्रबंधन को परिभाषित कीजिए। कार्यशील पूँजी के प्रमुख अवयव कौन-कौन से हैं ? आधुनिक व्यावसायिक संगठनों में मालसूची प्रबंधन कैसे नकदी प्रबंधन पर महत्त्व रखता है ? (15 अंक)

Answer approach & key points

Framework: UPSC Commerce & Accountancy Paper 1. (a) explain: definition/context > points in order > small example > short close | (b) discuss: intro > 3-4 dimensions > example > balanced close | (c) define: precise definition > the distinguishing feature > one example Full marks: Comprehensive coverage of all sub-parts with specific examples, diagrams, and statutory references.

Formal (organised, regulated) vs informal (moneylenders, chit funds, indigenous bankers) sectors
Four components: institutions (banking and non-banking, DFIs), markets (money and capital; primary and secondary), instruments (primary and secondary securities), services (fund-based and fee-based)
Labelled diagram showing the components, flow of funds from savers to users through intermediaries/markets, and regulators
Regulators and their domains: RBI, SEBI, IRDAI, PFRDA, IFSCA; FSDC co-ordination
IRDAI's role under the IRDA Act, 1999: licensing, product approval, solvency, policyholder protection, 'Insurance for All by 2047'
Life insurance trends: protection/term and annuity products, digital distribution, Bima Sugam, bancassurance, Bima Vistaar
Health insurance trends: fastest-growing segment, standalone insurers, 2024 reforms (no age limit, 5-year moratorium, faster cashless claims), wider coverage
Government initiatives: FDI 49% → 74% → up to 100% (2025 Act), GST exemption on individual life/health premiums (Sept 2025), PMJJBY, PMSBY, APY, AB PM-JAY (70+ extension)
Definition: managing current assets and current liabilities to balance liquidity and profitability; gross vs net working capital
Components: inventories (RM, WIP, FG, stores), receivables, cash and equivalents, and current liabilities
Operating/cash conversion cycle as the link between components
Why inventory matters more: largest current asset, drives production continuity and cash cycle; tools EOQ, ABC/VED, JIT; cash largely a residual

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