Mock Test Paper - Series II: August, 2025

Date of Paper: 25th August, 2025

Time of Paper: 2 P.M. to 5 P.M.
FOUNDATION COURSE
PAPER – 1: ACCOUNTING
Question No. 1 is compulsory.
Answer any four questions from the remaining five questions.
Wherever necessary, suitable assumptions should be made and disclosed
by way of note forming part of the answer.
Working Notes should form part of the answer.
(Time allowed: 3 Hours) (100 Marks)
1. (a) State with reasons whether the following statements are True or False:
i. Goods sold on approval or return basis are not recorded as credit sales
initially when they are sent-out.
ii. Warehouse rent paid for storage of finished inventory should be included
in the cost of finished inventory.
iii. The financial statements must disclose all the relevant and reliable
information in accordance with the Full Disclosure Principle.
iv. In case of admission of a new partner in a partnership firm, the profit/loss
on revaluation account is transferred to all partners in their new profit
sharing ratio.
v. The debit notes issued are used to prepare Sales Return Book.
vi. A Company is not allowed to issue shares at a discount to the public in general.
(6 Statements x 2 Marks = 12 Marks)
(b) Write short notes on the following:
(i) Accounting conventions.
(ii) Contingent Asset and Contingent Liability (4 Marks)
(c) M/s. Samar Steels wires were unable to agree the Trial Balance as on
31st March, 2025 and have raised a suspense account for the difference. Next
year the following errors were discovered:

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 (i) Repairs made during the year were wrongly debited to the building A/c -
` 37,500.
(ii) The addition of the 'Freight' column in the purchase journal was short by
` 4,500.
(iii) Goods to the value of ` 3,150 returned by a customer, alas & Co., had
been posted to the debit of alas & Co. and also to sales returns.
(iv) Sundry items of furniture sold for ` 90,000 had been entered in the sales
book, the total of which had been posted to sales account.
You are required to pass journal entries to rectify the above mistakes. (4 Marks)
(12 + 4 + 4 = 20 Marks)
2. (a) M/s Mcgraw, Profit and loss account showed a net profit of ` 32,00,000, after
considering the closing stock of ` 30,00,000 on 31st March, 2025. Subsequently
the following information was obtained from scrutiny of the books:
(i) Purchases for the year included ` 1,20,000 paid for new electric fittings for
the shop.
(ii) M/s Manas gave away goods valued at ` 3,20,000 as free samples for
which no entry was made in the books of accounts.
(iii) Invoices for goods amounting to ` 20,00,000 have been entered on
25th March, 2025, but the goods were not included in stock.
(iv) In March, 2025 goods of ` 16,00,000 sold and delivered were taken in the
sales for April, 2025.
(v) Goods costing ` 6,00,000 were sent on sale or return in March, 2024 at a
margin of profit of 33-1/3% on cost. Though approval was given in
April, 2025 these were taken as sales for March, 2025.
You are required to determine the adjusted net profit for the year ended on
31.3.2025 and calculate the value of stock on 31 st March, 2025. (10 Marks)
(b) The Machinery Account of a factory showed a balance of ` 95 Lakhs on
1st April,2024. The Books of Accounts of the factory are closed on 31 st March
every year and depreciation is written off @ 10% per annum under the Diminishing
Balance Method. On 1 st September,2024 a new machine was acquired at a cost
of ` 14 Lakhs and ` 44,600 was incurred on the same day as installation charges
for erecting the machine. On 1 st September,2024 a machine which had cost
` 21,87,000 on 1 st April,2022 was sold for ` 3,75,000. Another machine which had

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 cost ` 21,85,000 on 1st April,2023 was scrapped on 1 st September,2024 and it
realized nothing.
Prepare Machinery Account for the year ended 31 st March,2025. Allow the same
rate of depreciation as in the past and calculate depreciation to the nearest
multiple of a rupee. Also show all the necessary working notes. (10 Marks)
(10 +10 = 20 Marks)
3. (a) Following are the Manufacturing A/c, Creditors A/c and Raw Material A/c provided
by M/s. Anil related to financial year 2024-25. There are certain figures missing in
these accounts.
Raw Material A/c
Particulars Amount Particulars Amount
(`) (`)
To Opening Stock A/c 3,81,000 By Raw Materials
Consumed
To Creditors A/c - By Closing Stock -

Creditors A/c
Particulars Amount Particulars Amount
(`) (`)
To Bank A/c 70,50,000 By Balance b/d 47,10,000
To Balance c/d 19,80,000 -

Manufacturing A/c
Particulars Amount Particulars Amount
(`) (`)
To Raw Material A/c - By Trading A/c 52,32,000
To Wages 10,95,000
To Depreciation 6,45,000
To Direct Expenses 7,47,000

Additional Information:
(i) Purchase of machinery worth ` 36,00,000 on 1 st April; 2024 has been
omitted, Machinery is chargeable at a depreciation rate of 15%.

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 (ii) Wages include the following:
Paid to factory workers ` 9,45,000
Paid to labour at office ` 1,50,000
(iii) Direct expenses included the following:
Electricity charges ` 2,40,000
of which 25% pertained to office
Fuel charges ` 75,000
Freight inwards ` 96,000
Delivery charges to customers ` 66,000
You are required to prepare revised Manufacturing A/c and Raw Material A/c.
(10 Marks)
(b) Amar Akbar and Anthony are partners in a firm. On 1 st April 2025 their fixed capital
stood at ` 9,00,000, ` 4,50,000 and ` 4,50,000 respectively.
As per the provision of partnership deed:
(1) Anthony was entitled for a salary of 90,000 p.a.
(2) All the partners were entitled to interest on capital at 5% p.a.
(3) Profits and losses were to be shared in the ratio of Capitals of the partners.
Net Profit for the year ended 31 st March, 2024 of ` 5,94,000 and 31st March, 2025
of ` 8,10,000 was divided equally without providing for the above adjustments.
You are required to pass an adjustment journal entry to rectify the above errors .
(5 Marks)
(c) The profits and losses for the previous years are: 2021 Profit ` 10,000, 2022 Loss
` 17,000, 2023 Profit ` 50,000, 2024 Profit ` 75,000. The average Capital
employed in the business is ` 2,00,000. The rate of interest expected from capital
invested is 10%. The remuneration from alternative employment of the proprietor
` 6,000 p.a. Calculate the value of goodwill on the basis of 2 years’ purchases of
Super Profits based on the average of 3 years. (5 Marks)
(10 + 5 + 5 = 20 Marks)

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4. (a) The Balance Sheet of a Partnership Firm M/s Genesis and Associates consisted
of two partners A and B who were sharing Profits and Losses in the ratio of 5 : 3
respectively. The position as on 31-03-2025 was as follows:
Liabilities ` Assets `
A's Capital 4,10,000 Land & Building 3,80,000
B's Capital 3,30,000 Plant & Machinery 1,70,000
Profit & Loss A/c 1,12,000 Furniture 1,09,480
Trade Creditors 54,800 Stock 1,45,260
Sundry debtors 60,000
Cash at Bank. 42,060
9,06,800 9,06,800

On the above date, C was admitted as a partner on the following terms:

(a) C should get 1/5 th of share of profits.
(b) C brought ` 2,40,000 as his capital and ` 32,000 for his share of Goodwill.
(c) Plant and Machinery would be depreciated by 15% and Land & Buildings
would be appreciated by 40%.
A provision for doubtful debts to be created at 5% on sundry debtors.
An unrecorded liability of ` 6,000 for repairs to Buildings would be recorded
in the books of accounts.
(d) Immediately after C’s admission, Goodwill brought by him would be
adjusted among old partners. Thereafter, the capital accounts of old
partners would be adjusted through the current accounts of partners in
such a manner that the capital accounts of all the partners would be in their
profit sharing ratio.
Prepare Revaluation A/c, Capital Accounts of the partners, New profit sharing ratio
and Balance Sheet of the Firm after the admission of C. (10 Marks)
(b) Following is the extract of Balance Sheet of Sky Ltd. as at 31st March, 2025 :
`
Authorized capital:
3,00,000 equity shares of `10 each 30,00,000
25,000,10% preference shares of `10 each 2,50,000
32,50,000

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 Issued and subscribed capital:
2,70,000 equity shares of ` 10 each fully paid up 27,00,000
24,000, 10% preference shares of ` 10 each fully paid up 2,40,000
29,40,000
Reserves and surplus:
General reserve 3,60,000
Capital redemption reserve 1,20,000
Securities premium (collected in cash) 75,000
Profit and loss account 6,00,000
11,55,000

On 1st April, 2025, the company decided to capitalize its reserves by way of bonus
at the rate of two shares for every five equity shares held.
Show necessary journal entries in the books of the company and prepare the
extract of the balance sheet after bonus issue. (10 Marks)
(10 + 10 = 20 Marks)
5. (a) On 31st March 2025, the Bank Pass Book of Mansi showed a balance of
` 7,50,000 to her credit while balance as per cash book was ` 5,60,250. On
scrutiny of the two books, she ascertained the following causes of difference:
(i) She has issued cheques amounting to ` 4,00,000 out of which only
` 1,60,000 were presented for payment.
(ii) She received a cheque of ` 25,000 which she recorded in her cash book
but forgot to deposit in the bank.
(iii) A cheque of ` 1,10,000 deposited by her has not been cleared yet.
(iv) Mr. Bhalla deposited an amount of ` 78,500 in her bank which has not been
recorded by her in Cash Book yet.
(v) Bank has credited an interest of ` 7,500 while charging ` 1,250 as bank
charges.
Prepare a bank reconciliation statement. (5 Marks)

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 (b) From the following information supplied by Raipur Club, prepare Receipts and
Payments account and Income and Expenditure Account for the year ended
31st March, 2025.
01.04.2024 31.03.2025
` `
Outstanding subscription 70,000 1,00,000
Advance subscription 12,500 15,000
Outstanding salaries 7,500 9,000
Cash in Hand and at Bank 55,000 ?
10% Investment 70,000 35,000
Furniture 14,000 7,000
Machinery 5,000 10,000
Sports goods 7,500 12,500

Subscription for the year amount to ` 1,50,000/-. Salaries paid ` 30,000. Face
value of the Investment was ` 87,500, 50% of the Investment was sold at 80% of
Face Value. Interest on investments was received ` 7,000. Furniture was sold for
` 4000 at the beginning of the year. Machinery and Sports Goods purchased and
put to use at the last date of the year. Charge depreciation @ 15% p.a. on
Machinery and Sports goods and @10% p.a. on Furniture.
Following Expenses were made during the year:
Sports Expenses : ` 25,000
Rent : ` 12,000 out of which ` 1,000 outstanding
Misc. Expenses : ` 2,500 (15 Marks)
(5+15 = 20 Marks)
6. (a) Raghwan Limited issued 60,000 Equity shares of, 10 each at a premium of 10%,
payable ` 2 on application; ` 4 on allotment (including premium); ` 2 on first call
and balance on the final call. All the shares were fully subscribed. Mr. X who held
6,000 shares paid full remaining amount on first call itself. The final call which was
made after 4 months from the first call was fully paid except a shareholder having
600 shares and one another shareholder having 300 shares. They paid their due
amount after 3 months and 4 months respectively along with interest on calls in
arrears, Company also paid interest on calls in advance to Mr. X. The Company
maintains Calls in Arrear and Calls in Advance A/c. Give journal entries to record
these transactions. Show workings of Interest calculation. (15 Marks)

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(b) Write short notes on any two of the following:
(i) Bill of exchange and the various parties to it.
(ii) Retirement of bills of exchange.
OR
Explain, in brief, the basic considerations for distinguishing between capital and
revenue expenditures? (5 Marks)
(15 + 5 = 20 Marks)

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 Mock Test Paper - Series II: August, 2025
Date of Paper: 25th August, 2025
Time of Paper: 2 P.M. to 5 P.M.
FOUNDATION COURSE
PAPER – 1: ACCOUNTING
ANSWERS
1. (a) (i) False: They are recorded as sales irrespective of whether the customer
might accept or reject the goods at the end of the period given for the
approval.
(ii) False: Warehouse rent related to finished goods are expensed when
incurred and are not included in inventory costs unless storage is incurred
for getting the inventory ready for sale i.e. until and unless storage is
required as a part of process of production of inventory like in case of wine.
(iii) True: The financial statements must disclose all the relevant and reliable
information in accordance with the full Disclosure Principle.
(iv) False: In case of admission of new partner in a partnership firm, profit/loss
on revaluation account is transferred to old partners in their old profit-
sharing ratio.
(v) False: The debit notes issued are used to prepare purchases return book.
(vi) True: According to Section 53 of the Companies Act, 2013, a company
cannot issue shares at a discount except in the case of issue of sweat
equity shares (issued to employees and directors).
(b) (i) Accounting conventions emerge out of accounting practices, commonly
known as accounting principles, adopted by various organizations over a
period of time. These conventions are derived by usage and practice. The
accountancy bodies of the world may change any of the convention to
improve the quality of accounting information. Accounting conventions
need not have universal application.
(ii) Contingent Asset
An asset the existence, ownership or value of which may be known or
determined only on the occurrence or non-occurrence of one or more
uncertain future events.

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 Contingent Liability
An obligation relating to an existing condition or situation which may arise in future
depending on the occurrence or non-occurrence of one or more uncertain future
events.
(c) Rectification entries in the books of M/s Samar Steels
Particulars L.F. Dr. Cr.
` `
1. Profit and Loss Adjustment A/c Dr. 37,500
To Building A/c 37,500
(Repairs amounting ` 37,500 wrongly
debited to building account, now rectified)
2. Profit and Loss Adjustment A/c Dr. 4,500
To Suspense A/c 4,500
(Addition of freight column in purchase
journal was under casted, now rectification
entry made)
3. Suspense Account Dr. 6,300
To Alas & Co. 6,300
(Goods returned by Alas & Co. had been
posted wrongly to the debit of her account,
now rectified)
4. Profit and Loss Adjustment A/c Dr. 90,000
To Furniture A/c 90,000
(Being sale of furniture wrongly entered in
sales book, now rectified)

2. (a) Profit and Loss Adjustment A/c

` `
To Advertisement (samples) 3,20,000 By Net profit 32,00,000
To Sales (goods approved in 8,00,000 By Electric fittings 1,20,000
April to be taken as April By Samples 3,20,000
sales)
To Adjusted net profit 67,20,000 By Stock (Purchases 20,00,000
of March not
included in stock)

2
 By Sales (goods sold 16,00,000
in March wrongly
taken as April
sales)
By Stock (goods 6,00,000
sent on approval
basis not
included in stock)
78,40,000 78,40,000
Calculation of value of inventory on 31st March, 2025
`
Stock on 31st March, 2025 (given) 30,00,000
Add: Purchases of March, 2025 not included in the stock 20,00,000
Goods lying with customers on approval basis 6,00,000
56,00,000

(b) Plant and Machinery Account for the year ended 31st March,2025
` `
01-04-24 To Balance 01-09-24 By Bank (Sales)
95,00,000 3,75,000
b/d
01-09-24 To Bank 01-09-24 By Depreciation (on
(14,00,000 + 14,44,600 sold machine) 73,811
44,600)
01-09-24 By Loss on sale 13,22,659
01-09-24 By Loss on
scrapping the 18,84,562
machine
01-09-24 By Depreciation (on
Scrapped 81,938
machinery)
31-03-25 By Depreciation
6,60,471
(Note iii)
31-03-25 By Balance c/d 65,46,159
109,44,600 109,44,600

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Working Note:
(i) Calculation of loss on sale of machine on
01-09-2024
`
Cost on 1-4-2022 21,87,000
Less: Depreciation @ 10% on ` 21,87,000 (2,18,700)
W.D.V. on 31-03-2023 19,68,300
Less: Depreciation @ 10% on ` 19,68,300 (1,96,830)
W.D.V. on 31-03-2024 17,71,470
Less: Depreciation @ 10% on ` 17,71,470 (73,811)
for 5 months
16,97,659
Less: Sale proceeds on 01-09-2024 (3,75,000)
Loss 13,22,659
(ii) Calculation of loss on scrapped machine
Cost on 1-4-2023 21,85,000
Less: Depreciation @ 10% on ` 21,85,000 (2,18,500)
W.D.V. on 31-3-2024 19,66,500
Less: Depreciation @ 10% on ` 19,66,500
(81,938)
for 5 months
Loss 18,84,562
(iii) Depreciation
Balance of machinery account on 1-4-2024 95,00,000
Less: W.D.V of machinery sold 17,71,470
W.D.V. of machinery scrapped 19,66,500 (37,37,970)
Balance of other machinery after sale and
57,62,030
scrap on 1-4-2024
Depreciation @ 10% on ` 57,62,030 for 12
5,76,203
months
Depreciation @ 10% on ` 14,44,600 for 7
84,268
months
6,60,471

Note: The figures are rounded off to nearest rupee.

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3. (a) Manufacturing A/c

Particulars ` Particulars `
To Raw Material Consumed 27,45,000 By Trading A/c 54,96,000
(Balancing Figure) (W.N. 4)
To Wages (W.N. 2) 9,45,000
To Depreciation (W.N. 1) 11,85,000
To Direct Expenses 6,21,000
(W.N. 3)
54,96,000 54,96,000
Raw Material A/c
Particulars ` Particulars `
To Opening Stock A/c 3,81,000 By Raw Material Consumed
(from Manufacturing A/c 27,45,000
above)
To Creditors A/c 43,20,000 By Closing Stock A/c 19,56,000
(W.N. 5) (Balancing Figure)
47,01,000 47,01,000

Working Notes:
(1) Since purchase of Machinery worth ` 36,00,000 has been omitted.
So, depreciation omitted from being charged = 36,00,000 X 15%
= ` 5,40,000
Correct total depreciation expense = ` (6,45,000+5,40,000)
= 11,85,000
(2) Wages worth ` 1,50,000 will be excluded from manufacturing account as
they pertain to office and hence will be charged P&L A/c. So the revised
wages amounting ` 9,45,000 will be shown in manufacturing account.
(3) Expenses to be excluded from direct expenses:
Office Electricity Charges (2,40,000 X 25%) 60,000
Delivery Charges to Customers 66,000
Total expenses not part of Direct Expenses 1,26,000

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 => Revised Direct Expenses = ` (7,47,000 – 1,26,000)
= ` 6,21,000
Fuel charges are related to factory expenses and also freight inwards are
incurred for bringing goods to factory/ godown so they are part of direct
expenses.
(4) Revised Balance to be transferred to Trading A/c:
Particulars `
Current Balance transferred 52,32,000
Add: Depreciation charges not recorded earlier 5,40,000
Less: Wages related to Office -1,50,000
Less: Office Expenses -1,26,000
Revised balance to be transferred 54,96,000

(5) Creditors A/c

Particulars ` Particulars `
To Bank A/c 70,50,000 By Balance b/d 47,10,000
To Balance c/d By Raw Materials A/c
19,80,000 (Bal. figure) 43,20,000
90,30,000 90,30,000
(b)
Particulars Amar Akbar Anthony Total Profit
of firm
I. Amount already credited:
Share of profit (in the ratio
4,68,000 4,68,000 4,68,000 14,04,000
of [Link]) (2023-24, 2024-25)
II. Amount which should have been
credited:
Anthony’s Salary (2023-24,
2024-25) 1,80,000
Interest on Capital (2023-24,
2024-25) 90,000 45,000 45,000
Share of Profit 5,22,000 2,61,000 2,61,000 10,44,000
6,12,000 3,06,000 4,86,000
Net effect (I - II) (1,44,000) 1,62,000 (18,000) -

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 The necessary journal entry will be:
Particulars Debit (`) Credit (`)
Akbar’s Current A/c 1,62,000
To Amar’s Current A/c 1,44,000
To Anthony’s Current A/c 18,000
(Salary to Anthony, Interest on capital charged and
profit shared among partners in the ratio of capital)

(c) Total Profit for 3 years = (` 17,000) + ` 50,000+` 75,000 = ` 1,08,000.

Total Profit ` 1,08,000
Average profits = × = ` 36,000
No. of years 3

Average Profits for Goodwill = ` 36,000 – Proprietor Remuneration

= ` 36,000 – ` 6,000 = ` 30,000
Normal Profit = Interest on Capital employed
= ` 20,000 (i.e. ` 2,00,000 x 10/100) = ` 20,000
Super Profit = Average Profit-Normal Profit = ` 30,000 – ` 20,000 = ` 10,000
Goodwill = Super Profit x No of years purchases = ` 10,000 x 2 = ` 20,000
4. (a) Revaluation A/c
` `
To Plant & Machinery 25,500 By Land & 1,52,000
(1,70,000 x 15%) Building A/c
To Provision for Bad & Doubtful
Debts (60,000 x 5%) 3,000
To Outstanding Repairs to
6,000
Building
To Revaluation Profit
A’s Capital A/c (5/8) 73,438
B’s Capital A/c (3/8) 44,062
1,52,000 1,52,000

Partners’ Capital A/c

A B C A B C
To A’s Capital A/c - - 20,000 By Balance b/d 4,10,000 3,30,000 -

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To B’s Capital A/c 12,000 By Revaluation A/c 73,438 44,062 -
To B’s Current A/c - 68,062 By Profit & Loss A/c 70,000 42,000 -
To Balance c/d 6,00,000 3,60,000 2,40,000 By Bank - - 2,72,000
By C’s Capital A/c 20,000 12,000 -
By A’s Current A/c 26,562 - -
6,00,000 4,28,062 2,72,000 6,00,000 4,28,062 2,72,000

Calculation of New Profit Sharing Ratio and gaining ratio:

C’s Share of Profit = 1/5 = 2/10
Remaining Share = 1 – 1/5 = 4/5
A’s Share = 5/8 x 4/5 = 20/40 = 5/10
B,s Share = 3/8 x 4/5 = 12/40 = 3/10
New Profit sharing Ratio = [Link]
Gaining ratio = 5:3 (same as old profit sharing ratio among old partners)
Balance sheet of Genesis and Associates as on 31.3.2025
Liabilities ` Assets
Capital Accounts: Land & Buildings 5,32,000
A 6,00,000 Plant & Machinery 1,70,000
B 3,60,000 Less: Depreciation 25,500 1,44,500
C 2,40,000 12,00,000 Furniture 1,09,480
B’s Current A/c 68,062 Stock 1,45,260
Trade Creditors 54,800 Sundry Debtors 60,000
Outstanding 6,000 Less: Provision 3,000
57,000
Repairs to Building
Cash at Bank 3,14,060
A’s current A/c 26,562
13,28,862 13,28,862

Working Note:
Required Balance of Capital Accounts
C’s Capital after writing off Goodwill = 2,72,000 – 32,000 = 2,40,000
C’s Share of Profit = 1/5
Thus Capital of the firm shall be = 2,40,000 x 5 = 12,00,000

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 A’s Capital = 12,00,000 x 5/10 = 6,00,000 and
B’s Capital = 12,00,000 x 3/10 = 3,60,000
(b) In the books of Sky Ltd.
Journal Entries
Dr. Cr.
April 1 Capital Redemption Reserve A/c Dr. 1,20,000
Securities Premium A/c Dr. 75,000
General Reserve A/c Dr. 3,60,000
Profit and Loss A/c (b.f.) Dr. 5,25,000
To Bonus to Equity Shareholders 10,80,000
A/c
(Being bonus issue @ two shares for
every five shares held by utilizing
various reserves as per Board’s
Resolution dated...)
Bonus to Shareholders A/c Dr. 10,80,000
To Equity Share Capital A/c 10,80,000
(Being bonus shares issued)

Balance Sheet (Extract) as on 1st April, 2025 (after bonus issue)

Particulars Notes Amount (`)
Equity and Liabilities
1 Shareholders’ funds
a Share capital 1 40,20,000
b Reserves and Surplus 2 75,000

Notes to Accounts
1 Share Capital (`)
Authorized share capital:
3,78,000* Equity shares of ` 10 each 37,80,000*
25,000 10% Preference shares of ` 10 each 2,50,000
Total 40,30,000

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 Issued, subscribed and fully paid share
capital:
3,78,000 Equity shares of ` 10 each, fully paid
(Out of above, 1,08,000 equity shares @ ` 10 37,80,000
each were issued by way of bonus)
24,000 10% Preference shares of ` 10 each 2,40,000
Total 40,20,000
2 Reserves and Surplus
Capital Redemption Reserve 1,20,000 Nil
Less: Utilized 1,20,000
Securities Premium 75,000
Less: Utilised for bonus issue (75,000) Nil
General reserve 3,60,000
Less: Utilised for bonus issue (3,60,000) Nil
Profit & Loss Account 6,00,000
Less: Utilised for bonus issue (5,25,000) 75,000
Total 75,000

Note: *Authorized capital has been increased by the minimum required amount
i.e. ` 7,80,000 (37,80,000 – 30,00,000) in the above solution.
5. (a) Bank Reconciliation Statement as on 31st March, 2025
Particulars Details Amount
(`) (`)
Balance as per Pass Book (Cr.) 7,50,000
Add: Cheque deposited but not yet cleared 1,10,000
Cheque recorded in Cash Book but not yet 25,000
deposited
Bank Charges debited by bank 1,250 1,36,250
Less: Cheque issued but not yet presented 2,40,000
Less: Amount deposited but not recorded in Cash 78,500
Book
Less: Interest allowed by bank 7,500 (3,26,000)
Balance as per Cash Book 5,60,250

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(b) Receipts and Payments Account for the year ended 31-03-2025
Receipts ` Payments `
To balance b/d By Salaries 30,000
Cash and bank 55,000 By Purchase of sports goods 5,000
To Subscription received 1,22,500 ` (12,500 - 7,500)
(W.N.1)
To Sale of investments 35,000 By Purchase of machinery 5,000
(W.N.2)
To Interest received on 7,000 ` (10,000-5,000)
investment
To Sale of furniture 4,000 By Sports expenses 25,000
By Rent paid 11,000
` (12,000 -1,000)
By Miscellaneous expenses 2,500
By Balance c/d
Cash and bank 1,45,000
2,23,500 2,23,500
Income and Expenditure account for the year ended 31-03-2025
Expenditure ` ` Income ` `
To Salaries By Subscription 1,50,000
Salaries Paid 30,000
Add: Outstanding for 2025 9,000 By Interest on
39,000 Investment
Received 7,000
Less: Outstanding for 2024 (7,500) 31,500 Accrued (W.N.5) 1,750 8,750
To Sports expenses 25,000
To Rent 12,000
To Miscellaneous exp. 2,500
To Loss on sale of 3,000
furniture (W.N.3)
To Depreciation (W.N.4)
Furniture 700
Machinery 750
Sports goods 1,125 2,575
To Surplus 82,175
1,58,750 1,58,750

11
Working Notes:
1. Calculation of Subscription received during the year 2024-25
`
Subscription due for 2024-25 1,50,000
Add: Outstanding of 2024 70,000
Less: Outstanding of 2025 (1,00,000)
Add: Subscription of 2025 received in advance 15,000
Less: Subscription of 2024received in advance (12,500)
1,22,500

2. Calculation of Sale price and profit on sale of investment

Face value of investment sold: ` 87,500 × 50% = ` 43,750
Sales price: ` 43,750 × 80% = ` 35,000
Cost price of investment sold: ` 70,000 × 50% = ` 35,000
Profit/loss on sale of investment: ` 35,000 - ` 35,000 = NIL
3. Loss on sale of furniture
`
Value of furniture as on 01-04-2024 14,000
Value of furniture as on 31-03-2025 7,000
Value of furniture sold at the beginning of the year 7,000
Less: Sales price of furniture (4,000)
Loss on sale of furniture 3,000
4. Depreciation
Furniture - ` 7,000 × 10% = 700
Machinery - ` 5,000 × 15% = 750
Sports goods - ` 7,500 × 15% = 1,125
5. Interest accrued on investment
`
Face value of investment on 01-04-2024 87,500
Interest @ 10% 8,750
Less: Interest received during the year (7,000)
Interest accrued during the year 1,750

12
 Note: It is assumed that the sale of investment has taken place at the end of the
year.
6. (a) Journal Entries in the books of Raghwan Ltd.
Entry Particulars L.F. Debit Credit
No. Amount Amount
(`) (`)
Bank A/c Dr. 1,20,000
1 To Equity Share Application A/c 1,20,000
(Money received on applications for
60,000 shares @ ` 2 per share)
Equity Share Application A/c Dr. 1,20,000
2 To Equity Share Capital A/c 1,20,000
(Transfer of application money on
60,000 shares to share capital)
Equity Share Allotment A/c Dr. 2,40,000
3 To Equity Share Capital A/c 1,80,000
To Securities Premium A/c 60,000
(Amount due on the allotment of 60,000
shares @ ` 3 per share and Securities
Premium @ `1 per share)
Bank A/c Dr. 2,40,000
4 To Equity Share Allotment A/c 2,40,000
(Allotment money received)
Equity Share First Call A/c Dr. 1,20,000
5 To Equity Share Capital A/c 1,20,000
(Being first call made due on 60,000
shares at ` 2 per share)
Bank A/c Dr. 1,38,000
6 To Equity Share First Call A/c 1,20,000
To Calls in Advance A/c 18,000
(Being first call money received along
with calls in advance on 6,000 shares at
` 3 per share)

13
 Equity Share Final Call A/c Dr. 1,80,000
7 To Equity Share Capital A/c 1,80,000
(Being final call made due on 60,000
shares at ` 3 each)
Bank A/c Dr. 1,59,300
Calls in Advance A/c Dr. 18,000
8 Calls in Arrears A/c Dr. 2,700
To Equity Share Final Call A/c 1,80,000
(Being final call received for 53,100
shares, calls in advance for 6,000
shares and calls in arrears on 900
shares adjusted)
Interest on Calls in Advance A/c Dr. 720
9 To Shareholders A/c 720
(Being interest made due on calls in
advance of `18,000 at the rate of 12%
p.a.)
Shareholders A/c Dr. 720
10 To Bank A/c 720
(Being payment of interest made to
shareholder)
Shareholders A/c Dr. 45
11 To Interest on Calls in Arrears A/c 45
(Being interest on calls in arrears made
due at the rate of 10%)
Bank A/c Dr. 1,845
12 To Calls in Arrears A/c 1,800
To Shareholders A/c 45
(Being money received from
shareholder having 200 shares for calls
in arrears and interest thereupon)
13 Shareholders A/c Dr. 30
To Interest on Calls in Arrears A/c 30
(Being interest on calls in arrears made
due at the rate of 10%)

14
 14 Bank A/c Dr. 930
To Calls in Arrears A/c 90
To Shareholders A/c 30
(Being money received from
shareholder having 300 share for calls in
arrears and interest thereupon)

Calculation of Interest on Calls in Advance & Calls in Arrears:

Interest on Calls in Advance = ` 18,000 x 12% x 4 / 12 = ` 720
Interest on Calls in Arrears ` 1,800 x 10% x 3 / 12 = ` 45
Interest on Calls in Arrears ` 900 x 10% x 4 / 12 = ` 30
Table F of The Companies Act,2013 prescribes 10% and 12% p.a. as the
maximum rates respectively for calls in arrears and calls in advance. Accordingly,
these rates have been considered while passing the above entries,
(b) (i) A bill of exchange is an instrument in writing containing an unconditional
order, signed by the maker, directing a certain person to pay a certain sum
of money to or to the order of certain person or to the bearer of the
instrument. When such an order is accepted by the drawee on the face of
the order itself, it becomes a valid bill of exchange.
There are three parties to a bill of exchange:
(i) The drawer, who draws the bill, that is, the creditor to whom the
money is owing;
(ii) The drawee, the person to whom the bill is addressed or on whom
it is drawn and who accepts the bill that is, the debtor; and
(iii) The payee, the person who is to receive the payment. The drawer
in many cases is also the payee.
(ii) Retirement of bills of exchange: Sometimes, the acceptor of a bill of
exchange has spare funds much before the maturity date of the bill of
exchange accepted by him. He may, therefore, desire to pay the bill before
the due date. In such a circumstance, the acceptor shall ask the payee or
the holder of the bill to accept cash before the maturity date. If the payee
agrees, the acceptor may be allowed a rebate or discount on such early
payment. This rebate is generally the interest at an agreed rate for the
period between the date of payment and date of maturity. The
interest/rebate/discount becomes the income of the acceptor and expense

15
 of the payee. It is a consideration for premature payment. When a bill is
paid before due date, it is said to be retired under rebate.
OR
The basic considerations in distinction between capital and revenue expenditures
are:
(i) Nature of business: For a trader dealing in furniture, purchase of furniture
is revenue expenditure but for any other trade, the purchase of furniture
should be treated as capital expenditure and shown in the balance sheet
as asset.
(ii) Recurring nature of expenditure: If the frequency of an expense is quite
often in an accounting year then it is said to be an expenditure of revenue
nature while non-recurring expenditure is infrequent in nature and do not
occur often in an accounting year.
(iii) Purpose of expenses: Expenses for repairs of machine may be incurred in
course of normal maintenance of the asset. Such expenses are revenue in
nature. On the other hand, expenditure incurred for major repair of the
asset so as to increase its productive capacity is capital in nature.
(iv) Materiality of the amount involved: Relative proportion of the amount
involved is another important consideration in distinction between revenue
and capital.

16
 Mock Test Paper - Series II: August, 2025
Date of Paper: 26th August, 2025
Time of Paper: 2 P.M. to 5 P.M.

FOUNDATION COURSE
PAPER 2: BUSINESS LAWS
Question No. 1 is compulsory.
Attempt any four questions from the remaining five questions.
(Time allowed: 3 Hours) (100 Marks)
1. (a) (i) Tanishka purchased two flats in Ansal VVIP Homes at Greater Noida, one
at Block A and another at Block D. She also entered in contract with Sakshi
to letout the flat at Block D. At the time of entering into contract, both
Tanishka and Sakshi were unaware that Block D is completely destroyed
due to earthquake. Afterwards knowing the facts Sakshi requested to
transfer the contract in favour of flat at Block A. In the light of provisions of
the Indian Contract Act, 1872, whether Tanishka is liable to handover the
possession of flat at Block A in place of Block D? (4 Marks)
(ii) Mr. A, the employer induced his employee Mr. B to sell his one room flat
to him at less than the market value to secure promotion. Mr. B sold the
flat to Mr. A. Later on, Mr. B changed his mind and decided to sue
Mr. A. Examine the validity of the contract as per the provisions of the
Indian Contract Act, 1872. (3 Marks)
(b) The paid-up capital of Darshan Photographs Private Limited is ` 1 Crores in the
form of 50,000 Equity Shares of ` 100 each and 50,000 Preference Shares of
` 100 each (Preference shares are not having any voting rights). Shadow Evening
Private Limited is holding 25,000 Equity Shares in Darshan Photographs Private
Limited. State with reason,
(a) Whether Darshan Photographs Private Limited is subsidiary of Shadow
Evening Private Limited?
(b) Whether your answer would be different in case Shadow Evening Private
Limited is holding 25,000 Equity Shares and 5,000 Preference Shares in
Darshan Photographs Private Limited? (7 Marks)
(c) Explain the five essential elements of partnership under the Indian Partnership
Act, 1932. (6 Marks)

1
2. (a) (i) Rajnikant agrees to sell some specific goods coming on a ship name
“Titanic” to Chiranjivi which will be delivered on arrival of “Titanic”. The ship
arrived at the port but goods were not found on the ship. Chiranjivi had to
procure the goods from open market at higher price. Afterwards, Chiranjivi
sued Rajnikant for recovery of extra payment he made for goods. State
with reasons, whether Rajnikant is liable to compensate Chiranjivi under
the provisions of the Sale of Goods Act, 1930? (4 Marks)
(ii) Saurabh purchased electric scooter of Vivek for ` 5000 only on the gun
point. Vivek decided to file the complaint and to avoid the contract on the
basis of coercion applied against him by Saurabh. But before he could do
that, Saurabh sold the scooter to Vinay who had no idea about the
situation on which the scooter was purchased by Saurabh. Vivek sued
Saurabh and Vinay for recovery of scooter. Referring to the provisions of
the Sale of Goods Act, 1930, whether Vivek was correct in his decision?
(3 Marks)
(b) Briefly explain the nature of shares under the Companies Act, 2013 with reference
to legal position of shareholders, treatment as movable property, and requirement
of numbering. (7 Marks)
(c) Discuss the provisions of the LLP Act, 2008 relating to partners in a Limited
Liability Partnership. In your answer, explain:
(a) The eligibility and disqualifications of a person to become a partner,
(b) The minimum number of partners required and the consequences of
reduction below the statutory limit, and
(c) The concept of designated partners, including the requirement of having a
resident designated partner. (6 Marks)
3. (a) X, Y and Z are partners in a firm named M/s XYZ & Co. Timber is used in the
business of firm in the ordinary course of business. Y with intention to deceive
W, a timber dealer, purchased timber on behalf of M/s XYZ & Co. Y uses the
timber for construction of his own building. W has no idea that Y purchased the
timber for his own use and claims the payment from M/s XYZ & Co.
M/s XYZ & Co. refuses the payment as the timber was never received by it. State:
(i) Whether firm is liable to pay the price of Timber?
(ii) Whether the answer be different in case part of timber so purchased was
delivered to firm and rest was used by Y for his personal use which was
not in the knowledge of firm and W. (7 Marks)
(b) (i) Nolimit Private Company is incorporated as unlimited company having
share capital of ` 10,00,000. One of its creditors, Mr. Samuel filed a suit

2
 against a shareholder Mr. Innocent for recovery of his debt against
Nolimit Private Company. Mr. Innocent has given his plea in the Court that
he is not liable as he is just a shareholder. Explain whether Mr. Samuel will
be successful in recovering his dues from Mr. Innocent? (4 Marks)
(ii) A Company registered under Section 8 of the Companies Act, 2013, has
been consistently making profits for the past 5 years after a major change
in the management structure. Few members contented that they are
entitled to receive dividends. Can the company distribute dividend? If yes,
what is the maximum percentage of dividend that can be distributed as
per provisions of the Companies Act, 2013? Also, to discuss this along
with other regular matters, the company held a general meeting by giving
only 14 days’ notice. Is this valid? (3 Marks)
(c) On the basis of the mode of formation, contracts can be classified into different
types. Explain the various kinds of contracts, namely:
1. Express Contracts
2. Implied Contracts (including Tacit Contracts)
3. Quasi-Contracts
4. E-Contracts (6 Marks)
4. (a) (i) Rahul is manufacturer of jute bags. He contracted with Sonia to purchase
raw jute for the purpose of making bags. Rahul informed Sonia that
production process of jute bags would start from 27.06.2025 but Sonia
must supply raw jute till 25.06.2025 so that quality verifications can be done
in next two days. Sonia supplied the jute on 27.06.2025 and informed Rahul
that she couldn’t supply on 25.06.2025 due to some unavoidable reasons
and she also assured that quality measures were not anyway compromised
in supplies. But Rahul wanted to avoid the contract as he was not given
opportunity to examine the goods. In light of provisions of the Indian
Contract Act 1872, whether Rahul can avoid the contract? (4 Marks)
(ii) Kajal, wife of Ajay, is lunatic. She purchased a Diamond set of ` 15 Lakhs
from a famous Jewellers on credit. The Jewellers demanded the payment
from her husband, Ajay. The Jewellers filed suit against Ajay for recovery
of price of Diamond set. Referring to the provisions of the Indian Contract
Act, 1872, decide whether the Jewellers is entitled to claim the price from
Ajay? (3 Marks)
(b) Under what circumstances is presentment for payment of a negotiable instrument
not necessary under the Negotiable Instruments Act, 1881? (7 Marks)
(c) What is the significance of the Supreme Court and High Court in the Indian
judiciary? (6 Marks)

3
5. (a) Anant needs an air conditioner for his room. For this purpose, he approaches M/s
Frontline Electronics. The sales manager of M/s Frontline Electronics said that its
technician will visit the room of Anant and there after they will suggest the air
conditioner suitable for his room. After visiting the room, the technician suggests
that a split AC of 1 tonne capacity will be sufficient for his room. On this advice,
he purchases the suggested AC but after sometimes Anant found that AC is
insufficient to cool the room area. Now, Anant wants to avoid the contract, but M/s
Frontline Electronics denies returning or changing the AC as AC is installed and
returning or changing will result a heavy loss to it. Referring to the provisions of
the Sale of Goods Act, 1930, whether Anant can avoid the contract after
installation? (7 Marks)
(b) On the dissolution of a firm, what are the rights and obligations of partners under
the Indian Partnership Act, 1932 with respect to:
(i) The right to have the business wound up and surplus distributed,
(ii) The continuing authority of partners for the purpose of winding up and
completing unfinished transactions, and
(iii) The application of firm debts and separate debts of partners. (7 Marks)
(c) Define a Contract of Guarantee under the Indian Contract Act, 1872. Also explain
the essential features of a valid contract of guarantee. (6 Marks)
6. (a) ‘Nakul’ made promissory note in favour of ‘Sahdev’ of ` 10,000 and delivered to
him. ‘Sahdev’ indorsed the promissory note in favour of ‘Arjun’ but delivered to
Arjun’s agent. Subsequently, Arjun’s agent died, and promissory note was found
by ‘Arjun’ in his agent’s table drawer. ‘Arjun’ sued ‘Nakul’ for the recovery of
promissory note. Whether ‘Arjun’ can recover amount under the provisions of the
Negotiable Instruments Act, 1881? (7 Marks)
(b) Define the term Ratification under the Indian Contract Act, 1872. Explain the rights
of a person as to acts done for him without his authority. What is the effect of
ratification? (6 Marks)
(c) (i) When is the contract of sale in an auction complete?
(ii) What is the effect of pretended bidding by the seller in an auction?
(iii) Can the seller reserve a right to bid at his own auction? If yes, how?
(7 Marks)

4
 Mock Test Paper - Series II: August, 2025
Date of Paper: 26th August, 2025
Time of Paper: 2 P.M. to 5 P.M.
FOUNDATION COURSE
PAPER 2: BUSINESS LAWS
ANSWERS
1. (a) (i) Section 20 of the Indian Contract Act, 1872 provides, where both the
parties to an agreement are under a mistake as to a matter of fact essential
to the agreement, there is a bilateral mistake. In such a case, the
agreement is void. Bilateral mistakes may be as to the quality, existence,
identity, title, price or quantity of the subject matter.
In the instant case, Tanishka purchased two flats in Ansal VVIP Homes at
Greater Noida in Block A and Block D. She also entered in contract with
Sakshi to letout the flat at Block D. But at that time the Block D was
completely damaged by earthquake unknown to both Tanishka and Sakshi.
Sakshi demanded the possession of flat at Block A.
Here, the matter discussed in above problem is concerned with bilateral
mistake. As in case of bilateral mistake, contract is void, both Tanishka and
Sakshi are not bound with this contract. Hence Sakshi cannot demand the
possession of flat at Block A from Tanishka.
(ii) According to section 16 of the Indian Contract Act, 1872, a contract is said
to be induced by ‘undue influence’ where the relations subsisting between
the parties are such that one of the parties is in a position to dominate the
will of the other and he uses that position to obtain an unfair advantage
over the other.
When consent to an agreement is caused by undue influence, the contract
is voidable at the option of the party, whose consent was so caused.
Hence, the contract between Mr. A and Mr. B is voidable at the option of
Mr. B as it was induced by undue influence by Mr. A and therefore Mr. B
can sue Mr. A.
(b) According to Section 2(87) of the Companies Act, 2013 “subsidiary company” in
relation to any other company (that is to say the holding company), means a
company in which the holding company—

1
 (i) controls the composition of the Board of Directors; or
(ii) exercises or controls more than one-half of the total voting power either at
its own or together with one or more of its subsidiary companies:
For the purposes of this section —
(I) the composition of a company’s Board of Directors shall be deemed to be
controlled by another company if that other company by exercise of some
power exercisable by it at its discretion can appoint or remove all or a
majority of the directors;
(II) the expression “company” includes anybody corporate;
In the instant case, Darshan Photographs Private Limited is having paid-up capital
of ` 1 Crores in the form of 50,000 Equity Shares of ` 100 each and 50,000
Preference Shares of ` 100 each. Shadow Evening Private Limited is holding
25,000 Equity Shares in Darshan Photographs Private Limited.
Therefore, the answers are
(a) On the basis of provisions of Section 2(87) and facts of the given problem,
Shadow Evening Private Limited is holding one – half of total equity paid
up share capital of Darshan Photographs Private Limited. Therefore, as
Darshan Photographs Private Limited cannot be taken as subsidiary
company of Shadow Evening Private Limited as for being subsidiary
company, other company should control more than one – half of the total
voting power.
(b) Answer would remain same even if Shadow Evening Private Limited was
also holding 5000 preference shares as they don’t have voting rights.
(c) The definition of the partnership contains the following five elements which must
co-exist before a partnership can come into existence:
1. ASSOCIATION OF TWO OR MORE PERSONS: Partnership is an
association of 2 or more persons. Again, only persons recognized by law
can enter into an agreement of partnership. Therefore, a firm, since it is
not a person recognized in the eyes of law cannot be a partner. Again, a
minor cannot be a partner in a firm, but with the consent of all the partners,
may be admitted to the benefits of partnership.
The partnership Act is silent about the maximum number of partners but
section 464 of the Companies Act, 2013 has now put a limit of 50 partners
in any association/partnership firm.

2
 2. AGREEMENT: Partnership must be the result of an agreement between
two or more persons. There must be an agreement entered into by all the
persons concerned. This element relates to voluntary contractual nature of
partnership. Thus, the nature of the partnership is voluntary and
contractual.
An agreement from which relationship of Partnership arises may be
express. It may also be implied from the act done by partners and from a
consistent course of conduct being followed, showing mutual
understanding between them. It may be oral or in writing.
3. BUSINESS: Firstly, there must exist a business. For the purpose, the term
‘business’ includes every trade, occupation and profession. The existence
of business is essential. Secondly, the motive of the business is the
“acquisition of gains” which leads to the formation of partnership.
Therefore, there can be no partnership where there is no intention to carry
on the business and to share the profit thereof.
4. AGREEMENT TO SHARE PROFITS: The sharing of profits is an essential
feature of partnership. There can be no partnership where only one of the
partners is entitled to the whole of the profits of the business. Partners
must agree to share the profits in any manner they choose.
5. BUSINESS CARRIED ON BY ALL OR ANY OF THEM ACTING FOR ALL:
The business must be carried on by all the partners or by anyone or more
of the partners acting for all. This is the cardinal principle of the partnership
Law. In other words, there should be a binding contract of mutual agency
between the partners.
2. (a) (i) Section 6(2) of the Sale of Goods Act, 1930 provides the acquisition of
goods which depends upon uncertain contingency are called ‘Contingent
Goods’.
Contingent goods also operate as ‘an agreement to sell’ and not a ‘sale’ so
far as the question of passing of property to the buyer is concerned. In
other words, like the future goods, in the case of contingent goods also,
the property does not pass to the buyer at the time of making the contract.
In the instant case, there was an agreement between Rajnikant and
Chiranjivi to sell some specific goods coming on a ship name “Titanic” by
Rajnikant to Chiranjivi which will be delivered on arrival of “Titanic”. On the
arrival of ship, it was found that the goods were not on it. Chiranjivi

3
 procured the goods from open market at higher price, and he sued
Rajnikant for recovery of extra payment he made for goods.
On the basis of above provisions and facts, it is clear that goods under the
agreement were contingent goods and the agreement between Rajnikant
and Chiranjivi was ‘an agreement to sell’ and not a ‘sale’. The property in
goods will be passed only after arrival of goods. As there was no ‘Sale’
between them, Chiranjivi cannot recover extra payment he made for goods.
(ii) By virtue of provisions of Section 29 of the Sale of Goods Act, 1930, a
buyer would acquire a good title to the goods sold to him by a seller who
had obtained possession of the goods under a contract voidable on the
ground of coercion, fraud, misrepresentation or undue influence provided
that the contract had not been rescinded until the time of the sale.
In the instant case, Saurabh purchased electric scooter of Vivek for ` 5000
only by applying coercion. Before Vivek avoid the contract, Saurabh sold
the scooter to Vinay who was an innocent buyer. Now, Vivek sued Saurabh
and Vinay for recovery of scooter.
According to above provisions, even Saurabh purchased the electric
scooter by applying coercion, Vinay got good title as he was an innocent
buyer and purchased the scooter before setting aside the contract by
Vivek. However, Vivek may claim damages only from Saurabh.
(b) Nature of shares: Section 2(84) of the Companies Act, 2013 defines the term
‘share’ which means a share in the share capital of a company and includes stock.
A share thus represents such proportion of the interest of the shareholders as the
amount paid up thereon bears to the total capital payable to the company. It is a
measure of the interest in the company’s assets to which a person holding a share
is entitled.
Share is an interest in the company: Farwell Justice, in Borland Trustees vs.
Steel Bors. & Co. Ltd. observed that “a share is not a sum of money but is an
interest measured by a sum of money and made up of various rights contained in
the contract, including the right to a sum of money of a more or less amount”. The
shareholders are not, in the eyes of law, part owners of the undertaking. The
undertaking is somewhat different from the totality of the shareholders. The rights
and obligations attaching to a share are those prescribed by the memorandum
and the articles of a company. It must, however, be remembered that a
shareholder has not only contractual rights against the company, but also certain
other rights which accrue to him according to the provisions of the Companies Act.

4
 Shares are a movable property: According to section 44 of the Companies Act,
2013, the shares or debentures or other interests of any member in a company
shall be movable property transferable in the manner provided by the articles of
the company.
Shares shall be numbered: Section 45 provides, every share in a company
having a share capital, shall be distinguished by its distinctive number. This
implies that every share shall be numbered.
(c) Partners (Section 5 of the LLP Act, 2008): Any individual or body corporate may
be a partner in a LLP. However, an individual shall not be capable of becoming a
partner of a LLP, if—
(a) he has been found to be of unsound mind by a Court of competent
jurisdiction and the finding is in force;
(b) he is an undischarged insolvent; or
(c) he has applied to be adjudicated as an insolvent and his application is
pending.
Minimum number of partners (Section 6):
(i) Every LLP shall have at least two partners.
(ii) If at any time the number of partners of a LLP is reduced below two and
the LLP carries on business for more than six months while the number is
so reduced, the person, who is the only partner of the LLP during the time
that it so carries on business after those six months and has the knowledge
of the fact that it is carrying on business with him alone, shall be liable
personally for the obligations of the LLP incurred during that period.
Designated partners (Section 7):
(i) Every LLP shall have at least two designated partners who are individuals
and at least one of them shall be a resident in India.
(ii) If in LLP, all the partners are bodies corporate or in which one or more
partners are individuals and bodies corporate, at least two individuals who
are partners of such LLP or nominees of such bodies corporate shall act
as designated partners.
(iii) Resident in India: For the purposes of this section, the term resident in
India means a person who has stayed in India for a period of not less than
120 days during the financial year.

5
3. (a) Sections 19(1) and 22 deal with the implied authority of a partner. The impact of
these Sections is that the act of a partner which is done to carry on, in the usual
way, business of the kind carried on by the firm binds the firm, provided that the
act is done in the firm name, or any manner expressing or implying an intention to
bind the firm. Such an authority of a partner to bind the firm is called his implied
authority. It is however subject to the following restrictions:
1. The act done must relate to the usual business of the firm, that is, the act
done by the partner must be within the scope of his authority and related
to the normal business of the firm.
2. The act is such as is done for normal conduct of business of the firm. The
usual way of carrying on the business will depend on the nature and
circumstances of each particular case.
3. The act to be done in the name of the firm or in any other manner
expressing or implying an intention to bind the firm.
Thus, a partner has implied authority to bind the firm by all acts done by him in all
matters connected with the partnership business and which are done in the usual
way and are not in their nature beyond the scope of partnership. You must
remember that an implied authority of a partner may differ in different kinds of
business.
In the instant case, X, Y and Z are partners in a firm named M/s XYZ & Co. Y
purchased timber from W in the name of firm but uses the timber for construction
of his own building of which W was unaware. When W claims the payment from
M/s XYZ & Co. it refuses the payment.
Therefore, the answers are
(a) as timber is of the ordinary use of business of firm, firm has to pay the price
of timber to W.
(b) The answer will be same part of timber so purchased was delivered to firm
and rest was used by Y for his personal use which was not in the knowledge
of firm and W.
(b) (i) Section 2(92) of the Companies Act, 2013, provides that an unlimited
company means a company not having any limit on the liability of its
members. The liability of each member extends to the whole amount of the
company’s debts and liabilities, but he will be entitled to claim contribution
from other members. In case the company has share capital, the Articles
of Association must state the amount of share capital and the amount of

6
 each share. So long as the company is a going concern the liability on the
shares is the only liability which can be enforced by the company. The
creditors can institute proceedings for winding up of the company for their
claims. The official liquidator may call the members for their contribution
towards the liabilities and debts of the company, which can be unlimited.
On the basis of above, it can be said that Mr. Samuel cannot directly claim
his dues against the company from Mr. Innocent, the shareholder of the
company even the company is an unlimited company. Mr. Innocent is liable
upto his share capital. His unlimited liability will arise when official liquidator
calls the members for their contribution towards the liabilities and debts of
the company at the time of winding up of company.
(ii) A company registered under Section 8 of the Companies Act, 2013 is
prohibited from the payment of any dividends to its members.
Hence in the given case, the contention of the members to distribute
dividend from the profits earned is wrong.
Also, Section 8 company is allowed to call a general meeting by giving 14
days instead of 21 days.
(c) On the basis of the formation of contract
1. Express Contracts: A contract would be an express contract if the terms
are expressed by words or in writing. Section 9 of the Indian Contract Act,
1872 provides that if a proposal or acceptance of any promise is made in
words, the promise is said to be express.
2. Implied Contracts: Implied contracts in contrast come into existence by
implication. Most often the implication is by action or conduct of parties or
course of dealings between them. Section 9 of the Act contemplates such
implied contracts when it lays down that in so far as such proposal or
acceptance is made otherwise than in words, the promise is said to be
implied.
Tacit Contracts: The word Tacit means silent. Tacit contracts are those
that are inferred through the conduct of parties without any words spoken
or written. A classic example of tacit contract would be when cash is
withdrawn by a customer of a bank from the automatic teller machine
[ATM].
3. Quasi-Contract: A quasi-contract is not an actual contract, but it
resembles a contract. It is created by law under certain circumstances. The

7
 law creates and enforces legal rights and obligations when no real contract
exists. Such obligations are known as quasi-contracts. In other words, it is
a contract in which there is no intention on part of either party to make a
contract but law imposes a contract upon the parties.
4. E-Contracts: When a contract is entered into by two or more parties using
electronics means, such as e-mails is known as e-commerce contracts. In
electronic commerce, different parties/persons create networks which are
linked to other networks through ED1 - Electronic Data Inter change. This
helps in doing business transactions using electronic mode. These are
known as EDI contracts or Cyber contracts or mouse click contracts.
4. (a) (i) “Performance of Contract” means fulfilment of obligations to the contract.
According to Section 37 of the Indian Contract Act, 1872, the parties to a
contract must either perform, or offer to perform, their respective promises
unless such performance is dispensed with or excused under the
provisions of the Contract Act or of any other law. Further, the promisee
should have a reasonable opportunity to see that the things offered is the
things contracted for otherwise performance cannot considered as valid
performance.
In the instant case, Rahul, a manufacturer of jute bags entered in a contract
with Sonia to purchase raw jute with the instructions that his production
process would start from 27.06.2025 but he needs raw jute till 25.06.2025
so that quality verifications can be done in next two days. But Sonia
supplied the jute on 27.06.2025 with the information that she couldn’t
supply on 25.06.2025 due to some unavoidable reasons but quality
measures were assured by her. Now Rahul wanted to avoid the contract
as he was not given opportunity to examine the goods.
On the basis of facts of the case, Rahul was not given a proper opportunity
to examine the goods at the time of performance. This cannot be
considered as valid performance by Sonia. Hence, Rahul can avoid the
contract entered with Sonia.
(ii) By virtue of provisions of Section 68 of the Indian Contract Act, 1872, if a
person, incapable of entering into a contract, or anyone whom he is legally
bound to support, is supplied by another person with necessaries suited to
his condition in life, the person who has furnished such supplies is entitled
to be reimbursed from the property of such incapable person. In other
words, supplies of necessaries to a lunatic can be recovered from property
belonging to lunatic.

8
 In the instant case, Kajal, a lunatic, purchased a Diamond set of ` 15 Lakhs
from a famous Jewellers on credit. The Jewellers demanded the payment
from her husband, Ajay.
Here, Diamond set purchased by Kajal is not necessaries generally.
Hence, the Jewellers cannot recover the amount of ` 15 Lakhs from Ajay.
(b) When presentment unnecessary (Section 76 of the Negotiable Instruments
Act, 1881)
No presentment for payment is necessary, and the instrument is dishonoured at
the due date for presentment, in any of the following cases:
(a) (i) If the maker, drawee or acceptor intentionally prevents the
presentment of the instrument, or
(ii) if the instrument being payable at his place of business, he closes
such place on a business day during the usual business hours, or
(iii) if the instrument being payable at some other specified place,
neither he nor any person authorised to pay it attends at such place
during the usual business hours, or
(iv) if the instrument not being payable at any specified place, he cannot
after due search be found;
(b) as against any party sought to be charged therewith, if he has engaged to
pay notwithstanding non-presentment;
(c) as against any party if, after maturity, with knowledge that the instrument
has not been presented—
o he makes a part payment on account of the amount due on the
instrument,
o or promises to pay the amount due thereon in whole or in part,
o or otherwise waives his right to take advantage of any default in
presentment for payment;
(d) as against the drawer, if the drawer could not suffer damage from the want
of such presentment.
(c) (i) Supreme Court: The Supreme Court is the apex body of the judiciary. It
was established on 26th January 1950. The Chief Justice of India is the
highest authority appointed under Article 126. The principal bench of the
Supreme Court consists of seven members including the Chief Justice of

9
 India. Presently, the number has increased to 34 including the Chief Justice
of India due to the rise in the number of cases and workload. An individual
can seek relief in the Supreme Court by filing a writ petition under
Article 32.
(ii) High Court: The highest Court of appeal in each state and union territory
is the High Court. Article 214 of the Indian Constitution states that there
must be a High Court in each state. The High Court has appellant, original
jurisdiction, and Supervisory jurisdiction. However, Article 227 of the Indian
Constitution limits a High Court’s supervisory power. In India, there are
twenty-five High Courts, one for each state and union territory, and one for
each state and union territory. Six states share a single High Court. An
individual can seek remedies against violation of fundamental rights in High
Court by filing a writ under Article 226.
5. (a) According to Section 16(1) of the Sale of Goods Act, 1930, there is implied
condition of the part of the seller that the goods supplied shall be reasonably fit
for the purpose for which the buyer wants them, provided the following conditions
are fulfilled:
(a) The buyer should have made known to the seller the particular purpose for
which goods are required.
(b) The buyer should rely on the skill and judgement of the seller.
(c) The goods must be of a description dealt in by the seller, whether he be a
manufacturer or not.
In the instant case, Anant approaches M/s Frontline Electronics for purchasing an
AC. The technician of M/s Frontline Electronics visits the room of Anant where AC
to be installed and on the suggestion of M/s Frontline Electronics a split AC of 1
tonne capacity is installed. But AC is insufficient to cool the room area. Now, Anant
wants to avoid the contract, but M/s Frontline Electronics denies returning or
changing the AC as AC is installed and returning or changing will result a heavy
loss to it.
On the basis of above provisions and facts, undoubtedly Anant purchases AC only
on the suggestion of M/s Frontline Electronics. AC is not fit and suitable for the
room area of Anant, hence he can avoid the contract.
(b) (i) Right of partners to have business wound up after dissolution
(Section 46 of the Indian Partnership Act, 1932): On the dissolution of a
firm every partner or his representative is entitled, as against all the other
partners or their representative, to have the property of the firm applied in

10
 payment of the debts and liabilities of the firm, and to have the surplus
distributed among the partners or their representatives according to their
rights.
(ii) Continuing authority of partners for purposes of winding up
(Section 47): After the dissolution of a firm the authority of each partner to
bind the firm, and the other mutual rights and obligations of the partners,
continue notwithstanding the dissolution, so far as may be necessary to
wind up the affairs of the firm and to complete transactions begun but
unfinished at the time of the dissolution, but not otherwise:
Provided that the firm is in no case bound by the acts of a partner who has
been adjudicated insolvent; but this proviso does not affect the liability of
any person who has after the adjudication represented himself or knowingly
permitted himself to be represented as a partner of the insolvent.
(iii) Payment of firm debts and of separate debts (Section 49): Where there
are joint debts due from the firm and also separate debts due from any
partner:
(i) the property of the firm shall be applied in the first instance in
payment of the debts of the firm, and if there is any surplus, then
the share of each partner shall be applied to the payment of his
separate debts or paid to him;
(ii) the separate property of any partner shall be applied first in the
payment of his separate debts and surplus, if any, in the payment
of debts of the firm.
(c) “Contract of guarantee” [Section 126 of the Indian Contract Act, 1872]
Contract of guarantee: A contract of guarantee is a contract to perform the
promise made or discharge the liability, of a third person in case of his default.
Three parties are involved in a contract of guarantee
(i) Surety- person who gives the guarantee
(ii) Principal debtor- person in respect of whose default the guarantee is
given
(iii) Creditor- person to whom the gurantee is given

11
 ESSENTIAL FEATURES OF A GUARANTEE
The following are the requisites of a valid guarantee:
1. Purpose: The purpose of a guarantee being to secure the payment of a
debt, the existence of recoverable debt is necessary. If there is no principal
debt, there can be no valid guarantee.
2. Consideration: Like every other contract, a contract of guarantee should
also be supported by some consideration. A guarantee without
consideration is void, but there is no need for a direct consideration
between the surety and the creditor.
As per Section 127 consideration received by the principal debtor is
sufficient consideration to the surety for giving the guarantee, but past
consideration is no consideration for the contract of guarantee. Even if the
principal debtor is incompetent to contract, the guarantee is valid. But, if
surety is incompetent to contract, the guarantee is void.
3. Existence of a liability: There must be an existing liability or a promise
whose performance is guaranteed. Such liability or promise must be
enforceable by law. The liability must be legally enforceable and not time
barred.
4. No misrepresentation or concealment (section 142 and 143): Any
guarantee which has been obtained by the means of misrepresentation
made by the creditor, or with his knowledge and assent, concerning a
material part of the transaction, is invalid (section 142)
Any guarantee which the creditor has obtained by means of keeping
silence as to material circumstances, is invalid (section 143).
5. Writing not necessary: Section 126 expressly declares that a guarantee
may be either oral or written.
6. Joining of the other co-sureties (Section 144): Where a person gives a
guarantee upon a contract that the creditor shall not act upon it until
another person has joined in it as co-surety, the guarantee is not valid if
that other person does not join. That implies, the guarantee by a surety is
not valid if a condition is imposed by a surety that some other person must
also join as a co-surety, but such other person does not join as a co-surety.
6. (a) According to Section 48 of the Negotiable Instruments Act, 1881, a promissory
note, bill of exchange or cheque payable to order, is negotiable by the holder by
indorsement and delivery thereof.

12
 Further, delivery of an instrument is essential whether the instrument is payable
to bearer or order for effecting the negotiation. The delivery must be voluntary,
and the object of delivery should be to pass the property in the instrument to the
person to whom it is delivered.
The delivery can be, actual or constructive.
(i) Actual delivery takes place when the instrument changes hand physically.
(ii) Constructive delivery takes place when the instrument is delivered to the
agent, clerk or servant of the indorsee on his behalf or when the indorser ,
after indorsement, holds the instrument as an agent of the indorsee.
In the present case, Nakul made a promissory note in favour of Sahdev and
delivered it to him. Sahdev, in turn, indorsed the note in favour of Arjun and
delivered it to Arjun’s agent. This constitutes valid constructive delivery to Arjun.
The subsequent death of Arjun’s agent and the fact that Arjun later found the
instrument in his agent’s drawer does not affect the validity of the negotiation.
Therefore, since there was valid indorsement and delivery, Arjun has become the
holder of the promissory note and is entitled to recover the amount from Nakul.
(b) Rights of person as to acts done for him without his authority, Effect of
ratification [Section 196 of the Indian Contract Act, 1872]: Where acts are
done by one person on behalf of another, but without his knowledge or authority,
he may elect to ratify or to disown such acts. If he ratifies them, the same effects
will follow as if they had been performed by his authority. In simple words,
“Ratification” means approving a previous act or transaction. Ratification may be
express or implied by the conduct of the person on whose behalf the act was done.
Essentials of a valid Ratification
a. Ratification may be expressed or Implied [Section 197]: Ratification
may be expressed or may be implied in the conduct of the person on whose
behalf the acts are done.
b. Knowledge requisite for valid ratification [Section 198]: No valid
ratification can be made by a person whose knowledge of the facts of the
case is materially defective.
c. The whole transaction must be ratified [Section 199]: There can be
ratification of an act in entirely or its rejection in entirely. The principal
cannot ratify a part of the transaction which is beneficial to him and reject
the rest.

13
 d. Ratification cannot injure third person [Section 200]: When the interest
of third parties is affected, the principle of ratification does not apply.
Ratification cannot relate back to the date of contract if third party has in
the intervening time acquired rights.
e. Ratification within reasonable time: Ratification must be made within a
reasonable period of time.
f. Communication of Ratification: Ratification must be communicated to
the other party.
g. Act to be ratified must be valid: Act to be ratified should not be void or
illegal, for e.g. payment of dividend out of capital, forgery of signatures,
any other criminal offence, or anything which is not permitted under law.
(c) An ‘Auction Sale’ is a mode of selling property by inviting bids publicly and the
property is sold to the highest bidder. An auctioneer is an agent governed by the
Law of Agency. When he sells, he is only the agent of the seller. He may, however,
sell his own property as the principal and need not disclose the fact that he is so
selling.
Legal Rules of Auction sale: Section 64 of the Sale of Goods Act, 1930 provides
following rules to regulate the sale by auction:
(i) Completion of the contract of sale: The sale is complete when the
auctioneer announces its completion by the fall of hammer or in any other
customary manner. Until such announcement is made, any bidder may
retract from his bid.
(ii) Pretended bidding: If the seller makes use of pretended bidding to raise
the price, the sale is voidable at the option of the buyer.
(iii) Right to bid may be reserved: Right to bid may be reserved expressly by
or on behalf of the seller and where such a right is expressly reserved, but
not otherwise, the seller or any one person on his behalf may bid at the
auction.

14
 Mock Test Paper - Series II: August, 2025
Date of Paper: 28th August, 2025
Time of Paper: 2 P.M. to 4 P.M.
MOCK TEST PAPER II
FOUNDATION COURSE
Paper 3: Quantitative Aptitude
Time: 2 Hours Marks: 100

1.

3
( )
Find the value of log10 25 - log10 2 + log10 ( 4 ) 
2

(a) x
(b) 10
(c) 1
(d) None
2. If A: B = 2:5, then (10A + 3B): (5A + 2B) is equal to
(a) 7:4
(b) 7:3
(c) 6:5
(d) 7:9
3. The ratio compounded of 4:5 and sub-duplicate of a:9 is 8:15. Then value of “a” is
(a) 2
(b) 3
(c) 4
(d) 5
4. If ½, 1/3,1/5 and 1/x are in proportion, then the value of x will be
(a) 15/2
(b) 6/5
(c) 10/3
(d) 5/6

1
5. If P = x 1/3+ x -1/3 then find value of 3p 3 – 9p
(a) 3
(b) ½(x+1/x)
(c) (x+1/x))
(d) 2((x+1/x))
6. Fourth proportional to x, 2x, (x+1) is:
(a) (x+2)
(b) (x-2)
(c) (2x+2)
(d) (2x-2)

7. The value of
(3 n +1
+ 3n )
is equal to
(3 n +3
- 3n +1 )

(a) 1/5
(b) 1/6
(c) ¼
(d) 1/9
x2 − 9
8. Lim x→3 is equal to
x−3
(a) 0
(b) 6
(c) Does not exist
(d) -6
x 2 − 6x + 9
9. Let f(x) = , x  3 , f(3) = 0, then f(x) is
x−3
(a) Continuous at x = 3
(b) Discontinuous at x = 3
(c) Discontinuous for all x

2
 (d) None of these
3x - 2
10. If is the duplicate ratio of 2/3 then the value of ‘x’ is
5x - 6
(a) 2
(b) 6
(c) 5
(d) 9
11. If α and β are the roots of the equation x 2 + 7x + 12 = 0, then the equation whose roots
(α + β)2 and (α - β)2 will be:
(a) x2 – 14x + 49 = 0
(b) x2 – 24x + 144 = 0
(c) x2 – 50x + 49 = 0
(d) x2 – 19x + 144 = 0
12. Roots of the equation 2x 2 + 3x + 7 = 0 are α and β then the value of α β -1 + β α -1 is
(a) 2
(b) 3/7
(c) 7/2
(d) -19/14
13. On solving the inequalities 5x + y ≤ 100, x + y ≤ 60, x≥ 0, y ≥ 0, we get the following
situation:
(a) (0,0), (20,0), (10,50), & (0,60)
(b) (0,0), (60,0), (10,50), & (0,60)
(c) (0,0), (20,0), (0,100) & (10,50)
(d) none of these
14. The rules and regulations demand that the employer should employ not more than 5
experienced hands to 1 fresh one and this fact is represented by (Taking experienced
person as x and fresh person as y)
x
(a) y
5

3
 (b) 5y < x
(c) 5y > x
(d) none of these
15. In what time will be a sum of money doubles itself at 6.25% p.a simple interest?
(a) 5 years
(b) 8 years
(c) 12 years
(d) 16 years
16. Mr. X invests ` 10,000 every year starting from today for next 10 years suppose interest
rate is 8% per annum compounded annually. Calculate future value of the annuity: (Given
that (1+0.08) 10 = 2.158925]
(a) ` 156454.88
(b) ` 144865.625
(c) ` 156554.88
(d) none of these
17. The difference between the simple and compound interest on a certain of 3 years at 5%
p.a is ` 228.75. The compound interest on the sum of for 2 years at 5% per annum is
(a) ` 3175
(b) ` 3075
(c) ` 3275
(d) ` 2975
18. How much time would the simple interest on a certain sum be 0.125 times the principal
at 10% per annum
1
(a) 1 years
4
3
(b) 1 years
4
1
(c) 2 years
4

4
 3
(d) 2 years
4
19. The time in by which a sum of money is 8 times of itself if it doubles itself in 15 years
interest compounded annually.
(a) 42 years
(b) 43 years
(c) 45 years
(d) 46 years
20. Present value of a scooter is ` 7290, if its value decreases every year by 10% then the
value before 3 years is equal to
(a) 10,000
(b) 10,500
(c) 20,000
(d) 20,500
21. Find the effective rate of interest at 10% p.a when the interest is payable quarterly.
(a) 10.38%
(b) 5%
(c) 5.04%
(d) 4%
22. The difference between in simple interest on a sum invested of ` 1500 for 3 years is
` 18. The difference in their rate is
(a) 0.4
(b) 0.6
(c) 0.8
(d) 0.10
23. What will be the population after 3 years. When the population increases at the rate 3%
in I year, 4% in II year and 5% in III year.
(a) 28,119
(b) 29,118

5
 (c) 27,000
(c) 30,000
24. If ` 10,000 is invested at 8% per annum, then compounded [Link] value of
investment after 2 years is .
(a) ` 11,716.59
(b) ` 10,716.59
(c) ` 12,715.59
(d) none of these
25. In how many years will a sum of money become double at 5% p.a compound interest
(a) 14 years
(b) 15 years
(c) 16 years
(d) 14.3 years
26. The future value of an annuity of ` 1,000 is made annually for 5 years at interest rate of
14% compounded annually [Given that (1.14) 5 = 1.92541] is _______
(a) ` 5610
(b) ` 6610
(c) ` 6160
(d) ` 5160
27. The number of ways of arranging 6 boys and 4 girls in a row so that all 4 girls are together
is:
(a) 6!. 4!
(b) 2 (7! 4!)
(c) 7! 4!
(d) 2. (6! 4!)
28. 15C3r+15Cr+3 then ‘r’ is equal to
(a) 2
(b) 3

6
 (c) 4
(d) 5
29. If nP4 = 20 (nP2) then the value of ‘n’ is _____
(a) -2
(b) 7
(c) -2 and 7 both
(d) None of these.
30. How many different words can be formed with the letters of the word “LIBERTY”
(a) 4050
(b) 5040
(c) 5400
(d) 4500
31. If x, y and z are the terms in G.P, then the term x 2+y2, xy + yz, y 2 + z2 are in
(a) AP
(b) GP
(c) HP
(d) none of the above
32. In a G.P. if fourth term is 3 then the product of first seven terms is
(a) 35
(b) 37
(c) 36
(d) 38
2 2
33. In a G.P. If the third term of a GP is and 6th term is , then the first term is
3 81
(a) 6
(b) 1/3
(c) 9
(d) 2

7
 1 1 1 1 1
34. Sum upto infinity series + 2 + 3 + 4 + 5 + .....
2 3 2 3 2
(a) 19/24
(b) 24/19
(c) 5/24
(d) none of these
2+ x
35. If f(x) = , then f -1 (x) :
2− x
2 ( x − 1)
(a)
x +1
2 ( x + 1)
(b)
x −1
x +1
(c)
x −1
x −1
(d)
x +1
36. If f : R → R is a function, defined by f(x) = 2 x; then f(x+y) is
(a) f(x) + f(y)
(b) f(x). f(y)
(c) f(x) ÷ f(y)
(d) none
37. If f(x) = x+2, g(x) = 7 x, than g of (x) = ____
(a) 7x.x + 2.7x
(b) 7x + 2
(c) 49(7x)
(d) none of these

8
 dy
38. Given x = 2t + 5; y = t 2-2, then is calculated as:
dx
(a) t
(b) 1/t
(c) -1/t
(d) none of these
1

 (e )
x
39. Evaluate - e x dx
-1

(a) 1
(b) 0
(c) -1
(d) none of these
dy
40. if xy =1 then y 2 + =?
dx
(a) 1
(b) 0
(c) 2
(d) none of these
41. The missing term of the series 11, 10 _____27, 66.5, 198.5
(a) 14
(b) 16
(c) 21
(d) 19
42. What comes at last place in R, U, X, A , D, ?
(a) E
(b) F
(c) G
(d) H

9
43. If Z = 52 and ACT = 48, then BAT will be equal to
(a) 39
(b) 41
(c) 44
(d) 46
44. If ROSE is coded as 6821, CHAIR is coded as 73456 and PREACH is coded as 961473,
what will be the code for SEARCH?
(a) 246173
(b) 214673
(c) 214763
(d) 216473
45. If E = 5 and READ is coded as 7, then what is the code of 'DEAR'?
(a) 6
(b) 7
(c) 8
(d) 9
46. M is to the East of D, F is to the South of D and K is to the West of F. M is in which
direction with respect to K?
(a) South-West
(b) North-West
(c) North-East
(d) South-East
47. A cyclist goes 30 km to North and then turning to goes 40 km. Again he turns to his right
and goes 20 km. After this he turns to his right and goes 40 km. How far is the from his
starting point?
(a) 0 km.
(b) 10 km.
(c) 25 km.
(d) 40 km.

10
48. A boy from his home, first walks 20 m in North-West direction then 20 m in South - West
direction. Next, he walks 20m South - East direction. Finally, he turns towards his house.
In which direction is he moving?
(a) North - West
(b) North-East
(c) South – West
(d) South – East
49. Raju leaves his house and walks 12 km towards North. He turns right and walks another
12 km. He turns right, walks 12 km more and turns left to walk 5 km. How far is he from
his home and in which direction?
(a) 7 km east
(b) 10 km east
(c) 17 km east
(d) 24 km eas
50. A child goes 50 meter towards South and then turning to his right, he goes 50 meter.
Then, turning to his left, he goes 30 meter. Again he turns to his left and goes 50 meter.
How far is he from his initial position?
(a) 30 m
(b) 40 m
(c) 50 m
(d) 80 m
51. D is daughter of E. A is son of D . C is brother of A and B is sister of A . F is brother of
D. How F is related to B?
(a) Father-in -Law
(b) Uncle
(c) Brother
(d) Mother-in-law

11
52. Introducing a boy a girl said, “He is the son of the daughter of the father of my uncle ”.
Who is the boy to the girl?
(a) Brother
(b) Nephew
(c) Uncle
(d) Son-in-law
53. It is given that “A is the mother of B; B is the sister of C; C is the father of D”. How is A
related to D?
(a) Mother
(b) Grandmother
(c) Aunt
(d) Sister
54. Rita told Mani, "The girl I met yesterday at the beach was the youngest daughter of the
brother-in-law of my friend's mother."How is the girl related to Rita's friend ?
(a) Cousin
(b) Daughter
(c) Niece
(d) Aunt
55. Sanjay has three daughters, and each daughter has a brother. How many male members
are there in the family?
(a) 4
(b) 2
(c) 3
(d) 1
Directions (Q 56-57): Study the following information carefully and answer the questions given
below.
I. P, Q, R, S, T, U and V are sitting on a wall and all of them are facing West.
II. S is on the immediate left of R.

12
III. T is at an extreme end and has Q as his neighbor.
IV. V is between Q and U.
V. S is sitting third from the north end.
56. Who is sitting to the left of S ?
(a) Q
(b) U
(c) T
(d) R
57. Which of the following pairs of people are sitting at the extreme ends?
(a) QV
(b) PR
(c) TP
(d) ST
58. Five girls are sitting on a bench to be photographed. Seema is to the left of Rani and to
the right of Bindu. Mary is to the right of Rani. Reeta is between Rani and Mary. Who is
sitting immediate right to Reeta?
(a) Bindu
(b) Rani
(c) Mary
(d) Seema
(Directions 59-60) . Four ladies A, B, C and D and four gentlemen E, F, G and H are sitting in
circle around a table facing each other
(i) No two ladies or gentlemen are sitting side by side
(ii) C, who is sitting between G and E , facing D
(iii) F is between D and A and facing G
(iv) H is to the right of B

13
59. Who is immediate neighbor of B ?
(a) G and H
(b) E and F
(c) A and B
(d) None of the above
60. Who is sitting left of A
(a) F
(b) E
(c) C
(d) D
61. Median of a distribution can be obtained from
(a) Frequency polygon
(b) Histogram
(c) Ogives
(d) None of these.
62. The ______ the size of the sample more reliable is the result.
(a) Medium
(b) Smaller
(c) Larger
(d) None of these
63. The Standard deviation of the ______ distribution is called standard error.
(a) Normal
(b) Poisson
(c) Binomal
(d) Sampling

14
64. For a set of observations, the sum of absolute deviations is ______, when the deviations
are taken from the median.
(a) Zero
(b) Maximum
(c) Minimum
(d) None of these
65. For open-end classification, which of the following is the best measure of central
tendency?
(a) AM
(b) GM
(c) Median
(d) Mode
66. The quartiles of a variable are 45, 52 and 65 respectively. Its quartile deviation is
(a) 10
(b) 20
(c) 25
(d) 8.30
67. If x and y are related by y = 2x + 5 and the SD and AM of x are known to be 5 and 10
respectively, then the coefficient of variation is
(a) 25
(b) 30
(c) 40
(d) 20
68. For a moderately skewewd distribution, the median is twice the mean , then the mode is
____ times the median.
(a) 3
(b) 2
2
(c)
3

15
 3
(d)
2
69. If average marks for agroup of 30 girls is 80, a group of boys is 70 and combined average
is 76, then how many boys are in the group?
(a) 21
(b) 20
(c) 22
(d) 19
70. The median value of the set of observations 48, 36, 72, 87, 19, 66, 56 and 91
(a) 53
(b) 87
(c) 61
(d) 19
71. If two vriables a and b are related by c= ab then [Link] c =
(a) GM of a +GM of b
(b) GM of a×GM of b
(c) GM of a -GM of b
(d) GM of a /GM of b
72. If there are three obsewrvations 15, 20, 25 then the sum of devation of the observations
from their AM is.
(a) 0
(b) 5
(c) -5
(d) 10
73. The mean weight of 15 students is 110 kg. The mean weight of 5 of them is 100 kg. and
of another five students is 125 kg. then the mean weight of the remaining students is :
(a) 120
(b) 105
(c) 115

16
 (d) None of these
74. If the Arithmetic mean between two numbers is 64 and the Geometric mean between
them is 16. The Harmonic Mean between them is ________.
(a) 64
(b) 4
(c) 16
(d) 40
75. The regression coefficients remain unchanged due to
(a) Shift to origin
(b) Shift to scale
(c) Always
(d) Never
76. If the plotted points in a scatter diagram lie from upper left to lower right, then the
correlation is
(a) Positive
(b) Zero
(c) Negative
(d) none of these.
77. The covariance between two variables is
(a) Strictly positive
(b) Strictly negative
(c) Always 0
(d) Either positive or negative or zero.
78. If the coefficient of correlation between two variables is –0 9, then the coefficient of
determination is
(a) 0.9
(b) 0.81
(c) 0.1

17
 (d) 0.19.
79. For a probability of a random variable x is given below :
X: 1 2 4 5 6
P: 0.15 0.25 0.2 0.3 0.1

What is the Standrard deviation of x ?

(a) 1.49
(b) 1.56
(c) 1.69
(d) 1.72
80. Given that for two events A and B, P (A) = 3/5, P (B) = 2/3 and P ( AUB) = 3/4, what is P
(A/B)?
(a) 0.655
(b) 13/60
(c) 31/60
(d) 0.775
81. If 2x + 3y + 4 = 0 and V(x) = 6 then V(y) is
(a) 8/3
(b) 9
(c) 9
(d) 6
82. X and Y stand in a line with 6 other people. What is the probability that there are
3 persons between them?
(a) 1/5
(b) 1/6
(c) 1/7
(d) 1/3

18
83. Four unbiased coins are tossed simultaneously. The expected number of heads is :
X: 0 1 2 3 4
P(x) 1/16 4/16 6/16 4/16 1/16

(a) 1
(b) 2
(c) 3
(d) 4
84. Assume that the proabailityfor rain on a day is 0.4 . An umbrella salesman can earn
` 400 per day in case of rain on that day will lose `100 per day if there is no rain. The
expected eranings (in `) per day of the salesman is .
(a) 400
(b) 200
(c) 100
(d) 0
85. The covraince between two variables X and Y is 8.4 and their variances are 25 and 36
respectively .Calculate Karl Pearson’s coefficient of correlation between them.
(a) 0.82
(b) 0.28
(c) 0.01
(d) 0.09
86. What is the probability of getting 3 heads if 6 unbaised coins are tossed simultaneously?
(a) 0.3125
(b) 0.25
(c) 0.6825
(d) 0.50
87. The mode of the binomial distribution for which the mean is 4 varaince 3 is equal to?
(a) 4
(b) 4.5

19
 (c) 4.25
(d) 4.1
88. For Poisson Distribution :
(a) Mean and Standard Deviation are equal
(b) Mean and Vraince are equal
(c) Standard Devaiation and Variance are equal
(d) Both (a) and (b) are equal
89. If avaraiate x has , mean>variance , then the distribution will be ____
(a) Binomial Distribution
(b) Poisson Distribution
(c) Normal Distribution
(d) T-Distribution
90. An example of a bi-parametric continuous probability distribution
(a) Binomial
(b) Poisson
(c) Normal
(d) Chi-square
91. For a poisson variate X, P(x=2) =3 P(x=4) , then the standard deviation of X is
(a) 2
(b) 4
(c) √2
(d) 3
92. What is the mean of X having the following density function?

−
( x −10 )2
1
f(x) = e 32
for -  x  
4 2
(a) 10
(b) 4

20
 (c) 40
(d) none of these
93. The divations are minimum when taken from
(a) Mean
(b) Median
(c) Mode
(d) GM
94. Histogram is useful to determine graphically the value of
(a) Arithmetic Mean
(b) Median
(c) Mode
(d) HM
95. If x and y are related as 3x-4y = 20 then the Quartile divation of x is 12, then the Quartile
deviation of y is :
(a) 14
(b) 15
(c) 16
(d) 9
96. The base year____
(a) Is the reference year from which changes in the index are measured
(b) Is always last year
(c) Is the first year the index is created
(d) Is the current year the index is created
97. Monthly salary of an employee was ` 10,000 in the year 2000 and it was increased to
` 20,000 in the year 2013 while the consumer price index number is 240 in year 2013
with the base year 2000, what should be his salary in comparison of consumer price
index in the year 2013 ?
(a) 2,000
(b) 16,000

21
 (c) 24,000
(d) None
98. Find the Paasche’s Index number for prices from the following
Commodity Base year Current year
Price Commodity Price Commodity
A 1 6 3 5
B 3 5 8 5
C 4 8 10 6

(a) 261.36
(b) 265.48
(c) 274.32
(d) 282
99. Index numbers are not helpful in
(a) Framining Economic Policies
(b) Revealing Trend
(c) Forecasting
(d) Identifying errors
100. The weight average of price relatives of commodities when the weight is equal to the
value of commodities in base year yields _____index number
(a) Fisher’s Ideal
(b) Laspyres
(c) Paasches
(d) Marshall-Edgeworth

22
 Mock Test Paper - Series II: August, 2025
Date of Paper: 28 th August, 2025
Time of Paper: 2 P.M. to 4 P.M.
MOCK TEST PAPER II
FOUNDATION COURSE
Paper 3: Quantitative Aptitude
Answer Key

1. (c) 2. (a) 3. (c) 4. (a) 5. (c)

6. (c) 7. (b) 8. (b) 9. (a) 10. (b)
11. (c) 12. (d) 13. (a) 14. (a) 15. (d)
16. (a) 17. (b) 18. (a) 19. (c) 20. (a)
21. (a) 22. (a) 23. (a) 24. (a) 25. (d)
26. (b) 27. (c) 28. (b) 29. (b) 30. (b)
31. (b) 32. (b) 33. (a) 34. (a) 35. (a)
36. (b) 37. (c) 38. (a) 39. (b) 40. (b)
41. (a) 42. (c) 43. (d) 44. (b) 45. (b)
46. (c) 47. (b) 48. (b) 49. (c) 50. (a)
51. (b) 52. (a) 53. (b) 54. (a) 55. (b)
56. (b) 57. (c) 58. (c) 59. (a) 60. (a)
61. (c) 62. (c) 63. (d) 64. (c) 65. (c)
66. (a) 67. (c) 68. (b) 69. (b) 70. (c)
71. (b) 72. (a) 73. (b) 74. (b) 75. (a)
76. (c) 77. (d) 78. (b) 79. (c) 80. (d)
81. (a) 82. (c) 83. (b) 84. (c) 85. (b)
86. (a) 87. (a) 88. (b) 89. (a) 90. (c)
91. (c) 92. (a) 93. (b) 94. (c) 95. (d)
96. (a) 97. (c) 98. (a) 99. (d) 100. (b)
 Mock Test Paper - Series II: August, 2025
Date of Paper: 29th August, 2025
Time of Paper: 2.00 P.M. to 4.00 P.M.

FOUNDATION COURSE
PAPER – 4: BUSINESS ECONOMICS
Time: 2 Hours Marks: 100
1. Which of the following mechanisms are used for Allocation of Resources in Public
Financial Management:
(a) Market Mechanism
(b) Public Sector Units
(c) Both (a) and (b)
(d) Neither (a) nor (B)
2. Which of the following is/are a function of the government?
(a) Allocation of Resources
(b) Distribution of Income and Wealth
(c) Economic Stabilization
(d) All of Above
3. Which of the following is NOT an element of effective Government Budgeting?
(a) Aggregate Fiscal Discipline
(b) Maximization of Revenue
(c) Allocative Efficiency
(d) Operational Efficiency
4. Allocative efficiency can be improved by:
(a) Strategic Planning and Medium-Term Fiscal Framework
(b) Program Budgeting and Program Evaluation
(c) Both (a) and (b)

1
 (d) Neither (a) nor (b)
5. Information asymmetry with respect to factors that degrade the operational efficiency is
defined as:
(a) Service providers know more about outputs and costs than those who allocate
resources
(b) Spenders have incentives to use all the resources provided to them
(c) Government lacks independent information on performance
(d) Detailed ex-ante controls are costly and drive out initiative and variation
6. Which of the following statements is true about Open Market Operations?
(a) Central Bank controls the flow of credit through the sale and purchase of securities
in open market
(b) It increases money supply with commercial banks and public
(c) It will expand credit in the economy
(d) All of the above
7. Statutory Liquidity Ratio is:
(a) Banks have to keep deposits with RBI
(b) Certain percentage of deposits are to be kept by the bank in form of liquid assets
(c) It is the discount rate of the banks
(d) None of the above
8. The difference between revenue deficit and grants for creation of capital assets is called:
(a) Fiscal deficit
(b) Budget deficit
(c) Effective revenue deficit
(d) Primary deficit
9. The Book “The Wealth of Nations” is written by:
(a) Adam Smith
(b) Arthur Pigou

2
 (c) Robinson
(d) Ragnar Nurske
10. The Nature of Business Economics:
(a) Business Economics is a Science
(b) Incorporate elements of Macro Analysis
(c) Interdisciplinary in Nature
(d) All the above
11. Which of these country is a purely socialist economy?
(a) USSR
(b) China
(c) Vietnam
(d) None of these
12. Rational Decision making requires that:
(a) One’s Choice be arrived at logically and without error.
(b) One’s Choice be consistent with one’s goal.
(c) One’s Choice never vary.
(d) The consumer plan’s to attain the highest possible level of satisfaction.
13. The Substitution effect will be stronger when:
(a) The goods are closer substitute
(b) There is lower cost of switching to the substitute good.
(c) There is lower inconvenience while switching to the Substitute good.
(d) All the above
14. What are the Internal Causes of Business Cycle _____?
(a) Fluctuations in effective demand.
(b) Macroeconomic Policies
(c) Money Supply

3
 (d) All the above
15. According to Hawtrey trade cycle is a ______
(a) Monetary Phenomenon
(b) Unplanned Phenomenon
(c) Fiscal Phenomenon
(d) All the above
16. Which of the following describe a typical Business Cycle?
(a) Economic Expansions are followed by Contraction’s.
(b) Inflation is followed by rising Income and Unemployment.
(c) Economic Expansion are followed by economic growth and development.
(d) Stagflation is followed by Inflationary growth.
17. A Relative Price is:
(a) Price expressed in terms of money.
(b) The ratio of one money price to another
(c) Equal to money price.
(d) None of these.
18. In case of Substitute Product:
(a) The Demand Curve Slope upwards.
(b) The Demand Curve Slope downwards
(c) The Demand Curve is Perfectly Elastic
(d) None of these.
19. A dealer sells only two brands of Motorcycle- Royal and Hero. It was observed that when
the price of royal rises by 10% the demand for Hero increases by 15%. What is the cross
elasticity of Hero against the Price of Royal?
(a) + 1.5
(b) -1.5
(c) 2.5

4
 (d) None of these
20. When e = 0, elasticity of demand is :
(a) Perfectly elastic
(b) Unitary
(c) Inelastic
(d) Perfectly inelastic demand
21. A rise in Price will _______
(a) Increase in Consumer Surplus
(b) Decrease in Consumer Surplus
(c) No Change in Consumer Surplus
(d) None of these
22. Marginal Product is the slope of –
(a) Marginal product Curve
(b) Average Product Curve
(c) Total Product Curve
(d) Implicit Product Curve
23. Law of Production does not include _______
(a) Least Cost Combination of factors
(b) Law of variable proportion
(c) Law of diminishing returns to a factor
(d) None of these
24. What are the determinants of price elasticity?
(a) Availability of substitutes
(b) Price range
(c) Position of a Commodity in the Consumer’s budget.
(d) All the above

5
25. Income elasticities _______ in the short run and long run
(a) differ
(b) Same
(c) Can’t say
(d) Both (a) and (b)
26. Accounting costs are :
(a) Implicit cost
(b) Explicit Costs
(c) Economics Costs
(d) None of these
27. Telecom Industry is an example of :
(a) Monopoly
(b) Perfect Competition
(c) Oligopoly
(d) Monopolistic competition
28. On the basis of native of transaction the market is classified into :
(a) Regulated and Unregulated market
(b) Wholesale and Retail market
(c) Spot and future Market
(d) None of these
29. Total Revenue is maximised when total revenue is ____
(a) 1
(b) 0
(c) High
(d) None of these

6
30. Third degree Price discrimination can be explained through example of :
(a) Dumping
(b) Charging different Prices for domestic and commerce use
(c) Lower Price in ratioing for senior citizen
(d) All of the above.
31. Related goods are of ___________ types.
(a) two
(b) three
(c) Four
(d) Five
32. The elasticity of supply at any point on a given supply curve passing through the origin
point making angle of 35 degree with X-axis is _______
(a) Greater than one
(b) Less than one
(c) Equal to one
(d) Any of the above
33. Traditional approach of law of demand was propounded by___________
(a) Giffen
(b) Paul A Samuelson
(c) Alfred Marshall
(d) Pique
34. Which initiative aims to improve agricultural market infrastructure?
(a) PM Kisan
(b) E-NAM
(c) NDAP
(d) Shoonya

7
35. Which year marked the beginning of the Green Revolution?
(a) 1947
(b) 1956
(c) 1965
(d) 1991
36. What was the average GDP growth rate between 1950–80 (Hindu growth rate)?
(a) 2%
(b) 3.5%
(c) 5%
(d) 7%
37. Which state was NOT a major beneficiary of the Green Revolution?
(a) Punjab
(b) Haryana
(c) Bihar
(d) Western UP
38. Which sector contributed the most to India's GDP in 2022 ?
(a) Agriculture
(b) Industry
(c) Services
(d) Mining
39. Which initiative is aimed at reducing India’s oil import bill through alternative fuel?
(a) NDAP
(b) Methanol Economy Programme
(c) Shoonya
(d) E-Amrit

8
40. FDI is distinguished from FPI mainly because:
(a) FDI is short-term
(b) FDI is only financial
(c) FDI involves ownership & control
(d) FDI is speculative
41. Brownfield investment refers to:
(a) Building new infrastructure
(b) Investing in agriculture
(c) Buying or leasing existing setups
(d) foreign loans for farms
42. Which of the following best defines the real exchange rate?
(a) The market rate for converting one currency into another
(b) The rate at which a country trades goods/service for another
(c) Rate fixed by central bank
(d) The average of spot and forward rates
43. Which of the following effects real exchange rate directly?
(a) Spot rate only
(b) Domestic interest rate
(c) Domestic and foreign price levels
(d) Central bank reserves
44. Which of the following is a disadvantage of a floating exchange rate system?
(a) Requires large forex reserves
(b) Creates rigid monetary policy
(c) Currency fluctuations create trade uncertainty
(d) Fixed import/export prices

9
45. Absolute advantage theory assumes:
(a) Equal opportunity cost
(b) Fixed exchange rates
(c) Mobility of labour across countries
(d) Labour as the only input
46. Which of the following is a non-tariff barrier?
(a) Ad valorem duty
(b) Quotas
(c) Countervailing duty
(d) Export tax
47. Tariff Rate Quotas (TRQ) refer to:
(a) Export quotas only
(b) Prohibited tariffs
(c) Low tariff for a quota and high tariff beyond
(d) Elimination of tariff and quota
48. Which WTO agreement allows review of member trade policies?
(a) TBT Agreement
(b) SPS Agreement
(c) Trade Policy Review Mechanism
(d) Agreement on Agriculture
49. Escalated tariffs refer to:
(a) Uniform tariff structure
(b) Higher tariffs on final goods than raw materials
(c) Preferential tariffs
(d) Free trade policies

10
50. Which of the following protects against underpriced foreign goods?
(a) TRIMs
(b) Safeguards
(c) Anti-dumping duty
(d) Import subsidy
51. New Trade Theory emphasizes:
(a) No gains from trade
(b) Constant returns to scale
(c) Economies of scale and product variety
(d) No role for governments
52. The money multiplier is:
(a) (1 + c) / (r + e + c)
(b) (1 – c) / (r + e + c)
(c) (1 + r) / (c + e + r)
(d) None of the above
53. Money Supply (M) is equal to:
(a) M1 + M2
(b) CRR × SLR
(c) Money Multiplier × Base Money
(d) GDP ÷ Inflation
54. MSF is always:
(a) 0.5% above repo
(b) 2% above bank rate
(c) 1% above repo rate
(d) 1% below reverse repo

11
55. Which is a consequence of high money multiplier?
(a) High inflation risk
(b) Tight liquidity
(c) Increase in SLR
(d) Decline in GDP
56. What is a liquidity trap?
(a) Money becomes illiquid due to inflation
(b) Money supply becomes ineffective at zero interest rate
(c) Interest rate becomes infinite
(d) Bonds have negative yield
57. Which theory introduced the idea of interest rate influencing money demand?
(a) Fisher’s theory
(b) Cambridge approach
(c) Keynesian theory
(d) Inventory theory
58. Which economist applied capital asset demand theory to money?
(a) Keynes
(b) Tobin
(c) Baumol
(d) Milton Friedman
59. The function of money that allows individuals to save purchasing power for the future is
called:
(a) Medium of exchange
(b) Unit of account
(c) Store of value
(d) Standard of deferred payment

12
60. Which statement about the Finance Bill is correct?
(a) It authorizes public borrowing
(b) It includes details of tax proposals
(c) It gives expenditure estimates
(d) It is introduced in Rajya Sabha
61. Guillotine in budgetary procedure refers to:
(a) Cancelling debt
(b) Reducing tax rates
(c) Voting on all pending demands at once
(d) Cutting grants to states
62. Which department manages internal public debt in India?
(a) NITI Aayog
(b) Finance Commission
(c) RBI
(d) Economic Survey Cell
63. Which of the following reduces income inequality?
(a) Flat tax system
(b) Public expenditure on luxury goods
(c) Progressive taxation and targeted subsidies
(d) Tax holidays for MNCs
64. Outcome budgeting primarily links:
(a) Fiscal deficit with borrowing
(b) Policy and implementation
(c) Budget allocations with performance outcomes
(d) Revenue and capital expenditures

13
65. Keynes advocated increased government spending to tackle:
(a) Hyperinflation
(b) Balance of payments deficit
(c) Recession and unemployment
(d) Asset bubbles
66. Subsidy on goods with positive externalities leads to:
(a) Higher cost
(b) Higher price
(c) Lower price
(d) Inefficiency
67. In the consumption function C = a + bYc = a + bYc = a + bY, the term ‘a’ represents:
(a) Marginal Consumption
(b) Marginal Income
(c) Autonomous Consumption
(d) Autonomous Investment
68. What typically happens during the contraction phase?
(a) Employment increases
(b) Prices rise sharply
(c) Investment and demand decline
(d) GDP grows rapidly
69. Which sector is most vulnerable to business cycles?
(a) Agriculture
(b) Capital goods and durable goods
(c) Banking
(d) Education

14
70. Which of the following does not lead to a shift in demand?
(a) Change in income
(b) Change in population
(c) Change in price of the good
(d) Change in taste
71. Which market has infinite price elasticity of demand?
(a) Monopoly
(b) Monopolistic
(c) Oligopoly
(d) Perfect competition
72. What is the marginal revenue when price elasticity of demand is 1?
(a) Equal to price
(b) Equal to zero
(c) Equal to AR
(d) Maximum
73. AR and MR curves coincide in:
(a) Monopoly
(b) Monopolistic competition
(c) Perfect competition
(d) Oligopoly
74. Which of the following leads to Internal economies of scale?
(a) Technological progress in the industry
(b) Development of skilled labour in a region
(c) Bulk purchase of raw materials
(d) Government tax incentives

15
75. Which is an example of a sunk cost?
(a) Cost of raw material
(b) Cost of hiring temporary workers
(c) Advertising expenditure already incurred
(d) Salaries to be paid
76. Identify the items which is not a factor payment:
(a) free uniform to defence personnel.
(b) salaries to the members of Parliament.
(c) imputed rent of an owner-occupied building.
(d) scholarships given to the scheduled caste students.
77. Demand for final consumption arises in
(a) household sector only.
(b) government sector only.
(c) both household and government sector.
(d) neither household nor government sector.
78. The effect of increase CRR will be reduced or nullified if:
(a) Bank rate is reduced.
(b) Securities are sold in the open market.
(c) SLR is increased.
(d) People do not borrow from non-banking institutions.
79. Broad money refers to:
(a) M1
(b) M2
(c) M3
(d) M4

16
80. Which of the following is a lagging economic indicator?
(a) Consumer confidence index
(b) Stock market performance
(c) Unemployment rate
(d) New housing starts
81. Price Elasticity of Demand of a good is (-) 3. It shows that:
(a) When price falls by 1%, demand rises by 3%
(b) When price rises by 1%, demand falls by 3%
(c) Either (a) or (b)
(d) Neither (a) nor (b)
82. The demand for meals at a medium-priced restaurant is elastic. If the management of
the restaurant is considering raising prices, it can expect a relatively:
(a) Proportionately large fall in quantity demanded
(b) No change in quantity demanded
(c) Proportionately small fall in quantity demanded
(d) Infinite change in quantity demanded
83. Which of the following is not a reason for operation of increasing returns to a factor?
(a) Better utilisation of fixed factor
(b) Limitation of fixed factor
(c) Increase in efficiency of variable factor
(d) Indivisibility of fixed factor
84. At the Point of Inflexion:
(a) Total Product is maximum
(b) Average Product is maximum
(c) Marginal Product is maximum
(d) Marginal Product is zero
85. Cost function is a __________ concept:
(a) Economical

17
 (b) Functional
(c) Financial
(d) Technical
86. According to Hawtrey trade cycle is a ___
(a) Monetary phenomenon
(b) Unplanned phenomenon
(c) Fiscal phenomenon
(d) All the above
87. Minimum assured prices to the farmers to purchase their output by the government is
called:
(a) Market Price
(b) Equilibrium Price
(c) Support Price
(d) Ceiling Price
88. The income elasticity For Luxuries goods is:
(a) E>1
(b) E<1
(c) E=0
(d) None of these
89. Unique supply curve is monopoly is not due to __________
(a) P > MC
(b) P < MC
(c) P = MC
(d) None of these
90. Which of the following involve a trade-off?
(a) Taking a nap
(b) Going to University
(c) Watching a football game on Saturday afternoon

18
 (d) All of these
91. The Pure monopolist in the long run can make pure profit due to:
(a) High Selling Price
(b) Advertising
(c) Low LAC Cost
(d) Blocked entry
92. If the quantity demanded of mutton increases by 5 % when the price of chicken increases
by 20%, the cross elasticity of demand between mutton and chicken is:
(a) -0.25
(b) 0.25
(c) -4
(d) 4
93. The Supply function is given as Q = -100 + 10P. Find the elasticity using point method
when price is Rs 15
(a) 4
(b) 3
(c) -5
(d) None of these
94. The cobweb theory was propounded by ____
(a) Hawtrey
(b) Adam smith
(c) Nicolas Kaldor
(d) None of these
95. Find normal GDP if real GDP = 450 and price index= 120
(a) 540
(b) 640
(c) 500
(d) None of these

19
96. Suppose the Consumption of an economy is given by C = 20+ 0.6Y and Investment
I = 10 + 0.2Y. What will be the equilibrium level of National Income.
(a) 150
(b) 200
(c) 350
(d) None of these
97. If commercial banks reduce their holdings of excess reserves:
(a) The money supply falls
(b) The money supply increases
(c) The monetary base falls
(d) None of these
98. Non – tariff barriers (NTBs) include all the following except:
(a) import quotas
(b) technical standards of products
(c) tariff
(d) None of these
99. Pure Oligopoly is based on the ____ products.
(a) Differentiated
(b) Homogeneous
(c) unrelated
(d) None of these
100. Under equation C = a + bY, b = 0.8, what is the value of 2 sector expenditure multiplier:
(a) 4
(b) 5
(c) 2
(d) None of these.

20
 Mock Test Paper - Series II: August, 2025
Date of Paper: 29th August, 2025
Time of Paper: 2 P.M. to 4 P.M.
FOUNDATION COURSE
PAPER 4: BUSINESS ECONOMICS
ANSWERS

1. (c) 2. (d) 3. (b) 4. (c) 5. (a)

6. (d) 7. (b) 8. (c) 9. (a) 10. (d)
11. (d) 12. (d) 13. (d) 14. (d) 15. (a)
16. (b) 17. (b) 18. (a) 19. (a) 20. (d)
21. (b) 22. (c) 23. (a) 24. (d) 25. (a)
26. (b) 27. (c) 28. (c) 29. (a) 30. (d)
31. (a) 32. (c) 33. (c) 34. (b) 35. (c)
36. (b) 37. (c) 38. (c) 39. (b) 40. (c)
41. (c) 42. (b) 43. (c) 44. (c) 45. (d)
46. (b) 47. (c) 48. (c) 49. (b) 50 (c)
51. (c) 52. (a) 53. (c) 54. (c) 55. (a)
56. (b) 57. (c) 58. (d) 59. (c) 60. (b)
61. (c) 62. (c) 63. (c) 64. (c) 65. (c)
66. (c) 67. (c) 68 (c) 69 (b) 70 (c)
71. (d) 72. (b) 73. (c) 74. (c) 75. (c)
76. (d) 77. (c) 78. (a) 79. (c) 80. (c)
81. (c) 82. (a) 83. (b) 84. (c) 85. (d)
86. (a) 87. (c) 88. (a) 89. (a) 90 (d)
91. (c) 92. (b) 93. (b) 94. (c) 95. (a)
96. (a) 97. (b) 98. (b) 99. (b) 100. (b)
 Mock Test Paper - Series I: August, 2025
Date of Paper: 11th August, 2025
Time of Paper: 2 P.M. to 5 P.M.

FOUNDATION COURSE
PAPER – 1: ACCOUNTING
Question No. 1 is compulsory.
Answer any four questions from the remaining five questions.
Wherever necessary, suitable assumptions should be made and disclosed
by way of note forming part of the answer.
Working Notes should form part of the answer.
(Time allowed: 3 Hours) (100 Marks)
1. (a) State with reasons whether the following statements are True or False:
(i) Trade Discount is a reduction granted by a supplier from the list price
of goods or services on business considerations for prompt
payment.
(ii) M/s. XYZ & Co. runs a cafe. They renovated. some of the old cabins.
Because of this renovation some space was made free and number of
cabins was increased from 15 to 18. The total expenditure incurred
was ` 45,000 and was treated as a revenue expenditure.
(iii) Reducing balance method of depreciation is followed to have a uniform
charge for depreciation and repairs and maintenance together.
(iv) In case of bill of exchange, the drawer and the payee may not be the
same person but in case of a promissory note, the maker and the payee
may be the same person.
(v) Business of partnership comes to an end on death of a partner.
(vi) Since company has existence independent of its members, it continues to
be in existence despite the death, insolvency or change of members.
(6 Statements x 2 Marks = 12 Marks)
(b) What services can a Chartered Accountant provide to the society? (4 Marks)
(c) A Machinery costing ` 60,00,000 is depreciated on straight line assuming 10
years working life and nil salvage value for four years. At the end of the fourth

1
 year, the machinery was revalued upwards by ` 2,40,000. The remaining useful
life of the machinery was also reassessed as 8 years at the end of the fourth
year. Calculate the depreciation for 5th Year. (4 Marks)
(12 + 4+ 4 = 20 Marks)
2. (a) Mr. Kamal’s trial balance as on 31st March, 2025 did not agree. The difference
was put to a Suspense Account.
During the next trading period, the following errors were discovered:
(i) The total of the Purchases Book of one page, ` 15,615 was carried
forward to the next page as ` 16,551.
(ii) A sale of ` 462 was entered in the Sales Book as ` 642 and posted to the
credit of the customer.
(iii) A return to creditor, ` 5,420 was entered in the Returns Inward Book;
however, the creditor's account was correctly posted.
(iv) Cash received from Sita, ` 1,420 was posted to debit of Geeta.
(v) Goods worth ` 1,400 were dispatched to a customer before the close of
the year but no invoice was made out.
(vi) Goods worth ` 3,200 were sent on sale or return basis to a customer and
entered in the Sales Book at the close of the year, the customer still had
the option to return the goods. The gross profit margin was 20% on Sale.
(vii) ` 500 due from Mr. Sam was omitted to be taken ·to the trial balance.
(viii) Sale of goods to Mr. Manoj for ` 16,000 was omitted to be recorded.
You are required to give journal entries to rectify the errors in a way so as to
show the current year's profit or loss correctly (10 Marks)
(b) On 30th June. 2025, Cash Book of Mr. Gaurav (Bank Column of Account No. 1)
shows a Bank Overdraft of ` 1,97,400. On going through the Bank Pass book for
reconciling the Balance, she found the following:
(a) Out of cheques drawn on 26th June, those for ` 14,800 were cashed by
the bankers on 2nd July.
(b) A crossed cheque for ` 3000 given to Abdul, was returned by him on 1st
July,2025 and a bearer cheque was issued to him on the same date.
(c) Cash and cheques amounting to ` 13,600 were deposited in the Bank on
29th June., but cheques worth ` 5,200 were cleared by the Bank on

2
 1st July., and one cheque for ` 1,000 was returned by them as
dishonoured on the latter date.
(d) According to Gaurav’s standing instructions, the bankers have on 30th
June, paid ` 1,280 as interest to his creditors, paid quarterly premium on
his policy amounting to ` 640 and have paid a second call of ` 2,400 on
shares held by his and lodged with the bankers for safe custody. They
have also received ` 600 as dividend on his shares and recovered an
Insurance Claim of ` 3,200, as their charges and commission charged on
the above being ` 400. On receipt of information of the above
transaction, he has passed necessary entries in his Cash Book on
1st July.
(e) Bankers seem to have given a wrong credit for ` 2,000 paid in by him in
No. 2 account and wrong debit in respect of a cheque for ` 1,200 drawn
against her No. 2 account.
Prepare Bank Reconciliation Statement. (10 Marks)
(10 +10 = 20 Marks)
3. (a) Surajmal Enterprises maintain their books of accounts under single entry
system. The Balance Sheet as on 31st March, 2024 was as follows:
Liabilities ` Assets `
Capital A/c 6,75,000 Furniture & fixtures 1,50,000
Trade creditors 7,57,500 Stock 9,15,000
Outstanding exp. 67,500 Trade debtors 3,12,000
Prepaid insurance 3,000
Cash in hand & at bank 1,20,000
15,00,000 15,00,000

The following was the summary of cash and bank book for the year ended
31st March, 2025:
Receipts ` Payments `
Cash in hand & at Bank 1,20,000 Payment to trade 1,24,83,000
on 1st April, 2024 creditors
Cash sales 1,10,70,000 Sundry expenses paid 9,31,050
Drawings 3,60,000
Receipt from Debtors 27,75,000 Cash in hand & at Bank 1,90,950

3
 on 31st March, 2025
1,39,65,000 1,39,65,000

Additional Information:
1) Discount allowed to trade debtors and received from trade creditors
amounted to `54,000 and `42,500 respectively, (for the year ended
31st March. 2025)
2) Annual fire insurance premium of ` 9,000 was paid every year on
1st August for the renewal of the policy.
3) Furniture & fixtures were subject to depreciation @ 15% p.a. or
diminishing balance method.
4) The following are the balances as on 31st March, 2025:
Stock ` 9,75,000
Trade debtors ` 3,43,000
Outstanding expenses ` 55,200
5) Gross profit ratio of 10% on sales in maintained throughout the year.
You are required to prepare Trading and Profit & Loss account for the year
ended 31st March, 2025, and Balance Sheet as on that date. (10 Marks)
(b) M/s. Wellore is a partnership firm with the partners X, Y and Z sharing profits
and losses in the ratio of [Link]. The balance sheet of the firm as on
30th June, 2025 was as under:
Balance Sheet of M/s. Wellore as on 30-6-2025
Liabilities Amount Assets Amount
(`) (`)
X's Capital A/c 6,20,000 Land 6,00,000
Y's Capital A/c 4,80,000 Building 11,00,000
Z's Capital A/c 8,00,000 Plant & Machinery 20,00,000
Long Term Loan 21,00,000 Investments 2,10,000
Bank Overdraft 3,20,000 Inventories 6,80,000
Trade Payables 10,65,000 Trade Receivables 7,95,000
53,85,000 53,85,000

It was mutually agreed that Y will retire from partnership and in his place P will
be admitted as a partner with effect from 1st July, 2025. For this purpose,
following adjustments are to be made:

4
 (a) Goodwill of the firm is to be valued at ` 15 lakhs due to the firm's location
advantage but the same will not appear as an asset in the books of the
reconstituted firm.
(b) Building and Plant & Machinery are to be valued at 95% and 80% of the
respective balance sheet values. Investments are to be taken over by the
retiring partner at ` 2,30,000. Trade receivables are considered good
only upto 85% of the balance sheet figure. Balance to be considered bad.
(c) In the reconstituted firm, the total capital will be 20 lakhs, which will be
contributed by X, Z and P in their new profit sharing ratio, which is [Link].
(d) The amount due to retiring partner shall be transferred to his loan
account.
You are required to prepare Revaluation Account and Partners' Capital Accounts
after reconstitution, along with working notes. (10 Marks)
(10 + 10 = 20 Marks)
4 (a) Arav, Nirav and Bharat are in partnership. The following is their Balance Sheet
as at March 31, 2025 on which date they dissolved their partnership. They
shared profit in the ratio of [Link].
Liabilities ` Assets `
Creditors 2,40,000 Plant and machinery 1,80,000
Loan A/c – Arav 60,000 Premises 2,40,000
Capital A/cs – Arav 3,00,000 Stock 1,80,000
Nirav 90,000 Debtors 3,60,000
Bharat 2,70,000
9,60,000 9,60,000

It was agreed to repay the amounts due to the partners as and when the assets
were realised, viz.
April 15, 2025 ` 1,80,000
May 1, 2025 ` 4,38000
May 31, 2025 ` 2,82,000

Prepare a statement showing how the distribution should be made under

maximum loss method. (10 Marks)

5
(b) From the following Income and Expenditure account and the Balance sheet of a
club, prepare its Receipts and Payments Account and Subscription Account for
the year ended 31st March 2025:
Income & Expenditure Account for the year 2024-25
Particulars ` Particulars `
To Upkeep of ground 11,000 By Subscriptions 19,052
To Printing 1,100 By Sale of Newspapers (Old) 286
To Salaries 11,100 By Lectures (Fee) 1,650
To Depreciation on furniture 1,100 By Entrance Fee 2,145
To Rent 1,660 By Misc. Income 440
By Deficit 2,387
25,960 25,960

Balance sheet as at 31st March 2025

Liabilities ` Assets `
Subscription in 110 Furniture 9,900
advance (2025-26)
Prize Fund: Ground and Building 51,700
Opening balance 27,500 Prize Fund Investment 22,000
Add: Interest 1,100 Cash in Hand 2,530
28,600 Subscription (outstanding) 770
(2024-2025)
Less: Prizes given 2,200 26,400
General Fund:
Opening balance 62,062
Less: Deficit 2,387
59,675
Add: Entrance Fee 715 60,390
86,900 86,900

The following adjustments have been made in the above accounts:

1) Upkeep of ground ` 660 and printing ` 264 relating to 2023-24 were paid in
2024-25
2) One fourth of entrance fee has been capitalized by transfer to General Fund

6
 3) Subscription outstanding in 2023-24 was ` 880 and for 2024-25 ` 770
4) Subscription received in advance in 2023-24 was ` 220 and in 2024-25
for 2025-26 was ` 110
5) Furniture was purchased during the year. (10 Marks)
(10 + 10 = 20 Marks)
5. (a) An inexperienced book keeper has drawn up a Trial balance for the year ended
31st March, 2025.
Particulars Debit (`) Credit (`)
Provision for Doubtful Debts 1,000 -
Cash Credit Account 6,616 -
Capital - 18,364
Trade payables - 6,548
Due from customers 11,932 -
Discount Received 1,008 -
Discount Allowed - 2,932
Drawings 4,800 -
Office Furniture 8,620 -
Carriage Inward - 3,316
Carriage Outward 2,320
Purchases 43,692 -
Returns Inward - 2,320
Rent & Rates 1,256 -
Salaries 10,080 -
Sales - 67,528
Inventory 9,672 -
Provision for Depreciation on Furniture 1,456 -
Total 1,02,452 1,01,008

Draw up a corrected Trial Balance by debiting or crediting any residual errors to

a suspense account. (5 Marks)
(b) Attempt any ONE out of the two sub parts i.e. either (i) or (ii).
(i) The following details are available of raw material of a manufacturing unit:

7
 1-5-2025 Opening Inventory 100 units @ ` 15 per unit
2-5-2025 Purchases 300 units @ ` 18 per unit
5-5-2025 Issued for consumption 250 units
16-5-2025 Purchases 500 units @ ` 21 per unit
21-5-2025 Issued for consumption 100 units
25-5-2025 Issued for consumption 450 units

The manufacturer also incurred Freight of ` 600 and unloading charges

of ` 300 at the time of every purchase respectively.
You are required to find out the value of inventory as on May 31, 2025, if
the company follows:
(a) Weighted Average method for inventory valuation.
(b) First in First Out method for inventory valuation. (5 Marks)
OR
(ii) Mr. Viom runs a factory, which produces detergents. Following details
were available in respect of his manufacturing activities for the year
ended 31-03-2025.
Opening work-in-progress (27,000 units) 78,000
Closing work-in-progress (42,000 units) 1,44,000
Opening inventory of Raw Materials 7,80,000
Closing inventory of Raw Materials 9,60,000
Purchases 24,60,000
Hire charges of Machinery @ ` 0.70 per unit
manufactured
Hire charges of factory 7,80,000
Direct wages-contracted @ ` 0.80 per unit manufactured
and @ ` 0.40 per unit of closing W.I.P.
Repairs and maintenance 5,40,000
Units produced - 15,00,000 units

You are required to prepare a Manufacturing Account of Mr. Viom for the year
ended 31-03-2025. (5 Marks)

8
 (c) The Balance Sheet of XYZ Ltd. as at 31st March, 2023 inter alia includes the
following information: `
1,00,000, 8% Preference Shares of ` 100 each, ` 70 paid up 70,00,000
2,00,000 Equity Shares of ` 100 each fully paid up 2,00,00,000
Securities Premium 10,00,000
Capital Redemption Reserve 40,00,000
General Reserve 1,0000,000
Bank 30,00,000
Under the terms of their issue, the preference shares are redeemable
on 31st March, 2024 at 5% premium. In order to finance the redemption,
the company makes a rights issue of 1,00,000 equity shares of ` 100 each
at ` 110 per share, ` 20 being payable on application, ` 35 (including premium)
on allotment and the balance on 1st January, 2025. The issue was fully
subscribed and allotment made on 1st March, 2024. The money due on
allotment were duly received by 31st March, 2024. The preference shares
were redeemed after fulfilling the necessary conditions of Section 55 of the
Companies Act, 2013.
You are asked to pass the necessary Journal Entries. (Ignore date column).
(10 Marks)
(5 + 5 + 10 = 20 Marks)
6. (a) Divis Pharma Limited issued 50,000 equity shares of ` 10 each payable as ` 3
per share on application, ` 5 per share (including ` 2 as premium) on allotment
and ` 4 per share on call. All these shares were subscribed. Money due on all
shares was fully received except from X, holding 1000 shares who failed to pay
the allotment and call money and Y, holding 2000 shares, failed to pay the call
money. All those 3,000 shares were forfeited. Out of forfeited shares, 2,500
shares (including whole of X's shares) were subsequently re-issued to Z as fully
paid up at a discount of ` 2 per share.
Pass necessary journal entries in the books of Divis Pharma limited. Also
prepare Balance Sheet and notes to accounts of the company. (15 Marks)
(b) Discuss the expenses directly attributable to the cost of property, plant and
equipment. Also, the expenses that do not form a part of cost of cost of asset.
(5 Marks)
(15 + 5 = 20 Marks)

9
 Mock Test Paper - Series I: August, 2025
Date of Paper: 11th August, 2025
Time of Paper: 2 P.M. to 5 P.M.

FOUNDATION COURSE
PAPER – 1: ACCOUNTING
ANSWERS
1. (a) (i) False: Trade Discount is a reduction granted by a supplier from the list
price of goods or services on business considerations other than for prompt
payment.
(ii) False: Renovation of cabins increased the number of cabins. This has an
effect on the future revenue generating capability of the business. Thus the
renovation expense is capital expenditure in nature.
(iii) True: In the early periods of useful life of a fixed assets, repairs and
maintenance expenses are relatively low because the asset is new.
Whereas in later periods, as the asset become old, repairs and
maintenance expenses increase continuously. Under written down value
method, depreciation charged is high in the initial period and reduces
continuously in the later periods. Thus, depreciation and repair and
maintenance expenses become more or less uniform throughout the useful
life of the asset.
(iv) False: The drawer and payee may be same person in case of bill of
exchange whereas in promissory note maker and payee can’t be same
person.
(v) False: Surviving partners may continue to carry on the business in case of
partnership.
(vi) True: As per Perpetual Existence company has existence independent of
its members, it continues to be in existence despite the death, insolvency
or change of members.
(b) The practice of accountancy has crossed its usual domain of preparation of
financial statements, interpretation of such statements and audit thereof.
Chartered Accountants are presently taking active role in company laws and other
corporate legislation matters, in taxation laws matters (both direct and indirect)
and in general management problems.

1
 Some of the services rendered by chartered accountants to the society are briefly
mentioned hereunder:
(i) Maintenance of books of accounts;
(ii) Statutory audit;
(iii) Internal Audit;
(iv) Taxation;
(v) Management accounting and consultancy services;
(vi) Financial advice and financial investigations etc.
(vii) Other services like secretarial work, share registration work, company
formation receiverships, arbitrations etc.
(c) Depreciation per year for first 4 years = ` 60,00,000 / 10 = ` 6,00,000
Thus, WDV of the Machinery at end of the 4th year = ` 60,00,000 – (` 6,00,000 x
4) = ` 36,00,000
Revalued Amount i.e. New Depreciable Amount shall be = ` 36,00,000 +
` 2,40,000 = ` 38,40,000
Original remining useful life is (10-4) = 6 Years whereas it is reassessed as
8 Years.
Hence, depreciation for 5th Year = ` 38,40,000 / 8 = ` 4,80,000
2. (a)
Particulars L.F. Dr. Cr.
` `
(i) Suspense A/c Dr. 936
To Profit and Loss Adjustment A/c 936
(Correction of error by which Purchase
Account was over debited last year)
(ii) Profit & Loss Adjustment A/c Dr. 180
Customer’s A/c Dr. 1,104
To Suspense A/c 1,284
(Correction of the entry by which (a)
Sales A/c was over credited by ` 180 (b)
customer was credited by ` 642 instead
of being debited by ` 462)

2
(iii) Suspense A/c Dr. 10,840
To Profit & Loss Adjustment A/c 10,840
(Correction of error by which Returns
Inward Account was debited by ` 5,420
instead of Returns Outwards Account
being credited by ` 5,420)
(iv) Suspense A/c Dr. 2,840
To Sita A/c 1,420
To Geeta A/c 1,420
(Removal or wrong debit to Geeta and
giving credit to Sita from whom cash was
received)
(v) Customer’s A/c Dr. 1,400
To Profit & Loss Adjustment A/c 1,400
(Rectification of the error arising from
non-preparation of invoice for goods
delivered)
(vi) Profit & Loss Adjustment A/c Dr. 3,200
To Customer’s A/c 3,200
(The Customer’s A/c credited with goods
not yet purchased by him)
(vii) Inventory A/c Dr. 2,560
To Profit & Loss Adjustment A/c 2,560
(Cost of goods debited to inventory and
credited to Profit & Loss Adjustment A/c)
(viii) Trade receivable/ Sam’s Account Dr. 500
To Suspense A/c 500
(` 500 due by Sam not taken into trial
balance, now rectified)
(ix) Manoj’s account/Trade receivable A/c Dr. 16,000
To Profit & Loss Adjustment A/c 16,000
(Sales to Manoj’s omitted, now rectified)

3
 (x) Profit & Loss Adjustment A/c Dr. 28,356
To Kamal’s Capital A/c 28,356
(Transfer of the Profit & Loss Adjustment
A/c balance to the Capital Account)
Komal A/c Dr. 12,832
To Suspense A/c 12,832
(Transfer of the Suspense A/c balance to
the Capital Account)

(b) Bank Reconciliation Statement

Balance as per Cash Book (1,97,400)
Add: Cheques issued but not presented for
14,800
payment
Crossed Cheque issued to Abdul not
3,000
presented for payment
Amounts collected by Bank on our
behalf but not entered in the Cash
Book
Dividend 600
Insurance claim 3,200
3,800
(-) Bank Commission 400 3,400
Amount paid in A/c No. 2 credited by
2,000 23,200
the Bank wrongly to this A/c
(1,74,200)
Less: Cheques deposited in the bank but no
6,200
cleared (` 5,200 + ` 1,000)
Payments made by Bank on our behalf
but not entered in the Cash Book
Interest 1,280
Premium 640
Second call 2,400 4,320
Cheques issued against A/c No. 2 but
wrongly debited by the Bank to this A/c 1,200 (11,720)
Overdraft as per Pass Book 1,85,920

4
3. (a) Trading and Profit and Loss Account for the year ended 31.3.25
Particulars ` Particulars `
To Opening stock 9,15,000 By Sales
To Purchases (bal fig) 1,25,97,000 Cash 1,10,70,000
Credit 28,60,000 1,39,30,000
To Gross Profit @ 10% 13,93,000 By Closing stock 9,75,000
1,49,05,000 1,49,05,000
To Expenses( WN 2) 9,18,750 By Gross Profit 13,93,000
To Discount Allowed 54,000 By Discount Received 42,500
To Depreciation 22,500
To Net profit* 4,40,250
14,35,500 14,35,500

Balance Sheet as on 31.3.2025

Liabilities ` ` Assets ` `
Capital A/c Furniture 1,50,000
Opening balance 6,75,000 (-) Depreciation (22,500) 1,27,500
(+) Profit 4,40,250 Debtors (WN 3) 3,43,000
11,15,250 Stock 9,75,000
(-) Drawings (3,60,000) 7,55,250 Cash 1,90,950
Creditors (WN 1) 8,29,000 Prepaid 3,000
Insurance
Outstanding exp 55,200
16,39,450 16,39,450

W.N. 1: Creditors A/C

Liabilities ` Assets `
By Bal b/d 7,57,500
To Bank 1,24,83,000 By Purchase 1,25,97,000
To Discount 42,500
To Bal c/d (bal fig) 8,29,000
1,33,54,500 1,33,54,500

5
 W.N. 2: Expenses A/c (Incl. insurance)
Particulars ` Particulars `
To Prepaid 3,000 By Payable 67,500
To Bank 9,31,050 By P&L (bal fig) 9,18,750*
To Payable 55,200 By Prepaid (9,000*4/12) 3,000
9,89,250 9,89,250

W.N. 3: Debtors A/c

Particulars ` Particulars `
To Bal b/d 3,12,000 By Cash 27,75,000
To Sales (bal fig) 28,60,000 By Discount 54,000
By Bal c/d (bal fig) 3,43,000

31,72,000 31,72,000

(b) Revaluation Account

2025 ` 2025 `
July 1 To Building 55,000 July 1 By Investments 20,000
To Plant and Machinery 4,00,000 (2,30,000 – 2,10,000)
To Trade receivable By Partners’ Capital A/cs
1,19,250
(Bad Debts)
(loss on revaluation)
X (3/10) 1,66,275
Y (2/10) 1,10,850
Z (5/10) 2,77,125 5,54,250
5,74,250 5,74,250

Dr. Partners’ Capital Accounts Cr.

X Y Z P X Y Z P
` ` ` ` ` ` ` `
To Revaluation By Balance -
1,66,275 1,10,850 2,77,125 6,20,000 4,80,000 8,00,000
A/c b/d
To Y’s and Z’s By P’s –
capital A/cs – 4,50,000 Capital A/c 3,00,000 1,50,000
(W.N.1)
To Investments By Bank A/c (
– 2,30,000 1,46,275 1,27,125 10,50,000
A/c bal fig)
To Y’s loan A/c – 4,39,150

6
 To Balance c/d
6,00,000 8,00,000 6,00,000
(W.N. 2)
7,66,275 7,80,000 10,77,125 10,50,000 7,66,275 7,80,000 10,77,125 10,50,000

Working Notes:
1. Adjustment of goodwill
Goodwill of the firm is valued at ` 15 lakhs
Sacrificing ratio:
X 3/10 - 3/10 =0
Y 2/10 - 0 = 2/10
Z 5/10 - 4/10 = 1/10
Hence, sacrificing ratio of Y and Z is 2:1. X has not sacrificed any share in
profits after retirement of Y and admission of P in his place.
Adjustment of P’s share of goodwill through existing partners’ capital
accounts in the profit sacrificing ratio:
`
Y: 4,50,000 x 2/3 = 3,00,000
Z: 4,50,000 x 1/3 = 1,50,000
4,50,000
2. Capital of partners in the reconstituted firm:
`
Total capital of the reconstituted firm (given) 20,00,000
X (3/10) 6,00,000
Z (4/10) 8,00,000
P (3/10) 6,00,000
4. (a) Statement of Distribution of Cash by ‘Maximum Loss Method’
Creditors Arav’s Arav Nirav Bharat
Loan
` ` ` ` `
Balance due 2,40,000 60,000 3,00,000 90,000 2,70,000

7
 15th April 2025 realised
` 1,80,000
Paid to creditors 1,80,000 - - - -
Balance due 60,000 60,000 3,00,000 90,000 2,70,000
1st May, 2025 realised ` 4,38,000
Paid to creditors (` 60,000) 60,000 - - - -
Paid to Arav’s loan (` 60,000) - 60,000 - - -
Balance due (1) Nil Nil 3,00,000 90,000 2,70,000
Balance ` 3,18000
Maximum Loss (3,00,000 + 90,000
+ 2,70,000 - 3,18,000) = ` 3,42,000
(1,71,000) (1,02,600) (68,400)
shared in Profit & Loss ratio [Link]
1,29,000 (12,600) 2,01,600
Nirav’s deficiency shared by Arav &
12,600 (5,970)
Bharat in capital ratio 100:90 (6,630)
Cash paid [2] 1,22,370 - 1,95,630
Balance due (3) [1-2] 1,77,630 90,000 74,370
31st May 2025 realised
` 2,82,000
Maximum Loss [1,77,630 + 90,000
+ 74,370 – 2,82,000] = (30,000) (18,000) (12,000)
` 60,000 shared in [Link]
Cash paid (4) 1,47,630 72,000 62,370
Balance/Loss* on realisation
30,000 18,000 12,000
(3-4)

(b) Receipts and Payments A/c

for the year ending 31st March, 2025
Receipt ` Payments `
To Balance b/d (bal fig) 16,126 By Upkeep of Ground 11,660
(WN 1)
To Subscriptions: 19,052 By Printing (WN 2) 1,364
To Sale of Newspapers 286 By Salaries 11,100
To Lectures (Fee) 1,650 By Furniture: 9,900
To Entrance Fee (WN 3) 2,860 (+) Depreciation 1,100 11,000
To Miscellaneous Income 440 By Rent 1,660
To Interest 1,100 By Prizes distribution 2,200

8
 By Balance c/d 2,530

41,514 41,514
Subscription A/c

Particulars ` Particulars `
To Outstanding for the year 880 By Subscription received in 220
2023-24 advance for the year
2024-25
To Income & Expenditure 19,052 By Bank A/c (Bal fig) 19,052
A/c
To Subscription received in 110 By Subscription outstanding 770
Advance for the year as on 2024-25
2025-26
20,042 20,042

Working Note 1: Upkeep of Ground A/c

Particulars ` Particulars `
By outstanding expense of 2023-24 660
To Bank A/c (bal fig) 11,660 By Income & Expenditure A/c 11,000
11,660 11,660

Working Note 2 : Printing A/c

Particulars ` Particulars `
By Outstanding expenses 264
To Bank A/c (bal fig) 1,364 By Income & Expenditure A/c 1,100
1,364 1,364

Working Note 3 : Entrance fees adjustment

1/4th of the entrance fees capitalized by transferred to general fund = 715

∴ Total entrance fees received = 4 × 715

= 2,860

` 2,860 will be posted to debit of receipt & Payment A/c

9
5. (a) Trial Balance as on 31st March, 2025
Particulars Dr. ` Cr. `
Provision for Doubtful Debts – 1,000
Cash credit account (Bank overdraft) – 6,616
Capital – 18,364
Trade payables – 6,548
Dues from customers 11,932 –
Discount Received – 1,008
Discount allowed 2932 –
Drawings 4,800 –
Office furniture 8,620 –
Carriage inward 3,316 –
Carriage outward 2,320
Purchases 43,692 –
Returns Inward 2,320 –
Rent & Rates 1256 –
Salaries 10,080 –
Inventory* 9,672 –
Provision for Depreciation on Furniture – 1,456
Sales – 67,528
Suspense Account (Balancing figure) 1,310 –
Total 1,02,250 1,02,250
* considered as opening inventory.
(b) (i) (a) Weighted Average basis
Calculation of the value of Inventory as on 31-5-2025
Receipts Issues Balance
Date Units Rate Amount Units Rate Amount Units Rate Amount
(`) (`)
1-5-25 Balance 100 15 1,500
2-5-25 300 21 6,300 400 19.5 7,800
5-5-25 250 19.5 4,875 150 19.5 2,925
16-5-25 500 22.8 11,400 650 22.04 14,326
21-5-25 100 22.04 2,204 550 22.04 12,122
25-5-25 450 22.04 9,918 100 22.04 2,204

10
 Therefore, the value of Inventory is as follows:
Value as per Weighted Method as on 31-5-2025: 100 units @ ` 22.04 = ` 2,204
(b) First-in-First out basis
Calculation of the value of Inventory as on 31-5-2025
Receipts Issues Balance
Date Units Rate Amount Units Rate Amount Units Rate Amount
(`) (`)
1-5-25 Balance 100 15 1,500
2-5-25 300 21 6,300 100 15 1,500
300 21 6,300
5-5-25 100 15 1,500
150 21 3,150 150 21 3,150
16-5-25 500 22.8 11,400 150 21 3,150
500 22.8 11,400
21-5-25 100 21 2,100 50 21 1,050
500 22.8 11,400
25-5-25 50 21 1,050
400 22.8 9,120 100 22.8 2,280

Therefore, the value of Inventory as on 31-5-2025 will be as follows:

Value of Inventory as per FIFO Method: 100 units @ ` 22.8 = ` 2,280
Working Note:
(i) Per unit cost of raw material purchased on May 2,2025
300 x 18 + 600 + 300
= = ` 21
300
(ii) Per unit cost of raw material purchased on May 16,2025
500 x 21 + 600 + 300
= = ` 22.8
500
Note:
Freight and unloading charges are directly attributable cost and are
necessary to bring the inventory into present location and condition hence
are included in the cost of inventory.

11
 OR
(ii) In the Books of Mr. Viom
Manufacturing Account for the Year ended 31.03.2025
Particulars Units Amount Particulars Units Amount
` `
To Opening Work- 27,000 78,000 By Closing Work- 42,000 1,44,000
in-Process in-Process
To Raw Materials By Trading A/c - 15,00,000 58,00,800
Consumed: Cost of finished
Opening Inventory 7,80,000 goods
Add: Purchases 24,60,000 transferred
32,40,000
Closing Inventory (9,60,000) 22,80,000
To Direct Wages
– W.N. (1) 12,16,800
To Direct expenses:
Hire charges
on Machinery
– W.N. (2) 10,50,000
To Indirect expenses:
Hire charges of
Factory 7,80,000
Repairs &
Maintenance 5,40,000 ________
59,44,800 59,44,800

Working Notes:
(1) Direct Wages – 15,00,000 units @ `0.80 = ` 12,00,000
42,000 units @ `0.40 = ` 16,800
` 12,16,800
(2) Hire charges on Machinery – 15,00,000 units @ ` 0.70 = ` 10,50,000
(c) In the Books of XYZ Ltd
Journal Entries
` `
8% Preference Share Final Call A/c Dr. 30,00,000

12
 To 8% Preference Share Capital A/c 30,00,000
(For final call made on preference shares @ ` 30
each to make them fully paid up)
Bank A/c Dr. 30,00,000
To 8% Preference Share Final Call A/c 30,00,000
(For receipt of final call money on preference
shares)
Bank A/c Dr. 20,00,000
To Equity Share Application A/c 20,00,000
(For receipt of application money on 1,00,000
equity shares @ ` 20 per share)
Equity Share Application A/c Dr. 20,00,000
To Equity Share Capital A/c 20,00,000
(For capitalisation of application money received)
Equity Share Allotment A/c Dr. 35,00,000
To Equity Share Capital A/c 25,00,000
To Securities Premium A/c 10,00,000
(For allotment money due on 1,00,000 equity
shares @ ` 35 per share including a premium of `
10 per share)
Bank A/c Dr. 35,00,000
To Equity Share Allotment A/c 35,00,000
(For receipt of allotment money on equity shares)
General Reserve A/c Dr. 55,00,000
To Capital Redemption Reserve A/c 55,00,000
(For transfer of CRR the amount not covered by
the proceeds of fresh issue of equity shares i.e.,
1,00,00,000 - 20,00,000 - 25,00,000)
8% Preference Share Capital A/c Dr. 1,00,00,000
Premium on Redemption of Preference Shares A/c Dr. 5,00,000
To Preference Shareholders A/c 1,05,00,000
(For amount payable to preference shareholders
on redemption at 5% premium)
Preference Shareholders A/c Dr. 1,05,00,000
To Bank A/c 1,05,00,000
(For amount paid to preference shareholders)

13
 General Reserve A/c Dr. 5,00,000
To Premium on Redemption A/c 5,00,000
(For writing off premium on redemption of
preference shares)

Note: On the redemption of redeemable preference shares out of accumulated

divisible profits, it will be necessary to transfer to the Capital Redemption Reserve
Account an amount equal to the amount repaid on the redemption of preference
shares on account of face value less proceeds of a fresh issue of shares made
for the purpose of redemption.
6. (a) In the books of Divis Pharma Ltd.
Journal Entries
Date Particulars Dr. Cr.
` `
Bank A/c Dr. 1,50,000
To Equity Share Application A/c 1,50,000
(Application money on 50,000 shares @ ` 3
per share received.)
Equity Share Application A/c Dr. 1,50,000
To Equity Share Capital A/c 1,50,000
(Transfer of application money to Equity Share
Capital on 50,000 shares @ ` 3 per share as
per Directors resolution no… dated…)
Equity Share Allotment A/c Dr. 2,50,000
To Equity Share Capital A/c 1,50,000
To Securities Premium A/c 1,00,000
(Amount due from members in respect of
allotment on 50,000 shares @ ` 5 per share
including premium ` 2 per share as per
Directors resolution no… dated…)
Bank A/c Dr. 2,45,000
To Equity Share Allotment A/c 2,45,000
(Amount received against allotment on 49,000
shares @ ` 5 per share including premium ` 2
per share.)
Equity Share Call A/c Dr. 2,00,000
To Equity Share Capital A/c 2,00,000
(Amount due from members in respect of call
on 50,000 shares @ ` 4 per share as per
Directors resolution no… dated…)

14
 Bank A/c Dr. 1,88,000
To Equity Share Call A/c 1,88,000
(Amount received against the call on 47,000
shares @ ` 4 per share.)
Equity Share Capital A/c (3,000 x ` 10) Dr. 30,000
Securities Premium A/c (1,000 x ` 2) Dr. 2,000
To Equity Share Allotment A/c (1,000 X 5,000
` 5)
To Equity Share Call A/c (3,000 X ` 4) 12,000
To Forfeited Shares A/c 15,000
(Being forfeiture of 3,000 equity shares for
non-payment of allotment and call money on
1,000 shares and for non-payment of call
money on 2,000 shares as per Board’s
Resolution No…..dated ….)
Bank A/c Dr. 20,000
Forfeited Shares A/c Dr. 5,000
To Equity Share Capital A/c 25,000
(Being re-issue of 2,500 shares @ `8 each as
per Board’s Resolution No…..dated….)
Forfeited Shares A/c (WN 1) Dr. 7,000
To Capital Reserve A/c 7,000
(Being profit on re-issue transferred to Capital
Reserve)

Balance Sheet of Divis Pharma Limited as at……

Particulars Notes No. `
EQUITY AND LIABILITIES
Shareholders’ funds
Share capital 1 4,98,000
Reserves and Surplus 2 1,05,000
Total 6,03,000
ASSETS
Current assets
Cash and cash equivalents (bank) 6,03,000*
Total 6,03,000
*(5,83,000 +20,000)

15
 Notes to accounts
` `
1. Share Capital
Equity share capital
Issued share capital
50,000 Equity shares of ` 10 each 5,00,000
Subscribed, called up and paid up share capital
49,500 Equity shares of ` 10 each 4,95,000
Add: Forfeited shares 3,000 4,98,000
2. Reserves and Surplus
Securities Premium 98,000
Capital Reserve 7,000 1,05,000

Working Notes:
(1) Calculation of Amount to be Transferred to Capital Reserve
Amount forfeited per share of X ` 3 Amount forfeited per share of Y ` 6
Less: Loss on re-issue per share (` 2) Less: Loss on re-issue per share (` 2)

Surplus ` 1 Surplus `4

Transferred to Capital Reserve: X share (1,000 x ` 1) ` 1,000

Y’s Share (1,500 x ` 4) ` 6,000

Total ` 7,000

(2) Balance of Security Premium:

Total Premium amount receivable on allotment = 1,00,000
Less: Amount reversed on forfeiture = (2,000)
Balance remaining = 98,000
(b) Cost of Property, Plant and Equipment comprises:
(a) its purchase price, including non-refundable import duties and purchase
taxes, after deducting trade discounts and rebates.
(b) any cost directly attributable to bring the asset to the location and condition
necessary for it to be capable of operating in a manner intended by the
enterprise.

16
(c) the initial estimate of the costs of dismantling, removing, the item and
restoring the site on which an asset is located.
Examples of directly attributable costs are:
(a) cost of employee benefits arising directly from acquisition or construction
of an item of property, plant and equipment.
(b) cost of site preparation
(c) initial delivery and handling costs
(d) installation and assembly costs
(e) cost of testing whether the asset is functioning properly, after deducting the
net proceeds from selling the items produced while testing (such as
samples produced while testing)
(f) professional fees e.g. engineers hired for helping in installation of a
machine
Thus, all the expenses which are necessary for the asset to bring it in condition
and location of desired use will become part of cost of the asset. However,
following expenses should not become part of cost of asset:
(a) costs of opening new facility or business, such as inauguration costs;
(b) cost of introducing new product or service (for example cost of
advertisement or promotional activities).
(c) cost of conducting business in a new location or with a new class of
customer (including cost of staff training); and
(d) administration and other general overhead costs.

17
 Mock Test Paper - Series I: August, 2025
Date of Paper: 12th August, 2025
Time of Paper: 2 P.M. to 5 P.M.

FOUNDATION COURSE
PAPER 2: BUSINESS LAWS
Question No. 1 is compulsory.
Attempt any four questions from the remaining five questions.
(Time allowed: 3 Hours) (100 Marks)
1. (a) X was running a business of Car on lease. One fine day, Y came to hire a car for
10 days for his business tour from Delhi to Amritsar. X offered him a Honda city
for ` 50,000/- for 10 days on a condition that petrol and toll expenses will be borne
by him. During the journey, engine of car was choked. Y has to spend ` 10,000/-
for repair of engine. When he was coming back from Amritsar, brakes of car were
not working, and a major accident of Y happened due to this. Y was admitted to
hospital and paid a bill of ` 50,000 on recovery. Y asked X to compensate him
charges for car repair and hospital expenses amounting ` 60,000/-. X denied for
compensation by saying that he was not aware about the engine and brake’s fault.
Y filed a suit against X for recovery of damages. Give your opinion with reference
to provisions of the Indian Contract Act, 1872:
(i) Whether Y can withheld the amount of hire charges ` 50,000/- on account
of non-payment of damages?
(ii) Whether Mr. X was liable to pay Damage as he was not aware of the fact
of faults in car? (7 Marks)
(b) (i) Evergreen Private Limited has 9 directors on its Board of Directors. The
company's Articles of Association currently state that the quorum for board
meetings shall be 1/3rd of the total strength or 2 directors, whichever is
higher. The company now intends to amend this article to specify that the
quorum for board meetings shall be 1/3rd of the total strength or 4 directors,
whichever is higher. Advise the company on the procedure for including
this entrenchment provision in its Articles, in accordance with the
provisions of the Companies Act, 2013. Would your advice differ if the
company were a public company? (3 Marks)

1
 (ii) State with reasons whether the following companies can be treated as
Small Companies with reference to the provisions of the Companies
Act, 2013:
1. STS Pvt. Ltd., having a turnover of ` 10 crores and the paid-up
capital of ` 1 crore (1,00,000 equity shares of ` 100 each). Out of
these 60,000 equity shares are held by UV Infratech Pvt. Ltd.
2. ZX Ltd., having a paid-up capital of ` 3 crores and turnover of
` 35 crores. (4 Marks)
(c) "Explain the concept of 'Partner by Holding Out' as provided under the Indian
Partnership Act, 1932. Under what circumstances can a person be held liable as
a partner by holding out? (6 Marks)
2. (a) (i) P sold certain antique items to Q for ` 3,00,000/- on 13.12.2024. As per
the terms of agreement 75% of the amount was to be paid within a week
and the balance 25% was to be paid till 31.12.2024. Q appointed his agent
R to take delivery of the goods after payment of first installment.
Q transferred a sum of ` 2,80,000/- in the account of P through NEFT on
18.12.2024 which was credited in P's account on the same date. R failed
to take delivery of antique items due to medical emergency.
By the meantime, Q failed to make payment of the second installment till
31.12.2024. On 10.01.2025, Q's agent came to take the delivery of
goods. But, P refused to deliver the goods and exercised his right of lien
over the goods.
According to provisions of the Sale of Goods Act, 1930, give your opinion
whether P was justified in exercising right of lien as only ` 20,000/- was
left to be paid? (4 Marks)
(ii) An auction takes place in Delhi for antique items. It is notified to the
bidders that the sale will be completed, only when the hammer of the
auctioneer hits the table and he announces "you are the highest bidder".
During the auction, L bids for an antique sculpture, worth ` 8 lakhs. The
hammer falls, but announcement cannot be made as the auction
suddenly stops before the auctioneer can utter any words. It is notified to
everyone that there has been an unexpected rise in the market price for
that particular sculpture, and therefore, it will not be sold on that particular
day. L contends that the auctioneer is bound to sell the sculpture to him
at the price he bid because once he bid at the highest price in the auction
and the hammer fell, the auction sale was completed and therefore, the

2
 auctioneer is under a contractual obligation to sell the sculpture. The
auctioneer disagrees. Discuss the validity of L's claim in reference to the
provisions of the Sale of Goods Act, 1930. (3 Marks)
(b) (i) Explain the concept of ‘Separate Legal Entity’ in Company Law. How does
it differentiate a company from its members?
(ii) What is meant by ‘Perpetual Succession’ in relation to a company? How
does this feature contribute to the continuity of a company despite
changes in its membership? (7 Marks)
(c) "Explain the provisions relating to the change of name of a Limited Liability
Partnership (LLP) under the LLP Act, 2008. Under what circumstances can the
Central Government direct an LLP to change its name? What are the
consequences of non-compliance with such directions? (6 Marks)
3. (a) P, Q and R, are partners in a construction firm, PQR Associates. P buys cement
on behalf of the firm from D. The cement is used in the ordinary course of the
firm's business. P uses the cement for his personal purposes. The supplier D, who
is unaware of the private use of cement by P, claims the price from the firm. The
firm refuses to pay for the price, on the ground that the cement was never received
by it. Referring to the provisions of the Indian Partnership Act, 1932, answer the
followings:
(i) Whether the Firm's contention is tenable?
(ii) What would be your answer if a part of the cement so purchased by P
was delivered to the firm by him, and the rest of the cement was used by
him for his private use, about which neither the firm nor the supplier were
aware? (7 Marks)
(b) (i) The Object clause of Memorandum of Association of ABC Pvt. Ltd.
authorized the company to carry on the business of trading in property in
Gurgaon. Since the company was not doing well, the Directors of the
company in a recent board meeting planned to diversify the business and
enter into Construction business. For this purpose, they borrowed a sum of
` 5 crores from Magnum Finance Ltd. But the members of the company did
not approve the decision of the board hence, company refused to repay the
loan. According to provisions of the Companies Act, 2013 what is the
recourse available to Magnum Finance Ltd. for recovery of the loan?
(4 Marks)

3
 (ii) SNM Ltd. was registered in 2021 with a share capital of ` 50 Lakh divided
into 5 lakhs equity share of ` 10 each under Section 8 of the Companies
Act, 2013 for promotion of art in Jaipur. Company earned huge profits
during the financial year ending on 31st March 2025 due to boom in the
market. On 10 th May 2025, 75% members of the company demanded to
distribute 10% dividend to the equity shareholders. For this purpose, they
passed special resolution in Extra Ordinary General Meeting.
With reference to provisions of the Companies Act, 2013 decide whether
SNM Ltd. can declare dividend @ 10% to equity shareholders for the year
ending 31st March 2025. (3 Marks)
(c) "Explain the various persons by whom a contract may be performed as per the
Indian Contract Act, 1872. (6 Marks)
4. (a) Examine the validity of the following agreements under the provisions of the Indian
Contract Act, 1872 and justify your answer:
(i) Mrs. Priya pays a sum of ` 10,000 to a marriage bureau to provide
information about the prospective grooms for her daughter's marriage.
(ii) Bharat agrees with John to sell his white bull. Unknown to both the
parties, the bull was dead at the time of agreement.
(iii) Rishabh sells the goodwill of his shop to Omkar for ` 10,00,000 and
promises not to carry on such similar business within the local limits so
long as Omkar carries on like business.
(iv) A property worth ` 2,00,000 was agreed to be sold for just ` 25,000 by a
person of unsound mind. (7 Marks)
(b) Explain the legal provisions regarding presentment for acceptance of a bill of
exchange under the Negotiable Instruments Act, 1881. What are the
consequences of failure to present a bill for acceptance?
Also, distinguish it from the presentment of a promissory note for sight.
(7 Marks)
(c) "Explain the process by which a Bill becomes an Act of Parliament in India. After
a law is enacted, how is it enforced, and which authorities are responsible for its
implementation? (6 Marks)

4
5. (a) (i) MNO Limited, a supplier of electronic components, entered into a contract
on August 1, 2023, with PQR Enterprises for the sale of 1000 units of
microchips. The contract specifically identified the microchips by serial
numbers and confirmed that they were in a deliverable state, stored in
MNO Limited's warehouse. The contract stipulated that the goods would
be delivered on September 1, 2023.
On August 10, 2023, a flood occurred, damaged the warehouse and
destroyed the entire stock of microchips, including the 1000 units
intended for PQR Enterprises. Examine, with reference to the provisions
of the Sale of Goods Act, 1930 who shall suffer the loss? What will be
your answer if the microchips are not specifically identified and marked
for PQR Enterprises at the time of the contract? (4 Marks)
(ii) A purchases a motorcycle from B and uses it for some time. It turns out
that the motorcycle sold by B to A was a stolen one and had to be returned
to a rightful owner. A brings action against B for the return of the price.
Will he succeed? Examine this with reference to the provisions of the
Sale of Goods Act, 1930. (3 Marks)
(b) "Discuss the various grounds on which a partnership firm may be dissolved by the
Court under the Indian Partnership Act, 1932. (7 Marks)
(c) What are the conditions to be satisfied for an "Agent's authority in an emergency"
under the Indian Contract Act, 1872? (6 Marks)
6. (a) Classify the following instruments as inland or foreign instruments as per the
Negotiable Instruments Act, 1881 and justify your classification with proper
reasoning.
(i) A promissory note is made in Kolkata and is payable in Mumbai.
(ii) A bill is drawn in Varanasi on a person resident in Jodhpur, but it is made
payable in Singapore.
(iii) A, resident of Agra, draws a bill of exchange in Agra on B, a merchant in
New York, and B accepts it as payable in Delhi.
(iv) A promissory note is made in New York by A, a resident of New York,
and made payable to B in Delhi, India.
(v) A bill of exchange is drawn in London on a person residing in Dubai, and
it is payable in Dubai. (7 Marks)

5
(b) With reference to provisions of the Indian Contract Act, 1872 define the following
terms:
(i) Quasi-contracts and its salient features
(ii) Responsibility of finder of goods (6 Marks)
(c) (i) Classify the following transactions according to the types of goods they
are:
(A) A wholesaler of cotton has 100 bales in his godown. He agrees to
sell 50 bales and these bales were selected and set aside.
(B) A agrees to sell to B one packet of sugar out of the lot of one
hundred packets lying in his shop.
(ii) Sometime breach of condition will be treated as breach of warranty as a
result of which buyer losses his right to rescind. State the circumstance
where a contract cannot be avoided even on account of breach of
condition. (7 Marks)

6
 Mock Test Paper - Series I: August, 2025
Date of Paper: 12th August, 2025
Time of Paper: 2 P.M. to 5 P.M.
FOUNDATION COURSE
PAPER 2: BUSINESS LAWS
ANSWERS
1. (a) Bailment: As per Section 148 of the Indian Contract Act, 1872, bailment is the
delivery of goods by one person to another for some purpose, upon a contract,
that the goods shall, when the purpose is accomplished, be returned or otherwise
disposed of according to the directions of the person delivering them.
Bailor’s duty to disclose faults in goods bailed in case of non- gratuitous
bailment (Section 150): If the goods are bailed for hire, the bailor is responsible
for such damage, whether he was or was not aware of the existence of such faults
in the goods bailed.
Duty to pay necessary expenses in case of non-gratuitous bailment [Section
158]: The bailor is liable to pay the extraordinary expenses incurred by the bailee.
Bailor’s responsibility to indemnify losses [Section 164]: It is the duty of bailor
to indemnify all the losses and expenses, which bailee has to pay on account of
defective goods.
In the instant case, Y took a car on lease from X for 10 days for ` 50,000. During
the journey, Y has to spend ` 10,000 for repair of engine and paid ` 50,000 for
hospital expenses due to accident because of fault in brakes of car. These are
the extraordinary expenses and losses and it is the bailor’s duty to bear such
expenses and losses.
Therefore, the answers are:
(i) Y can withhold the hire charges of ` 50,000 on account of non-payment of
damages and claim an additional `10,000, from X.
(ii) X is liable for the full ` 60,000 (`10,000 repair + ` 50,000 hospital) as it is
the bailor’s duty to supply a car fit for the purpose for which it was hired.
(b) (i) Section 5(4) and (5) of the Companies Act, 2013 contains the following
provisions:
Manner of inclusion of the entrenchment provision: The provisions for
entrenchment shall only be made either on formation of a company, or by

1
 an amendment in the articles agreed to by all the members of the company
in the case of a private company and by a special resolution in the case of
a public company.
Notice to the registrar of the entrenchment provision: Where the
articles contain provisions for entrenchment, whether made on formation
or by amendment, the company shall give notice to the Registrar of such
provisions in such form and manner as may be prescribed.
In the instant case, Evergreen Private Limited can follow the above
procedure i.e. with the consent of all the members and notice to the
registrar to include the entrenchment provision in its Articles.
Yes, the advice will differ, if the company is public company, since it has to
pass Special Resolution and also inform to the registrar.
(ii) According to Section 2(85) of the Companies Act, 2013, Small company
means a company, other than a public company—
(i) paid-up share capital of which does not exceed four crore rupees or
such higher amount as may be prescribed which shall not be more
than ten crore rupees; and
(ii) turnover of which as per profit and loss account for the immediately
preceding financial year does not exceed forty crore rupees or such
higher amount as may be prescribed which shall not be more than
one hundred crore rupees:
Exceptions: This clause shall not apply to:
(A) a holding company or a subsidiary company;
(B) a company registered under section 8; or
(C) a company or body corporate governed by any special Act.
In the instant case,
1. STS Pvt. Ltd. though is a small company taking into account its
turnover and paid up share capital (i.e. ` 10 crores and ` 1 crore
respectively), but since it is the subsidiary company of UV Infratech
Pvt. Ltd. (UV Infratech Pvt. Ltd. holds ` 60,00,000 equity share
capital of STS Pvt. Ltd.), hence STS Pvt. cannot be considered as
small company.

2
 2. ZX Ltd. cannot be considered as a small company since it is a public
company.
(c) Partner by holding out (Section 28 of the Indian Partnership Act, 1932):
Partnership by holding out is also known as partnership by estoppel. Where a man
holds himself out as a partner, or allows others to do it, he is then stopped from
denying the character he has assumed and upon the faith of which creditors may
be presumed to have acted.
When a person represent himself, or knowingly permits himself, to be represented
as a partner in a firm (when in fact he is not) he is liable, like a partner in the firm
to anyone who on the faith of such representation has given credit to the firm.
A person may himself, by his words or conduct have induced others to believe
that he is a partner or he may have allowed others to represent him as a partner.
The result in both the cases is identical.
It is only the person to whom the representation has been made and who has
acted thereon that has right to enforce liability arising out of ‘holding out’.
For the purpose of fixing liability on a person who has, by representation, led
another to act, it is not necessary to show that he was actuated by a fraudulent
intention.
The rule given in Section 28 is also applicable to a former partner who has retired
from the firm without giving proper public notice of his retirement. In such cases a
person who, even subsequent to the retirement, give credit to the firm on the belief
that he was a partner, will be entitled to hold him liable.
2. (a) (i) Rights of lien (Section 47 of the Sale of Goods Act, 1930)
An unpaid seller has a right of lien on the goods for the price while he is in
possession, until the payment or tender of the price of such goods. It is the
right to retain the possession of the goods and refusal to deliver them to
the buyer until the price due in respect of them is paid or tendered.
Exercise of right of lien: This right can be exercised by him in the
following cases only:
(a) where goods have been sold without any stipulation of credit; (i.e.,
on cash sale)
(b) where goods have been sold on credit but the term of credit has
expired; or
(c) where the buyer becomes insolvent.

3
 In the instant case, P is still in possession of the goods and the full price
was not paid by Q within the stipulated time i.e. till 31st December 2024.
Therefore, P is an unpaid seller and can rightfully exercise lien under
Section 47.
Even though the unpaid amount is only ` 20,000, P’s refusal to deliver the
goods is valid. Thus, P is legally justified in exercising right of lien.
(ii) Legal Rules of Auction sale: Section 64 of the Sale of Goods Act, 1930
provides following rules to regulate the sale by auction:
Completion of the contract of sale: The sale is complete when the
auctioneer announces its completion by the fall of hammer or in any other
customary manner. Until such announcement is made, any bidder may
retract from his bid.
In the instant case, the sale of sculpture to L is not complete as only
hammer falls but the auctioneer did not announce “you are the highest
bidder”.
Therefore, L’s claim contending that the auctioneer is bound to sell the
sculpture to him at the price he bid is not valid as the auction sale was not
complete.
(b) (i) Separate Legal Entity: There are distinctive features between different
forms of organisations and the most striking feature in the company form
of organisation vis-à-vis the other forms of business organisations is that it
acquires a unique character of being a separate legal entity. In other words,
when a company is registered, it is clothed with a legal personality. It
comes to have almost the same rights and powers as a human being. Its
existence is distinct and separate from that of its members. A company can
own property, have bank account, raise loans, incur liabilities and enter
into contracts.
(a) It is at law, a person which is different from the subscribers to the
memorandum of association. It’s personality is distinct and separate
from the personality of those who compose it.
(b) Even members can contract with company, acquire right against it
or incur liability to it. For the debts of the company, only its
creditors can sue it and not its members.
A company is capable of owning, enjoying and disposing of property in
its own name. Although the capital and assets are contributed by the

4
 shareholders, the company becomes the owner of its capital and assets.
The shareholders are not the private or joint owners of the company’s
property.
A member does not even have an insurable interest in the property of the
company. The leading case on this point is of Macaura Vs. Northern
Assurance Co. Limited (1925):
Fact of the case
Macaura (M) was the holder of nearly all (except one) shares of a timber
company. He was also a major creditor of the company. M insured the
company’s timber in his own name. The timber was lost in a fire.
M claimed insurance compensation. Held, the insurance company was
not liable to him as no shareholder has any right to any item of property
owned by the company, for he has no legal or equitable interest in them.
Hence in this case, since the timber was not insured in the company’s
name, M could not claim the compensation from insurance company.
(ii) Perpetual Succession: Members may die or change, but the company
goes on till it is wound up on the grounds specified by the Act. The shares
of the company may change hands infinitely but that does not affect the
existence of the company. Since a company is an artificial person
created by law, law alone can bring an end to its life. Its existence is not
affected by the death or insolvency of its members.
(c) Change of name of LLP (Section 17 of the LLP Act, 2008):
(1) Notwithstanding anything contained in sections 15 and 16, if through
inadvertence or otherwise, a LLP, on its first registration or on its
registration by a new body corporate, its registered name, is registered
by a name which is identical with or too nearly resembles to —
(a) that of any other LLP or a company; or
(b) a registered trade mark of a proprietor under the Trade Marks Act,
1999, as is likely to be mistaken for it,
then on an application of such LLP or proprietor referred to in clauses (a)
and (b) respectively or a company,
the Central Government may direct that such LLP to change its name or
new name within a period of 3 months from the date of issue of such
direction.

5
 It is further provided that an application of the proprietor of the registered
trade marks shall be maintainable within a period of 3 years from the date
of incorporation or registration or change of name of the LLP under this
Act.
(2) Where a LLP changes its name or obtains a new name under sub-section
(1), it shall within a period of 15 days from the date of such change, give
notice of the change to Registrar along with the order of the Central
Government, who shall carry out necessary changes in the certificate of
incorporation and within 30 days of such change in the certificate of
incorporation, such LLP shall change its name in the LLP agreement.
(3) If the LLP is in default in complying with any direction given under sub-
section (1), the Central Government shall allot a new name to the LLP in
such manner as may be prescribed and the Registrar shall enter the new
name in the register of LLP in place of the old name and issue a fresh
certificate of incorporation with new name, which the LLP shall use
thereafter.
Nothing contained in this sub-section shall prevent a LLP from subsequently
changing its name in accordance with the provisions of section 16.
3. (a) The given question is based on the Section 18 read with sections 25 & 26 of the
Indian Partnership Act, 1932. Section 18 deals with the Partner to be an agent of
the firm. This means that a partner is the agent of the firm for the purpose of the
business of the firm.
The partner indeed virtually holds the character of both a principal and an agent.
So as far as he acts for himself and in his own interest in the common concern of
the partnership, he may properly be deemed a principal and so far as he acts for
his partners, he may properly be deemed as an agent.
The rule that a partner is the agent of the firm for the purpose of the business of
the firm cannot be applied to all transactions and dealings between the partners
themselves. It is applicable only to the act done by partners for the purpose of the
business of the firm.
According to section 25, the partners are jointly and severally responsible to third
parties for all acts which come under the scope of their express or implied
authority. “Act of firm’ connotes any act or omission by all the partners or by any
partner or agent of the firm, which gives rise to a right enforceable by or against
the firm.

6
 As per section 26, the firm is liable to the same extent as the partner for any loss
or injury caused to a third party by the wrongful acts of a partner, if they are done
by the partner while acting:
(a) in the ordinary course of the business of the firm
(b) with the authority of the partners.
According to the facts given in the questions, P, a partner to PQR Associates,
buys cement on behalf of the firm from D in the ordinary course of the firm’s
business. P uses the cement for his personal purposes. D, the supplier was
unaware of the private use of cement by P and claims price from the firm. Firm
refuses to pay the price on the ground that the cement was never received by it.
Referring to the stated provisions of the Indian Partnership Act, 1932, following
are the answers:
(i) Said Section is applicable only to the act done by partners for the purpose
of the business of the firm. In such case, partner act as the agent of the
firm for the purpose of the business of the firm. Since in the given case, P,
buys cement on behalf of the firm from D in the ordinary course of the firm’s
business.
Therefore, in the given case, firms’ contention of refusal to pay the price
on the ground that the cement was never received by it, is not tenable.
(ii) Further for commission of the wrongful act by the partner, the firm is liable to
the same extent as the partner for any loss or injury caused to a third party by
the wrongful acts of a partner, if they are done by the partner while acting:
(a) in the ordinary course of the business of the firm
(b) with the authority of the partners.
In the given case, part of the cement so purchased by P was delivered to
the firm by him and the rest of the cement was used by him for his private
use, was not known to the firm and the supplier. Since the act of the P to
purchase the cement was in the ordinary course of business with the
authority of the partner, however wrongful use by the partner will make
the firm liable to the same extent as the partner for loss or injury caused
to D.
However, PQR Associates can take action against P, the partner.
(b) (i) It is a fundamental rule of Company Law that the objects of a company as
stated in its memorandum can be departed from only to the extent

7
 permitted by the Act, thus far and no further. In consequence, any act done
or a contract made by the company which travels beyond the powers not
only of the directors but also of the company is wholly void and inoperative
in law and is therefore not binding on the company.
On this account, a company can be restrained from employing its fund for
purposes other than those sanctioned by the memorandum. Likewise, it
can be restrained from carrying on a trade different from the one it is
authorised to carry on.
The impact of the doctrine of ultra vires is that a company can neither be
sued on an ultra vires transaction, nor can it sue on it.
Since the memorandum is a “public document”, it is open to public
inspection. Therefore, when one deals with a company one is deemed to
know about the powers of the company. If in spite of this you enter into a
transaction which is ultra vires the company, you cannot enforce it
against the company.
In the instant case, ABC Pvt. Ltd. was authorised to trade in property
only, so taking loan for construction business was ultra virus the power
of the company.
Therefore, Magnum Finance Ltd. cannot enforce against ABC Pvt. Ltd.
for recovery of the loan. But,
(a) It can recover the money to the extent it has been utilised in
meeting lawful debt of the company, then it steps into shoes of the
debtor paid off and consequently it would be entitled to recover the
loan to that extent from the company.
(b) if the money is not spent, it may stop ABC Pvt. Ltd. from spending
by means of injunction and recover the unspent amount.
(ii) Formation of companies with charitable objects etc. (Section 8
company): Section 8 of the Companies Act, 2013 deals with the
formation of companies which are formed to
• promote the charitable objects of commerce, art, science, sports,
education, research, social welfare, religion, charity, protection of
environment etc.
• Such company intends to apply its profit in promoting its objects and
• prohibiting the payment of any dividend to its members.

8
 In the instant case, SNM Ltd. cannot declare dividend @10% to equity
shareholders for the year ending 31st March, 2025 as it is a Section 8
company which are specifically prohibited from paying dividend. The
profits of a section 8 company must be applied towards promoting its
objects. Therefore, the special resolution passed in the EGM to declare
a dividend is invalid.
(c) By Whom a Contract may be Performed (Section 40, 41 and 42 of the Indian
Contract Act, 1872)
The promise under a contract may be performed, as the circumstances may
permit, by the promisor himself, or by his agent or his legal representative.
1. Promisor himself: If there is something in the contract to show that it
was the intention of the parties that the promise should be performed by
the promisor himself, such promise must be performed by the promisor.
This means contracts which involve the exercise of personal skill or
diligence, or which are founded on personal confidence between the
parties must be performed by the promisor himself.
2. Agent: Where personal consideration is not the foundation of a contract,
the promisor or his representative may employ a competent person to
perform it.
3. Legal Representatives: A contract which involves the use of personal
skill or is founded on personal consideration comes to an end on the
death of the promisor. As regards any other contract the legal
representatives of the deceased promisor are bound to perform it unless
a contrary intention appears from the contract (Section 37, para 2). But
their liability under a contract is limited to the value of the property they
inherit from the deceased.
4. Third persons: Effect of accepting performance from third person
(Section 41): When a promisee accepts performance of the promise from
a third person, he cannot afterwards enforce it against the promisor. That
is, performance by a stranger, if accepted by the promisee, this results in
discharging the promisor, although the latter has neither authorised not
ratified the act of the third party.
5. Joint promisors (Section 42): When two or more persons have made a
joint promise, then unless a contrary intention appears by the contract,
all such persons must jointly fulfil the promise. If any of them dies, his
legal representatives must, jointly with the surviving promisors, fulfil the

9
 promise. If all of them die, the legal representatives of all of them must
fulfil the promise jointly.
4. (a) (i) Under Section 10 of the Indian Contract Act, 1872, a valid contract requires
free consent, lawful consideration, and a lawful object.
In the instant case, the agreement to pay ` 10,000 in exchange for a
service (providing information about prospective grooms) is lawful.
Hence, the agreement is valid.
(ii) According to section 20, where both the parties to an agreement are
under a mistake as to a matter of fact essential to the agreement, there
is a bilateral mistake. In such a case, the agreement is void.
In the instant case, the bull's death (unknown to both parties) constitutes
a bilateral mistake regarding the subject matter of the contract.
Hence, the agreement is void.
(iii) Under Section 27, agreements in restraint of trade are void. However, an
exception is provided for contracts involving the sale of goodwill. The
local limits within which the seller of the goodwill agrees not to carry on
similar business must be reasonable.
In the instant case, the restriction is limited to the local area and does not
extend indefinitely.
Hence, the agreement is valid.
(iv) According to section 12, a contract by a person who is not of sound mind
is void.
In the instant case, a property worth ` 2,00,000 was agreed to be sold
for just ` 25,000 by a person of unsound mind.
Hence, the agreement is void.
(b) Presentment for acceptance [Section 61 of the Negotiable Instruments
Act, 1881]: A bill of exchange payable after sight must [if no time or place is
specified therein for presentment] be presented to the drawee thereof for
acceptance [if he can, after reasonable search, be found] by a person entitled to
demand acceptance, within a reasonable time after it is drawn, and in business
hours on a business day.

10
 In default of such presentment, no party thereto is liable thereon to the person
making such default. If the drawee cannot, after reasonable search, be found, the
bill is dishonoured.
If the bill is directed to the drawee at a particular place, it must be presented at
that place, and if at the due date for presentment he cannot, after reasonable
search, be found there, the bill is dishonoured.
Where authorised by agreement or usage, a presentment through the post office
by means of a registered letter is sufficient.
Presentment of promissory note for sight [Section 62]: A promissory note,
payable at a certain period after sight, must be presented to the maker thereof for
sight (if he can after reasonable search be found) by a person entitled to demand
payment, within a reasonable time after it is made and in business hours on a
business day.
In default of such presentment, no party thereto is liable thereon to the person
making such default.
(c) The Process of Making a Law: When a law is proposed in parliament it is called
a Bill. After discussion and debate, the law is passed in Lok Sabha. Thereafter, it
has to be passed in Rajya Sabha. It then has to obtain the assent of the President
of India. Finally, the law will be notified by the Government in the publication called
the Official Gazette of India. The law will become applicable from the date
mentioned in the notification as the effective date. Once it is notified and effective,
it is called an Act of Parliament.
Enforcing the Law: After a law is passed in parliament it has to be enforced.
Somebody should monitor whether the law is being followed. This is the job of the
executive. Depending on whether a law is a Central law or a State law the Central
or State Government will be the enforcing authority. For this purpose government
functions are distributed to various ministries. Some of the popular Ministries are
the Ministry of Finance, the Ministry of Corporate Affairs, the Ministry of Home
Affairs, the Ministry of Law and Justice and so on. These Ministries are headed
by a minister and run by officers of the Indian administrative and other services.
The Government of India exercises its executive authority through a number of
Government Ministries or Departments of State. A Ministry is composed of
employed officials, known as civil servants, and is politically accountable through
a minister. Most major Ministries are headed by a Cabinet Minister, who sits in the
Union Council of Ministers, and is typically supported by a team of junior ministers
called the Ministers of State.

11
5. (a) (i) According to Section 18 of the Sale of Goods Act, 1930, where there is a
contract of sale for unascertained goods, the property in goods cannot pass
to the buyer unless and until the goods are ascertained. The buyer can get
the ownership right on the goods only when the goods are specific and
ascertained.
According to section 20 of the Sale of Goods Act, 1930, where there is
an unconditional contract for sale of specific goods in deliverable state,
the property in the goods passes to the buyer when the contract is made,
and it is immaterial whether the time of payment of price or the time of
delivery of the goods, or both, is postponed. Here, the condition is goods
must be ready for delivery.
In the instant case, since the microchips were specifically identified and
were in a deliverable state when the contract was formed on
August 1, 2023, ownership (and risk) likely passed to PQR Enterprises
on August 1, 2023.
Therefore, PQR Enterprises will suffer the loss.
Goods are not specifically identified and ascertained: If the
microchips were not specifically identified and marked for PQR
Enterprises at the time of the contract, MNO Limited will suffer the loss,
as the risk would not have transferred to PQR Enterprises.
(ii) As per Section 27 of the Sale of Goods Act, 1930, “no one can transfer a
better title than they themselves have.” This means that a person who is
not the owner of goods cannot convey ownership unless authorized by
the true owner.
Also, Section 14(a) imposes an implied condition in every contract of sale
that the seller has the right to sell the goods means he should be the real
owner. If the seller’s title turns out to be defective, the buyer must return
the goods to the true owner and recover the price from the seller.
In the instant case, A will succeed in his action against B for the return of
the price, as B had no title to sell the stolen motorcycle, and the sale was
in breach of the implied condition.
(b) Dissolution By the Court (Section 44 of the Indian Partnership Act, 1932):
Court may, at the suit of the partner, dissolve a firm on any of the following ground:
(a) Insanity/unsound mind: Where a partner (not a sleeping partner) has
become of unsound mind, the court may dissolve the firm on a suit of the

12
 other partners or by the next friend of the insane partner. Temporary
sickness is no ground for dissolution of firm.
(b) Permanent incapacity: When a partner, other than the partner suing,
has become in any way permanently incapable of performing his duties
as partner, then the court may dissolve the firm. Such permanent
incapacity may result from physical disability or illness etc.
(c) Misconduct: Where a partner, other than the partner suing, is guilty of
conduct which is likely to affect prejudicially the carrying on of business,
the court may order for dissolution of the firm, by giving regard to the
nature of business. It is not necessary that misconduct must relate to the
conduct of the business. The important point is the adverse effect of
misconduct on the business. In each case nature of business will decide
whether an act is misconduct or not.
(d) Persistent breach of agreement: Where a partner other than the partner
suing, wilfully or persistently commits breach of agreements relating to
the management of the affairs of the firm or the conduct of its business,
or otherwise so conduct himself in matters relating to the business that it
is not reasonably practicable for other partners to carry on the business
in partnership with him, then the court may dissolve the firm at the
instance of any of the partners. Following comes in to category of breach
of contract:
 Embezzlement,
 Keeping erroneous accounts
 Holding more cash than allowed
 Refusal to show accounts despite repeated request etc.
(e) Transfer of interest: Where a partner other than the partner suing, has
transferred the whole of his interest in the firm to a third party or has
allowed his share to be charged or sold by the court, in the recovery of
arrears of land revenue due by the partner, the court may dissolve the
firm at the instance of any other partner.
(f) Continuous/Perpetual losses: Where the business of the firm cannot
be carried on except at a loss in future also, the court may order for its
dissolution.
(g) Just and equitable grounds: Where the court considers any other
ground to be just and equitable for the dissolution of the firm, it may

13
 dissolve a firm. The following are the cases for the just and equitable
grounds-
(i) Deadlock in the management.
(ii) Where the partners are not in talking terms between them.
(iii) Loss of substratum.
(iv) Gambling by a partner on a stock exchange.
(c) Agent’s authority in an emergency [Section 189 of the Indian Contract Act,
1872]: An agent has authority, in an emergency, to do all such acts for the purpose
of protecting his principal from loss as would be done by a person of ordinary
prudence, in his own case, under similar circumstances.
To constitute a valid agency in an emergency, following conditions must be
satisfied:
(i) Agent should not be in a position or have any opportunity to communicate
with his principal within the time available.
(ii) There should have been actual and definite commercial necessity for the
agent to act promptly.
(iii) the agent should have acted bonafide and for the benefit of the principal.
(iv) the agent should have adopted the most reasonable and practicable
course under the circumstances, and
(v) the agent must have been in possession of the goods belonging to his
principal and which are the subject of contract.
6. (a) “Inland instrument” and “Foreign instrument” [Sections 11 & 12 of the
Negotiable Instruments Act, 1881]
“Inland instrument”: A promissory note, bill of exchange or cheque drawn or
made in India and made payable in or drawn upon any person resident in India
shall be deemed to be an inland instrument.
“Foreign instrument”: A foreign instrument is one which is not an inland instrument.
In the instant case,
(i) A promissory note made in Kolkata and payable in Mumbai is an Inland
instrument
(ii) A bill drawn in Varanasi on a person resident in Jodhpur (although it is
stated to be payable in Singapore) is an Inland instrument

14
 (iii) A, a resident of Agra, drew (i.e., made) a bill of exchange in Agra on B,
a merchant in New York. And B accepted the bill of exchange as payable
in Delhi. In this case, the bill of exchange was drawn in India and also
payable in India. Hence, it is an inland instrument.
(iv) A promissory note is made in New York by A, a resident of New York,
and made payable to B in Delhi, India. It is a Foreign instrument as it is
Drawn outside India, payable in India.
(v) A bill of exchange is drawn in London on a person residing in Dubai, and
it is payable in Dubai. It is a Foreign instrument as it is Drawn outside
India, on a person residing outside India, payable outside India.
(b) (i) Quasi- Contracts: A quasi-contract is not an actual contract, but it
resembles a contract. It is created by law under certain circumstances. The
law creates and enforces legal rights and obligations when no real contract
exists. Such obligations are known as quasi-contracts. In other words, it is
a contract in which there is no intention on part of either party to make a
contract but law imposes a contract upon the parties.
Salient features of quasi contracts:
(a) In the first place, such a right is always a right to money and
generally, though not always, to a liquidated sum of money.
(b) Secondly, it does not arise from any agreement of the parties
concerned, but is imposed by the law; and
(c) Thirdly, it is a right which is available not against all the world, but
against a particular person or persons only, so that in this respect
it resembles a contractual right.
(ii) Responsibility of finder of goods: As per section 71 of the Indian
Contract Act, 1872, ‘A person who finds goods belonging to another and
takes them into his custody is subject to same responsibility as if he were
a bailee’.
Thus, a finder of lost goods has:
(i) to take proper care of the property as man of ordinary prudence
would take
(ii) no right to appropriate the goods and
(iii) to restore the goods if the owner is found.

15
(c) (i) (A) A wholesaler of cotton has 100 bales in his godown. So, the goods
are existing goods. He agrees to sell 50 bales and these bales were
selected and set aside. On selection, the goods becomes
ascertained. In this case, the contract is for the sale of ascertained
goods, as the cotton bales to be sold are identified and agreed after
the formation of the contract.
(B) If A agrees to sell to B one packet of sugar out of the lot of one
hundred packets lying in his shop, it is a sale of existing but
unascertained goods because it is not known which packet is to
be delivered.
(ii) Section 13 of the Sale of Goods Act, 1930, specifies cases where a
breach of condition be treated as a breach of warranty. As a result of
which the buyer loses his right to rescind the contract and can claim
damages only.
In the following cases, a contract is not avoided even on account of a
breach of a condition:
(i) Where the buyer altogether waives the performance of the
condition. A party may for his own benefit, waive a stipulation. It
should be a voluntary waiver by buyer.
(ii) Where the buyer elects to treat the breach of the conditions, as
one of a warranty. That is to say, he may claim only damages
instead of repudiating the contract. Here, the buyer has not waived
the condition but decided to treat it as a warranty.
(iii) Where the contract is non-severable and the buyer has accepted
either the whole goods or any part thereof.
(iv) Where the fulfilment of any condition or warranty is excused by
law by reason of impossibility or otherwise.

16
 Mock Test Paper - Series I: August, 2025
Date of Paper: 13th August, 2025
Time of Paper: 2.00 P.M. to 4.00 P.M.
FOUNDATION COURSE
PAPER – 3: QUANTITATIVE APTITUDE
Time: 2 hours Marks: 100
1. The triplicate ratio of 8/3 and 16/5 is
(a) 625:216
(b) 26:36
(c) 225:36
(d) 125:216
2. if 2/5A = 3/7 B, then B:A is
(a) 15:14
(b) 14:15
(c) 10:21
(d) 6:35
3. If (3x + 2y)/(4x - 3y) = 3/2, then find x:y
(a) 13:6
(b) 13:18
(c) 15:2
(d) 18:6
4. The roots of the quadratic equation 9x 2 + 3kx + k = 0 are coincident, if
(a) k=±2
(b) k =± 3
(c) k =± 4
(d) k =± 5

1
5. if (x-1) is a factor of the cubic equation x 3 - 9x2 + 23x - 15 = 0, then roots of the cubic
equation are
(a) 1,3 and 5
(b) -1 and 3 and 5
(c) 1,-3 and 5
(d) 1,3 and -5
p2 q2 r2
6. log + log + log =
qr pr pq

(a) pqr
1
(b)
pqr
(c) 1
(d) 0
1
7. loga 3 = , find the value of a
6
(a) 9
(b) 81
(c) 27
(d) 3
8. If 2X × 3y×5z = 720 then the value of x, y, z ?
(a) 4, 2, 1
(b) 1, 2, 4
(c) 2, 4, 1
(d) 1, 4, 2
9. A man wants to cut three lengths from a single piece of boaard of length 91 cm . The
Second length is to be 3 cm longer than the shortest and third length is to be twice as
the shortest. What is the possible length for the shortest piece ?
(a) 22
(b) 20

2
 (c) 15
(d) 18
10. The sum of three numbers is 98. If the ratio of the first to second number is 2 : 3 and that
of the second to third is 5: 8, then the second number is
(a) 20
(b) 30
(c) 48
(d) 58
11. On solving the inequalities 6x + y ≥ 18, x + 4y ≥ 12, 2x + y ≥ 10; which of the following
are correct solutions?
(a) (0, 18), (12, 0), (4, 2) and (2, 6)
(b) (3,0), (0, 3), (4, 2) and (7, 6)
(c) (5,0), (0, 10), (2, 4) and (2, 6)
(d) (0, 18), (12, 0), (4, 2) and (0, 7)
12. Side is 4 cm shorter than the longest side. If the perimeter of the triangle is at least
61 cm, find the minimum length of the shortest side.
(a) 7 cm
(b) 9 cm
(c) 11 cm
(d) 13 cm
13. Find future value of annuity of ` 1000 made annualy for seven yeras at interest rate 16%
compounded annaualy. [ Given that (1.16) 7= 2.8262]
(a) ` 11413.75
(b) ` 11000.35
(c) ` 8756
(d) ` 9892.34
14. Assuming that the discount rate is 7% is p.a. How much would you pay to receive
` 500. Growing at 5% annually forever?
(a) ` 2,500

3
 (b) ` 5,000
(c) ` 7,500
(d) ` 25,000
15. Rajesh deposits ` 3,000 at the start of each quarter in his savings account. If the
accaount earns interest 5.75% per annuam compounded quarterly, how much money
(in `) while he have at the end of 4 years ? [ Given that (1.014375)16 = 1.25654]
(a) ` 54,308.6
(b) ` 58,553.6
(c) ` 68,353.6
(d) ` 63,624.4
16. The annual rate of simple interest is 12.5%. In how many years does principal doubles?
(a) 11 years
(b) 9 years
(c) 8 years
(d) 7 years
17. ` 5000 is paid every year for 10 years to pay off a loan . What is the loan amount of
interest rate be 14% p.a compounded annualy ?
(a) ` 26,000.90
(b) ` 26080.55
(c) ` 15000.21
(d) ` 16,345.11
18. ` 800 is invested at the end of each month in account paying interest 6% per year
compounded monthly. What is the future value of annuity after 10th payment ?
[Given that (1.005)10 = 1.0511]
(a) ` 4444
(b) ` 8766
(c) ` 3491
(d) ` 8176

4
19. Certain sum of money borrowed at simple interest to ` 2688 in three years and to ` 2784
in four years at the rate per annum equal to
(a) 4%
(b) 6%
(c) 5%
(d) 7%
20. Ravi made of an investment of ` 15,000 in a scheme and at the time of maturity the time
of maturity the amount was ` 25,000. If Compound Annual Growth Rate (CAGR) for this
investment is 8.88%. Calculate the approximate number of years for which he has
invested the amount.
(a) 6
(b) 7.7
(c) 5.5
(d) 7
21. Madhu takes a loan of ` 50,000 from ABC Bank [Link] rate of interest is 10% per
annum. The first instalmennt will be paid at the end of five year. Determine the amount
(in `) of equal instalments, if Madhu wishes to repay the amount in five years.
(a) ` 19,510
(b) ` 19,430
(c) ` 19,310
(d) ` 16,630
22. Rajesh invests ` 20,000 per year in a stock index fund, with earns 9% per year, for the
next ten [Link] would be closest value of accumulated investment upon payment of
the last installment ? [Given : (1.09)10 = 2.36736 ]
(a) ` 3,88,764.968
(b) ` 3,03,858.564
(c) ` 2,68,728.484
(d) ` 4,08,718.364

5
23. An investment is earning compounded interest ` 100 invested in the year 2 accumulated
to ` 105 by year 4. If ` 500 invested in the year 5, will become `_____by year 10.
(a) ` 364.80
(b) ` 564.80
(c) ` 464.80
(d) ` 664.80
24. An investor is saving to pay off an obligation of ` 15,250 which will due in seven years,
if the investor is earning 7.5% simple interest rate per annum , he must deposit ` _____
to meet the obligation.
(a) ` 8,000
(b) ` 9,000
(c) ` 10,000
(d) ` 11,000
25. The value of scooter is ` 1,00,000 find its depreciation is 10% p.a. Calculte total
depreciation value at the end of seven years .
(a) ` 47829.70
(b) ` 47000.90
(c) ` 42709
(d) ` 42,000
26. Effective rate of interest does not depend upon
(a) Amount of Principal
(b) Amount of Interest
(c) Number of conversion periods
(d) none of these
27. The number of traingles that can be formed by choosing the vertices from a set of 12
ponts, Seven of which lie on the same lie on the same straight line is :
(a) 185
(b) 175
(c) 115

6
 (d) 105
28. Five bulbs of which three are defective are to be tired in two light-points in a dark-room.
In how many trails the room shall be lightened ?
(a) 10
(b) 7
(c) 3
(d) none of these
29. In how many ways can a party of 4 men and 4 women be seated at a circular table, so
that no two women are adjacent ?
(a) 164
(b) 174
(c) 144
(d) 154
30. How many words can be formed with the letters of the word ‘ORIENTAL’. So that A and
E always oocupy odd places:
(a) 540
(b) 8460
(c) 8640
(d) 8450
31. The number of ways of painting the faces of a cube by 6 different colours is
(a) 30
(b) 36
(c) 24
(d) 1
32. The sum of an AP, whose first is -4 and last term is 146 is 7171. Find the value of n
(a) 99
(b) 100
(c) 101

7
 (d) 102
33. In a geometric progression, the second term is 12 and sixth term is 192. Find 11th term.
(a) 3,072
(b) 1,536
(c) 12,288
(d) 6,144
34. The first and last terms of an arithmetic progression are 5 and 905. Sum of the terms is
45,955. The number of terms is
(a) 99
(b) 100
(c) 101
(d) 102
35. The sum of first eight terms of geometric progression is five times the sum of the first
four terms. The common ratio is
(a) √3
(b) √2
(c) 4
(d) 2
36. If the sum of n terms of an AP is (3n2-n) and its common difference is 6, then its term is
(a) 3
(b) 2
(c) 4
(d) 1
37. Two finite sets have m and n elements .The total number of sub sets of first set is
56 more than the total number of subsets of the second set. The value of m and n are
(a) 6,3
(b) 7,6
(c) 5,1

8
 (d) 8,7
1
38. If f(p) = , then f -1 is
1- p

(a) 1-p
p -1
(b)
p

p
(c)
p -1

1
(d)
p

39. Determine f(x), given that f’(x) =12x2 -4x and f(-3) = 17
(a) f(x) = 4x3-2x2+143
(b) f(x) = 6x3-x4+137
(c) f(x) = 3x4-x3-137
(d) f(x) = 4x3-2x2-143
1

∫ x.e dx
x
40.
0

(a) -1
(b) 1
(c) e1
(d) 1/e
41. Find the missing term in each of the following series : 6, 13, 25, 51, 101,?
(a) 201
(b) 202
(c) 203
(d) 205

9
42. Find the missing term in each of the following series : 28, 33, 31, 36, 34,?
(a) 48
(b) 39
(c) 54
(d) 62
43. In a certain code, TEACHER is written as VGCEJGT, How is CHILDREN written in that code?
(a) EJKNEGTP
(b) EGKNEITP
(c) EJKNFGTO
(d) EJKNFTGP
44. In a certain code language, '253' means 'books are old'; '546' means 'man is old' and
‘378’ means 'buy good books'. What stands for 'are' in that code?
(a) 2
(b) 4
(c) 5
(d) 6
45. If SUMMER is coded as RUNNER, the code for WINTER will be
(a) SUITER
(b) VIOUER
(c) WALKER
(d) SUFFER
46. From home Neha goes towards North for her college and then she turns left and then
turns right, and finally she turns left and reaches college. In which direction her college
is situated with respect to her home ?
(a) South-West
(b) North-East
(c) North-West
(d) South-East

10
47. Y is in the East of X which is in the North of Z. If P is in the South of Z, then in which
direction of Y, is P?
(a) North
(b) South
(c) Soth-East
(d) South-West
48. Five villages P, Q, R, S, and T are situated close to each other. P is to the west of Q, R
is to the south of P. T is to the north of Q and S is to the east of T. Then, R is in which
direction with respect to S?
(a) North-West
(b) South-East
(c) South-West
(d) Data inadequate
49. If South-West becomes North, then what will North-East be?
(a) North
(b) South-East
(c) South
(d) East
50. In a clock at 12 : 30, hour needle is in North direction while minute needle is in South
direction. In which direction would be minute needle at 12:45?
(a) North-West
(b) South-East
(c) West
(d) East
51. Five students are standing in a circle. Abhinav is between Alok and Ankur. Apurva is on
the left of Abhishek. Alok is on the left of Apurva. Who is sitting next to Abhinav on his
right?
(a) Apurva
(b) Ankur

11
 (c) Abhishek
(d) Alok
Directions(Illustrations 52-54) Study the following information carefully and answer the
questions given below.
Six friends A, B, C, D, E and F are sitting in a row facing towards North. C is sitting between A
and E. D is not at the end. B is sitting at immediate right of E. F is not at the right end but D is
sitting at 3rd left of E.
52. How many persons are there to the right of D?
(a) One
(b) Two
(c) Three
(d) Four
53. Which of the following is sitting to the left of D?
(a) F
(b) C
(c) E
(d) A
54. Who is at the immediate left of C?
(a) A
(b) E
(c) Either E or A
(d) Cannot be determined
55. Five persons are sitting on a bench to be photo graphed , S is to the left of N and to the
right of B .M is to the right of N . R is between N amd M . Who is sitting immediate right
to R.
(a) B
(b) N
(c) M
(d) S

12
56. B is the brother of A whose only sister is mother of C, D is maternal grandmother of C
How is A related to D?
(a) Aunt
(b) Daughter-in-law
(c) Daughter
(d) Nephew
57. If X+Y maens X is the mother of Y; X-Y means X is the brother of Y; X%Y means X is the
father of Y and X×Y means X is the sister of Y, Which of the following shows that A is
the materanal uncle of B ?
(a) B+D×C-A
(b) B - D% A
(c) A-C+D×B
(d) A+C×D-B
Directions(Question 58-60) Read the following information and answer the questions given
below.
Anita is the niece of Prateek's mother. Anita's mother is Prateek's aunt. Rohan is Anita's
mother's brother. Rohan's mother is Anita's grandmother. From this information, deduce the
relationship between.
58. Rohan's mother is ______to Anita's mother.
(a) Aunt
(b) Mother
(c) No relation
(d) Sister
59. Prateek's and Anita's mother are ______
(a) Cousin sister
(b) Sister-in-law
(c) Friends
(d) Sisters
60. Rohan is Prateek's __________
(a) Brother

13
 (b) Brother-in-law
(c) Uncle
(d) Cousin brothers
61. The distribution of profits of a company follows:
(a) J - shaped frequency curve
(b) U - shaped frequency curve
(c) Bell - shaped frequency curve
(d) Any of these
62. Median of a distribution can be obtained from:
(a) Historgarm
(b) Frequency Polygon
(c) Less than type ogives
(d) None of these
63. Frequency density corresponding to a class interval is the ratio of
(a) Class Frequency to the Total Frequency
(b) Class Frequency to the class Length
(c) Class frequency to the class Frequency
(d) Class Frequency to the Cumulative Frequency.
64. Cost of sugar in a month under the heads raw Materials, labour, direct production and
others were 12, 20, 35 and 23 units respectively. What is the difference between the
central angles for the largest and smallest components of the cost of sugar?
(a) 72o
(b) 48o
(c) 56o
(d) 92o
65. In a group of persons, average weight is 60 kg. If the average of males and females taken
separately is 80 kg and 50 kg respectively, find the ratio of the number of males to that
of females.
(a) 2:3

14
 (b) 3:2
(c) 2:1
(d) 1:2
66. A train covered the first 5 km of its journey at a speed of 30km/hr and next 15 km at a
speed of 45 km/hr. The average speed of the train was :
(a) 38 km/hr
(b) 40 km/hr
(c) 36 km/hr
(d) 42 km/hr
67. If 2x + 3y + 4 = 0 and v(x) = 6 then v (y) is :
(a) 8/3
(b) 9
(c) -9
(d) 6
68. If the standard deviation of 1, 2, 3, 4, ...... 10 is σ, then the standard deviation of 11, 12,
13, 14, ....., 20 is :
(a) 10σ
(b) 10 + σ
(c) σ
(d) None of these
69. What is the standard deviation of the following series :
Measurements : 0-10 10-20 20-30 30-40
Frequency : 1 3 4 2
(a) 81
(b) 7.6
(c) 9
(d) 2.26

15
70. If the difference between Mean and Mode is 69, then the difference between Mean and
Median will be ________:
(a) 63
(b) 31.5
(c) 23
(d) None of these
71. If all observations in a distribution are increased by 6, then the variance of the series will
be ________
(a) Increased
(b) Decreased
(c) Unchanged
(d) None of these.
72. Which measure of dispersion is base on the absolute deviation only ?
(a) Range
(b) Standard Deviation
(c) Mean Devaition
(d) Quartile Devation
73. Calculaue the value of 3rd quartile from the following data 40, 35,51, 21, 25, 16, 29,
27, 32
(a) 36.25
(b) 30.25
(c) 25
(d) 35
74. The mean of 100 students was 45. Later on , it was discovered that the marks of two
students were misread as 85 and 54 instead of 58 and 45. Find correct mean.
(a) 68
(b) 36
(c) 44.64
(d) 52

16
75. The arithmetic maen and coefficienct of variation of data set x are respectively, 10 and
30. The variance of 30-2x is
(a) 28
(b) 32
(c) 34
(d) 36
76. The approximate ratio of SD, MD, QD is
(a) [Link]
(b) [Link]
(c) [Link]
(d) [Link]
77. The geometric mean of three numbers 40, 50 and x is 10, the value of x is
(a) 5
(b) 4
(c) 2
(d) ½
78. Difference between upper limit and lower limit of classs is known as
(a) Range
(b) Class Mark
(c) Class Size
(d) Class Boundary
79. Let P be a probability function on S = {X1, X2, X3) if P(X1)=1/4 and P(X3) = 1/3 then P(X2)
is equal to :
(a) 5/12
(b) 7/12
(c) 3/4
(d) none of these

17
80. A speaks truth in 60% of the cases and B in 90% of the cases. In what percentage of
cases are they likely to contradict each other in stating the same fact :
(a) 36%
(b) 42%
(c) 54%
(d) none of these.
81. A candidate is selected for interview for 3 posts. For the first there are 3 candidates, for
the second there are 4 and for the third there are 2. What are the chances of his getting
at least one post?
(a) 3/4
(b) 2/3
(c) 1/10
(d) 1
82. A card is drawn from a pack of playing cards and then another card is drawn without the
first being replaced. What is the probability of getting two kings :
(a) 7/52
(b) 1/221
(c) 3/221
(d) None of these.
83. The probability of a man hitting the target is 1/4. If he fires 7 times, the probability of
hitting the target at least twice is :
6
 5  3 
(a) 1 −   
 2  4 
6
15  3 
(b) 1−  
2 4
5
(c) 1− , 35
6
6
 3
(d) 1−  
4

18
84. If 5% of the electric bulbs manufactured by a company are defective, use Poisson
distribution to find the probability that in a sample of 100 bulbs, 5 bulbs will be defective.
[Given : e-5 = 0.007]
(a) 0.1823
(b) 0.1723
(c) 0.1623
(d) 0.1923
85. In a non- leap year, the probability of getting 53 Sundays or 53 Tuesdays or 53 Thursdays
is :
4
(a)
7
2
(b)
7
3
(c)
7
1
(d)
7
86. Examine the validity of the following : Mean and standard deviation of a binomial
distribution are 10 and 4 respective :
(a) Not valid
(b) Valid
(c) Both [a] and [b]
(d) Neither [a] nor [b]
87. For a Poisson variate X, P(x=1) =P(x=2) , what is the mean of x ?
(a) 1
(b) 3/2
(c) 2
(d) 5/2
88. Thity balls are serially numbered and placed in bag. Find chance that the first ball drawn
is a multiple of 3 or 5
(a) 8/15

19
 (b) 2/15
(c) 1/2
(d) 7/15
89. For a normal distribution , the first and third quartile are given to be 37 and 49, the mode
of the distribution is
(a) 37
(b) 49
(c) 43
(d) 45
90. The odds in favour of event A in a trail is 3:1. In a three independent trails , the proabibility
of non occurrence of the event A is
(a) 1/64
(b) 1/32
(c) 1/27
(d) 1/8
91. If 4y - 5x = 15 is the regression line of y on x and the coefficient of correlation between x
and y is 0.75, what is the value of the regression coefficient of x on y ?
(a) 0.45
(b) 0.9375
(c) 0.6
(d) None of these
92. If the regression line of y on x and of x on y are given by 2x + 3y = -1 and 5x + 6y = -1
then the arithmetic means of x and y are given by.
(a) (1,-1)
(b) (-1,1)
(c) (-1, -1)
(d) (2,3)
93. If correlation co-efficient r between x and y is 0.5 then r between x and –y is
(a) 1

20
 (b) 0.5
(c) -0.5
(d) 0
94. For a positive and perfectly correlated random varaiables, one of the regression
coefficeint is 1.4 and the standard devation of X is 2, the variance of Y is
(a) 2.37
(b) 6.76
(c) 6.56
(d) 3.16
95. For n pairs of of observations , the coefficient of concurrent devation is calculated as
1
. If there are six concurrent deviations, n =
3
(a) 11
(b) 10
(c) 9
(d) 8
96. Consumer Price Index Number goes up from 100 to 200 and salary of a worker is also
raised from 300 to 500, then Real Wage is
(a) 300
(b) 250
(c) 600
(d) 350
97. From the following data, find out an Index number for 2022 taking 2021 as base (using
simple aggregative method):
Commodities Price in 2021 Price in 2022
A 80 120
B 220 200
C 300 400

(a) 100

21
 (b) 120
(c) 108
(d) 190
98. From the following chain base index numbers based on 2015, find out new chain base
index number for the year 2022 by shifting the base year 2019.
Years 2015 2016 2017 2018 2019 2020 2021 2022
Index No: (Base 2015) 100 105 95 85 120 110 130 150

(a) 125
(b) 180
(c) 100
(d) 150
99. Laspyres índex number is aweighted aggregate method by taking _________ as weights.
(a) Quanatity consumed in the base year
(b) Quanatity consumed in the current year
(c) Value of items consumed in base year
(d) Vlaue of items consumed in the current year
100. Find the Paasche’s Index number for prices from the following
Commodity Base year Current year
Price Commodity Price Commodity
A 5 25 6 30
B 3 8 4 10
C 2 10 3 8
D 10 4 3 45

(a) 151.21
(b) 165.28
(c) 157.26
(d) 160.21

22
 Mock Test Paper - Series I: August, 2025
Date of Paper: 13th August, 2025
Time of Paper: 2.00 P.M. to 4.00 P.M.
FOUNDATION COURSE
PAPER – 3: QUANTITATIVE APTITUDE

1 (d) 2 (b) 3 (a) 4 (c) 5 (a)

6 (d) 7 (c) 8 (a) 9 (a) 10 (b)
11 (a) 12 (d) 13 (a) 14 (d) 15 (a)
16 (c) 17 (b) 18 (d) 19 (a) 20 (a)
21 (c) 22 (b) 23 (b) 24 (c) 25 (a)
26 (a) 27 (a) 28 (b) 29 (c) 30 (c)
31 (a) 32 (c) 33 (d) 34 (c) 35 (b)
36 (b) 37 (a) 38 (b) 39 (a) 40 (b)
41 (c) 42 (b) 43 (d) 44 (a) 45 (b)
46 (c) 47 (d) 48 (c) 49 (c) 50 (c)
51 (d) 52 (d) 53 (a) 54 (a) 55 (c)
56 (c) 57 (c) 58 (b) 59 (d) 60 (c)
61 (c) 62 (c) 63 (b) 64 (d) 65 (d)
66 (b) 67 (a) 68 (c) 69 (c) 70 (c)
71 (c) 72 (c) 73 (a) 74 (c) 75 (d)
76 (c) 77 (d) 78 (c) 79 (a) 80 (b)
81 (a) 82 (b) 83 (a) 84 (a) 85 (c)
86 (a) 87 (c) 88 (d) 89 (c) 90 (a)
91 (a) 92 (a) 93 (c) 94 (a) 95 (a)
96 (c) 97 (b) 98 (a) 99 (a) 100 (c)
 Mock Test Paper - Series I: August, 2025
Date of Paper: 14th August, 2025
Time of Paper: 2.00 P.M. to 4.00 P.M.

FOUNDATION COURSE
PAPER – 4: BUSINESS ECONOMICS
Time: 2 Hours Marks: 100
1. Bank Rate is the rate:
(a) At which RBI lends to the commercial banks
(b) At which RBI rediscounts the bills of the commercial banks
(c) Both (a) and (b)
(d) Neither (a) nor (b)
2. Which of the following is NOT an instrument of monetary policy?
(a) Cash Reserve Ratio
(b) Statutory Liquidity Ratio
(c) Public Expenditure Management
(d) Repo Rate
3. Reverse Repo Rate is:
(a) Rate at which RBI borrows from commercial banks
(b) Rate at which RBI lends to the commercial banks
(c) Both (a) and (b)
(d) Neither (a) nor (b)
4. Fiscal deficit can be remedied by:
(a) Borrowing money
(b) Printing Currency
(c) Both (a) and (b)
(d) Neither (a) nor (b)
5. Which of the following Budget documents is mandated by Fiscal Responsibility and
Budget Management Act, 2003?
(a) Annual Financial Statement (AFS)

1
 (b) Demand for Grants
(c) Finance Bill
(d) Macro-Economic Framework Statement
6. Non‐Plan Grants are determined by:
(a) Planning Commission
(b) Finance Commission
(c) Central Government
(d) State Government
7. Public Debt Management refers to:
(a) Terms of new bonds
(b) Proportion of different components of public debt
(c) Maturity
(d) All the above
8. Public Expenditure increases:
(a) Interest rate
(b) Employment
(c) Exports
(d) Imports
9. Which of the following are the instruments of money market?
(a) Call money
(b) Certificate of deposits
(c) Trade bills
(d) All of the above
10. Who issues a treasury bill?
(a) Any nationalised bank
(b) Any private sector bank
(c) Reserve Bank of India
(d) All of the above

2
11. It is a method by which banks borrow from each other to be able to maintain the cash
reserve ratio.
(a) Commercial bill
(b) Commercial papers
(c) Call money
(d) None of the above
12. The Dumping word refers to:
(a) Tariffs should be cut to make more money.
(b) A lower-priced sale of goods abroad is below the cost and price of their home
market.
(c) Buying goods at low prices in another country and selling them at a higher price
here.
(d) Expensive goods are being sold at low prices.
13. The margin for a currency long term must be retained with the repository by:
(a) The buyer
(b) The seller
(c) Both the buyer and the seller
(d) None
14. Money cost is considered by:
(a) Modern theory of trade
(b) Comparative cost advantage
(c) New Trade theory
(d) Factor equalization theorem
15. Factor abundance is considered to be part of international trade:
(a) Heckscher Ohlin theory of international trade
(b) Comparative cost advantage theory
(c) New Trade theory
(d) Factor Equalization theorem
16. The most controversial topic in the Doha Agenda?
(a) Agriculture

3
 (b) Industry
(c) Service
(d) None of these
17. Hedging is indicated by:
(a) Transaction in odd amounts
(b) Presentation in documentary support
(c) Frequency of such transactions
(d) None of these
18. In the long run____ affect the exchange rate:
(a) Transaction in odd amount
(b) Presentation of documentary support
(c) Frequency of such transaction
(d) None of these
19. India’s foreign exchange rate system is:
(a) Free Float
(b) Managed Float
(c) Fixed
(d) Fixed target of bank
20. Which of the following measures of money supply is known as Broad Money?
(a) M1
(b) M2
(c) M3
(d) M4
21. Which one is not true regarding the Market Stabilization Scheme (MSS)?
(a) It absorbs surplus liquidity of enduring nature arising out of large capital flows
(b) It absorbs surplus liquidity through sale of short, dated government securities and
treasury bills
(c) Mobilised surplus liquidity is held in the MSS accounts with the RBI

4
 (d) MSS account liquidity can be used for normal government expenditure of capital
nature
22. Business Economics is:
(a) A normative science
(b) Interdisciplinary
(c) Pragmatic
(d) All the above
23. In the free market economy the allocation of resources is determined by ______
(a) voting done by consumers
(b) A Central Planning Authority
(c) Consumer Preferences
(d) The level of profits of firms
24. Unlimited ends and limited means together present the problem of _______
(a) Scarcity of Resources
(b) Distribution
(c) Choice
(d) None of these
25. When two goods are complementary to each other the cross elasticity between them is:
(a) Negative
(b) Positive
(c) Constant
(d) None of these
26. The Indifference curve analysis is superior to utility analysis:
(a) It dispenses with the assumption of measurability of Utility
(b) It studies more than one commodity at a time
(c) It segregate income effect from substitution effect
(d) All the above
27. Comfort lie between:
(a) Inferior goods and necessities

5
 (b) Luxuries and Inferior good
(c) necessities and Luxuries
(d) None of the above
28. How would that budget line be affected if the price of both goods fell?
(a) The budget line could not shift
(b) The new budget line must be parallel to the old budget line
(c) The new budget line will have the same slope as the original so long as the prices
of both goods change in the same proportion
(d) None of these
29. Exception to the law of demand includes ___________
(a) Giffen goods
(b) Speculative goods
(c) Conspicuous necessities
(d) All the above
30. What are the Characteristics of labour?
(a) Labour is perishable
(b) Labour is an active
(c) Labour is mobile
(d) All the above
31. A consumer buys 80 units of a good at a price of ` 4 per unit. Suppose the price elasticity
of demand is -4. At what prices will he buys 60 units.
(a) 4.2 per unit
(b) 3.8 per unit
(c) 4 per unit
(d) None of these
32. A vertical supply curve parallel to Y axis implies that the elasticity of supply is:
(a) Zero
(b) Infinity
(c) Equal to One

6
 (d) None of these
33. In the third of three stages of Production:
(a) The marginal Product curve had a positive slope
(b) The marginal product curve lies completely below the average product curve
(c) The Total Product Increases
(d) None of these
34. Time element was conceived by:
(a) Adam Smith
(b) Alfred Marshall
(c) Pigou
(d) None of these
35. The Firm and the Industry are one and the same in:
(a) Perfect Competition
(b) Monopolistic Competition’
(c) Monopoly
(d) Oligopoly
36. A rational person does not act unless:
(a) The action is ethical
(b) The action produces marginal costs that exceed marginal benefit
(c) The action makes money for the person
(d) The marginal benefits that exceed marginal cost
37. The Structure of the Cold drink Industry in India is best described as:
(a) Perfectly Competitive
(b) Monopolistic
(c) Oligopolistic
(d) Monopolistically Competitive
38. In the long run equilibrium, the pure monopolist can make pure profits because of:
(a) Blocked entry
(b) The high price he charges

7
 (c) The Low LAC Costs
(d) Advertising
39. Full capacity is utilized only when there is:
(a) Monopoly
(b) Perfect Competition
(c) Price discrimination
(d) Oligopoly
40. The Kinked demand hypothesis is designed to explain in the context of oligopoly:
(a) Price and output determination
(b) Price rigidity
(c) Collusion among rivals
(d) None of these
41. Which of the following is not a variable in the Index of leading indicators:
(a) New consumer good orders
(b) Prime rate
(c) New building permits
(d) None of these
42. The main thrust of New Industrial Policy is to invite greater participation of:
(a) Public sector
(b) Private sector
(c) Stock Holders
(d) Bank
43. Pump Priming should be resorted to at the time of:
(a) Inflation
(b) Deflation
(c) Reflation
(d) Stagflation
44. The expansion of the government debt could result in:
(a) A decline in savings

8
 (b) An increase in interest
(c) A decline in Investment
(d) All the above
45. Psychological law of consumption is given by:
(a) Milton Friedman
(b) Pigou
(c) Tobin
(d) Keynes
46. One of the most important factors in trade reforms is to:
(a) Increase export duties
(b) Reduce import duties
(c) Keep export duties constant
(d) Keep import duties constant
47. Fiscal Policy relates to government decision in respect of:
(i) Taxation
(ii) Government spending
(iii) Government borrowing
(iv) Public debt
Codes
(a) iii and iv are correct
(b) ii, iii, iv
(c) i and ii are correct
(d) All the above are correct
48. An agreement between two countries to maintain a free trade area, a common external
tariff free mobility of capital and labour and degree of unification in government policies
and monetary policy is called:
(a) Common market
(b) Free Trade Area
(c) Economic Union

9
 (d) Custom Union
49. Margin requirement specified under instrument of monetary policy:
(a) Variable reserve requirement
(b) Statutory liquidity requirement
(c) Selective credit control
(d) Open market operation
50. High growth of which Industry provide a positive signal for Industrial Growth in Future?
(a) Capital good industries
(b) Basic good industries
(c) Durable consumer good industries
(d) Intermediate good Industries
51. Even as fixed average cost continues to fall the average variable cost begins to rise
because:
(a) return to factor start diminishing
(b) return to factor start rising
(c) input price start rising
(d) producer budget starts shrinking
52. Adverse Selection arises because of:
(a) Lack of information
(b) Wrong Information
(c) Asymmetrical Information
(d) Uncertainty of future
53. Which of the following is not used to measure inflation?
(a) Wholesale Price Index Number
(b) Consumer Price Index number
(c) Purchasing Power Parity Prices
(d) GDP deflator
54. Public goods are characterized by:
(1) Collective Consumption

10
 (2) Divisibility
(3) Non-Exclusion
(4) Rival Consumption
Select the correct answer from the code given below:
(a) 1 & 2 are correct
(b) 1 & 3 are correct
(c) 1 &4 are correct
(d) 2 & 4 are correct
55. Giffen Paradox occurs when income effect is:
(a) Greater than the substitution effect
(b) Equal to the substitution effect
(c) Less than substitution effect
(d) Negative and is greater than substitution effect
56. In case of deficit budget when the deficit are covered through taxes that budget is called:
(a) Unbalanced budget
(b) Surplus budget
(c) Balanced budget
(d) None of these
57. Which of the following is credited with Introduction of LPG Model of economic
development in India?
(a) Dr. C Rangarajan
(b) Dr. Montek Singh Ahluwalia
(c) Dr. Manmohan Singh
(d) None of these
58. In which of the following market situations/forms, firms are able to maximise profits?
(a) Price Leadership
(b) Cartel
(c) At the Kink Point
(d) Monopolistic Competition

11
59. The slope of aggregate demand becomes flatter?
(a) The more sensitive investment spending is to the rate of interest
(b) The more sensitive the demand for money is to the rate of interest
(c) The larger the nominal money supply
(d) None of these
60. When exchange rate is flexible a decrease in country B’s taxes:
(a) Has no effect upon output in country B
(b) Causes output in country B to increase
(c) Results in an increase in country B’s export
(d) None of these
61. Crowding Out occurs when _________
(a) A decrease in the money supply raises the rate of interest which crowds out
interest sensitive private sector spending
(b) An increase in taxes for the private sector reduces private sector disposable
income and spending
(c) A reduction in income taxes results in a higher interest rate which crowds out
interest sensitive private sector spending
(d) None of these
62. A change in autonomous spending is represented by:
(a) A movement along (C+I+G) spending line
(b) A shift of a (C+I+G) spending line
(c) A change in the behavioural coefficient
(d) None of these
63. In mixed economy the feature include existence of:
(a) Private Sector
(b) Public Sector
(c) Combined Sector
(d) All of these
64. Which of the following is demerit of capitalism:
(a) There is precedence of property rights over human right

12
 (b) It functions in a domestic framework
(c) High degree of operative efficiency
(d) None of these
65. Which of the following is included in study of Micro Economics:
(a) Product Pricing
(b) Factor Pricing
(c) Both (a) and (b)
(d) None of these
66. Scarcity definition is economics is given by:
(a) Lipsey
(b) Adam Smith
(c) J B Say
(d) Robinson
67. Snob effect is explained as:
(a) It is a function of consumption of others
(b) It is a function of price
(c) Both (a) and (b)
(d) None of these
68. Which of the following are the determinant of price elasticity of demand:
(a) Availability of substitutes
(b) Time period
(c) Tied demand
(d) All of these
69. If the cross elasticity is only- slightly below zero which of the following is correct?
(a) They are weak complements
(b) Negative and very high they are strong complements
(c) Both (a) and (b)
(d) None of these

13
70. Indifference Curve Analysis was proposed by _________
(a) J. R Hicks and R.G.D Allen
(b) Alfred Marshall
(c) Jeremy Bentham
(d) None of these
71. The rate at which the consumer is prepared to exchange-good x and y is:
(a) Marginal rate of Substitution
(b) Elasticity of Substitution
(c) Diminishing Marginal Utility
(d) None of these
72. Contraction of demand is the result of:
(a) Decrease in the number of consumers
(b) Increase in the price of the good concerned
(c) Price of related products
(d) None of these
73. Economic indicator required to predict the turning point of business cycle is:
(a) Leading Indicator
(b) Lagging Indicator
(c) Coincident Indicator
(d) All the above
74. Empirical evidence of liquidity trap is found during:
(a) COVID – 19
(b) Great Recession
(c) Global Financial Crisis
(d) None of the above
75. New Trade Theory was developed in:
(a) 1919
(b) 1970
(c) 2008

14
 (d) 1991
76. Which one is included in National Income?
(a) Transfer Earnings
(b) Sale proceeds of Shares and Bonds
(c) Black Money
(d) None of the Above
77. The major reasons for market failure is:
(a) Market Power
(b) Externalities
(c) Incomplete Information
(d) All the above
78. Which of the following instrument is not FDI Compliant Instrument:
(a) Equity Shares
(b) Compulsorily Convertible Debentures
(c) Redeemable Preference Share
(d) None of the above
79. An expansionary fiscal policy is used for:
(a) Reduction in Inflation
(b) Increase in Exports.
(c) Appreciation of Currency
(d) Close recessionary gap
80. What is GDP Deflector?
(a) It is GDP of Base Year
(b) It is ratio of nominal GDP in a given year to real GDP of that year
(c) It is GDP at current price
(d) It is GDP of current year at base year price
81. An increase in the price of a commodity when demand is inelastic causes the total
expenditures of consumers of the commodity to:
(a) Increase,

15
 (b) Decrease,
(c) Remain unchanged,
(d) any of the above.
82. At the point of producer equilibrium:
(a) The isoquant is tangent to the isocost,
(b) The MRTSLK equals PL/PK,
(c) MPL/PL / MPK/PK,
(d) All of the above.
83. Price varies by attributes such as location or by customer segment is _______degree of
price discrimination:
(a) First
(b) Second
(c) Third
(d) None of these
84. The Idea of ________in economics is that we have unlimited wants but limited resources:
(a) Opportunity Costs.
(b) Scarcity
(c) Marginal Analysis
(d) Specialization
85. Which of the following is a key assumption of the monopoly model?
(a) Barriers to entry
(b) A product with several substitutes
(c) Price-taking behavior
(d) Many identical producers
86. What is the full form of LIFE?
(a) Lifestyle for Economy
(b) Life for Everyone
(c) Lifestyle for Environment
(d) Living in Financial Equality

16
87. Which program was launched to promote organic farming?
(a) MIDH
(b) PMFBY
(c) PKVY
(d) None of these
88. Which of the following is a non-tariff barrier?
(a) Ad valorem duty
(b) Quotas
(c) Countervailing duty
(d) None of these
89. Most-Favoured Nation (MFN) principle under WTO means:
(a) Preferential tariffs for allies
(b) Equal treatment to all members
(c) Protection to domestic producers
(d) All of these
90. Which agreement replaced GATT and created WTO?
(a) Doha Round
(b) Tokyo Round
(c) Uruguay Round
(d) Marrakesh Protocol
91. What is a liquidity trap?
(a) Money becomes illiquid due to inflation
(b) Money supply becomes ineffective at zero interest rate
(c) Interest rate becomes infinite
(d) All the above
92. According to Friedman, the key determinant of money demand is:
(a) Current Income
(b) Future expectations only
(c) Permanent Income

17
 (d) Government Spending
93. According to Baumol, cash balances are kept to:
(a) Invest in stock
(b) Earn capital gains
(c) Minimize total transaction cost
(d) Hedge inflation
94. When demand increases and supply remains constant, what happens to equilibrium
price?
(a) Falls
(b) Rises
(c) Remains same
(d) Cannot say
95. Mixed income of self-employed includes:
(a) Rent and Interest only
(b) Wages only
(c) Capital and Labour income that cannot be separated
(d) Only profit
96. The LAC curve is also known as:
(a) Shut down curve
(b) Expansion path
(c) Planning curve
(d) None of these
97. Fiscal federalism refers to:
(a) Sharing of political power
(b) Sharing of fiscal functions and resources
(c) Decentralization of planning
(d) None of these

18
98. The percentage of Central tax share for 2021–26 is:
(a) 38%
(b) 41%
(c) 46%
(d) Not decided
99. Liquidity Adjustment Facility (LAF) includes:
(a) Only Repo
(b) Repo and Reverse Repo
(c) Only Reverse Repo
(d) None of these
100. The Monetary Policy Committee Sets:
(a) SLR
(b) CRR
(c) Repo rate
(d) Bank rate

19
 Mock Test Paper - Series I: August, 2025
Date of Paper: 14th August, 2025
Time of Paper: 2 P.M. to 4 P.M.
FOUNDATION COURSE
PAPER 4: BUSINESS ECONOMICS
ANSWERS

1. (c) 2. (c) 3. (a) 4. (c) 5. (d)

6. (c) 7. (d) 8. (b) 9. (a) 10. (c)
11. (b) 12. (d) 13. (c) 14. (a) 15. (a)
16. (a) 17. (d) 18. (d) 19. (b) 20. (c)
21. (d) 22. (d) 23. (c) 24. (c) 25. (a)
26. (d) 27. (c) 28. (c) 29. (d) 30. (d)
31. (a) 32. (a) 33. (b) 34. (b) 35. (c)
36. (D) 37. (b) 38. (a) 39. (b) 40. (b)
41. (b) 42. (b) 43. (b) 44. (d) 45. (d)
46. (b) 47. (d) 48. (c) 49. (c) 50 (a)
51. (a) 52. (c) 53. (c) 54. (b) 55. (d)
56. (c) 57. (c) 58. (d) 59. (a) 60. (a)
61. (c) 62. (c) 63. (d) 64. (a) 65. (c)
66. (d) 67. (a) 68 (a) 69 (a) 70 (a)
71. (a) 72. (b) 73. (a) 74. (c) 75. (b)
76. (d) 77. (d) 78. (c) 79. (d) 80. (b)
81. (a) 82. (d) 83. (c) 84. (b) 85. (a)
86. (c) 87. (c) 88. (b) 89. (b) 90 (c)
91. (b) 92. (c) 93. (c) 94. (b) 95. (c)
96. (c) 97. (b) 98. (b) 99. (b) 100. (c)