1. Commerce Option: To Opt or not to opt?
  2. How to prepare Commerce Paper-1
  3. How to prepare Commerce Paper-2
  4. Notes making for Paper-2
  5. Mains-2014: Commerce Paper1
  6. Mains-2014: Commerce Paper2

Commerce Option: To Opt or not to opt?

This is a guest post by Mr.Raj Karan Agarwal CA,CS,B.Com(H) on how to prepare commerce optional subject for Civil service Mains exam. Mr. Agarwal had scored 144+128=272 marks in Commerce optional, and secured 474th rank in his 1st Attempt in CSE-2013. At present, he is undergoing training for Indian Revenue Service (IRS).


  • Commerce is one of the technical optional and provides advantage to commerce graduates as your college and professional studies are utilized in both paper 1 & 2. There are about 150 marks worth numerical, which can fetch very good marks. Besides, large portion of the syllabus is static in nature.
  • However, Commerce is also one of the lengthy optional in terms of time required for preparation & revision.
  • The biggest hurdle is that commerce requires vast reading and then integration from different sources, for a comprehensive coverage in paper 1 and 2.
  • Since UPSC numericals are very unpredictable, it requires high level of competence.
  • In this scenario, there is no harm in taking coaching if you’re uncomfortable. For example, I did join coaching for Paper-II, since the basics are taught in class and regular test provide a check. Besides, time is saved since you don’t have to refer to material from different sources
  • But a word of caution: coaching helps only around 20-25%, rest is application and hardwork of student itself.

Commerce Paper1

  • For CA students who have not joined any coaching classes- refer to your CA PCC/IPCC material, instead of putting time in different standard books.
  • You can also rely on coaching class, but only after prudently analyzing past year questions.
Topic & Prep. Source Remarks
Financial Accounting : JR Monga & DS Rawat(For AS) OR Material of CA PCC.
  • Focus more on Accounting Standards and presentation (for numericals) should be taken care of properly with working notes.
  • No need to practice again & again. Just mark the important adjustments/questions and refer them only in subsequent revisions.
Cost Accounting: Maheswari & Mittal plus theoretical part from either book itself or some compilation like CA PCC scanner. Also material of RANKER’s CLASSES (RC) provides very good compilation of numericals and theory. OR Material of CA PCC can be referred. Emphasis should be given on theory equally.
Taxation: GirishAhuja OR CA PCC. One can go in depth initially and mark important adjustments and later on focus on basics itself. Again theoretical portion is important like exceptions to any section/rule etc. Overall questions are of graduation level only.
Auditing : CA PCC notes for relevant topics or Aruna Jha or Compilation from RC.
Financial Management : RP Rastogi OR CA PCC notes plus relevant topics from CA Final can also be seen. FM has been the most wicked portion for past few years but don’t try to control this part as question have wide range. Just see you’re aware of different models/concepts/terms that come along.
Financial Markets and Institution :Relevant Chapters from Indian Financial system by Bharati V Pathak or any other book and newspaper cuttings provided by RC. Keep track of steps/initiatives by RBI,SEBI,IRDA etc.
  • I did not prepare this section in detail, since it is highly unpredictable and I suggest not to waste much time in it.
  • For paper 1, exam day revision is impossible and therefore make chaperwise notes of important formulae and adjustment which are tricky especially for Acct,FM and Cost.For tax,one can go in slight details also.

Capsule for Exam Hall

  • In exam hall patience & calmness holds the key since there will definitely be bouncers (unpredictable & unexpected questions). You’ve to smartly avoid them in Choice and for compulsory questions don’t beat around the bush if you don’t know the answer.
  • Rather invest the time in known questions & numericals.
  • Even if 25-40 marks questions are unanswered, still you can achieve 140 easily. Try to attempt more numerials than theory.

Paper-1 Analysis

2013 Paper was highly unpredictable and high level of difficulty was there with average score being 100 only for many candidates.
2014 In 2014 exactly opposite paper was set. Questions were easy.However,in both the years mix of theory and practical was there.

How to prepare Commerce Paper2

  • I followed Rankers material and class notes sincerely for paper 2 together with good reading of basic books mentioned below and compiled all of them in around 80 pages Organization Theory and Behavior, Human Resource Management and Industrial Relations.
  • Organisation Theory & OB : SP Robbins OT book (for different models/terms/concepts),Singh & chhabra. SP Robbins OB book(only relevant chapters) PLUS RC notes and answers.
  • Human Resources Management (HRM) : CB Gupta,RC notes and answers.
  • Industrial Relations : RC notes are sufficient.


  • Here preparation should start with a general reading & developing the conceptual clarity with subsequent reading focusing upon important definition by authors/thinkers, establishing links with other topics/chapters and current corporate practices.
  • After reading the definition & basic explanation try to think before studying in detail.

Notes making for Paper-II

  • Note making is very important here wherein diagrams,verbatim defintions(by thinkers),examples & only core points should be noted without explanation.
  • Topics from all sources should be integrated at one place.
  • Important lines from class notes should be on the lips like NR Murthy says “ our most important assets walk out everyday and we have to make sure they return” in context of HRM.

Capsule for Exam Hall

  • For compulsory question same as for Paper 1.Choice here is more important as little knowledge of every question shall be there.
  • So,after choice careful reading of question is needed before writing & while writing also.
  • Make use of all chapters and topics in your answers but basic tone of answer should be maintained like for HR answers,focus more on such dimensions and less of OB etc.Also avoid GS type and general answers.

Answer writing

  1. For Long answers-Introduction can be either indirect through some lines or quotes or direct with general explanation followed by exact definition.
  2. Thereafter topic need to be explained in short followed by establishing links with other chapters and focusing on the question again. Here give a pause,read the question again & think again. Diagrams can be used effectively.
  3. Ending of the answers should always be visionary/positive and solution based with example if needed or with some lines.
  4. There should be mixed use of paras and points. Examples should be quoted wherever possible but refrain from using one enterprise again & again.
  5. For short answers, write the basic definition and then directly hit the core.
  6. Ending should be solution based. For merit/demerit/feature use diagram or points.
  7. Test series can be joined for practice.

Paper-II Analysis for 2013 & 2014

  • In both the years questions were similar but 2014 was more general in nature.
  • Level of difficulty was reduced.

Mains-2014: Commerce Paper1

Time allowed : Three Hours Maximum Marks : 250

Question Paper Specific Instructions

  1. Please read each of the following instructions carefully before attempting questions :
  2. There are EIGHT questions divided in TWO SECTIONS and printed both in HINDI and in ENGLISH.
  3. Candidate has to attempt FIVE questions in all.
  4. Questions no. 1 and 5 are compulsory and out of the remaining, THREE are to be attempted choosing at least ONE from each section.
  5. The number of marks carried by a question/part is indicated against it.
  6. Answers must be written in the medium authorized in the Admission Certificate which must be stated clearly on the cover of this Question-cum-Answer (QCA) Booklet in the space provided. No marks will be given for answers written in a medium other than the authorized one.
  7. Word limit in questions, wherever specified, should be adhered to.
  8. Assume suitable data, if considered necessary, and indicate the same clearly.
  9. Attempts of questions shall be counted in chronological order. Unless struck off, attempt of a question shall be counted even if attempted partly. Any page or portion of the page left blank in the Question-cum-Answer Booklet must be clearly struck off.


Q1. Answer the following in about.150 words each: 10×5=50

  1. ‘Accounting is a language of business.’ Comment.
  2. Discuss Zero Base Budgeting as a tool of planning and controlling.
  3. Write a short note ,on. the provisions of Indian Accounting Standards regarding Inventories.
  4. What are the main provisions of Companies Act, 2013 with respect to the audit related to Dividends ?
  5. What are the various ‘Heads of Income’ ? Explain briefly each head of income.

Q2. Modern Toys Ltd. had budgeted the following sales for the month of June :

Toy-A 9000 Units at Rs.50 Per unit
Toy-B 6500 Units at Rs.100 Per unit
Toy-C 12000 Units at Rs.150 Per unit

As against this, the actual sales were as under :

Toy-A 10000Units at Rs.55 Per unit
Toy-B 7000 Units at Rs.95 Per unit
Toy-C 11000 Units at Rs.156 Per unit

The cost per unit of Toy A, B and C was Rs. 45, Rs. 85 and Rs. 130 respectively. Compute the different variances to explain the difference between the budgeted and actual profit. 20 marks

An analysis of costs of Namya Polymer Ltd. led to the following information :

Cost of element Variable Cost as % of Sales Fixed Cost Rs.
(1)Direct Materials 32%
(2)Direct Labour 28%
(3)Factory Overheads 12% 189900
(4) Distribution Expenses 5% 58400
(5) Administration Expenses 2% 66700

Budgeted Sales for the next year are 18,50,000. You are required to determine following: 20 marks

  1. the break-even sales volume.
  2. the profit at the budgeted sales volume.
  3. the profit, if actual sales drop by 10 percent of budgeted sales.
  4. the profit, if actual sales increase by 5 percent of budgeted sales.

Q2.(c) Describe the salient features relating to ‘Value Added Tax’. 10 marks

Q3. ABC Ltd. invited applications for 1,00,000 equity shares of 100 each at a discount of 6% payable as under :

  • On Application Rs. 25
  • On Allotment Rs. 34
  • On First and Final Call Rs. 35

The applications were received for 90,000 shares and all of these were accepted. All payments due were received except the first and final call on 1,000 shares, which were forfeited after doing all legal formalities. 500 shares out of them were re-issued at 90 each as fully paid-up.

  • Pass entries in (i) the Cash Book and (ii) Journal Book of ABC Ltd. 20 marks

(b)The following are the balances of Manohar Co. Ltd. as on 31st March, 2014:

Debit Rs. Credit Rs.
Premises 3072000 Share Capital 4000000
Plant 3300000 12%Debentures 3000000
Stock(1-4-2013) 750000 Profit andLoss A/c 262500
Debtors 870000 Bills Payable 370000
Goodwill 250000 Creditors 400000
Cash and Bank 406500 Sales 4150000
Calls in Arrear 75000 General Reserve 250000
Interim Dividend paid 392500 Baddebtsprovisionason1-4-2013 35000
Purchases 1850000
Preliminary Expenses 50000
Wages 979800
General Expenses 68350
Salaries 202250
Bad debts 21100
Debenture Interest paid 180000
total 12467500 total 12467500

Additional Information:

  1. Depreciate Plant by 15%.
  2. Write-off 5,000:from Preliminary Expenses.
  3. Half year’s Debenture interest due.
  4. Create 5% provision on Debtors for doubtful debts.
  5. Provide for Income Tax @ 35%.
  6. Stock on 31st March, 2014 was 9,50,000.
  7. A claim of 25,000 for workmen’s compensation is being disputed by the company.
  8. Prepare Final Accounts of the company. 30 marks

Q4. Answer following

  1. Distinguish between Job Costing and Process Costing. 20 marks
  2. State the basic conditions of Income-Tax Act to “determine the residential status of an individual, a company and all other persons. 15 marks
  3. Prepare a note on deductions from gross total income in respect of certain incomes and certain payments for individuals. 15 marks

Paper-1: SECTION B

Q5. Answer the following in about.150 words each: 10×5=50

  1. “Internal Rate of Return Method of Capital budgeting is considered to be superior to Payback Period Method.” — Critically evaluate. 10 marks
  2. What is the relationship between leverage and cost of capital as per the (i) net income approach and (ii) net operating income approach of theories of capital structure ? 10 marks
  3. Banks are permitted to enter the insurance sector. Critically evaluate the current scenario of Bancassurance in India. 10 marks
  4. What is the justification for the goal of maximizing the wealth of shareholders? 10 marks

Q6. From the following Balance Sheets as on December, 2012 and 2013, you are required to prepare a Statement of Funds Flow and Schedule of Changes in Working Capital :

Liabilities 2012 Rs. 2013 Rs.
Share Capital 200000 250000
General Reserve 50000 60000
Profit and Loss 30500 30600
Long Term Loan 70000
Sundry Creditors 150000 135200
Provision for Tax 30000 35000
530500 510800
Assets 2012 Rs. 2013 Rs.
Land and Building 200000 190000
Machinery 150000 169000
Stock 100000 74000
Sundry Debtors 80000 64200
Cash 500 600
Bank 8000
Goodwill 5000
530500 510800

Additional information during the year ended 2013 is as under :

  1. Dividend of. 23,000 was paid.
  2. Assets of other company were purchased for Rs. 50,000 payable in shares. Assets purchased were Stock of Rs. 20,000, Machinery Rs. 25,000 and Goodwill Rs. 5,000.
  3. Machinery was further purchased for Rs. 8,000.
  4. Depreciation written off on machinery Rs. 12,000.
  5. Income Tax provided during the year Rs. 33,000.
  6. Loss on sale of machine Rs. 200 was written off to General Reserve. 20 marks

(b)Calculate the explicit cost of debenture for each of the following situations, assuming (i) tax rate of 35%, (ii) coupon rate of interest 10%, (iii) face value of debenture 1,000, (iv) maturity — 20 years

  1. If debentures are sold at a premium of 10% and floatation costs are 2%.
  2. If debentures are sold at a discount of 5% and floatation costs are 3%. 20 marks

The present value factor of an annuity of 1 for 20 years and present value factor of 1 for the 20th year are as under :

For Rs.1 9% 10% 11%
PV factor of Annuity for 1-20 years 9.129 8.514 7.963
PV factor for the year : 20th 0.178 0.149 0.124

Q6.(c) What is Corporate Restructuring with special reference to Mergers and Acquisitions? 10 marks

Q7. Rudra Ltd.’s Balance Sheet as on 31-12-2013 is as under :

Balance Sheet (As on 31-12-2013)

Liabilities Rs. Assets Rs.
EquityCapital(Rs.10pershare) 60000 Net Fixed Assets 150000
10%Long-termLoan 80000 Current Assets 50000
Retained Earnings 20000
Current Liabilities 40000
total 200000 total 200000

The company’s total assets turnover ratio is 3-0. Its fixed operating costs are Rs.1,00,000. Its variable operating costs to sales ratio is 40%. The income tax rate is 35%.

  1. Calculate the Degree of operating leverage, financial leverage and combined leverage.
  2. Determine the likely level of EBIT if EPS is (a) Rs. 3 and (b) 0 (zero). 20 marks

(b)Earnings per share of Shree Laxmi Textile Ltd. is Rs. 20 per share. The company has an internal rate of return of 12 percent and the capitalisation rate is 10 percent. Determine the following using Walter’s Dividend Model :

  1. Optimum payout ratio of the firm.
  2. The price of the share at this payout. 10 marks

(c)Using the following information, complete the Balance Sheet given below:

Balance Sheet

Capital and Liabilities Rs. Assets Rs.
Equity Capital 200000 Plant and Equipments ?
Retained Earnings 300000 Inventory ?
Creditors and Bills Payable ? Debtors ?
Cash ?
Total Total

Other Information :

  1. Total debt to Net worth Ratio is : 0.5 : 1.0
  2. Turnover on Total Assets : 2
  3. Gross Profit margin : 30%
  4. Average Collection Period (based on 360 days year) : 40 Days
  5. Inventory Turnover (based on cost of goods sold and year end inventory) : 3 times
  6. Acid Test Ratio : 0.75: 1.0. 20 marks

Q8. Answer the following: (20+10+20 marks)

  1. Critically evaluate the functioning of primary and secondary markets in relation to (i) money market and (ii) capital market instruments. 20 marks
  2. How is venture capital different from traditional financing ? What are the different types of venture capital funds ? 10 marks
  3. Critically evaluate Reserve Bank of India and (i) its monetary policy and (ii) its credit policy. 20 marks

Mains-2014: Commerce Paper2


Time Allowed : Three Hours Maximum Marks : 250

  1. Candidate has to attempt FIVE questions in all.
  2. Question Nos. 1 and 5 are compulsory and out of the remaining, THREE are to be attempted choosing at least ONE question from each Section. PAPER-2 SECTION—A

Q1. Explain the following (each in about 150 words) : 10×5=50

  1. Cybernetic Aspects of System Theory
  2. Scope of Impression Management
  3. Fishnet Organization
  4. Problems in Matrix Organization Structure
  5. Managerial Grid

Q2. Answer the following (20+20+10 marks)

  1. “Organization is the human group deliberately and consciously created for the attainment of certain goals with rational coordination of closely relevant activities.” In the light of this statement, discuss the distinguishing features of an organization. 20 marks
  2. “Quality circles are getting popularity for academic purpose, but they tend to show little or no effect on employee satisfaction and productivity.” Comment. How can these quality circles be made more effective and viable in their approach? 20 marks
  3. What is virtual organization? Do you visualize it in Indian scenario? Examine its merits and limitations. 10 marks

Q3. Answer the following (20+20+10 marks)

  1. “Most of the theories of motivation are complementary, but not competitive to each other. Hence, there is need to understand their interrelationships and integrate them.” Discuss the statement and suggest action plan for integration. 20 marks
  2. “There is a positive relationship between the organizational environment and its structural design.” Make an analysis of this statement and in the light of the same, suggest steps to design an organization. 20 marks
  3. What is charismatic leadership? Are charismatic leaders born or made? How do they influence followers? Discuss. 10 marks

Q4. Answer the following (20+20+10 marks)

  1. “Conflict in an organization is not always problematic, but it paves the way for development.” Elucidate. What are the possible implications of this statement? Develop a suggestive framework to make the conflict management more responsive and effective. 20 marks
  2. “Organizational politics refers to intentional behaviours that are designed to enhance or protect a person’s influence and self-interest.” Analyze the statement and discuss the reasons contributing the political behaviour and the way-outs to avoid organizational politics. 20 marks
  3. “Organizational culture emphasizes building on employees’ strength and rewards more than punishments. It emphasizes individual vitality and growth.” Elucidate. 10 marks


Q5. Explain the following (each in about 150 words) : 10×5=50

  1. Ethical Training
  2. Stock Option Scheme
  3. HR Outsourcing
  4. Induction vs. Orientation Programme
  5. e-Recruitment

Q6. Answer the following (20+20+10 marks)

  1. Why are workers not more proactive in job analysis programmes, though it is more helpful in their possible development in comparison to managers? Identify the reasons and offer suggestions to make the job analysis more relevant and effective. 20 marks
  2. “Indian trade union movement is plagued by intraunion rivalry, outside leadership and political patronage, and has failed, to serve the purpose of its own formation.” Elucidate and develop a suggestive framework to improve the functioning of trade unions in India. 20 marks
  3. Examine the influence of ILO on labour policy, labour legislation and trade union movement in India. 10 marks

Q7. Answer the following (20+20+10 marks)

  1. “Disinvestment programme has adversely affected the IR climate in public enterprises.” Assess the implications of this statement. In this context, make out a viable plan to protect the interest of employees. 20 marks
  2. “There is a need for a balanced exit policy for the mutual benefit of employer and employees.” Keeping this in your mind, outline the salient features of exit policy statement. 20 marks
  3. There are two approaches of managing industrial disputes in an organization, viz., preventive and curative. Discuss these two approaches. 10 marks

Q8. Answer the following (20+20+10 marks)

  1. “Skill development programme fits into recruitment policy of Indian employers and Government is also proactive to it.” Comment on the statement and identify the issues as to why this programme is not successful in India so far. 20 marks
  2. “Workers have not been empowered to participate in worker participation management programmes, though it is a popular instrument of industrial democracy.” In the light of the statement, analyze the factors responsible for it and offer suggestions to make the worker participation more viable and effective. 20 marks
  3. Examine the reasons and impact of growing labour turnover in Indian IT companies, though their compensation package is better and more competitive. Prepare a plan of action to improve their retention. 10 marks