Importance of Solving Questions for Effective CA Exam Preparation

Apr 06 , 2021
Importance of MCQ solving

What is the one thing which CA aspirants never do? The simple answer is, they never forget to practice solving questions when they prepare for the CA exams.

Efficient and effective CA preparation has many aspects to it and the most important one is solving questions regularly to check a student’s understanding of a particular topic and his/her preparation status. 

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The old saying of ‘Practice makes perfect’ is apt in every exam preparation. When it comes to CA exam preparation, this phrase deserves a special mention as a thorough understanding of basic concepts is crucial for CA aspirants to ace the CA examinations. A candidate can score good marks/rank in the CA exams only through regular practice.

Solving questions and answering them correctly during preparation not only gives a boost to your confidence level but also gives you a deeper understanding of a topic. In this blog, we will understand how solving questions on a regular basis can help you to crack CA exams with flying colours.

Also read: How to tackle distractions while studying?

Why Solve Questions during preparation?  

It’s only when you will solve questions with utmost attention, that you will be able to understand and solve similar problems which will assist you in better exam preparation. It can be compared to driving a car, you can only drive it if it has fuel/charging. CA exam preparation can be considered productive only when you solve various practical questions pertaining to a chapter. Chapters such as Derivatives Analysis and Valuation, Security Valuation, Forex, Consolidated and Separate Financial Statements of Group Entities, Preparation of Financial Statements, Computation of Total Income and Tax Payable, Bank Reconciliation Statement, Trial Balance are practical in nature and demand thorough and constant practice to understand them better.  

Let’s understand it with the help of an example.

ABC Ltd. has 1,000,000 quantity of Rs.1 ordinary shares and 1,000 quantity of Rs.100 10% convertible bonds (issued at par), each convertible into 20 ordinary shares on demand, all of which have been in issue for the whole of the reporting period.

ABC Ltd’s share price is Rs. 4.50 per share and earnings for the period are Rs. 500,000. The tax rate applicable to the entity is 21%.

Calculate the basic EPS, earnings per incremental share for the convertible bonds, and diluted EPS.

Now, this question is purely practical and unless you don’t solve it, you won’t be able to understand and apply the concepts/formulas which are required to get the correct answer. If you will just focus on the theory aspect of the chapter and ignore the practical questions associated with it, then you are surely missing the important ingredient of exam preparation.

The answer to the above-stated question, if solved properly, is:

Basic EPS is Rs. 0.50 per share ( i.e 500,000/1,000,000 )

The earnings per incremental share for the convertible bonds is calculated as follows:

Earning effect = No. of bonds * nominal value * interest cost *  (1- applicable tax rate) = 1,000 * 100 * 10% * (1-0.21) = Rs. 7,900.

Incremental shares calculation:

Assume all bonds are converted to shares, even though this converts Rs.100 worth of bonds into 20 shares worth only Rs.90 and is therefore not economically rational. This gives 1000*20 = 20,000 additional shares.

Earnings per incremental share = Rs. 7,900/20,000 = Rs. 0.395

Diluted EPS = ( Rs 500,000 + Rs. 7,900) / ( 1,000,000 + 20,000 ) = Rs. 0.498 per share.

The answer clearly depicts the importance of solving problems and the amount of calculations, formulas, and understanding required for getting the right answer. So, it is strongly recommended to CA aspirants to give equal time and devotion to solving practical questions to score those ‘Extra’ marks in CA exams. However, there are a few things that you should avoid during your exam preparation at any cost.

Read: 6 Things you should avoid in CA exam preparation.

Here are some advantages you get, if you equally focus on solving questions along with theory. Let’s have a look at them.

Advantages of Solving Questions

The prominent advantages of solving questions during CA exam preparation are as follow:

  • Through regular practice, students learn and develop new techniques for problem-solving which ultimately improves the quality of answers.
  • It gives conceptual clarity and helps in better retention of a topic.
  • It gives a major boost to the confidence level.
  • Students when reading a question automatically get a fair idea of the concept/formula to be used in the question.
  • The practice of solving questions during preparation also helps students with time management.
  • It also helps you to identify mistakes and rectify them during your preparation to improve your final score. It gives students a reality check of their preparation.

So, it’s time to buckle up and give a fresh start to your CA exam preparation with a new perspective.

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All the best for your exams. Stay tuned for more updates. 

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