The clock gains 10 minutes in 24 hours, so in 24 hours, the clock will show 10 minutes more than the true time. Since the time is being observed after 1 day and 5 hours (from 10 am to 3 pm next day), we calculate the total time elapsed:
\[ 24 \, \text{hours} + 5 \, \text{hours} = 29 \, \text{hours}. \]
The clock gains 10 minutes for every 24 hours, so in 29 hours, it will gain:
\[ \frac{10 \times 29}{24} = 12.08 \, \text{minutes}. \]
Thus, when the watch shows 3 pm, the true time is:
\[ 3 : 00 - 12.08 \, \text{minutes} = 2 : 47 : 52 \, \text{pm}. \]
So, the true time is approximately 48 minutes past 2 pm.