Assignment – A
Answer any five of the question below.
For the following transactions in ABC Ltd, prepare Accounting Equation.
Started Business with Cash Rs.36,000
Purchased goods for cash Rs.18,000 and credit Rs.12,000
Paid Rent in advance Rs.300
Paid Salary Rs.300 and Salary outstanding is Rs.60
Bought motorcycle for personal use Rs.3,000
Prepare a Trial Balance of Mohan & Co. as on March 31 2003
Sundry Creditors 1,88,520
Bills Payable 69,300
Provision for doubtful debts 13,200
Sundry debtors 1,56,000
Cash in hand 9,880
Cash in bank 1,45,340
Bills Receivable 58,440
Carriage outwards 12,910
Bad Debts 6,130
Sales Return 2,850
(a) Explain the nature, uses and limitations of Financial Statements
(b) Prepare a Trading Account of Mr. Anil for the year ending 31st March, 2009
Stock (April 1, 2008) 40,000
Return Outwards 3,000
Return Inward 2,500
Freight and Clearing Charges 5,000
Additional Information :-
Stock on 31st March, 2009 42,000
Explain what is Bank Reconciliation statement? Draw a Proforma of a Bank Reconciliation statement with favorable balance as per cash book. Illustrate with the help of an example.
Write short notes on any three of the following.
Dural Aspect Concept
Cash book is Journal as well as Ledge. Explain
Accrued Income and Outstanding Expenses
Convention of Conservatism
B and C enter a joint venture to prepare a film for the Government. The Government agrees to pay Rs.1,00,000. B contributes Rs.10,000 and C contributes Rs.15,000. These amounts are paid into a Joint Bank Account. Payments made out of the joint account were:
Purchases of Equipment Rs.6,000
Hire of equipments Rs.5,000
Other Expenses Rs.5,000
B paid Rs.2,000 as licensing fees. On completion, the film was found defective and Government made a deduction of Rs.10,000. The equipment was taken over by C at a valuation of Rs.2,000. Prepare P & L account in respect of the company.
Shakti International invited applications for 100,000 shares of Rs.10 each issued at a discount of 10% payable as follows:
Application Rs. 4 per share
Allotment Rs. 3
First call Re. 1
Final call Balance amount
The company received applications for 140,000 shares and pro rata allotment was made for applications for 120,000 shares who had applied for 600 shares failed to pay amount due on allotment and his shares were forfeited after the first call. Subsequently after the final call, half of his shares were re-issued to K for Rs.11 per share. Journalize and prepare balance sheet in the books of Shakti International.
Anil sent on 1st July, 2006 to Rahul goods costing Rs.50,000 and spent Rs.1,000 etc. On 3rd July 2006, Rahul received the goods and sent his acceptance to Anil Rs.30,000 payable at 3 months. Rahul spent Rs.2,000 on freight and cartage, Rs.500 on godown rent and Rs.300 on insurance. On 31st December, 2006 he sent his Account Sales (along with the amount due to) Showing that 4/5 of the goods had been sold for Rs.55,000. Rahul is entitled to a commission of 10%. One of the customers turned insolvent and could not pay Rs.600 due from him. Show the necessary ledger accounts.
X, Y and Z were partners in a firm sharing profits in the proportions of 1/2, 1/3 and 1/6 respectively. The Balance Sheet of the firm on 31st March 2001 was as follows:
Liabilities Amt. Assets Amt.
Exployees Provident Fund
15,000 Cash at Bank 5,000
6,000 Debtors 40,000
18,000 Less : Provision 2,000
Plant & Machinery
Z retired on the above date on the following terms:
Goodwill of the firm was valued at Rs.30,000
Value of patents was to be reduced by 20% and that of plant and machinery to 90%.
Provision for doubtful debts was to be raised to 6%.
Z took over the investments at a value of Rs.17,600.
Liability for workmen’s compensation to the extent of Rs.375 is to be created.
Trade creditors to the extent of 2.5% are not like to claim their dues.
Amount due to Z is to be settled on the following basis:
50% on retirement, 50% of the balance to be paid in 2 equal half yearly installments carrying interest at 5% p.a. and the balance by a Bill of Exchange (without interest) as 3 months.
The entire capital of the firm as newly constituted is fixed at Rs.100,000 and the partner’s capital accounts are to be adjusted in the profit sharing ratio. Any excess is to be transferred to current account and any deficit is to be brought in cash.
Prepare Revaluation Account, Partners’ Capital Accounts and Balance Sheet of X & Y and Z’s retirement. Also prepare Z’s Loan Account till it is fully paid.
Q.1: Which of the following is the activity which finance people are involved?
Q.2: Refers to part of current assets that fluctuates directly with changes in sales level.
Q.3: Profit and Loss Account is –
None of the above
Q.4: According to the account profession which of the following would be considered a cash-flow item from a “financing” activity?
A cash outflow to the government for taxes.
A cash outflow to repurchase the firm’s own common stock.
A cash outflow to lenders as interest.
A cash outflow to purchase bonds issued by another company
Q.5: Which of these items would be accounted for as an expense?
Repayment of a bank loan
Dividends of stockholders
The purchase of land
Payment of the current period’s rent
6: Which of the following would not be included on a balance sheet?
Q.7: The requirements that only transaction data capable of being expressed in terms of money be included in the accounting records relates to the –
Monetary unit assumption
Economic entity assumption
Both a & b
Q.8: Revenue is generally recognized at the pint of sales. Which principle is applied herein –
Revenue recognition principle
Q.9: Petty cash fund is –
Used to pay relatively small amounts
Reimbursed when the amount of money in the fund is reduced to a predetermined minimum amount
Established by estimating the amount of cash needed for disbursement of relatively small amounts during a specified period
All of the above
Q.10: Which of the following errors will be disclosed in the preparation of a trial balance?
Recording transaction in the wrong account
Duplication of a transaction in the accounting records
Posting only the debit portion of a particular journal entry
Recording the wrong amount for a transaction to both the account debited and the account credited.
Q.11: Book Value is –
The amount that is due at the maturity or due date of a note
The process of transferring the cost of natural resources to an expense account.
The cost of a fixed asset accumulated depreciation on the asset
The estimated value of a fixed asset at the end of its useful life.
Q.12: An examination of the sources and uses of funds is part of –
a forecasting technique
a funds flow analysis
a ration analysis
calculations for preparing the balance sheet
Q.13: Which of the following is not a cash outflow for the firm?
Q.14: What must be known or estimated in order to calculate depreciation?
The estimated useful life of the asset to the company
The acquisition cost of the asset
The estimated residual value of the asset
All of the above
Q.15: Information that goes into ____________ can be used to help prepare ________.
a forecast balance sheet; a forecast income statement
forecast financial statements; a cash budget
a cash budget; forecast financial statements
a forecast income statement; a cash budget
Q.16: Which of the following terms best relates to natural resources?
Q.17: A debit may signify –
An increase in an asset account
A decrease in an asset account
An increase in a liability account
An increase in the owner’s capital account
Q.18: When a partnership firm is to be dissolved, the following account is opened in the ledger –
Profit and Loss Adjustment Account
Profit and Loss Appropriation Account
Q.19: Settlement of accounts on the dissolution of a partnership firm is governed by the following section for the Indian Partnership Act, 1932
Q.20: A new partner brings in cash as his share of goodwill, this amount will be distributed among the fold partners –
In the old profit sharing ratio
In the ratio of their capital
In the ratio of sacrifice of profit by them
Q.21: In the absence of an agreement to the contrary, on drawings –
No interest is to be charged
Interest @5% per annum is to be charged
Interest @6% per annum is to be charged
Interest @12% per annum is to be charged
Q.22: For a charitable institution, subscriptions by its member constitute its –
Q.23: the most suitable method for providing depreciation on mines, oil wells and quarries –
Straight line method
Machine hour rate method
Q.24: In income and expenditure account, the excess of income over expenditure is called –
Q.25: In consignment the risk of loss is borne by –
The consignor only
The consignee only
The consignor as well as the consignee
Neither the consignor nor the consignee
Q.26: Carriage Outward Account will appear on the –
Debit side of the Trading Account
Debit side of the Profit and Loss Account
Credit side of the Trading Account
Credit side of the Profit and Loss Account
Q.27: At the end of an accounting year, trade debtors total Rs.50,000. Provisions for bad debts and discount on debtors are made @5% and @% respectively. Provisions on discount on debtors will be made for –
Q.28: The primary record of a credit purchase of a fixed asset is made in –
Q.29: Which of the following assets could be described as a current asset?
Machinery to manufacture goods for resale
Stock of goods for resale
Buildings to house the machinery
Land on which the buildings stand
Q.30: Which of the following equations properly represents a derivation of the fundamental accounting equation?
Assets + Liabilities = Capital
Assets + Capital = Liabilities
Asset = Liabilities + Capital
Assets = Capital – Liabilities
Q.31: It we take goods for own use we should —
Debit Drawings Account: Credit Stock Account
Debit Purchases Account: Credit Drawings Account
Debit Sales Account: Credit Stock Account
Debit Drawings Account: Credit Purchases Account
Q.32: Forfeited Shares Account is finally closed by the transfer of its balance to –
Securities Premium Account
General Reserve Account
Debenture Sinking Fund Account
Capital Reserve Account
Q.33: Capital Expenditure is –
The costs of running the business on a day-to-day
Money spent on selling fixed assets
The extra capital paid in by the proprietor
Money spent on buying fixed assets or adding value to them
Q.34: If it is required to maintain fixed capitals then the partner’s shares of profits must be –
Credited to capital accounts
Debited to partner’s current accounts
Debited to capital accounts
Credited to partners’ current accounts
Q.35: According to the money measurement concept, the following will be recorded in the books of account of the business –
Health of the managing director of the company
Quality of the company’ goods
Value of plant and machinery
Dedicated and trusted employees
Q.36: Sales made to Mahesh for cash should be debited to –
Q.37: A bank reconciliation is prepared so that the difference in the under-mentioned balance is reconciled
The difference in the balance of the bank and cash balances
The difference in the balance in the Pass Book in the beginning and at the end
The difference in the Pass Book and Cash Book balance
Q.38: In the absence of any provisions in the partnership agreement, profits and losses are shared by the partners –
In the ratio of their capitals
In the ratio of loans given by them to the partnership firm
None of the above
Q.39: Under the Written Down Value method, the amount of depreciation goes on________ from year to year
None of the above
Q.40: How will the purchase of an asset on credit affect the accounting equation?
It will decrease the assets and decrease the capital
It will decrease the assets and decrease the liabilities
It will increase the assets and decrease another asset
It will increase the assets and increase the liabilities