1 Assignment BBA 101

JAIPUR NATIONAL UNIVERSITY, JAIPUR School of Distance Education & Learning Internal Assignment No. 1 Bachelor of Business Administration (BBA)- (Retalling) Paper Code: Paper Title:

BBA – 101 Fundamentals of Accounting

Last date of submission: submission:

Max. Marks: 15

Note : Question No. 1 is of short answer type and is compulsory for all the students. It carries 5 Marks. (Word limits 50-100) Q. 1. (i) (ii) (iii) (iv) (v)

Answer all the questions: What do you mean by accounting? Distinguish between between Profit and Loss Account and trading a/c. What do you mean by incomplete records? What do you mean by forfeited of share? shar e? Explain with example. Explain any one method of depreciation .

Note: Answer any two questions. Each question carries 5 marks (Word limits 500) Q. 2. What do you you mean by accounting? accoun ting? Who Who are the users of of accounting? account ing? Explain its scope. Q. 3. Define debenture. Explain the various types of debentures. Q. 4. Journalise Journa lise the following transactions transaction s in the books of M/s Sohan & sons: 2008 Jan., 01 Goods purchase for cash Jan., 02 Purchase good from Ram Jan., 04 Goods sold to Laxman Jan., 05 Furniture purchase for cash Jan., 07 Charge interest on capital Jan., 11 Goods return from Laxman Jan., 12 Goods return to Ram Jan., 14 Withdrew from bank for private use Jan., 16 Give in charity: Cash Goods Jan., 19 Salaries paid by cheque Jan., 21 Goods sold to Sachin on 10% trade discount and 8% Cash discount Jan., 23 Laxman become insolvent and could pay only 75 paise in a rupee Jan., 26 Proprietor Propriet or took goods for his personal use Jan., 29 Postage Rs. 200 and Rent Rs. 1000 Paid Jan., 31 Received Rs. 4,000 from insurance company

Rs. 1,200 1,500 1,000 800 2,500 200 500 6,000 100 200 4,000 1,000 2,000

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 An s wer t o th e all al l Que Q uest stii o n No -1

i)

What do you mean by accounting?

 Accounting  Answer: Accounting

operates within a broad socioeconomic environment, a

nd so, the knowledge required of the accountant cannot be sharply compart mentalized. It is therefore, difficult to discuss one area are a without relating to ot her areas of knowledge. The broad objects of Accounting may be briefly sta ted follows: 1.To maintain the cash accounts through throug h the Cash Book and to find out o ut the  Cash balance on any particular day. 2. To maintain various other Journals for recording day-to –day non cash transactions.

ii)

Distinguish between Profit and Loss Account and trading a/c.

 Answer: Distinguish

between profit and loss account and trading account

given below: Basis

Trading Account

Profit and Loss Account

1.Stage of

It is the first stage of final

It is the second stage of

Final

accounts.

the final accounts.

The gross profit or gross loss

The profit and loss account

 Account 2.Nature

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business. 3.Relation

Trading account is a part of

Profit and Loss Account is

profit and loss account.

the main account.

4.Transfer of

The balance of the trading

The Balance of the Profit

Balance

 Account is transferred to the

and Loss Account is

Profit and Loss Account.

transferred to the Capital  Account of the proprietor.

5.Item

Items shown in the Trading

Items like indirect

 Account are Purchases, Sales, expenses related to sales, Stock, Direct expenses etc.

distribution, administration, finance etc. are shown in the profit and loss Account.

iii)

What do you mean by incomplete records?

 Answer:

 Accounts from incomplete records is the system in which we convert single entry system into double entry system. s ystem. As per accounting rules, single entr  y system can only show incomplete records because accountant (who follo ws this single entry system) do not records the expenses and revenue. He He j ust record total cash and credit. It means, it is very difficult to know the profi t or loss of such business because we cannot make profit and loss accounti accou nti n single entry system. For converting incomplete records into complete rec ords with double entry system, we need current year’s profit or loss.

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 Answer: A

forfeited share is a share in a company that the owner loses

(forfeits) by failing to meet the purchase requirements. Requirements may include paying any allotment any allotment or  call  call money owed, or avoiding selling or transferring shares during a restricted period. When a share is forfeited, the shareholder no longer owes any remaining balance, surrenders any potential capital potential capital gain on the shares and the shares become the property of the issuing company. The issuing company can re-issue forfeited shares at shares at par, a par, a premium or a discount as determined by the board the board of directors. v)

Explain any one method of depreciation.

Straight-line Depreciation The simplest and most commonly used method, straight-line depreciation is calculated by taking the purchase or acquisition price of an asset, subtracting the salvage the salvage value (value at which it can be sold once the company no longer needs it) and dividing by the total productive years for which the asset can reasonably be expected to benefit the company (or its useful life). Example:

For $2 million, Company ABC purchased purchas ed a machine that will

have an estimated useful life of five years. The company also estimates that in five years, the company will be able to sell it for $200,000 $200, 000 for scrap parts. Q. 2. What do you mean by accounting? accounting? Who are the users of accounting? Explain its scope.

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summarizing, analyzing and reporting these transactions to oversight agencies and tax collection entities. Accounting is one o ne of the key functions for almost any business; it may be handled by a bookkeeper and accountant at small firms or by sizable finance departments with dozens of employees at large companies. User of Accountin g:  Financial accounting information is used for decision

making by external users, such as investors inve stors and creditors. Managerial accounting information is used for decision making by internal users, such as the management or operational managers. Scope of Accounti ng:  Accounting is the language of business. The main

objectives of Accounting are to safeguard safegua rd the interests of the business, its proprietors and others connected co nnected with the business transactions. This is done by providing suitable information to the owners, creditors, shareholders, Government, financial institutions and other related agencies.

Q. 3. Define debenture. Explain the vari vari ous typ es of debentur debentur es.  Ans  A ns wer : Debenture is a security issued or allotted to the investors under

the seal of the company, who become creditors of the company. Therefore, a debenture may be defined as a document issued by the company as an evidence of its debt.

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1.

Ordinary Debentures

It is the first type of debentures, which does not n ot hold any security on account. These debentures are standing in the similar point as any other unsecured creditors and having no concern at the time of company winding up. 2.

Mortgage Debentures

These types of debentures are secured against the credit on the actual property of the company. The holder of debenture has a lawful right to sell the possessions and recover the credit if the company does not refund the borrowed money at a particular period of time. 3.

Redeemable Redeemable Debentur es

Redeemable debentures are refundable after a particular period of time. On these debentures, actual interest is paid from time to time, but amount of principal is refund after a predetermined period. These are issued on redeemable basis, therefore company mostly refers to borrow amount on redeemable debentures. 4.

Irredeemable Debentures

These types of debentures are not refundable during the life time of the issuing company. These are only to be paid either at the time of any failure to pay on the part of the company or on the winding up of the company.

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These types of debentures are issued in the name of specific person. The name must show on the front side of the bond and also in the company books. 6.

Bearer Debentures

These does not show specific name of person on the bond. The holder of said debenture is allowed to receive any interest fee on the payable dates. 7.

Equipment tru st Debentures Debentures

These debentures are issued to raise funds for the purchase of new equipment of a business. 8.

Convertibl e Debentur Debentur es

It certain cases, the company allow the debentures holders to convert their debentures for the Shares of the company. If the investor avails of this t his provision, then he becomes the shareholder of the company.  An s wer t o th e Quest Que stii o n No -04

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purchased for cash]

Jan-02

-

Goods/Stock a/c

Dr

To Ram a/c

Cr

[Being the value of stock purchased from Mr. Ram on

1,500 1,500

-

credit ]

Jan-04

-

Laxman a/c

Dr

To Goods/Stock a/c

Cr

[Being the value of stock

1,000 1,000

-

sold to Mr. Laxman on credit ]

Jan-05

-

Furniture a/c

Dr

Cash a/c

Cr

[Being the furniture

800 -

800

-

purchased for cash] P & L Appropriation A/c Dr Jan-07

To Partners' Capital A/c Cr [Being Charged on Capital] Goods/Stock a/c

Dr

-

2,500 2,500

200

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Drawings a/c Jan-14

-

To Bank a/c

Dr Cr

[Being the amount of

6,000 6,000

-

withdrawn from bank for personal use] Charity a/c

Jan-16

-

Dr

To cash a/c

Cr

To Purchases a/c

Cr

[Being give charity by cash

300 100

-

200

-

and goods] Salary a/c Jan-19

-

To cash a/c

Dr Cr

[Being salary paid by

4,000 -

4,000

-

cheque]

Jan-21

-

Cash a/c

Dr

828

Discount a/c

Dr

72

To Sales a/c [Being sold on 10% trade discount and 8% cash

Cr

-

900

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-

To Purchases a/c

Cr

-

2000

[For cash and goods taken away for personal use]

Jan-29

-

Rent paid a/c

Dr

1000

Postage a/c

Dr

200

To cash a/c

Cr

[Being paid rend and

-

1200

-

postage] Jan-31

-

 Accounts Receivable

Dr

To Insurance Compensation

Cr

-

4000 4000