ACCOUNTS QUESTION PAPER WITH SOLUTIONS

OMTEX CLASSES “THE HOME OF SUCCESS”

OMTEX CLASSES

I ST PRELIMINARY EXAMINATION

BOOK KEEPING & ACCOUNTANCY

GROUP: A

TIME: - 3 HRS

DATE: - 16.11.2010

DAY - TUESDAY

MARKS: 100

Q1. Answer Any four of the following. A. Answer the following.

(20 marks)

(5)

1. What is Balance Sheet? Ans. A balance sheet is a statement showing the financial position of the business in the form of its assets and liabilities on a particular date. 2. Who is co – venture? Ans. A co – venture is a temporary partner of joint – venture business only. 3. What is Super Profit? Ans. Super profit is the profit earned over and above the normal return on the capital employed by the business firm. 4. What is Endorsement of Bill? Ans. Endorsement of a bill is the holder’s signing on its back with the intention of  transferring its title or ownership to another. 5. What is Good will of the firm? Ans. Goodwill is the monetary value of the reputation of a firm as measured in terms of  its expected future profits. B. Write word/term/phrase which can substitute each of the followings: 1. Reputation of a firm expressed in terms of money. Ans. Goodwill. 2. Payment of expenses before they have become due. Ans. Prepaid Expenses. 3. Payment of bill of exchange before its due date at rebate. Ans. Retirement of Bill of Exchange.

(5)

OMTEX CLASSES “THE HOME OF SUCCESS”

4. The person on whom the bill of exchange is drawn. Ans. Drawee. 5. The account that is credited when depreciation is charged. Ans. Respective Assets Account. C. Match the pairs.

(5)

A

B (Answers)

1. Depreciation

1. Wear and tear

2. Dishonour of bill

2. Notary Public

3. Joint Venture

3. Temporary partnership

4. Goodwill

4. Intangible Asset

5. Co – Ventures

5. Temporary Partners

D. Select the most appropriate alternative from those given below:

(5)

1. Debit Balance in Profit and Loss Account shows _______________ a. Net profit b. Gross profit

c. Net loss d. Gross loss 2. A bill of exchange must be accepted by ___________________ a. A drawer b. A payee c. An endorsee

d. A drawee

OMTEX CLASSES “THE HOME OF SUCCESS”

3. At the end of the financial year balance of Depreciation account is transferred to  _______________ a. Depreciation account b. Asset account c. Trading account

d. Profit and loss account. 4. In the absence of partnership deed the partners share the profit and loss of the firm  _____________ a. In the ratio of capital

b. Equally c. As per rights in management d. On the basis of experience.

5.  ____________ has to ultimately bear the noting charges. a. Drawer

b. Drawee c. Endorser d. Bank

E. State True / False with reasons. (Any Two)

(5)

1. Under fixed capital method for each partner two accounts are maintained. Ans. The given statement is true because of the following reasons. i.

Under fixed capital method each and every transactions of partners are transferred to their current account and not in their capital account.

OMTEX CLASSES “THE HOME OF SUCCESS”

ii.

It becomes compulsory for the partners to maintain two accounts for their transactions. Once is capital account to record additional capital introduced and current account as well.

2. Under fixed instalment method depreciation is charged on the diminishing value of the asset. Ans. The above statement is false because of the following reasons. i.

Under fixed instalment method depreciation is charged on the original value of the assets and the amount of depreciation will remain constant for each year.

ii.

Under Diminishing balance method only the depreciation on fixed asset is charged on the written down value of fixed asset every year.

3. Interest on partner’s drawings is debited to Profit and loss appropriation account. Ans. The above statement is false because of the following reasons. i.

Profit and loss appropriation account account is another profit and loss account prepared especially to record the transactions pertaining to the partners.

ii.

Thus Interest on Partner’s drawings is credited to the profit and loss

account (or) profit and loss appropriation account and it will be debited to Partners capital account in the case of fluctuating capital method and to Partners current account account in the case of fixed fixed capital method.

F. Prepare a bill of exchange from the following information: Drawer: Vilas Patil, 21. M.G. Road, Pune Drawee: Vikas Pawar, 31. S.V. Road, Nasik. Payee: Viraj Potade, 41, A.B. Road, Sholapur, Period: 2 months Amount: Rs. 7,500/st

Date of Bill: 1 January, 2007. rd

Date of acceptance: 3 January, 2007.

OMTEX CLASSES “THE HOME OF SUCCESS”

Ans.

OMTEX CLASSES “THE HOME OF SUCCESS” st

Q2. Ravindra Trading company. Ambajogai Purchased machinery for Rs. 55,000/- on 1 April, st

1996 and spent Rs. 5,000/- on its fixation and erection. In the same year on 1 October, st

additional machinery costing Rs. 40,000/- was purchased. On 1 October, 1998 the machinery st

st

purchased on 1 April, 1996 became obsolete and was sold for Rs. 43,000/- On 1 January, 1999, a new machinery was also purchased for Rs. 20,000. st

Depreciation was provided annually on 31 March at the rate of 10% per annum on Fixed Instalment Method. Prepare Machinery A/c and Depreciation A/c for the years 1996 – 97, 199798, 1998-99. (March 2005 Board exam Question). Ans.

M/s Ravindra Trading Co. Machinery Account. Date

Particulars

1.4.1996

To cash / bank a/c [machinery purchased] To cash / bank a/c [fixation and erection] To cash / bank a/c [marhinery purchased]

1.4.1996 1.10.1996

1.4.1997

1.4.1998

J F

Amount 55000

Date

Particulars

31.3.1997

By Depreciation a/c

31.3.1997

By Balance c/d

40000

To balance b/d

100000 92000

To balance b/d

92000 82000

31.3.1998 31.3.1998

By depreciation a/c By balance c/d

1.10.1998 1.10.1998

By depreciation a/c By cash/ bank a/c [Machinery sold] By profit / loss a/c [ loss on machinery sold] By depreciation a/c By balance c/d

31.3.1999 31.3.1999 To balance b/d

Amount 8000

5000

1.10.1998

1.4.1999

J F

92000 100000 10000 82000 92000 3000 43000 2000 4500 49500 102000

102000 49500

Depreciation account Date

Particulars

31.3.1997

To machinery a/c

31.3.1998

To Machinery a/c

1.10.1998 31.3.1999

To Machinery a/c To Machinery a/c

J F

Amount

Date

Particulars

8000 8000

31.3.1997

By profit & loss a/c

8000 8000

10000 10000 3000 4500

31.3.1998

By profit & loss a/c

10000 10000

31.3.1999

By profit & loss a/c (balancing figure)

7500

7500

OR

J F

Amount

7500

OMTEX CLASSES “THE HOME OF SUCCESS” st

Q2. (A) The books of a business showed that the capital employed on 31 December, 1992 was Rs.1, 00,000/-. Profits for the last five years are_1988, 1989, 1990, 1991 & 1992 were Rs, 60,000, Rs, 55,000, Rs, 75,000, Rs, 85,000 & Rs, 65,000 respectively. Goodwill is valued at 2 years purchase of the Super profit of the business. NRR is 10%.

&

OMTEX CLASSES “THE HOME OF SUCCESS”

Q2. (B) Importance of computer in accounting. Ans. Today computers are put to a variety of uses. They have been designed with highly improved performances. performances. Computers can be used to process voluminous data at a high speed. As regards its application in the field of accounting, a computer should be able to d eal with routine accounting. It means all normal accounting processes such as financial transactions should be dealt with the use of a computer. All cash and bank transactions, handling of accounts of debtors and creditors and calculation of wages and salaries etc should be handled with the use of computer. In addition, computers can be put to other popular uses such as production, programming and control, flexible budgetary control, variance analysis, sales and forward trends etc. Following points explain the importance of computer in modern age. Speed: - In the modern world, the desire of a man to complete tasks within the stipulated time limits has been, to a large extent, fulfilled by using a computer. Computers enable us to do arithmetical computations with a high degree of speed and ease. It has enables us to do things,   which would have been almost impossible earlier. The speed which computers functions are measured in Pico seconds (1/1000 of Nano – second). Thus, computers are capable of  making millions of computations per second. Hence, a powerful computer is capable of  completing the tasks in less than an hour, which could have taken a year for a group of people to compute.  Accuracy : - Computers are not only fast in completing a job at a great speed, but it is also performed with a high degree of accuracy. Sometimes, it is common to say that there is a “Computer error”. As a matter of fact, it is “Human error” and not a “Computer error” since a computer carries out the instructions efficiently given by the programmer. As such, if the instructions are faulty, the errors creep in the computer’s output. Diligence:: - By doing similar job continuously, human beings get tired which results into some Diligence mistakes. As against this, a computer co mputer is capable of doing the same job continuously error free. A  computer takes the same time to complete the first calculation as well as the 10000 th calculation. Thus, the degree of diligence possessed by a computer is impossible in case the same job is done  by human beings. Storage:: - Another advantage offered by a computer is that of its enormous capability to store Storage data. A computer is capable of storing data along with the instructions given by the programmer in the primary (main) memory. In case, the primary memory is not sufficient it can be stored in its secondary (auxiliary) memory. There are various devices used for storing the secondary  memory. Some of the common devices used in secondary memory are Compact Disks, Tapes, Drums, pen Drives etc. Having large capacity to store data.  Versatility : - A computer possesses great versatility, which is capable of performing arithmetic calculations, logic operation of comparison and moving data within different sections of the computer and in input and output operations. Although, a computer lacks a brain of its own, it can be put to a varied uses such as preparation of mark  – lists, financial accounting, share analysis etc. Miscellaneous:: - In addition to the above – mentioned advantages, a computer can offer Miscellaneous economies in the form of effective managerial control, saving in labour cost because it is fully  automatic.

OMTEX CLASSES “THE HOME OF SUCCESS”

Q3. Anil sold goods to Ravindra for Rs. 6000. Ravindra accepted Anil’s bill for Rs. 6000 payable after 3 months. After a month, Anil discounted the bill with his bank at 10% p.a. On the due date, Ravindra dishonoured his acceptance. Ravindra paid paid Rs. 3000 to Anil and accepted a fresh bill for 3 months for the balance including interest @ 8% p.a. Anil sent the bill to bank for collection. On due date, Ravindra honoured the bill. Pass the j ournal entries in the books of  Anil. (October 2002 board exam questions). Ans. Journal of Anil Date Particulars

?1

2

3

4

5

6

7

8

9

Ravindra’s A/c………Dr. To Sales A/c (Being the goods are sold) Bills Receivable A/c ……… Dr. To Ravindra’s A/c (Being the bill is drawn) Cash/ Bank A/c ……… Dr. Discount A/c ………… Dr. To Bills Receivable A/c (being the bill is discounted) Ravindra’s A/c ……… Dr  To Cash/Bank A/c (being the bill is dishonored) Cash/ bank a/c………… Dr  To Ravindra’s A/c (being the part payment is made) Ravindra’s A/c ……… Dr. To Interest a/c (being the interest is charged on balance amount) Bills Receivable A/c ………… Dr. To Ravindra’s A/c (being the new bill is drawn along with interest) Bank for collection A/c ……… Dr. To Bills Receivable a/c (being the bill is send to bank for collection) Cash/ bank a/c ……… Dr. To Bank for collection a/c (being the sent to bank for collection bill is honored)

OR

L Debit Credit F 6000 6000

6000 6000 5900 100 6000 6000 6000 3000 3000 60 60 3060 3060 3060 3060 3060 3060

OMTEX CLASSES “THE HOME OF SUCCESS”

Q3. Journalize the following transactions in the books of Motilal: a.

Bhavna informed Motila that Jyoti’s acceptance for Rs. 3600 endorsed to Bhavna has

been dishonoured and noting charges have been Rs. 150. b.

Anil renews his acceptance to Motilal for Rs. 3400 by paying Rs. 900 in cash and accepting a new bill for the balance plus interest at 8% p.a. for 3 months.

c.

Prabhakar retired his acceptance to Motilal for Rs. 4000 by paying Rs. 3850 in cash.

d.

Bank informed Motilal that Arun’s acceptance of Rs. 7000 which was discounted with

bank has been dishonoured with noting charges Rs. 100. (March 2008 board exam questions)

Date

Particulars

a

Jyoti’s A/c ……… Dr. To Bhavna’s (being the endorsed bill is dishonored along with noting charges) Anil’s A/c ……… Dr. To Bills Receivable a/c (being the bill is dishonored) Cash / bank a/c ……… Dr. To Anil’s a/c (being the part payment is made) Anil’s A/c ……… Dr. To Interest A/c (being the interest is charged on balance amount) Bills receivable a/c ……… Dr. To Anil’s A/c (being the new bill is drawn along with interest) Cash/ bank a/c ……… Dr. Rebate’s A/c ……… Dr. To Bill’s Receivable A/c (being the bill is retired) Arun’s A/c ………… Dr. To Cash/ bank A/c (bein the discounted bill is dishonored along with noting charges)

b i.

ii.

iii.

iv.

c

d

L F

Debit

Credit

3750 3750 3400 3400 900 900 50 50 2550 2550 3850 150 4000 7100 7100

OMTEX CLASSES “THE HOME OF SUCCESS”

Q4.

Ajay and Abhijeet were partners in a Joint Venture sharing profits and losses in the proportion of 4/5 and 1/5 respectively. Ajay supplied goods to the value of Rs. 25000 and incurred expenses amounting to Rs. 2700. Abhijeet also supplied goods to the value of Rs. 7000 and his expenses amounted to Rs. 400. Abhijeet sold all the goods for Rs. 46000. Abhijeet is  jeet settled Ajay’s account by bank draft. Prepare entitled to a commission at 5% on sales. Abhi jeet Joint venture account and Abhijeet account in the books of Ajay. (March 2006 board exam questions.) In the books of Ajay Joint venture account Particulars To Goods a/c To cash/bank a/c To Abhijeet’s a/c To Abhijeet’s a/c To Abhijeet’s a/c To profit on joint venture transferred to Profit / loss A/c Abhijeet’s A/c

Amount

6880 1720

Amount 25000 2700 7000 400 2300

Particulars By Abhijeet’s A/c

Amount

8600 46000

46000

Abhijeet’s Account Particulars To Joint venture a/c

Amount

Amount 46000

46000

Particulars By Joint venture a/c By Joint venture a/c By Joint venture a/c By Joint venture a/c (profit) By cash/ bank a/c (balancing figure)

Amount 46000

Amount

Amount 7000 400 2300 1720 34580 46000

OMTEX CLASSES “THE HOME OF SUCCESS”

Q5. Mrs. Archana keeps her books on single entry system and gives the following information: (March 2008 board exam question)

Particulars

31.3.2006

31.3.2007

Cash at bank  Sundry debtors Stock in trade Furniture Machinery Bills payable Sundry creditors

5000 25000 30000 20000 50000 5000 15000

32000 40000 50000 20000 50000 5000 20000

Further information: 1. Mrs. Archana withdrew from business Rs. 15000 for personal use. 2. She further introduced fresh capital of Rs. 25000. 3. Depreciation is to be charged @ 10% p.a. on Furniture and Machinery. Prepare : (1) statement of affairs as on 31.3.2006. (2) statement of affairs as on 31.3.2007. (3) statement of profit and loss for the year ended on 31.3.2007. ANS. In the books of Mrs. Archana st

Statement of affairs as on 31 March, 2006

Liabilities Bills payable Sundry creditors Capital at the beginning of the year

Assets Amount Machinery 50000 Furniture 20000 Stock in trade 30000 Sundry debtors 25000 Cash at bank  5000 130000 130000 st Statement of affairs as on 31 March, 2007

Liabilities Bills payable Sundry creditors Capital at the end of the year

Amount 5000 15000 110000

Amount 5000 20000 167000

192000

Assets Machinery Furniture Stock in trade Sundry debtors Cash at bank 

Amount 50000 20000 50000 40000 32000 192000

OMTEX CLASSES “THE HOME OF SUCCESS” st

Statement of profit or loss for the year ended 31 March, 2007

Particulars Capital at the end of the year Add: Drawings Less: Additional capital introduced Less: Capital at the beginning of the year GROSS PROFIT Less: Depreciation On Machinery = (50000)(10/100)(12/12) = 5000 On Furniture = (20000)(10/100)(12/12)=2000 (20000)(10/100)(1 2/12)=2000 NET PROFIT

Amount 167000 15000 182000 25000 157000 110000 47000

7000 40000

Q6. Sanjay, Ajay and Vijay undertook the construction construction of building at a contract price of Rs. 6,00,000 payable in cash Rs. 4,00,000 and in the form of debentures of company Rs. 2,00,000. They shared profits and losses in the ration of 3:2:1 respectively. They opened a Joint Bank account wherein they deposited the following amounts. Sanjay Rs. 3,00,000, Ajay Rs. 2,00,000 and Vijay Rs. 1,00,000. The following payments are made out through Joint bank account. 1. 2. 3. 4.

Purchase of materials Rs. 2,50,000. Payment of wages Rs. 77,000. Purchase of plant Rs. 45,000 and Other charges Rs. 11,000.

Sanjay bring the truck of Rs. 40,000. Ajay brings in the material of Rs. 55,000. Vijay brings mixer worth Rs. 10,000. At the close of venture the unused materials were taken by Sanjay for Rs. 5,000. Ajay took over the mixer and plant for Rs. 27,000. The truck was sold in the market for Rs. 22,000. The contract price was received as per ther agreement and Vijay agreed to take over the debentures at Rs. 1,90,000. Prepare : Joint venture account, Joint Bank account and Co  – ventureres account. (March 2008 board exam questions)

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In the books of Joint venture Joint venture account Particulars To Join bank a/c Materials Wages Plant Other charges To Sanjay’s A/c (Truck) To Ajay’s A/c (materials) To Vijay’s A/c (mixture) To Debentures A/c (discount on debenture) To profit on joint venture transferred to Sanjay Ajay Vijay

Amount

Amount

250000 77000 45000 11000

383000 40000 55000 10000

Particulars By Joint Bank a/c (contract price) By Debentures a/c (contract price) By joint bank a/c (truck sold) By Sanjay’s A/c (Materials taken over) By Ajay’s A/c (Mixer and plant)

Amount

Amount 400000 200000 22000 5000

27000

10000

78000 52000 26000

156000 654000

654000

CO – VENTURERS’ ACCOUNT Particulars To Joint venture a/c To debenture a/c To joint bank a/c

Sanjay 5000

Ajay 27000

Vijay 190000

413000

280000

418000

307000

Particulars By joint bank a/c By joint venture A/c By joint venture A/c By joint Bank A/c

190000

Sanjay 300000 40000 78000

Ajay 200000 55000 52000

418000

307000

Joint Bank A/c Particulars To Sanjay’s A/c To Ajay’s A/c To Vijay’s A/c To joint venture A/c To Joint Venture A/c To Vijay’s A/c

Amount 300000 200000 100000 400000 22000 54000 1076000

Particulars By joint venture a/c By Sanjay’s A/c By Ajay’s A/c

Amount 383000 413000 280000

1076000

Vijay 100000 10000 26000 54000 190000

OMTEX CLASSES “THE HOME OF SUCCESS”

Debentures A/c Particulars To Joint venture A/c

Amount Particulars 200000 By Vijay’s A/c By Joint Venture A/c 200000 (balancing figure)

Amount 190000 10000 200000

st

Q7. Following is the Trial Balance of Premlal and Sundarlal as on 31 March 2006. st

Trial balance as on 31 March, 2006.

Particulars

Amount Particulars

Amount

Stock on 1-4-2005 Purchases Drawings: Premlal Sundarlal Sales return Wages : productive Unproductive Salaries Rent, rates and insurance Bad debts Discount allowed Machinery Building Sundry debtors Cash Government bonds

1. 2. 3. 4. 5. 6. 7.

90000 Sales 375000 225000 Purchase returns 3000 33000 Discount received 3000 30000 Sundry creditors 90000 7200 Capital : Premlal 105000 10500 Sundarlal 135000 1800 Bank overdraft 30000 18600 10200 1200 3900 45000 108600 153000 1000 2000 741000 741000 Closing stock was valued on 31.3.2006 at market price Rs. 60,000 which was 20% above its cost price. Outstanding productive wages Rs. 600 th Rent, Rates and insurance include insurance Rs. 1600 paid for one year ending on 30 June 2006. Maintain Reserve for doubtful debts at 5% on debtors. Depreciate buildings by 5% and machinery at 10% p.a. Goods costing Rs. 2500 were distributed as free samples for which no record has been made in the books. Six months interest is due on Bank Overdraft at 10% p.a. st

Prepare trading and profit and loss account for the year ended 31 March 2006 and Balance Sheet as on that date. (September 2008 board exam questions)

OMTEX CLASSES “THE HOME OF SUCCESS”

In the books of Premlal and Sunderlal st

Trading account for the year ended 31 March, 2006. Particulars To opening stock To purchases (-)return To productive wages (+) outstanding To Gross profit c/d

Amount 225000 (3000) 10500 600

Amount 90000 222000 11100 97200

Particulars

Amount 375000 (7200)

By sales (-) return By goods distributed as free samples By closing stock

Amount 367800 2500 50000

420300

420300 st

Profit and loss account for the year ended 31 March, 2006 Particulars Particu lars To Salaries To unproductive wages To rent, rates and insurance (-) prepaid insurance To bad debts (+) FBD (+)NRDD (-) ORDD To discount allowed To advertisement To depreciation: Buildings Machinery To interest on bank over draft To net profit c/d Premlal Sundarlal

Amount

Amount 18600 1800

10200 (400) 1200 NIL 7650 NIL

Amount

8850 3900 2500

9930 1500

43320 100200

100200

Partners’ capital accounts Particulars To drawings To balance c/d

Premlal 33000 93660 126660

Amount 97200 3000

9800

5430 4500

21660 21660

Particulars Particul ars By gross profit b/d By discount received

Sunderlal Particulars 30000 By balance b/d 126660 By Net profit b/d 156660

Premlal 105000 21660

Sunderlal 135000 21660

126660

156660

OMTEX CLASSES “THE HOME OF SUCCESS” st

Balance sheet as on 31 March, 2006 Liabilities Capital account Premlal Sunderlal Sundry creditors Bank overdraft Add: interest Outstanding productive wages

Rs. 93660 126660 30000 1500

Rs.

220320 90000 31500 600

342420

Assets Buildings (-) Deprn@5% Machinery (-) Deprn@10% Sundry Debtors (-) N.R.D.D. @5% Closing stock  Cash Prepaid insurance Government Bonds

Rs. 108600 5430 45000 4500 153000 7650

Rs. 103170 40500 145350 50000 1000 400 2000 342420