DU B.com(H) First Year (Financial Acc.) - Q Paper 2009

B.COM (H) 1st Year.1

ARUN BAJAJ CLASSES  B.Com. (Hons.) / I-NS Paper II – Financial Accounting 2009 Time : Part A – 2½ Hrs.

Max. Marks : Part A – 45

Time : Part B – 30 Min.

Max. Marks : Part B – 10

General Instruction :

This questions paper has 2 parts. Part A is compulsory compulsory for all examin examines. es. Part B is meant meant only for those examinees examinees who have not offered Computerised Computerised Accounts. Applicable for student’s student’s of Regular College). Student Student of SOL have to Attempt Part A & B. Part A and B are to be answered on separate answer books. PART - A 1.

State with reasons whether the following statements are True or False. (i)

Expenses Expenses incurred to keep keep the machine machine in workin working g conditio condition n is capital expenditure expenditure..

(ii) (ii) Accrual Accrual concep conceptt implies implies accoun accounting ting on cash basis. basis. (iii (iii)) Depreciation Depreciation cannot be provide provided d in case of loss loss in a financial year. year. (iv) Prudence Prudence is a concept concept to recognise recognise unrealised unrealised profits and not not losses.

2.

(v) The receipts receipts and payments payments account account records receipts receipts and payments payments of revenue revenue nature only only.

5

(a) Distinguish Distinguish between between capital expenditure expenditure and reven revenue ue expend expenditure. iture.

4

(b) M/s S.S Traders commen commenced ced business business on 1st January, 2005, when when they purchased machine machinery ry of  . ˆ

7,00,000. 7,00, 000. They adopted a policy of (i) charging charging depreciation at 15% p.a. p.a . on diminishing diminishing balance basis, bas is, and (ii) charging full year’s depreciation on additions made during the year. year. Over the year, the purchases of machinery have been : Date

ˆ

1-8-2006

1,50,000

30-9-2006

2,00,000

On 1st January, 2008, it was decided to change the method of depreciation and rate of depreciation to 10% on straight line basis with retrospective effect from 1-1-2005, the adjustment being made in the accounts for the year ending 31st December, 2008. Prepare Machinery Account and Provision for Depreciation Account for the year 2008.

10

OR (a) Distinguish Distinguish betwee between n periodic periodic and and prepetual prepetual system of invento inventory ry valuation. valuation.

4

(b) A company company started its its business business on 1st January, January, 2008. It purchased and used used raw material material during the year year 2008 as stated below : January 10

800 kgs @

February 28

1,200 kg kgs @

March 10

Issued 1,000 kgs.

ˆ

62 per kg ˆ

57 per kg www.moryastudypoint.weebly.com

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B.COM (H) 1st Year.2

March 26

Issued 500 kgs

May 20

900 kgs @

June 28

Issued 600 kgs.

ˆ

65 per kg

Calculate the value of closing stock of raw materials on June 30 according to (i) (i)

Last Last in in Fir First st out out basi basis, s, and and

(ii) (ii) Weighted eighted average basis, using perpetual inventory inventory system system.. 3.

(a) Explain the relevance relevance of disclosure disclosure principle principle in accounting accounting..

10 4

(b) From the follo following wing informatio information n of M/s Kapil Brothers, Brothers, prepare pr epare Trading Trading and Profit Profit and Loss Account Account for the year ended 31st March, 2008 and the Balance Sheet as on that date : Liabilities & Assets

31-3-2007

31-3-2008

( )

( )

Motor Car

90,000

90,000

Stock

70,000

90,000

Furniture

10,000

10,000

Debt or s

62,000

46,000

Creditors

60,000

?

9,000

16,000

ˆ

Bank

ˆ

The following further information is also available : (i)

M/s Kapil Brothers Brothers purchases goods goods for for resale from manufacturers who who allow discount discount of of 3% on on goods purchased in excess of  2008 was

ˆ

ˆ

5,00,000 in a year. The discouint for the year ended 31st March,

12,480.

(ii) (ii) All good goodss are sold sold at a gross margin margin of of 30% on selling selling price. price. (iii (iii)) Bank statements statements for the year reveal reveal the following following payments payments : ˆ

Creditors

9,03,520

Salaries

60,000

Car Expenses

23,000

Rent

30,000

Printing & Stationery

6,400

Rates and Taxes

3,000

Carriage Outward

18,600

Travelling Expenses

14,900

Bought Delivery Van Misc. Expenses Dr awings

1,70,000 9,580 50,000

Depreciation on Car and Delivery Van @ 20% and Furniture @ 10% is to be provided on balances

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B.COM (H) 1st Year.3

The following following is the Trial Balance of of a traders as on 31st March, Marc h, 2008 Particulars

Debit

Credit

( )

( )

ˆ

Cash in hand

ˆ

5,000

Land and Building

80,000

Pland and Machinery

50,000

Debtors & Creditors

25,000

Stock on 1-4-2007

10,000

15% Investments on 1-4-2007

20,000

Purchase and Sales

95,000

Bank Overdraft

40,000

1,90,000 20,000

Wa ges

28,000

Salaries

16,000

Rent, Rates and Taxes

15,000

Bad Debts

6,000

Dr awings

5,000

Bills Receivable and Bills Payable

15,000

Carriage Inwards

21,000

6,000

Customs Duty on Purchases

16,000

Fire Insurance Premium

4,000

Advertisement

30,000

Provision for Doubtful Debts

2,000

Interest on Investments

2,000

Sundry Expenses

11,000

Furniture

20,000

Valued Added Tax

25,000

Capital

1,57,000 4,57,000

4,57,000

Additional Information : (i) (i)

Stock Stock on 31st 31st March, March, 2008 2008 was was valu valued ed at

(ii) (ii) Incl Includ uded ed in deb debtor torss are

ˆ

ˆ

40,000.

8,000 due from Ram and included in creditors are

ˆ

6000 due to Ram.

(iii) (iii) Bill’s Bill’s Receivable include a bill of Rs. 5,000 received from Mohan, Mohan, which has has been dishonoured. dishonoured. (iv) (iv) Sales Sales inclu include de

5,000 for the goods goods sold on approval basis. Approval was not received received till 31st March.

ˆ

Goods are sold at a profit of 25% on cost. (v) (v) Wages ages incl includ udee

ˆ

5,000 spent on the erection of machinery on 1-4-2007.

(vi) Create a provision provision for doubtful doubtful debts debts at 5% on debtors. debtors.

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B.COM (H) 1st Year.4

4.

Mayur Electricals Electr icals Ltd. sells TV sets and Music System on hire purchase basis. From the following particulars part iculars,, 14

prepare Hire Purchase Trading Account to find out the profit (show your workings clearly) : T.V. Se Sets Cost

ˆ

Cash Price

ˆ

Down Payment

16,200 18,900 2,700

ˆ

Monthly instalment

Musi usic Syst Systeem ˆ

ˆ

ˆ

1,800

ˆ

Number of instalments

10

ˆ

6,000 7,200 1,200 600 12

During the year ended 31st December, 2008, the company sold 200 TV sets and 240 Musich System on hire purchase purcha se basis. 4 TV sets on which on only ly 3 instalments each could be collected and 8 music music system on which which only 5 instalments each each could be collected collected were repossessed for non-payment of other instalments. These were valued at 50% of their costs and after spending ˆ

ˆ

6,000 for their reconditioning, they were sold for

84,000. 84,000 . Other instalments collected and due (customers still paying) were respective as follows follows : TV sets

540 and 40

Music System

800 and 60

14 OR

The following is the Receipts and Payments Account of a Sports Club for the year ended 31st December, 2008 : Receipts

ˆ

Balance b/d

Payments

7,500 Salaries

Subscriptions (including Rs. 2000 for year 2007)

Match Expenses

ˆ

14,000 28,000

40,000 12% Investment on 1-1-20-8

40,000

Donations

15,000 Spots Materials

15,000

Life Membership Fees

35,000 Printing & Stationery

12,000

Sale of Furniture at book value

5,000 Honorarium

5,000

Entr ance Fees

10,000 Furniture

Int. on 10% Investments for full year

20,000 Municipal Taxes

Match Fund

40,000 Balance c/d

40,000

Donation for Building Fund

45,000 Magazine & Journal’s

10,000

Sale of Newspapers

2,500 Books 2,20,000

Additinoal Information : (i)

The positio position n of of the Club on January 1, 2008 2008 was as follow followss : Subscription due

—

Furniture

—

Books

—

Building

ˆ

ˆ

ˆ

ˆ

3,000 10,000 20,000 1,25,000

15,000 6,000

35,000 2,20,000

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B.COM (H) 1st Year.5

(iii (iii)) Municipal Municipal Taxes Taxes are paid every every year year on 1st April. (iv) One mem member ber donated donated a Billiard Billiard Table Table worth worth (v) (v) Books wo worth rth

ˆ

ˆ

50,000.

46,000 on 31st December, 2008 and stock of sports materials on that date amounted to

ˆ

4,000. (vi) (vi) 12% inve investme stments nts includ includee

ˆ

30,000 invested from donations received for building fund.

Prepare Income and Expenditure Account for the year ended 31st December, 2008 and a Balance Sheet as on 14

that date. 5.

Mayur stores Ltd. with their Head Office in Delhi, invoiced to its branch at Noida at 20% less than the list price which is cost plus 100% with instrucations that cash sales were to be made at invoice price and credit sales at list price. From the following particulars, prepare Branch Stock Account, Branch Debtors Account, Branch Expense Account, Branch Adjustment Account and Branch profit & Loss Account for the year ended 14

31st December, 2008: ˆ

Branch Stock on 1-1-2008 at cost to Branch

40,000

Branch Debtors on 1-1-2008

30,000

Goods received from H.O. at invoice price

3,60,000

Cash sales

90,000

Credit received from Debtors

3,00,000

Cash received from Debtors

2,40,000

Goods in Transit

40,000

Bra nch Expenses

40,000

Bad Debts

2,000

Loss of Goods by fire at invoice price

2,400

Transfer of goods to Faridabad at I.P.

6,000

Pilferage at I.P. (Normal)

1,000

Remittance to Head Office

3,30,000

Insurance claim admitted against loss by fire

1,200

Debtors on 31-12-2008 at invoice price

88,000

Stock on 31-12-2008 at invoice price

60,000 OR

X Ltd. with his Head Office in Delhi, invoiced goods to its Chandigarh branch at 20% less than the catalogue price which is cost plus 50%, with instructions that cash sales were to be made at invoice price and credit sales at catalogue price. From the following particulars available from the branch, prepare Branch Account for the year ended 31st December, 2008 : ˆ

Stock on 1-1-2008 at I.P. Goods received from H.O. at invoice price Debtors on 1-1-2008

48,000 5,28,000 40,000

Cash Sales

1,84,000

Credit Sales

4,00,000

Cash received from customers

3,42,540

Di

ll

d

53 460

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B.COM (H) 1st Year.6

It was reported that a part of stock at the branch was lost by fire during the year whose value is to be 14

ascertained. It is decided to provide for discount on debtors @ 15%.

PART - B 6.

(a) What What is gradu gradual al distri distribut butio ion n of cash cash ? (b) A, B and C were partners sharing profits and losses losses in the the ratio of 3 : 2 : 1. On 31st Decem December, ber, 2008 2008 their their Balance Sheet was as follows Liabilities

Assets

ˆ

Sundry Creditors

ˆ

30,000 Ca Cash at Bank

9,500

Bills Payable

5,000 Stock

15,500

A’s Loan

6,000 Sundry Debtors

32,000

Reserve Fund

12,000 Furniture

Profit & Loss Account

5,000

6,000 Plant

Capital Accounts :

21,000

A’s Drawings

4,000

A

20,000 B’s Drawings

1,000

B

15,000 C’s Capital A/c

6,000

94,000

94,000

The firm was dissolved on that date. Assets realised as follows : Stock -

ˆ

12,200; Debtors -

ˆ

30,100 and Furniture rrealise ealised d-

A contingent liability for bill discounted is setttled at insolvent and only

ˆ

ˆ

ˆ

4,200. Plant was taken over by A

600. Realisation expenses amounted to

ˆ

ˆ

18,000.

600. C is

1,900 could be recovered from his private estate. 3+7

Prepare Prepar e necessary Ledger Ledger Accounts to close the books of the firm. Apply Garner Vs. Murray. Murr ay. OR

AB Ltd. was formed for med to acquire the business of A and B who share profits in the ratio ra tio of 3 : 2 respectively. respectively. The Balance Sheet of A and B as on 31st December, 2008 was as under Liabilities

Assets

ˆ

Capital Accounts :

ˆ

Land and Building

40,000

A

64,000 Machinery

20,000

B

40,000 Stock

24,000

Mrs. A’s Loan

3,200 Debt ors

Bills Payable

7,200 Bi Bills Receivable

Sundry Creditors

23,200 6,400

21,600 In Investment s

4,800

Cash at Bank

9,600

Goodwill

8,000

1,36,000

1,36,000

It was agreed by the company to take over the assets at book value with the exception of land and building, stock and goodwill which are taken over a were retained by the firm and sold for

ˆ

ˆ

45,000 ,

ˆ

20,000 and

ˆ

28,000 respectively. The investments

4,000. The firm discharged the loan loan of Mrs. A . The company took 

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B.COM (H) 1st Year.7

ANSWERS - BCom(1st Year) 2009 1.

(i)

whereas perpetual inventory system is based on continuous record keeping of various items of inventories.

False : Expenses to kee the machine in wokring condition is a revenue expense

(ii) Periodic system of inventory valuation

because there is no increase in the capacity

provides a perodic stewardship of the

of the machine to produce more.

inventory and little is known about the exact

(ii) False : The word accrual means earned or

composition and amount of inventory items

incurred and not received or paid in cash.

between actual counts in the beginning and at

Hence it is not accounting on cash basis.

the end. Perpetual system provides a continuous

(iii) False : Depreciation expenses is a charge against the profit and not an item of 

stewardship of the inventory. Inventory

appropriat appr opriation. ion. Hence it must be debited in

records are continuously updated so that

the profit and loss account whether the firm

financial statements can be prepared at

makes profit or incurs loss.

shorter intervals. Prudence

(iii) Perpetual system provides provides a bas is for

means anticipate all losses but record profits

inventory control so that physical stocks can

only when they are realised.

be compared with book records and

(iv) False : Itis other way round.

discrepancies, if any, investigatted. This is not

(v) False : Receipts and Payment Account

feasible under the periodic system.

records all types of receipts and payments

(iv) (iv) Periodic Periodic system system is is comparatively comparatively simple simple and

whether they are of capital nature or revenue

less expensive while detailed records and a nd high

nature provided the transaction is in cash.

cost of maintaining them are must for perpetual system.

2.(a) 2.(a) Distinction Distinction between between Revenu Revenuee and Capita Capitall

(v) Unde Underr periodic periodic system system,, invento inventory ry is directly directly

Expenditures (i) (i)

determined and cost of sales is taken as

Capital expend expenditure iture is incurred incurred a perman permanen entt

residual figure. In perpetual system, cost of 

assets, but b ut the revenue expenditure expenditure is incurred

sales is directly determined and inventory is

to maintain the efficiency of the fixed or

taken as residual figure.

capital asset.

(vi) (vi) Under Under periodic periodic system, system, cost of sales sales includes includes

(ii) (ii) Capital expen expendit diture ure is incurre incurred d to increas increasee the

lost goods. In perpetual perpetu al system, inventory inventory

earning capacity of fixed assets e.g. to increase the seating capacity of a Cinema Hall. Revenue expenditure does not increase the earning capacity capacit y e.g. replacement of small

includes lost goods. (b)

Valuation of Inventories (LIFO) = Valuation of Inventories (FIFO) =

ˆ

ˆ

50,500 50,286

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B.COM (H) 1st Year.8

the capital of the t he enterprise or supply of goods

Chandigarh Branch A/c

on credit or lending of money. Whatever

Chandigarh Branch Cash A/c

ˆ

7,03,000 ˆ

5,28,000

details are available that must be honestly reported and additional information information must be appended to the financial statements for the

6.(a) Graud Graudua uall Distrib Distribut ution ion of of Cash Cash

benefits of the users. It would be more more

This is is used in the context of dissolution of 

appropriate if the summary of the accounting

partnership. It simply means means that cash is distributed

policies followed in the preparation of the

amongest the creditors of tahe firm as and wahen

financial statements is appended. For example,

realised from rhe sale of assets of the firm or other

in a balance sheet the basis of valuation of 

sources. Under this system, the creditors are

assets such as investments, inventories, land

informed informed about the dates of the distribution of cash.

and buildings etc. etc. should be clearly clearly disclosed.

The sequence of payment is settlement of accounts

Similarly any change in the method of 

given in the Partnership Act, namely:

depreciation must also be clearly indicated.

(i)

There must be ful, fair a nd adequate

(ii) (ii) Payment Payment of of outside outside liabilities liabilities like like creditors creditors bills bills

disclosure of accounting information.

payable, loans from wives of partners etc.

(b) Capital (Bal. figure) 1,81,000

(iii) Repayment of loans received received from the

ˆ

partners

Gross Profit 3,84,000 ˆ

(iv) (iv) Repayment Repayment of the capital capital contribution contribution of the

Net Profit 1,78,000 ˆ

Balance Sheet

ˆ

Bank A/c (B/f)

partners.

3,69,000 ˆ

(v) If there there is is still still any surpll surpllus us left left after after meeting meeting

16,000

above claims, it will be shared by the partners part ners

OR Gross Profit Net Loss

ˆ

ˆ

in their profit sharing ratio.

79,000

The purpose of gradual or piecemeal distribution

2,450

Balancel Sheet

ˆ

Cost Cost of of dis disso solu luti tio on

of cash is that the partners waould not like to wait

2,49,550

until all the assets are sold before receivi receiving ng a certain amount of cash realised.

4.

(b)

Valuation of goods 56,400 ˆ

Profit & Loss A/c A/c

ˆ

6,00,171

Hire Purchase Trading Account OR Surplus 19,700 ˆ

Net Loss

ˆ

10,200

A’s Capital Capit al A/c ˆ

76,26,000

B’s Capital A/c C’s C’s Capital A/c Bank A/c

ˆ

ˆ

ˆ

ˆ

5,444 18,756 1,900

66,400