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Roll No..........................

Time allowed : 3 hours Maximum marks : 100

Total number of questions : 8 Total number of printed pages : 7

NOTE : Answer SIX questions including Question No.1 which is compulsory. All workingnotes should be shown distinctly.

1. (a) Explain any two of the following :

(i) Limitations of accounting

(ii) Accrual concept

(iii) Petty cash book

(iv) Error of omission.

(5 marks each)

(b) State, with reasons in brief, whether the following statements are true or false :

(i) Every error affects the agreement of trial balance.

(ii) Being invisible, goodwill is a fictitious asset.

(iii) For preparing final accounts of non-corporate entities, there is no need todistinguish between capital expenditure and revenue expenditure.

(iv) Single entry system has no advantages at all.

(v) Trial balance and balance sheet are the same.

(2 marks each)

2. (a) Re-write the following sentences after filling-in the blank spaces with appropriateword(s)/figure(s) :

(i) When an asset is shown at its original cost till its disposal, the annualdepreciation is recorded by credit to ____________ account.

(ii) The relationship between the consignor and consignee is that of ____________and ____________.

(iii) A statement forwarded by the consignor to the consignee about description ofgoods consigned is called ____________ invoice.

(iv) Partnership business is carried on in the name of the ____________.

(v) In case of new accounts, debit in the account of a person means that theperson has become the ____________ of the business.

(vi) The ledger is the ____________ books of account.

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(vii) When the trial balance does not agree, the difference may be transferred toa ____________ account to make the trial balance agree.

(viii) When the benefit of a revenue expense extends over a number of years, it iscalled ____________ expenditure.

(1 mark each)

(b) Distinguish between any two of the following :

(i) ‘Joint venture’ and ‘consignment’.

(ii) ‘Revaluation account’ and ‘realisation account’.

(iii) ‘Trading account’ and ‘profit and loss account’.

(4 marks each)

3. (a) Choose the most appropriate answer from the given options in respect of thefollowing :

(i) Plant and machinery account is a —

(a) Personal account

(b) Tangible real account

(c) Intangible real account

(d) Nominal account.

(ii) The credit sales of goods in trade are recorded in the —

(a) Purchases book

(b) Cash book

(c) Sales book

(d) Returns outwards book.

(iii) The person who draws a bill of exchange is called its —

(a) Drawee

(b) Payee

(c) Drawer

(d) Endorsee.

(iv) Statement of affairs as prepared under single entry system is a statementof —

(a) Incomes and expenses

(b) Cash receipts and cash payments

(c) Trade debtors and trade creditors

(d) Assets and liabilities.

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(v) Under the straight line method of depreciation, the amount of yearly

depreciation —

(a) Remains the same

(b) Fluctuates

(c) Increases year after year

(d) Decreases year after year.

(vi) The value of a fixed asset after deducting depreciation is known as its —

(a) Book value

(b) Market value

(c) Face value

(d) Realisable value.

(vii) Cash book acts as a —

(a) Journal only

(b) Part of ledger only

(c) Financial report

(d) Journal as well as a part of ledger.

(viii) The expired cost is known as —

(a) Asset

(b) Expense

(c) Liability

(d) Provision.

(1 mark each)

(b) Explain any two of the following statements :

(i) Bank reconciliation statement is significant for business.

(ii) From the point of view of accounting, it is essential to distinguish between

‘capital profit’ and ‘revenue profit’.

(iii) One of the objectives of providing depreciation is to know correct profit and

true financial position of the business.

(iv) Average clause is applicable only when the amount of the insurance policy is

less than the value of the asset insured.

(4 marks each)

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4. Following is the receipts and payments account of Fun Club for the year ended31st March, 2009 :

Receipts Rs.

To Cash in hand 4,080

To Entrance fees 4,000

To Subscriptions : Rs.

2007-08 1,000

2008-09 32,200

2009-10 1,400 34,600

To Sale of refreshments 30,000

To Loan taken from Y 8,000

80,680

Payments

By Salary 18,640

By Cost of refreshments 20,000

By Rent 7,440

By Electricity 3,120

By Printing and stationery 1,320

By Insurance premium 720

By General expenses 1,840

By Purchase of new furniture 18,000

By Cash in hand 9,600

80,680

Following information is also relevant :

(i) Outstanding and unexpired expenses, and income due were :

Rent Electricity Subscriptions Unexpired

due due due insurance

(Rs.) (Rs.) (Rs.) (Rs.)

On 31st March, 2008 720 2,560 1,000 200

On 31st March, 2009 1,440 800 1,600 280

(ii) On 31st March, 2008, the book value of furniture was Rs.12,000. The new furniture

was purchased on 1st October, 2008. Depreciation is to be provided at 10% per

annum on furniture.

(iii) Entrance fees are to be treated as revenue receipts.

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(iv) Loan from Y was taken on 1st October, 2008. Interest @ 10% per annum is to bepaid on the same.

Prepare the income and expenditure account of Fun Club for the year ended31st March, 2009 and balance sheet as on that date.

(16 marks)

5. (a) On 1st May, 2008, Kunal sold goods to Subhash invoiced at Rs.60,000 and drewupon the latter two bills of exchange, one for Rs.20,000 at two months and anotherfor Rs.40,000 at four months. Subhash accepted both the bills. On 4th May, 2008,Kunal got the first bill discounted with bank @ 12% per annum and endorsed thesecond bill in favor of his creditor Mohit. Subhash met the first bill for Rs. 20,000on due date. Before the due date of the second bill, Subhash became insolvent andhis estate paid only 60 paise in a rupee on 8th November, 2008.

Pass journal entries to record all the transactions in the books of Kunal andSubhash.

(10 marks)

(b) On the basis of following information, prepare a bank reconciliation statement asat 31st December, 2008 :

Rs.

(i) Bank balance as per cash book as on 31st December, 2008 10,000

(ii) Cheques deposited for collection, but not credited by thebank before 1st January, 2009 7,500

(iii) Incidental charges appearing in the pass book on30th December, 2008 with no advice received yet 50

(iv) Cheques issued, but not presented to bank forpayment before 1st January, 2009 4,000

(6 marks)

6. (a) On 12th June, 2008, fire occurred in the godown of X. Cost of goods which remainedundamaged was Rs.1,12,000. Value placed on goods retrieved in a damaged conditionwas Rs.1,05,000. From the books of account, the following particulars were available:

(i) His stock on the close of accounts on 31st March, 2008 was valued at Rs.8,35,000.

(ii) His purchases from 1st April, 2008 to 12th June, 2008 were Rs.11,20,000 andhis sales during that period amounted to Rs.15,40,000.

On the basis of his accounts for the past three years, it appears that he earns onan average a gross profit of 30% on sales.

X has insured his stock for Rs.6,00,000. Compute the amount of insurance claim.

(8 marks)

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(b) Pass journal entries to rectify the following errors. The trial balance had Rs.1,860

excess credit. The difference has been posted to a suspense account :

(i) The total of returns inwards book has been cast Rs.2,000 short.

(ii) The purchase of an office table costing Rs.6,000 has been passed through the

purchases day book.

(iii) A sum of Rs.7,500 paid to workman for wages for making showcases has been

charged to wages account.

(iv) A purchase of Rs.1,340 has been posted to the creditor’s account as Rs.600.

(v) A cheque of Rs.4,000 received from Y has been dishonoured; it has been

posted to the debit of allowances account.

After passing journal entries, prepare the suspense account.

(8 marks)

7. On 1st January, 2009, a flour mill consigned wheat flour to Sat Pal, invoiced at Rs.4,00,000.

The mill cost of the wheat flour was Rs.3,70,000. The consignor paid Rs.5,000 as

freight and Rs.10,000 as loading and unloading charges.

On 31st March, 2009, an account sale was received from the consignee showing that

90% of the goods had been sold for Rs.4,10,000 with selling expenses of Rs.2,000. The

consignee enclosed a cheque for the proceeds less expenses and commission of 1% on

gross sales. Show necessary ledger accounts in the books of the consignor.

(16 marks)

8. P, Q and R were partners sharing profits and losses in the ratio of 5:3:2 respectively.

On 31st March, 2009, their balance sheet was as follows :

Liabilities Rs. Assets Rs.

Capitals : Land and building 5,50,000

P 7,00,000 Machinery 3,00,000

Q 4,00,000 Furniture 1,65,000

R 3,00,000 14,00,000 Stock 2,80,000

Creditors 1,15,000 Debtors 2,00,000

Less : Provision

for bad debts 10,000 1,90,000

Cash at bank 30,000

15,15,000 15,15,000

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Creditors and all the assets except debtors and cash at bank were taken over byM Ltd. for Rs.12,00,000 payable in the form of fully paid equity shares of Rs.10 eachissued at par. M Ltd. valued land and building at Rs.5,70,000.

The firm was able to realise Rs.1,80,000 only from debtors. Expenses of dissolutioncame to Rs.3,000.

The shares were distributed among the partners in their profit sharing ratio. Theremaining amounts due to partners were settled in cash.

Prepare ledger accounts in the books of the firm.

(16 marks)

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Roll No..........................

Time allowed : 3 hours Maximum marks : 100

Total number of questions : 8 Total number of printed pages : 7

NOTE : Answer SIX questions including Question No.1 which is compulsory. All workingnotes should be shown distinctly.

1. (a) Explain any two of the following :

(i) Combined journal entries

(ii) Sub-division of journal

(iii) Balancing ledger accounts

(iv) Accommodation bill.

(5 marks each)

(b) State, with reasons in brief, whether the following statements are correct or incorrect:

(i) Depreciation cannot be provided if there is a loss in a financial year.

(ii) Trial balance ensures the arithmetical accuracy of the ledger.

(iii) Account sale is a statement sent by the consignor to the consignee.

(iv) Wages paid for erection of machinery are debited to profit and loss account.

(v) Receipts and payments account is a summary of all capital receipts and capital

payments.

(2 marks each)

2. (a) Re-write the following sentences after filling-in the blank spaces with appropriate

word(s)/figure(s) :

(i) No depreciation has been charged on machinery. This is an error of ____________.

(ii) Valuation of closing stock in hand is done at the lower of _______ and___________.

(iii) Payments recorded in the petty cash book are posted in ________ to ledger

accounts.

(iv) Closing capital is Rs.4,00,000 and opening capital is Rs.3,00,000, but profit

ascertained is Rs.1,40,000. There must have been net _________ of Rs.40,000

during the year.

(v) If a suspense account has been opened, every one-sided error is rectified by

passing a journal entry through __________ account.

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(vi) Trade discount is deducted from the ____________ price.

(vii) When a bill receivable is dishonoured, the amount of the bill is debited to the

____________ account.

(viii) The period of indemnity in case of fire insurance claims generally does not

exceed___________.

(1 mark each)

(b) Distinguish between any two of the following :

(i) ‘Cash discount’ and ‘trade discount’.

(ii) ‘Bill of exchange’ and ‘promissory note’.

(iii) ‘Trial balance’ and ‘balance sheet’.

(4 marks each)

3. (a) Choose the most appropriate answer from the given options in respect of thefollowing :

(i) Opening entry is passed with —

(a) Balances from trial balance

(b) Balances from the last year’s balance sheet

(c) Items of trading account

(d) Items of profit and loss account.

(ii) The following error would not affect the profit —

(a) Goods sold to Ram, debited to Mohan

(b) Sales book was undercast by Rs.1,000

(c) A purchase of Rs.400 was wrongly written as Rs.40 in purchases book

(d) Expenses of plant repairs debited to plant account.

(iii) Which one of the following accounting concepts treats owner of the businessas creditor of the business —

(a) Going concern concept

(b) Historical cost concept

(c) Business entity concept

(d) Realisation concept.

(iv) The process of entering transactions in the ledger is called —

(a) Journalising

(b) Posting

(c) Summarising

(d) Balancing.

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(v) If a payment is made on a bill on due date, then it is called —

(a) Honouring of the bill

(b) Retiring of the bill

(c) Dishonouring of the bill

(d) Renewal of the bill.

(vi) Trading account is a part of —

(a) Trial balance

(b) Cash book

(c) Final accounts

(d) Journal.

(vii) Revaluation account is prepared to find out the profit or loss on —

(a) Sale of fixed assets

(b) Revaluation of assets and liabilities

(c) Sale of goods

(d) Sale of services.

(viii) When depreciation is charged equally year after year, it is known as —

(a) Fixed instalment method

(b) Diminishing balance method

(c) Depreciation fund method

(d) Annuity method.

(1 mark each)

(b) Explain any two of the following statements :

(i) In the absence of partnership deed, provisions of the Indian Partnership Act,

1932 are applied.

(ii) Single entry system of book keeping is unscientific, incomplete and defective

system.

(iii) Every transaction has debit and credit aspects.

(4 marks each)

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4. (a) Rim Zim Ltd. maintains a current account with the State Bank of India. On31st March, 2010, the bank column of its cash book showed a debit balance ofRs.1,54,300. However, the bank statement showed a different balance as on thatdate. The following were the reasons for the difference :

Rs.

(i) Cheques deposited, but not yet credited by the bank 75,450

(ii) Cheques issued, but not yet presented for payment 80,760

(iii) Bank charges not yet recorded in the cash book 1,135

(iv) Cheques received by the bank directly from trade debtors 1,35,200

(v) Insurance premium paid by the bank as per standinginstructions, but not yet recorded in the cash book 15,400

(vi) Dividend collected by the bank, but not yet recorded inthe cash book 1,000

Find out the balance as per the bank statement as on 31st March, 2010.

(8 marks)

(b) On 1st April, 2005, a company acquired a lease of land for a term of 5 years at acost of Rs.4,00,000. It is proposed to depreciate the lease by annuity methodcharging 5% per annum interest.

Show the lease account for the entire period of 5 years. A reference to the annuitytables shows that to depreciate Re.1 by annuity method over 5 years, charging 5%per annum interest, one must write off a sum of Re.0.230975 every year.

(8 marks)

5. (a) Amar, Akbar and Anthony were carrying on a business in partnership, sharingprofits and losses in the ratio of 2:1:1 respectively. They took a joint life policy forRs.1,20,000 on 1st April, 2006. The annual premium of Rs.5,000 was payable on1st May every year. The last premium was paid on 1st May, 2009. Akbar died on10th June, 2009 and policy money was received on 31st July, 2009.

The surrender values of the policy as on 31st March in different years were asfollows :

(i) 2007 – Nil;

(ii) 2008 – Rs.1,000; and

(iii) 2009 – Rs.1,600.

Prepare joint life policy account for the entire period assuming that the jointlife policy was maintained at its surrender value and the accounts were closedon 31st March every year.

(8 marks)

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(b) The following information is available from Sachin, who maintains books of account

on single entry system :

Particulars On 1st April, 2009 On 31st March, 2010

(Rs.) (Rs.)

Cash and bank 20,000 21,000

Sundry debtors 17,000 25,000

Stock 40,000 60,000

Furniture 29,000 29,000

Sundry creditors 32,000 22,000

10% Loan from Mrs. Sachin 30,000 30,000

Sachin withdrew Rs.5,000 from the business every month for meeting his household

expenses. During the year, he sold investments held by him privately for Rs.35,000

and invested the amount in his business.

At the end of the year 2009-10, it was found that full year’s interest on loan from

Mrs. Sachin had not been paid. Depreciation @ 10% per annum was to be provided

on furniture for the full year. Shop assistant was to be given a share of 5% on the

profits ascertained before charging such share.

Calculate profit earned during the year ended 31st March, 2010 by Sachin.

(8 marks)

6. The following is the summary of the cash transactions of a literary society for the year

ended 31st March, 2010 :

Rs. Rs.

Cash balances on Rent and rates 16,800

1st April, 2009 31,900 Wages 24,500

Entrance fees 25,500 Lighting 7,200

Subscriptions 1,60,000 Lecture fees 43,500

Donations 16,500 Books 21,300

Life membership subscription 25,000 Office expenses 45,000

Interest on fixed deposit 1,200 Fixed deposit @ 6% per annum on

Profit from entertainment 4,400 1st October, 2009 80,000

Cash at bank on 31st March, 2010 24,200

Cash in hand on 31st March, 2010 2,000

2,64,500 2,64,500

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At the beginning of the year, the society possessed books worth Rs.2,00,000 and furniturevalued at Rs.85,000. Ordinary subscriptions in arrear at the beginning of the yearamounted to Rs.3,500 and at the end of the year Rs.4,500. Six months’ rent, Rs.6,000was due both at the beginning and at the end of the year. Provide Rs.5,000 as depreciationon furniture and Rs.11,300 as depreciation on books.

Prepare the society’s income and expenditure account for the year ended 31st March,2010 and its balance sheet as on that date.

(16 marks)

7. From the following balances extracted from the books of Karan and the additionalinformation, prepare the trading and profit and loss account for the year ended31st March, 2010 and also show the balance sheet as on that date :

Debit Balance Credit Balance(Rs. ’000) (Rs. ’000)

Stock on 1st April, 2009 625 —

Purchases and sales 903 1,372

Returns 22 13

Capital account — 300

Drawings 45 —

Land and buildings 300 —

Furniture and fittings 80 —

Trade debtors and trade creditors 250 450

Cash in hand 35 —

Investments 100 —

Interest — 5

Commission — 30

Direct expenses 75 —

Postage, stationery and telephone 25 —

Fire insurance premium 20 —

Salaries 90 —

Bank overdraft — 400

2,570 2,570

Additional information :

(i) Closing stock on 31st March, 2010 is valued at Rs.6,50,000. Goods worth Rs.5,000are reported to have been taken away by the proprietor for his personal use athome during the year.

(ii) Interest on investments Rs.5,000 is yet to be received while Rs.10,000 of thecommission received is yet to be earned.

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(iii) Rs.5,000 of the fire insurance premium paid is in respect of the quarter ending30th June, 2010.

(iv) Salaries Rs.10,000 for March, 2010 and bank overdraft interest estimated at Rs.20,000are yet to be recorded as outstanding charges.

(v) Depreciation is to be provided on land and buildings @ 5% per annum and onfurniture and fittings @ 10% per annum.

(vi) Make a provision for doubtful debts @ 5% of trade debtors.

(16 marks)

8. (a) Ajoy of Agra and Bijoy of Bijnor enter into a joint venture to consign 200 bales ofcloth to Dinesh of Delhi to be sold on their joint risk which is in the proportionof 3/7 and 4/7 respectively. Ajoy sends 150 bales of cloth at Rs.2,600 each, payingfreight and other charges Rs.4,900. Bijoy sends 50 bales of cloth at Rs.2,500 each,paying expenses amounting to Rs.3,600. All the bales of cloth are sold by Dineshfor Rs.14,00,000 out of which Dinesh deducts Rs.6,000 for expenses and 10% ontotal sales as his commission. Dinesh remits Rs.3,00,000 to Ajoy and the balanceto Bijoy through bank drafts.

Prepare joint venture account and the accounts of Bijoy and Dinesh in Ajoy’sledger.

(8 marks)

(b) A merchant closes his books every year on 31st March. A fire occurred in hispremises on 16th May, 2009 and stock costing Rs.38,000 only could be salvaged.Using the following additional information, prepare a statement showing the amountof claim to be lodged with the insurance company :

Particulars 2006-07 2007-08 2008-09 1-4-2009to

16-5-2009

(Rs.) (Rs.) (Rs.) (Rs.)

Opening stock 1,50,300 1,40,300 1,58,200 1,60,000

Purchases 4,40,000 5,12,900 5,86,800 78,000

Sales 6,00,000 6,60,000 7,80,000 99,200

Closing stock 1,40,300 1,58,200 1,60,000 ?

(8 marks)

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