1. JOSEPH’S COLLEGE OF COMMERCE (AUTONOMOUS)

END SEMESTER EXAMINATION – OCTOBER 2014

B.COM. – I SEMESTER

 FINANCIAL ACCOUNTING

Duration: 3 Hours                                                                                       Max. Marks: 100

  SECTION – A

 

1. Answer ALL the questions. Each carries 2 marks.                                       (10 x2 =20)

 

1. A purchased a machine on hire purchases system. The Cash price of the machine was Rs. 74,500.  He paid Rs. 20,000 on signing of the agreement and the rest in three annual instalments of Rs. 20,000 each.  Calculate interest for each year.

 

2. If original cost of the asset is Rs. 5,50,000; its scrap value is Rs. 50,000 and its estimated useful life is 10 years, then what is the annual depreciation under straight line method?

 

3. Ram purchased Machinery worth Rs. 12,00,000 on credit. This was wrongly entered in Purchases Book.  You are required to pass the Rectification Entry.

 

4. Avinash purchases a machine on hire purchase system paying Rs. 2,00,000 as Down Payment on the date of agreement and Rs. 2,80,000 annually for ten years. The rate of interest charged by the vendor is 5% p.a.  Given the present value of an annuity of Re. 1 for 10 years at 5% is 7.7217.  Determine the Cash Price of the Machine.

 

5. Anitha purchased a Car on 01.04.2012 for Rs. 10,00,000. If she charges depreciation at the rate of 15% on Written Down Value Method, then what is the amount of depreciation for the year 2013-14 and the Written Down Value of the Car on 01.04.2014?

 

6. What is Abnormal Loss of Stock?
7. What is a Suspense Account? Why is it prepared?
8. Mention any four methods of charging Depreciation.
9. What are the three fundamental accounting assumptions?
10. Mention any four types of Accounting Errors.

 

SECTION – B

1. Answer any FOUR Each carries 5 marks.                              (4×5=20)

 

11. State True or False with reasons:
12. In Hire Purchase System, the purchaser gets title of the goods on the date of making the down payment.
13. Salary paid to Vishnu for Rs. 10,000 was debited to his personal account. This error will overstate the profits of the year.
14. Purchase of Machinery for Rs. 1,20,000 on credit will keep the total of the assets unchanged.
15. Bad Debts written off earlier now recovered will be debited to Cash/Bank Account.
16. Two sided errors are rectified by passing a Journal Entry.
17. Business Entity Concept is not applicable to sole trading concerns and partnership concerns.
18. Assets will be equal to capital if there are no liabilities.
19. The essence of convention of prudence is to anticipate no profits and provide for all possible losses.
20. Legal Expenses incurred on purchase of Land and Building is a Revenue Expenditure.
21. Cash stolen by the cashier during business hours is a Capital Expenditure.

 

12. In taking out a trail balance, a book-keeper finds that debit total exceeds the credit total by Rs.352. The amount is placed to the credit of a newly opened suspense account.  Subsequently the following mistakes were discovered.  You are required to pass the necessary entries for rectifying the mistakes, and show the Suspense Account:
13. Sales Day Book was overcast by Rs.100;
14. A sale of Rs.50 to Shri Ram was wrongly debited to Shri Krishna;
15. General expenses Rs.18 were posted as Rs.80;
16. Cash received from Shri Govind was debited to his account Rs.150;
17. While carrying forward the total of one page of the Purchases Book to the next the amount of Rs.1,235 was entered as Rs.1,325;
18. The books of Praveen revealed the following information:

Particulars	Rs.
Opening Inventory	4,50,000
Purchases during the year 2013-14	37,00,000
Wages	2,25,000
Selling and Distribution Expenses	25,000
Carriage Outwards	5,500
Freight inwards	4,500
Sales during the year 2013-14	46,00,000
Return Inwards	25,000
Return Outwards	5,000

 

On March 31, 2014, the value of inventory as per physical stock-taking was Rs. 8,95,500.  The Company’s gross profit on sales has remained constant at 25%.  The management of the company suspects that some inventory might have been pilfered by some employees.  What is the estimated cost of missing inventory?

 

14. Jaideep Cotton Mills purchased machinery on 1^st August, 2011 for Rs. 90,000. On October, 2012 it purchased another machine for Rs. 40,000.

On 30^th June, 2013 it sold off the first machine purchased in 2009 for Rs. 58,000 and on the same date purchased a new machinery for Rs. 1,00,000.  Depreciation is provided at 20% p.a. on the original cost each year.  Accounts are closed each year on 31^st March.

Show the Machinery Account for three years.

15. Pass necessary adjusting entries in Shri Ram Bhrose’s Journal on 31^st March, 2003.
16. The stock on 31^st March, 2003 of raw materials was of the value of Rs.4,00,000 and that of finished goods of Rs.3,50,000;
17. 30,000 for wages and Rs.10,000 for printing were outstanding;
18. 12,000 for insurance (personal) and Rs.20,000 for income tax were paid in advance;
19. Write off depreciation on machinery Rs.80,000 and the building Rs.30,000;
20. 25,000 were received in advance for commission;
21. 1,000 is interest accrued on investment;

Before making the above adjustments his net profit for the year ended 31^st March, 2003 was Rs.2,15,000, what will be net profit for the year after making the adjustments ?

 

16. The balance sheet for the 1^st four days and the corresponding transactions are given below.  Identify the mistakes in the balance sheet and prepare balance sheet on the 5^th  Assume that the business is dealing in real estate and correct the balance sheet based on each day transaction is it is required.

Liabilities	Day 1	Day 2	Day 3	Day 4	Assets	Day 1	Day 2	Day 3	Day 4
Capital	20,000	20,000	20,000	20,000	Bank	25,000	25,000	27,700	27,200
Loan	10,000	10,000	10,000	10,000	Stock	NIL	5,000	3,000	1,800
Creditors	NIL	5,000	5,000	5,000	B/R	NIL	NIL	NIL	2,600
P & L a/c	NIL	NIL	700	1,600	Cash	5,000	5,000	5,000	5,000
	30,000	35,000	35,700	36,600		30,000	35,000	35,700	36,600

Day 1 : Owner contributed Rs. 20,000 and borrowed Rs. 10,000.  He retained balance of cash of Rs. 5,000 and the remaining are deposited into a bank account on the same date.

Day 2: the store purchased and received merchandise for stock for Rs. 10,000, agreeing to pay within 30 days.

Day 3: Stock costing Rs. 1,500 was sold for Rs. 2,200 which was received in cash.

Day 4: Stock costing Rs. 1,700 was sold for Rs. 2,400, the customers agreeing to pay Rs. 2,400 within 30 days.

Day 5: cash paid to creditors Rs. 10,000

 

SECTION – C

• Answer any THREE questions. Each carries 15 marks.                    (3×15=60)

 

17. The following are the particulars relating to hire purchase:
18. Purchaser: Vivek & Co.
19. Seller: Ravi & Co.
20. Date of Purchase: Jan, 1^st
21. Asset Purchased: Vehicle.
22. Cash Price: Rs. 10,31,520.
23. Payments : Rs. 1,60,000 on signing of the agreement and the balance in the three equal annual instalments of Rs. 3,20,000 due on 31^st December each year.
24. Rate of Interest: 5% per annum.
25. Depreciation: 20% on the written down value each year.

 

You are required to:

1. Pass Journal Entries for year 2011 and 2012 in the books of Vivek & Co. under Outright Property Method.
2. Also prepare Vehicle A/c, Ravi & Co. A/c and Depreciation for the first three years under Outright Property Method.

 

18. From the following details, prepare a stores ledger under:
19. a) FIFO Method and            b) Weighted Method  for Material ‘M’.

 

Date	Particulars	Quantity in Nos.	Rate per unit (Rs.)
1.4.2014	Opening balance	5,500	30
3.4.2014	Purchases	1,000	32
5.4.2014	Issues	4,000	?
10.4.2014	Purchases	3,800	34
14.4.2014	Issues	2,600	?
16.4.2014	Purchases	2,500	36
28.4.2014	Issues	3,000	?

 

On physical verification, it was found that there is a shortage of 50 units on 22^nd April 2014.  Assume this shortage as Normal and find the Closing Stock under the two methods mentioned above.

 

19. The following balances were extracted from the books of M/s Rajan as on 31^st March, 2014.

Debit Balances	Rs.	Credit Balances	Rs.
Cash	5,000	Creditors	7,500
Debtors	8,000	Bank Overdraft	5,250
Stock (01.04.2013)	22,600	Capital	25,000
Furniture	5,000	Sales	1,01,000
Drawings	575	Provision for bad debts	900
Motor Car	3,000	Bills Payable	1,500
Purchases	72,800	Outstanding Wages	2,185
Wages	7,500	Returns	430
Returns	350	Unearned Rent	500
Salaries	1,600
Stationery & Printing	465
Bad debts	300
Bills Receivable	2,000
Rent	1,800
Loan at 3% to Subhash on  (1-12-2013)	5,000
Investments (Short term)	7,900
Prepaid Insurance	375
TOTAL	1,44,265	TOTAL	1,44,265

Adjustments:

1. Depreciation on furniture is to be charged at 10%.
2. Goods of the value of Rs. 800 were withdrawn by the proprietor for his personal use.
3. Bills Receivables include a dishonoured bill for Rs. 260.
4. Sundry Debtors include an item of Rs. 300 due from a customer who has become insolvent.
5. Provision for Doubtful Debts is to be maintained at 5% on Debtors.
6. Outstanding Salaries is Rs. 400.
7. Stock on 31^st March 2014 was Rs. 12,000.

From the above information you are required to prepare Trading and Profit and Loss Account for the year ended 31^st March, 2014 and the Balance Sheet as on that date.

 

20. X owns the following assets as on 1.4.2013:

Assets	Rates of Depreciation	WDV as on 1.4.2013 (Rs.)
Building A	10%	63,000
Building B	10%	99,000
Building C	5%	1,98,000
Building D	10%	54,000
Machinery P	15%	27,000
Machinery Q	15%	36,000
Machinery R	30%	63,000
Car X	15%	1,35,000

The following assets are acquired during the Previous Year 2013-14:

Assets	Rates of Depreciation	Cost of Acquisition (Rs.)	Date of Acquisition
Car Y	15%	2,25,000	15.05.2013
Machinery S	15%	18,000	14.08.2013
Machinery T	30%	54,000	10.09.2013
Patents	25%	72,000	01.01.2014
Know-how	25%	54,000	15.03.2014

The following assets have been sold during the Previous Year 2013 -14:

Assets	Sale Consideration (Rs.)
Building B	1,08,000
Machinery P	9,000

The assets acquired during the year were put to use the day they were acquired.  You are required to compute the depreciation allowable to X as per in the Income Tax Act for the Previous Year 2013-14.

21. Prepare Balance Sheet at the end of each and every transaction.
22. Ramu started business with Cash Rs. 3,50,000; Stock Rs. 1,80,000; and Land & Building Rs.9,00,000.
23. He purchased Furniture for Rs. 1,50,000.
24. He purchased goods worth Rs. 3,00,000 from X.
25. He sold goods costing Rs. 80,000 for Rs. 1,00,000.
26. He sold goods costing Rs. 50,000 for Rs. 80,000 to Y.
27. He opened a bank account and deposited Rs. 10,000 into the bank.
28. Ram withdrew Rs. 50,000 for his personal use from office cash.
29. Received an order for the supply of goods worth Rs. 1,00,000.

 

SECTION – D

1. Compulsory question.                                                          (1×15=15)
2. Deepa is a B.Sc., graduate. Unfortunately her father, who owned a Proprietary Concern, passed away on 17^th September, 2014.  She is the only legal heir to her father’s estate.  She does not have any knowledge in Accountancy.  She has with her the following three Balance Sheets of her father’s concern.

She has a number of queries which are given at the end of the Balance Sheets.  You are asked to answer them.

Balance Sheet as on 15^th September, 2014 Evening

Liabilities	Amount (Rs.)	Assets	Amount (Rs.)
Capital	2,70,000	Land and Building	1,71,000
Creditors	30,000	Debtors	79,200
Profit	93,900	Cash	34,500
		Stock	1,09,200
Total	3,93,900	Total	3,93,900

Balance Sheet as on 16^th September, 2014 Evening

Liabilities	Amount (Rs.)	Assets	Amount (Rs.)
Capital	3,30,000	Land and Building	1,71,000
Creditors	30,000	Debtors	79,200
Profit	93,900	Cash	4,500
Divya & Co (Crs. For furniture)	60,000	Furniture	90,000
		Bank	60,000
		Stock	1,09,200
Total	5,13,900	Total	5,13,900

 

Balance Sheet as on 17^th September, 2014 Evening

Liabilities	Amount (Rs.)	Assets	Amount (Rs.)
Capital	3,30,000	Land and Building	1,71,000
Creditors	30,000	Debtors	60,000
Profit	92,700	Cash	4,500
Divya & Co (Crs. For furniture)	60,000	Furniture	90,000
		Bank	78,000
		Stock	1,09,200
Total	5,12,700	Total	5,12,700

Queries:

2014. She wants to know the transactions that took place on 16th and 17^th of September, 2014.    ( 6 Marks)
2015. She is planning to buy a machinery worth Rs. 5,00,000 at the beginning of next accounting year. It is given that depreciation is to be charged at 10% p.a. on written down value method.  She wants to know the amount of depreciation she could charge to Profit and Loss Account for the first three years.      ( 3 Marks)
2016. She is planning to buy a Computer on Hire Purchase System for her father’s concern. She has to make a down payment of Rs. 8,000 and Rs. 10,000 at the end of 1^st, 2^nd and 3^rd  The rate of interest is 5% p.a.  Given the present value of annuity of Re. 1 at 5% for one, two and three years respectively as 0.9524 ; 0.9070 and 0.8639, she wants to know the Cash Price of the Computer to be accounted in books.    (3 Marks)
2017. On 20^th September, 2014, Mrs. Deepa herself passed the following entries as her accountant was absent on that day. She wants you to check the entries passed by her and pass the rectification entries, if you find them wrong.

• Appointed a new employee at a monthly salary of Rs. 10,000 payable at the end of every month

Salary A/c                                                                Dr	10,000
To  Cash		10,000

• Paid wages for the installation of New Machinery purchased Rs. 3,500.

Wages A/c                                                                Dr	3,500
To  Cash		3,500

• Cash Deposited into Bank Rs. 20,000.

Cash  A/c                                                                Dr	20,000
To  Bank		20,000

                                                                                                                            ( 3 Marks)

 

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