LOYOLA COLLEGE (AUTONOMOUS), CHENNAI – 600 034
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B.Com. DEGREE EXAMINATION – COMMERCE
FIRST SEMESTER – November 2008
CO 1500 – FINANCIAL ACCOUNTING
Date : 12-11-08 Dept. No. Max. : 100 Marks
Time : 1:00 – 4:00
SECTION A
Answer ALL (10 x 2 = 20)
- What are the limitations of single entry system.
- State the advantages of departmental accounts.
- State, with reasons in brief, whether the following statement is true or false : The provision for discount
on debtors is calculated after deducting the provision for doubtful debts from debtors.
- What is an average clause in a insurence policy?
- Distinguish between straight line and diminishing balance methods of depreciation.
- Give journal entries for the following: (i) Goods used for personal consumption- 5,000;
(ii) Stock destroyed by fire-Rs. 50,000-covered fully by insurance.
- Calculate cash price of the asset taking into consideration the following particulars: Down payment
Rs. 15,000; first, second and third instalments at the end of each year Rs. 25,000, Rs. 25,000, and
Rs. 15,000 respectively. Interest is reckoned at 10% p.a.
- Find the amount of claim under average clause if a stock of Rs. 3,00,000 is insured for Rs. 2,00,000 and
the loss amounts to Rs. 1,50,000.
- From the following particulars of Mr. Bhat, under single entry system, ascertain the total sales:
Opening stock Rs. 12,000, purchases Rs. 60,000, wages Rs. 7,000 closing stock Rs. 15,000, the rate of
gross profit on sales 20%.
- Madras Traders opened a branch at Bangalore on 1.1.2006. From the following particulars prepare
branch account in the books of Head Office: Goods sent to branch Rs. 20,500, Cash sent to branch – for
salary Rs. 4,000; for rent Rs. 1,000, Goods returned by branch Rs. 2,000; Cash received from branch
during the year Rs. 20,000; stock on 31st December 2006-Rs. 10,000.
SECTION B
Answer any FIVE only (5 x 8 = 40)
- Explain the steps involved in arriving at the claim for loss of profits under consequential loss policy.
- What do you understand by hire purchase? How does it differ from a purchase on instalment basis?
- A firm has two departments-cloth and readymade clothes departments. The readymade clothes are
made by the firm itself out of the cloth supplied by the cloth department at its usual selling price. From
the following figures, prepare departmental trading and profit and loss account for the year ended 31st
March, 2004.
Particulars Cloth Deptt. Readymade Clothes Deptt.
Opening Stock Rs. 2,40,000 Rs. 48,000
Purchases 18,00,000 24,000
Sales 20,00,000 6,00,000
Transfer to readymade clothes dept. 4,00,000 —
Manufacturing expenses — 68,000
Selling expenses 40,000 4,000
Closing stock 3,00,000 60,000
The stock in readymade clothes department may be considered as consisting 80% cloth and rest as
other expenses. The cloth department earned a gross profit of 25% in 2002-2003.
- Show the relevant adjustment accounts in General Ledger under self-balancing Ledgers.
Rs.
Total balances of Trade Debtors as on 1st January, 2007 18,700
Total balances of Trade Creditors as on 1st January, 2007 23,560
Transaction during January 2001
Credit Sales 19,700
Cash received from Trade Debtors 9,800
Discount Allowed to Trade Debtors 200
Bills Receivable received from Trade Debtors 12,000
Bills Receivable received from Trade Debtors dishonoured 1,000
Credit Purchases 25,560
Cash paid to Trade Creditors 28,800
Discount received from Trade Creditors 1,200
- Nila Ltd. which depreciates its machinery @ 10% per annum according to diminishing balance method,
had on 1st April, 2006 Rs. 4,86,000 balance in its machinery account. During the year ended 31st March,
2007, the machinery purchased on 1st April, 2004for Rs. 60,000 was sold for Rs. 40,000 on 1st October,
2006 and a new machinery costing Rs. 70,000 was purchased and installed on the same date; installation
charges being Rs. 5000.
The Company wants to change its method of depreciation from diminishing balance method to
straight line method w.e.f. 1st April, 2004and adjust the difference before 31st March, 2007, the rate of
depreciation remaining the same as before.
Show the machinery account for the year ended 31st March, 2007.
- The Sandur Iron Co. has taken on lease a mine on a royalty of 50 paise per tonne of iron ore raised
with a minimum rent of Rs. 20,000 per year, and power to recoup shorworkings during the first four
years was as under:
1st year 10,000 tonnes, 2nd year 24,000 tonnes, 3rd year 40,000 tonnes, 4th year 90,000 tones.
Prepare Minimum Rent A/c, Royalty A/c, Shortworking A/c and Landlord’s A/c in the books of
the company.
- Quick Movers Ltd. acquires two Motor Vans each costing Rs. 18,650 from Karnatak Motors Ltd. on
hire purchase system. Payment to be made Rs. 10,000 down and the balance in three equal instalments
of Rs. 10,000 each at the end of each year. The interest charged is at 5% p.a. Depreciation to be
provided is at 10% p.a. on diminishing balance method.
Quick Movers Ltd. after having paid the advance and the first instalment at the end of first year, failed
to pay the second instalment because of financial difficulties. Karnatak Motors Ltd. took possession of
theVans and sold them for Rs. 21,998 after spending Rs. 400 on repairs.
Write up the necessary ledger accounts in the books of Quick Movers Ltd.
- Due to heavy fire in the godown of a company on 1st October, 2005, the entire stock was burnt except
some costing Rs. 35,000. The books were, however, saved.
From the information available it was found that:
- The Company’s average gross profit was 25% on sales.
- The stock on 31st March, 2005 valued at 10% above cost was Rs. 1,10,000.
- The purchases and sales from 1st April 2005, upto the date of fire were
Rs. 1,50,000 and Rs. 3,40,000 respectively.
- The wages for the period amounted to Rs. 72,000
- The company insured the stock for Rs. 60,000
- The policy had an average clause.
You are required to prepare a statement showing the amount of stock lost by fire and the amount
of claim to be lodged with the Insurance Company.
SECTION C
Answer any TWO only (2 x 20 = 40)
- Following is the trial balance of Nathan & Co. as on 31st March, 2007
Rs. Rs.
Capital Account 80,000
Drawing Account 6,000
Stock(1.4.2006) 45,000
Purchases 2,60,000
Sales 3,10,000
Furniture 10,000
Sundry Debtors 40,000
Freight and Octroi 4,600
Trade expenses 500
Salaries 5,500
Rent 2,400
Advertising expenses 5,000
Insurance Premium 400
Commission 1,300
Discount 200
Bad Debts 1,600
Provision for Bad Debts 900
Creditors 20,000
Cash in hand 5,200
Bank 5,800
Goodwill(at cost) 20,000____________________
_4,12,200 4,12,200__
Adjustments:
- Stock on 31st March, 2007 was valued at Rs. 53,000
- Salaries paid have been only for 11 months
- Unexpired insurance included in the figure of Rs. 400 appearing in trial balance is Rs. 100
- Commission earned but not yet received amounting to Rs. 122 is to be recorded in books of account
- Provision for bad debts is to be brought upto 3% of sundry debtors.
- Manager is to be allowed a commission of 10% of net profits after charging such commission
- Furniture is depreciated @ 10% per annum .
- Only 1/4th of advertising expenses are to be written off.
Prepare trading and profit and loss account for the year ended 31st March, 2007and balance sheet as on that date
- Southern Traders have opened a branch at Nagpur on 1.1.2000. The goods were sent by the head office
to the branch and invoiced at selling price to the branch which was 125% of the cost price of the head
office. The following are the particulars relating to transactions of Nagpur Branch.
Rs. Rs.
Goods sent to Branch(at cost) 2,80,800
Sales: Cash 1,25,000
Credit 1,75,000 3,00,000
Cash collected from debtors 1,56,000
Discount allowed 4,000
Stock on 31.12.2000
(at invoice price) 55,000
Cash sent to branch for:
Wages 3,000
Freight 11,000
Other expenses 6,000 20,000
Spoiled good written off(at invoice price) 500
Prepare the necessary accounts in the books of Head Office under Stock and Debtors System.
21.Shri Ramdas commenced business on 1 April, 2006 with a capital of Rs. 45,000 he immediately
purchased furniture of Rs. 24,000. During the year he borrowed from his father a sum of Rs. 5,000. He
had withdrawn Rs. 600 per month for his household expenses. He had no bank account and all dealings
were in cash. He did not maintain any books but following information is given:
Rs.
Sales(including cash sales of Rs. 30,000) 1,00,000
Purchases (including cash purchases of Rs. 10,000) 75,000
Carriage inwards 700
Wages 300
Discount allowed to debtors 1,200
Salaries 6,200
Bad debts written off 1,100
Trade expenses 1,200
Advertisements 2,200
He used goods worth Rs. 1,300 for his personal use and paid Rs. 500 to his son for
examination and college fees.
On 31st March 2007, his debtors were worth Rs. 21,000 and creditors Rs. 15,000. Stock in trade was
valued at Rs. 10,000. Furniture to be depreciated by 10% p.a.
Prepare Trading and Profit & Loss Account and the Balance Sheet for the year
ended 31st March 2007.
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