Accounts Of Other Companies (Accounts Elective Paper IV)

1. JOSEPH’S COLLEGE OF COMMERCE (AUTONOMOUS)

END SEMESTER EXAMINATION – APRIL 2013

B.COM / BBM- VI SEMESTER

Accounts of other companies – (ACCOUNTS ELECTIVE-PAPER IV)

TIME: 3 HOURS                                                                             MAX. MARKS: 100

SECTION – A

1. Answer ALL questions. Each question carries 2 marks. (10×2=20)

 

1. What is consideration for annuities granted?
2. Write the meaning of bonus in reduction of premium.
3. What do you mean by reserve for unexpired risk?
4. Identify the schedules in which the following items appear in the books of general insurance companies.
   1. Commission paid
   2. Travelling expenses
   3. Sundry creditors
   4. Advance payment of tax
5. Distinguish between double entry system and double account system.
6. What is Tariffs and dividend control reserve?
7. Mention the factors to be considered while calculating daily occupancy of rooms.
8. Write any two powers of CAG of India regarding the audit of government companies.
9. What is a government company?
10. Mention the main books to be prepared by a hotel company.

 

Section – B

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

 

11. Hari occupies a room in a three star hotel at Ajmer. He checks in the hotel at 9.00 pm on 15^th December 2012. He is to be charged @ `200 for every night spent plus 10% as service charges. Compute the amount payable by Mr. Hari in each of the following circumstances:
    10. If he checks out at 10.00 am on 16^th December 2012.
    11. If he checks out at 6.00 pm on 16^th December 2012.
    12. If he checks out at 6.00 pm on 17^th December 2012.
    13. If he checks out at 8.00 pm on 18^th December 2012.
12. The following information is extracted from the books of Modern electricity Co. Ltd for the year ended 31^st March 2012.

Rs.

Net profit before charging debenture interest                            6750150

10% debenture interest paid during the year                              1125000

Capital base arrived at by the company                                       31089000

Reasonable return calculated by the company                           4068450

Indicate the disposal of surplus of the company.

13. A life insurance company prepared its revenue account for the year ended 31^st March 2011 and ascertained its life assurance fund to be `3500000. It was found that the following had been omitted from the accounts.

	Rs.
Interest accrued on investments: Income tax liable to be deducted there on estimated to be	45000 10500
Outstanding premiums	37500
Bonus utilised in reduction of premiums	8500
Claims intimated but not admitted	18750
Claims covered under reinsurance	7250

What is the true life assurance fund?

14. A new marine insurance company reported the following figures for the first year of its working. Make necessary reserve for unexpired risks and ascertain the profit or loss made by the company.

	Rs.
Premiums received on original policies	8000000
Reinsurance premium paid	1100000
Reinsurance premium received	350000
Claims	1100000
Commission on direct business	465000
Expenses of management	2100000

 

15. Distinguish between life and non-life insurance business.
16. What do you understand by a statutory corporation? How does it differ from a joint stock company?

Section – C

• Answer any three Each carries 15 marks. (3×15=45)

 

17. From the following balances of Prudential General Insurance Company, prepare – (i) Fire revenue account; (ii) Marine revenue account and (iii) Profit and loss account for the year ending 31^st March 2012.

	Fire   Rs ‘ 000	Marine   Rs ‘ 000	Not related to any business Rs. ‘ 000
Claims paid and outstanding	360000	760000
Additional reserve on 1/4/11	100000
Sundry expenses regarding claims	20000
Bad debts	10000	24000
Auditor’s fees			2400
Director’s fees			10000
Share transfer fees			1600
Bad debts recovered			2400
Fund as on 1/4/11	500000	1640000
Commission @5% of premium earned on reinsurance ceded	20000	40000
Depreciation			70000
Interests, dividends etc. received			28000
Difference in exchange (Cr.)			600
Miscellaneous receipts			10000
Profit on sale of land			120000
Insurance premium less reinsurance	1200000	2160000
Management expenses	290000	800000

Additional reserve in case of fire insurance is to be raised by 5% of net premiums in addition to usual reserve. Reinsurance premiums received amounted to ` 30,00,00,000 for fire business and  `64,00,00,000 for marine business. Management expenses are exclusive of commission. Rate of commission on direct business, reinsurance ceded is 5%.

18. From the following balances as at 31^st March 2012 appearing in the books of Karnataka Life Insurance Company, prepare Revenue account and Balance Sheet.

	Rs. ‘000		Rs ‘000
Share Capital (Shares of ` 100 each)	800000	Mortgages in India	573000
Life assurance fund as on 1/4/11	1360000	Claims by death (in India ` 62000)	88000
General Reserve	90000	Claims by maturity (in India ` 60000)	80000
Advances to ceding companies	18800	General reserve	90000
Due from reinsurers	15400	Deposit with RBI	84000
Due to reinsurers	19000	Indian Govt securities	436000
Agents’ balances	7200	Foreign Govt securities	30000
Annuities paid (In India ` 25000)	32700	Sundry creditors	720
Premiums: First year Renewal	80000 204000	Commission Direct: First year Renewal	16000 1000
Reinsurance accepted	20000	Commission on reinsurance accepted	4800
Reinsurance ceded	28000
Interim bonus to policy holders	9000	Commission on reinsurance ceded	1600
Interest and dividends received (Gross)	86400	Bank loan	8700
Loans on companies policies	84000	Salaries	12000
Leasehold buildings	25320	Auditor’s fees	2000
Shares of Indian companies	760000	Rent paid	1600
Cash with bankers on current a/c	24200	Legal charges	1520
Cash in hand	2800	Travelling expenses	200
Outstanding premiums	26400	Management expenses	880
State Govt Securities	290000	Furniture and fixtures	15600

 

19. Write short notes on a) Resident guests; b)Double occupancy rate; c) KOT; d) Sponsored Guests and d) Night audit
20. Explain the provisions regarding the maintenance of books of account, presentation of annual accounts and audit of government companies.
21. Prepare Revenue account and the general Balance Sheet under double account system from the following trial balance as on March 31^st 2008 of the Rural Electric Supply Company Ltd. A call of ` 1 per share was payable on September 30, 2007 and arrears are subject to interest at 10% per annum.Depreciation to be provided on opening balances, on building 2.5%, Machinery 7.5%, Mains 5%, Transformers etc. 10%, meters and electrical instruments 15%. Advertising has been prepaid by `5000 and provision of 5% to be made for doubtful debts. Provide interest on depreciation fund at 4% on the beginning balance.

As on 31/3/07		Rs.`	Rs.`
600000	Capital – Nominal 300000 shares of `10 each. Subscribed 150000 shares of `5 paid		750000
450000	6% Debentures		450000
30000	Depreciation fund		30000
	Calls in arrears	30000
279000	Freehold land	279000
120000	Buildings	150000
180000	Machinery at station	300000
150000	Mains	240000
30000	Transformers, motors etc.	60000
15000	Meters	45000
9000	Electrical instruments	12000
48000	General stores (cables, lamps etc.) in stock	70500
7500	Office furniture	7500
	Coal and fuel	49500
	Oil, waste and engine room stores	30000
	Coal, oil etc. in stock	3000
	Wages at station	75000
	Repairs and replacement	30000
	Rates and taxes	9000
	Salaries of secretary, managers etc.	60000
	Directors’ fees	15000
	Stationery, printing and advertising	18000
	Incidental charges	3000
	Law charges	6000
	Sales by meters		262500
	Sales by contracts		150000
	Meter rent		9000
	Sundry creditors		30000
	Sundry debtors	90000
	Cash in hand and at bank	99000
		1681500	1681500

 

Section – D

1. Compulsory question. (15 marks)

 

22. In India, the Insurance Act of 1938 controls the working and the activities of the companies carrying on insurance business. On 19^th January 1956, life insurance business was nationalised by the Government and later on the Life Insurance Corporation Act of 1956 was passed.

However, as a result of continued liberalization policy of the Government, the insurance business has now also been opened to the Private sector.

1. Analyse how the insurance sector has grown after this milestone event?
2. What is the perception of an ordinary person about these private insurance companies?
3. Are LIC and GIC losing their monopoly to private insurance companies?

 

 

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