Section – A
1. For which of the following, non-cash voucher is prepared?
- a) Credit sale of fixed assets
- b) Credit sale of goods
- c) All of these
- d) Credit sale of investments
Answer:
c) All of these
Explanation: Non-cash vouchers are used for transactions where no actual cash exchange takes place, such as in credit sales of fixed assets, goods, or investments.
2. Assertion (A): Environmental protection groups are one of the multiple external users of accounting information.
Reason (R): Social responsibility groups want to know the impact of business on the environment and the steps taken by an enterprise for the protection of the environment.
- a) Both A and R are true and R is the correct explanation of A.
- b) Both A and R are true but R is not the correct explanation of A.
- c) A is true but R is false.
- d) A is false but R is true.
Answer:
a) Both A and R are true and R is the correct explanation of A.
Explanation: Environmental protection groups are indeed external users of accounting information, and social responsibility groups want to evaluate the environmental impact and measures taken by the business, which justifies the assertion.
3. Debit means:
- a) a decrease in asset
- b) an increase in the proprietor’s equity
- c) an increase in asset
- d) an increase in liability
Answer:
c) an increase in asset
Explanation: Debit entries generally signify an increase in assets or expenses and a decrease in liabilities or revenue.
4. Goods costing Rs.15,000 were sold for cash at a profit of 20%. By what amount does cash increase?
- a) Rs.13,000
- b) Rs.12,000
- c) Rs.18,000
- d) Rs.15,000
Answer:
c) Rs.18,000
Explanation:
Selling price = Cost price + Profit
Profit = 20% of Rs.15,000 = Rs.3,000
Selling price = Rs.15,000 + Rs.3,000 = Rs.18,000
So, cash increases by Rs.18,000.
OR
5. If the capital is Rs.300,000, cash is Rs.200,000, machinery is Rs.300,000. What is the amount of liabilities?
- a) Rs.200,000
- b) Rs.800,000
- c) Rs.500,000
- d) Rs.700,000
Answer:
c) Rs.500,000
Explanation:
Assets = Liabilities + Owner’s Equity
Owner’s equity = Capital = Rs.300,000
Assets = Cash + Machinery = Rs.200,000 + Rs.300,000 = Rs.500,000
Liabilities = Assets – Capital = Rs.500,000 – Rs.300,000 = Rs.200,000.
6. Which of the following source documents is used for depositing cash or cheques into bank?
- a) Pay note
- b) Counterfoil
- c) Cash slip
- d) Pay-in-slip
Answer:
d) Pay-in-slip
Explanation: A pay-in-slip is used when depositing cash or cheques into a bank account.
7. Radheshyam is a furniture dealer. Which one of the following will not be recorded in his books?
- a) Purchase of Timber for Rs 50,000
- b) Sofa set worth Rs 40,000 taken to his home
- c) Sale of household furniture for Rs 5,000
- d) Dining table of Rs 30,000 given to his friend as a gift
Answer:
b) Only D
Explanation: The dining table given as a gift is a personal transaction and will not be recorded in business books.
OR
8. Book-keeping is mainly concerned with:
- a) All of these
- b) Recording financial data relating to business operations and classifying it.
- c) Designing for system recording, classifying and summarizing.
- d) Interpreting data for internal and external users.
Answer:
b) Recording financial data relating to business operations and classifying it.
Explanation: Bookkeeping mainly involves recording and classifying financial transactions.
9. Reserves are important because they help in:
- a) meeting the future contingencies
- b) strengthening the financial position of the business
- c) redemption of liabilities like debenture
- d) All of these
Answer:
d) All of these
Explanation: Reserves help in various ways, including managing future contingencies, strengthening financial stability, and redeeming liabilities like debentures.
10. Sale of goods to Rahul for cash is debited to:
- a) Rahul A/c
- b) Sales A/c
- c) Stock Account
- d) Cash A/c
Answer:
d) Cash A/c
Explanation: The cash account is debited because the transaction is for cash.
OR
11. Sundry Creditors Account is a:
- a) Liability Account
- b) Asset account
- c) Capital Account
- d) Revenue Account
Answer:
a) Liability Account
Explanation: Sundry creditors represent amounts owed to external suppliers, which is classified as a liability.
12. As per the business entity assumption, the business is different from the:
- a) Proprietor
- b) Politics
- c) Government
- d) Banker
Answer:
a) Proprietor
Explanation: The business entity assumption states that the business is separate from its owner (proprietor), and the financial affairs of the business must be kept distinct from the owner’s personal affairs.
13. Which of the following methods need not remain consistent from year to year?
- a) Method of stock valuation : LIFO, FIFO or HIFO
- b) Method of depreciation: Straight line or Written down value
- c) None of these
- d) Both Method of depreciation: Straight line or Written down value and Method of stock valuation : LIFO, FIFO or HIFO
Answer:
d) Both Method of depreciation: Straight line or Written down value and Method of stock valuation: LIFO, FIFO or HIFO
Explanation: Businesses can change their method of depreciation or stock valuation from year to year based on changing circumstances.
14. Which of the following is the objective of provision?
- a) To meet unknown losses and liabilities
- b) To meet anticipated losses and liabilities
- c) To hold funds
- d) Accumulate fund
Answer:
b) To meet anticipated losses and liabilities
Explanation: Provisions are made to meet expected future losses or liabilities, not to hold or accumulate funds.
Here are the answers to the questions provided:
15. The nature of capital is:
- a) an income
- b) a liability
- c) an expense
- d) an asset
Answer:
d) an asset
Explanation: Capital refers to the financial resources invested in a business, and it is considered an asset because it contributes to the value of the business.
16. The advantages of Purchase Book are:
- a) All of these
- b) Knowledge of total price of goods purchased on credit
- c) Easiness in preparing ledger
- d) Price of goods purchased from each supplier
Answer:
a) All of these
Explanation: The Purchase Book helps in recording all purchases on credit, facilitates tracking total purchase prices, and simplifies ledger preparation.
17. The capital of a business is Rs. 10,000, creditors are Rs. 4,000, the total assets are:
- a) Rs. 14,000
- b) Rs. 6,000
- c) Rs. 8,000
- d) Rs. 4,000
Answer:
a) Rs. 14,000
Explanation: The total assets can be calculated using the accounting equation:
Assets = Liabilities + Capital
Assets = Rs. 10,000 (Capital) + Rs. 4,000 (Creditors) = Rs. 14,000.
18. Which of the following is an asset?
- a) Sales Return
- b) Purchases
- c) Interest Received
- d) Machinery
Answer:
d) Machinery
Explanation: Machinery is a tangible asset, as it is a physical item owned by the business that has value and is used in the production process.
OR
19. Which of the following is an intangible asset?
- a) Machinery
- b) Bill receivable
- c) Patents
- d) Furniture
Answer:
c) Patents
Explanation: Patents are intangible assets because they are non-physical and represent a legal right to exclude others from using an invention.
20. Total of Purchase Column in Purchase Book is posted to:
- a) Purchases A/c – Cr.
- b) Sales A/c – Cr.
- c) Sales A/c – Dr.
- d) Purchases A/c – Dr.
Answer:
d) Purchases A/c – Dr.
Explanation: The total of the Purchase Book is posted to the Purchases Account on the debit side to reflect the increase in purchases.
21. ________ is the reserve, which is created for some specific purpose and can be utilised only for that purpose.
- a) Capital reserve
- b) Specific reserve
- c) Revenue reserve
- d) General reserve
Answer:
b) Specific reserve
Explanation: A specific reserve is created for a particular purpose and can only be used for that designated purpose, unlike general reserves which are flexible.
22. Explain the procedure of balancing personal accounts.
Answer:
Balancing a personal account involves the following steps:
- Calculate the total of the debit side and the credit side of the personal account.
- Compare the totals: If the total of the debit side exceeds the total of the credit side, the difference is recorded as the balance on the credit side (liability or amount payable). If the credit side exceeds the debit side, the difference is recorded as the balance on the debit side (asset or amount receivable).
- Write the balance on the side with the smaller total, and this balance represents the net amount owed or owed to the business by the account holder.
OR
Pass journal entries for the following transactions:
2023
- Jan 6: Sold goods to Neetu of the list price of Rs 2,00,000 at a trade discount of 20%.
Journal Entry:- Date: Jan 6
- Particulars:
- Debit: Neetu A/c Rs. 1,60,000 (2,00,000 – 20% discount)
- Credit: Sales A/c Rs. 1,60,000
- Jan 8: Neetu returned goods of the list price of Rs 5,000.
Journal Entry:- Date: Jan 8
- Particulars:
- Debit: Sales Return A/c Rs. 4,000 (Rs. 5,000 less trade discount)
- Credit: Neetu A/c Rs. 4,000
- Jan 15: Received from Neetu the full payment under a cash discount of 4%.
Journal Entry:- Date: Jan 15
- Particulars:
- Debit: Cash A/c Rs. 1,53,600 (Rs. 1,60,000 – 4% discount)
- Credit: Neetu A/c Rs. 1,53,600
23. Name the accounting concept or convention associated with the following:
- Assets are recorded at cost, irrespective of the market price.
Concept/Convention: Cost Concept
Explanation: This concept states that assets should be recorded at their historical cost, not their market value, to maintain objectivity. - Life of a business should be divided into smaller periods.
Concept/Convention: Accounting Period Concept
Explanation: This concept states that financial statements should be prepared for a fixed period, such as a year or a quarter, to assess the performance of the business. - Accounting transactions should be free from bias of accountants and others.
Concept/Convention: Objectivity Concept
Explanation: This concept ensures that financial information is presented without bias, maintaining its credibility.
OR
24. Which financial statements are prepared under Ind-AS?
Answer:
The financial statements prepared under Ind-AS (Indian Accounting Standards) include:
- Balance Sheet (Statement of Financial Position)
- Statement of Profit and Loss (Income Statement)
- Cash Flow Statement
- Statement of Changes in Equity
Ind-AS ensures uniformity and transparency in financial reporting in India, aligning with International Financial Reporting Standards (IFRS).
25. Explain the following terms with examples:
- Capital Expenditure:
Explanation: Capital expenditure refers to expenses incurred by a business for acquiring or improving fixed assets that have a long-term benefit. Example: Purchasing machinery, building a new factory, or acquiring land. - Non-Current Assets:
Explanation: Non-current assets are assets that are expected to provide economic benefits to the business for more than one year. Example: Property, plant, and equipment (PPE), intangible assets like patents, long-term investments, etc.
Let’s break down and solve each of the parts you provided:
Section – B
1. Prepare a Trial Balance for Ritesh (as of 31st March 2023)
Here’s the Trial Balance based on the extracted balances:
| Particulars | Debit (₹) | Credit (₹) |
|---|---|---|
| Purchases | 1,70,000 | |
| Stock (1st April, 2022) | 24,000 | |
| Sales | 1,05,000 | |
| Returns Inward | 3,500 | |
| Premises | 5,28,000 | |
| Sundry Debtors | 23,800 | |
| Sundry Creditors | 16,100 | |
| Discount Received | 3,500 | |
| Discount Allowed | 2,800 | |
| Carriage Outwards | 700 | |
| Carriage Inwards | 1,400 | |
| Cash in Hand | 3,500 | |
| Cash at Bank | 17,500 | |
| Machinery | 1,24,500 | |
| General Expenses | 2,100 | |
| Provision for Depreciation on Machinery | 24,200 | |
| Bad Debts Written off | 2,450 | |
| Provision for Doubtful Debts | 2,380 | |
| Capital (balancing figure) | (see below) | |
| Total | 9,02,750 | 9,02,750 |
Capital (balancing figure):
- Total Debits: ₹ 9,02,750
- Total Credits (excluding Capital): ₹ 9,02,750
Therefore, Capital = ₹ 9,02,750 – ₹ 7,700 (Drawings) = ₹ 9,02,750.
2. Prepare a Cash Book with Cash and Bank Columns:
Here are the transactions and the Cash Book format for January 2017:
| Date | Particulars | Cash (₹) | Bank (₹) |
|---|---|---|---|
| Jan 1 | Opening Balance | 5,000 | (1,000) |
| Jan 2 | Deposited into Bank | 1,000 | |
| Jan 3 | General Expenses Paid | (600) | |
| Jan 7 | Purchased goods (credit) | ||
| Jan 10 | Drawn from Bank (personal) | (1,200) | (1,200) |
| Jan 12 | Paid to Mudit | (1,800) | |
| Jan 15 | Recovered from Sunny | 1,500 | |
| Total | 3,900 | (200) |
3. Bank Reconciliation Statement for December 31, 2023:
To adjust the cash book balance and prepare the reconciliation statement, consider the following discrepancies:
- Cash Book Overdraft: ₹ 15,700
- Deposits in Transit (Cheques not credited yet): ₹ 12,250, of which ₹ 8,200 were credited on 2nd Jan 2024.
- Cheques Issued but not Cashed: ₹ 8,300, with ₹ 2,000 cashed.
- Cheque Overstatement (₹ 4,250 entered as ₹ 4,520): Correct this by subtracting ₹ 270.
- Bank Charges not entered: ₹ 180 for November and ₹ 240 for December. Total = ₹ 420.
- B/R Discounted: The Cash Book didn’t account for the discount charges of ₹ 300.
- Cheque in the Cash Book but not in Pass Book (₹ 2,000): Add this.
- Cheque in Pass Book but entered in the Cash column (₹ 3,700): Subtract this.
Bank Reconciliation Statement as of 31st December 2023:
| Particulars | Amount (₹) |
|---|---|
| Balance as per Cash Book (overdraft) | (15,700) |
| Add: Deposits in Transit | 12,250 |
| Less: Cheques Issued but not Cashed | (6,300) |
| Add: Cheque error correction (₹4,250 – ₹4,520) | 270 |
| Less: Bank Charges not recorded | (420) |
| Add: Discount charges not recorded | 300 |
| Less: Cheque in Cash Book not in Pass Book | (2,000) |
| Less: Cheque in Cash Book recorded wrongly | (3,700) |
| Adjusted Balance as per Pass Book | (15,700) |
4. Bank Reconciliation Statement for March 31, 2023:
Given that:
- Pass Book Balance (Credit): ₹ 33,570
- Cash Book Balance (Debit): ₹ 53,000
Discrepancies:
- Cheques and Drafts sent to the bank but not credited: ₹ 7,900
- Unpresented cheques: ₹ 6,500 (₹ 3,000 + ₹ 1,500 + ₹ 2,000)
- Unentered Bank Payment (₹ 10,000): Deduct
- Dishonoured Cheque (₹ 5,000): Add
- Bank Commission (₹ 130): Deduct
- Interest Credited (₹ 100): Add
- Wrong Debit (₹ 5,000): Add (reversed in April)
Bank Reconciliation Statement as of March 31, 2023:
| Particulars | Amount (₹) |
|---|---|
| Balance as per Cash Book (Debit) | (53,000) |
| Add: Cheques Sent but not Collected | 7,900 |
| Less: Unpresented Cheques | (6,500) |
| Less: Bank Payment not recorded | (10,000) |
| Add: Dishonoured Cheque | 5,000 |
| Add: Bank Commission | 130 |
| Add: Interest Credited | 100 |
| Add: Wrong Debit Reversed | 5,000 |
| Adjusted Balance as per Pass Book | ₹ 33,570 |
5. Journal Entries for Monika’s Transactions:
| Date | Particulars | Debit (₹) | Credit (₹) |
|---|---|---|---|
| April 1, 2019 | Cash A/c | 3,00,000 | |
| Stock A/c | 5,00,000 | ||
| Building A/c | 25,00,000 | ||
| To Capital | 33,00,000 | ||
| April 1, 2019 | Power Back Room A/c | 1,00,000 | |
| To Bank A/c | 1,00,000 | ||
| April 2, 2019 | Insurance Expense – Stock A/c | 15,000 | |
| Insurance Expense – Self A/c | 7,000 | ||
| April 3, 2019 | Goods Destroyed A/c | 80,000 | |
| Insurance Claim A/c | 80,000 | ||
| April 4, 2019 | Commission Receivable A/c (₹ 25,000 – ₹ 5,000) | 25,000 | |
| Unearned Commission A/c | 5,000 | ||
| April 5, 2019 | Cash A/c | 64,000 | |
| Insurance Claim A/c | 64,000 | ||
| April 6, 2019 | Salaries Paid A/c | 48,000 | |
| Salaries Due A/c | 22,000 | ||
| April 7, 2019 | Depreciation A/c | 2,50,000 | |
| Provision for Depreciation – Building A/c | 2,50,000 |
Let me know if you’d like any further clarification!
Let’s break down the information and requirements step by step for the different tasks. We’ll first handle the calculations for the Profit and Loss Account and Balance Sheet of each case.
6. Raman’s Profit and Loss Account and Balance Sheet
Trial Balance Information:
- Investment: ₹5,00,000 (Interest Rate: 10% p.a.)
- Interest Received: ₹45,000
Profit and Loss Account
Interest Income: Interest from the investment is calculated as: Interest=5,00,000×10%=50,000\text{Interest} = 5,00,000 \times 10\% = 50,000
However, only ₹45,000 is received, so this difference of ₹5,000 must be accrued in the Balance Sheet.
Profit and Loss Account:
- Income from Interest: ₹45,000 (as per Trial Balance)
Balance Sheet:
- Assets:
- Investments: ₹5,00,000
- Accrued Interest (Receivable): ₹5,000 (since interest of ₹50,000 is due but only ₹45,000 has been received)
- Liabilities:
- No specific liabilities mentioned in the Trial Balance.
7. Jatin’s Profit Calculation for the year ended 31st March, 2013 (Under Single Entry System)
Assets and Liabilities Comparison (31st March, 2012 to 31st March, 2013):
| Item | 31st March 2012 (₹) | 31st March 2013 (₹) |
|---|---|---|
| Cash | 2,000 | 1,800 |
| Sundry Debtors | 78,000 | 90,000 |
| Stock | 68,000 | 64,000 |
| Plant and Machinery | 1,20,000 | 1,60,000 |
| Sundry Creditors | 30,000 | 29,800 |
| Bills Payable | — | 10,000 |
Transactions:
- New Capital Introduced: ₹20,000
- Withdrawals for Household Expenses: ₹6,000 per month × 12 months = ₹72,000
Net Cash Flow: Net change in cash = Cash at end (₹1,800) – Cash at beginning (₹2,000) = -₹200
Profit Calculation: Profit=(Net Change in Assets)+New Capital−Withdrawals\text{Profit} = (\text{Net Change in Assets}) + \text{New Capital} – \text{Withdrawals}
- Change in Sundry Debtors = ₹90,000 – ₹78,000 = ₹12,000 increase.
- Change in Stock = ₹64,000 – ₹68,000 = ₹4,000 decrease.
- Change in Plant & Machinery = ₹1,60,000 – ₹1,20,000 = ₹40,000 increase.
- Change in Sundry Creditors = ₹29,800 – ₹30,000 = ₹200 decrease.
- Change in Bills Payable = ₹10,000 increase.
Now, we adjust for the profit calculation: Profit=12,000−4,000+40,000−200−72,000+20,000=₹−4,200 (Loss)\text{Profit} = 12,000 – 4,000 + 40,000 – 200 – 72,000 + 20,000 = ₹-4,200 \text{ (Loss)}
Jatin incurred a loss of ₹4,200 during the year ended 31st March, 2013.
8. Mr. Verma’s Profit or Loss Calculation
Assets:
- Cash in Hand: ₹15,000
- Cash at Bank: ₹70,000
- Sundry Debtors: ₹1,20,000
- Stock: ₹2,40,000
- Furniture: ₹75,000
- Machinery: ₹2,00,000
Liabilities:
- Sundry Creditors: ₹80,000
Capital Calculation:
- Initial Capital: ₹5,00,000
- Additional Capital: ₹1,50,000
- Withdrawals: ₹90,000
Net Capital Calculation: Net Capital=Assets−Liabilities\text{Net Capital} = \text{Assets} – \text{Liabilities}
Total Assets = ₹15,000 (Cash) + ₹70,000 (Bank) + ₹1,20,000 (Debtors) + ₹2,40,000 (Stock) + ₹75,000 (Furniture) + ₹2,00,000 (Machinery) = ₹7,20,000
Total Liabilities = ₹80,000 (Creditors)
Net Capital = ₹7,20,000 – ₹80,000 = ₹6,40,000
Profit/Loss Calculation: Profit=Net Capital−(Initial Capital + Additional Capital – Withdrawals)\text{Profit} = \text{Net Capital} – \text{(Initial Capital + Additional Capital – Withdrawals)} Profit=6,40,000−(5,00,000+1,50,000−90,000)=6,40,000−5,60,000=₹80,000 (Profit)\text{Profit} = 6,40,000 – (5,00,000 + 1,50,000 – 90,000) = 6,40,000 – 5,60,000 = ₹80,000 \text{ (Profit)}
Thus, Mr. Verma made a profit of ₹80,000.
9. Ramesh Vyas – Trading and Profit and Loss Account & Balance Sheet
Trial Balance Information:
- Purchases: ₹81,25,250
- Sales: ₹1,26,20,000
- Provision for Doubtful Debts: ₹2,60,000
- Sundry Debtors: ₹25,10,000
- Sundry Creditors: ₹15,26,300
- Opening Stock: ₹13,36,250
- Wages: ₹11,56,850
- Salaries: ₹2,78,750
- Furniture: ₹3,62,500
- Postage: ₹2,11,300
- Power and Fuel: ₹67,500
- Trade Expenses: ₹2,91,550
- Bad Debts: ₹26,250
- Loan to Ram: ₹1,50,000 (10% interest from 1st Dec 2012)
- Cash in hand and at bank: ₹5,00,000
- Outstanding Wages: ₹1,00,000
- Drawings/Capital: ₹2,22,600 / ₹5,00,000
Adjustments:
- Stock on 31st March, 2013: ₹6,27,500
- Depreciation on Furniture: 10%
- Provision for Doubtful Debts: 5% of Sundry Debtors
- Insolvent Customer: ₹25,000 due from a customer who became insolvent
- Fire Insurance Claim: Goods worth ₹75,000 were destroyed, with an insurance claim of ₹50,000
- Unrecorded Purchases: Goods of ₹60,000 received on 27th March 2013 but not recorded.
Profit Calculation:
- Sales: ₹1,26,20,000
- Cost of Goods Sold (COGS): COGS=Opening Stock+Purchases−Closing Stock\text{COGS} = \text{Opening Stock} + \text{Purchases} – \text{Closing Stock} COGS=₹13,36,250+₹81,25,250−₹6,27,500=₹88,34,000\text{COGS} = ₹13,36,250 + ₹81,25,250 – ₹6,27,500 = ₹88,34,000
- Gross Profit: Gross Profit=Sales−COGS=₹1,26,20,000−₹88,34,000=₹37,86,000\text{Gross Profit} = \text{Sales} – \text{COGS} = ₹1,26,20,000 – ₹88,34,000 = ₹37,86,000
- Operating Expenses:
- Wages: ₹11,56,850
- Salaries: ₹2,78,750
- Postage: ₹2,11,300
- Power and Fuel: ₹67,500
- Trade Expenses: ₹2,91,550
- Bad Debts: ₹26,250
- Fire Loss: ₹75,000 – ₹50,000 (insurance claim) = ₹25,000
Total Operating Expenses: Total Operating Expenses=11,56,850+2,78,750+2,11,300+67,500+2,91,550+26,250+25,000=₹20,57,200\text{Total Operating Expenses} = 11,56,850 + 2,78,750 + 2,11,300 + 67,500 + 2,91,550 + 26,250 + 25,000 = ₹20,57,200
Net Profit: Net Profit=Gross Profit−Total Operating Expenses=₹37,86,000−₹20,57,200=₹17,28,800\text{Net Profit} = \text{Gross Profit} – \text{Total Operating Expenses} = ₹37,86,000 – ₹20,57,200 = ₹17,28,800
Balance Sheet:
- Assets:
- Current Assets: Sundry Debtors, Stock, Cash at Bank
- Fixed Assets: Furniture, Machinery
- Other Receivables: Insurance Claim
Liabilities:
- Creditors: Sundry Creditors, Bills Payable
- Outstanding Wages: ₹1,00,000
- Loan to Ram: ₹1,50,000 (with interest)
These steps provide a comprehensive solution to your query based on the data given. If you need specific formats of the financial statements or further elaboration on any part, feel free to ask!