TS Inter 2nd Year – Commerce Previous Paper  2020

COMMERCE, Paper-II

(English Version)

Time: 3 Hours] [Max. Marks: 100

PART – I (Marks-50)

SECTION – A

Note: Answer any two of the following questions not exceeding 40 lines each: 2 x 10 = 20

1. What is SEBI? What are its functions and powers?

Answer:

SEBI stands for Securities and Exchange Board of India. It is a regulatory body established by the Government of India to protect the interests of investors in the securities market and to promote the development and regulation of the securities market.

Functions of SEBI:

• Protecting Investors: SEBI takes measures to protect the interests of investors in the securities market by regulating intermediaries such as stockbrokers, merchant bankers, and underwriters. It also conducts investigations and takes action against fraudulent activities.
• Regulating Securities Market: SEBI regulates the primary and secondary markets for securities. It sets standards for financial reporting, disclosure requirements, and trading practices.
• Promoting Development of Securities Market: SEBI promotes the development of the securities market by encouraging new issuances, facilitating efficient trading, and promoting investor education.

Powers of SEBI:

• Investigative Powers: SEBI has the power to conduct investigations into any matter relating to the securities market.
• Regulatory Powers: SEBI can issue directions and guidelines to market intermediaries and listed companies.
• Adjudicatory Powers: SEBI can adjudicate disputes between market participants.
• Penal Powers: SEBI has the power to impose penalties on entities that violate securities laws.

2. Define banking and explain the functions of the banking.

Answer:

Banking is the business of accepting deposits from the public and lending money to borrowers. Banks also provide a range of other financial services, such as credit cards, investment products, and foreign exchange services.

Functions of Banking:

• Accepting Deposits: Banks accept deposits from customers in various forms, such as savings accounts, current accounts, and fixed deposits.
• Lending Money: Banks lend money to individuals, businesses, and governments for various purposes, such as personal loans, home loans, and business loans.
• Providing Payment Services: Banks provide a range of payment services, such as cheque clearing, electronic fund transfers, and credit cards.
• Offering Investment Products: Banks offer a variety of investment products, such as mutual funds, insurance products, and retirement plans.
• Providing Financial Advice: Banks provide financial advice to customers on various financial matters, such as investment planning and retirement planning.

3. What are the principles of Management?

Answer:

The principles of management are a set of guidelines that managers can follow to effectively manage their organizations. These principles were first formulated by Henri Fayol in his book “General and Industrial Management.”

The 14 principles of management are:

1. Division of Work: Dividing work into specialized tasks can increase efficiency and productivity.
2. Authority and Responsibility: Managers should have the authority to give orders and the responsibility to ensure that their ¹ subordinates carry out those orders. 

    

    

3. Discipline: Employees should be disciplined and obedient to organizational rules and regulations.
4. Unity of Command: Each employee should receive orders from only one superior.
5. Unity of Direction: All activities within an organization should be directed towards a common goal.
6. Subordination of Individual Interests to General Interest: The interests of the organization should take precedence over the interests of individual employees.
7. Remuneration: Employees should be paid fairly for their work.
8. Centralization: The degree to which decision-making power is concentrated at the top of the organization.
9. Scalar Chain: There should be a clear chain of command from top to bottom of the organization.
10. Order: There should be a place for everything and everything should be in its place.
11. Equity: Managers should treat employees fairly and equitably.
12. Stability of Tenure of Personnel: Employees should be given a reasonable amount of time to learn their jobs and perform their duties.
13. Initiative: Employees should be encouraged to take initiative and be creative.
14. Esprit de Corps: Managers should foster a sense of team spirit and unity among employees.

SECTION – B

Note: Answer any four of the following questions not exceeding 20 lines each: 4 x 5 = 20

4. List out the objectives of SEZs.

SEZs, or Special Economic Zones, are designated areas within a country that have different economic regulations than the rest of the country. They are typically established to boost economic growth and attract foreign investment. Here are some of the key objectives of SEZs:

• Promote exports: SEZs are designed to encourage exports by offering preferential treatment to businesses operating within their boundaries. This includes lower taxes, streamlined customs procedures, and access to infrastructure and utilities.
• Generate employment: SEZs are expected to create jobs, both directly and indirectly, by attracting businesses and industries to the region.
• Develop infrastructure: SEZs often lead to the development of infrastructure in the surrounding areas, such as roads, ports, and airports.
• Attract foreign investment: SEZs are designed to attract foreign investment by offering a more favorable business environment than other parts of the country.
• Technology transfer: SEZs can facilitate the transfer of technology and knowledge to the local economy by attracting foreign companies with advanced technologies.

5. What are the characteristics of Entrepreneur?

Entrepreneurs are individuals who identify and pursue business opportunities. They are often characterized by the following traits:

• Risk-taking: Entrepreneurs are willing to take risks and invest their time, money, and effort in new ventures.
• Innovation: Entrepreneurs are often creative and innovative, coming up with new ideas and solutions to problems.
• Proactiveness: Entrepreneurs are proactive and take initiative to make things happen.
• Self-confidence: Entrepreneurs believe in their own abilities and are confident in their ability to succeed.
• Determination: Entrepreneurs are persistent and determined to overcome challenges.
• Leadership: Entrepreneurs are often good leaders who can motivate and inspire others.
• Passion: Entrepreneurs are passionate about their businesses and are driven by a strong desire to succeed.

6. What are the differences between Primary Market and Secondary Market?

The primary market and secondary market are two distinct markets for securities. Here are the key differences between them:

7. Explain the principles of Directing.

Directing is one of the key functions of management, involving guiding and motivating employees to achieve organizational goals. Here are some of the key principles of directing:

• Leadership: Effective leaders inspire and motivate employees to perform at their best.
• Communication: Clear and effective communication is essential for directing employees and ensuring that they understand their roles and responsibilities.
• Motivation: Motivating employees is crucial for ensuring that they are willing to put in the effort required to achieve organizational goals. This can be done through various means, such as offering incentives, providing recognition, and creating a positive work environment.
• Supervision: Supervisors play a crucial role in directing employees by providing guidance, feedback, and support.
• Coordination: Ensuring that the activities of different departments and individuals are coordinated is essential for achieving organizational goals.

8. State the features of Insurance.

Insurance is a contract between an insurer and an insured, where the insurer agrees to compensate the insured for a specific loss in exchange for a premium. Here are some of the key features of insurance:  

 

• Risk Transfer: Insurance transfers the risk of financial loss from the insured to the insurer.
• Risk Pooling: Insurance companies pool the premiums of many individuals to create a large pool of funds to pay claims.
• Indemnity: Insurance contracts are typically based on the principle of indemnity, which means that the insured is compensated for the actual loss suffered.
• Utmost Good Faith: Both the insurer and the insured are expected to act in good faith and disclose all material information.
• Insurable Interest: The insured must have an insurable interest in the subject matter of the insurance.

9. Explain the special support extended by the government of Telangana to the SC/ST entrepreneurs in our state.

The government of Telangana provides a range of special support measures to encourage entrepreneurship among SC/ST communities. These measures include:

• Financial Assistance: The government provides various financial assistance schemes, such as subsidies, loans, and grants, to SC/ST entrepreneurs.
• Skill Development Programs: The government offers skill development programs to help SC/ST entrepreneurs acquire the necessary skills and knowledge to start and run businesses.
• Marketing Support: The government provides marketing support to SC/ST entrepreneurs, such as assistance with branding and promotion.
• Infrastructure Support: The government provides infrastructure support to SC/ST entrepreneurs, such as access to industrial parks and technology centers.
• Reservation in Government Tenders: SC/ST entrepreneurs are given preference in government tenders.

These are just some of the special support measures extended by the government of Telangana to SC/ST entrepreneurs. The aim of these measures is to promote economic empowerment and create a level playing field for SC/ST entrepreneurs.

SECTION – C

Note: Answer any five of the following questions not exceeding 5 lines each: 5 x 2 = 10

10. Bears

Answer:

Bears are large mammals belonging to the Ursidae family. They are known for their thick fur, strong claws, and omnivorous diet. They can be found in various habitats across the world, including forests, mountains, and tundra. Some well-known bear species include brown bears, black bears, and polar bears.

11. What is the IRDA?

Answer:

IRDA stands for Insurance Regulatory and Development Authority of India. It is the statutory body responsible for regulating and developing the insurance industry in India.

12. Adoptive Entrepreneur.

Answer:

An adoptive entrepreneur is an individual who takes over an existing business and manages it as their own. They may acquire the business through purchase, inheritance, or other means.

13. What is Bridge loans ?

Answer:

Bridge loans are short-term loans used to bridge the gap between the sale of one asset and the purchase of another. They are typically used to finance the down payment on a new property while waiting for the sale of the existing property to close.

14. Hawkers and Pedlars.

Answer:

Hawkers and pedlars are individuals who sell goods from door to door or in public places. They typically sell small items, such as snacks, toys, and household goods.

15. Define planning.

Answer:

Planning is the process of setting goals, developing strategies, and allocating resources to achieve desired outcomes. It involves defining objectives, identifying potential challenges, and developing action plans to address them.

16. What is Bonded warehouse?

Answer:

A bonded warehouse is a secure facility for storing imported goods until customs duties are paid. Goods stored in bonded warehouses are not subject to customs duties until they are released for domestic consumption.

17. Bill of Lading.

Answer:

A bill of lading is a document issued by a carrier to a shipper, acknowledging receipt of cargo for shipment. It serves as a contract of carriage between the shipper and the carrier and also acts as a document of title to the goods.

PART-II (Marks-50)

SECTION – D

Note: Answer the following question: 1 x 20 = 20

Question 18:

Raju and Rao are partners sharing profit and losses in the ratio of 3:2. Their balance sheet as on 31st March, 2018 was as under:

They decided to admit Mr. Reddy into partnership by giving him 1/4th share in future profits of the firm on the following conditions:

1. Reddy is to bring ₹2,50,000 as capital and ₹1,00,000 as goodwill in cash.
2. Stock and furniture to be depreciated by 10%.
3. Make a provision of 5% on Sundry debtors.
4. Land & Buildings are to be appreciated by 20%.

Prepare necessary Ledger Accounts and show the new Balance Sheet.

Answer:

1. Journal Entries

a) Admission of Reddy

b) Depreciation on Stock and Furniture

c) Provision for Bad Debts

d) Appreciation of Land & Buildings

2. Ledger Accounts

• Cash: Opening Balance: 2,00,000; Reddy’s Capital: 3,50,000; Closing Balance: 5,50,000
• Goodwill: Reddy’s Capital: 1,00,000; Closing Balance: 1,00,000
• Stock: Opening Balance: 3,00,000; Depreciation: 30,000; Closing Balance: 2,70,000
• Furniture: Opening Balance: 1,00,000; Depreciation: 10,000; Closing Balance: 90,000
• Land & Buildings: Opening Balance: 2,50,000; Appreciation: 50,000; Closing Balance: 3,00,000
• Sundry Debtors: Opening Balance: 2,00,000; Provision for Bad Debts: 10,000; Closing Balance: 1,90,000
• Provision for Bad Debts: Profit & Loss Adjustment A/c: 10,000; Closing Balance: 10,000
• Profit & Loss Adjustment A/c: Depreciation: 40,000; Provision for Bad Debts: 10,000; Appreciation: 50,000; Closing Balance: 0 (transferred to partners’ capital)
• Partners’ Capital Accounts:
  • Raju: Opening Balance: 4,00,000; Goodwill: 60,000; Profit & Loss Adjustment A/c: 20,000; Closing Balance: 4,80,000
  • Rao: Opening Balance: 3,00,000; Goodwill: 40,000; Profit & Loss Adjustment A/c: 15,000; Closing Balance: 3,55,000
  • Reddy: Opening Balance: 2,50,000; Closing Balance: 2,50,000

3. New Balance Sheet as on 31st March, 2018

Note:

• The Profit & Loss Adjustment Account balance is transferred to the partners’ capital accounts in their profit-sharing ratio (3:2:1).
• The goodwill is shared by the existing partners in their profit-sharing ratio.

 

Section – E

Note: Answer any one of the following question’s: 1 x 10 = 10

Question 19:

Rao & Co. sent goods worth ₹10,000 on consignment to their agent Mehta & Co. of Bombay at proforma invoice price of cost plus 20%. Rao & Co. paid ₹500 as expenses. Mehta & Co. sent advance of ₹6,000 and net carriage ₹600. Other expenses ₹400. Mehta & Co. sold all the goods for ₹18,500 and they are entitled to 5% commission.

Prepare necessary ledger accounts in the books of Rao & Co.

Solution:

Ledger Accounts in the Books of Rao & Co.

1. Consignment to Mehta & Co. A/c

2. Mehta & Co. A/c

Explanation:

• Consignment to Mehta & Co. A/c: This account records the transactions related to the consignment sent to Mehta & Co. It is debited for the cost of goods sent and expenses incurred by Rao & Co., and credited for the sales proceeds, commission earned by Mehta & Co., expenses incurred by Mehta & Co., and the closing stock value (which is zero in this case as all goods were sold).
• Mehta & Co. A/c: This account records the transactions with Mehta & Co. It is debited for the goods received, expenses incurred by Rao & Co., and credited for the advance received from Mehta & Co., sales proceeds, and commission.

Closing Balance:

The closing balance in both accounts is ₹14,925, which represents the amount due from Mehta & Co. to Rao & Co. This amount includes the sales proceeds, commission, and expenses incurred by both parties.

Question 20:

Karim Nagar Youth Club gives you their Receipts and Payments Account and other information and requests you to prepare their Income and Expenditure account for the year ended 31-03-2018.  

 

Receipts and Payments Account for the year ended 31-03-2018.

Additional Information:

1. Subscriptions received in advance as on 31-03-2018 were ₹5,000.
2. Subscriptions outstanding as on 31-03-2018 were ₹10,000.
3. Depreciation on furniture for the year was ₹15,000.
4. Interest on investments amounted to ₹10,200.
5. General Expenses amounted to ₹4,000.
6. Balance c/d was ₹5,000.

Income and Expenditure Account

For the Year Ended 31-03-2018

Explanation:

1. Subscriptions: We adjust the subscriptions received by subtracting subscriptions received in advance and adding outstanding subscriptions.
2. Depreciation on Furniture: Depreciation is an expense, so it is debited in the Income and Expenditure Account.
3. Interest on Investments: Interest on investments is considered as income.
4. General Expenses: General expenses are debited in the Income and Expenditure Account.
5. Balance c/d: This represents the closing balance of the Income and Expenditure Account, which is carried forward to the next accounting period.

Note:

• The purchase of furniture and shares is not considered in the Income and Expenditure Account as they are capital expenditures.

SECTION – F

Note: Answer any two of the following questions: 2 x 5 = 10

21. Explain the five differences between Receipts and Payments Account and Income and Expenditure Account.

Here are five key differences between Receipts and Payments Account and Income and Expenditure Account:

1. Basis of Preparation:

   • Receipts and Payments Account: Records only cash transactions, both receipts and payments, during a specific period. It focuses on the flow of cash.
   • Income and Expenditure Account: Records all incomes earned and expenses incurred during a specific period, regardless of whether cash has been received or paid. It focuses on the financial performance of the organization.

2. Accruals and Prepayments:

   • Receipts and Payments Account: Ignores accruals (income earned but not yet received) and prepayments (expenses paid in advance).
   • Income and Expenditure Account: Considers accruals and prepayments to present a true and fair view of income and expenditure for the period.

3. Capital Receipts and Payments:

   • Receipts and Payments Account: Includes capital receipts (like sale of assets) and capital payments (like purchase of assets).
   • Income and Expenditure Account: Excludes capital receipts and payments.

4. Depreciation:

   • Receipts and Payments Account: Does not record depreciation as it is a non-cash expense.
   • Income and Expenditure Account: Records depreciation as an expense to reflect the wear and tear of assets.

5. Purpose:

   • Receipts and Payments Account: Primarily used by non-profit organizations to track their cash inflows and outflows.
   • Income and Expenditure Account: Used to determine the surplus or deficit of the organization and to assess its financial performance.

22. Srinivas bought a plant and machine on 1st April, 2016 for 23,000 and paid 2,000 for its installation. Depreciation is to be allowed at 10% under straight line method. On 31st March, 2019 the plant was sold for 8,000. Assuming that the accounts are closed at the end of the financial year, prepare Plant & Machine A/c.

Plant & Machinery A/c

Explanation:

1. Cost of Plant & Machinery: 23,000 (Purchase) + 2,000 (Installation) = ₹25,000
2. Annual Depreciation: 25,000 * 10% = ₹2,500
3. Accumulated Depreciation (till 31st March, 2019): 2,500 * 3 years = ₹7,500
4. Book Value of Plant & Machinery on 31st March, 2019: 25,000 – 7,500 = ₹17,500
5. Loss on Sale: Book Value (17,500) – Sale Price (8,000) = ₹9,500

23. Find out Profit from the following data:

• Capital at the beginning of the year: ₹12,000
• Capital at the end of the year: ₹18,000
• Drawings during the year: ₹4,000
• Further capital introduced during the year: ₹5,500

Solution:

Formula:

Profit = Closing Capital – Opening Capital + Drawings – Additional Capital Introduced

Calculation:

Profit = 18,000 – 12,000 + 4,000 – 5,500

Profit = 6,000 + 4,000 – 5,500

Profit = 10,000 – 5,500

Profit = ₹4,500

Therefore, the profit for the year is ₹4,500.

24. Write any five advantages of Computerized Accounting.

Here are five advantages of Computerized Accounting:

1. Accuracy: Computerized accounting software can perform calculations with high accuracy, reducing the risk of human errors.
2. Speed: Data entry, calculations, and report generation are significantly faster with computerized systems, improving efficiency.
3. Data Storage and Retrieval: Electronic records are easy to store, retrieve, and search, making it easier to access information when needed.
4. Audit Trail: Computerized systems maintain a detailed audit trail, which can be helpful for audits and investigations.
5. Integration: Accounting software can be integrated with other business applications, such as inventory management and customer relationship management, improving overall business operations.

SECTION – G

Note: Answer any five of the following questions not exceeding 5 lines each: 5 x 2 = 10

25. What is Obsolescence?

Answer: Obsolescence refers to the reduction in value of an asset due to technological advancements, changes in market demand, or the emergence of better alternatives. This means the asset becomes outdated or less useful, even if it is still physically functional.

26. What is Statement of Affairs?

Answer: A Statement of Affairs is a financial statement prepared for an insolvent company to show its financial position at a particular point in time. It lists the company’s assets and liabilities, along with the estimated realizable value of the assets. This statement helps creditors assess the company’s ability to repay its debts.

27. What is Del Credere Commission?

Answer: Del Credere Commission is an additional commission paid to an agent or consignee beyond their regular commission. It is given to the agent to guarantee the collection of sales proceeds from customers. In essence, the agent assumes the risk of bad debts.

28. Legacy

Answer: In a legal context, a legacy refers to a gift of money or property left to someone in a will. It is a bequest made by a deceased person to their heirs or beneficiaries.

29. Gaining Ratio

Answer: The Gaining Ratio is the ratio in which the existing partners share the profit sacrificed by an outgoing partner or the additional profit earned by an incoming partner.

30. X and Y are partners sharing profits and losses in the ratio of 3: 2. They decided to admit Mr. Z for 1/5 share in profit. Calculate New Profit Sharing Ratio of X, Y and Z.

Solution:

1. Calculate the total share given up by X and Y:

   • Total share given up = 1/5

2. Calculate the share given up by X and Y individually:

   • X’s share given up = (1/5) * (3/5) = 3/25
   • Y’s share given up = (1/5) * (2/5) = 2/25

3. Calculate the new shares of X and Y:

   • X’s new share = (3/5) – (3/25) = 12/25
   • Y’s new share = (2/5) – (2/25) = 8/25

4. New Profit Sharing Ratio of X, Y, and Z:

   • X:Y:Z = 12/25 : 8/25 : 1/5
   • To simplify, multiply each ratio by 25:
   • X:Y:Z = 12:8:5

Therefore, the new profit-sharing ratio of X, Y, and Z is 12:8:5.

31. ERP.

Answer: ERP stands for Enterprise Resource Planning. It is a business management software that integrates various business processes, such as finance, human resources, supply chain management, and customer relationship management, into a single system.  

 

32. Spreadsheet

Answer: A spreadsheet is an electronic document with rows and columns used to organize, analyze, and manipulate data. It is a powerful tool for calculations, data entry, and presentation. Examples of popular spreadsheet software include Microsoft Excel, Google Sheets, and LibreOffice Calc.