CBSE Class 10 – Elements of Book Keeping and Accountancy Previous Paper 2023

ELEMENTS OF BOOK-KEEPING AND ACCOUNTANCY (Commerce)

Time allowed: 3 hours

Maximum Marks: 70

General Instructions:

• (i) This question paper contains 30 questions.
• (ii) Question 1 to 18 are of one mark each.
• (iii) Question 19 to 22 are of three marks each.
• (iv) Question 23 to 26 are of four marks each.
• (v) Question 27 to 30 are of six marks each.

Q1. Which of the following is a Capital Receipt? (1 mark)

• (a) Rent received
• (b) Sale of services
• (c) Loan received by the business
• (d) Salary received

Answer: (c) Loan received by the business

Explanation: Capital receipts are those that result in an increase in the owner’s equity or liabilities. A loan increases the business’s liability, making it a capital receipt. Rent received, sale of services, and salary received are revenue receipts, as they are part of the normal operating activities of a business.

OR

Which of the following is Revenue Expenditure? (1 mark)

• (a) White wash expenses
• (b) Trade marks purchased
• (c) Expenses incurred to get the manager’s office air-conditioned
• (d) Goodwill purchased

Answer: (a) White wash expenses

Explanation: Revenue expenditures are short-term expenses incurred for the day-to-day running of the business. White wash expenses (painting, minor repairs) fall under this category. Trade marks, air conditioning for the manager’s office (assuming it’s a significant upgrade), and goodwill purchased are generally considered capital expenditures, as they provide long-term benefits to the business.

Q2. Capital Receipts and Revenue Receipts (1 mark)

• (a) are different
• (b) are not different
• (c) may or may not be distinguished
• (d) must not be distinguished

Answer: (a) are different

Explanation: Capital receipts and revenue receipts are fundamentally different. They are classified differently, have different impacts on a business’s financial statements, and are treated differently for accounting purposes. It’s crucial to distinguish between them for accurate financial reporting and decision-making.

Q3. A machinery was purchased for ₹8,00,000 on 1st October, 2021. Depreciation was to be charged @ 10% p.a. by straight line method. What will be the book value of machinery on 31st March, 2022? (1 mark)

• (a) ₹7,60,000
• (b) ₹7,20,000
• (c) ₹7,00,000
• (d) ₹8,00,000

Answer: (b) ₹7,20,000

Explanation:

• The machinery was used for 6 months (October 2021 to March 2022).
• Annual depreciation = 10% of ₹8,00,000 = ₹80,000
• Depreciation for 6 months = (₹80,000 / 12) * 6 = ₹40,000
• Book value on 31st March, 2022 = ₹8,00,000 – ₹40,000 = ₹7,60,000

Note: There seems to be a typo in the options. The correct answer, based on the calculation, should be ₹7,60,000. However, the closest option provided is (a) ₹7,60,000.

OR

A firm purchased furniture of ₹5,00,000 on 1st April, 2020. Depreciation was to be charged @ 5% p.a. by ‘Written Down Value Method’. What will be the book value of machinery on 31st March, 2022? (1 mark)

• (a) ₹4,57,250
• (b) ₹4,51,250
• (c) ₹4,50,000
• (d) ₹4,51,000

Answer: (b) ₹4,51,250

Explanation:

• Year 1 (2020-2021):
  • Depreciation = 5% of ₹5,00,000 = ₹25,000
  • Book Value at the end of Year 1 = ₹5,00,000 – ₹25,000 = ₹4,75,000
• Year 2 (2021-2022):
  • Depreciation = 5% of ₹4,75,000 = ₹23,750
  • Book Value at the end of Year 2 (31st March, 2022) = ₹4,75,000 – ₹23,750 = ₹4,51,250

Q4. On 1st April, 2019 B Ltd. purchased machinery of ₹8,00,000. Depreciation was to be charged @ 10% p.a. by Fixed Installment System. On the same day, Ram Ltd. also purchased machinery of the same amount and charged depreciation @ 10% p.a. by Reducing Installment System. On 31st March, 2021 which of the following statement holds true? (1 mark)

• (a) Book value of machinery of both the firms will be the same.
• (b) Book value of machinery of Ram Ltd. will be ₹8,000 more than B Ltd.
• (c) Book value of machinery in B Ltd. will be ₹8,000 more than Ram Ltd.
• (d) Book value of machinery in B Ltd. will be ₹10,000 less than Ram Ltd.

Answer: (c) Book value of machinery in B Ltd. will be ₹8,000 more than Ram Ltd.

Explanation:

• B Ltd. (Fixed Installment System):

  • Annual Depreciation = 10% of ₹8,00,000 = ₹80,000
  • Total Depreciation over 2 years (2019-2021) = ₹80,000 * 2 = ₹1,60,000
  • Book Value on 31st March, 2021 = ₹8,00,000 – ₹1,60,000 = ₹6,40,000

• Ram Ltd. (Reducing Installment System):

  • Year 1 Depreciation = 10% of ₹8,00,000 = ₹80,000
  • Book Value after Year 1 = ₹8,00,000 – ₹80,000 = ₹7,20,000
  • Year 2 Depreciation = 10% of ₹7,20,000 = ₹72,000
  • Book Value on 31st March, 2021 = ₹7,20,000 – ₹72,000 = ₹6,48,000

• Difference: ₹6,48,000 (Ram Ltd.) – ₹6,40,000 (B Ltd.) = ₹8,000

Q5. Depreciation Account is closed at the end of the year by transferring its balance to the specific account. Which of the following is a name of this Account? (1 mark)

• (a) Fixed Asset Account
• (b) General Reserve Account
• (c) Profit and Loss Account
• (d) Capital Account

Assertion (A): Under the written down value method, the amount of depreciation decreases every year.

Reason (R): In the written down value method, the book value of the asset will never become zero.

Options:

• (a) Both (A) and (R) are correct and (R) is the correct explanation of (A).

• (b) Both (A) and (R) are correct but (R) is not the correct explanation of (A).

• (c) (A) is correct but (R) is incorrect.

• (d) (A) is incorrect but (R) is correct.  

Answer: (a) Both (A) and (R) are correct and (R) is the correct explanation of (A).

Q6. Bank Reconciliation Statement is prepared (1 mark)

• (a) to know the payment made through cheques.
• (b) to know the errors in the Bank Pass Book.
• (c) to compare the cash book balance with Bank Pass Book balance and ascertain the difference.
• (d) to balance Pass book.

Answer: (c) to compare the cash book balance with Bank Pass Book balance and ascertain the difference.

Explanation: The primary purpose of a Bank Reconciliation Statement is to identify and explain the discrepancies between the bank balance as per the company’s cash book and the balance as per the bank statement (Pass Book). It’s not about just knowing payments or errors, but about reconciling the two records.

OR

Bank Reconciliation statement is: (1 mark)

• (a) a part of Double Entry System
• (b) not a part of Double Entry System
• (c) a part of Single Entry System
• (d) a part of cash balances of the Cash Book

Answer: (b) not a part of Double Entry System

Explanation: A Bank Reconciliation Statement is a separate process. Double-entry bookkeeping records transactions in the company’s books, while the bank reconciliation compares these records with the bank’s records. It’s a control mechanism, not a recording mechanism.

**Q7. Statement-I: When Bank Reconciliation Statement is prepared with overdraft Balance as per Pass Book, the Balance derived will be only Balance as per Bank Pass Book.

Statement-II: Bank Reconciliation statement is prepared by Account holder. (1 mark)**

• (a) Both the Statements are False.
• (b) Both the Statements are True.
• (c) Only Statement-I is true.
• (d) Only Statement-II is true.

Answer: (d) Only Statement-II is true.

Explanation:

• Statement I is False: When starting with an overdraft balance as per the Pass Book (bank statement), the reconciliation process aims to arrive at the adjusted cash book balance, not the Pass Book balance again.

• Statement II is True: The bank reconciliation statement is prepared by the account holder (the company or individual who owns the bank account), not by the bank.

Q8. A business receives its bank statement showing the closing balance as ₹8,500 overdrawn. It is found that there were unpresented cheques of ₹2,000 and uncredited deposits of ₹1,500. Overdraft as per cash book will be: (1 mark)

• (a) ₹5,000
• (b) ₹8,000
• (c) ₹9,000
• (d) ₹12,000

Answer: (b) ₹8,000

Explanation:

• Start with the bank statement balance (overdraft): ₹8,500 (Dr.)
• Add: Unpresented cheques (cheques issued but not yet cleared by the bank): ₹2,000
• Less: Uncredited deposits (deposits made but not yet recorded by the bank): ₹1,500
• Overdraft as per cash book: ₹8,500 + ₹2,000 – ₹1,500 = ₹9,000 (Dr.)

Note: There appears to be a typo in the options. The correct answer, based on the calculation, is ₹9,000 (Dr.), but it is not provided in the options. The closest option is (c) ₹9,000, but it is not specified as an overdraft.

Q9. Cash Book shows ₹1,000 as overdrawn. When the bank statement is received, it was identified that one of the debtors has deposited ₹400 into the account and bank charges of ₹20 had been debited to the account. Bank Statement balance is (1 mark)  

• (a) ₹1,420 (Dr)
• (b) ₹620 (Dr)
• (c) ₹4,300 (Cr)
• (d) ₹1,700 (Dr)

Answer: (b) ₹620 (Dr)

Explanation:

• Start with the cash book balance (overdraft): ₹1,000 (Dr.)
• Less: Direct deposit by debtor (increases the bank balance): ₹400
• Add: Bank charges (decreases the bank balance): ₹20
• Bank statement balance: ₹1,000 – ₹400 + ₹20 = ₹620 (Dr.)

Q10. Assertion (A): A bill of exchange must be unconditional. (1 mark)

**Reason (R): A bill of exchange must specify the date by which the amount should be paid. **

• (a) Both (A) and (R) are correct and (R) is the correct explanation of A.

• (b) Both (A) and (R) correct but (R) is not the correct explanation of (A).

• (c) (A) is correct but (R) is incorrect.  

• (d) (A) is incorrect but (R) is correct.

Answer: (b) Both (A) and (R) correct but (R) is not the correct explanation of (A).  

Explanation:

• Assertion (A) is correct: A bill of exchange must be unconditional, meaning the payment is not dependent on any specific condition being met.

• Reason (R) is correct: A bill of exchange must state a specific date (or determinable future date) when the payment is due.

• However, (R) is not the explanation for (A): While both are requirements for a valid bill of exchange, the reason a bill must be unconditional is not because it has a due date. The unconditionality refers to the certainty of payment, while the due date refers to when that certain payment is to be made.

Q11. A bill of exchange facilitates credit purchase. A bill of exchange has: (1 mark)

• (a) two parties
• (b) three parties
• (c) four parties
• (d) seven parties

Answer: (b) three parties

Explanation:

The three parties involved in a bill of exchange are:

1. Drawer: The seller or creditor who draws the bill.
2. Drawee: The buyer or debtor who is required to pay the bill.
3. Payee: The person to whom the payment is to be made (can be the drawer or a third party).

Q12. On 1st January, 2022, Ishu issued a bill of ₹10,000 on Ram for 4 months. What will be the maturity date of the bill? (1 mark)

• (a) 3rd May, 2022
• (b) 4th May, 2022
• (c) 5th May, 2022
• (d) 10th May, 2022

Answer: (b) 4th May, 2022

Explanation:

• The bill is for 4 months, so adding 4 months to January 1st, 2022 brings us to May 1st, 2022.
• Add the standard 3 days of grace to May 1st, 2022, which makes the maturity date May 4th, 2022.

OR

On 1st April, 2021, Ram sold goods to Mohan for ₹50,000. On the same date, Mohan accepted a bill drawn upon him by Ram at 3 months for ₹50,000. On the due date, the bill was met. Who is the Drawer of the bill in the above situation? (1 mark)  

• (a) Ram
• (b) Mohan
• (c) Bank
• (d) Government

Answer: (a) Ram

Explanation: The drawer is the one who initiates the bill, which in this case is Ram, the seller.

Q13. Loss on sale of an old car is debited to (1 mark)

• (a) Profit & Loss Account
• (b) Car Account
• (c) Depreciation Account
• (d) Trading Account

Answer: (a) Profit & Loss Account

Explanation: Losses on the sale of assets are recorded in the Profit & Loss Account as they are considered revenue losses.

OR

While preparing the ‘Trading Account’ return Inward is deducted from (1 mark)

• (a) Purchases
• (b) Sales
• (c) Return outward
• (d) Gross profit

Answer: (b) Sales

Explanation: “Return Inward” refers to sales returns, which reduce the total sales figure.

Q14. Gross Profit of a firm was ₹4,00,000, rent received was ₹60,000 and repair expenses were ₹50,000. The final result will be: (1 mark)

• (a) Net profit ₹2,80,000
• (b) Net profit ₹4,10,000
• (c) Net profit ₹5,10,000
• (d) Net profit ₹1,00,000

Answer: (b) Net profit ₹4,10,000

Explanation:

• Gross Profit: ₹4,00,000
• Add: Rent Received (Income): ₹60,000
• Less: Repair Expenses: ₹50,000
• Net Profit: ₹4,00,000 + ₹60,000 – ₹50,000 = ₹4,10,000

OR

Gross Profit of a firm was ₹4,00,000. Which of the following will reduce the amount of Net Profit? (1 mark)

• (a) Rent received
• (b) Depreciation
• (c) Interest received
• (d) Discount received

Answer: (b) Depreciation

Explanation: Depreciation is an expense, and expenses reduce net profit. The other options are incomes, which would increase net profit.

Q12. On 1st January, 2022, Ishu issued a bill of ₹10,000 on Ram for 4 months. What will be the maturity date of the bill? (1 mark)

• (a) 3rd May, 2022
• (b) 4th May, 2022
• (c) 5th May, 2022
• (d) 10th May, 2022

Answer: (b) 4th May, 2022

Explanation:

• The bill is for 4 months, so adding 4 months to January 1st, 2022 brings us to May 1st, 2022.
• Add the standard 3 days of grace to May 1st, 2022, which makes the maturity date May 4th, 2022.

OR

On 1st April, 2021, Ram sold goods to Mohan for ₹50,000. On the same date, Mohan accepted a bill drawn upon him by Ram at 3 months for ₹50,000. On the due date, the bill was met. Who is the Drawer of the bill in the above situation? (1 mark)  

• (a) Ram
• (b) Mohan
• (c) Bank
• (d) Government

Answer: (a) Ram

Explanation: The drawer is the one who initiates the bill, which in this case is Ram, the seller.

Q13. Loss on sale of an old car is debited to (1 mark)

• (a) Profit & Loss Account
• (b) Car Account
• (c) Depreciation Account
• (d) Trading Account

Answer: (a) Profit & Loss Account

Explanation: Losses on the sale of assets are recorded in the Profit & Loss Account as they are considered revenue losses.

OR

While preparing the ‘Trading Account’ return Inward is deducted from (1 mark)

• (a) Purchases
• (b) Sales
• (c) Return outward
• (d) Gross profit

Answer: (b) Sales

Explanation: “Return Inward” refers to sales returns, which reduce the total sales figure.

Q14. Gross Profit of a firm was ₹4,00,000, rent received was ₹60,000 and repair expenses were ₹50,000. The final result will be: (1 mark)

• (a) Net profit ₹2,80,000
• (b) Net profit ₹4,10,000
• (c) Net profit ₹5,10,000
• (d) Net profit ₹1,00,000

Answer: (b) Net profit ₹4,10,000

Explanation:

• Gross Profit: ₹4,00,000
• Add: Rent Received (Income): ₹60,000
• Less: Repair Expenses: ₹50,000
• Net Profit: ₹4,00,000 + ₹60,000 – ₹50,000 = ₹4,10,000

OR

Gross Profit of a firm was ₹4,00,000. Which of the following will reduce the amount of Net Profit? (1 mark)

• (a) Rent received
• (b) Depreciation
• (c) Interest received
• (d) Discount received

Answer: (b) Depreciation

Explanation: Depreciation is an expense, and expenses reduce net profit. The other options are incomes, which would increase net profit.

Q12. On 1st January, 2022, Ishu issued a bill of ₹10,000 on Ram for 4 months. What will be the maturity date of the bill? (1 mark)

• (a) 3rd May, 2022
• (b) 4th May, 2022
• (c) 5th May, 2022
• (d) 10th May, 2022

Answer: (b) 4th May, 2022

Explanation:

• The bill is for 4 months, so adding 4 months to January 1st, 2022 brings us to May 1st, 2022.
• Add the standard 3 days of grace to May 1st, 2022, which makes the maturity date May 4th, 2022.

OR

On 1st April, 2021, Ram sold goods to Mohan for ₹50,000. On the same date, Mohan accepted a bill drawn upon him by Ram at 3 months for ₹50,000. On the due date, the bill was met. Who is the Drawer of the bill in the above situation? (1 mark)  

• (a) Ram
• (b) Mohan
• (c) Bank
• (d) Government

Answer: (a) Ram

Explanation: The drawer is the one who initiates the bill, which in this case is Ram, the seller.

Q13. Loss on sale of an old car is debited to (1 mark)

• (a) Profit & Loss Account
• (b) Car Account
• (c) Depreciation Account
• (d) Trading Account

Answer: (a) Profit & Loss Account

Explanation: Losses on the sale of assets are recorded in the Profit & Loss Account as they are considered revenue losses.

OR

While preparing the ‘Trading Account’ return Inward is deducted from (1 mark)

• (a) Purchases
• (b) Sales
• (c) Return outward
• (d) Gross profit

Answer: (b) Sales

Explanation: “Return Inward” refers to sales returns, which reduce the total sales figure.

Q14. Gross Profit of a firm was ₹4,00,000, rent received was ₹60,000 and repair expenses were ₹50,000. The final result will be: (1 mark)

• (a) Net profit ₹2,80,000
• (b) Net profit ₹4,10,000
• (c) Net profit ₹5,10,000
• (d) Net profit ₹1,00,000

Answer: (b) Net profit ₹4,10,000

Explanation:

• Gross Profit: ₹4,00,000
• Add: Rent Received (Income): ₹60,000
• Less: Repair Expenses: ₹50,000
• Net Profit: ₹4,00,000 + ₹60,000 – ₹50,000 = ₹4,10,000

OR

Gross Profit of a firm was ₹4,00,000. Which of the following will reduce the amount of Net Profit? (1 mark)

• (a) Rent received
• (b) Depreciation
• (c) Interest received
• (d) Discount received

Answer: (b) Depreciation

Explanation: Depreciation is an expense, and expenses reduce net profit. The other options are incomes, which would increase net profit.

Q12. On 1st January, 2022, Ishu issued a bill of ₹10,000 on Ram for 4 months. What will be the maturity date of the bill? (1 mark)

• (a) 3rd May, 2022
• (b) 4th May, 2022
• (c) 5th May, 2022
• (d) 10th May, 2022

Answer: (b) 4th May, 2022

Explanation:

• The bill is for 4 months, so adding 4 months to January 1st, 2022 brings us to May 1st, 2022.
• Add the standard 3 days of grace to May 1st, 2022, which makes the maturity date May 4th, 2022.

OR

On 1st April, 2021, Ram sold goods to Mohan for ₹50,000. On the same date, Mohan accepted a bill drawn upon him by Ram at 3 months for ₹50,000. On the due date, the bill was met. Who is the Drawer of the bill in the above situation? (1 mark)  

• (a) Ram
• (b) Mohan
• (c) Bank
• (d) Government

Answer: (a) Ram

Explanation: The drawer is the one who initiates the bill, which in this case is Ram, the seller.

Q13. Loss on sale of an old car is debited to (1 mark)

• (a) Profit & Loss Account
• (b) Car Account
• (c) Depreciation Account
• (d) Trading Account

Answer: (a) Profit & Loss Account

Explanation: Losses on the sale of assets are recorded in the Profit & Loss Account as they are considered revenue losses.

OR

While preparing the ‘Trading Account’ return Inward is deducted from (1 mark)

• (a) Purchases
• (b) Sales
• (c) Return outward
• (d) Gross profit

Answer: (b) Sales

Explanation: “Return Inward” refers to sales returns, which reduce the total sales figure.

Q14. Gross Profit of a firm was ₹4,00,000, rent received was ₹60,000 and repair expenses were ₹50,000. The final result will be: (1 mark)

• (a) Net profit ₹2,80,000
• (b) Net profit ₹4,10,000
• (c) Net profit ₹5,10,000
• (d) Net profit ₹1,00,000

Answer: (b) Net profit ₹4,10,000

Explanation:

• Gross Profit: ₹4,00,000
• Add: Rent Received (Income): ₹60,000
• Less: Repair Expenses: ₹50,000
• Net Profit: ₹4,00,000 + ₹60,000 – ₹50,000 = ₹4,10,000

OR

Gross Profit of a firm was ₹4,00,000. Which of the following will reduce the amount of Net Profit? (1 mark)

• (a) Rent received
• (b) Depreciation
• (c) Interest received
• (d) Discount received

Answer: (b) Depreciation

Explanation: Depreciation is an expense, and expenses reduce net profit. The other options are incomes, which would increase net profit.

Q15. Which statement shows the financial position of the business? (1 mark)

• (a) Trading Account
• (b) Profit and Loss Account
• (c) Balance Sheet
• (d) Trial Balance

Answer: (c) Balance Sheet

Explanation: The Balance Sheet is a snapshot of a company’s financial position at a specific point in time, showing its assets, liabilities, and equity.

Q16. Which of the following is not shown in the Balance Sheet? (1 mark)

• (a) Opening Stock
• (b) Closing Stock
• (c) Patents
• (d) Debtors

Answer: (a) Opening Stock

Explanation: Opening stock is shown in the Trading Account, which is used to calculate the gross profit. The Balance Sheet shows assets (like closing stock, patents, and debtors), liabilities, and equity.

Q17. Statement-I: Statement of Profit and Loss is not prepared by the owner in case of ‘Incomplete Records’.

Statement-II: The single-entry system is an incomplete double-entry system varying with circumstances. (1 mark)

• (a) Both statements are false.
• (b) Both statements are true.
• (c) Only Statement-I is true.
• (d) Only Statement-II is true.

Answer: (b) Both statements are true.

Explanation:

• Statement I is True: When records are incomplete, a full-fledged Profit & Loss statement as per double-entry bookkeeping may not be possible. Instead, a ‘Statement of Affairs’ or other methods might be used to estimate profit.

• Statement II is True: The single-entry system is indeed often described as an incomplete form of double-entry. It lacks the systematic recording of both debit and credit aspects of transactions, making it less accurate and reliable.

Q18. While preparing ‘Statement of Affairs’ total of assets side was ₹6,00,000, Loan ₹1,00,000. Here the balancing figure of ₹5,00,000 will be known as (1 mark)

• (a) Loss
• (b) Profit
• (c) Capital
• (d) Creditor

Answer: (c) Capital

Explanation: In a Statement of Affairs:

• Assets = Liabilities + Capital
• Here, Assets (₹6,00,000) – Liabilities (Loan ₹1,00,000) = Capital (₹5,00,000)

OR

From incomplete records, it is possible to prepare (1 mark)

• (a) Ledger Accounts
• (b) Trial Balance
• (c) Statement of Affairs
• (d) Profit and Loss Account

Answer: (c) Statement of Affairs

Explanation: When records are incomplete, it’s difficult to create traditional ledger accounts or a trial balance. However, a Statement of Affairs can be prepared to estimate the financial position by listing known assets and liabilities. A precise Profit & Loss Account is also challenging with incomplete records.

Q19. Meera started a business with capital of ₹5,00,000. She purchased furniture of ₹75,000 and a shop for ₹1,75,000. During the year 2021-22, she paid salaries of ₹50,000. She also spent ₹30,000 on advertisement for launching her business which is assumed to provide benefit to the business for more than one financial year. (3 marks)

On the basis of the above information, calculate the following:

(a) Total Revenue Expenditure

• Salaries: ₹50,000

(b) Total Capital Expenditure

• Furniture: ₹75,000
• Shop: ₹1,75,000
• Total: ₹2,50,000

(c) Total Deferred Revenue Expenditure

• Advertisement: ₹30,000 (Since the benefit extends beyond one year)

Q20. State any three points of difference between Capital Expenditure and Revenue Expenditure. (3 marks)

1. Simple and Easy to Calculate: The calculation is straightforward, making it easy to understand and apply.
2. Consistent Depreciation Charge: The depreciation amount remains the same each year, making it predictable for budgeting and forecasting.
3. Fully Depreciates the Asset: The asset is fully depreciated down to its salvage value over its useful life.

Q22. (a) On 10th March, 2022, A sold goods to B for ₹20,000. A drew on B a bill at 3 months for ₹20,000 which B accepted immediately and returned it to A. The bill was met on the due date. Give necessary journal entries for the above transactions in the books of A. (3 marks)

In the books of A (Seller)

• Note: The due date is calculated as June 13th, 2022 (March 10th + 3 months + 3 days of grace).

OR

(b) On 20th April, 2022, Rajesh purchased goods from Sunil of ₹25,000 and accepted a bill for two months. The bill was met on the due date. Pass necessary journal entries for the above transactions in the book of Rajesh. (3 marks)

In the books of Rajesh (Buyer)

• Note: The due date is calculated as June 23rd, 2022 (April 20th + 2 months + 3 days of grace).

Q23. (a) On 31st March 2022, the Cash Book of Naman showed a bank balance of ₹7,800. On comparing the Cash Book with the Pass Book, the following discrepancies were noted: (4 marks)

(i) Cheque deposited in bank but not credited ₹3,000.

(ii) Cheque issued but not yet presented for payment ₹1,500.

(iii) Insurance premium paid by the bank ₹2,000.

Prepare a Bank Reconciliation Statement.

Bank Reconciliation Statement as on 31st March, 2022

• Start with the balance as per the Cash Book.
• Add items that increase the Pass Book balance (cheques issued but not yet cleared).
• Deduct items that decrease the Pass Book balance (cheques deposited but not yet credited, bank charges/payments like insurance).

Let’s prepare the Bank Reconciliation Statement for Bharti as of January 31, 2022:

Bank Reconciliation Statement of Bharti as on 31.1.2022

1. Cheque issued to Rahim (₹4,000): This cheque was correctly recorded in the bank statement (Pass Book) as a payment. However, it was incorrectly recorded in the cash column of the Cash Book, implying it was a cash payment, not a bank payment. This means the Cash Book balance is too low. To reconcile, we need to add it back to the Cash Book balance (or, equivalently, deduct it from the Pass Book balance in this reconciliation format).

2. Cheque paid into bank (₹15,000): This deposit was correctly recorded by the bank (Pass Book) but was omitted from the Cash Book. This means the Cash Book balance is too low. We need to add it to the Cash Book balance (or, in this format, add it to the Pass Book balance).

3. Bank commission (₹55): The bank charged a commission that would have been automatically deducted from Bharti’s account (Pass Book). This would reduce the Pass Book balance. To reconcile, we need to deduct it from the Cash Book balance (or, in this format, deduct it from the Pass Book balance).

4. Interest allowed by bank (₹50): The bank credited interest to Bharti’s account, increasing the Pass Book balance. This was not yet recorded in the Cash Book. We need to add it to the Cash Book balance (or, in this format, add it to the Pass Book balance).

Reconciliation Process:

We start with the Pass Book balance and adjust it for items not yet reflected in the Cash Book. The goal is to arrive at the adjusted Cash Book balance.

Important Note: There are two ways to prepare a bank reconciliation statement:

• Starting with the Pass Book balance: Adjust the Pass Book balance for items not in the Cash Book to arrive at the Cash Book balance.
• Starting with the Cash Book balance: Adjust the Cash Book balance for items not in the Pass Book to arrive at the Pass Book balance.

Q24. Prakash received from Mohan an acceptance for ₹30,000 on 1st July, 2022, at 3 months. Prakash got this acceptance discounted @ 10% p.a. from his bank. On the due date, Mohan paid the required amount. Give the necessary Journal Entries for the above transactions in the books of Prakash and Mohan. (4 marks)

In the books of Prakash (Creditor):

In the books of Mohan (Debtor):

• Discount = (30,000 * 10 * 3) / (100 * 12) = ₹750

Q25. Give four points of distinction between Trading Account and Profit and Loss Account. (4 marks)

Q26. Mayank does not keep proper records of his business. He gives you the following information: Opening Capital ₹1,00,000, Closing Capital ₹1,25,000, Drawings made during the year ₹30,000, Additional Capital introduced during the year ₹37,500. Calculate profit and loss for the year. (4 marks)

Calculation of Profit/Loss:

• Closing Capital = Opening Capital + Additional Capital + Profit – Drawings
• ₹1,25,000 = ₹1,00,000 + ₹37,500 + Profit – ₹30,000
• ₹1,25,000 = ₹1,07,500 + Profit
• Profit = ₹1,25,000 – ₹1,07,500
• Profit = ₹17,500

Q27. On 1st January, 2018, a company purchased a second-hand machinery for ₹96,000 and spent ₹24,000 on its erection. Prepare the Machinery Account for three years. The rate of depreciation is 10%. The accounts are closed on 31st December. Depreciation was charged on the basis of the ‘Straight Line Method’. (6 marks)

Machinery Account

• Total Cost of Machinery = ₹96,000 + ₹24,000 = ₹1,20,000
• Annual Depreciation = 10% of ₹1,20,000 = ₹12,000

Important Notes:

• In the Straight Line Method, the depreciation amount remains constant each year.
• The book value of the machinery decreases by ₹12,000 each year.

29. (a) Ramaji’s Profit Calculation (6 marks)

1. Calculate Capital at the end of 2020-21:

• Assets (31-3-21):

  • Cash: ₹900
  • Sundry Debtors: ₹45,000
  • Stock: ₹32,000
  • Plant and Machinery: ₹80,000
  • Total Assets: ₹1,57,900

• Liabilities (31-3-21):

  • Sundry Creditors: ₹14,900
  • Bills Payable: ₹50,000
  • Total Liabilities: ₹64,900

• Capital (31-3-21) = Total Assets – Total Liabilities

  • Capital (31-3-21) = ₹1,57,900 – ₹64,900 = ₹93,000

2. Calculate Capital at the beginning of 2020-21 (Capital as on 31-3-20):

• Assets (31-3-20):

  • Cash: ₹1,000
  • Sundry Debtors: ₹39,000
  • Stock: ₹34,000
  • Plant and Machinery: ₹60,000
  • Total Assets: ₹1,34,000

• Liabilities (31-3-20):

  • Sundry Creditors: ₹15,000

• Capital (31-3-20) = Total Assets – Total Liabilities

  • Capital (31-3-20) = ₹1,34,000 – ₹15,000 = ₹1,19,000

3. Calculate Profit for 2020-21:

• Profit = (Capital at end of year) – (Capital at beginning of year) – (Additional Capital) + (Drawings)

• Drawings: ₹3,000 per month * 12 months = ₹36,000

• Profit = ₹93,000 – ₹1,19,000 – ₹10,000 + ₹36,000

• Profit = ₹0 (There is no profit or loss)

Therefore, Ramaji’s profit for the year ended 31st March, 2021, is ₹0.

29. (b) Advantages of Single Entry System (6 marks)

The single-entry system, despite its limitations, offers certain advantages, particularly for small businesses:

1. Simplicity: The most significant advantage is its simplicity. It’s easy to understand and operate, requiring no specialized accounting knowledge. This makes it suitable for small businesses with limited resources.

2. Low Cost: Due to its simplicity, the single-entry system is inexpensive to set up and maintain. There’s no need to hire professional accountants or invest in complex accounting software.

3. Less Time-Consuming: Recording transactions under this system is less time-consuming compared to the double-entry system. This allows business owners to focus on other aspects of their operations.

4. No Strict Accounting Principles: The single-entry system doesn’t adhere to strict accounting principles, offering flexibility in recording transactions. This can be beneficial for very small businesses with informal practices.

5. Suitable for Small Businesses: It’s best suited for very small businesses, sole proprietorships, or businesses with a limited number of transactions. For such entities, the cost and complexity of a double-entry system might be unnecessary.

It’s important to note that while the single-entry system offers these advantages, it also has significant limitations:

• Inaccuracy: It’s prone to errors and doesn’t provide a complete or accurate picture of the business’s financial position.
• Lack of Control: It offers minimal internal control, making it susceptible to fraud and mismanagement.
• Difficulty in Decision-Making: The limited information makes it difficult for owners to make informed business decisions.
• Unsuitable for Growth: As the business grows, the single-entry system becomes inadequate and needs to be replaced with a more robust system.

Here’s the solution to prepare the Trading and Profit & Loss Accounts:

Trading and Profit & Loss Account for the year ended 31st March 2021

Explanation and Workings:

• Trading Account:

  • Gross Profit: Calculated as (Sales + Closing Stock) – (Opening Stock + Purchases + Wages).
  • Gross Profit = (1,70,000 + 1,00,000) – (50,000 + 1,00,000 + 30,000) = ₹90,000

• Profit & Loss Account:

  • Net Profit: Calculated as Gross Profit + Interest Received – (Salaries + Office Expenses + Interest on Drawings + Bad Debts + Repairs + Depreciation + Rent).
  • Net Profit = 90,000 + 6,000 + 2,000 – (20,000 + 25,000 + 5,000 + 1,15,000 + 10,000 + 8,000) = ₹15,000

Key Points:

• The closing stock is given in the problem, so it’s directly used in the Trading Account.
• Purchases figure is derived as the balancing figure of the Trial Balance.
• The net profit is the balancing figure in the Profit & Loss Account.