CS FP : Financial Accounting - June2012

CS FP • Financial Accounting • June 2012

This Paper has 38 answerable questions with 5 answered.

Roll No………
Time allowed : 3 hours	Maximum marks : 100
Total number of questions : 8	Total number of printed pages : 8

Note: Answer SIX questions including Question No. 1 which is compulsory. All working notes should be shown distinctly.

Note: Answer SIX questions including Question No. 1 which is compulsory. All working notes should be shown distinctly.

(a)

Explain any two of the following:

(i)

Financial statements

(0)

(ii)

Petty cash book

(0)

(iii)

Cash system of accounting.

(0)

(5 marks each)

(b)

State, with reasons in brief, whether the following statements are true or false:

(i)

A bank reconciliation statement is prepared at the end of an accounting period only.

(0)

(ii)

At the time of receiving the goods, the consignee treats the consignor as a creditor.

(0)

(iii)

Trade discount is not recorded in the books of account.

(0)

(iv)

Interest on capital and salary to proprietor are incomes and hence are shown on the credit side of profit and loss account of the proprietary firm.

(0)

(v)

If the date of payment of a bill after taking into account the days of grace falls on a holiday, the payment of the bill is to be made on the following working day.

(0)

(2 marks each)

(a)

Re–write the following sentences after filling–in the blank spaces with appropriate word(s)/figure(s)

(i)

When the bank column of the columnar cash book shows a credit balance, it means that there is a bank ____________.

(0)

(ii)

Acceptance of a bill of exchange is an acknowledgement of ____________.

(0)

(iii)

____________ account is prepared at the time of dissolution of a firm.

(0)

(iv)

Real account usually shows a ____________ balance.

(0)

(v)

When goods are returned to a supplier, a ____________ note is sent to him.

(0)

(vi)

Joint venture account is a ____________ account prepared to find out profit or loss of the joint venture.

(0)

(vii)

____________ is the amount which a non-trading concern receives as per the will of a deceased person.

(0)

(viii)

Promissory note contains an unconditional ____________ to pay a certain sum of money to a certain person or to his order after the specified period of time.

(0)

(1 mark each)

(b)

Distinguish between any two of the following :

(i)

‘Reserve’ and ‘provision’.

(0)

(ii)

‘Bill of exchange’ and ‘promissory note’.

(0)

(iii)

‘Sale’ and ‘consignment’.

(0)

(4 marks each)

(a)

Write the most appropriate answer from the given options in respect of the following:

(i)

For a non–trading concern, subscription received in advance is –

(a)	An income
(b)	An expense
(c)	An asset
(d)	A liability

(1)

(ii)

A manager is entitled to a commission @ 5% on profits before deducting such commission. In an accounting year, gross profit is Rs. 96,000 while selling and office expenses, other than commission to manager, totalled Rs. 12,000. Manager’s commission for the year will be –

(a)	Rs. 4,000
(b)	Rs. 4,200
(c)	Rs. 4,800
(d)	Rs. 4,562.

(0)

(iii)

If an amount written off as a bad debt is recovered subsequently, it will be –

(a)	Debited to the debtor’s personal account
(b)	Credited to the debtor’s personal account
(c)	Debited to bad debts recovered account
(d)	Credited to bad debts recovered account.

(1)

(iv)

Cash purchases are made of goods at the list price of Rs. 40,000 at a trade discount @ 5% and a cash discount @ 2%; cash payable is –

(a)	Rs. 40,000
(b)	Rs. 38,000
(c)	Rs. 37,240
(d)	Rs. 38,800.

(1)

(v)

At the end of an accounting year, total debtors are Rs. 1,00,000. Provision for bad debts and for discount on debtors are made @ 5% and 2% respectively. The amount of provision for discount on debtors will be –

(a)	Rs. 2,000
(b)	Rs. 5,000
(c)	Rs. 1,900
(d)	Rs. 1,950.

(1)

(vi)

The primary record of a credit purchase of a fixed asset is made in–

(a)	Cash book
(b)	Sales book
(c)	Purchases book
(d)	Journal proper.

(1)

(vii)

A firm took an insurance policy against fire for Rs. 50,000. The policy contained an average clause. A fire occurred. On the date of fire, goods costing Rs. 75,000 were available in the stores. Goods salvaged totalled Rs. 15,000. The insurance company will admit a claim for –

(a)	Rs.75,000
(b)	Rs.60,000
(c)	Rs.50,000
(d)	Rs.40,000.

(0)

(viii)

Closing stock is shown in the trial balance. When preparing the final accounts of a business concern, the closing stock is shown –

(a)	Only on the assets side of balance sheet
(b)	Only on the credit side of trading account
(c)	On the credit side of trading account as well as on the assets side of balance sheet
(d)	Nowhere.

(0)

(1 mark each)

(b)

Explain any two of the following statements:

(i)

No transaction can break the accounting equation

(0)

(ii)

Receipts and payments account is a summary of cash book.

(0)

(iii)

Columnar cash book is a combination of cash account and bank account.

(0)

(4 marks each)

A, B and C were equal partners. The following was their balance sheet as on 31^st March, 2012 :

Liabilities

Rs.

Assets

Rs.

Sundry creditors
Bills payable
Capital Accounts:

1,20,000
66,000

Cash
Sundry debtors
Stock

12,000
2,16,000
2,28,000

	Rs.
A B C	3,36,000 2,52,000 1,20,000

7,08,000

Furniture
Buildings

48,000
3,90,000

8,94,000

They agreed to take D into partnership with effect from 1st April, 2012 on the following terms :

(i)	D will be given one-fourth share in future profits.
(ii)	D to bring in cash Rs. 2,00,000 as capital and Rs. 1,80,000 as share in goodwill, the entire amount of Rs. 3,80,000 be credited to D’s capital account and no goodwill account be raised.
(iii)	Old partners to withdraw in cash one–half of their shares of goodwill.
(iv)	Stock and furniture be depreciated by 10%.
(v)	A provision of 5% on sundry debtors be made for doubtful debts.
(vi)	Value of buildings be raised to Rs. 4,50,000.
(vii)	Amount of sundry creditors be reduced by Rs. 6,000 as this amount is not payable by the firm.

Prepare revaluation account and all the partners’ capital accounts. Also draw the initial balance sheet of the new firm as on 1st April, 2012.

(0)

(16 marks)

(a)

Ravi and Kavi entered into a joint venture to purchase and sell new year gift items. They agreed to share the profits and losses equally. On 4th November, 2011, Ravi purchased goods worth Rs. 2,00,000 and spent Rs. 12,000 in sending the goods to Kavi. He also paid Rs. 4,000 for insurance. On the same date, Ravi drew a bill of exchange upon Kavi for Rs. 2,00,000 at 2 months. On 7th November, 2011, he got the bill discounted at 18% per annum.

Kavi spent Rs. 6,000 on cartage, Rs. 10,000 as rent and Rs. 10,000 on advertisement. He sold all the gift items for Rs. 4,00,000 after retaining gift items worth Rs. 4,000 for his personal use. He sent a cheque to Ravi for the amount due on 8th January, 2012.

You are required to prepare – (i) memorandum joint venture account; and (ii) joint venture with Kavi account in the books of Ravi.

(0)

(8 marks)

(b)

While preparing a trial balance, an accountant found a difference of Rs. 1,980. The difference was placed on the credit side of a newly opened suspense account. Later on, the following errors were discovered :

(i)	Sales amounting to Rs. 600 were posted to purchases account.
(ii)	Goods were sold to Raman for Rs. 3,300 and to Mohan for Rs. 4,500. But they were recorded in sales book as sales to Raman Rs. 4,500 and to Mohan Rs.3,300.
(iii)	Goods returned by Mohan worth Rs. 2,520 were recorded in the sales book.
(iv)	An amount of Rs. 1,500 spent on repairs of old plant purchased stood debited to repairs account.
(v)	Goods returned to Krishna worth Rs. 1,590 were recorded in the purchases book. However, the account of Krishna was correctly debited.
(vi)	Ashok owed us Rs. 1,200, but by mistake the amount was included in creditors.

Rectify the abovementioned errors by passing journal entries and prepare the suspense account.

(0)

(8 marks)

Avdesh commenced business on 1st April, 2011 with a capital of Rs. 9,00,000. He immediately purchased furniture of Rs. 4,80,000. During the year, he received from his uncle a gift of Rs. 60,000 and he borrowed from his father a sum of Rs. 1,00,000. He had withdrawn Rs. 12,000 per month for his personal expenses. Avdesh did not maintain any books of account.
However, the following information is available :

	Rs. 000
Sales (including cash sales of Rs. 6,00,000) Purchases (including cash purchases of Rs. 2,00,000) Carriage inwards Wages Discount allowed to debtors Salaries Bad debts written off Trade expenses Advertisements	2,000 1,500 14 6 24 124 22 24 44

He used goods worth Rs. 26,000 for his personal use and paid Rs. 10,000 to his son for examination and college fees. On 31st March, 2012, his debtors were Rs. 4,20,000 and creditors were Rs. 3,00,000, stock in trade was valued at Rs. 2,00,000. Furniture was to be depreciated @ 10% per annum.

Prepare the trading and profit and loss account for the year ended on 31st March, 2012.

(0)

(16 marks)

(a)

On 30th June, 2011, an accidental fire destroyed a major part of the stocks in the godowns of Viki Associates. Stock costing Rs. 30,000 could be salvaged but not their store ledgers. A fire insurance policy with an average clause was in force under which the sum insured was Rs. 3,50,000. From available records, the following information was made available :

(i)	Total sales invoices during the period April, 2011 to June, 2011 amounted to Rs. 30,20,000. An analysis showed that goods of the value of Rs. 3,00,000 had been returned by the customers before the date of fire.
(ii)	Opening stock as on 1st April, 2011 was Rs. 2,20,000 including stocks of the value of Rs. 20,000 being lower of cost and net value subsequently realised.
(iii)	Purchases between 1st April, 2011 and 30th June, 2011 were Rs. 21,00,000.
(iv)	Normal gross profit rate was 33 ⅓% on sales.
(v)	A sum of Rs. 30,000 was incurred by way of the fire fighting expenses on the date of fire.

Prepare a statement showing the insurance claim recoverable.

(0)

(8 marks)

(b)

On 31st December, 2011, the debit bank balance according to cash book of a trader was Rs. 6,000. On comparison with the pass book, the following information was gathered :

(i)	A cheque for Rs. 5,000 deposited with the bank on 28th December, 2011 was credited in pass book on 2nd January, 2012.
(ii)	On 29th December, 2011, a cheque for Rs. 3,000 was issued to a supplier. The cheque was presented to bank for payment on 3rd January, 2012.
(iii)	Insurance premium of Rs. 4,000 was paid by bank, but not yet recorded in the cash book.
(iv)	A cheque of Rs. 3,000 received from Ramesh was entered in the bank column of the cash book, but was omitted to be deposited in the bank.
(v)	Bank charges of Rs. 100 were not shown in cash book.
(vi)	Bank interest allowed by bank, Rs. 150 had not been entered in cash book.

Prepare the bank reconciliation statement as on 31st December, 2011.

(0)

(8 marks)

(a)

SPL Ltd., which depreciates its machinery @ 10% per annum according to diminishing balance method, had on 1st April, 2011 a balance of Rs. 9,72,000 in its plant and machinery account. During the year ended 31st March, 2012, the plant and machinery purchased on 1st April, 2009 for Rs. 1,20,000 was sold for Rs. 80,000 on 1st October, 2011 and a new machinery costing Rs. 1,40,000 was purchased and installed on the same date; installation charges being Rs. 10,000.

The company wants to change its method of depreciation from diminishing balance method to straight line method with effect from 1st April, 2009 and adjust the difference before 31st March, 2012, the rate of depreciation remaining the same as before.

Show the machinery account for the year ended 31st March, 2012.

(0)

(10 marks)

(b)

Calculate the amount of stationery used for the accounting year ended 31st March, 2012 :

	Rs.
Stock of stationery on 1st April, 2011 Creditors for stationery on 1st April, 2011 Advance paid for stationery, brought forward from the year ended 31st March, 2011 Amount paid for stationery during the accounting year ended 31st March, 2012 Stock of stationery on 31st March, 2012 Creditors for stationery on 31st March, 2012 Advance paid for stationery as on 31st March, 2012	6,000 4,000 400 21,600 1,000 2,600 2,600

(0)

(6 marks)

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