B.V. Patel Institute of Business Management, Computer & Information Technology, Uka Tarsadia University : Financial Accounting

Transcription

1 Unit 1 Consignment Account Answer the following. (1 mark) 1. Define consignor. 2. State the meaning of consignee. 3. What is normal loss? 4. Which formula is used to calculate the value of unsold stock? 5. What is the type of consignment account? 6. State the type of goods sent on consignment account. 7. What is Del credere commission? 8. Write the examples of direct expenses. (non- recurring expenses) 9. When goods sent on consignment which journal entry is passed in the books of consignor? 10. Give an example of normal loss. 11. Which journal entry is passed in the books of consignor? For expenses incurred by consignee 12. What is direct expense? OR What is non- recurring expense? 13. Define indirect expense. OR Define recurring expense. 14. Write any two examples of indirect expenses. 15. State the type of consignee s account. 16. What is an abnormal loss? 17. When an advance is received from consignee, which journal entry is passed in the books of consignor? 18. When goods are sold on credit, which journal entry is passed in the books of the consignee?

2 2 marks question 1. What is consignment accounting? 2. State any two differences between consignment and sale. 3. What is an account Sale? 4. What is proforma invoice? 5. Hemant sent 100 bicycles to Rajesh on consignment at Rs. 1,000. He paid Rs. 4,000 for freight and carriage. Rajesh paid Rs. 3,000 for customs and carriage. Hemant received an account sale for 80 bicycles sold by Rajesh at Rs. 1,240. Rajesh has also paid Rs. 52,000 for advertisement and salary of the salesmen. Find out the value of the closing stock. 6. A of Ahmedabad consigned goods of Rs. 10,000 to M of Madras and paid Rs. 500 for expenses. The consignee paid Rs. 100 for freight and Rs. 50 godown rent. 80% of goods were sold and commission of Rs. 500 was paid. Find out the value of closing stock. 7. A consignee has sold goods on credit for Rs. 40,000 and is allowed 3% del credere commission. A debtor of Rs. 1,000 was declared insolvent and a dividend of 25 paise was received from his receiver. What entries would be made in the books of both consignor and consignee for these transactions? tins of oil at Rs. 530 per tin of 15 kg. Each was sent to Bhavnagari by Ahmedabadi to be sold on consignment. He pays Rs. 625 for expenses. Normal loss is considered to be 5%. Calculate the value of closing stock if the quantity left is 285 kgs. 9. A of Patan consigned goods of Rs. 10,000 to B of Bulsar and pays Rs. 1,000 for expenses. Goods worth Rs. 2,000 was burnt in transit and the insurance company accepted a claim of Rs. 1,500. Calculate the abnormal loss.

3 10. What Journal entries will be made in the books of consignor for bad debts, when (i) Del credere commission is given to consignee (ii) Del credere commission is not given to consignee. 11. Mr. Kamal from Surat sent on consignment goods worth Rs. 12,000 to Mr. Nishant from Chikhli. Mr. Kamal paid Rs. 1,200 by way of expenses. Goods valued at Rs. 4,000 were damaged during transit. The insurance company accepted the claim of Rs. 2,500 for damaged goods. Show the calculation of abnormal loss and pass necessary journal entries. 12. Gujarat Tea Co. has sent 2,000 kgs. Tea on consignment at Rs. 150 per kg. Consignor has paid the expenses of Rs. 6,000, consignee has paid octroi and carriage Rs. 2,000. Fire broke into consignee s godown and destroyed 100 kgs. of tea. The insurance Co. has accepted claim for Rs. 10,000. Calculate the abnormal loss and pass journal entry. 13. Mahendra and Co. of Unjha dispatched on consignment 100 table fans of Rs. 400 each to Nilesh Bros., Dabhoi. They paid Rs.500 for railway freight, Rs. 100 transport charges and Rs. 200 for insurance. 10 fans were completely destroyed by accident in transit. Nilesh Bros. paid following expenses: carriage Rs. 200; Clearing charges Rs. 250 and selling expenses Rs. 1,000 and sold 70 fans. Ascertain the value of closing stock and calculate the abnormal loss to be transferred to profit and loss account. 14. Minoo Oil Co. of Ahmedabad consigned 10,000 litres of oil at Rs. 8 per litre to Taru Motors of Surat. They paid Rs. 4,000 as expenses. 400 litres of oil evaporated. 7,200 litres were sold at Rs per litre. A commission of 5% is payable to the consignee on sales. Prepare the consignment account in the books of Minoo Oil Co. 15. Ram sent on consignment 5,000 umbrellas of Rs. 100 each to shyam. He paid Rs. 2,000 for freight and insurance premium. 500 umbrellas were destroyed in transit and the insurance co. accepted a claim of 50%. Write journal entry.

4 Answer the following (limit 250 words). (5 marks) 1. Write the difference between consignment and sale. 2. Write a short note on del credere commission. 3. Explain the valuation of closing stock of consignment. 4. Write brief note of normal loss and abnormal loss of consignment account. 5. How would you calculate the closing stock in consignment Account? 6. Ayar & Co. of Madras consigned 1,000 radios at Rs. 150 to Jashani Bros. of Bhavnagar. Ayar & Co. paid Rs. 10,000 for freight; Rs. 1,000 for wages and Rs. 500 for insurance. 100 radios were destroyed by fire in transit and the insurance co. accepted a claim of Rs. 6,000 only. Jashani Bros. took delivery of the remaining radios and paid Rs. 13,500 for custom duties and other charges. The consignee accepted a bill of Rs. 50,000 drawn by the consignor for 3 months. The consignee sent an account sale after 2 months stating that he has sold 800 radios at Rs He had paid Rs. 3,000 for advertisement and other selling expenses. The consignee is entitled to a commission of 5% on gross sale proceeds. Prepare consignment account in the books of the consignor. 7. Rachael Music consigned 1,000 radio sets costing Rs. 900 each to its agent Sugam Melodies on 1 st July Rachael Music incurred the following expenditure on sending the consignment- carriage Rs. 650; freight Rs. 7,000 and insurance Rs. 3,250. Its agent received the delivery of 950 radio sets. An accounts sale dated 30 th November, 2004 showed that 750 sets were sold for Rs. 9, 00,000 and Sugam Melodies incurred Rs. 3,000 for carriage and Rs. 7,500 for the customs duty at the time of taking the delivery and was entitled to 6% on the sales affected. Sugam Melodies incurred expenses amounting to Rs. 2,500 for repairing the damaged radio sets remaining in the stock. Rachael Music lodged a claim with the insurance company which was admitted at Rs. 35,000. Show the consignment account and Sugam Melodies account in the books of Rachael Music. 8. Amul radio consigned 1,000 radios to Bombay Radio service on The cost price was Rs. 600 per radio, but the pro- forma invoice was made out at a figure so as to show a profit of 25% on invoice price. On the same day, Amul Radio incurred the following expenses: carriage Rs. 2,000, freight Rs. 30,000 and insurance Rs. 25,000. On the same day Bombay Radio Service sent a bank draft for Rs. 2, 44, 000. On 30 th June, 2005, Bombay Radio service sent an account sale and a bank draft for the amount payable. According to Account sale 600 radios were sold at Rs. 820 each for cash, 100 Radios were sold at Rs. 850 each to Anil on credit and 40 radios were sold at Rs. 840 each to Darshan on the Recommendation and Responsibility of Amul Radio. Selling expenses incurred Rs. 10,450, Octroi incurred Rs. 7,000. Anil and

5 Darshan became bankrupt and Bombay Radio could recover only 80 % from their estate. Bombay Radio Service is entitled to get a commission of 5% on sale and 2% Del credere commission on credit sales and 1/7 share of the net profits on consignment after deducting both his commission and share of profits. Prepare necessary accounts in the books of the consignor. 9. Bharath refineries consigned 5,000 litres of industrial oil to southern oil of Rs. 15 per litres Bharath refineries paid for freight and insurance Rs. 5,000. Southern oil received the consignment and incurred selling expenses Rs. 2,000. The consignee sent an account sale mentioning sale of 4, and remitted the amount due by a draft after deducting his expenses and 5%. He also reported that petrol in hands was 950 litres. Pass the journal entries and open necessary accounts in the books of consignor. 10. Joyce corporation of Kancipuram consigned 50 bundles of printed silk Rs. 700 each bundles to Vasuki Sarees of Chennai to be sold on consignment basis. An advance of Rs. 16,000 were received from vasuki sarees. Vasuki sarees sent an account sale which states that total goods were sold for Rs. 56,000 and Rs. 1,800 were paid for carriage, godown rent and port expenses. Their commissions were Rs. 2,000. They sent a bank draft for the balance amount to Joyce corporation. From the above particulars, pass necessary journals in the books of Ganpati and also show important accounts. 11. An oil agency consigned 200 tins of vegetable oil (one tin contains 10 kg of oil) to its dealer, sundar costing Rs. 25 per kg. The agency paid Rs. 4,000 for forwarding charges and Rs. 6,000 for freight. 5 tins of oil were totally damaged during transit and nothing could be realized from the insurance company. Sundar took delivery of the oil and sent an account sales showing that 150 tins were sold for Rs. 60,000. The expenses incurred by him were custom duty and clearing charges Rs. 3,580 and selling expenses Rs. 1,000. They are entitled to a commission of 5% on sales. He also reported that 10 kilograms of oil were lost due to leakage. Show the necessary ledger accounts in the books of oil agency ,000 Baby bicycles were consigned by premier Bicycle Co. Delhi to Superior Brother, Kanpur, at an invoice cost of Rs. 150 cash. Premier Bicycle Company paid freight Rs. 10,000 and insurance in transit Rs. 1,500. During the transit 100 bicycles were totally damaged by fire. Superior brothers took delivery of the remaining bicycles. This loss was changed to profit and loss account. Superior Brothers sent a bank draft to Premier Company for Rs. 50,000 as advance payment and later sets an account sales showing that 800 bicycles were sold at Rs. 220 each. Expenses incurred by Superior Brothers on godown rent and advertisement, etc. amounted to Rs. 2,000. Superior Brothers in entitled to commission of 5%. Prepare necessary ledger accounts in the books of Baby bicycles.

6 13. Mohan consigned 400 packets of pen, each packet containing 100 pens. Cost price of each packet was Rs Mohan sent Rs. 50 per packet as cartage, freight, insurance and forwarding commission. One packet was lost on the way and Mohan lodged claim with the insurance company and could get only Rs. 270 as claim on average basis. Consignee took delivery of the rest of the packets and spent Rs. 19,950 as other non-recurring expenses and Rs. 11,250 as recurring expenses. He sold 370 packets as the rate of Rs per pen. He was entitled to 2% commission on sales plus 1% del credere commission. Prepare consignment account and consignee account in the books of consignor. 14 2,000 shirts were consigned by Bhagwan & company of Delhi to Shreyans to Tokyo at a cost of Rs. 150 each. Bhagwan & company paid freight Rs. 20,000and insurance Rs. 3,000. During the transit 200 shirts were totally damaged by fire. Shreyans took delivery of the remaining shirts and paid Rs. 28,800 as customs duty. Shreyans has sent a bank draft to Bhagwan & company for Rs. 1,00,000 as advance payment. 1,600 shirts were sold by him at Rs. 200 each. Expenses incurred by Shreyans on godown rent and advertisement, etc. amounted to Rs. 4,000. He is entitled to a commission of 5%. One to the customer to whom the goods were sold on credit could not pay the cost of 10 shirts. Prepare the consignment account, goods sent on consignment account and Mr. Shreyans account in the books of Bhagwan & company 15 Shri Mehta of Mumbai consigns 1,000 cases of goods costing Rs. 100 each to Shri Sundaram of Chennai. Shri Mehta pays the following expenses in connection with the consignment: Carriage Rs. 1,000 Freight Rs. 3,000 Loading charges Rs. 1,000 Shri Sundaram sells 700 cases at Rs. 140 per case and incurs the following expenses: Clearing charges Rs. 850 Warehousing and Storage Rs. 1,700 Packing and selling expenses Rs. 600 It is found that 50 cases have been lost in transit and 100 cases are still in transit. Shri Sundaram is entitled to a commission of 10% on gross sales. Draw up the consignment account, Shri Sundaram account and goods sent on consignment account in the books of Shri Mehta. 16 On 1 st January 2007, Lila & Co. of Kolkata consigned 100 cases of milk powder to Shilla & Co. of Mumbai. The goods were charged at a proforma invoice value of Rs. 10,000 including a profit of 25% on invoice price. On the same date consignor paid Rs. 600 for freight and insurance. On 1 st July, the consignee paid import duty Rs.

7 1,000, dock charges Rs. 200 and sent to the consignor a Bank Draft of Rs. 4,000 as advance. On 1 st August, they sold 80 cases for Rs. 10,500 and sent a remittance for the balance due to the consignors after deducting commission at the rate of 5% on gross sale proceeds. Show the consignment account and Shilla & Co. s account in the books of Lilla & Co. 17 On Mr. John of Mumbai consigned to Mr. Raj of Chennai goods for sale at invoice price. Mr. Raj is entitled to a commission of 5% on sales at invoice price and 20% of any surplus price realized. Goods costing Rs. 1,00,000 were consigned to Chennai at the Invoice price of Rs. 1,50,000. The direct expenses of the consignment amounted to Rs. 10,000. On an account sales was received by Mr. John from Mr. Raj showing that he had effected sales of Rs. 1,20,000 in respect of 4/5 of the quantity of goods consigned to him. His actual recurring expenses were Rs. 3,000. Mr. Raj accepted a bill drawn by Mr. John for Rs 1,00,000 and remitted the balance due in cash. Show the Consignment account, Goods sent on consignment account and account of Mr. Raj in the books of Mr. John. 18 On Mr. X of Delhi consigned to Mr. Y of Mumbai goods for sale at invoice price. Mr. Y is entitled to a commission of 4% on invoice price and 20% of any surplus price realized. Goods costing Rs. 12,000 were consigned to Mumbai at the Invoice price of Rs. 14,400. The expenses of the consignment amounted to Rs. 1,000. On an account sales was received by Mr. Y showing that he had effected sales of Rs. 12,000 in respect of 3/4 of the quantity of goods consigned to him. His actual out of pocket expense amounted to Rs Mr. Y accepted a bill drawn by Mr. X for Rs 5,000 and remitted the balance due from hin in cash. Show the Consignment account, Goods sent on consignment account and Y account in the books of X. 19 A of Ahmedabad consigned goods to B of Mumbai for sale at proforma invoice price or over. B is entitled to a commission on sale at 5% on proforma invoice price and 25% of any surplus price realized. Goods consigned by A to B during the year ended 31 st March, 2005, cost A Rs 20,900 and invoiced at Rs. 28,400. A paid Rs. 1,045 as freight and received Rs. 15,000 as advance from B. 80% of the goods were sold by B for Rs. 26,000. B remitted the balance of proceeds after deducting his commission. Prepare necessary ledger accounts in the books of A. 20 On January 15, 2003 Prem sends a consignment of goods costing Rs. 24,000 to sunder invoiced at Rs. 30,000 to be sold at a commission of 4% on sale price. He was allowed an overriding commission of 1% on sale. By March 2003, 80% of the goods are sold for Rs. 32,000. Prem and Sunder have respectively incurred the following expense on the consignment. Prem :- Freight Rs. 350, Cartage Rs. 400, Insurance Rs. 250

8 Sunder :- Customs duty Rs. 960, Cartage Rs. 360, Sales Expense Rs. 120, Warehouse Expense Rs. 120 Prem decides to adopt the invoice amount for entering in the consignment account and also to take customs duty paid by Sunder as part of the cost of the closing stock in addition to expenses incurred by him. Write up the relevant accounts in the books of Prem and Sunder, the money due to Prem as on March 31, 2003 being paid by means of cheque.

9 Unit-2 Joint Venture Account Answer the following. (1 mark) 1. Who are Co- ventures? 2. What is the other name of joint venture? 3. Write the type of joint venture account. 4. What is the nature of co-venture account? 5. Which account is debited when goods are purchased for joint venture? 6. For which types of business out of the following is joint venture suitable: Construction of college building Paper mills Film distribution Steel Factory 7. When ventures contributed cash to the joint venture which journal entry is passed? 8. When expenses are paid by the ventures which journal entry is passed? 9. Which account is transferred the profit of joint venture account? 10. What are the rights of co-ventures? 11. Which act is followed by partnership firm? 12. What are the systems of accounting in joint venture? 13. Which journal entry is passed for unsold stock in joint venture account? 14. What is a joint trade? 15. State any one features of joint venture. Briefly answer the following. (2 marks) 1. Define joint venture.

10 2. Mention any two differences between joint venture and consignment. 3. Write any two differences between joint venture and partnership firm. 4. Which accounts are kept in books of joint venture? 5. State the methods of recording transaction of joint venture. 6. What is joint venture account? 7. What is joint bank account? 8. Ram and Rahim are partners in joint venture. If Rahim sold of goods worth Rs. 5,000. What will be journal entry in the books of Ram? 9. Dev and Dhruv are partners in a joint venture. Dhruv has to pay Rs. 5,000 to Dev as interest for capital invested in joint venture. write journal entries in the books of both the partners. 10. In which of the following business joint venture can be adopted? Construction of building Film distribution Paper mill Steel factory Sale and purchase of old books Underwriting of shares House building contract Answer the following (limit 250 words). (5 marks) 1 Define joint venture. Explain the difference between joint venture and partnership firm. 2 Differentiate between joint venture and consignment. 3 X and Y of Mumbai agreed to import cotton into India on Joint venture. On Jan. 1, 2008 they opened a bank account, X contributing Rs. 1, 40,000 and Y Rs. 1, 00,000

11 and agreed to divide profits and losses according to their cash contributions. They remitted Rs. 1, 80,000 to their agent in Egypt to pay for the cotton purchased there and later on a further Rs. 10,000 in settlement of his account. The fright insurance and dock charges were all paid in Mumbai and amounted to Rs. 10,000. On July 31, 2008 the various sales realized Rs. 2, 40,000 net which enabled them to repay themselves(taking no account of interest) the cash respectively advanced by them on Jan.1. The venture is then closed by X taking over the balance of cotton unsold for Rs. 38,000 for which he paid a cheque into the bank account. You are required to prepare necessary accounts dealing with these transactions and to finally close them. 4 Rajiv and Shyam enter into a joint venture to import silk. On 1 st January, 2006, they opened a joint bank account with the syndicate bank, Rajiv contributing Rs. 20,000 and Shyam Rs. 10,000. They agreed to share profits in the ratio of the capitals introduced by them. On 15 th February, 2006, they remitted to a manufacturer in Japan Rs. 25,000 for the goods received and incurred an expense of Rs.800 for freight, insurance, etc. The goods were sold for Rs. 33,000 for which the selling expenses were as follows: Godown rent Rs. 200, commission payable to Shyam on the gross amount of sales 10%, and Misc. expenses Rs. 300 Give Journal entries and the necessary ledger accounts showing the final distribution of cash among the co- ventures. 5 Mr. S and Mr. R carrying on a business separately as contractors, jointly take up the work of constructing a building at an agreed price of Rs. 3,50,000, payable in cash Rs. 2,40,000 and in fully paid shares of a company for the balance of Rs. 1,10,000. A bank account is opened in which Mr. S Mr. R paid Rs. 75,000 and Rs. 50,000 respectively. The following costs were incurred in completing the construction and the contract price was duly realized: (1) Wages paid Rs. 90,000 (2) Materials purchased for cash Rs. 2,10,000 (3) Materials supplied by R from his stock Rs. 27,000 (4) Consulting Engineer s fees paid by Mr. S Rs. 6,000 The accounts were closed, Mr. S taking up all the shares of the company at an agreed valuation of Rs. 48,000, treating loss on shares as Joint venture loss and Mr. R taking the remaining stock of materials at Rs. 9,000. Prepare and closed the Joint venture account and personal accounts of Mr. S and Mr. R assuming that separate set of books are opened for this purpose and that the net result of the venture is shared by Mr. S and Mr. R in the ratio of 2: 1. 6 Prakash and Suresh doing business separately as building contractors, undertake jointly to construct a building for a newly started Joint Stock Company for a contract price of Rs. 1,00,000 payable as to Rs. 80,000 by instalment in cash and Rs. 20,000 in fully paid shares of the company. A bank account is opened in their joint names, Prakash paying in Rs. 50,000 and Suresh Rs. 25,000. They are to share profit or loss in the

12 proportion of 2/3 and 1/3 respectively. Their transactions were as follows: Wages paid Rs. 30,000 Bought materials Rs. 40,000 Materials supplied by Prakash from his stock Rs. 5,000 Materials supplied by Suresh from his stock Rs. 4,000 Architect s fees paid by Prakash Rs. 2,000 The contract was completed and price duly received. The joint venture was closed by Prakash taking up all the shares of the company at an agreed valuation of Rs. 16,000. Prepare joint venture account, showing profits and loss and the accounts of Prakash and Suresh showing the final distribution. 7 Ram and Laxman were participants in a joint venture, sharing profits and losses in the proportion of 2/3 and 1/3 respectively. Each party maintains a complete record in his own books. Ram supplies goods to the value of Rs. 15,000 and incurs an expenditure of Rs. 600 on them, and Laxman supplies goods to the extent of Rs. 12,000 and his expenses amount to Rs Ram sells all the goods for Rs. 36,000 for which he is entitled to receive a commission at 5%. Accounts are settled by bank draft. Give the necessary journal entries and the ledger accounts in the books of Ram to record the above transactions. 8 Banerjee and Mukherjee agree to import Russian timber into India. On 1 st July, 2004 they opened a joint bank account with Rs. 25,000 towards which Banerjee contributed Rs. 15,000 and Mukhaerjee contributed Rs. 10,000. They agree to share profits and losses in proportion to their cash contributions. They remitted to their agent in Russia Rs. 20,000 to pay for timber purchased, and later Rs. 2,100 in settlement of his account. Freight, insurance and dock charges amounted to Rs. 3,900. On Dec. 31, 2004 the sales amounted to Rs. 28,740 which enabled them to repay themselves with cost originally advanced. They then decided to close the venture and Mukherjee agreed to take over the timber unsold for Rs. 1,260, which is to be deducted from his share profit. Prepare necessary accounts showing the amount of cash available for division by way of profits and how the same is divisible between Banerjee and Mukherjee. 9 Rajeev and Ashok enter into a joint venture as dealers in land and opened a joint bank account with Rs. 60,000 towards which Rajeev contributed Rs. 40,000. They agreed to share profits and losses in proportion to their cash contribution. They purchased a plot of land measuring 5,000 square yards for Rs. 50,000. It was decided to sell the land in smaller plots and a plan was got prepared at a cost of Rs. 1,200. In the said plan, 1/5 th of the total area of the land was left over for public roads and the remaining land was divided into 8 plots of equal sizes. Out of 8 plots, 3 plots were Rs. 15 per square yard and the remaining 5 plots were Rs. 14 per square yard. Expenses incurred in connection with the plots were : Registration expenses Rs. 4,000, stamp duty Rs. 400 and other expenses Rs. 1,000. Allow 2% on the sale proceeds as a commission to Rajiv.

13 Journalise the above transactions and prepare the necessary ledgers accounts. 10 A and B, both contractors, undertook a joint venture involving the construction of a building. A joint Bank Account was opened in which A contributed Rs. 75,000 and B contributed Rs. 37,500. The contract price was Rs. 3, 75,000. The result of joint venture was shared to 2/3 and 1/3. The details of the transactions were as follows: Wages paid Rs. 89,000. Materials supplied by A Rs. 13,500 Materials supplied by B Rs. 12,000 Materials purchased Rs. 1,65,000 Salaries Rs. 12,000 Cartage Rs. 18,500 Architect fee paid by A 10,000 Concrete mixer plant purchased Rs. 38,500 The stock of materials on the completion of the contract, valued at Rs. 16,500, was taken over by A. concrete mixer plant was taken over by B for Rs. 30,000. A was to be paid Rs. 18,000 per annum against establishment expenses to be charged to the Joint Venture Account. The contract lasted for 8 months. Prepare Joint Venture Account, Joint Bank Account and accounts of A and B. 11 Misha, Seema and Nisha entered into a joint venture agreeing to share profits 6:3:1. They paid into a Joint Bank Account their contribution amount as follows: Misha Rs. 60,000, Seema Rs. 40,000 and Nisha Rs.20,000. Purchases paid from Joint Bank Account Rs. 1,00,000. Most of the goods were sold for Rs. 2,50,000. Nisha took over damaged goods for Rs. 1,500. Other expenses were as follows: carriage paid by Misha Rs. 5,200; rent paid by Seema Rs. 2,500 and Nisha paid for advertising Rs. 2,000. Prepare the necessary ledger accounts. 12 A and B enter into a Joint Venture to take a building contract for Rs. 2,40,000. They provide the following information regarding the expenditure incurred by them. Particulars A (Rs.) B (Rs.) Materials 68,000 50,000 Cement 13,000 17,000 Wages - 27,000 Architect s fee 10,000 - Licence fee - 5,000 Plant - 20,000 Pant was valued at Rs. 10,000 at the end of the contract and B agreed to take it at that value. Contract amount of Rs. 2,40,000 was received by A. Show joint venture account and B s account in the books of A and joint venture account and A s account in the books of B.

14 Unit 3 Hire purchase and Installment purchase system Answer the following. (1 mark) 1. Who is hirer? 2. How many ledger accounts are prepared in the books of hire purchaser? 3. What is down payment? 4. Define cash price. 5. Which act is followed by hire purchase system? 6. Which price of the asset is calculated depreciation? 7. What is interest? 8. Which journal entry is passed in the books of hire purchaser on taking the delivery of assets at the time of agreement? 9. Which act is followed by instalment purchase system? 10. Which journal entry is passed in the books of vendor on receipt of instalment? 11. Total amount payable less its cash price is equal to. 12. Cash price of asset + interest =? 13. What is the other name of hire purchase charges? 14. What is an agreement of sale? 15. What is an agreement of hire? 16. Who is vendor? Briefly answer the following. (2 marks) 1. What are the conditions of instalment purchase system?

15 2. State any two differences between hire purchase system and instalment purchase system. 3. List out ledger accounts are prepared in the books of hire purchaser under hire purchase system. 4. State the ledger accounts are prepared in the books of vendor under hire purchase system. 5. On a machine was purchased on hire purchase system. Its cash price was Rs. 109,000. At the time of contract Rs. 25,000 was paid. Thereafter four yearly installments of Rs. 25,000 each were paid. Find out the amount of interest and the amount paid for asset in each installment. 6. Write a condition of hire purchase contract. 7. State the ledger accounts are prepared in the books of hire purchaser under installment system. 8. Mention the ledger accounts are prepared in the books of vendor under installment system. 9. Calculate the cash price of the machinery from the following information. Paid Rs. 2,800 at the time of contract. Four annual installment were paid respectively Rs. 3,120, Rs. 2,480, Rs. 1,880 and Rs. 1,320. Rate of interest 10%. 10. Rashmi Ltd. has purchased one machine from Ashma Ltd. on on hire purchase agreement, paying cash Rs. 20,000 and agreed to pay further three instalments of Rs. 23,400, Rs. 21,600 and Rs. 19,800 respectively on 31 st March, every year. Compute the cash price. 11. A machine was purchased for Rs. 6,000 on hire purchase. Rs. 1,200 was paid on signing the agreement and the balance was paid in four equal annual instalments of Rs. 1,800 each. Find out interest for all the years.

16 12. Gita has purchased one machinery on hire purchase agreement. The cash price of machinery is Rs. 90,000. The amount is to be paid on agreement Rs. 30,000 and balance amount is paid by three equal annual instalments of Rs. 30,000 each. Compute the interest of third year. 13. X purchased a truck from B whose cash price is Rs. 60,000 on 1 st Jan Rs. 20,000 is paid at the signing of the contract and the balance is to be paid in three equal annual instalments of Rs. 20,000 each. The rate of interest being 22% p.a. You are required to calculate the amount of interest included in each installment. 14. A acquired on 1 st January, 2003 a machine under a hire purchase agreement which provides for 5 half- yearly installments of Rs. 6,000 each, the first installment being due on 1 st July, Assuming that the applicable rate of interest is 10%, calculate the cash value of the machine. 15. A purchased two trucks on hire purchase system. He pays Rs. 50,000 down and Rs. 60,000 at the end of second year, fourth year and sixth year. Interest is charged by the vendor at 10% with two yearly rests on unpaid balance. Calculate interest paid with each installment. Answer the following (limit 250 words). (5 marks) 1. Differentiate between hire purchase system and installment purchase system. 2. Clarion Industries purchased on instalment basis a machine on 1 st January, The term was that on 31 st December each year a payment of Rs.5,000 has to be made to the vendors Messrs Sole Expert Co., which includes on the balance of cash down price due and so on for five years completing the payment in five instalments. It was decided to depreciate the 10% p.a. on reducing balance method. Ascertain the cash down price and show Machinery account, Interest suspense Account and Depreciation account in the books of the buyer. 3. On 1 st July 2006, Eastern Printers purchased a printing machine on a hire purchase basis, payments to be made Rs. 10,000 on the said date and the balance in three halfyearly instalments of Rs. 8,200, Rs. 7,440 and Rs. 6,300 commencing from 31 st December, The vendor charged interest at 10 % per annum calculated at halfyearly rates. Eastern printers close their books annually on December, 31 st and provide

17 depreciation at 10% per annum on diminishing balance in each year. Determine the cash price of the machine and prepare journal entries in the books of Eastern Printers. 4 Write journal entries in the books of vendor under the hire purchase system. 5 Ahmedabad Manufactures Ltd. purchased on 1 st April,2003 machinery costing Rs. 47,400 from ABC Co. Ltd. on Hire purchase system. The terms were as under: (1) Rs. 20,000 to be paid on 1 st April, 2003 (2) Rs. 10,000 to be paid on 31 st march, 2004 (3) Rs. 10,000 to be paid on 31 st march, 2005 (4) Rs. 10,309 to be paid on 31 st march, 2006 You are required to write up Machinery Account, Interest Account and ABC Co. Ltd. s Account. Charge interest at 5% per annum on the yearly balances. Depreciation at 20% on the original cost was to be written off each year. Give journal entries in the books of both the parties. 6 On 1 st January, 2004 Jaya Brothers acquired a machine on hire purchase. The terms of the contract were as follows: 1. The cash price of the machine was Rs. 10, Rs. 4,000 was to be paid on the signing of the contract. 3. The balance was to be paid in annual instalments of Rs. 2,000 plus interest. 4. Interest chargeable on outstanding balance 6% per annum. Depreciation at 10% per annum is to be written off on the straight line method. Prepare necessary ledger accounts in the books of hire purchaser and vendor. 7 Which journal entries are passed in the books of hire purchaser in hire purchase system? 8 D ltd. had purchased machinery on hire purchase system from H ltd. The terms are that they would pay Rs. 20,000 down on and 5 annual instalments of Rs. 11,000 each commencing from They charged depreciation on machinery at the rate of 15% per annum under diminishing balance system. Prepare machinery account, H ltd. account, interest account and depreciation account in the books of D ltd. account. 9 Rapid Engineering works sold to Pratap Industries a machine of the cash price of Rs. 31,360 on hire purchase basis on 1 st April, A sum of Rs. 9,000 was paid at the time of delivery. The balance was payable in three equal annual instalments of Rs. 9,000 each payable on 31 st March of every year. Interest was 10% per annum. The purchaser charged 10% depreciation per annum on the diminishing balance of the machine. Prepare necessary ledger accounts in the books of hire purchaser.

18 10 A purchased on instalment basis, a machinery from B on 1 st January, 2005 for a sum of Rs. 80,000, Rs. 20,000 is to be paid on the signing of the contract and rest in three instalments of Rs. 20,000 each. The cash price of the machine is Rs. 74,500 and interest is charged by the vendor at 5% p.a. the buyer charges depreciation at 10% p.a. on the diminishing balance. Give journal entries in the books of both the buyer and the vendor. 11 Write journal entries in instalment system in the books of vendor. 12 On 1 st January 2003, the C company purchased machinery on Instalment system. Rs. 6,000 was to be paid on signing the agreement and the balance in four annual instalments of Rs. 6,000 each payable on 31 st December every year. 5% interest is charged on the balance by the vendor company. The cash price of the machinery is Rs. 27,300. Depreciation is written off at 10% per annum on the reducing balance method. Give necessary journal entries and ledger accounts in the books of the C company and the vendor. 13 Which journal entries are passed in the books of hire purchaser in installment system? 14 On , A purchased four machines from B on Instalment system. The cost of each machine is Rs. 2,000 payable as under: On Rs. 2,400 On Rs. 2,300 On Rs. 2,200 On Rs. 2,100 Interest is charged at 5% on opening balance of each year. Depreciation is charged at 10% on original cost of machines. Make entries in the books of A for all the four years. 15 On 1 st April 2005 A Ltd. bought a machine from B Ltd. on Hire purchase system, the cash price being Rs. 29,900. Rs. 8,000 was payable on signing the contract and the balance in three annual instalment of Rs. 8,000 each. Depreciation is provided at 10% per annum by reducing balance method. Prepare machine account and B Ltd. account in the books of A ltd.

19 Unit 4 Branch accounting Answer the following. (1 mark) 1. State the types of branches. 2. When goods are supplied by the head office to the branch, which journal entry is passed in the books of the head office? 3. Define dependent branch. 4. State the nature of Branch account. 5. Goods worth Rs. 5,000 sent by the head office on 27 th December to its branch, received by the branch in the beginning of the next year. Give journal entry in the books of the head office. 6. Which account is prepared to find out the balance of the debtors at the end of the accounting period? 7. State the type of branch account under the branch final account system. 8. When goods are returned by branch, which journal entry is passed in the books of the head office? 9. Who are paid all expenses of the branch? 10. Petty expenses are recorded by branch in which books of accounts? Briefly answer the following. (2 marks) 1. What is cash-in-transit? 2. What are various methods of writing accounts of dependent branches? 3. What is goods-in-transit? 4. What is inter branch transaction? 5. Goods worth Rs. 15,000 sent by Baroda head office to Deesa branch on which were received by the branch on Give journal entry in the books of the head office. 6. Write any two objects of branch account. 7. What is the use of branch stock account?

20 8. What are various accounts opened under the stock and debtors system? 9. Goods amounting to Rs. 400 transferred from Ahmedabad Branch to Rajkot Branch under instructions from head office. Pass journal entry in the books of head office. Answer the following (limit 250 words). (5 marks) 1 X & Co. of Delhi have a branch at Chennai. Goods are sent by the Head Office at invoice price which is at the profit of 25%von cost price. All expenses of the branch are paid by the Head Office. From the following particulars, prepare Branch Account in Head Office books: when goods are shown at invoice price. 1. Opening balance: Stock at invoice price Rs. 11,000 Debtors Rs. 1,700 Petty cash Rs Goods sent to branch at invoice price Rs. 20, Expenses made by head office: Rent Rs. 600 Wages Rs. 200 Salary Rs Remittances made to head office: Cash sales Rs. 2,650 Cash collected from Debtors Rs. 21, Goods returned by Branch at invoice price Rs Balance at the end: Stock at invoice price Rs. 13,000 Debtors at the end Rs. 2,000 Petty cash Rs From the following particulars relating to Kolkata Branch for the year ended December 31, 2006 prepare Branch account in the books of head office: Particulars Rs. Stock at branch on January 1, ,000 Branch debtors on January 1, ,000 Branch debtors on Dec. 31, ,900 Petty cash at branch on January 1, Furniture at branch on January 1, ,000 Prepaid fire insurance on January 1, Salaries outstanding at branch on January 1, Goods sent to branch during the year 80,000 Cash sales during the year 1,30,000 Credit sales during the year 40,000 Cash received from debtors 35,000 Cash paid by the branch debtors direct to head office 2,000 Discount allowed to debtors 100

21 Cash sent to branch for expense Rent 2,000 Salaries 2,400 Petty cash 1,000 Insurance upto March 31, ,000 Goods returned by the branch 1,000 Goods returned by the debtors 2,000 Stock on December 31 5,000 Petty Expenses at Branch 850 Provide depreciation on furniture 10% p.a. Goods costing Rs. 1,200 were destroyed on account of fire and a sum of Rs. 1,000 was received from the Insurance Company. 3 From the following particulars, prepare Branch Account showing the profit or loss of the Branch: Opening stock at the branch Rs. 30,000 Goods sent to branch Rs. 90,000 Sales (cash) Rs. 1,20,000 Expenses : Salaries Rs. 10,000 Other expenses Rs. 4,000 Closing stock could not be ascertained, but it is known that the branch usually sells at cost plus 20 %. The Branch Manager is entitled to a commission of 5% on the profit of the branch before charging such commission. 4 Explain the features of dependent branch. 5 Messrs Gupta Brothers have their Head Office at Delhi and Branch at Calcutta. The following are the transactions of the Head Office with Branch for the year ended 31 st August, Particular Rs. Stock at Branch as on ,800 Debtors at Branch as on ,500 Petty cash as on Goods supplied to the branch 1,51,200 Remittances from Branch Cash sales 10,500 Realization debtors 1,57,740 1,68,240 Amount sent to branch: Salary 7,440 Rent 2,400 Petty cash 3,000 12,840 Stock at Branch as on ,150

22 Sundry Debtors at the Branch as on ,460 Petty cash as on Show the Branch account in the books of the head of office. 6 Hari Brothers of Calcutta has a branch at Ranchi and in order to maintain strict control on stock, invoices goods to the branch at selling price which is cost plus 33 %. From the following particulars, prepare branch stock account, branch debtors account, goods sent to branch account and branch adjustment account to show gross profit and net profit or loss made there: Stock on 1 st January, 2008 (invoice price) Rs. 15,000 Debtors on 1 st January, 2008 Rs. 11,400 Goods invoiced to branch during the year (invoice price) Rs. 67,000 Sales at the Branch: Cash Rs. 31,000 Credit Rs. 37,400 Cash received from debtors Rs. 40,000 Bad debts written off Rs. 250 Expenses at the branch Rs.6,700 Stock on 31 st December, 2008 (invoice price) Rs. 13,400 7 Delhi head office supplies goods to its branch at Kanpur at invoice price which is cost plus 50%. All cash received by the branch is remitted to Delhi and all branch expenses are paid by the head office. From the following particulars relating to Kanpur branch for the year 2007, prepare branch stock account, branch debtors account, branch expenses account and branch adjustment account in the books of head office so as to find out gross profit and net profit or loss made by the branch. Stock with branch on (invoice price) Rs. 60,000 Branch debtors on Rs. 12,000 Petty cash balance on Rs. 100 Goods received from head office (invoice price) Rs. 1,86,000 Goods returned to head office Rs. 3,000 Credit sales less returns Rs. 84,000 Allowance to customer off selling price (already adjusted while invoicing) Rs. 2,000 Cash received from debtors Rs. 90,000 Discount allowed to debtors Rs. 2,400 Expenses (cash paid by head office) Rent Rs. 2,400 Salaries Rs. 24,000 Petty cash Rs. 1,000 27,400 Cash sales Rs. 1,04,000 Stock with branch on (invoice price) Rs. 54,000 Petty cash balance on Rs.100

23 8 Shri X has a retail branch at Allahabad. Goods are sent by the H.O.to the Branch marked at selling price which is cost plus 25%. All the expenses of the branch are paid by the H.O. all cash collected by the branch (from customers and from cash sales) is deposited to the credit of H.O. From the following particulars of the branch, prepare branch stock account, branch debtors account, branch expenses account and branch adjustment account in the books of head office. Particulars Rs. Debtors on ,000 Debtors on ,000 Inventory with the branch at invoice price : on ,000 on ,000 Cash sales during the year 60,000 Total amount deposited in the H.O. account during the year 1,27,000 Return of goods to H.O. at invoice price 5,000 Salaries paid 6,000 Rent paid 4,000 Discount allowed to customers 2,000 Bad debts written off 1,000 Spoilage 2,000 9 P.O.Ltd., Kolkata, started a branch in Mumbai on 1 st April, 2003 to which goods were sent at 20% above cost. The branch makes both credit and cash sales. Branch expenses are met from branch cash and balance money remitted to H.O. The branch does not maintain double entry books of account and necessary accounts relating to branch are maintained in H.O. Following are further details for the year ended 31 st March, Particulars Rs. Cost of goods sent to Branch 50,000 Goods received by branch till 31 st March, 2004 at invoice price 54,000 Credit sales for the year 58,000 Debtors as on 31 st march, ,800 Bad debts and discount written off 200 Cash remitted to H.O 43,000 Cash in hand at branch on 31 st march, ,000 Cash remitted by H.O. to Branch during the year 3,000 Closing stock at branch at invoice price 6,000 Expenses incurred at Branch 12,000 Show the necessary ledger accounts according to stock and debtors system in the books of the Head office and determine the profit or loss of the branch for the year ended 31 st March, 2004.