SOLUTION. Q.1 A) Fill in the blanks with appropriate option.(any 8) (08)

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1 SOLUTION EXAM: S.Y.B.Com (Accounting & Finance) SEM III Date of Exam: 16/11/2017 SUBJECT: Financial Accounting (Special Accounting Areas) - III Q.P.Code : INSTRUCTIONS FOR EXAMINERS. 1) Stepwise Marking Scheme is provided for each answer. 2) Answer should be allotted step wise as shown. 3) Marks to be given even though answer is written in different possible way and it is logically correct. (e.g. 1.In Final Account, Old RDD and Bad debts may be written in Credit and debit side of P & L A/c instead of adjusting to each other. 2. In case of some combine journal entry student may write separate entries.etc ) 4) In case of theory answers provided are suggestive so please see if student has written relevant answer then give marks accordingly. 5) Whereas Full marks can be allotted even in theory answers if all aspects as per requirement are covered in it. 6) If any query feel free to contact Prof. Vijay Gawde [Chairperson] Prof. Pratap Kadam Prof. Mubeen Shaikh Q.1 A) Fill in the blanks with appropriate option.(any 8) (08) 1. 6% 2. Divisible 3. Gradual 4. 3:2 5. Book 6. Realisation 7. Sale 8. Shares, debentures &/or other assets 9. Nominal 10. Profit & loss Q. 1 B) State whether the following statements are True or False: (Any7) (07) 1) False 2) False 3) True 4) True 5) False 6) True 7) False 8) False 9) True 10) False

2 Q.2. [A] IN THE BOOKS OF RAJU, RANCHO AND FARHAN TRADING ACCOUNT FOR THE YEAR ENDED 31/12/2016 PARTICULARS Rs. Rs. PARTICULARS Rs. Rs. To Opening Stock 40,000 By Sales 500,000 To Purchases 310,000 By Closing Stock 50,000 To Wages 20,000 By Goods destroyed by fire 5,000 To Gross Profit c/d , ,000 PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31/12/2016 PARTICULARS PRE POST PARTICULARS PRE POST To Rent &Insurance (T) 2,550 7,650 By Gross Profit b/d 55,500 1,29,500 To Salaries(T) 10,000 30,000 To Advertisement(S) 2,400 5,600 To Commision to 1,200 2,800 To General Expenses (T) 1,000 3,000 To Depreciation (T) Equipment 3,750 11,250 Furniture 750 2,250 Computer 1,500 4,500 To Net Profit c/d 32,350 62,450 55,500 1,29,500 55,500 1,29,500 PROFIT & LOSS APPROPRIATON ACCOUNT FOR THE YEAR ENDED 31/12/2016 PARTICULARS PRE POST PARTICULARS PRE POST To Interest on Capital To Net Profit b/d 32,350 62,450 Raju 2,000 6,000 Rancho 1,500 4,500 Farhan 1,000 - To P.Cap.A/c(Profit) 27,850 51,950 32,350 62,450 32,350 62,450 BALANCE SHEET AS ON 31/12/2016 LIABILITIES Amt. Amt. ASSETS Amt. Amt. Capital A/c: Equipment 1,50,000 Less: Dep@ 10% -15, Raju 1,17,115 Debtors 1,20,000 Rancho 97,115 Cash 35,800 Farhan s Loan a/c 42,570 Furniture 60,000 Less: 5% -3,000 57,000 Bank O/D 25,000 B/R 20,000 Creditors 1,20,000 Computer 40,000 Less: -6,000 34,000 Bank Loan 50,000 Closing Stock 50,000 Bills payable 5,000 Insurance Claim 5,000 4,56,800 4,56,800 PARTNER'S CAPITAL ACCOUNT PARTICULARS RAJU RANCHO FARHAN PARTICULARS RAJU RANCHO FARHAN To Drawings 8,000 6,000 4,000 By Bal.b/d 80,000 60,000 40,000 By Interest 8,000 6,000 1,000 To Farhan s Loan a/c ,570 By P& L App. 11,140 11,140 5,570 To Bal.c/d 1,17,115 97,115 - By P& L App. 25,975 25,975-1,25,115 1,03,115 46,570 1,25,115 1,03,115 46,570 WORKING NOTES. 1 mark 1) Time Ratio = 1:3 Since Pre period = 1 st Jan to 31 st Mar = 3 months and post period = 1 st April to 31 st Dec = 9 months 2) Sales Ratio = 3:7 Since sales in pre period = and in post period = = MARKS 4 MARKS 2 MARKS 4 MARKS 2 MARKS

3 Q.2. [B] IN THE BOOKS OF KAMAL, KUSUM AND KAJAL TRADING ACCOUNT FOR THE YEAR ENDED 31ST DECEMBER 2016 PARTICULARS AMT AMT PARTICULARS AMT AMT TO Opening stock 79,450 By Sales 5,25,300 To Purchase 343,250 (-) Return I/w 10, ,800 (-) ReturnO/w 8, ,000 By Free Sample 2,000 To Wages 34,350 By closing stock 40,000 To Gross Profit 108, , ,800 PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31ST DECEMBER 2016 PARTICULARS PRE POST PARTICULARS PRE POST To salary 9,795 9,795 To Depreciation Furniture By G/P 54,000 54,000 To Depreciation Trademark 3,100 3,100 By Interest on Investment 250 To Postage 3,240 3,240 By RDD To Trade Expenses 2,690 2,690 (-) old Bad Debts 800 To Rent 4,200 4, To Free sample 1,000 1,000 To Net Profit 34,275 34,525 58,800 59, BALANCE SHEET AS ON 31ST DECEMBER 2016 LIABILITIES AMOUNT AMOUNT ASSETS AMOUNT AMOUNT Capital A/C Furniture 10,000 Komal 30,000 (-) 1, Kusum 20,000 Trade Mark Kajal 28,000 (-) Depreciation 1/5 6, Current A/C Debtors 80,400 Komal Investment 12,000 Kusum Interest on Investment ,250 Kajal 7508 (12,000 x 5/100 x5/12) B/P 23,900 Prepaid Rent 480 Creditors 51,050 Bills Receivable 40,140 Out Standing salaries 4,200 Stock 40,000 Cash PARTNERS CURRENT ACCOUNT PARTICULARS KAMAL KUSUM KAJAL PARTICULARS KAMAL KUSUM KAJAL To Balance b/d 10,000 8,000 4,000 By Good will (Sacrifies Ratio) By Net profit Pre To Balance c/d Post ,646 34,646 11,508 34,646 34,646 11,508 3 MARKS 5 MARKS 5 MARKS 2 MARKS

4 Q.3 IN THE BOOKS OF SHUBHADA, KOMAL, NIKITA AND DIPTI STATEMENT OF PURCHASE CONSIDERATION [ 4 MARKS] PARTICULARS SK & Co. ND & Co. TOTAL Rs. Rs. Rs. Rs. ASSETS TAKEN OVER AT AGREED VALUE: Goodwill 75,000 90,000 1,65,000 Computers 65,000 96,200 1,61,200 Furniture 38,000-38,000 Stock 55,000 47,750 1,02,750 Investments 45,000 45,000 90,000 Debtors 98,250 1,11,550 2,09,800 Cash 2,000 3,000 5,000 TOTAL ASSETS 3,78,250 3,93,500 LESS: LIABILITIES TAKEN OVER: Loan 25,000 30,000 55,000 Sundry Creditors 35,600 78,500 1,14,100 TOTAL LIABILITIES. 60,600 1,08,500 PURCHASE CONSIDERATION 3,17,650 2,85,000 REALISATION ACCOUNT [ 3 MARKS ] PARTICULARS SK & CO. ND & CO. PARTICULARS SK & CO. ND & CO. TO SUNDRY ASSETS: BY SUNDRY LIABILITIES: Computers 75,400 96,200 Loan 25,000 30,000 Stock 62,350 47,750 By New Firm A/c 3,17,650 2,85,000 Investment 50,000 45,000 By Partners Cap. a/c (N) - 24,000 Debtors 1,01,350 1,11,550 Cash 2,000 3,000 To P. Cap. A/c( Profit) 52,650 89,000 3,78,200 4,17,500 3,78,200 4,17,500 PARTNERS CAPITAL ACCOUNT [ 03 MARKS] PARTICULARS SHUBH KOMAL NIKITA DIPTI PARTICULARS SHUBH KOMAL NIKITA DIPTI To Realisation. A/c 24,000 By Balance b/d. 85,000 1,05,000 80,000 90,000 To New Firm A/c 1,27,550 1,90,100 1,11,600 1,73,400 By General Re 25,000 50,000 20,000 30,000 3 MARKS By Realisation. 17,550 35,100 35,600 53,400 1,27,550 1,90,100 1,35,600 1,73,400 1,27,550 1,90,100 1,35,600 1,73,400 NEW FIRM ACCOUNT [01 MARK] PARTICULARS SK& CO. ND& CO. PARTICULARS SK& CO. ND& CO. To Realisation a/c 3,17,650 2,85,000 By Partners Capital a/c Subhada 1,27,550 Komal 1,90,100 Nikita 1,11,600 Dipti 1,73,400 3,17,650 2,85,000 3,17,650 2,85,000 1 MARKS 4 MARKS 3 MARKS

5 BALANCE SHEET AS ON 31 st MARCH 2016 [04 MARKS] LIABILITIES AMT. ASSETS AMT. CAPITAL A/C: Goodwill 1,65,000 Shubhada 1,27,550 Computers 1,61,200 Komal 1,90,100 Furniture 38,000 Nikita 1,11,600 Stock 1,02,750 Dipti 1,73,400 Investment 90,000 Creditors 1,14,100 Debtors 2,09,800 Loan 55,000 Cash 5,000 7,71,750 7,71,750 4 MARKS

6 Q.3 B CALCULATION OF NET ASSET Assets taken over at agreed value Building Machinery Stock Sundry Debtors Cash Less :- Liability taken over at A.V. Outstanding expenses Creditors TOTAL - B NET ASSET = A - B MARKS JOURNAL PROPER OF HIXESO LTD. PARTICULARS DEBIT CREDIT Business Purchase a/c Dr To Liq. of old partnership firm a/c Assets taken over at A.V Dr. Building Machinery Stock Sundry Debtors Cash To Liabilities taken over at A.V. Outstanding expenses Creditors To Business Purchase a/c Liq. of old partnership firm a/c Dr To Equity Share capital a/c To Cash a/c MARKS DISCHARGE OF PURCHASE CONSIDERATION WHOM AMOUNT WHAT Hira , Equity shares in HIXASO ltd at Xelia Rs. 100 each at par [6000 X 100] Sayyed Cash [Bal Fig] JOURNAL PROPER OF OLD PARTNERSHIP FIRM PARTICULARS DEBIT CREDIT Realisation a/c..dr To Sundry Assets a/c Building Machinery Stock Sundry Debtors Sundry Liabilities a/c Dr Outstanding expenses Bank overdraft Sundry Creditors To Realisation a/c Hira's capital a/c.dr Xelia's capital a/c.dr Sayyed's capital a/c.dr To Preliminary Expenses a/c Hixesu Ltd a/c...dr To Realisation a/c Eq. Shares in Hixesu a/c..dr Cash a/c.dr To Hixesu a/c Realisation a/c..dr To Cash a/c [Payment of Bank OD] Realisation a/c..dr To Cash a/c Realisation a/c..dr To Partner's Capital a/c Hira Xelia Sayyed Hira's capital a/c.dr To Equity Shares in Hixesu a/c To Cash a/c Xelia's capital a/c.dr To Equity Shares in Hixesu a/c To Cash a/c Sayyed's capital a/c.dr To Equity Shares in Hixesu a/c To Cash a/c MARKS [EACH ENTRY 1 MARK] 1 MARK

7 Q.4. A JOURNAL OF PEACOCK LTD DATE PARTICULARS LF DEBIT CREDIT Purchase A/C..Dr. (4,00,000 62) To Parrot s A/c (3,40, ) To Bank A/c (60,000 62) (Being goods imported and down payment made) Parrot A/C.. Dr. (1,40,000 62) Foreign Exchange Fluctuation A/c Dr. (1,40,000 2) To Bank A/C (1,40,000 64) (Being payment made & fluctuation in exchange rate is recorded) Parrot Account. Dr. (1,20,000 62) Foreign Exchange Fluctuation A/c Dr. (1,20, ) To Bank A/c (1,20, ) (Being payment made & fluctuation in exchange rate is recorded) Parrot Account. Dr. ( 80,000 2) To Foreign Exchange Fluctuation A/c (Being fluctuation in exchange rate at the year-end is accounted) Profit & Loss a/c...dr To Foreign Exchange Fluctuation A/c (2,80,000+1,80,000-1,60,000) (Being balance on Foreign Exchange Fluctuation A/c is transferred to Profit & Loss A/C.) Parrot Account. Dr. (1,80,000 60) To Bank (80, ) To Foreign Exchange Fluctuation A/c (80, ) (Being payment made & fluctuation in exchange rate is recorded) Foreign Exchange Fluctuation A/C Dr To Profit & Loss A/c (Being balance on Foreign Exchange Fluctuation A/c is transferred to Profit & Loss A/C.) NOTE :2 MARKS FOR NARRATIONS MARKS 2 MARKS 2 MARKS 2 MARKS 2 MARKS 2 MARKS 1 MARK Q.4.B STATEMENT OF EXCESS CAPITAL 5 Marks PARTICULARS UMA MAYA KAMA Capital Balances Add: Reserves Adjusted capital PSR Unit capital Base capital Proportionate capital Excess capital New PSR 2 1 New Unit capital New Base capital New Proportionate capital Excess capital

8 Q4 B CONTINUED.. STATEMENT OF DISTRIBUTION OF CASH 10 Marks PARTICULARS CASH CREDITORS UMA MAYA KAMA Opening balances Less: Remuneration of Uma Less: Creditors Balance st realisation less: Creditors less: Kaya's Capital nd realisation Less: Kaya's capital less: M and K in 2: less: balance in PSR rd realisation Add: Stock by Kama less: Balance In PSR Unpaid Balance Q.5 A) 2 marks for meaning and 1 mark each for every item listed Monetary Item: Net investment in a non-integral foreign operation, refers to a monetary item that is receivable or payable to a foreign operation.balance in monetary item must be translated at the closing rate. Examples of Monetary item (any 6 to be written) Ÿ Investments in debt securities Ÿ Net investment in the lease Ÿ Trade receivables (including allowances) Ÿ Other receivables to be settled in cash Ÿ Deposits and bank accounts Ÿ Cash Ÿ Provisions for employee benefits Ÿ Finance lease liability Ÿ Bank and other loans Ÿ Accruals Ÿ Trade payables Ÿ Current tax liability

9 Q. 5 B) 2 marks for step 1 and 1 Mark each for all other steps. Steps to calculate partners share under Excess capital Method: Step 1 CALCULATE ADJUSTED CAPITAL OF EACH PARTNER AS UNDER PARTICULARS AMT. AMT. Capital A/c ( Cr.) Balance as per Balance sheet Add: Current A/c (Cr.) Balance Reserves Funds (in PSR) Profit and loss A/c (Cr.)Balance (in PSR) Total Less : Current A/c (Cr.) Balance Profit and loss A/c (Cr.)Balance (in PSR) Deferred Revenue Expenditure (in PSR) Adjusted capital Step 2 Calculate Unit Capital = Adjusted Capital / PSR Step 3 Compute Base Capital = Minimum of Unit Capital Step 4 Compute Proportionate Capital = Unit Capital X PSR Step 5 Compute Excess Capital = Base Capital as per Step 2 - Proportionate Capital asper Step3 Step 6 Compute Final / Excess Capital If there is only one partner in excess then pay him otherwise compute further excess capital by repeating step 2 to 5 till one partner remain with excess capital. Pay the final excess capital and then proportionate capital in the last stage.followed by previous Stages payment. OR Q5. Short notes (Any 3) 5 marks each 1) Payment method of Purchase Consideration The agreement between selling firm and purchasing firm may specify the amount payable to the partnersof the selling firm in the form of cash, Shares, Debentures, other assets or discount. Thus, under net payment method purchase consideration is the total of shares, debentures and cash which are to be paid for claims of partners of the transferor firm. The following points are to be noted while ascertaining the purchase price under net payment method: (i) The assets and liabilities taken over by the transferee firm and the values at which they are taken over are not relevant to compute the purchase consideration. (ii) All payments agreed upon should be added, whether it is for equity shareholders or preference share-holders. (iii) If any liability is taken over by purchasing firm to be discharged later on, such amount should not be deducted or added while computing purchase consideration. (iv) When liabilities are not taking over by the transferee firm, they are neither added nor deducted while computing consideration. (v) Any payment made by transferee firm to some other party on behalf of transferor firm are to be ignored. 2) Adjustment of Capitals in the books of Amalgamated firm. : If the capitals of the partners in the new firm are changed as per the new profit sharing ratio or as per the agreement, there is a need to pass journal entries for the adjustment of capitals. The adjustments of capital may be made in cash or through current A/cs. a) For cash brought in or through current A/c for adjustment of shortage of capital Cash / Bank A/c... Dr. Particular Partner Current A/c... Dr.

10 To Particular Partner Capital A/c a) For cash paid or through current a/c for adjustment of excess capital Particular Partner Capital A/c... Dr. To Cash / Bank A/c To Particular Partner Current A/c 1) Preferential Liability : In case of dissolution, at the time of distribution of cash, the outside liabilities are paid in preferential order before the payment to partners, such as creditors, bank loans, loan from others even partenrs' relativesetc Mostly it is classified in two categories secured and unsecured creditors. In case of dissolution secured liabilities are paid from the realisation of assets kept as security against it. In case of partially secured liabilities unrecovered part is considered as unsecured creditors. Unsecured liabilities are again classified as preferential creditors and others.out of unsecured creditors, preferential creditors must be settled first before making payment to other unsecured creditors under piecemeal distribution.income tax payable, dues to be paid to the Government, dues payable to employees like outstanding salaries, wages, PF contribution, Compensation etc. are examples of unsecured liabities 4. AS11 Accounting Standard 11 deals With Accounting For The Effects of Changes In Foreign Exchange Rates Purpose of This Accounting Standard 11 is Accounting for transactions in foreign currencies and in translating the financial statements of foreign branches for inclusion in the financial statements of the reporting enterprise. RELEVANT DEFINITIONS Reporting currency is the currency used in presenting the financial statements Foreign currency is a currency other than the reporting currency of an enterprise. Exchange rate is the ratio for exchange of two currencies Average rate is the mean of the exchange rates. Forward rate is the exchange rate established by the terms of an agreement for exchange of two currencies Closing rate is the exchange rate at the balance sheet date. Monetary items include foreign currency notes, balances in bank accounts denominated in a foreign currency, receivables, payables and loans denominated in a foreign currency. Non-monetary items are assets and liabilities other than monetary items e.g.fixed assets, inventories, investments in equity shares. Settlement date is the date at which a receivable is due to be collected or a payable is due to be paid. Recoverable amount is the amount, to be recovered from the future use of an asset, including its residual value on disposal. This Accounting standard gives procedure about Recording A Foreign Exchange Transaction Changes In Exchange Rate Subsequent To Initial Recognition Changes In Exchange Rate Subsequent To Initial Recognition - Contd. Monetary Items Denominated In A Foreign Currency Should Be Reported Using The Closing Rate But Accounting Treatment- Forward Exchange Contracts Translation Of Financial Statements Of Foreign Branches Disclosure. 5. Piecemeal Distribution: In case of dissolution of firm, liabilities of a firm must be paid out of assets realised by the firm. But the process of realising assets takes long time. Therefore the cash is distributed among the creditors and partners as and when cash is available from the realisation of assets step by step. For this preferential order is followed in the following way. a) Realisation/ Dissolution Expense b) Outside liabilities (third party debts ) in the ration of due from each creditor c) Loan from Partners (in the proportion of their dues if more than one partner) d) Capital of partners : in the profit sharing Ratio if capital is in the same ration otherwise it is paid with the use of following methods: i) Excess Capital Method ii) Maximum Loss Method Thus the process of distribution of cash is called as Piecemeal Distribution since Piecemeal means in stages and not in one stage.

T.Y.BAF Financial Accounting Paper V Marks: 75 Sem V Pre Final Exam 2 (2017) Time:2 ½ hrs.

T.Y.BAF Financial Accounting Paper V Marks: 75 Sem V Pre Final Exam 2 (2017) Time:2 ½ hrs. Bandra West Vile Parle West H. O. : Shop No. 5, Hill Crest Society, 16 th Road, Bandra (W), Mum: 50. Ph: 26051635 Branch : Avon Arcade, Shop No. A/121, 1 st Fl.,Vile Parle (W), Mumbai: 56. Ph: 26189748