LECTURES PLAN - IPCC ACCOUNTS - GR. 1st

Transcription

1 LECTURES PLAN - IPCC ACCOUNTS - GR. 1st S.N. PAGE NO. LECTURES CHAPTER NAME EXPECTED WEEK Imp. Topics for May ) 3 Insurance Claim Jan. 4rth week 2) 3 Investment Accounts (AS 13) Feb. 1st week 3) 1 Average Due date Feb. 2nd week 4) 2.5 Hire Purchase- Books of H.P & H.V. Feb. 2nd week 5) 2.5 Hire Purchase Profit Calculation Feb. 3rd week 6) 2.5 Internal Reconstruction Feb. 4rth week 7) 6.5 Amalgamation (AS 14) Mar. 1st week 8) 4.5 Accounting for Incomplete records Mar. 3rd week 9) 2.5 Non Profit Organisation Apr. 1st week 10) 0.5 Account Current Apr. 1st week 11) 0.5 Self/Sectional Balancing Apr. 2nd week 12) 3 Final a/cs of a Company Apr. 2nd week 13) 3 Cash Flow Statement (AS 3) Apr. 3rd week 14) 0.25 Accounting for Bonus Issue Apr. 4th week 15) 3.75 Remaining Accounting Standards Apr. 4th week 16) 4 Partnership Introduction May 1st week 17) 6.5 Partnership Adm/Ret/Death May 2nd week 18) 0.5 Pre Incorporation Profits May 4th week 19) Notes A/cng in Computerised Environment 20) Notes Latest 2 IPCC Exam Papers & E.C. By: FCA. RAVI CHUGH Course Duration 125 hours (will be covered in 50 lectures of 2.5 hours each in 4 Months with weekly test series) CA. Ravi Chugh Classes 1 caravi1234.blogspot.in

2 From the Author s Desk Dear Students, we all believe that nothing is difficult, if we put our honest and sincere efforts in it. But for the subject Accounting and Advanced Accounting in CA IPCC, the examiner can test the very basic and core concepts of accounting as well as can put the lengthiest question in comparison to any other subject. So, I have put all my experience of teaching Accountancy of CA IPCC (erstwhile CA PCC/PE II) for the past 10 years, in preparing the Assignments which can help CA students in getting the maximum marks in their very first attempt. I am also uploading time by time any changes/updation in the book from previous edition on the internet ( facebook), specially Banking Companies rates for CRR, SLR, Provisioning for advances and any revisions in SH VI of Co. Act 1956 and Accounting Standards, so as to benefit as many students as I can. Your comments are highly appreciated. TeAcHiNg ACcOuNtS Is NoT JuSt My PrOfEsSiOn, Its My PaSsIoN Thanks CA. Ravi Chugh (FCA, Visiting Faculty ICAI & Top Institutes for CA Studies) Salient Features: 100% exam papers of IPCC Accountancy of last Attempts are from Class Assignments and students are getting ranks in every attempt. Improvement in presentation skills by weekly tests & 100% query resolution in the class. Personal touch to each student. Facility to revise missed topics again in next batch free. Large number of illustrations based on questions set in examination papers of ICAI and Delhi University. Accounting treatment in conformity with the AS issued by the ICAI. Important marked questions in each chapter for better understanding and revision. Hints, bold important words and underlines for important points in each question are some features that you will not find in any other book in the market. Last but not the least, Level wise questions on each topic i.e. the best learning process of concepts, another special feature you will not find in any other book in the market. CA. Ravi Chugh Classes 2 caravi1234.blogspot.in

3 Few more results of IPCC Accounts of Nov.2011 Batch students: Shreya Arora: 84 & 90 (Roll:233169), Anurag Sharma: 91 (Roll:225508), Praveen kumar: 89 (Roll:N.A.),Sharmishtha Gupta: 84 (Roll:224586), Akhil Aggarwal: 81 (Roll:234088), Radhika Arora: 73 (Roll:233171), Kanika Goel: 70 (Roll:225167), Nikhil Singh: 70 (Roll:231793), Renuka Thakur: 66 (Roll:221112), Aman Chopra: 66 (Roll:235536), Vinay kumar: 61 (Roll:223453), Shahid Saifi: 61 (Roll:224776), Dilip kumar: 57 (Roll:322461),...n many more Few more results of IPCC Accounts of May 2012 Batch students: Neeraj Jain: 93 & 89 (Roll:247994), Raman Bansal: 87 (Roll:248164), Rohan Singal: 86 (Roll:248371), Jitesh: 82 & 85 (Roll:248031), Abhishek Agrawal: 83 (Roll:247794), Sakshi Jain: 83 (Roll:248247), Nikhil Bansal: 82 (Roll:248177), Jyoti Dalmia: 80 (Roll:248035), Shagun Goyal: 80 & 69 (Roll:247993), Ankit Garg: 71 & 74 (Roll:225004), Hemant Chand: 73 (Roll:237533), Manoj kumar: 68 (Roll:237129), Garima Gupta: 67 (Roll:224983), Aman Chopra : 66 (Roll:237248), Uday kumar: 61 (Roll:238722), Supriya Nautiyal: 58 (Roll:237331), Vaibhav Goel: 57 (Roll:224982), Yogesh kumar: 56 (Roll:224509), Nutan: 55 (Roll:237046), Nitika Batra: 53 (Roll:226752), Nikhil Relan: 48 (Roll:224984),...n many more CA. Ravi Chugh Classes 3 caravi1234.blogspot.in

4 TOPICS A) Types of Insurance B) Calculation of Insurance claim for loss due to fire: 1) Loss of Stock Policy 2) Loss of Profit Policy(Consequential loss policy) C) Average Clause INSURANCE CLAIMS A) Types of Insurance 1) Life Assurance 2) General Insurance a) Fire Insurance i) Loss of Stock ii) Loss of Profit iii) Loss of Capital Assets (for e.g. Building, Furniture, etc) b) Marine Insurance c) Miscellaneous Insurance i) Health Insurance (Mediclaim) ii) Motor Vehicle Insurance iii) etc B) Calculation of Insurance claim for loss due to fire: 1) Loss of Stock Policy Step 1: Prepare Trading A/c (from beginning of the year till the date of fire) to find Closing Stock on the DOF as b.f. Note: If either G.P.ratio or Opening stock is not given, then prepare Trading A/c of last year also as working note. Step 2: Prepare Statement of Claim as below: Statement of Claim Particulars Estimated value of stock on the date of fire (W.N. 1) xxx Less: Value of stock salvaged (given) (xxx) Estimated value of stock lost due to fire xxx Add: Fire fighting expenses xxx Gross Claim xxx Net Claim = Gross Claim x Sum Insured xxx (Average clause) Sum Insurable 2) Loss of Profit Policy(Consequential loss policy) Statement of Claim Particulars Gross Profit lost during claim period (W.N. 5) xxx Add: Claim for the increased cost of working (Additional Expenses) (W.N. 8) xxx Less: Saving in insured standing charges (given) (xxx) Gross Claim xxx Net Claim = Gross Claim x Sum Insured xxx (Average clause) Sum Insurable (W.N.-7) CA. Ravi Chugh Classes 4 caravi1234.blogspot.in

5 Working Notes: 1) Adjusted G.P. ratio Net Profit + Insured standing charges x 100 ± Trend Turnover of last accounting year 2) Adjusted Standard turnover = Turnover for the corresponding claim period in the preceding year ± Trend 3) Claim period = Indemnity period (max. 12 months ) or dislocation period, whichever is less 4) Short Sales (Turnover lost in claim period) = Adjusted Standard turnover Actual turnover during the claim period 5) Gross Profit lost during claim period = Short Sales (Turnover lost in claim period) x Adjusted G.P. ratio 6) Adjusted Annual turnover = Turnover during 12 months immediately preceding the date of fire ± Trend 7) Sum Insurable = Adjusted Annual turnover x Adjusted G.P. ratio 8) Claim for the increased cost of working = Increase in cost of working x Sum Insurable (Additional Expenses) [least of two] (Additional Expenses) Sum Insurable + Uninsured standing charges Or Reduction in turnover avoided due to increased cost of working x Adjd.G.P.ratio C) Average Clause This clause is a clause of Fire Insurance Policy. Under Average Clause, if the amount of policy is less than the value of the subject matter of the insured, the insurer will be liable for only that portion of loss which the policy amount bears in respect of the subject matter. The fire insurance policies often include an average clause for discouraging the under insurance. Loss of Stock Policy: Level 1 Que. Q.1 A fire broke out in the Godown of Ram on destroying Stock and books of accounts. Mr. Ram has taken an Insurance Policy for the loss of Stock. Following information are available: a) Stock as on f) Purchases from b) Purchases during the year g) Wages from c) Wages for the year h) Sales from d) Sales during the year i) Gross Profit Ratio Uniform from year to year e) Gross Profit Ratio 20% on sales j) Value of Salvaged Stock 2000 Find out the Amount of Insurance Claim assuming: i) Sum Insured = ii) Sum Insured = iii) Sum Insured = Ans: Insurance Claim: i) 18000, ii) 10800, iii) Hints: Stock as on = Estimated value of Stock as on the date of fire ( ) = Q.2 A fire occurred in the workshop of Mr. A on 31st Mar.2006, where a large part of the stock was destroyed. Scrap realised Mr. A gives you the following information for the period of 1st January to 31st Mar.2006: a) Purchases and Sales were and b) Goods costing 1000 were taken by Mr. A for personal use. c) Cost price of stock on 1st January, 2006 was d) Over the past few years, Mr. A has been selling goods at a consistent gross profit margin of 30%. e) The insurance policy was for It included an average clause. Prepare a statement of claim to be made on the Insurance Company by Mr. A. (6 marks) [May 06] CA. Ravi Chugh Classes 5 caravi1234.blogspot.in

6 Ans: Insurance Claim = Estimated value of Stock as on the date of fire ( ) = Hints: Assume gross profit % given is on sales. Goods taken by Mr. A is deducted from Purchase Q.3 On the stock of Mr. Black was destroyed by fire. However following particulars were furnished from the records saved: a) Stock at cost as on d) Sales from to b) Stock at 90% of cost on e) Purchases from to c) Purchases from to f) Sales from to Other information: i) Sales upto includes being the goods not dispatched to the customers. ii) Purchases upto includes a machinery acquired for iii) Purchased upto does not include goods worth received from suppliers, as invoice not received upto the date of fire. These goods have remained in the godown at the time of fire. iv) Value of stock salvaged from fire and this has been handed over to the insurance company. v) The insurance policy is for and it is subject to average clause. Ascertain the amount of claim for loss of stock. (8 marks) [May 07] Ans: Insurance Claim: Hints: Gross Profit Ratio = 1/3rd on sales Estimated value of Stock as on the date of fire (2.6.07) = Goods not dispatched isnot considered as sales Salvaged stock handed over to the insurance company is also treated as loss to Mr. Black. Q.4 Mr. 'A' prepares accounts on 30th September each year, but on 31st Dec.2001 fire destroyed the greater part of his stock. Following information was collected from his books: a) Stock as on c) Wages from b) Purchases from d) Sales from The rate of Gross profit is 33 1/3% on cost. Stock to the value of 3000 was salvaged. Insurance policy was for and claim was subject to average clause. Other information: i) Stock in the beginning was calculated at 10% less than cost. ii) A Plant was installed by firm's own worker. He was paid 500, which was included in wages. iii) Purchases include the purchase of the plant for You are required to calculate the claim for the loss of Stock. (7 marks) [Nov. 02] Ans: Insurance Claim: Hints: Gross Profit Ratio = 25% on sales Estimated value of Stock as on the date of fire ( ) = Q.5 From the following information, compute the amount of claim under loss of Stock Policy: a) Sum Assured g) Stock as on Nil b) Accounting Year Calender Year h) Purchases during the year c) Reason for Damage on Due to fire accident i) Sales during the year d) Value of Salvaged Stock j) Purchases from e) G.P. Ratio Uniform from year to year k) Sales from f) Stock as on You are informed that in 2002, the cost of purchases and selling prices have increased by 20% and 10% respectively above the levels prevailing in Ans: Insurance Claim = 7000 Hints: Gross Profit Ratio = 20% on sales Estimated value of Stock as on the date of fire ( ) = Adjusted Gross Profit Ratio = % on sales CA. Ravi Chugh Classes 6 caravi1234.blogspot.in

7 Level 2 Que. Q.6 From the following information, compute the amount of claim under loss of Stock Policy: a) Sum Assured g) Stock as on b) Accounting Year Calender Year h) Purchases during the year c) Reason for Damage on Due to fire accident i) Sales during the year d) Value of Salvaged Stock j) Purchases from e) G.P. Ratio Uniform from year to year k) Sales from f) Stock as on You are informed that in 2002, the cost of purchases and selling prices have increased by 20% and 10% respectively above the levels prevailing in Ans: Insurance Claim = 7238 Hints: Gross Profit Ratio = 30% on sales Estimated value of Stock as on the date of fire ( ) = [FIFO basis] Q.7 A fire broke out in the Godown of Ram on destroying Stock and books of accounts. Mr. Ram has taken an Insurance Policy for the loss of Stock. Following information are available: a) Stock as on f) Purchases from b) Purchases during the year g) Wages from c) Wages for the year h) Sales from d) Sales during the year i) Gross Profit Ratio Uniform from year to year e) Stock as on j) Value of Salvaged Stock 2000 In Valuing the Stock as on , 2300 has been written off from a certain Stock costing A portion of these goods of book value 3450 is sold in year 2002 at a loss of 250. Remaining of such goods is valued at Book value less 450 for the purpose of claim. Find out the Amount of Insurance Claim assuming Sum Insured = Ans: Insurance Claim: Hints: Gross Profit Ratio = 20% on normal sales Estimated value of Stock as on the date of fire ( ) = Q.8 A fire broke out in the Godown of Ram on destroying Stock and books of accounts. Mr. Ram has taken an Insurance Policy for the loss of Stock. Following information are available: a) Stock as on f) Purchases from b) Purchases during the year g) Wages from c) Wages for the year h) Sales from d) Sales during the year i) Gross Profit Ratio Uniform from year to year e) Stock as on j) Value of Salvaged Stock 2000 In Valuing the Stock as on , 2300 has been written off from a certain Stock costing A portion of these goods costing 3450 is sold in year 2002 at a loss of 250. Remaining of such goods is valued at Cost less 450 for the purpose of claim. Find out the Amount of Insurance Claim assuming Sum Insured = Ans: Insurance Claim: Hints: Gross Profit Ratio = 20% on normal sales Estimated value of Stock as on the date of fire ( ) = CA. Ravi Chugh Classes 7 caravi1234.blogspot.in

8 Q.9 On , the Premises of Rocky Ltd. was destroyed by fire. The following information is made available: a) Stock as on d) Stock as on b) Purchases from e) Purchases from c) Sales from f) Sales from In valuing the Stock as on , due to damage 50% of the value of the stock which originally cost was written off. In June 2007, about 50% of this stock was sold for 5500 and the balance of obsolete stock is expected to realise the same price (i.e. 50% of the original cost). The gross profit ratio is to be assumed as uniform in respect of other sales. Stock salvaged from fire amounts to Compute the value of stock lost in fire. (8 marks) [May 08] Ans: Estimated value of Stock lost due to fire = Hints: Gross Profit Ratio = 20% on normal sales Estimated value of Stock as on the date of fire ( ) = Loss of Profit Policy: Level 1 Que. Q.10 From the following information, compute the amount of Gross profit lost during claim period: a) Indemnity Period 6 months g) Turnover for the period b) Reason for Damage Due to fire on h) Turnover for the period c) Period of Interruption i) Standing charges (out of which d) Accounting Year Calender year j) have not been insured) e) Net Profit for the year k) Agreed increase for upward trend in turnover 15% f) Turnover for the year ended 31st Dec l) Agreed increase for upward trend in G.P. 2% Ans: Hints: Adjusted G.P. Ratio = 32% Q.11 From the following information, compute the amount of Gross profit lost during claim period: a) Indemnity Period 6 months g) Turnover for the period b) Reason for Damage Due to fire on h) Turnover for the period c) Period of Interruption i) Standing charges (out of which d) Accounting Year Calender year j) have not been insured) e) Net Profit for the year k) Agreed increase for upward trend in turnover 15% f) Turnover for the year ended 31st Dec Ans: Hints: G.P. Ratio = 30% Q.12 a) Date of fire d) Turnover from to b) Gross profit lost during claim period e) Agreed G.P. Ratio 20% c) Agreed increase for upward trend in turnover 10% f) Claim for increased Cost of working Find out the Amount of Insurance Claim assuming: i) Sum Insured = ii) Sum Insured = Ans: Insurance Claim: i) , ii) Hints: Assume trend adjustment is required on total Sum Insurable = amount of annual turnover. CA. Ravi Chugh Classes 8 caravi1234.blogspot.in

9 Level 2 Que. Q.13 From the following information, compute the amount of claim under loss of Profit Policy: a) Sum Insured i) Turnover for the year ended 31st Dec b) Indemnity Period 6 months j) Turnover for the period c) Reason for Damage Due to fire on k) Turnover for the period d) Period of Interruption l) Turnover for the period e) Accounting Year Calender year m) Standing charges (out of which f) Net Profit for the year have not been insured) g) Increase in cost of working 6700 n) Agreed increase for upward trend in turnover 15% h) Saving in Insured standing charges 2450 [Study Mat] Ans: Insurance Claim: Hints: G.P. Ratio = 30% Sum Insurable = Claim for increased cost of working = 6372 Assume trend adjustment is required on total Assume Reduction in turnover avoided = Actual turnover during claim period. amount of annual turnover. Q.14 On account of a fire on 15 June 2002 in the business house of a company, the working remained disturbed upto 15th Dec.2002 as a result of which, it was not possible to affect any sales. The company had taken out an insurance policy with an average clause against consequential losses for and a period of 7 months has been agreed upon as indemnity period. An increase of 25% was marked in the current year's sales as compared to last year. The company incurred an additional expenditure of to make sales possible and made a saving of 2000 in the insured standing charges. Ascertain the claim under consequential loss policy keeping the following additional information in view: a) Actual sales from to e) Total standing charges for the last f/year b) Sales from to f) Turnover for the last financial year c) Net profit for the last financial year g) Turnover for one year i.e to d) Insured standing charges for the last f/year (9 marks) [Nov. 03] Ans: Insurance Claim: Hints: G.P. Ratio = 25% Sum Insurable = Claim for increased cost of working = 9333 Assume trend adjustment is required on total Assume Reduction in turnover avoided = Actual turnover during claim period. amount of annual turnover. Q.15 From the following information, compute the amount of claim under loss of Profit Policy: a) Sum Insured h) Turnover for the year ended 31st Dec b) Indemnity Period 6 months i) Turnover for the period c) Reason for Damage Due to fire on j) Turnover for the period d) Period of Interruption k) Turnover for the period e) Accounting Year Calender year l) Standing charges f) Net Profit m) Sales were evenly throughout the period and there is g) Increase in cost of working no clause for upward/downward trend Ans: Insurance Claim: Hints: G.P. Ratio = 40% Sum Insurable = Claim for increased cost of working = Assume all standing charges are insured. Assume Reduction in turnover avoided = Actual turnover during claim period. CA. Ravi Chugh Classes 9 caravi1234.blogspot.in

10 Q.16 From the following information, calculate consequential loss claim: a) Date of fire: 1st September; b) Indemnity period = six months; c) Period of disruption: 1st September to 1st February; d) Sum insured = ; e) Sales were for preceding financial year ended on 31st March; f) Net profit for preceding financial year plus insured standing charges 72000; g) Rate of Gross profit = 18%; h) Uninsured standing charges 6000 i) Turnover during the disruption period 67500; j) Annual turnover for 12 months immediately preceding the date of fire ; k) Standard turnover i.e. for corresponding months (1st Sep. to 1st Feb.) in the year preceding the date of fire l) Increase in the cost of working capital with a saving of insured standing charges 4500 during the disruption period; m) Reduction in turnover avoided through increase in working capital 30000; n) Increase in rate of G.P. = 2%, Increase in turnover (Standard and Annual) = 10% (8 marks) [Nov. 08] Ans: Insurance Claim: Hints: Use G.P. Ratio = 18% [Given] + 2% = 20% Sum Insurable = Claim for increased cost of working = 6000 No use of Netprofit & Insured standing charges Assume trend adjustment is required on total amount of annual turnover. Q.17 From the following information, compute the amount of claim under loss of Profit Policy: a) Cover Gross Profit b) Indemnity period = six months. c) Damage due to fire accident on 28th December, accounting year ends on 31st December. d) Net profit plus all standing charges in the prior accounting year e) Standing charges uninsured = f) Turnover of the last accounting year was , the rate of gross profit being 25%. g) The annual turnover (the turnover for 12 months immediately preceding the fire) = h) As a consequence of fire, there was a reduction in certain insured standing charges at per annum. i) The standard turnover was j) Increased cost of working during the period of Indemnity were k) Turnover during the period of indemnity was and out of this, turnover of was maintained due to increased cost of working. (8 marks) [Nov. 77] Ans: Insurance Claim: Hints: Saving in insured Standing charges = Sum Insurable = Claim for increased cost of working = Use G.P. Ratio = 25% [Given] Reduction in turnover avoided = Sum Insured = It is assumed that Annual turnover & Standard turnover given, have already been adjusted for upward trend. Q.18 From the following information, compute the amount of claim under loss of Profit Policy: a) Indemnity period = 12 months. Sum insured = b) Turnover, last financial year ended 31st Dec.2010 = 12 lakhs c) Gross Profit i.e. Net profit plus insured standing charges, giving a gross profit rate of 20% d) Net profit plus all standing charges = (50000 of the standing charges are not insured) e) Fire occurs on 31st Mar.2011, and affects business for 6 months f) Turnover for 12 months ended 31st Mar.2011 = g) Turnover: to = and to = h) Increase in cost of working, otherwise of which turnover during to would reduce hereinafter by i) Saving in insured standing charges in the indemnity period = [Study Mat] Ans: Insurance Claim: Hints: Use G.P. Ratio = 20% [Given] Sum Insurable = Claim for increased cost of working = Downward trend in turnover = 10% Reduction in turnover avoided = Adjusted Annual turnover = CA. Ravi Chugh Classes 10 caravi1234.blogspot.in

11 Q.19 Ramda & Sons had taken out policies (without Average Clause) both against loss of stock and loss of profit, for and respectively. A fire occurred on 1st July, 2011 and as a result of which sales were seriously affected for a period of 3 months. Trading and Profit & Loss Account of Ramda & Sons for the year ended 31st Mar.2011 PARTICULARS Amount PARTICULARS Amount To Opening Stock By Sales To Purchases By Closing Stock To Wages To Manufacturing Expenses To Gross Profit c/d To Administrative Expenses By Gross Profit b/d To Selling Expenses (Fixed) To Commission on Sales To Carriage Outward To Net Profit c/d Following additional information are also available: a) Sales, Purchases, Wages and Manufacturing Expenses for the period to were 3,36,000, 2,14,000, 51,000 and 12,000 respectively. b) Other Sales figure were as follows From to From to From to c) Due to decrease in the material cost, Gross Profit during was expected to increase by 5% on sales. d) 1,98,000 were additionally incurred during the period after fire. The amount of policy included 1,56,000 for expenses leaving 42,000 uncovered. Compute the claim for loss of stock, loss of profit and additional expenses. (16 marks) [May 12] Ans: Insurance Claim: loss of Stock , loss of Profit Hints: G.P. Ratio = 30% (for Stock), 23% (for profit) Sum Insurable = (for Additional Expenses) Adjusted Annual turnover = Claim for increased cost of working = Estimated value of Stock as on the date of fire ( ) = Assume Reduction in turnover avoided = Actual turnover in claim period. Upward trend in turnover = 12% CA. Ravi Chugh Classes 11 caravi1234.blogspot.in