All BATCHES DATE: 29.04.2018 MAXIMUM MARKS: 100 TIMING: 3 Hours PAPER 1: PRINCIPLES & PRACTICE OF ACCOUNTING All Questions is compulsory. 1. (i) Ans. Errors Of Principle Errors Of Omission When a transition is recorded in contravention If a transaction is of accounting principles, like treating the completely or partially purchase of an asset as an expense, it is an error of principle. in this case there is no effect on the trial balance since the amounts are placed on the correct side, though in a wrong omitted from the books of account, it will be a case of omission. Examples would be: not recording a credit account. suppose on the purchase of a purchase of furniture or computer, the office expense account is debited: not posting any entry into the trial balance will still agree. (ii) Ans. Bill of exchange Promissory Note A bill of exchange has been defined as "an A promissory note needs no instrument in writing containing an acceptance, as the debtor unconditional order signed by the maker directing a certain person to pay a certain sum of money only to or to the order of himself writes the document promising to pay the stated amount. like bills of exchange, certain person or to the bearer of the promissory notes are also instrument." when such an order is accepted negotiable instruments, and by the drawee, it becomes a valid bill of can be transferred by exchange. A promissory note is an endorsement. in case of bill of instrument in writing (not being a bank note exchange, the drawer and the or a government currency note) containing payee may be the same an unconditional undertaking, signed by the person but in case of a maker, to pay a certain sum of money only to, or to the order of, a certain person, or to the bearer of the instrument. promissory note, the maker and the payee cannot be the same person. 2. (i) Ans. Natural resources include physical assets like mineral deposits, oil and gas resources and timber. these natural resources exhaust by exploitation. depletion per unit is calculated as Acquisition cost-residual value Estimated life in terms of production units (ii) Ans. Sinking fund method of providing depreciation is used where the aims not only to charge depreciation but also to replace the asset. In case a large sum of money is required for the replacement of an asset at the end of its effective life, it may not be advisable to leave in the amount of depreciation set apart annually, for it may or may not be available in the form of concern itself the readily realizable assets at the time it is required. to safeguard this position, the amount annually provided for depreciation may be placed to the credit of the Sinking Fund account, and at the same time an equivalent amount may be invested in government securities. the book value of the old asset, at the time, is transferred to the Sinking Fund Account. Any amount realized on sale 3m 3m 3m 3m 1 P a g e
of the old asset, as well as the profit or loss on sale of securities, is transferred to the Sinking Fund Account and it is closed off by transfer of the balance to the profit and loss account general reserve. 3 Ans. Rectified Journal Entries Transaction Particulars Debit () 1 Suspense A/c Dr. 10,000 To A's A/c (Being rectification of amount received from a Wrongly debited to his account) 2 Suspense A/c Dr. 40,000 To Purchase A/c To Purchase Return A/c (Being rectification of purchase return wrongly posted to purchase A/c) 3 Suspense A/c Dr. 16,000 To Discount A/c (Being rectification of discount received wrongly debited to Discount A/c) 4 Motor Car Repairs A/c Dr. 9060 To Motor Car A/c To Suspense A/c (Being rectification motor car repairs of 9060 wrongly debited to motor car A/c as 7060) 5 B's A/c Dr. 40,000 To A's A/c (Being rectification of amount paid to B wrongly debited to A) Credit () 10,000 20,000 20,000 16,000 7060 2000 40,000 Suspense A/c Particulars Particulars To A's A/c By Difference in trial Balance (Bal. fig.) 1,54,000 To purchase A/c 20,000 By Motor Car Reparis A/c 2,000 To Purchase Return A/c 20,000 to Discount A/c 16,000 1,56,000 1,56,000 3m 4 Ans. (a) A Philip s Dr. Cash Book (Cash Column) Cr. Date 2017 Particulars Amount Date 2017 Particulars Amount Dec. 30 Dec. 30 To Balance b/d 4,610 By Trade receivables- 73,000 To Dividend received 3,80,000 Cheque dishonoured 2 P a g e
Dec. 31 By Bank interest and charges 4,200 10,000 By Trade Subscription By Balance c/d 2,97,410 3,84,610 3,84,610 2018 Jan. 1 To Balance b/d 2,97,410 (b) Bank Reconciliation Statement as at 30th December, 2017 Particulars Amount Balance per cash book 2,97,410 Add: Cheques not yet presented 6,30,000 9,27,410 Deduct: Lodgement not yet recorded by bank (2,50,000) 6,77,410 Deduct: Cheque wrongly charged (27,000) Balance as per the bank statement 6,50,410 5 Ans. Statement of Valuation of Physical as on 31 st March 1996 Particulars Value of Stock as on 9 th April, 1996 25,000 Add: Cost of Sales Sales made between 31.03.1996 and 9.04.1996 1,720 Less: Gross profit @ 25% on Sales 430 1,290 26,290 Less: Purchases actually received purchases from 1.4.1996 to 9.4.1996 120 Less: Goods not received up to 9.4.1996 50 70 26,220 Less: Purchases during March, 1996, received on 4.4.1996 100 Value of Physical stock as on 31.03.1996 26.120 6 Ans. Machinery Account Date Particulars Date Particulars 1993 Jan. 1 To Bank A/c 1,94,000 1993 Dec. 31 By Dep. A/c 25,000 To Bank A/c 6,000 By Balance c/d 2,75,000 (Erection Cost) July 1 To Bank A/c 3,00,000 3,00,000 1994 To Balance b/d 2,75,000 1994 By Dep. A/c 30,000 Jan.1 Dec. 31 Dec. 31 Balance c/d 2,45,000 3 P a g e
2,75,000 2,75,000 1995 To Balance c/d 2,45,000 July 1 By Bank A/c (Sales Jan. 1 Proceeds) July 1 To Bank A/c 1,50,000 Dec. 31 By P&L A/c (loss on 60,000 sale By Dep. A/c 17,500 By Balance c/d 2,17,500 3,95,000 3,95,000 1996 To Balance b/d 2,17,500 1996 By Dep. A/c (15& 32,625 Jan.1 Dec. 31 on 2,17,500) By Balance c/d 1,84,875 Note: (1) Calculation of Depreciation (10% per Machinery I Machinery II Machinery III annum on the original cost) Date of 1 st Jan. 1993 () 1 st Jan. 1993 () 1 st July 1995 ) Purchase: 1993 20,000 5,000-10 100 2,00, 000 5 1,00,000 12 1994 20,000 10,000-1995 - 10,000 7,500 10 100 6 1,50,000 12 10 100 (2) Loss on Sale: Cost (Purchase) 2,00,000 Less: Total Depreciation (on First Machinery) 40,000 W.D.V. on the date of sale 1,60,000 Less: Sale Value Loss on Sale 60,000 7 Ans. Books of K. Katrak Journal Entries (i) Bills Payable Account Dr. 2,500 Interest Account Dr. 50 To Cash A/c 1,000 To Bills Payable Account 1,550 (Bills Payable to Basu discharged by cash payment of 1,000 and a new bill for 1,550 including 50 as interest 4 P a g e
(ii) (a) G. Gupta Dr. 4,020 To M. Mehta 4,020 (G. Gupta s acceptance for 4,000 endorsed to M. Mehta dishonoured, 20 paid by M. Mehta as noting charges) (b) M. Mehta Dr. 4,020 To Bank Account 4,020 (Payment to M. Mehta on withdrawal of bill earlier received from Mr. G. Gupta) (iii) Bank Account Dr. 1,990 Discount Account Dr. 10 To Bills Receivable Account 2,000 (Payment received from D. Dalal against his acceptance for 2,000. Allowed him a discount of 10) (iv) Bills Payable Account Dr. 5,000 To Bills Receivable Account 5,000 (Bills Receivable from Mody endorsed to Patel in settlement of bills payable issued to him earlier) 8 Ans. In the books of CE Journal Entries Date Particulars L.F. Dr. (in ) 2016 Sept. 15 Trade receivables A/c Dr. To Sales A/c (Being the goods sent to customers on sale or return basis ) Oct. 20 Return Inward A/c (Note 1) Dr. To Trade receivables A/c (Being the goods returned by customers to whom goods were sent on sale or return basis) Dec. 31 Sales A/c Dr. To Trade receivables A/c (Being the cancellation of original entry of sale in respect of goods on sale or return basis) Dec. 31 Inventories with customers on Sale or Return A/c Dr. To Trading A/c (Note 3) (Being the adjustment for cost of goods lying with customers awaiting approval) Note: 40,000 20,000 15,000 (1) Alternatively, Sales account can be debited in place of Return Inwards account. (2) No entry is required for receiving letter of approval from customer 20,000100 133.33 (3) Cost of goods with customers = 15, 000 Cr. (in ) 40,000 20,000 15,0000 5 P a g e
MITTAL COMMERCE CLASSES 9 Ans. In the books of E Ltd Journal Entries Date Particulars L.F. 2016 Dec. 31 Sales A/cs ( 30x90) Dr. 2,700 To Trade receivables A/c 2,700 (Being the adj. for reduction in the selling price of 90 accounting machines @ 30 each) Dec. 31 Sales A/c ( 280 x 210) To Sundry Debtor A/c (Being the cancellation of original entry for sale in respect of 210 accounting machines sent to customers not yet returned or approved) Inventories with customers on Sale or Return A/c To Trading A/c (Being the cost of 210 accounting machines @ 200 each adjusted against Trading Account) Dr. 58,800 Dr. 42,000 58,800 42,000 10 Ans. Books of Ajay Consignment to Delhi Account Particulars Particulars To Goods sent on 1,25,000 By Goods sent on Consignment A/c 25,000 Consignment A/c To Cash A/c 10,000 By Abnormal Loss 11,000 To Vijay(Expenses) 8,000 By Vijay(Sales) To Vijay(Commission) 10,938 By Inventories on Consignment A/c 20,250 To Inventories Reserve A/c 3,750 By General Profit & Loss A/c 1,438 1,57,688 1,57,688 Vijay s Account Particulars Particulars To Consignment A/c By Consignment A/c 8,000 By Consignment A/c 10,938 11 Ans. Date Output (in tones) Royalty @ 10 per tone By Bank A/c 81,062 Minimu m Rent Shortworking s allowabl e Shortworkin gs recoupe d by lessee Shortworkings irrecovera ble Amount receivab le from lessee 31-3-12 6,000 60,000 40,000 6 P a g e
31-3-13 10,500 1,05,000 5,000 31-3-14 13,000 1,30,000 30,000 5,000 31-3-15 20,000 2,00,000 2,00,000 In the books of Omega Journal Entries 2012 March 31 State Collieries Co. To Royalties Receivable Account To Short-workings allowable Account (Minimum rent receivable from State Collieries Co., royalties receivable being 60,000; excess of the former over the latter being credited to Short workings allowable Account.) Bank A/c To State Collieries Co. (Receipt of amount due from State Collieries Co.) Royalties Receivable Account To Profit & Loss 2013 March 31 Bank Account (Transfer of Royalties Account to Profit & Loss Account) State Collieries Co. Short-workings allowable Account To Royalties Receivable Account (Minimum rent receivable from State Collieries Co.,after adjusting 5,000 of short-workings allowable against royalties receivable) To State Collieries Co. (Receipt of amount due from State Collieries Co.) Royalties Receivable Account To Profit & Loss Account (Transfer of Royalties Account to Profit & Loss Dr. Dr. Dr. 60,000 Dr. Dr. 5,000 Dr. Dr. 1,05,000 60,000 40,000 60,000 1,05,000 1,05,000 Account) 2014 March 31 Bank State Collieries Co. Short-workings allowable Account To Royalties Receivable Account (Minimum rent receivable from State Collieries Co., after adjusting of short-workings allowable 30,000 against royalties receivable) To State Collieries Co. (Amount received from State Collieries Co). Dr. Dr. 30,000 Dr. 1,30,000 7 P a g e
MITTAL COMMERCE CLASSES Short-workings allowable Account To Profit & Loss Account (Balance of Short workings allowable count, being irrecoverable short-workings, transferred to Profit & Loss Account.) Royalties Receivable Account 2015, Mar. 31 Bank To Profit & Loss Account (Transfer of Royalties Receivable Account to Profit & Loss Account ) State Collieries Co. To Royalties Receivable Account (Amount due from State Collieries Co., for royalties receivable for the year) To State Collieries Co. (Amount of royalties received from State Collieries Co.) Royalties Receivable Account 12 Ans. To Profit & Loss Account (Transfer of Royalties Receivable Account to Profit & Loss Account.) Revaluation Account Dr. 5,000 Dr. 1,30,000 Dr. 2,00,000 Dr. 2,00,000 2,00,000 5,000 1,30,000 2,00,000 2,00,000 2,00,000 2016 2016 April To provision for bad 550 April 1 By Inventory in 2,500 1 and doubtful debts trade To Furniture and 650 By Land and 5,000 fittings Building To Capital A/c: (Profit on revaluation transferred) Dalal 2,520 Banerji 2,520 Mallick 1,260 6,300 7,500 7,500 Particulars Dalal () Banerji () Mallick () Mistri () Particulars Dalal () Benerji () Mallick () Mistri () To Dalal 1,000 By Balance b/d 12,000 12,000 5,000 To Banerji 1,000 By General Reserve 2,600 2,600 1,300 To Balance 19,120 18,120 7,560 3,000 By Cash 5,000 c/d By Mistri 1,000 1,000 By Outstanding Liabilities 1,000 By Revaluation A/c 2,520 2,520 1,260 19,120 18,120 7,560 5,000 19,120 18,120 7,560 5,000 8 P a g e
Working Note: Calculation of sacrificing ratio Partners New share Old share Sacrifice Gain Dalal 5/15 2/5-1/15 Benerji 5/15 2/5-1/15 Malick 3/15 1/5 No gain no Loss Mistri 2/15 2/15 Sacrifice by Mr. Dalal and Mr. Banerji = 15,000 1, 000 each. Liabilities Assets Trade payables 12,850 Land and Buildings 30,000 Outstanding Liabilities 500 Furniture 5,850 Capital Accounts of Partners: Inventory of goods 14,250 Mr. Dalal 19,120 Trade receivables 5,500 Mr. Banerji 18,120 Less: Provisions (550) 4,950 Mr. Mallick 7,560 Cash in hand 140 Mr. Mistri 3,000 47,800 Cash at Bank 5,960 13 Ans. 1 15 Revaluation Account To Buildings A/c 10,000 By Investments A/c 3,000 To Plant and Machinery A/c 26,000 By Loss to Partners: To Provision for Doubtful Debts A/c 27,800 A 30,400 B 18,240 C 12,160 60,800 63,800 63,800 A s Capital Account To Revaluation A/c 30,400 By Balance b/d 80,000 To Balance c/d 80,000 By Reserves A/c 10,000 By C and D s Capital A/c 10,000 By Bank A/c (balancing figures) 10,400 1,10,400 1,10,400 B s Capital Account To Revaluation A/c 18,240 By Balance b/d 20,000 To Investments A/c 15,000 By Reserves A/c 6,000 To B s Loan A/c 22,760 By C and D s Capital A/c 30,000 56,000 56,000 C s Capital Account To Revaluation A/c 12,160 By Balance b/d 30,000 To A and B s Capital A/c 20,000 By Reserves A/c 4,000 To Balance c/d 80,000 By Bank A/c (balancing figures) 78,160 1 1 1 9 P a g e
1,12,160 1,12,160 D s Capital Account To A and B s Capital A/cs 20,000 By Bank A/c 60,000 To Balance c/d 40,000 60,000 60,000 Bank Account To A s Capital A/c 10,400 By Bank Overdraft A/c 44,000 To C s Capital A/c 78,160 By Balance c/d 1,04,560 To D s Capital A/c 60,000 1,48,560 1,48,560 1 1 1 Balance Sheet of Dowel co. As at 1 st April, 2015 Liabilities Assets Capital Accounts: Land 10,000 A 80,000 Buildings 1,90,000 C 80,000 Plant and Machinery 1,04,000 D 40,000 2,00,000 Furniture 43,000 Long Term Debts 3,00,000 Inventories 1,30,000 Trade payables 1,70,000 Trade receivables 1,39,000 B s Loan Account 22,760 Less: Provision for (27,800) 1,11,200 Doubtful Debts) Balance at Bank 1,04,560 6,92,760 6,92,760 14 Ans. The Youth Club Receipts and Payments Account for the year ended 31st December, 2016 Receipts Payments To Balance b/d (balancing figure) 1,390 By Salaries 4,750 To Subscriptions as per Income& Add: Paid for 2015 400 Expenditure Account 7500 5,150 Add: 2015 s Received 600 Less: Unpaid for 2016 (450) 4,700 2017 s Received 270 By General Expenses 500 8,370 60 560 Less: 2016 s Received in 2015 (450) By Audit fee (2016) 200 7,920 By Secy. Honorarium 1,000 Less: 2016 s Outstanding (750) 7,170 By Stationery & Printing 450 To Entrance Fees 250 By Annual Dinner Expenses 1,500 To Contribution for annual dinner 1,000 By Interest & Bank 150 Charges To Sport meet : By Sports Equipments 400 [2700 - (2600-300)] Receipt less 750 By Balance c/d 1,600 10,560 10,560 10 P a g e
To Balance b/d 1,600 Balance Sheet of Youth Club as at December 31, 2016 Liabilities Assets Subscription received in 270 Freehold Ground 10,000 advance Audit Fee Outstanding 250 Sport Equipment: Salaries Outstanding 450 As per last Balance Sheet 2,600 Bank Loan 2,000 Additions 400 Capital Fund : Balance as per previous 11,540 Balance Sheet 3,000 Less : Depreciation (300) 2,700 Add : Surplus for 2016 600 12,140 Subscription Outstanding 750 Insurance Prepaid 60 Cash in hand 1,600 15,110 15,110 Balance Sheet of Youth Club as at 31st December, 2015 Liabilities Assets Subscriptions received in advance 450 Freehold Ground 10,000 Salaries outstanding 400 Sports Equipment 2,600 Audit fees unpaid 200 Subscriptions Outstanding 600 Bank Loan 2,000 Cash in hand 1,390 Capital Fund (balancing figure) 11,540 14,590 14,590 15 Ans. Date 2016 Particulars Bank A/c (Note 1 Column 3) Dr. 7,10,000 July 1 To Equity Share Application A/c 7,10,000 (Being application money received on 3,55,000 shares @ 2 per share) July 10 Equity Share Application A/c Dr. 7,10,000 To Equity Share Capital A/c 2,00,000 To Equity Share Allotment A/c(Note 1 Column 5) 4,30,000 To Bank A/c (Note 1 Column 6) 80,000 (Being application money on shares transferred to Equity Share Capital Account; on 2,15,000 shares adjusted with allotment and on 40,000 shares refunded as per Board s Resolution No..dated ) Equity Share Allotment A/c Dr. 5,00,000 To Equity Share Capital A/c To Securities Premium a/c 4,00,000 (Being allotment money due on shares @ 5 each including premium at 4 each as per Board s Resolution No. dated.) Bank A/c (Note 1 Column 8) Dr. 70,000 To Equity Share Allotment A/c 70,000 11 P a g e
(Being balance allotment money received) 2017 Equity Share Final Call A/c Dr. 7,00,000 To Equity Share Capital A/c 7,00,000 (Being final call money due on shares @ 7 per share as per Board s Resolution No..dated.) April 30 Bank A/c Dr. 7,00,000 To Equity Share Final Call A/c 7,00,000 (Being final call money on shares @ 7 each received) Working Notes: Category No. of Shares Applied for Calculation for Adjustment and Refund Amount Amount Amount adjusted Received on Required on on Application Application Allotment No. of Shares Allotted Refund [3-4 + 5] Amount due on Allotment Amount received on Allotment (1) (2) (3) (4) (5) (6) (7) (8) (i) 5,000 5,000 10,000 10,000 Nil Nil 25,000 25,000 (ii) 30,000 15,000 60,000 30,000 30,000 Nil 75,000 45,000 (iii) 3,20,000 80,000 6,40,000 1,60,000 4,00,000 80,000 4,00,000 Nil TOTAL 3,55,000 7,10,000 2,00,000 4,30,000 80,000 5,00,000 70,000 Also, (i) Amount Received on Application (3) = No. of shares applied for (1) x 2 (ii) Amount Required on Application (4) = No. of shares allotted (2) x 2 *** 12 P a g e