MODEL ANSWERS F Y B COM SEM-II (ATKT) ACCOUNTANCY AND FINANCIAL MANAGEMENT -II(C0668) QP CODE : 7446 Dated: 6th October, 2017 Q.1 A) Fill in the blanks with most appropriate words: (Any 10 One Mark Each) 1. Loading is a difference between Invoice price and cost price. 2. Limited companies are not permitted to maintain their Books of Accounts as per Single Entry System. 3. Gross Profit cannot be ascertained under single entry system. 4. Person who sends the goods on consignment is a consignor. 5. A goods sent on consignment account is closed by transfer to Trading account 6. Dependent branches do not maintain complete set of books of accounts. 7. Local branches are located in the same country as that of the head office. 8. Branch stock adjustment account is maintained to find out Gross profit. 9. Under stock debtors system, balance on branch expenses is transferred to Branch P & L account. 10. Goods saved from fire is called as Salvage. 11. Insurance Claim = Amount of Policy Stock on the date of Fire x Actual loss 12. Credit sales can be ascertained from Debtors account. B) State whether the following statements are True or False (Any 10 One Mark Each) 1. Trial balance cannot be prepared under single entry system. True 2. Under Conversion Method, credit purchases are ascertained from Creditors Account. True 3. Collection from debtors is ascertained from Debtors Account. True 4. Profit on consignment belongs to the consignor. True 5. Consignee s account is debited when goods are sent on consignment. False 6. Account sale is sent by consignor to the consignee. False 7. Abnormal loss is credited to Branch Stock Account. True 8. Loading in closing stock is debited to stock reserve account under stock debtors system. False 9. Under stock debtors system, entries are made in branch stock account at invoice price. True 10. Goods distributed as free sample should be credited to trading account. True 11. Memorandum Trading Account is prepared to find out amount paid by creditors. False 12. Valuation of stock is done at market value only. False Q.2 Either In the books of Amarnath Trading & Profit Loss Account for the Year ended 31st March 2017 ( 2+3 Marks ) Particulars Rs. Rs. Particulars Rs. Rs. To Opening Stock 30,000 By Sales To Purchases Cash 60,000 To Cash Sales 30,000 Credit (W Note 1 and 2) 229,000 289,000 Credit (W Note 3 and 4) 150,000 180,000 By Closing stock 20,000 To Gross Profit c/d to P& L A/c 99,000 309,000 309,000 By Gross Profit b/d 99,000 To Salaries 40,000 By Miscellaneous Income 3,000 To Printing and Stationery 25,000 To Insurance 8,000 To Sales Commission 14,000 To Dep on Laptop 4,000 (Working Note 5) To Net Profit Transferred to Capital A/c 11,000 102,000 102,000
Balance Sheet As on 31st March 2017 (3 Marks) Liabilities Rs. Rs. Assets Rs. Rs. Capital Furniture 10,000 Opening 68,000 Laptop Add: Net Profit 11,000 79,000 Opening balance 0 Additions 30,000 Creditors 22,000 30,000 Bills payable 14,000 Less Depreciation @10% 4,000 26,000 Loan Received 20,000 (Working Note5 ) Closing Stock 20,000 Debtors 60,000 Bills Receivables 9,000 Cash and Bank Balances 10,000 135,000 135,000 W Note 1 Bills Receivable A/C (1 Mark) To Bal b/d 5,000 By Cash & Bank 15,000 To Debtors 19,400 By Debtors 400 (New Bills Drawn - (Bills Dishonored) Balancing Figure) By Bal c/d 9,000 24,400 24,400 W Note 2 Debtors A/c ( 1 Mark) To Bal b/d 40,000 By Cash & Bank 190,000 To B/R (Dishonored) 400 By Bills Receivable 19,400 To Credit Sales 229,000 (From Debtors A/c) (Balancing Figure) By Bal c/d 60,000 269,400 269,400 W Note 3 Bills Payable A/c (1 Mark) To Cash & Bank 18,000 By Bal b/d 6,000 To Bal c/d 14,000 By Creditors 26,000 (New Bills Accepted- 32,000 Balancing figure) 32,000 W Note 4 Creditors A/C (1 Mark) To Cash & Bank 120,000 By Bal b/d 18,000 To Bills Payable 26,000 By Credit Purchases 150,000 To Bal c/d 22,000 (Balancing Figure ) 168,000 168,000 W Note 5 : Depreciation ( 1 Mark) Laptop Rs. On Purchases 30,000 Dep @ 40% for 4 months 4,000 Total Depreciation 4,000 W Note 6 Opening Statement of Affairs as on 1st April 2016 (2 Marks) Liabilities Rs. Assets Rs. Capital 68,000 Furniture 10,000 (Balancing figure) Closing Stock 30,000 Creditors 18,000 Debtors 40,000 Bills payable 6,000 Bills Receivable 5,000 Cash and Bank 7,000 92,000 92,000
Q. 2 OR In the books of Mr. Jagdish Trading & Profit Loss Account for the Year ended 31st March 2017 ( 3 + 2 Marks) Particulars Rs. Rs. Particulars Rs. Rs. To Opening Stock 15,000 By Sales To Purchases Cash Sales 20,000 Cash Purchases 8,000 Credit Sales 85,000 105,000 Credit 45,000 53,000 By Closing stock 12,000 To Gross Profit c/d to P& L A/c 49,000 117000 117000 To Salaries 18,000 By Gross Profit b/d 49,000 To Office Expenses 9000 By Commission Received 4,000 To Dep on Machinery 4000 To Net Profit Transferred to Capital A/c 22000 53000 53000 Balance Sheet As on 31st March 2017 (3 Marks) Liabilities Rs. Rs. Assets Rs. Rs. Capital Machinery Opening 80,000 Opening balance 28,000 Add: Net Profit 22,000 102,000 Add: Additions 24,000 52,000 Less: Dep (W Note 6) 4000 48,000 Creditors (W Note 5) 16,000 Debtors (W. note 3) 40,000 Bills Payable (W Note 4) 4,000 Bills Receivable 8,000 (W Note 2) Closing Stock 12000 Cash and Bank Balances 14,000 (W Note 1) 122000 122000 W Note No. 1 (a) Cash and Bank Account ( 2 Marks) To Balance b/d 6,000 By Cash Purchases 8,000 To Cash Sales 20,000 By Creditors 30,000 To Debtors 70,000 By Salaries 18,000 To Commission Received 4,000 By Office Expenses 9,000 To Bills Receivable By Computer Purchased 24,000 (Matured and Received) 10,000 By Bills Payable Paid 7,000 By Balance c/d 14,000 110,000 110,000 W Note No. 2 Bills Receivable A/c (1 Mark) To Bal b/d 3,000 By Cash & Bank 10,000 To Debtors 15,000 (New Bills Drawn ) By Bal c/d 8,000 18,000 18,000 W Note 3 Debtors A/c (1 Mark) To Bal b/d 40,000 By Cash & Bank 70,000 To Credit Sales 85,000 By Bills Receivable 15,000 (Balancing Figure) (New Bills Drawn) By Bal c/d 40,000 125,000 125,000
W Note 4 Bills Payable A/c (1 Mark) To Cash & Bank 7,000 By Bal b/d 2,000 To Bal c/d 4,000 By Creditors 9000 (New Bills Accepted) 11,000 11,000 W Note 5 Creditors A/C (1 Mark) To Cash & Bank 30,000 By Bal b/d 10,000 To Bills Payable 9,000 By Credit Purchases 45,000 (New Bill Accepted) To Bal c/d 16,000 55,000 55,000 W Note 6 (1 Mark) Depreciation on Machinery Rs. On 28000 @10% for one year 2800 On 24000 @10% for 6 months 1200 Total Depreciation 4000 Q.3 Either In the books of Anupam Cloth Emporium Aurangabad Branch Account ( 10 Marks) Balance as on 1-4-2016 Goods returned by Branch to H.O ( In 36,000 - Branch Debtors 60,000 By Stock Reserve (Op Stock) 120000 30,000 - Stock at Invoice price 120,000 By Goods sent to Branch ( Loading) 4 112,500 - Cash 6,000 By Cash Remitted to HO To Goods sent by H.O. at Invoice Price 450,000 Cash Sales 170000 To Goods sent to Branch (Loading on re 8,750 Cash received from debtors 240,000 Cheques received from HO Balance as on 31-3-2017 - Salary 24,000 - Branch Debtors 52000 - Advertising 8,000 - Cash 5000 -Rent and Taxes 5,000 - Stock at Invoice Price 132,000 - Petty Cash 6,000 To Stock Reserve ( Closing Stock)13200 33000 To General P&L 56,750 777,500 777,500 Branch Debtors Account ( 3 Marks) To balance b / d 60,000 By Cash received from debtors 240,000 -Credit Sales 250,000 By Discount allowed 9,000 By Bad debts 6,000 By Goods returned by debtors 3,000 By balance c / d 52000 310,000 310,000 Branch Petty Cash Account (2 Marks) To Balance b / d 6,000 By Actual Petty Cash Expenses 7000 To Cheque sent to branch for Petty Cash 6,000 By Balance c / d 5,000 12,000 12,000
Q.3 OR In the Books of M/s Bharat Enterprises, Pune Kolkata Branch Stock Account ( 4 marks) To Bal b/d 80,000 By Branch Cash (Cash Sales) 140,000 To Goods sent to Branch 200,000 By Branch Debtors (Credit Sales) 80,000 To Branch Debtors ( returns) 3,000 By Goods sent to Branch (Returns) 6,000 By balance c/d 88,000 To Branch P & L Account ( Gross Profit 31,000 314,000 314,000 Goods Sent To Branch Account ( 1 mark) To Branch Stock ( Returns) 6,000 By Branch stock 200,000 To Purchases/ Trading Account 194,000 200,000 200,000 * If Goods Sent to Branch account is not prepared then Branch stock Account is to be allotted 5 Marks Branch Debtors Account ( 2 marks) To balance b/d 24,000 By Branch P & L (Discount allowed) 2,000 To Branch Stock Account (Credit Sales) 80,000 By Branch Stock Account (returned) 3,000 By Branch Cash 71,000 By balance c/d 28,000 104,000 104,000 Branch Cash Account ( 3 marks) To balance b/d 18,000 By Branch Expenses 23,000 To Branch Debtors 71,000 By Cash Remitted to Pune H O 195,500 To Branch Stock (Cash Sales) 140,000 By balance c/d 10,500 229,000 229,000 Branch Expenses Account (2 mark) Expenses paid by H.O. By Branch Profit and Loss A/c 9,000 - Salaries 6,000 - Rent and Taxes 2,000 - Printing and Stationery 1,000 9,000 9,000 * If Goods Sent to Branch Expenses Account is not prepared, then Branch P&L Account is to be allotted 3 Marks Branch P&L Account ( 2 marks) To Branch Expenses 9,000 By Branch stock Account ( Gross Pro 31,000 To Discount Allowed 2,000 To Depreciation 400 To General P& L Account 19,600 31,000 31,000 Branch Furniture Account ( 1 marks) To balance b/d 6,000 By Depreciation 400 By balance c/d 5,600 6,000 6,000
Q.4 Either IN THE BOOKS OF HIND CYCLE, PUNE CONSIGNMENT ACCOUNT (8 Marks) To Goods sent on Consignment A/c By Patil & Co. [Sale Proceeds] A/c 225,000 [500 * 400] 200,000 By Goods sent on Consignment A/c To Cash [Freight and Insurance] 10,000 [500 * 100] [Load] 50,000 To Patil & Co. A/c [Commission] 22,500 By Consignment Stock A/c 21,000 To Patil & Co. A/c [2,10,000 * 50] Godown Rent 3000 500 Advertisement 2000 5,000 To Stock Reserve A/c [Load] [500*100] 5,000 To Profit and Loss A/c 53,500 296,000 296,000 PATIL AND CO. A/C [Consignee's A/c] (5 Marks ) To Consignment A/c [Sale Proceeds] A/ 225,000 By Bank A/c 50,000 [450 * 500] By Consignment A/c [Commission] 22,500 By Consignment A/c [Expenses] 5,000 By Bank A/c [Bal. Fig] 147,500 225,000 225,000 GOODS SENT ON CONSIGNMENT ACCOUNT (2 Marks) To Trading A/c[transfer] 150,000 By Consignment A/c 200,000 To Consignment A/c 50,000 200,000 200,000 Q.4 OR IN THE BOOKS OF AJAY, AHEMEDABAD CONSIGNMENT ACCOUNT (9 Marks) To Goods sent on Consignment A/c 20,000 By Bhavesh's A/c 22,500 200*100 90*250 To Cash A/c 1,000 By consignment Stock A/c [Working note 2,100 (Freight & Insurance) 21000/100*10 To Bhavesh's A/c 500 (Godown rent ) To Bhavesh's A/c [Commission] 1,125 To Profit & Loss A/c: 1975 24,600 24,600 BHAVESH A/C [Consignee's A/c] (4 Marks ) To Consignment A/c 22,500 By Consignment A/c (Commission) 1,125 By Consignment A/c (Godown rent) 500 By Cash/Bank A/c 20,875 22,500 22,500 GOODS SENT ON CONSIGNMENT ACCOUNT (2 Marks ) To Trading A/c[transfer] 20,000 By Consignment A/c 20,000 20,000 20,000
Q 5 Either In the Books of M/S. Firezone Limited Trading Account For the year ended 31st March (4 Marks ) Particulars 2014 2015 2016 Particulars 2014 2015 2016 To Op Stk 90300 108000 120000 By Sales 360000 396000 420000 To Purchase By Cl Stk 108000 120000 123000 less Ret 224700 240000 243000 To Wages 52200 57000 62532 To G P 100800 111000 117468 468000 516000 543000 468000 516000 543000 G P Ratio = Gross Profit Net Sales G P Ratio 2014 = 100800 360000 G P Ratio 2015 = 111000 396000 G P Ratio 2016= 117468 420000 Average G P ratio = 28 + 28.03 +27.97 / 3 = 28% 28% 28.03% 27.97% (3 Marks ) Memorandum Trading Account (4 Marks ) To Opening Stock 123000 By Sales less Return 36000 To Purchase less return 18000 By Closing Stock 121080 To Wages 6000 To Gross Profit 28 % 10080 157080 157080 Actual Loss = Closing Stock on the date of Fire - Salvage (1 Marks ) = 121080-17000 = 104080 Amt of Insurance Claim as per Average clause (3 Marks ) Sum Assured Insurance Claim = x Actual Loss Stock on the date of Fire 105000 Insurance Claim = x 104080 121080 Insurance Claim = 90258 Note: i)the date of closing in the books of every year may be real as 31st December instead of 31st March in the Question ii) Wages & Free samples given in the Question are assumed to be for the year 2016 Q 5 OR In the Books of Fireworks Trading Account for the Year Ended 31 st Dec 2016 (5 Marks ) To Opening Stock 90909 By Sales 300000 (100000x100/110 ) By Free Sample 20000 To Purchases 290000 By Closing Stock 104545 Less Machinery 50000 240000 ( 115000 / 110) To Wages 20000 To G P ( Bal Fig ) 73636 424545 424545 G P Ratio = Gross Profit Sales G P Ratio = 73636 300000 G P Ratio = 24.55% (1 Marks )
Memorandum Trading Account for the Year Ended 31 st Dec 2016 (5 Marks ) To Opening Stock 104545 By Sales 90000 To Purchases 37500 By Closing Stock (BF) 79140 To Wages 5000 To G P (24.55%) 22095 169140 169140 Actual Loss = Closing Stock on the date of Fire - Salvage (1 Marks ) = 79140-15000 = 64140 Amt of Claim (3 Marks ) Since there is no underinsurance, the amt of claim = same as Actual loss Ins Claim = 64140 Q.6 A. What is Single Entry System? Explain the advantages and limitations of the Single Entry System? Single Entry Meaning and Definition (4 Marks) Single Entry simplifies transaction recording and minimization of maintenance of records for small business resulting into accounting of only part of transaction. Only one aspect of the transaction i.e. personal or which affects cash is recorded and the other aspect is ignored. The above process results into maintenance of only those accounts which are absolutely essential. All personal accounts of customers and suppliers have to be maintained. But other accounts i.e. nominal account and real account are ignored. SES is a system of incomplete accounting of business transactions and the maintenance of incomplete and inadequate accounting records. Definition: Kohler defines single entry in his Dictionary for Accountants as A system of book-keeping in which as a rule only records of cash and of personal accounts are maintained. It is always incomplete double entry, varying with circumstances. Advantages (2 marks) Simple method Does not require adequate knowledge of book keeping Less costlier Determination of profit is much easier Suitable for small concern Limitations (4 marks) No arithmetical accuracy Scope for misappropriation Gross profit cannot be ascertained Profit and loss account cannot be prepared in full fledge Unable to prepare balance sheet. Difficult to know the financial position of organization Difficult to calculate pc and goodwill Tax return will not be correct Companies act does not allow limited companies to adopt this system. No trail balance B. What is branch? Describe various Accounting Methods of Branch Accounting? What is Branch (1 Mark) A Branch is a part of central system or organization it is subordinate unit of the organization and carried on same activities of organization and located at different places. Accounting methods of Branch accounting 1) Debtors method (4 marks) This system is adopted in case of those branches which are small in size. Under this system Head office opens a separate account for each branch called as branch account, for the purpose of finding out profit or loss. Branch account is prepared in head office books only. Under this system, Head Office considers Branch as a debtor and accounting entries are made treating branch as a personal account. The following transactions between branch and head office are recorded in this account. Transaction between head office and branch, head office and other relation to branch, branch and head office Apart from the accounting transactions, the following details are also ascertained Value of stock at branch, details in respect of branch sales, cash on hand at branch, creditors in respect of goods purchased, and payment of expenses.
2) Stock and debtors method (5 marks) This method is applicable particularly where there are large numbers of transactions. This method helps the Head Office to have efficient control on branches as there are a few more accounts to be opened viz: (a) Branch Stock Account; b) Branch Debtors Account; (c) Branch Stock Adjustment Account; (d) Goods Sent to Branch Account; e) Branch Profit and loss Account. Sometimes in addition to above, Branch Cash Account, Branch Expenses; Branch Fixed Assets Account etc. may also be opened. It may be recalled that Branch Stock Account, Branch Debtors Account, Branch Cash Account, Branch Expenses Account, Goods Sent to Branch Account have been explained in detail, So, in order to avoid repetition we will only explain here in detail, the most significant and important account under Stock-Debtors System i.e., Branch (Stock) Adjustment Account. Practically Branch (stock) Adjustment Account deals with the loading on the respective items of goods relating to Branch Stock Account. In short, loading is to be computed on Opening Stock at Branch, Closing Stock at Branch, Goods sent to Branch, Goods Returned by Branch, Shortage of Stock, Surplus of Stock, Lost-in-Transit, Pilferage of Stock, Wastage of Stock, or any Normal and Abnormal Losses. Branch Stock Adjustment Account is prepared at Invoice Price. The difference between the two sides of this account reveals either gross profit (if credit side is greater than the debit side) or gross loss (if debit side is greater than the credit side). Q.6 OR Write Short note on ( Any Four) 1. Distinguish between Consignment and Sale. ( 5 marks) Consignment Sales 1) Consignment occurs between consignor and consignee 1) Sales occur between seller and buyer 2) Consignor is a principal and consignee is an agent 2) Buyer deals with seller as principal to principal 3) Consignor sends a proforma invoice to the consignee 3) Seller sends regular invoice to buyer 4) Ownership of goods remains with consignor 4) Ownership of goods transfer to buyer 5) Consignee is liable to pay consignor only price of 5) Buyer is liable to pay seller price of good received. goods sold not for all goods received 6) Consignee obtains goods for earning commission. 6) Buyer obtain goods for own use or for resale 2. Different types of Consignment Commission. (5 Marks) 1. Ordinary Commission 2. Overriding Commission 3. Commission on Surplus Price 4. Del-credere Commission (detailed explanation required) 3. Branch Adjustment Account. (5 Marks) The purpose of this account is to find out gross profit and net profit made at branch. The first section of this account shows gross profit and second section of this account shows net profit. Loading in goods sent, goods returned, opening stock, closing stock, shortage of stock or surplus of stock are shown in the first section of this account. Branch expenses and shortage of surplus at cost is shown in the second section of this account. Branch adjustment A/c format is required 4. Dependent Branch. (5 Marks) Dependent Branch: When the policies and administration of a branch are totally controlled by the head office, who also maintains its accounts, the branch is called a dependent branch. Following are the salient features of such a branch: A dependent branch does not maintain its own set of books. The Head Office maintains a record of all transaction. However, the branch maintains a Debtors Ledger and a Stock Ledger. Debtors ledger is maintained in order to find out the money due from debtors. Stock ledger is kept to provide information regarding the movement of the goods from Head Office and the balance of stock in hand. Generally, all goods are supplied to the Branch by the Head Office; Sometimes the branch may be allowed to make purchases from the local parties for which the payments are made by Head Office. Goods are generally sold by such branches in cash. Such branches can sell goods with the permission of the Head Office. The amount collected from cash sales or debtors is either remitted to Head Office immediately (the same or next day) or banked intact in the account of the Head Office in some local bank. All major expenses of the branch are paid, as far as possible by the Head Office. In order to meet the petty expenses of the branch, the branch may be provided with the petty cash from the Head Office. Petty cash account at the branch may be maintained on either simple system or imprest system.
5. Treatment of Abnormal Goods (5 Marks) Abnormal goods are damaged goods. Valuation of such goods may be at cost or at a lower value as given. It becomes necessary to adjust purchases, sales and stock on account of abnormal goods. Abnormal items are treated as follows. 1) If abnormal items included in closing stock (a) Deduct value of abnormal items from closing stock (b) Deduct cost of abnormal items from purchases (c) Deduct the sale of abnormal items from sales 2) If abnormal items are included in opening stock (a) Deduct value of abnormal item from opening stock. (b) Deduct sales of abnormal items from sales (c) Deduct value of abnormal items (if any) from closing stock 3) If abnormal items are written off to some extent from closing stock (a) Deduct the value of remaining items from closing stock (b) Deduct the cost of abnormal items from purchases (c) Deduct the sale of abnormal items from sales 6. Difference between Branch and Department. (5 Marks) Basis Branch Department Location Branches are located at different places Departments are located at same place under one roof Independence Branches can have independence to Departments do not have independence varying extent in operations. in operation Control Branches are controlled through head Departments are directly controlled as they office, as these are located at different places are located under one roof. Accounts a) Branch may have independent books Department do not have independent books of accounts. of accounts. b) Where branches maintained independent Such accounts are not required record only final account are incorporated by head office. In other case periodical statements are referred by head office c) HO maintains an account for each branch for recording transaction at head office. In case of Queries, if any, please contact: Chairman :CA Santosh Ghag - 9969965858 Members: CA Kanak Jayawant - 9833284253 Dr Shamim Sayed - 9821888102 Prof. Satish Pharate - 9820726707 Dr Sunil Kadam - 9769780513