Principles of Accounting

A firm whose books are closed on 31st March, purchased machinery for Rs.50,000 on April 2002, Additional machinery was acquired for Rs. 20,000 on October 1, 2003 and for Rs.28,100 on 30th September 2006. On April 1, 2005 a part of the machinery purchased for rs 20,000 on April 1, 2002 was sold for Rs.8,000. You are required to write up the Machinery Account for 5 years. Depreciation is written off at 10% on the written down value.

State the usual adjustments that have to be made while preparing the final Accounts.

The following is the Trial Balance of Ram on 31st March, 2007


Prepare the Trading and Profit & Loss Account for the year ending March 31, 2013 and also the Balance Sheet as on that date for making the following adjustments
i) Depreciate furniture and fittings by 10% on original cost.
ii) Make a provision for doubtful debts equal to 5% of debtors.
iii) Salaries for the month of March amounting to rs. 3,000 were unpaid which must be provided for. The balance in the account includes Rs.2.000 paid in advance.
iv) Insurance is prepaid to the extent of Rs.2,000
v) Provide Rs. 8,000 for office expenses.
vi) Stock valued at rs.6,000 was put up by Ram for his personal use, the cost of which has not been adjusted in the books of account.
vii) Closing stock valued at rs.68,000 (net realizable value rs.60,000).

Differentiate between Sales Book and Sales Account.

Enter the following transactions in the triple column cash book with cash, bank and discount columns.

What are the qualitative characteristics of Accounting Information? Explain in detail.

What are the Accounting Standards? Explain the meaning, nature and utility of Accounting Standards.

Attempt any three parts:

(a) Explain the relationship of accounting with other allied disciplines.

(b) Explain the reasons for changing depreciation as an expense.

(c) Why do we create for provision for bad debts in books of amount? State its relevance. (d) Distinguish between LIFO & FIFO. Which method is better under the state of rising prices and why?

(e) What are Accounting Standards? Why are these issued?

State true or false with reason in support:- Credit note is sent to a customer when goods sold on returned by him.

R. Ltd bought machinery for Rs. 30,000 on 1^st April, 2001. One more machinery was purchased on 1^st October, 2001 costing Rs. 20.000. On 1^st July, 2002, a new machinery for Rs. 10,000 was added to the existing machinery. On 1^st January, 2003, one third of the Machinery which was installed on 1^st April, 2001 was sold for RS. 3,000/-. Show the Machinery Ac in the books of the company. The rate of depreciation is 10% on reducing balance method. 

Differentiate between-

(a) Outstanding Expense and Prepaid Expense

(b) Outstanding Income and Accrued Income

(c) Interest on Capital and Interest on Drawings

From the following trial balance of XYZ Lid., you are required to prepare Trading and Profit and Loss A/C for the year ended 31^st December, 2015 and balance sheet on that date. 

Explain the different types of Goods Journals with suitable examples.

b) Record the following transactions in the cash book and post them in the ledger:

Jan. 1 Opening Balance                  Cash Rs. 3000/-

                                                           Bank Rs. 4000/-

Jan. 4 Rent paid by cheque           Rs.2000/-

Jan. 6 Received on account of cash sales Rs.3000/-

Jan. 8 Paid to Mehta Bros by cheque Rs 2000/- and earned Rs. 200,- as cash discount

Jan. 10 Received from suresh by cheque Rs. 2000/- and allowed him Rs. 100/- as cash discount

Jan 12 Cash Sales Rs.                     20000/- 

Jan. 20 Cash Purchases Rs.          5000/-

Jar. 31 Salaries paid Rs.                  5000/-

 b) What is an opening entry?

During the month of January following receipts and issue of material were made. Record these transaction in store ledger on FIFO and weighted average method.

Receipts

Jan 1 Balance 50 units @ Rs.4 per unit

Jan 5 Purchase Order No. 10, 40 units @ Rs.3 per unit

Jan 8 Purchase Order No. 12, 30 units @ Rs.4 per unit

Jan 15 Purchase Order No. 11, 20 units @ Rs.5 per unit

Issues

Jan 10 Material requisition no.4,70 units

Jan 12 Material requisition no.5, 10 units

Jan 20 Material requisition no.6, 20 units

Jan 24 Material requisition no.7, 10 units

Jan 27 Material requisition no.8, 5 units

Jan 26 Purchase Order No. 13, 40 units @ Rs.3 per unit 

A limited company purchased on 1st January 1998 a second hand plant for Rs. 12,000 and immediately spent Rs.8000 on its overhauling. On 1st July in the same year additional plant costing Rs.10,000 is purchased. On 1st July 2000 the plant purchased on 1st Jan. 1998 having become obsolete is sold for Rs.4000 and on the same date fresh plant is purchased at the cost of Rs.24,000.

Depreciation is provided @ 10% per annum on original cost on 31st Dec every year. In 2001 the company changes the method of depreciation and adopts the diminishing balance method @15% from retrospective affect.

Prepare machinery Account and depreciation account. 1 inuddor account.com 

Why adjustment entries are required to be made at the time of preparing Final Accounts. Give illustrative examples of any five such adjustment entries. 

From the following information prepare trading and profit and loss A/C and Balance sheet as on 31 March, 2019.

Adjustments:-

1. Stock on 31st March, 2019 was value at Rs.20,000

2. Depreciation on premises Rs.300 and furniture Rs.260

3. Create provision on doubtful debtors @5%

4. Interest on capital @5%

5. Unexpired insurance Rs.700

Enter the following transactions of M. Raur in a Double Column Canh Book and post them to concerned accounts in the ledger:

 On 1st January 2019, the following were the balance of Rajan & Co.: Cash in hand Rs.900; Cash at bank Rs.21,000, Soni (Cr.) Rs.3,000; Zahir (Dr.) Rs.2,400; Stock Rs.12,000; Prasad (Cr.) Rs.6,000; Sharma (Dr.) Rs.4,500; Lall (Cr.) Rs.2,700. Journalise the above transactions.  

What are the fundamental accounting assumptions? Explain their implications. 

 Explain the following

a) Convention of conservatism

b) Matching concept

c) Need for Accounting standards

d) Branches of Accounting

e) Inter-relationship between Accounting and Management 

. e) Compare the LIFO and FIFO methods of inventory valuation.

d) Explain the Imprest System of preparing Petty cash book.

c) Explain the need and significance of charging Depreciation.

Define "Inventory" Why proper valuation of inventory is important?

Attempt any three parts:

State the persons who should be interested in accounting information.

What is perpetual inventory system? How is it different from periodic inventory system? Which one you consider is better and why? 

What are the limitations of final accounts of a firm along with the importance. Explain clearly. 

On 1^st July, 2013 a company purchased a machine for Rs. 3,90,000 and spent Rs. 10,000 on its installation. It decided to provide depreciation @ 15% per annum, using written down value method On 30th November, 2016 the machine was dismantled at a cost of Rs. 5,000 and then sold for Rs. 1,00,000. On 1st December, 2016 the company acquired and put into operation a new machine at a total cost of Rs. 7,60,000. Depreciation was provided on the same basis as had been used in case of earlier machine. The company closes its books of account every year on 31^st March.

Prepare Machinery amount and depreciation account for the four accounting years ended 31^st March, 2017.

What is inventory? What are its different forms? What is the rationale for valuation of inventory? Which method do you think is better for evaluation amongst numerous methods of inventory valuation?

From the following data prepare the Trading, Profit and Loss Account and Balance Sheet for the year ending on 31st Dec. 2017.

Trial Balance of M/s Kumar Bros. for the year ending on 31st Dec. 2017

Additional Information:

(a) Closing stock amounted to Rs. 70,000.

(b) Provision for depreciation is to be made for the current year:

- Plant and machinery @ 10% on Book value.

- Furniture and fittings @ 8% on book value.

(c) Outstanding expenses: Wages Rs. 8,000 Water and Electricity Rs. 3,000

(d) Prepaid expenses: Rent and Rates: Rs. 14,000 Insurance Rs. 25,000

(e) Accrued Income: Accrued interest upto and including 31 Dec. 2017 is Rs. 13,000.

(f) Provide for doubtful debts: 4% of total debtors. 

Distinguish between the following:

(a) Cash Book and Petty cash book

(b) Journal and journal proper 

(c) Straight line method and written down value method of changing depreciation. 

(d) Trading and profit and loss account

(e) Provision and Reserve Capital expenditure and revenue expenditure. 

Reward the following adjustments in the books of accounts

(a) Loss of goods by fire Rs. 8,000

(b) Pilferage loss Rs. 4,000.

(c) Bad debts Rs. 5,000

(d) Outstanding expenses Rs. 3,000

(e) Remuneration of manager Rs. 20,000 not reward in books.

(f) Sales Rs. 20,000 is on approval basis.

Explain the following with the help of examples:-

(a)Business Entity Concept

(b)Convention of Prudence

(c)Matching concept

(d)Dual Entity concept

(e)Accrual concept

What is accounting? What is the importance of accounting records and information for its stakeholders? 

Pass an opening entry in the journals on the basis of the following information on 1. April 2015

Cash in hand               2000/-

Sundry Debtors           6000,-

Stock                             4000/

Machinery                     11000/-

Furniture                       5000/-

Sundry Creditors          1000/- 

Define Accounting State its functions. How does it differ from Book Keeping?

Discuss briefly the basic accounting concept and accounting assumptions 

State true or false with reason in support

(a) Accounting records only transactions which are of a financial character.

(b) It is on the basis of going concern concept that the assets are always values at market price

(c) In accounting all business transactions are recorded as having a dual aspect

(d) The terms loss and Expense have synonymous meaning

(e) While posting transactions in the ledger, if the account is dcbited in Journal, it will be credited in the ledger

(f) Purchase Journal is meant for recording all purchases of goods.

(g) All intangible Assets are fictitious assets.

(h) Goods taken out by the proprietor from the business for his personal use are credited to Sales Account

(i) Depreciation is charged on the book value of the asset each year in case of Diminishing Balance Method

(j) Periodic inventory gives a continuous balance of stock in hand

b) Record the following transactions in the cash book and post them in the ledger:

Jan. 1 Opening Balance                  Cash Rs. 3000/-

                                                           Bank Rs. 4000/-

Jan. 4 Rent paid by cheque           Rs.2000/-

Jan. 6 Received on account of cash sales Rs.3000/-

Jan. 8 Paid to Mehta Bros by cheque Rs 2000/- and earned Rs. 200,- as cash discount

Jan. 10 Received from suresh by cheque Rs. 2000/- and allowed him Rs. 100/- as cash discount

Jan 12 Cash Sales Rs.                     20000/- 

Jan. 20 Cash Purchases Rs.          5000/-

Jar. 31 Salaries paid Rs.                  5000/-