Dibrugarh University - Financial Accounting 2011 (Solved)

a) Recording Inter-Branch Transactions: Where there are number of branches, inter-branch transactions are likely to take place, e.g., cash or goods sent by one branch to another or expenses incurred by one branch on behalf of another.  Such transactions are usually adjusted assuming that they were entered into under the instructions from the H.O.  Suppose Kolkata branch transfers some goods to Mumbai branch under the directions of the H.O.  The entries will be as follows:
In the books of Kolkata Branch:
Head Office A/c                                                Dr
        To Goods Supplied to Branch A/c

In the books of Mumbai Branch:
Goods received from Branches A/c                   Dr
        To Head Office A/c

In the books of Head Office:
Mumbai Branch A/c                                        Dr
        To Kolkata Branch a/c

Note:     Inter-branch transactions without the knowledge of head office may be passed as between the branches only in the usual manner.

b) Minimum Rent:
Minimum Rent is the amount below which landlord never accepts in any year from the person who has to pay royalty in case of mines. Minimum Rent is also known as Fixed Rent, Dead Rent, Flat Rent or Contract Rent. If in any year amount of royalty is less than the amount of minimum rent, the amount of minimum rent is payable by the person who has to pay the royalty, but if the amount of royalty is more than the amount of minimum rent, royalty will be paid.
Importance of Minimum Rent:
Fixation of minimum rent is in the interest of landlord because it guarantees him the receipt of the minimum rent even in the case of low output or sales. In the absence of minimum rent clause, only the actual royalty will be paid to the landlord. Moreover, it also gives incentive to the lessee to enhance production or sales because he is bound to pay minimum rent.
Redeemable Minimum Rent:
Generally, when minimum rent is more than royalty, then minimum rent is payable if no such provision is given in the agreement, but if it is mentioned in the agreement that when royalty will be more than minimum rent, the excess of minimum rent over royalty paid in the earlier years will be written off out of the excess of the royalty over minimum rent in the coming years such minimum rent is called Redeemable Minimum Rent.

c) Benefits of Accounting Standard:
Accounting  standard  seek to  describe the  accounting  principles, the valuation  techniques  and  the  methods  of  applying  the accounting  principles   in the  preparation  and  presentation of  financial  statements  so that  they  may  give  a true  and  fair   view  .
By setting the accounting standards, the accountant has following benefits:
(a)    Standards  reduce  to a reasonable  extent or  eliminate  altogether  confusing   variations   in   the  accounting  treatments  used  to prepare  financial  statements.
(b)   There are certain areas where   important information is not statutorily required to be disclosed. Standards may call for disclosure beyond that required by law.
(c)    The  application   of  accounting standards  would ,to  a  limited  extent, facilitate  comparison  of  financial  statements  of  companies  situated in  different parts  of  the  world  and also of  different   companies  situated  in  the  same  country. However, it  should  be  noted  in  this  respect  that  differences in the institutions, traditions  and  legal  systems  from  one  country  to  another give rise  to  differences   in  accounting   standards  adopted  in  different  countries.

d) Difference between Complete Repossession and Partial Repossession
If the hire purchaser fails to pay any of the installments in time, then default is said to have been committed by him. When a default in the payment of any installment is committed by the hire purchaser, as the ownership of the goods sold has not been transferred to the hire purchaser, the hire vendor has the right to take back the possession of the goods from the hire purchaser and treat the previous installments paid by the hire purchaser as mere hire charges for the use of the asset till then. There are two types of Repossession:
(a)    Complete Repossession
(b)   Partial Repossession
If the hire vendor takes back complete possession of the goods from the hire purchaser, then it is called complete repossession. Sometimes, in case of default, the hire vendor takes back only a part of the goods from the hire purchaser, leaving the remaining part with the hire purchaser himself. It is a case of partial repossession.
In case of complete repossession, Vendor will close the account of the hire purchaser by transferring the balance to the goods repossessed account. But in case of partial repossession, Vendor will close the hire purchaser’s account but an entry will be passed with the agreed value of the assets which has been taken back by the vendor.