BACHELOR IN COMMERCE CHOICE BASED CREDIT SYSTEM (CBCS)
TUTOR MARKED ASSIGNMENT
Dear Students,
As explained in the Programme Guide, you have to do one Tutor Marked Assignment in this Course. These assignments have been bifurcated into three sections. Section-A indicate descriptive questions consist of 5 Question (10 marks each). Section-B indicate short questions consist of 5 Question (6 marks each). Section-C indicate very short questions such as differentiation/short note/briefly comment consist of 2 Question (10 marks each). It carries 100 marks and covers all blocks of the course.
Assignment is given 30% weightage in the final assessment. To be eligible to appear in the Term-end examination, it is compulsory for you to submit the assignment as per the schedule. Before attempting the assignments, you should carefully read the instructions given in the Programme Guide.
This assignment is valid for two admission cycles (July 2019 and January 2020). The validity is given below:
1. Those who are enrolled in July 2019, it is valid up to December 2019.
2. Those who are enrolled in January 2020, it is valid up to June 2020.
You have to submit the assignment of all the courses to the Coordinator of your Study Centre. For appearing in June Term-End Examination, you must submit assignment to the Coordinator of your study centre latest by 15th March. Similarly for appearing in December Term-End Examination, you must submit assignments to the Coordinator of your study centre latest by 15th September.
COURSE CODE: BCOC-131 COURSE
TITLE: FINANCIAL ACCOUNTING
ASSIGNMENT CODE: BCOC-131/TMA/2019-20
COVERAGE: ALL BLOCKS Maximum Marks: 100
Attempt all the questions
SECTION-A Note: Attempt all the questions. Each question carries 10 marks.
Solution of Q.N.1.
Solution of Q.N.4
Q.5 Define Computerized Accounting. Explain the advantages and disadvantages of Computerised Accounting System. 10
Ans: Computerized Accounting System: A computerised accounting system is an accounting information system that processes the financial transactions and events as per Generally Accepted Accounting Principles (GAAP) to produce reports as per user requirements. Every accounting system, manual or computerised, has two aspects. First, it has to work under a set of well-defined concepts called accounting principles. Another, that there is a user-defined framework for maintenance of records and generation of reports. In a computerised accounting system, the framework of storage and processing of data is called operating environment that consists of hardware as well as software in which the accounting system, works. The type of the accounting system used determines the operating environment. Both hardware and software are interdependent. The type of software determines the structure of the hardware. Further, the selection of hardware is dependent upon various factors such as the number of users, level of secrecy and the nature of various activities of functional departments in an organisation.
Advantages of Computerised Accounting System
Computerised accounting system offers various advantages over manual accounting which are stated below:
1) Speed: The most important advantage of using the computer is the speed with which we can get the work of accounting done. Computer can process a large number of transactions in seconds.
2) Accuracy: One can expect accurate results with valid data and instructions. Computers do not commit errors.
3) Versatility: Computers are not only capable of handling complex arithmetical problems, but can perform number of jobs equally well. It can be used to carry out multiple jobs at a time.
4) Storage capability: A business needs to store different types of data for future reference. A computer can store and recall any information regarding debtors, creditors, assets, liabilities, expenses, incomes, working capital etc. as and when required and can be retained as long as desired by the user.
5) Reduction of lengthy cycle: In manual accounting system, a transaction has to pass through four stages i.e. journal, ledger, trial balance and final accounts. This process is very lengthy which consumes lot of time also. In computerized accounting system, a transaction has to be recorded once through data entry screen and the computer does the rest of the processing of the transaction automatically.
Disadvantages of Computerized Accounting
Some of the major limitations of the computerized accounting system are discussed below:
a) Costly: The computerized accounting is a costly system as it requires number of facilities and attachments to set up the system. This includes the computer, printers, scanner and other related accessories.
b) Chances of Loss of data: When a computer is used, it is possible that data can be lost because of hardware or software damage.
c) Fraud and embezzlement: Fraud and embezzlement are usually achieved on a computer system by altering data or programs. There are numerous techniques, varying from additions and deletions to input data, through changing the standing information, files, modifying the behavior of programs, to duplicating or suppressing output.
d) Obsolescence: Obsolescence is a major problem in computer industry. Information technology industry follows the culture of ‘here today, gone tomorrow.’ Even the latest hardware and software purchased today may become outdated very soon. The latest version of the software provides more facilities as compared to the previous versions. This creates a problem of software up gradation.
e) Dependence on computer staff: In the computerized accounting system, the organizations depend upon the computer staff for maintaining the accounting. In the absence of computer literates for some reason in the organization, it may pose a problem to run the accounting software.
SECTION-B Note: Attempt all the questions. Each question carries 6 marks.
Q.6 Briefly explain the qualitative Characteristics of accounting information. 6
Ans: Accounting Information is a set of financial data indicating an organization's resources, revenues, debts or expenses. Accounting information must possess the following qualitative characteristics:
a) Reliability: Reliability means the users must be able to depend on the information.
b) Relevance: To be relevant, information must be available in time, must help in prediction and feedback.
c) Understandability: Understandability means decision-makers must interpret accounting information in the same sense as it is prepared and conveyed to them.
d) Comparability: The users of the accounting information must be able to compare various aspects of an entity over different time period and with other entities.
e) Timeliness: Timeliness is how quickly information is available to users of accounting information. The less timely (thus resulting in older information), the less useful information is for decision-making. Timeliness matters for accounting information because it competes with other information.
Q.7 What is a journal proper? List the transactions recorded in the journal proper. 6
Ans: Journal proper is book of original entry (simple journal) in which miscellaneous credit transactions which do not fit in any other books is recorded. It is also called miscellaneous journal. This book is used to record all the residual transactions which cannot find place in any of the subsidiary books. While recording, the entries are made in the journal covering both the aspects of the transaction. The form and procedure for maintaining this journal is the same that of simple journal.
The following are some of the examples of transactions which are entered in this book:
a) Opening entries: When a businessman wants to open the book for a new year, it is necessary to journalise the various assets and liabilities before the new accounts are opened in the ledger. The journal entries so passed are called “opening entries".
b) Closing entries: At the close of the accounting period balances from the various accounts are transferred in order to balance the books of accounts. Thus, this process of transferring balances of the trading and profit and loss account at the end of year is called closing the books and entries passed at that time are called closing entries.
c) Adjusting entries: Modification of the accounts at the end of an accounting period is called adjustments. If there be any event affecting the related period of accounts but left out of the books, the same should be incorporated in the books before the preparation of the final accounts. This is done by means of adjusting entries through the journal proper.
d) Transfer entries from one account to another account: Such entries are the entries which are passed in order to transfer one account to another account.
e) Rectification entries: When an error is detected in the books, the same is rectified through an entry in the journal proper which is called rectification entry.
Q.8 Discuss the factors that must be taken into consideration for determining the amount of depreciation. 6
Ans: Depreciation may be defined as permanent decrease in the value of assets due to Use and /or the lapse of the time. For determining the amount of depreciation on fixed assets, following factors should be considered:
a) Cost of asset including expenditure at the time of acquisition of assets.
b) Estimated working life of the assets.
c) Estimated salvage/residual/ scarp value which is estimated to be realised when asset is sold.
d) Provision for repairs and renewals required to keep the asset in good condition.
e) Addition and subtraction during the life of the asset.
f) Obsolescence of asset due to change in technology.
Q.9 What are the salient features of joint ventures? Explain. 6
Ans: A joint venture is the combination of two or more persons into a single activity. It is a form of partnership which is limited to a specific venture. It is exactly the same as partnership, with the exception that it is one of a business that is to be terminated. Since the business is to be terminated after completion of the venture, a firm name is not generally used. Thus the joint venture is like a temporary partnership without a firm name. it can also be said a particular partnership or partnership for a particular object.
Features of a Joint Venture:
a) It is a specific partnership and is limited to a specific venture.
b) It does not entail a continuing partnership since termination is certain.
c) The business is dissolved after the venture is terminated. Since the business is to be terminated after completion of the venture, a firm name is not generally used.
d) Many accounting concepts are not applicable such as the going concern concept.
e) Ascertainment of income is relatively simple.
Q.10 What are post dated vouchers? Explain the uses of post dated vouchers. 6
SECTION-C Note: Attempt all the questions. Each question carries 10 marks.
Q.11 Distinguish Between the following: (a) Cash Basis and Accrual Basis of Accounting. (b) Trading Account and Manufacturing Account. 10
Ans: (a) Accounting on ‘Cash basis’: Under cash basis of accounting, entries are recorded only when cash is received or paid. No entry is passed when a payment or receipt becomes due. Government system of accounting is mostly on cash basis. The main advantage of this basis is that there is no need to keep the records of receivables and payables.
Accrual Basis of Accounting or Mercantile System: Under accrual basis of accounting, accounting entries are made on the basis of amounts having become due for payment or receipt. Incomes are credited to the period in which they are earned whether cash is received or not. Similarly, expenses and losses are detailed to the period in which, they are incurred, whether cash is paid or not. The profit or loss of any accounting period is the difference between incomes earned and expenses incurred, irrespective of cash payment or receipt.
(b) Difference between Trading Account and Manufacturing Account
Trading Account
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Manufacturing account
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1. Trading Account is prepared by both trading and manufacturing entities.
2. Trading Account is prepared to calculate gross profit of the business enterprise.
3. In the Trading Account, items related to direct expenses and direct incomes are recorded.
4. The balance of Trading Account viz. gross profit or gross loss is to be transferred to the Profit & Loss Account.
5. Trading account does help in preparation of manufacturing account.
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1. Manufacturing account is prepared by manufacturing entities only.
2. Manufacturing account is prepared to calculate cost of goods manufactured.
3. In manufacturing account, only expenses relating to manufacture of products are included.
4. The balance of manufacturing account is cost of goods manufactured.
5. Manufacturing helps in preparation of trading account.
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Q.12 Write short notes on the following: (a) Imprest System of maintaining Petty Cash Book. (b) Preparation of Report.
Ans: (a) Imprest System of Petty Cash book: In this system, petty cash requirements for a specific period of time, a week or month is estimated and that money is given to the petty cashier. The petty cashier makes payments for various expenses during the period and is reimburse exactly by the cashier at the end of the period. So, that he can start the next week or month with the full estimated money. This system of book keeping is called the ‘imprest system’.
Features of Imprest System of Petty Cash Book:
a) Under this Imprest system, the amount of money in the petty cash is kept at a fixed sum or float which is depending on the size of the organization and its uses.
b) An initial fixed amount is given to the cashier or the custodian. At each balancing period or when the fixed amount is utilized, a cheque or cash is issued for the exact amounts that have been utilized.
c) The petty cash book looks much the same as the main cash book.
Advantages of Imprest system of Petty cash book:
a) It reduces the chances of fraud and misappropriations.
b) It minimises the possibility of accumulation of large sums of cash within the petty cashier.
(b) Preparation of reports: Basically, financial reporting is the process of preparing, presenting and circulating the financial information in various forms to the users which helps in making vigilant planning and decision making by users. The core objective of financial reporting is to present financial information of the business entity which will help in decision making about the resources provided to the reporting entity and in assessing whether the management and the governing board of that entity have made efficient and effective use of the resources provided. Financial reporting is of two types – Internal reporting and external reporting. The financial report made to the management is generally known as internal reporting and the financial report made to the shareholders and creditors is generally known as external reporting. The internal reporting is a part of management information system and they uses MIS reporting for the purpose of analysis and as an aid in decision making process.
The components of financial reporting are:
a) The financial statements – Balance Sheet, Profit & loss account, Cash flow statement & Statement of changes in stock holder’s equity
b) The notes to financial statements
c) Quarterly & Annual reports (in case of listed companies)
d) Prospectus (In case of companies going for IPOs)
e) Management Discussion & Analysis (In case of public companies)
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