Advance Financial Accounting
2019 (November)
Commerce (Speciality)
Course: 301: Advance Financial Accounting)
Full Marks: 80
Pass Marks: 32
The figures in the margin indicate full marks for the questions.
1. (a) Fill in the blanks: 1x4=4
1) As per the Finance Act, 2005, banks are allowed to issue _________ shares.
2) Life insurance business is carried on by Life Insurance Corporation of India since _________.
3) The general insurance business was taken over by the Central Government with effect from _________.
4) _________ price is not the real price of investment.
(b) State whether the following statements are True or False: 1x4=4
1) Banks in India are under the general supervision of the Central Government.
2) Life insurance is more appropriate to be called life assurance.
3) Commission on re-insurance ceded is an income.
4) Only FIFO method is used to calculate cost of closing balance of investment.
2. Write short notes on any four of the following: 4x4=16
a) Slip System of Posting.
b) Insurance Regulatory and Development Authority.
c) Life Assurance Fund.
d) Marine Insurance.
e) Cum-interest and Ex-interest Quotations.
3. (a) Discuss the following items which are related to a banking company: 3½ x 4=14
1) Rebate on Bills Discounted.
2) Non-performing Assets.
3) Statutory Reserve.
4) Statutory Liquidity Ratio.
Or
(b) Following figures are extracted from the books of J. K. Bank Ltd. as on 31.03.2019:
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Rs. (‘000) |
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Interest and discount received Interest paid on deposits Share Capital Commission and exchange Rent received Profit on sale of Investment Salaries paid to employees Rent paid Stationery Postal expenses Audit fees Depreciation on Bank’s properties Director’s fees Preliminary expenses |
4,060 2,404 1,000 180 60 190 210 108 48 40 8 25 34 10 |
Further Information:
1) A customer to whom a sum of Rs. 5,00,000 has been advanced has become insolvent and 40% recovered from his estate.
2) Provision for bad and doubtful debts necessary Rs. 1,00,000.
3) Rebate on bills discounted as on 31.03.2018 Rs. 10,000.
Rebate on bills discounted as on 31.03.2019 Rs. 15,000.
4) Provide Rs. 7,00,000 for income tax.
5) The directors desire to declare 10% dividend.
Prepare Profit & Loss A/c of J. K. Bank Ltd. in accordance with law. 14
4. (a) What is life insurance? What are the statutory and subsidiary books maintained by a Life Insurance Company? 2+6+6=14
Or
(b) Best Life Insurance Co. Ltd. had a paid-up capital of Rs. 10,00,000 divided into 1,00,000 shares of Rs. 10 each. Its net liability on all contracts in force as on 31st March, 2019 was Rs. 96,00,000 and on 31st March, 2018, this liability was Rs. 84,00,000. The company has paid an interim bonus of Rs. 2,60,000 and 20% of the surplus is to be allocated to shareholders, 20% to reserves and balance being carried forward. Following figures are extracted from the books of the company for the year ended 31st March, 2019:
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Rs. |
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Premium less re-insurance premium Interest, dividend and rent Fees Income tax Management expenses Annuities paid Commission Surrenders Surplus on revaluation of reversions Re-insurance irrecoverable Claims less re-insurance claims Consideration for annuities granted |
57,20,000 28,00,000 16,000 4,40,000 7,00,000 50,000 2,20,000 3,20,000 20,000 16,000 34,00,000 1,60,000 |
Prepare Revenue A/c of Best Life Insurance Co. Ltd. for the year ended 31st March, 2019. 14
5. (a) What do you mean by ‘Reserve for Unexpired Risk’? How and why is it created in General Insurance? Also distinguish between General Insurance and Life Insurance. 2+4+4+4=14
Or
(b) Prepare a Revenue A/c in respect of Fire Business from the following details for the year ended 31st March, 2019: 14
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Rs. |
|
Reserve for unexpired risk on 01.04.2018 @ 50% Additional Reserve as on 01.04.2018 Estimated liabilities for claims: Intimated on 01.04.2018 31.03.2019 Claims paid Legal expenses Medical expenses Re-insurance, recoveries of claims Bad debts Premium recovered Premium on re-insurance accepted Premium on re-insurance ceded Commission on re-insurance accepted Commission on direct business Commission on re-insurance ceded Expenses of management Interest, dividend and rent Profit on sale of investments |
1,80,000 36,000 31,000 42,000 3,65,000 6,000 4,000 32,000 800 4,86,000 32,000 43,000 1,600 48,600 2,150 90,000 24,000 3,000 |
Create Reserve on 31st March, 2019 on the same extent as on 1st April, 2018.
6. (a) (1) What is Investment A/c? Discuss about the features and purposes of Investment A/c. 2+4+4=10
(2) Distinguish between Cum-interest and Ex-interest in Investment A/c. 4
Or
(b) Mr. Babu bhai furnishes the following details relating to his holding in 6% Government Bonds:
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Opening Balance (On 01.04.2018) 01.06.2018 01.10.2018 01.01.2019 01.02.2019 |
: 1,200 bonds of Rs. 100 each at a cost of Rs. 1,18,000. : 200 bonds purchased ex-interest at Rs. 98. : Sold 400 bonds ex-interest out of the original holding at Rs. 100. : Purchased 100 bonds at Rs. 98 cum-interest. : Sold 400 bonds ex-interest at Rs. 99 out of the original holdings. |
Interests are calculated as on 30th June and 31st December. Mr. Babu Bhai closes his books on every 31st March. Show the Investment A/c as it would appear in his books. Working note should be a part of your answer. 14
(Old Course)
Full Marks: 80
Pass Marks: 32
Time: 3 hours
1. (a) Fill in the blanks: 1x4=4
1) Non-banking assets are shown in Schedule _________ of a bank Balance Sheet.
2) In case of marine insurance, the provision against unexpired risk is maintained at _________% of net premium.
3) The Presidency Towns Insolvency Act, _________ applies to the persons residing in the Presidency Towns of Mumbai, Kolkata and Chennai.
4) Investment A/c is a _________ A/c.
(b) Write True or False: 1x4=4
1) A bank can open a branch only at the permission of the Reserve Bank of India.
2) Valuation Balance Sheet is prepared to know surplus or deficiency of the life insurance business.
3) Preferential creditors are shown under List C of the Statement of Affairs.
4) By the term inflation, we mean a rise in the value of money and a fall in general price level.
2. Write short notes on any four of the following: 4x4=16
a) Rebate on Bills Discounted.
b) Life Insurance Corporation Act, 1956.
c) Deficiency A/c.
d) Objectives of Investment Accounting.
e) Mid-period Conversion.
3. (a) Explain in relation to Bank Accounting: 3x4=12
1) Cash credit and overdraft.
2) Cash reserve ratio.
3) Core banking.
4) Non-performing assets.
Or
(b) Prepare the Profit & Loss A/c with necessary schedule of Trinity Bank Ltd. for the year ended 31st March, 2019: 12
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Rs. (‘000) |
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Interest on loans Interest on deposits Commission, exchange and brokerage Discount on bills discounted (gross) Payment to employees Interest on cash credit Rent and rates Interest on overdrafts Directors’ fees Auditors’ fees Postal expenses Printing and stationery Sundry expenses |
2,590 3,850 82 1,950 540 2,230 180 1,540 30 12 14 29 17 |
Other Information:
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Rs. (‘000) |
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(1) Rebate on bills discounted (2) Bad debts (3) Provision for Income Tax |
490 400 1,000 |
4. (a) (1) What are the different types of insurance contracts? Explain them in brief.
(2) How is profit or surplus ascertained and distributed by a life insurance company? 7+4=11
Or
(b) From the following information, prepare a Revenue A/c of North-East Life Insurance Company for the year ended 31st March, 2019: 11
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Rs. (‘000) |
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Life assurance fund as on 1st April, 2018 Premiums Interest, dividends and rents Consideration for annuities granted Fines for revival of lapsed policies Claims paid Bad debts Expenses of management Commission Bonus in reduction of premiums Annuities paid Surrenders Surplus on revaluation of reversions purchased Income tax paid Bonus in cash |
7,50,000 3,72,000 2,26,000 12,500 200 42,500 400 35,000 16,000 500 18,500 25,500 1,500 32,000 18,000 |
5. (a) What is Statement of Affairs? How is it prepared? Distinguish between a Statement of Affairs and a Deficiency Account. 2+5+4=11
Or
(b) Mr. Ramesh Kumar filed a petition of insolvency on 30th June, 2018. His books showed the following balances:
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Rs. |
Rs. |
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Cash in Hand Fixture and Fittings (estimated to produce Rs. 1,200) Stock-in-Trade (estimated to produce Rs. 18,000) Sundry Creditors: Trade Creditors Bills Payable Sundry Debtors: Good Doubtful (estimated at 50%) Bad Bank Overdraft Capital |
150 3,750 27,000 15,000 30,000 30,000 |
30,000 33,000 18,000 24,900 |
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1,05,900 |
1,05,900 |
Other Information:
1) Liability on bills discounted amounting to Rs. 7,500 (expected to rank Rs. 1,500)
2) His household furniture, etc. was valued at Rs. 3,750. He owned a house valued at Rs. 11,250, having a mortgage on it of Rs. 9,000 at 4% p.a. Interest thereon was paid up to the preceding 31st December.
3) Preferential creditors amounted to Rs. 525 (include in Sundry Creditors) and Rs. 225 for rates on the house.
Prepare a Statement of Affairs and Deficiency A/c. 7+4=11
6. (a) What are the special features of Investment Accounts? How are stock exchange transactions (sale and purchase of securities) recorded in books? 6+5=11
Or
(b) Jaipur Investment Ltd. holds 1,000, 15% debentures of Rs. 100 each in Udaipur Industries Ltd. as on 1st April, 2018, at a cost of Rs. 1,05,000. Interest is payable on 30th June and 31st December each year. On 1st May, 2018, 500 debentures are purchased cum-interest at Rs. 53,500. On 1st November, 2018, 600 debentures are sold ex-interest at Rs. 57,300. On 30th November, 2018, 400 debentures are purchased ex-interest at Rs. 38,400. On 31st December, 2018, 400 debentures are sold cum-interest for Rs. 55,000. Prepare Investment A/c valuing holding on 31st March, 2019 at cost (applying FIFO method). 11
7. (a) What do you mean by ‘Inflation Accounting’? What are the limitations of historical accounting in a period of inflation? Also distinguish between holding gain and operating gain. 2+5+4=11
Or
(b) Compute the net monetary result of X Co. Ltd. as on 31st March, 2019. The relevant data are given below: 11
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01.04.2018 Rs. |
31.03.2019 Rs. |
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Cash Book Debts Creditors Loan Retain Price Index Numbers: 1st April 31st March Average for the year 240 |
5,000 20,000 15,000 20,000 200 - |
10,000 25,000 20,000 20,000 - 300 |
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