November' 2019 Financial Accounting Solved Question Papers, Dibrugarh University B.Com 1st Sem (Non-CBCS)

 Financial Accounting Solved Question Papers November' 2019
Dibrugarh University B.Com 1st Sem

COMMERCE (General/Speciality)

Course: 103 (Financial Accounting)

The figures in the margin indicate full marks for the questions

(NEW COURSE)

Full Marks: 80

Pass Marks: 24

Time: 3 hours

1. (a) Answer in one sentence:          1x4=4

1) What is IFRS?

Ans: IFRS is a set of international accounting standards stating how particular types of transactions and other events should be reported in financial statements. IFRS are generally principles-based standards and seek to avoid a rule-book mentality.

2) What do you mean by repossession of goods?

Ans: When hire purchaser is not able to make the payment in time, then default is committed by him and the owner takes back the possession of goods. This is called repossession of goods.

3) Mention any one objective of a branch.

Ans: To determine the profit or loss of each branch

4) What is royalty?

Ans: Royalty is a periodical payment based on production or sales which is made by the lessee to the landlord.

(b) Fill in the blanks:                                                                  1x4=4

1) Accounting Standard Board was set up in India in the year 1973.

2) The cost of goods sold on hire purchase is transferred to HP Sales Account.

3) Cash sent by the branch not received by the head office by the end of the year is debited to Cash in transit Account.

4) Shortworking is the excess of Minimum Rent over actual royalty.

2. Write short notes on (any four):           4x4=16

a) Features of Accounting Principles.

Ans: Essential features of Accounting Principles

(i)      Manmade: Accounting principles are manmade. They are not tested in a laboratory.

(ii)    Objectivity: It means accounting principles must be based on facts and free from personal bias or judgment of the individuals who prepares the statements.

(iii)   Usefulness/relevance: Accounting principles must be relevant and useful to the person who is using financial statements.

(iv)  Feasibility: The accounting principles should be practicable or feasible.

(v)    Axiom: It denotes a statement of truth which cannot be questioned by anyone.

b) Termination of Hire-purchase Agreement.

Ans: Where a hirer makes more than one default in the payment of hire-purchase agreement then, subject to the provisions of Section 21 and after giving the hirer notice in writing of not less than -

a.    One week, in a case where the hire is payable at weekly or lesser intervals; and

b.    Two weeks, in any other case,

The owner shall be entitled to terminate the agreement by giving the hirer notice of termination in writing.

Where a hire-purchase agreement is terminated under this Act, then the owner shall be entitled to retain the hire which has already been paid and to recover the arrears of hire due.

c)  Inter branch Transactions.

Ans: 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:




1.

In the books of Kolkata Branch:

Head Office A/c                        Dr                        

        To Goods Supplied to Branch A/c

XXX

 

 

XXX

2.

In the books of Mumbai Branch:

Goods received from Branches A/c       Dr          

        To Head Office A/c

XXX

 

 

XXX

3.

In the books of Head Office:

Mumbai Branch A/c                      Dr                 

        To Kolkata Branch a/c

XXX

 

 

XXX

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

d)  Features of Departmental Account.

Ans: Out of Syllabus

e)  Strike and Lockout

Ans: Out of Syllabus

3. (a) What are Accounting Standards? Discuss the objectives of such standards. Also distinguish between Accounting Standards and Accounting Principles.                  2+7+5=14

Ans: ACCOUNTING STANDARDS

Accounting Standards are the policy documents or written statements issued, from time to time, by an apex expert accounting body in relation to various aspects of measurement, treatment and disclosure of accounting transactions for ensuring uniformity in accounting practices and reporting. These standards are prepared by Accounting Standard Board (ASB). Accounting Standards are formulated with a view to harmonies different accounting policies and practices in use in a country.

Objectives or Purposes of Accounting Standards:

The  whole  idea  of  accounting  standards  is  cantered  around  harmonization   of   accounting  policies  and practices  followed  by  different  business  entities   so  that  the  diverse  accounting  practices  adopted  for   various  aspects   of  accounting  can be  standardized. Accounting   standards   standardizes diverse accounting policies   with a view to:

a.      To provide information to the users as to the basis on which the accounts have been prepared and the financial statements have been presented.

b.      To serve the statutory purpose of eliminating the impact of diverse accounting policies and practices and to ensure uniformity in accounting policies & practices, i.e., to harmonize the diverse accounting policies & practices which are in use the preparation & presentation of financial statements.

c.       To make the financial statements more meaningful and comparable and to make people place more reliance on financial statements prepared in conformity with the accounting standards.

d.      To guide the judgment of professional accountants in dealing with those items, which are to be followed consistently from year to year.

e.       To provide   a  set  of  standard  accounting  policies, valuation  norms  and  disclosure  requirements.

Difference between Accounting Standard and Accounting Principles

Accounting Standard is the set of rules that should be applied for measurement, valuation, presentation and disclosure of a subject matter. For example, measurement of deferred tax, valuation of assets, intangibles and financial instruments etc. and presentation and disclosure of such measurements and valuations.

Accounting Principles however, are the fundamental principles providing a framework within which accounting should be done. These principles also govern the formulation of Accounting Standards. For example, Accrual accounting, Substance over legal form, Prudence etc.

Basis

Accounting Standard

Accounting Principles

1.Nature

Accounting standards are fixed in nature.

Accounting principles are flexible in nature.

2. Compulsory

Following of accounting standards is compulsory for every person.

Following of accounting principles is not   compulsory.

3. Responsibility

Accounting standards creates more responsibility in accountant and auditors.

Accounting principles are less responsible.

4. Uniformity

Accounting standard are uniform rules.

Accounting principles are various.

Or

(b) Following is the Trial Balance of Ajay and Bijay as on 31st March, 2019:

Dr. Balances

Rs.

Cr. Balances

Rs.

Opening Stock

Purchases

Bills Receivable

Cash in Hand

Bad Debts

Plant and Machinery

Advertisement

Sundry Debtors

Goodwill

Land and Building

Fuel

Wages and Salaries

Rent and Taxes

Discount

Commission

Furniture

1,60,000

4,00,000

4,000

26,000

2,000

1,32,000

16,000

1,00,000

1,40,000

4,50,000

30,000

80,000

40,000

17,200

20,000

30,000

Sundry Creditors

Bank Loan

Sales

Bills Payable

Interest

Capital:

Ajay

Bijay

1,50,000

87,200

8,40,000

40,000

10,000

 

3,20,000

2,00,000

From the following additional information, you are required to prepare Trading and Profit & Loss A/c for the year ended 31st March, 2019 and a Balance Sheet as on that date:          4+5+5=14

1) Closing Stock as on 31st March, 2019 – Rs. 1,20,000.

2) Depreciation machinery by 10% and furniture by 5%.

3) Create a reserve of 5% on sundry debtors for doubtful debts.

4) Write-off 1/4th of advertising.

4. (a) What is Instalment Purchase System? What are its characteristics? Distinguish between Instalment Purchase System and Credit Sales.                        3+5+6=14

Ans: Meaning and Definition of Installment Purchase System

Installment payment system (also called the deferred installments) is a system where the buyer is given the ownership as well as the possession of the gods at the time of signing the contract. The buyer has the facility to pay the price in installments.

According to J.B. Batliboi, Installment Purchase System is a system under there is an agreement to purchase and pay by installments, the goods which become the property of the Purchaser immediately when he receives the delivery of the same.

Features and Characteristics of Installment Payment System:

a)    Under this system, there will be an outright sale of goods/assets.

b)   The possession as well as the ownership is passed to the buyer right at the time of signing the contract.

c)    The buyer can make the payment in installments.

d)   IN case of default in payment, the seller cannot repossess the goods, but he can sue the buyer for the recovery of unpaid price.

e)   The buyer cannot exercise the option of returning the goods and terminate the contract, unless the same becomes void or voidable under the contract act.

Or

(b) On 1st April, 2016, Assam Traders purchased a machine from M/s Jai Hind Machinery on hire-purchase system. As per agreement, an amount of Rs. 5,000 paid on signing the agreement and balance in three equal annual instalment of      Rs. 20,000 each on 31st March each year. The hire vendor charged interest @ 5% p.a. on yearly balance. Depreciation was charged @ 15% p.a. on straight-line method.           4+5+5=14

Ascertain the cash price of the machine and prepare (1) Machinery A/c and (2) M/s Jai Hind Machinery’s A/c in the books of Assam Traders.

 

5. (a) What is Departmental Account? How are the inter-departmental transactions recorded in Departmental Accounts? Explain the basis of allocation of common expenses over the various departments in Departmental Accounts.  2+4+8=14

Ans: Out of Syllabus

Or

(b) Jorhat Head Office sent out goods to its Dibrugarh Branch at cost plus 25%. The branch remits all cash received to the Head Office and all expenses of the branch are met by the Head Office. From the particulars, prepare the following in Head Office books:

1) Dibrugarh Branch Account.

2) Goods sent to Branch Account.

Particulars

(Rs.)

Stock at branch on 01.04.2018 (invoice price)

Stock at branch on 31.03.2019 (invoice price)

Goods sent to branch during the year (invoice price)

Goods returned by the branch (invoice price)

Cash sales

Credit sales

Goods returned by customers

Discount and allowances to customers

Bad debts

Cash received from customers

Cash sent to branch:

For salaries                                                                                          10,000

For rent                                                                                                  2,400

For sundry expenses                                                                            2,500

Branch debtors as on 01.04.2018

1,800

2,000

1,37,500

7,500

30,000

99,875

4,000

6,000

500

1,04,500

 

 

 

14,900

24,000

Show Branch Debtor’s A/c as a part of working note.                   8+4+2=14

6. (a) (1) Discuss about the different types of royalty. Why is minimum rent important in Royalty Account?  5+5=10

(2) Distinguish between Rent and Royalty.           4

Or

(b) Sri Ajit Das took a colliery on lease from Sri Ratan Singh for a period of 20 years from 1st April, 2014 on a royalty of  Rs. 16 per ton of coal raised with a minimum rent of Rs. 80,000 per annum and power to recoup shortworking was first four years of the lease. The annual coal raised were:                 5+5+4=14

Year

Output (in tons)

2014-15

2015-16

2016-17

2017-18

2018-19

3000

3500

5000

9000

10000

From the above particulars, prepare the following in the books of Sri Ajit Das:

1) Royalty A/c.

2) Shortworking A/c.

3) Sri Ratan Singh’s A/c.

(OLD COURSE)

Full Marks: 80

Pass Marks: 32

Time: 3 hours

1. (a) Fill in the blanks:    1x4=4

1) Accounting Standard 6 deals with Depreciation Accounting.

2) Hire-purchase transactions are governed by the Hire-purchase Act, 1972.

3) Cash sent by the branch not received by the head office by the end of the year is debited to cash in transit Account.

4) Registration of a partnership firm is not compulsory but beneficial.

(b) Write True or False:                                                 1x4=4

1) Accounting principles are formulated by the government.

Ans: False, Accounting Standard Board

2) There is no difference between Hire-purchase System and Instalment-purchase System.

Ans: False

3) In Branch Accounting, each branch has separate entity.

Ans: False, Each branch has separate existence but each branch cannot be treated as separate legal entity

4) Minimum rent is also known as ‘rock rent’ in Royalty Account.

Ans: True

2. Write short notes on (any four):         4x4=16

a) Instalment-purchase system.

b) Independent branch.

c)  Sublease.

d) Realization Account.

e) The provisions of Accounting Standard-1.

3. (a) (1) How does the money measurement concept limit the scope of accounting?      4

Ans: According to this concept, only those events and transactions are recorded in accounts which can be expressed in terms of money. Facts, events and transactions which cannot be expressed in monetary terms are not recorded in accounting. There are certain incidences in business which cannot be expressed in terms of money say dispute between management and worker, but this has significant effect on business. So due to money measurement concept, various qualitative aspects having significant effect on business are ignored.

(2) Write four points of the necessity of accounting.                     4

Ans: The objectives and importance of accounting are as follow:

a)      To keep systematic and authentic records of all the financial transaction of a business.

b)      To ascertain the net profit or loss suffered on account of carrying the business by preparing profit and loss account.

c)       To ascertain the financial position of business on a particular date by preparing balance sheet.

d)      To determine the tax liability of the business.

e)      To assist the management in taking various important managerial decisions.

(3) Write a short note on Indian Accounting Standard Board.                       4

Ans: Accounting Standard Board

The Institute of Chartered Accountants of India (ICAI), after recognising the need to harmonies the diverse accounting policies and practices, constituted an Accounting Standards Board (ASB) on April 21, 1977. The main function of ASB is to formulate accounting standards so that such standards may be mandated by the Council of ICAI. While formulating the standards in India, ASB will take into consideration the applicable laws, customs, usages and business environment.

Objectives and function of Accounting Standard Board:

1. Primary objectives of accounting standard board are:

a)    To suggest areas in which accounting standard is needed.

b)    To formulate accounting standards which are to be followed while preparing financial statements.

c)     To improve the reliability of financial statements.

d)    To review the existing accounting standards at regular intervals and revise the same if the current business environment so demands.

e)    To ease inter-firm and intra-firm comparison.

f)     To harmonise different accounting policies which are used in preparation of financial reports.

2. The main function of accounting standard board is to formulate accounting standards so that such standards may be mandated by the Council of ICAI. While formulating the standards in India, ASB will take into consideration the applicable laws, customs, usages and business environment.

Or

(b) The following is the Trial Balance of Ajay and Bijay, a partnership firm as on 31st March, 2019:

Dr. Balances

Rs.

Cr. Balances

Rs.

Opening Stock

Purchases (adjusted)

Machinery

Salaries 

Wages

Building

Insurance

Freight

Conveyance

Carriage Inward

Rent

Returns Inward

Carriage Outward

Sundry Debtors

Bills Receivable

Cash in Hand

Drawings:

Ajay

Bijay

Closing Stock

24,500

1,30,000

50,000

10,000

14,000

60,000

500

3,000

1,400

3,850

2,400

1,600

2,400

18,000

5,250

2,300

 

3,600

4,200

38,000

General Reserve

Reserve for Doubtful Debts

Sales

Sundry Creditors

Bills Payable

Commission

Capital:

Ajay

Bijay

38,000

500

2,35,000

33,700

17,350

450

 

30,000

20,000

3,75,000

3,75,000

Prepare a Trading and Profit & Loss A/c for the year ended 31st March, 2019 and a Balance Sheet as on that date after considering the following information:   3+4+5=12

1) On 29.02.2019, a fire broke out in the godown and goods worth Rs. 7,000 were destroyed. Goods being insured, the insurance company admitted a claim for Rs. 6,000.

2) Reserve for Doubtful Debts is to be maintained at 5% of Sundry Debtors.

4. (a) Distinguish between Hire-purchase System and Ordinary Credit Sales. Mention any three rights of hire vendor and three rights of hire purchaser as laid down in the Hire-purchase Act, 1972.     5+3+3=11

Ans: Difference between Hire Purchase system and Sale

Although hire purchase system could ultimately result in sale of goods, the sale in normal sense and sale under hire purchase system are not the same. The following are the differences between Hire Purchase and Sale.

Hire Purchase

Sale

Hire purchase is governed by the Hire Purchase Act, 1972.

A ‘sale’ is governed by the sale of Goods Act, 1930.

In case of Hire purchase, the ownership of goods is transferred to buyer on payment of all installments.

In case of sale, the ownership of the goods is transferred to the buyer immediately.

In case of hire purchase, the payment is made in installments.

In case of sale, the buyer makes payment in lump sum.

The hire purchaser pays for the price of goods and also some amount of interest.

The buyer pays only for the price of goods.

On non-payment of any installment, the seller can re-possess the goods.

On non-payment of the consideration the seller cannot take back the goods, but can only take legal action on buyer.

Either the buyer or the seller can terminate the contract at any point of time, until the payments of last installment.

Once a sale has taken place, neither the seller, nor the buyer can terminate the contract (unless it is for genuine reason like damage of goods etc.)

Rights and duties of the Hire vendor

RIGHTS OF THE HIRE VENDOR

(i) Rights of owner to terminate hire-purchase agreement for default in payment of hire or authorised act or breach of express conditions: Where a hirer makes more than one default in the payment of hire-purchase agreement then, subject to the provisions of Section 21 and after giving the hirer notice in writing of not less than-

c.     One week, in a case where the hire is payable at weekly or lesser intervals; and

d.    Two weeks, in any other case,

The owner shall be entitled to terminate the agreement by giving the hirer notice of termination in writing:

(ii) Rights of owner on termination: Where a hire-purchase agreement is terminated under this Act, then the owner shall be entitled to retain the hire which has already been paid and to recover the arrears of’ hire due.

Rights and duties of the Hire Purchaser

RIGHTS OF THE HIRE PURCHASER

a)        Right of hirer to purchase at any time with rebate: The hirer may, at may time during the continuance of the hire-purchase agreement and after giving the owner not less than fourteen days notice in writing of his intention so to do, complete the purchase of the goods by paying or tendering to the owner the hire-purchase price or the balance thereof as reduced by the rebate.

b)        Right of hirer to terminate agreement at any time: The hirer may, at Dairy time before the final payment under the hire-purchase agreement falls due, and after giving the owner not less than fourteen days’ notice in writing of his intention so to do, terminate the hire-purchase agreement.

c)         Right to appropriate payments in respect of two or more agreements in such proportions as he thinks fit.

d)        Assignment and transmission of hirer’s rights or interest under hire-purchase agreement: The hirer may assign his right, title and interest under the hire-purchase agreement with the consent of the owner, or, if his consent is unreasonably withheld, without his consent.

Or

(b) On 1st April, 2016, X Ltd. purchased a machine on hire-purchase basis of payments which were as follows:

Particulars

(Rs.)

On signing the agreement

At the end of the first year

At the end of second year

At the end of third year

5,000

6,000

3,500

2,200

16,700

Interest included in Rs. 16,700 was charged on the cash price @ 10% p.a. You are required to ascertain the cash price of the machine and write up Machinery a/c and Hire Vendor’s A/c in the books of X Ltd.     3+4+4=11

5. (a) Dutta Co. Ltd. Jorhat invoiced goods to its Dibrugarh Branch at cost plus 30%. The following are the transactions between the Head Office and Branch for the year ended 31st March, 2019:7+4=11

Particulars

(Rs.)

Stock at branch on 01.04.2018 (invoice price)

Sundry Debtors on 01.04.2018

Petty Cash on 01.04.2018

Goods sent to branch (invoice price)

Total sales effected during the year 

Cash sales

Cash received from branch debtors

Expenses incurred by the branch for the year

Sundry debtors on 31.03.2019

Stock at branch on 31.03.2019 (invoice price)

Petty cash on 31.03.2019

13,000

25,000

125

65,000

1,10,000

85,000

42,000

11,500

8,000

52,000

65

From the above information, prepare Dibrugarh Branch A/c and goods sent to Branch A/c in the books of Head Office.

Or

(b) In the context of Branch Accounts, explain the following:       4+4+3=11

1)  Goods in transit.

2) Cash in transit.

3) Inter-branch transactions.

Ans:

(i) Cash in transit: If the cash sent by branch to H.O. or the cash sent by H.O. to branch has not been received by the other party upto the end of the year, it is known as cash in transit. There is a difference in the balances of two accounts on account of this transaction also. To reconcile the two balances, the following journal entry is passed:

In the books of head office

In the books of branch

Cash in Transit a/c Dr.

To Branch a/c

Cash in Transit a/c Dr

To Head office

At the beginning of the next year, reverse entry will be passed.

(ii) Goods in transit: When goods are dispatched by the head office to branch and the branch does not receive it even upto the end of the year, it is known as goods in transit. In the same way when goods are returned by branch to head office and the head office does not receive it upto the end of the year it is also known as goods in transit. It is quite understandable that a difference should arise in the balances of two accounts due to these transactions. Therefore, to reconcile, the following journal entry will be passed:

In the books of head office

In the books of branch

Goods in Transit a/c Dr.

To Branch a/c

Goods in Transit a/c Dr

To Head office

In the Balance Sheet of Head office both the above items will be shown as an asset.

(iii) 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:

1.

In the books of Kolkata Branch:

Head Office A/c                        Dr                        

        To Goods Supplied to Branch A/c

XXX

 

 

XXX

2.

In the books of Mumbai Branch:

Goods received from Branches A/c       Dr          

        To Head Office A/c

XXX

 

 

XXX

3.

In the books of Head Office:

Mumbai Branch A/c                      Dr                 

        To Kolkata Branch a/c

XXX

 

 

XXX

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

 

Out of Syllabus

6. (a) (1) What is called ‘rock rent’ in Royalty Account?                                                                    4

(2) What do you mean by recoupment of shortworking? What conditions are to be satisfied for recoupment of shortworking?    3+4=7

Or

(b) A took a lease of a colliery with a minimum rent of Rs. 30,000 per annum merging into a royalty of Rs. 5 per ton of coal raised with a right to recoup shortworking within the first four years of lease. The output for first five years was given below:

Year

Output (in tons)

1

2

3

4

5

Nil

3000

5000

7000

8000

Prepare necessary Ledger A/c in the books of the lessee.                                                       11

7. (a) A, B, C and D are partners of a partnership firm sharing profits and losses in the ratio of 2:2:1:1. Their Balance Sheet as on 31st March, 2019 was as follows:

Liabilities

Rs.

Assets

Rs.

Capital A/c:

A                                         14,000

B                                         12,000

C                                           2,000

D                                           1,600

Creditors

Bills Payable

 

 

 

 

29,600

12,000

2,400

Fixed Assets

Debtors

Cash at Bank

Surplus A/c (Dr.)

20,000

10,000

2,000

12,000

44,000

44,000

On 1st April, 2019, the firm was dissolved. All assets except cash were realized for Rs. 24,800. Realization expenses were Rs. 200. All the liabilities were discharged at book values. C became insolvent and he could not bring anything from his private estate. Close the books of the firm.                   4+4+3=11

Or

(b) What do you mean by ‘amalgamation’? What are the different methods of amalgamation? Mention about the objectives and advantages of amalgamation.  2+3+3+3=11

***

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