Financial Accounting Solved Question Papers 2023 [Gauhati University Solved Question Papers BCOM 1st Sem]

Financial Accounting Question Paper 2023 
[Gauhati University BCOM 1st SEM NEP 2023 Syllabus]
COMMERCE [Paper: BCM0100204 (Financial Accounting)]

Full Marks: 60

Time: 2½ hours

The figures in the margin indicate full marks for the questions.

1. Select the appropriate answer of the questions from the following:   1x8=8

(a) Accounting gives information on

(1) Financial states of the organisations.

(2) Income and cost for the managers.

(3) Company’s tax liability for a particular year.

(4) All of the above.

Ans: (4) All of the above.

(b) Which of the accounting principles state that companies and owners should be treated as separate entities?

(1) Money measurement concept. 

(2) Business entity concept.

(3) Periodicity assumption.

(4) Going concern concept.

Ans: (2) Business entity concept.

(c) Accounting principles are generally based on

(1) Objectivity.

(2) Subjectivity.

(3) Convenience in recording.

(4) None of the above.

Ans: (1) Objectivity. (recorded transactions should be based on verifiable evidence i.e. source documents.

(d) Ind AS 9 is related to

(1) Revenue recognition.

(2) Accounting for fixed asset.

(3) Leases.

(4) Depreciation accounting.

Ans: (1) Revenue recognition.

(e) Amount spent on increasing the seating capacity in a cinema hall is a

(1) Revenue expenditure.

(2) Capital expenditure.

(3) Both revenue and capital expenditure.

(4) None of the above.

Ans: (2) Capital expenditure.

(f) Excess of debit in the Profit and Loss Account is known as

(1) Gross loss.

(2) Gross profit.

(3) Net loss.

(4) Net profit.

Ans: (3) Net loss.

(g) Profit and Loss Account is also known as

(1) Statement of affairs.

(2) Income statement.

(3) Statement of operation.

(4) Statement of labour.

Ans: (2) Income statement.

(h) In hire purchase system the buyer charges depreciation on the

(1) Cash price.

(2) Future market price.

(3) Hire purchase price.

(4) Middle price.

Ans: (1) Cash price.

2. Answer in brief any six questions:      2x6=12

(1) Mention any two of the users of financial accounting information.

Ans: Users of accounting information may be categorised into: (1) Internal Users; and (2) External Users.

(1) Internal Users:

(i) Owners: Owners contribute capital in the business and they are always exposed to risk. In view of risk involved, the owners are always interested in knowing the profitability and financial strength of the company.

(ii) Management: Managers has the responsibility to not only safeguard the owner’s investment but also to increase the value of business. Financial statements help the management to find out the overall as well as segment-wise efficiency of the business. It helps them in decision making as well as in controlling and self-evaluation.

(2) What is the basic difference between Accounting Standard and Generally Accepted Accounting Principles?

Ans: Difference between Accounting Standards and GAAP

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) What is the significance of Accounting Standards?

Ans: Significance of Accounting Standards:

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.

(4) Explain in brief the meaning of matching concept in the measurement of income.

Ans: The essence of the matching concept lies in the view that all costs which are associated to a particular period should be compared with the revenues associated to the same period to obtain the net income of the business.

(5) How are expenses recognised under AS 9?

Ans: Expenses under AS 9 is governed by Matching principles. This principle mandates that expenses must be recognized in the same accounting period as the revenue they helped generate.

(6) What is revenue receipt?

Ans: A receipt of money is considered as revenue receipt when it is received from customers for goods supplied or fees received for services rendered in the ordinary course of business, which is a result of the firm’s activity in the current period. Receipts of money in the revenue nature increase the profits or decrease the losses of a business and must be set against the revenue expenses in order to ascertain the profit for the period.

(7) What is the significance of inventory valuation?

Ans: The way a company values its inventory directly affects its cost of goods sold, gross profits, and the monetary value of inventory remaining at the end of each period. Therefore, inventory valuation affects the profitability of a company and its potential value, as presented in its financial statements.

(8) What is the basic advantage of computerised accounting?

Ans: Computerised accounting system offers various advantages over manual accounting which are stated below:

- Speed: Computer can process a large number of transactions in seconds.

- Accuracy: One can expect accurate results with valid data and instructions.

- Versatility: It can be used to carry out multiple jobs at a time.

- Storage capability: A business needs to store different types of data for future reference.

(9) What is the basic difference between hire purchase system and instalment payment system?

Ans: Differences Between Hire Purchase System and Installment Purchase System:

Hire-Purchase System	Installment Purchase
It is a contract of hiring.	It is a contract of sale.
It is transferred by seller to buyer only after payment of all installments.	It is transferred by seller to buyer, immediately on signing the contract.

(10) How do you define accounting software package?

An accounting software package is a computer program or set of integrated programs designed to record, process, and manage the day-to-day financial transactions and operations of a business or organization. It essentially replaces manual accounting methods to provide a more efficient, accurate, and real-time view of a company's financial health.

3. Answer any four questions in short:   5x4=20

(a) Mention the qualitative characteristics of accounting information.

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:

1. Reliability: Reliability means the users must be able to depend on the information.

2. Relevance: To be relevant, information must be available in time, must help in prediction and feedback.

3. Understandability: Understandability means decision-makers must interpret accounting information in the same sense as it is prepared and conveyed to them.

4. 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.

5. 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.

(b) Write the meaning of the following accounting principles:

(1) Cost Concept.

(2) Consistency.

Ans: Cost Concept: According to this concept, the transactions are recorded in the books of account with the respective amounts involved. For example, if an asset is purchases, it is entered in the accounting record at the price paid to acquire the same and that cost is considered to be the base for all future accounting.

Consistency: The convention of consistency implies that the same accounting procedures should be used for similar items over periods. It is essential for clear and correct understanding and interpretation of the financial statements. It is also important for inter-period comparison.

(c) What are the objectives of measurement of business income?

Ans: Objectives of Measurement of Business Income

1. To measure of Managerial Efficiency.

2. To measure the Creditworthiness or short term liquidity.

3. To provide base for calculation of tax.

4. To help in taking investments decisions.

5. To assist in taking dividend decision.

(d) Write the differences between capital expenditure and revenue expenditure. What is capital receipt?   3+2=5

Ans: Difference between capital expenditure and revenue expenditure:

Basis	Capital Expenditure	Revenue Expenditure
1. Benefits	Its benefit realised for more than one accounting period.	Its benefits enjoyed within a particular accounting period.
2. Nature	It is non-recurring (Irregular) in nature.	It is Recurring (Regular) in nature.
3. Conversion	All Capital Expenditures eventually become Revenue Expenditures like depreciation	Revenue Expenditures are not generally capital expenditures.
4. Matching	These are not matched with Capital Receipts.	These are matched with Revenue Receipts.
5. Shown	These are shown in balance sheet.	These items are shown in income statement.

(e) Write the advantages and disadvantages of hire purchase system.      3+2=5

Ans: Advantages and Importance of Hire Purchase System

1. Costly items can easily be purchased by the consumers which he cannot otherwise purchase by making entire payment in lump sum.

2. Hirer has a right to terminate the agreement at any time before the goods is transferred.

3. Hire purchase is a rewarding field of financial investment today, because, despite the chance of bad debts, the rewards earned are higher than the normal rates of interest.

Disadvantages of hire purchase system:

1. Cost of items purchased by hire purchase system is more than the normal price as the customer has to pay interest on the balance amount.

2. Hirer does not become the owner of goods hired, until payment of last installment is made.

3. Hirer cannot sell or pledge goods hired until he becomes owner of such goods.

(f) Write a note on accounting system of a dependent branch.

Ans: Dependent Branch: The term ‘Dependent Branch’ means a branch which does not maintain its own set of books. All records have to be maintained by the head office. When the business policies and the administration of a branch are wholly controlled by the head office, its accounts also are maintained by it. In such a case, Branch accounts are written up at the head office out of reports and returns received from the branch.

Methods of Branch Accounting – In case of a dependent branch, the head office may keep accounts of the branch according to any of the following systems:

1. Debtors System (Synthetic Method): This is the most popular method for small branches. The HO opens a single Branch Account (nominal in nature) to calculate profit or loss. It is debited with opening assets, goods sent, and expenses, and credited with remittances and closing assets. This account is prepared whether goods are sent at cost price or invoice price. If sent at invoice price (cost plus profit), a Stock Reserve adjustment is required for the unrealised profit included in opening/closing stock and goods sent. Credit sales, bad debts, and depreciation are typically not shown in this main Branch Account.

2. Stock and Debtors System (Analytical Method): This is a detailed method suitable for branches with high turnover. Instead of one account, the HO prepares separate accounts to maintain greater control, such as Branch Stock Account, Branch Debtors Account, Goods Sent to Branch Account, and a Branch Profit and Loss Account. If goods are sent at Invoice Price, a Branch Adjustment Account is also used to record the profit loading.

3. Wholesale Systems: Wholesale System: The HO sends goods to the branch at the wholesale price. The branch's profit is the difference between its retail selling price and the wholesale price charged by the HO.

4. Final Accounts System: The head office can also ascertain the profit or loss of a dependent branch by preparing branch trading and profit and loss a/c at cost. In this method, profit and loss of each branch can be ascertained. All expenses whether direct or indirect is shown in profit and loss account.

(g) What are the features of Tally 9?

Ans: Tally ERP 9 is a comprehensive accounting software that offers a variety of features to help businesses manage their financial operations effectively. Some of the key features of tally ERP 9 is given below:

1. Accounting Management: Tally ERP 9 allows users to manage all the business transactions, including sales, purchases, returns, receipts, and payments.

2. Inventory Management: Users of Tally ERP 9 can easily track inventory levels, manage stock levels, and generate reports on stock movement.

3. Taxation: Tally ERP 9 supports various tax calculations, including GST, ensuring compliance with local regulations.

4. Multi-Currency Support: Tally allows transactions in multiple currencies, making it suitable for businesses dealing with international clients.

5. Banking Integration: Tally can integrate with bank accounts for easy reconciliation and management of bank transactions with cash book.

6. Data Backup and Restore: Tally provides options for data backup and restoration to prevent data loss.

7. Customizable Invoicing: Users can create and customize invoices according to their business needs.

(h) Write the basic differences of manual accounting and computerised accounting.

Ans: Difference between Manual Accounting System and Computerized Accounting

a)    Recording of data: The recording of financial transactions, in manual accounting system is through books of original entries while the data content of such transactions is stored in a well-designed accounting database in computerised accounting system.

b)    Classification and processing of data: In a manual accounting system, transactions recorded in the books of original entry are further classified by posting into ledger accounting. This results in transactions data duplicity. In computerized account, no such data duplication is made to cause classification of transactions.

c)    Summarizing and updating of data: The transactions are summarized to produce trial balance in manual accounting system by ascertaining the balances of various accounts. The generation of ledger accounts is not a necessary condition for producing trial balance in a computerized accounting system because it is done automatically.

d)    Adjusting entries. In a manual accounting system, entries are made to the principle of cost matching revenue. These entries are passed to match the expenses of the accounting period with the revenues generated by them. However, in computerized accounting, journal vouchers are prepared and stored to follow the principle of cost matching revenue, but there is nothing like passing adjusting entries for errors and rectification, except for rectifying an error of principle by having passed a wrong voucher.

4. Answer any two questions:   10x2=20

(a) From the following Trial Balance of M/s. Gupta Enterprise, prepare Trading and Profit and Loss Account for the year ended on 31^st March, 2023:   4+6=10

Particulars	Dr.(Rs.)	Cr. (Rs.)
Capital Drawings Opening Stock Purchases Sundry Creditors Sales Sundry Debtors Freight inward Discounts Commissions Returns Salaries Rent, Rates and Taxes Postage, Telegrams and Telephone Loan Interest Brand name and Design Furniture Advertisement Cash in Bank Cash in Hand Duty drawbacks	- 50,000 75,000 4,20,000     1,20,000 20,000 16,000 12,000 16,000 1,20,000 40,000 25,000   20,000 60,000 3,50,000 1,00,000 1,50,000 63,000	4,00,000       75,000 8,10,000     28,000 14,000 20,000       3,00,000             10,000
	16,57,000	16,57,000

Other information:

(1) Closing Stock Rs. 1,70,000.

(2) Depreciation Furniture @ 10% p.a.

(3) The enterprise spent heavy expenditure in advertisement for launching new product which is to be written off over 5 years.

(4) Salary Outstanding Rs. 12,000.

(5) Salary Paid in Advance Rs. 10,000.

(b) On 1^st April, 1998 A Ltd. purchased from B Ltd. five trucks under hire purchase system, Rs. 5,00,000 being paid on delivery and balance in five instalments of Rs. 7,50,000 each payable annually on 31^st March. The vendor charges 5% p.a. interest on yearly balances. The cash price on five trucks was Rs. 37,50,000. You are required to show Trucks A/c and B Ltd. A/c in the Ledger Books of A Ltd. Company.

Ans:

(c) Hari Brothers of Kolkata has a branch at Ranchi and in order to maintain strict control on stock, invoices goods to the branch at selling price which is cost plus 33 1/3%. From the following particulars, prepare Branch Stock A/c, Branch Debtors Accounts and Goods sent to Branch A/c. 4+4+2=10

Particulars	Rs.
Stock on 1st April, 2022 (Invoice Price) Debtors on 1st April, 2022 Goods invoiced to Branch during the year (Invoice Price) Sales at Branch Cash Credit Cash received from debtors Bad debt written off Discount allowed to customer Expenses at Branch Stock on 31st March, 2023	15,000 11,400 67,000   31,000 37,400 40,000 250 300 6,700 13,400

(d) Assam Motor Service Co. buys a motor car on instalment payment system from Hind Motors Ltd. on 01-01-2018 under which payment is to be made on December 31 each year for 4 years @ Rs. 50,000 per annum, interest being calculated @ 5% p.a. The cash down price of the car is Rs. 1,77,300. Depreciate the car @ 10% p.a. on diminishing balance method. Prepare:

(1) Motor Car A/c,

(2) Hind Motors Ltd. A/c and

(3) Interest Suspense A/c in the books of Assam Motors Service Co. for 4 years.

Ans:

(e) Explain the procedures for setting Accounting Standards in India.

Ans: Following procedure will be adopted for formulating Accounting Standards:

1. Identification of the broad areas by the ASB for formulating the Accounting Standards.

2. Constitution of the study groups by the ASB for preparing the preliminary drafts of the proposed Accounting Standards.

3. Consideration of the preliminary draft prepared by the study group by the ASB and revision, if any, of the draft on the basis of deliberations at the ASB.

4. Circulation of the draft, so revised, among the Council members of the ICAI and 12 specified outside bodies such as Standing Conference of Public Enterprises (SCOPE), Indian Banks’ Association, Confederation of Indian Industry (CII), Securities and Exchange Board of India (SEBI), Comptroller and Auditor General of India (C& AG), and Department of Company Affairs, for comments.

5. Meeting with the representatives of specified outside bodies to ascertain their views on the draft of the proposed Accounting Standard.

6. Finalization of the Exposure Draft of the proposed Accounting Standard on the basis of comments received and discussion with the representatives of specified outside bodies.

7. Consideration of the comments received on the Exposure Draft and finalisation of the draft Accounting Standard by the ASB for submission to the Council of the ICAI for its consideration and approval for issuance.

8. Consideration of the draft Accounting Standard by the Council of the Institute, and if found necessary, modification of the draft in consultation with the ASB.

9. The Accounting Standard, so finalised, is issued under the authority of the Council.

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