Financial Accounting Solved Question Papers 2024 [Gauhati University Solved Question Papers BCOM 1st Sem]

Financial Accounting Question Paper 2024
[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. Answer the following questions as directed: 1*8=8

(a) IFRSs are intended to ________ accounting practices all over the world. (Fill up the blank with appropriate word/words)

Ans: Harmonized

(b) Matching concept is based on ________ basis of accounting. (Fill up the blank with appropriate word/words)

Ans: Accrual Basis

(c) A Trading Account is prepared to find out ________ profit. (Fill up the blank with appropriate word/words)

Ans: Gross Profit

(d) Debit balance of Profit and Loss Account shows net profit. (State whether this statement is True or False)

Ans: False, Net Loss

(e) Under instalment system, ownership of the goods passes to buyer only after the payment of the last instalment. (State whether this statement is True or False)

Ans: False

(f) Under synthetic system, stock-in-transit is shown on the credit side of the Branch Account. (State whether this statement is True or False)

Ans: True

(g) The full form of C.P.U. is ________. (Fill up the blank with appropriate word/words)

Ans: Central Processing Unit

(h) Computerized accounting systems can significantly reduce the likelihood of human errors in calculations and data entry. (State whether this statement is True or False)

Ans: True

2. Answer in brief any six questions: 2*6=12

(a) Define Accounting Standard.

Ans: 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.

(b) Very briefly explain any two objectives of IFRS.

Ans: The two objectives of IFRS are:

1. Global Framework: To provide a single, world-wide standard for how public companies prepare and disclose their financial statements.

2. Simplify Reporting: To simplify accounting procedures by allowing international companies to use one reporting language, giving investors and auditors a unified view of finances.

(c) What do you mean by money measurement concept?

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. Hence, the accounting does not give a complete picture of all the transactions of a business unit.

(d) What is capital receipt?

Ans: A receipt of money is considered as capital receipt when a contribution is made by the proprietor towards the capital of the business or a contribution of capital to the business by someone outside the business. Capital receipts do not have any effect on the profits earned or losses incurred during the course of a year. Additional capital introduced by the proprietor; by partners, in case of partnership firm, by issuing fresh shares, in case of a company; and, by selling assets, previously not intended for resale.

(e) What is Balance Sheet?

Ans: Balance sheet is one of the financial statements prepared by the company to show the financial position of company at a particular time. Balance sheet is prepared to ascertain the position of assets and liabilities of the company at a particular date.

(f) Mention any two objectives of preparing a Trading Account.

Ans: Objectives or Need for Trading Account: The trading account may be prepared with the following objectives:

1)      To ascertain gross profit or gross loss.

2)      To know the direct expenses.

(g) Mention any two disadvantages of hire purchase system.

Ans: Disadvantages of hire purchase system:

a)    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.

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

(h) Very briefly explain any two objectives of Branch Accounting.

Ans: The main objectives and purpose of Branch accounting system are listed below:

1. To ascertain the profit or loss of each branch separately.

2. To ascertain financial position of each branch on a particular date.

3. To evaluate the progress and performance of each branch.

(i) Very briefly explain any two advantages of Computerized 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.

(j) Mention any two key 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. Answer any four questions in short: 5*4=20

(a) Briefly explain any five points of distinction between cash basis and accrual basis of Accounting.

Ans: 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.

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.

Basis	Cash Basis	Accrual Basis
1. Recognition	Entries are recorded only when cash is received or paid.	Entries are recorded when income is earned or expense is incurred irrespective of cash flow.
2. Outstanding Items	This basis Ignores outstanding expenses and accrued incomes.	It Records outstanding expenses and accrued incomes.
3. True Profit	Does not show the true and fair view of profit or financial position for the period.	Shows the true and fair view of the profit or loss and financial position.
4. Legal Status/GAAP	Not recognized under the Companies Act and generally not compliant with GAAP .	Recognized and mandatory for most companies under the Companies Act and compliant with GAAP.
5. Applicability	This basis is Mostly used by professionals and government entities.	This basis is Used by commercial entities to correctly match revenues and expenses.

(b) Briefly explain any five key principles of revenue recognition as per Accounting Standard 9.

Ans: Principles of Revenue recognition as per AS 9:

- Transfer of Risks & Rewards: For goods, revenue is recognized only when all significant risks and rewards of ownership are transferred to the buyer.

- Measurable Revenue: The amount of revenue must be reliably measurable (known consideration/price).

- Collectability Certainty: There must be reasonable assurance that the payment will be collected; otherwise, recognition is postponed.

- Service Completion: For services, revenue is recognized based on the stage of completion (e.g., proportionate completion method) of the service act.

- Time-Proportion Basis: Interest is recognized on a time-proportion basis, and dividends when the right to receive payment is established.

(c) Explain any five distinctions between capital expenditure and revenue Expenditure.

Ans: The following are the points of distinction 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.

(d) Write a comprehensive note on inventory valuation and its significance.

Ans: Inventory valuation is the accounting process of assigning a monetary value to a company's unsold stock at the close of an accounting period. Inventory, which includes raw materials, work-in-progress, and finished goods, is typically one of the largest current assets on the balance sheet for manufacturing, retail, and merchandising businesses. The valuation is based on the basis of cost or market price whichever is lower.

Significance of valuation of inventory

1. Determines Net Income: The valuation method directly impacts the Income Statement by setting the Cost of Goods Sold. A higher COGS means a lower Gross Profit and Net Income or vice-versa. Correct inventory valuation is crucial for accurately measuring profitability during price fluctuations.

2. Values Assets: It sets the monetary value of closing Inventory, which is reported as a Current Asset on the Balance Sheet. Accurate valuation is essential to avoid distorting total assets and working capital, which could misrepresent the company's true financial position.

3. Affects Tax Liability: The method of valuation of inventory directly affects taxable income. In inflationary markets, methods like LIFO can result in a higher COGS and lower taxable income, providing tax deferral benefits, while FIFO results in higher current tax liability.

4. Pricing Strategy: Accurate inventory cost data is important for management to set competitive and profitable selling prices. By knowing the true cost of goods sold, managers can ensure prices cover costs and achieve desired profit margins.

5. Ensures Stakeholder Confidence: Consistent and accurate valuation is critical for reliable financial reporting, which is used by external stakeholders like shareholders or creditors or bankers to assess the company's operational efficiency, asset base, and long-term financial health.

(e) From the following particulars, prepare a Trading Account and ascertain the gross profit for the year ended on 31st March, 2024:

Particulars	Amount (Rs.)
Purchases	55,000
Sales	96,000
Carriage Inward	5,000
Carriage Outward	6,000
Freight	16,000
Dock Duty	1,000
Wages	6,000
Returns Inwards	4,000
Returns Outwards	2,000
Packing Charges	3,000
Closing Stock	16,000
Trade Expenses	2,300

(f) Briefly describe any of the five key 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.

(iii) Employees and Workers: Employees and workers are entitled to bonus at the yearend besides the salary and wages which is directly linked with the profits of the enterprise. Therefore, the employees and workers are interested in financial statements.

(2) External Users:

(i) Banks and Financial Institutions: Banks and Financial Institutions provide loans to the businesses. They watch the performance of the business to ensure the safety and recovery of the loan advanced.

(ii) Investors and Potential Investors: Investors uses financial statements to assess the earning capacity of the enterprise and ensure the safety of their investment.

(iii) Creditors: Creditors supply goods and services on credit. Before granting credit, Creditors satisfy themselves about the creditworthiness of the business. The financial statement helps them in making such assessment.

(g) On 1st January, 2024, Bharat Ltd. opened a Branch at Kolkata. From the following particulars, pass the necessary Journal entries in the books of Head Office:

Particulars	Amount (Rs.)
Goods sent to Branch	35,000
Cash sent to Branch for expenses	6,000
Cash Sales at Branch	48,000
Stock at Branch on 31st December, 2024	30,000

(h) Briefly explain any five distinctions between manual accounting and computerized 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: 10*2=20

(a) Following is the Trial Balance of Sadhu and Madhu as on 31st March, 2024:

Debit	Amount (Rs.)	Credit	Amount (Rs.)
Plant and Machinery	40,000	Capital Account: Sadhu	1,20,000
Salaries	8,000	Madhu	94,310
ESI Contribution	3,000	Trading Account	32,940
Freight on Sales	15,000	Creditors	21,000
Building	5,400	Bank Loan	3,000
Goodwill	1,200	Bills Payable	14,000
Computer	10,000	Reserve Fund	1,000
Sundry Debtors	30,000	Sale of Scrap	200
Bad debt	1,500	Bad debt Recovered	500
Cash at Bank	15,000
Furniture	10,000
Bills Receivable	48,200
Fixed Deposit	1,400
Cash in Hand	650
Drawings : Sadhu	12,000
Madhu	8,000
Closing Stock	20,000
Total	2,84,250	Total	2,84,250

Adjustments:

(i) Partners are entitled to get Interest on Capital @ 5% p.a.

(ii) Depreciate Machinery @ 10% p.a.

(iii) Transfer 10% of Net Profit to Reserve Fund.

Prepare Profit and Loss Account and Profit and Loss Appropriation Account for the year ended on 31st March, 2024 and a Balance Sheet as on that date after taking into consideration the following adjustments.

(b) Asomi Industries has a branch at Itanagar. The branch sells goods both in cash and on credit. From the following particulars, prepare a Branch Account and Goods sent to Branch Account in the books of Head Office for the year ended on 31st March, 2024:

Particulars	Amount (Rs.)
Balance of Stock on 1st April, 2023	30,000
Balance of Debtors on 1st April, 2023	12,000
Balance of Petty Cash on 1st April, 2023	200
Goods sent to Branch during the year	60,000
Goods returned to Head Office by Branch	1,000
Cash Sales at Branch	40,000
Credit Sales at Branch	55,000
Sales Returns at Branch	300
Bad debts written off	400
Discount allowed	200
Cash sent to Branch for: Salaries: 5,000; Rent: 1,800; Petty Cash: 2,000	-
Petty Expenses paid by Branch	2,000
Cash collected from Branch Debtors	-
Balance of Stock on 31st March, 2024	-

(c) Write a comprehensive note on Hire Purchase System and Instalment System.         

Ans: Hire Purchase Meaning:

A trader could sell goods either for cash or for credit. For goods sold on credit, the payments may be made by the buyer in lump sum on a future date, or in installments spread over for a specified period of time. When goods are sold on credit, for which payment is made by the buyer in installments over a period of time, it is called purchase system or installment system.

Hire Purchase System defers to the system wherein; the seller of goods transfers the goods to the buyer without transferring the ownership of goods. The payment for the goods will be made by the buyer in installments. If the buyer pays all the installments, the ownership of the goods will be transferred, on payment of the last installment. However, if the buyer does not pay for any installment, the goods will be repossessed by the seller and the money paid on earlier installments will be treated as hire charges for using the goods. So, under this system, the transaction may result in purchasing of goods by the buyer or in hiring the goods. Hence, the system is called Hire Purchase System.

Installment Purchase System Meaning:

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:

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

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

3. The buyer can make the payment in installments.

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

5. 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.

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.
In this case, the buyer is like a bailee	In this case, the buyer is not in the position of a bailee
Such risk is on the seller.	Such risk is on the buyer.
On default of payment of any installment by the buyer, the seller can repossess the goods.	On default and payment of any installment by the buyer, seller cannot repossess the goods, but can file a suit in the court of law against the buyer for the recovery of unpaid price.
The buyer can exercise the option of return of goods.	The buyer cannot exercise the option of return of goods.
The buyer cannot dispose the goods, until the payment of last installment. If disposed, the third party buyer does not get a better title.	The buyer has the right to dispose the goods, even if all installments are not yet paid.

(d) Guwahati Constructions Ltd. purchased a plant from Mumbai Machinery Ltd. on instalment system on 1st April, 2019 paying Cash Rs. 10,000 and agreeing to pay three further instalments of Rs. 10,000 each on 31st March each year. The cash price of the plant is Rs. 37,250. Interest is charged @ 5% p.a. Guwahati Constructions Ltd. writes off depreciation @ 10% p.a. on written down value method. Pass necessary Journal entries in the books of Guwahati Constructions Ltd. for three years.

Ans:

(e) Briefly describe various types of Accounting packages.

1. Tally ERP 9: Tally is the market leader and a robust, integrated financial solution. It manages core accounting, including ledgers, cash flow, and balance sheets. Tally also provides full payroll, inventory control, and is highly valued for its strong focus on Indian taxation and GST compliance.

2. ProfitBooks: This is a popular cloud-based software perfect for mobility and remote access. It simplifies sales by creating GST-compliant invoices and integrating with payment gateways. Key features include expense tracking, comprehensive inventory management, and support for multi-currency transactions.

3. Zoho Books: Zoho Books is a user-friendly online accounting software ideal for small and medium enterprises (SMEs). It streamlines processes by filing GST returns, using secure, automatic bank feeds, and efficiently creating invoices. It also helps businesses track bills and manage projects and timesheets accurately.

4. BUSY: BUSY is an integrated software solution well-suited for micro and small businesses. It offers specialized tools for managing TDS and TCS compliance and generating powerful MIS reports. Operationally, it is strong in managing multi-location inventory, production, and using fully configurable invoicing.

5. Marg ERP: Marg ERP is a leading general accounting system often used as a full ERP solution. It covers the entire transaction cycle, from generating and managing sales and purchase orders to processing payroll management. It is also utilized for critical functions like quick GST e-return filing.