Chapter: Introduction to Accounting

Q1. Giving examples, explain each of the following accounting terms :

• Fixed assets • Gain • Profit

• Revenue • Expenses • Short-term liability

• Capital

Q2. Medico Plus plans to install a new equipment..Which of the following is the relevant data for this decision?

a. Similar business acquired the new equipment in the previous year for Rs. 10,00,000

b. Equipment cost details of last two years

c. Equipment cost details of last ten years

Q3. Many People in today’s society think of an accountant as simply a glorified bookkeeper. But the role of an

accountant is continually changing. Discuss.

Q4. As a senior accountant of Taxman Limited, what three steps would you take to make your company’s financial

statements understandable and decision useful?

1. ——————————————————————————————

2. ——————————————————————————————

3. ——————————————————————————————

Q5. Which stakeholder group… Would be most interested in

(a) the VAT and other tax liabilities of the firm

(b) the potential for pay awards and bouns deals

(c) the ethical or environmental activities of the firm

(d) whether the firm has a long-term future

(e) profitability and share performance.

(f) the ability of the firm to carry on providing a service or producing a product.

Q6. Aditya started a business for buying and selling of stationery with Rs. 5,00,000 as an initial investment. Of which

he paid Rs.1,00,000 for furniture, Rs. 2,00,000 for buying stationery items. He employed a sales person and

clerk. At the end of the month he paid Rs.5,000 as their salaries. Out of the stationery bought he sold some

stationery for Rs.1,50,000 for cash and some other stationery for Rs.1,00,000 on credit basis to Mr.Rahul.

Subsequently, he bought stationery items of Rs.1,50,000 from Mr. Peace. In the first week of next month there

was a fire accident and he lost Rs. 30,000 worth of stationery. A part of the machinery, which cost Rs. 40,000,

was sold for Rs. 45,000.

From the above, answer the following :

1. What is the amount of capital with which Mr. Sunrise started business.

2. What are the fixed assets he bought?

3. What is the value of the goods purchased?

4. Who is the creditor and state the amount payable to him?

5. What are the expenses?

6. What is the gain he earned?

7. What is the loss he incurred?

8. Who is the debtor? What is the amount receivable from him?

9. What is the total amount of expenses and losses incurred?

Chapter: Theory Base of Accounting

Q1. Name the convention that states that same accounting methods should be adopted every year in preparing

financial statements.

Q2. Fill in the blanks:

(i) If a firm believes that some of its debtors may ‘default’, it should act on this by making sure that all possible

losses are recorded in the books. This is an example of the ___________ concept.

(ii) The fact that a business is separate and distinguishable from its owner is best exemplified by the

___________ concept.

(iii) The ___________ concept states that if straight line method of depreciation is used in one year, then it

should also be used in the next year.

(iv) The management of a firm is remarkably incompetent, but the firms accountants can not take this into

account while preparing book of accounts because of ___________ concept.

Q3. Why is it important to adopt a consistent basis for the preparation of financial statements? Explain.

Q4. Why is it necessary for accountants to assume that business entity will remain a going concern?

Q5. When should revenue be recognised? Are there exceptions to the general rule?

Q6. Explain the meaning and significance of the Accrual Assumption.

Q7. Sumit is owner of ‘Modern Art’, an art gallery. In the process of preparing financial statements, the accountant

of the firm fell ill and had to proceed on leave. Sumit was urgently in need of the statements as these had to be

submitted to the bank, in pursuance of a loan of Rs. 5 lakh applied for the expansion of the business of the firm.

Nisha his friend, volunteered to complete the work. On scrutinising the accounts, the banker found that the

value of building bought a few years back for Rs. 27 lakh has been shown in the books at Rs. 80 lakh, which is its

present market value. Similarly, as compared to the last year, the method of valuation of stock was changed,

resulting in value of goods to be about 15 per cent higher. Also, the whole amount of Rs. 70,000 spent on

purchase of personal computer (expected life 5 years) during the year had been charged to the profits of the

current year. The banker did not rely on the financial data provided by Nisha. Advise Nisha for the mistakes

committed by her in the preparation of financial statements in the context of basic concepts in accounting.

Chapter: Recording of Transaction I

1. State different kinds of transactions that increase and decrease capital.

2. Classify the following into assets, liabilities, revenue, expense, gain and losses:

(1) Building (2) Wages (3) Credit sales (4) Credit purchases (5) Electricity charges due but not yet

paid(outstanding electricity bills) (6) Godown rent paid in advance(prepaid godown rent) (7) Sales (8)

Fresh capital introduced (9) Drawings (10) Discount paid

3. Analyse the effect of each transaction on assets and liabilities and show that the both sides of

Accounting Equation (A = L + C) remains equal :

(i) Introduced Rs. 8,00,000 as cash and Rs. 50,000 by stock.

(ii) Purchased plant for Rs. 3,00,000 by paying Rs. 15,000 in cash and balance at a later date.

(iii) Deposited Rs. 6,00,000 into the bank.

(iv) Purchased office furniture for Rs. 1,00,000 and made payment by cheque.

(v) Purchased goods worth Rs. 80,000 for cash and for Rs. 35,000 in credit.

(vi) Goods amounting to Rs. 45,000 was sold for Rs. 60,000 on cash basis.

(vii) Goods costing to Rs. 80,000 was sold for Rs. 1,25,000 on credit.

(viii) Cheque issued to the supplier of goods worth Rs. 35,000.

(ix) Cheque received from customer amounting to Rs. 75,000.

(x) Withdrawn by owner for personal use Rs. 25,000.

4. Prepare accounting equation for the following information:

Date Details

1.4.2005 Business started with cash Rs. 1,50,000.

1.4.2005 Goods purchased form Manisha Rs. 36,000.

1.4.2005 Stationery purchased for cash Rs. 2,200.

2.4.2005 Open a bank account with SBI for Rs. 35,000.

2.4.2005 Goods sold to Priya for Rs. 16,000.

3.4.2005 Received a cheque of Rs. 16,000 from Priya.

5.4.2005 Sold goods to Nidhi Rs. 14,000.

8.4.2005 Nidhi pays Rs. 14,000 cash.

10.4.2005 Purchased goods for Rs. 20,000 on credit from Ritu.

14.4.2005 Insurance paid by cheque Rs. 6,000.

18.4.2005 Paid rent Rs. 2,000.

20.4.2005 Goods costing Rs. 1,500 given as charity.

24.4.2005 Purchased office furniture for Rs. 11,200.

29.4.2005 Cash withdrawn for household purposes Rs. 5000.

30.4.2005 Interest received cash Rs.1,200.

5. Prove that the accounting equation is satisfied in all the following transactions of Sita Ram house by preparing the

analysis table. Also record the transactions in Journal.

(i) Business commenced with a capital of Rs. 6,00,000.

(ii) Rs. 4,50,000 deposited in a bank account.

(iii) Rs. 2,30,000 Plant and Machinery Purchased by paying Rs. 30,000 cash immediately.

(iv) Purchased goods worth Rs. 40,000 for cash and Rs. 45,000 on account.

(v) Paid a cheque of Rs. 2, 00,000 to the supplier for Plant and Machinery.

(vi) Rs. 70,000 cash sales (of goods costing Rs. 50,000).

(vii) Withdrawn by the proprietor Rs. 35,000 cash for personal use.

(viii) Insurance paid by cheque of Rs. 2,500.

(ix) Salary of Rs. 5,500 outstanding.

(x) Furniture of Rs. 30,000 purchased in cash.

6. Journalise the following:

(1) Goods worth Rs. 1300 were used by proprietor for domestic use

(2) Rs. 800 due from Zaid are bad debts.

(3)Goods uninsured worth Rs. 2800 were destroyed by fire

Q7. Journalize the following transactions:-

1) Sohan is declared insolvent. Received from his official Receiver a first and final dividend of 6op. In

the rupee on a debt of Rs. 100

2) Mohan who owed me Rs. 200 has failed. He pays me a composition of 50 p. in the rupee.

3)Received cash for a bad debt written off last year Rs. 70

Q8. Pass Journal Entries for the following:-

1) Received Rs. 4,000 from Manish, which were written off as bad debts in the previous year. 2) Salaries

due to clerk Rs. 7,500

3) Out of the rent paid this year, Rs. 2,000 is related to next year.

4) Provide 10% depreciation on furniture costing Rs. 5,000.

5) Provide 10% interest on capital amounting to Rs. 1,00,000

6) Goods used in making of furniture(Sales Price Rs 2,000, cost Rs. 1,500)

Q9. Record the following transactions in Journal

1. Paid rent in advance Rs 1,000.

2. Received cash from Ram for a bad debt written off last you Rs. 1100

3. Paid Rs. 1450 to Anil on his account for Rs. 1500

4. Bought goods of the list price of Rs. 25,000 from Rohit less 20% trade discount and 2% cash

discount and paid 40% by cheque.

5. Sold goods to Rakesh of the list price of Rs. 50,000 less 20% trade discount and 2% trade discount

and 2% cash discount and paid 50% by cheque.

Q10. State the title of the accounts affected, type of account and the account to be debited and account

to be credited :

Rs

1. Bhanu commenced business with cash 1,00,000

2. Purchased goods on credit from Ramesh 40,000

3. Sold goods for cash 30,000

4. Paid salaries 3,000

5. Furniture purchased for cash 10,000

Q11. Journalise the following transactions of M/s Mallika Fashion House and post the entries to the

Ledger. Also prepare the trial balance.

Date Details Amount

2005 Rs.

June 05 Business started with cash 2,00,000

June 08 Opened a bank account with Syndicate Bank 80,000

June 12 Goods purchased on credit from M/s Gulmohar Fashion House 30,000

June 12 Purchase office machines, paid by cheque 20,000

June 18 Rent paid by cheque 5,000

June 20 Sale of goods on credit to M/s Mohit Bros 10,000

June 22 Cash sales 15,000

June 25 Cash paid to M/s Gulmohar Fashion House 30,000

June 28 Received a cheque from M/s Mohit Bros 10,000

June 30 Salary paid in cash 6,000

Q12. Prepare Journal from the transactions given below :

(a) Cash paid for installation of machine Rs. 500

(b) Goods given as charity Rs. 2,000

(c) Interest charge on capital @7% p.a. when total capital was Rs. 70,000

(d) Received Rs.1,200 of a bad debts written-off last year.

(e) Goods destroyed by fire Rs. 2,000

(f) Rent outstanding Rs. 1,000

(g) Interest on drawings Rs. 900

(h) Sudhir Kumar who owed me Rs. 3,000 has failed to pay the amount. He pays me a

compensation of 45 paise in a rupee.

(i) Commission received in advance Rs. 7,000

Chapter : Recording of Transactions II

Q1. The Rough Book of M/s Heeralal & Co. contains the following:

2000

July 1. Purchased form M/S Natraj & co on credit:

5 gross pens @ Rs 100 per gross

1 gross registers @ Rs 100 per Gross

Less: Trade Discount @10%

July 2.Purchased for cash from the Laxmi Stationers

10 gross exercise books @ Rs. 60 per dozen

July 3.Purchased typewriter for office use from M/s Variety Corner Co.On credit for Rs. 1400

July 4. Purchased on credit from the Paper Co.5 reams of white paper @ Rs.100 per ream 10

reams of ruled paper @ Rs. 65 per ream Less: Trade discount @ 10%

July 5. Purchased one dozen inkpots @ Rs. 10 each from M/s Mehta Bros. On credit

Make out the purchase book of M/s Heeralal & Co.

Q2. Prepare bank column cash book from the following tansactions of M/s Laser Zone for the month of

January 2005 and post them to the related ledger accounts :

Date Details Amount

Rs.

Jan. 01 Cash in hand 4,000

Bank overdraft 3,200

Jan. 04 Wages paid 400

Jan. 05 Cash sales 7,000

Jan. 07 Purchased goods by cheque 2,000

Jan. 09 Purchased furniture for cash 2,200

Jan. 11 Cash paid to Rohit 2,000

Jan. 13 Cash sales 4,500

Jan. 14 Deposited into bank 7,000

Jan. 16 Bank charged interest on overdraft 200

Q3. Enter the following transactions in the Sales and Sales Return book of M/s Vineet Stores:

Date Details

Dec.01. Sold goods on credit to M/s Rohit Stores as per invoice no.325 :

30 Kids Books @ Rs. 60 each.

20 Animal Books @ Rs. 50 each

Dec. 05 Sold goods on credit to M/s Mera Stores as per invoice no.328 :

100 Greeting Cards @ Rs.12 each.

50 Musical Cards @ Rs. 50 each

Less 5% trade discount.

Dec. 10 Sold Goods on credit to M/s Mega Stationers as per invoice no.329 :

50 Writing Pads @ Rs. 20 each.

50 Colour Books @ Rs. 30 each

20 Ink Pads @ 16 each

Dec. 15 Goods Returned from M/s Rohit Stores as per credit note no.201:

2 Kids Books @ Rs. 60 each

1 Animal Book @ Rs. 50 each

Dec. 19 Sold goods on credit to M/s Abha Traders as per invoice no.355 :

100 Cards Books @ Rs. 10 each.

50 Note Books @ Rs. 35 each

Less 5% trade discount.

Dec. 22 Goods returned from M/s Mega Stationers as per credit note no.204:

2 Colour Books @ Rs. 30 each

Dec. 26 Sold goods on credit to M/s Bharti Stores as per invoice no.325 :

100 Greeting Cards @ Rs. 20 each.

100 Fancy Envelopes @ Rs. 5 each

Q4. Prepare double column cash book from the following transactions for the year December 2005:

Rs.

01 Cash in hand 17,500

Cash at bank 5,000

03 Purchased goods for cash 3,000

05 Received cheque from Jasmeet 10,000

08 Sold goods for cash 7,000

10 Jasmeet’s cheque deposited into bank

12 Purchased goods and paid by cheque 20,000

18 Cash sales 7,000

27 Received commission by cheque 6,000

29 Paid Rent 2,000

Withdrew cash for personal use 1,200

Q5. Record the following transactions during the week ending Dec.30, 2005 with a weekly imprest Rs. 500

Rs.

24 Stationery 100

25 Bus fare 12

25 Cartage 40

26 Taxi fare 80

27 Wages to labour 90

29 Postage 80

Q6. Prepare proper subsidiary books and post them to the ledger from the following transactions for the

month of February 2006:

Rs.

01 Goods sold to Sachin 5,000

04 Purchase from Kushal Traders 2,480

06 Sold goods to Manish Traders 2,100

07 Sachin returned goods 600

08 Returns to Kushal Traders 280

10 Sold to Mukesh 3,300

14 Purchased from Kunal Traders 5,200

15 Furniture purchased from Tarun 3,200

17 Bought of Naresh 4,060

20 Return to Kunal Traders 200

22 Return inwards from Mukesh 250

24 Purchased goods from Kirit & Co. for list price of 5,700

less 10% trade discount

25 Sold to Shri Chand goods 6600

less 5% trade discount

26 Sold to Ramesh Brothers 4,000

28 Return outwards to Kirit and Co. 1,000

less 10% trade discount

28 Ramesh Brothers returned goods Rs. 500.

Q7 Record the following in a two column cash book:-

2000

Jan1 Purchased machinery from rajiv for Rs. 5,000 and paid him by means of a bank draft

purchased from bank for Rs. 5,005.

Jan2 Discounted a bill for Rs. 1,000 at 1% through bank.

Jan3 Purchased 100 bonds for Rs. 100 each at Rs. 95 each and paid for them through cheque.

Jan4 Honoured our acceptance in favour of Shyam by Cheque Rs. 5000.

Jan5 Received Rs. 2000 for a B/E from Hari Ram and deposited the same into bank.

Jan6 Received payment of a loan by Rs. 5000 and deposited Rs. 3,000 out of it into the bank

Q8 Record the following transactions in a Cash Book with Cash and Bank columns:

1982

June1 Cash in Hand 3,151,.20

Cash at Bank 91,401.10

2 Discounted a Bill Recievable (BR) for Rs. 1,000 at 1% through Bank

5 Bought goods for Rs. 2,000 and paid by cheque, discount allowed 1%

15 Paid trade expenses 120.00

16 Paid taxes 400.00

17 Paid insurance charges 100.00

25 Sold goods for Rs. 12,500, received cheque and allowed discount 1%

27 Cheque received on 25th

deposited into Bank

28 Received cheque from John & Co 6,000.00

30 Purchased 100 National Plan Certificates for Rs. 100 each @ Rs. 95 each

and paid for them by cheque

Q9. Prepare Return Books of M/s Gupta Brothers from the following transactions :-

1994

March 7 Returned to Arora & Co. Nai Sarak, Delhi being not according to samples:-

10 Chairs @ Rs. 200 each

1 Table for Rs. 600

Less :10%

10 Subhash Furniture Co, Faridabad returned to us :-

2 Broken Almirahs @ Rs. 2,000 each

Less : 15%

20 Returned to Fateh Chand & Co, Lajpat Nagar, New Delhi, the following goods for

being damaged in transit-

5 Chairs @ Rs. 180 each

Less : 12%

25 Ravi Saxena, Jaipur returned to us the following, being not of specified quality:-

1 Dining Table for Rs. 2,000

6 Chairs @ Rs. 200 each

Less : 15%

Q10 Prepare a Bills Receivable Book from the following transactions :

2002

Jan 5 Received from Shashi Kant his acceptance at 3 months for Rs. 20,000.

Jan 12 Acceptance received from V. Kumar for Rs. 30,000 payable after 2 months.

Jan 18 Acceptance received from Tushar for Rs. 25,000 for 60 days.

Jan 25 Received Sunil’s acceptance for Rs. 40,000 payable after 90 days.

Chapter : Bank Reconciliation Statement

Q1 What is Bank Reconciliation Statement? Why the preparation of Bank Reconciliation Statement is

necessary?

Q2 Explain the reasons on account of which the balances as shown by the pass book.

Q3 What is the purpose of preparing Bank Reconciliation Statement?

Q4 Give the significance of Bank Reconciliation.

Q5 What is meant by bank overdraft.

Q6 On 30th

June, 1994, the bank column of Mohan Kapoor’s Cash Book showed a debit balance of Rs.

12,000. On checking the Cash Book with bank statement you find that :-

1. Cheques paid into Bank Rs. 8,000, but out of these only cheques of Rs. 6,500 were cleared

and credited by the Bankers upto 30th

June

2. Cheques of Rs. 9,200 were issued but out of these only cheques of Rs. 7,000 were presented

to payment upto 30th

June

3. The receipt column of the Cash Book has been undercast by Rs. 200.

4. The Pass Book shows a credit of Rs. 330 as interest on investments collected by bankers and

debit of Rs. 60 for bank charges.

5. On 29th

June a Customer deposited Rs. 3,000 direct in the bank account but it was entered

only in the Pass Book.

Prepare Bank Reconciliation Statement

Q7 Prepare a Bank Reconciliation Statement from the following particulars as on 30th

June, 1980:-

1. Credit Balance as per Bank column of Cash Book 3,600

2. Cheque issued to the creditor but not yet presented for payment 720

3. Cheques deposited into Bank for collection but not collected by the bank upto

this time. 1,540

4. Bank charges charged by Bank 20

5. Interest on overdraft charged by bank 25

6. A customer deposited into our bank account without informing us. 240

Q8. Prepare the Bank Reconciliation Statement from the following particulars for the period ending 31st

December, 1993.

1. Overdraft as per Pass Book on 31-12-1993 Rs. 7,600

2. Cheques deposited but not collected by the Bank Rs. 8,560.

3. Incidental charges not recorded in Cash Book Rs. 80

4. Cheques issued but not presented for payment Rs. 3,400

5. Insurance premium paid by bank not recorded in the Cash Book Rs. 4,200

6. On 31st

December, 1993 cash was deposited in Bank Rs. 385 but the cashier debited

the bank column with Rs. 485 by mistake.

Q9. On 31st

January, 1989 the Pass Book of Shri S. N. Sharma shows a debit balance of Rs. 41,000. Prepare a bank

reconciliation statement from the following particulars :-

1. Cheques amounting to Rs. 15,600 were drawn on 27th

January, 1989. Out of which cheques for Rs.

11,000 were encashed upto 31-1-1989

2. A wrong debit of Rs. 800 has been given by the bank in the Pass Book.

3. A Cheque of Rs. 200 was credited in the Pass Book but was not recorded in the Cash Book.

4. Cheques amounting to Rs. 21,000 were deposited for collection. But out of these, cheques of Rs.

7,400 have been credited in the Pass Book on 5th February 1989

5. A Cheque of Rs. 1,000 was returned dishonoured by the bank and was debited in the Pass Book only.

6. Interest on overdraft and bank charges amounting to Rs. 100 were not entered in the Cash Book.

7. A cheque of Rs. 500 debited in the cash book omitted to be banked.

Q10. On 31st

March 1994 the Pass Book shows a credit balance of Rs. 9,000. Prepare a bank

reconciliation statement from the following particulars :-

1. Cheques issued but not yet present for payment 7,000

2. Cheques issued but omitted to be recorded in the Cash Book 3,800

3. Cheques paid into bank but not yet collected by the bank 2,600

4. Premium on Life Policy paid by the bank on standing advice 360

5. Payments received from customers direct by bank 2,000

Chapter: Rectification of Errors

Q1. Is it right to say that there are no errors if a trial balance agrees? Justify your answer.

Q2. Give two examples of errors that will not be disclosed by trial balance.

Q3. Give two examples of errors of complete omission.

Q4. What is a suspense A/C?

Q5. Which of the following would not affect the trial balance and why?

a) Purchase of goods from Raj of Rs.30000 entered in Rajesh’s A/c.

b) Payment of trade expenses through cheque entered only in cash book.

c) Sale of good to Lalit for Rs.5000 entered in both accounts as Rs.500.

d) Salaries A/C added up incorrectly by Rs100 being short totaled.

Q6. Give two examples of errors of principle.

Q7. Will a trial balance agree when a transaction is posted to the wrong side of an account?

Q8. Identify the type of error in the following:-

a) Purchase of office furniture worth Rs.1200 posted to Trade Expense A/C.

b) Sale of goods to Riya not entered in the books.

c) Posting of the total of Sales Book Rs.10505 as Rs.10500 in the Sales A/C.

d) Car expenses wrongly entered in Car A/C.

Q9. State four reasons due to which a trial balance may not agree.

Q10. Give two examples of one sided errors.

Q11. An asset has been purchased by a firm. However the amounts have been posted to Purchases A/C.

Identify the type of error and rectify it.

Q12. What do you understand by errors of commission?

Q13. Give two examples of two sided errors.

Q14. In which book are rectification entries recorded?

Q15. Give two examples of compensating errors.

Q16. Give rectifying entries from the following:-

1. A credit purchase of goods from shyam amounting to Rs. 1,000 has been wrongly passed

through the Sales Book.

2. A credit sales of goods to Ram for Rs. 2,500 has been wrongly passed through the ‘Purchases

Book’

3. A return of goods worth Rs. 500 by a customer were entered in ‘ Purchases Return Book’

4. A return of goods worth Rs. 1,100 to Mohan was passed through the Sales Return Book.

Q17. Pass Journal entries to rectify the following errors :-

(a) Sales of Rs. 200 to Manoj were recorded as Rs. 2,000 in the Sales Book.

(b) Goods of Rs. 300 taken by the proprietor have not been entered in the books at all.

(c) Goods of the value of Rs. 400 returned to Ashok, but no entry was made in the books.

(d) A Cheque of Rs. 400 received from Shiv Prasad was dishonoured and debited to Discount

Account.

(e) An amount of Rs. 600 due from Harish Bros, which has been written off as Bad Debts in

previous year, was unexpectedly recovered, and has been Credited to the personal A/C of

Harish Bros.

(f) Bill for Rs. 820 received from Ramesh for repairs of Machinery was entered in the Purchase

Book as Rs. 720.

Q18. There was difference of Rs. 725 in a Trial Balance. It has been transferred to credit side of

Suspense A/c. Later on following errors were discovered. Pass the rectifying entries and prepare

suspense A/c :-

(i) An amount of Rs. 375 has been posted on the debit side of commission account instead of

Rs. 275.

(ii) Goods of Rs. 200 purchased from Sohan Lal has been posted to his account as Rs. 250.

(iii) Total of Sales Return Book was overdraft by Rs. 475.

(iv) A credit amount of Rs. 50 was posted as Rs. 150 to the debit side of a personal account.

(v) Goods of Rs. 300 were sold to Mahesh, but it was recorded in Purchase Book.

Q19. Give journal entries to rectify the following errors using Suspense Account, where necessary:-

(1) A credit purchase of Rs. 2800 was passed through the Sales Day Book.

(2) Goods of the value of Rs. 2,000 returned by Mr. Gupta were entered in the Sales Day Book and

posted therefrom to the credit of his account

(3) Rs. 2,600 stolen by an ex-employee stood debited to Suspense A/c.

(4) Rs. 3,000 received from a customer as an advance against order was credited to Sales A/c.

(5) A sum of Rs. 800 written off as depreciation on Machinery, were not posted to Depreciation

A/c.

(6) Purchase of Scooter was debited to conveyance account Rs. 16,000. Firm charges 10%

depreciation on vehicles.

(7) Payment of Rs. 500 to Mohan and Rs. 600 to Sohan was made but Mohan was debited with Rs.

600 and Sohan with Rs. 500.

(8) Sales X Rs. 500 were posted to Y’s Account.

Chapter: DEPRECIATION

Ql. What is Depreciation ? What is the need for providing Depreciation? Describe the two methods of

providing depreciation. Also explain the effects of Depreciation on (a) Profit and Loss Account (b) Balance

Sheet

Q2. Distinguish between Fixed Instalment Method and Diminishing Balance Method.

Q3. State four causes of providing Depreciation on Asset.

Q4. Why is it necessary to provide Depreciation before arising at the Net Profit of a Business?

Q5. On 1" January, 1990, X Ltd., purchased a Plant and Machinery for Rs.43,000. It was estimated that the

effective life of the Plant and Machinery will be 10 years and after 10 years its scrap value will De Rs.3,000.

On First January, 1991, the Company purchased additional machine for Rs.25,000/- of which the effective

life will be 15 years and scrap value Rs.2,500.

On 1s' July, 1992, a new machine was purchased for Rs.12,000, of which the scrap value will be Rs.2,000

and effective life 20 years. Show the Plant and Machinery A/c from 1990 to 1993, if depreciation is

provided on Straight Line Method. The accounts are closed on 31 *' December every year. (Ans. C/d

27,000, 20500, 11250).

Q6. On 1st

January, 1990, a Company purchased a plant for Rs.60,000. On 1 July in the same year, it

purchased additional plant worth Rs.18,000 and spends Rs.2.000 on its erection. On 1" July, t992, the plant

purchased on Jan., 1990 having become obsolete, Is sold off. For Rs.27.000. On 1st

October, 1993, fresh

plant was purchased for Re.64,000 and on the same date the plant purchased on 1»' July, 1990 was sold

for Rs.10,000. Depreciation is provided- at 10% per annum on Original cost on 31st

Dec every year Show

the Plant Account from 1990 to 1993. (Ans. Bal C/d 62400, Lose on Plant 18000 (1992), 3500 (1993)

Q7. A Company whose accounting year is the calendar year, purchased on 1st

April, 1980, machinery

costing Rs. 30,000. It purchased further machinery on 1st

October, 1980, costing Rs. 20,000 and on 1st

July,

1981 costing Rs. 10,000. On 1st

January, 1982, one-third cf the machinery which was installed on 1st

April,

1980 became obsolete and was sold for Rs. 3,000.

Show how the machinery account would appear in the books of the company, it being given that

machinery was depreciated by Fixed Instalrment at 10 per cent p.a.

(Loss on plant 5250, Bal C/d 38,500/-.)

Q8. The book value of Plant and Machinery on 1.1.1976 was Rs. 2,00,000. New Machinery for Rs. 10,000

was purchased on 1.10.1976 and for Rs. 20,000 on 1.7.1977. On 1.4.1978. a machinery whose

book value had been Rs. 30,000 on 1.1.1976 was sold for Rs. 16,000/- and the entire amount was credited

to Plant & Machinery Account. Depreciation had been charged at 10% per annum on straight-line method.

Show the Plant and Machinery Account from 1.1.1976 to 31.12.1978.

Chapter: BILLS OF EXCHANGE

Q1 Define Bills of Exchange. What are advantages of Bills of Exchange?

Q2 Define Promissory Notes. Distinguish between Bills of exchange and a Promissory Notes.

Q3 Define Accommodation of Bill ? Distinguish between Trade Bill and Accommodation of Bill?

Q4 Who is the Holder in Due Course?

Q5 What is meant by ‘Dishonor of a bill of exchange?

Q6 Explain the following terms:

(i) Terns of Bill

(ii) Date of Maturity and

(iii) Negotiation

Q7. Calculate the due dates of the bills in the following cases:-

(1) 23rd

November 1993 2 Months

(2) 27th

November 1991 3 Months

(3) 29th

May 1993 4 Months

(4) 23rd

May 1993 60 days

(5) 13th

July 1993 30 days

(6) 31st

May, 1993 1 Month

Emergency Holiday : 25th

July 1993.

Q8 On 1st

January 1994, X sold goods to Y for Rs. 5,000. On the same date X draws a bill on Y for Rs.

5,000 due after three months. Y accepted the bill and returned to X. X retained the bill till the due

date and Y meets the bill on the due date. Pass Journal Entries and prepare necessary ledger

accounts in the books of both the parties.

Q9. X sold goods to Y for Rs. 10,000 on 15th

March 1994. On the same day, Y accepted a bill drawn upon

him by X at four months for Rs 10,000. X discounted the bill on 15th

April 1994 at 18% p.a. at his

bank and Y met the bill on maturity. Make journal entries in the books of both the parties.

Q10 Y owed Rs. 2,600 to X. On 5th

March, 1994 he accepted a bill for Rs. 2,500 for one month drawn by

X in full settlement of debt. X allowed Rs. 100 as discount. X endorsed the bill to his creditor Z

immediately. The bill was duly met on the due date. Pass journal entries in the books of all the

three parties.

Q11 A bill for Rs. 10,000 is drawn by A on B which is duly accepted by the latter. The bill is duly met by B

on its due date. Show what entries would be passed in the books of A and B under each of the

following circumstances :

i. If A retires the bill till the due date.

ii. If he discounts it with his banker of Rs. 9,750.

iii. If he endorses it to his creditor. C in full settlement of his debt of Rs. 10,000

iv. If he sends it to his bankers for collection.

Q12 On 1st

July 1993, Chander sold goods to Dinesh of the list price of Rs. 5,000 at 20% trade discount

and on the same day drew a bill on Dinesh for the amount payable after three months. Dinesh

accepted the bill. On 4th

Septemeber 1993 Dinesh retires his acceptance, receiving rebate of 15%

p.a. Pass entries in books of both the parties.

Q13 On 1st

January 1994, X sold goods to Y for Rs. 15,000 and immediately received from Y Rs. 5,000 in

cash and on the same date drew a bill on Y at three months for the balance. The bill is duly

receipted by Y. Bill was dishonoured on the due date and X paid Rs. 25 as noting charges. Ten days

later Y pay the amount due to X. Pass journal entries in the books of both the parties.

Q14 On 1st

August 1993, A sold goods of the value of Rs. 20,000 to B and drew upon him a bill at two

months for the amount. B accepted the draft. On the due date of expressed his inability to meet

the bill and offered to pay Rs. 8,000 in cash and accepted a new bill for the balance plus interest at

15% p.a. for three months. A agreed to this proposal. On maturity this bill was duly met by B. Pass

entries in the books of A and B.

Q15 Y purchased goods for Rs. 6,000 on 1st

June 1993 from X and on the same date accepted a bill

payable after three months. 3 days later, X endorsed the Bill to Z. On maturity, the bill was

dishonoured for non-payment and Z to pay Rs. 50 as noting charges. Three days after the dishonour

of the bill X made full settlement payment to Z. 15days after the dishonour of the bill, Y paid to X

and requested to draw a second bill for the balance amount plus Rs. 90 for the amount of interest,

payable after two months. X accepted the proposal and drew the bill on Y, which was accepted by

Y was duly met on maturity.

Record the transactions in the books of all the three parties.

Q16 Journalise the following in the books of Neelam :

1. Neelam’s acceptance to Dinesh for Rs. 2,000 renewed at 3 months together with interest @ 18%

2. Ranjaa requests Neelarm to renew his acceptance for Rs. 1,500 for two months. Neelam agrees

to it provided interest is paid at 20% in cash.

3. Neelam’s acceptance in favour of Guddi for Rs. 15,000 dishonoured and Noting charges paid by

Guddi Rs. 20, which was paid by cheque later on.

Q17. A sold goods to B for Rs. 4,000 and drew a bill at any two months for the amount. A discounted the

bill at 15% p.a. with his bank. On maturity the bill was returned by the bank dishonoured with Rs.

50 as noting charges. B paid Rs. 1,000 and the noting charges in cash and gave another bill at

three months for Rs. 3000 together with 15% p.a. interest before maturity. B became insolvent

and ultimately paid to his creditors 40 paise in the Rupee. Pass journal entries in the books of A

and B and prepare B’s account.

Chapter: Final Accounts

(a)Capital expenditure

(b) Revenue expenditure

(c) Expenditure for assets

(d) None

Q2. A second hand machinery is purchased for Rs. 1,00,000 and Rs. 20,000 are spent on

its overhauling. Rs. 20,000 will be treated as

(a) Revenue expenditure

(b) Added to the cost of car and shown as assets in the balance sheet.

(c) Either 1) or 2) it depends

(d) None of the above

Q3. Marshalling of assets and liabilities can be done in order of:-

(a) Liquidity

(b) Permanence

(c) Both a and b

(d) None

Q4. Which is the example of deferred revenue expenditure?

(a) Heavy expenditure on advertisement

(b) Purchase of office furniture

(c) Purchase of air condioner

(d) Payment of salaries

Q5. Opening Stock Rs.15,000, sales Rs.48,000, Carriage Inward Rs.3,000, Sales Return Rs.3,000, Gross Profit

Rs.18,000, Purchases Rs.30,000, Purchases Returns Rs.2,700. Calculate closing Stock and the cost of goods

sold.

Q6. Preparing A Trading Account for the year ending March 31, 2007 From the following balance as at

March 31,2007:

Stock 10,000

Purchases 1,00,000

Wages 5,000

Carriage Inwards 1,000

Sales (inclusive of sales tax) 1,70,000

Return Inwards 5,000

Returns Outward 8,000

Sales Tax Paid 15,000

Freight 500

Octroi Duty 2,500

Closing Stock as on March 31,2007 was valued at Rs.20,000

Q1. If the benefit of expenditure extends up to one accounting period it is termed as:

Q7. What is the difference between Balance Sheet and Trial Balance?

Q8. Give the journal entries for the following adjustments :

(a) Outstanding salary Rs. 3,500.

(b) Rent unpaid for one month at Rs. 6,000 per annum.

(c) Insurance prepaid for a quarter at Rs. 16,000 per annum.

(d) Purchase of furniture costing Rs. 7,000 entered in the purchases book.

Q9. Stock loss by fire Rs. 20,000 , insurance claim received Rs. 18,000 how will you treat it

in trading and P&L a/c ?

Q10. Prepare the trading and profit and loss account and a balance sheet of M/s Shine Ltd. from the following

particulars.

Adjustments

1. Closing stock was valued Rs. 35,000.

2. Depreciation charged on furniture and fixture @ 5%.

3. Further bad debts Rs. 1,000. Make a provision for bad debts @ 5% on debtors.

4. Depreciation charged on motor car @ 10%.

5. Interest on drawing @ 6%.

6. Rent, rates and taxes was outstanding Rs.200.

7. Discount on debtors 2%.

(Ans. : Gross loss Rs,17,050 ; Net loss Rs.27,344 ; Total balance sheet

Rs. 3,19,032).

Q11. The following balances apperead in the trial balance of M/s Kapil Traders as on March 31, 2006

Rs.

Sundry debtors 30,500

Bad debts 500

Provision for bad debts 2,000

The partners of the firm agreed to records the following adjustments in the books of the Firm: Further bad

debts Rs.300. Maintain provision for bad debts 10%. Show the following adjustments in the bad debts

account, provision account, debtors account, profit and loss account and balance sheet.

(Ans ; Dr. Profit and Loss account Rs.1,820)

Q12. Prepare the bad debts account, provision for account, profit and loss account and balance sheet

from the following information as on December 31, 2005

Rs.

Debtors 80,000

Bad debts 2,000

Provision for bad debts 5,000

Adjustments :

Bad debts Rs.500 Provision on debtors @ 3%.

(Ans : Credit Profit and Loss account Rs.115)

Chapter: Accounts from Incomplete Records

Q1. Mahesh Chandra, the owner of a shop of general merchandise, maintains incomplete records of his business. He

wants to know the result of his business on 31st

Dec., 1980 and for that, following informations are available :

1st

Jan., 1980 31st Dec., 1980

Rs. Rs.

Cash in hand 150 175

Bank Balance 750 800

Furniture 100 100

Stock 500 650

Creditors 350 400

Debtors 250 300

During the year he had withdrawn Rs. 500 for his personal use and invested Rs. 250 as additional

capital. Calculate his profit on 31st

Dec., 1980.

Q2. Kapil who keeps his books on single entry, tells you that his capital on 31-12-1996 was Rs. 18,700 and

his capital on 1-11996 was Rs. 19,200. He further informs you that during the year he withdrew for his

household purposes Rs. 8,420. He once sold his investments of Rs. 2,000 at 2% premium and brought that

money into the business. You are required to prepare a statement of Profit & Loss.

Kaushik maintains his books of Accounts on Single Entry System. His books provide the following

information:

Particulars April 1, 1995 March 31, 1996

Furniture 200 200

Stock 2,800 3,800

Debtors 2,100 3,400

Cash 150 200

Creditors 1,750 1,900

Bill Receivables ------ 300

Loan Given ------ 500

Investment ------ 1,000

His drawing during the year were Rs. 500. Prepare the Statement showing profit for the year.

Q3. Mr. Ramesh Chand Gupta keeps his books by ‘Single Entry Method’. His position on 31st

December,

1996 was as follows :

Cash in hand Rs. 500, Cash at Bank Rs. 6,000. Stock Rs. 5,000, Debtors Rs. 3,300 furniture Rs. 1,200,

Creditors Rs. 4,000. During the year he introduced Rs. 4,000 as further capital in the Business, and

withdrew Rs. 9,000 out of which he purchased a Machine for Rs. 6,000 for the business.

On 31st

Dec. 1997 his position was as follows :

Cash in hand Rs. 500, Cash at Bank Rs. 5,000, Stock Rs. 6,000, Debtors Rs. 4,600, Furniture Rs. 1,500 and

Creditors Rs. 6,000.

Prepare necessary statements showing the Profit or Loss made by Mr. Gupta during the year and a

Balance Sheet as at 31st

December, 1997 after making the following adjustments :

Depreciate Furniture and Machine at 10% (on closing balances) write off bad debts Rs. 200 and provide 5%

for doubtful debts.

Q4. Following information is given below. Prepare the statement of profit or loss.

Capital at the end of the year 5,00,000

Capital in the beginning’ of the year 7,50,000

Drawings made during the period 3,75,000

Additional capital introduced 50,000