Financial Accounting Past Paper PDF

MODEL QUESTIONS WITH KEY CLASS: I BBA (CODE:MAMIC) SUBJECT: FINANCIAL ACCOUNTING SECTION –A 1. What are Accounting Concepts? Ans. Accounting Concepts are some assumptions or ide...

MODEL QUESTIONS WITH KEY CLASS: I BBA (CODE:MAMIC) SUBJECT: FINANCIAL ACCOUNTING SECTION –A 1. What are Accounting Concepts? Ans. Accounting Concepts are some assumptions or ideas as a base for preparing the financial statements. 2. What do you mean by double entry book keeping? Ans. 3. Define the term Ledger. Ans. Ledger may be defined as a statement showing the summary of all the transactions relating to a person, asset, expense or income which have occurred and shows their net effect during a given period. 4. What do you understand by final accounts? Ans. A final account includes preparation of Trading & Profit & Loss a/c and Balance Sheet. These two statements are collectively called Final accounts and are prepared at the end of financial year. 5. What is receipts & Payments A/cs.? Ans. This is a real a/c prepared t the end of a year showing a summary of cash for a particular period. The a/c opens with cash & bank balance along with all cash receipts on the debit side and all cash payments on the credit side. 6. What are the stages in partnership final a/cs.? Ans.The partnership firm’s accounts are recorded on the double entry system of book keeping. These a/cs are maintained in the same manner as a sole trade. since there are two or more partners in partnership ,each partners capital a/c is to be maintained separately. 7. What is sacrificing ratio? Ans. When a new partner is admitted, the old partners surrender a part of their old share. This surrender in the form of proportion is called sacrificing ratio. 8. Define the term goodwill. Ans. Goodwill is the current value o expected future income in excess of a normal return on the investment in net tangible asset, not a recorded or reported amount unless paid for. 9. Give a list of causes of providing depreciation. Ans. The causes of depreciation are (1) Usage (2) Passage of time,(3) Improper Maintenance.,(4) Non Usage,(5) Obsolescence.(6) Exhaustion (7) Accidents. 10. State the features of Single entry system. Ans. Adopted by small traders, no definite rules and procedures are adopted; the transactions are mixed in cash book with personal transactions, there is no uniformity in this system since they differ from one business to another business. 11. Write a short note on “loss of profit”. Ans.When fire occurs, apart from the direct loss of stock and assets, there is also consequential loss because, for sometime the business has to be discontinued, and during that period, the standing expenses of the business like rent, salaries etc. have to be incurred there is a loss of profit which the business would have earned during that period. This loss can be insured by a “Loss of profit policy. 12. What is conversion method in single entry? Ans. In the net worth method, the result of a business is not provided clearly. This method does not provide clear information about the real business situation. To overcome this, businesses which keep records under single entry convert them in to double entry. 13. Write a note on Income & Expenditure A/c. Ans.This is nominal account. It is prepared instead of Profit & loss account. This account takes only the revenue incomes and expenditures and excludes those not relating to the current. 14. What is cash book? Ans.Cash book may be defined as the record of transactions concerning cash receipts and cash payments for a particular period of time. 15. What do you mean by capital receipts? Ans. Capital receipts are those amount received permanently or received on slae of asset used in carrying of the organization. 16. Define partnership. Ans. Partnership is the relation between persons who have agreed to share the profit of them acting for all. 17. Define Depreciation. Ans.Depreciation is the permanent decrease in the value of an asset through wear and tear in use or the passage of time. 18. What is meant by loss of stock? Ans.Whenever a fire occurs; there can be a destruction and damage to the stock. The business, if they have insured their stock in the go down or stores against the risk of fire, they are entitled to claim the amount of such loss. 19. Define Single Entry system. Ans. Single Entry system is a defective double entry system where no proper accounts are maintained. This system is usually taken by small traders and professionals. 20.What is business entity concept? Ans. According to business entity concept the business is treated as a separate entity from persons who initiates, provides capital, and manages the business. 21. List out the defects of Single Entry system. Ans. 1.Only partial information is obtained, since incomplete records are maintained. 2. There can be risk of fraud and errors, as theses cannot be discovered. 3. Trading & Profit & Loss a/c cannot be prepared. 22. Mention the methods of depreciation. Ans. Straight Line method, Written down Value method, Sinking fund method, Annuity method, revaluation method. 23.What is a journal? Ans. A journal is a book of original entry wherein transactions are recorded for the first time from the source document. 24.List out the objectives of Trial Balance. Ans. 1.To verify the arithmetical accuracy.2. To help in locating errors.3. To provide a basis for preparation of financial a/cs.4.To bring the balances of all a/cs in a single statement. 25. Give a list of non trading concern. Ans.Sports club, hospitals, trade unions, political associations, educational institutions, libraries, societies etc. SECTION-B 1. John starts business with Rs.10,000 on 01.07.2012.Of this, he pays Rs.9,000 in to his bank account. Enter the following in a single column cash book and find the closing balance. July, 1; purchased stationary, paid cash Rs.40 July, 1.Purchased goods for cash Rs.650 July.1.Purchased office table and chair Rs.200 July, 2.Cash sales Rs.150 July, 3.Received from Suresh advance for goods Rs.200 July 4.Paid Sekar & Co. Rs.140 Jluy, 5.Paid for advertisement Rs.130 Jluy, 6.Cash Sales Rs.160 July, 7.Purchased old machine Rs.30  Solution: CASH BOOK(SINGLE COLUMN) Debit Credit Date Particulars Amount Date Particulars Amount 01/07 To Capital 10,000 01/07 By Bank 9,000 02/07 To Sales 150 01/07 By Stationary 40 03/07 To Suresh 200 01/07 By Purchases 650 06/07 To Sales 160 01/07 By furniture 200 04/07 By Sekar & Co. 140 05/07 By Advertisement 130 07/07 By old machine 300 By Balance c/d. 50 10,510 10,510 2. Calculate amount of salaries to be shown in Receipts and Payments a/c. (a) Salaries as per Income & Expenditure a/c Rs.2,500 (b) Outstanding at the end of the current year Rs.1,300 (c) Paid in advance in previous year Rs. 700 (d) Outstanding at the end of previous year Rs.1,800 Solution: Calculation of salaries to be shown in Receipts & Payments A/cs. Salaries as per I & E A/cs. 2,500 Less: Outstanding In the c.y. 1,300 Add: Outsatanding in the p.y 700 Add: Paid in advance in the P.Y. 1,800 Salaries to be shown in Receipts & Payments A/cs 3,700 3. Pass Journal entries for the following transactions: (a) Capital Introduced Rs. 2,50,000 (b) Purchase of building Rs. 75,000 (c) Deposited in to bank Rs.2,00,000 (d) Cash sales Rs.1,50,000 (e) Cash withdrawn from bank Rs. 75,000 (f) Cheque paid to A for goods purchased Rs. 40,000 Solution: Journal Entries in the books of ------ (a) Cash a/c Dr. 2,50,000 To Capital a/c 2, 50,000 (Being capital introduced) (b) Building a/c Dr. 75,000  To Cash a/c 75,000 (Being Building Purchased) (c) Bank a/c Dr 2,00,000 To cash a/c 2,00,000 Being cash deposited in to bank) (d) Cash a/c Dr. 1,50,000 To Sales 1,50,000 Being cash sales made) Cash a/c Dr 75,000 To Bank a/c 75,000 (Being cash deposited in to Bank) Purchases a/c Dr. 40,000 To Bank a/c 40,000 (Being goods purchased, amount paid by cheque) 4. A fire occurred on 30.09.2012 in the go down of a company. From the following particulars, calculate the amount of claim. Stock on 1/1/2012 Rs.17,000: Purchases from 1/1/2012 to the date of fire Rs.1,70,000 : Sales from 1/1/2012 to the date of fire Rs.2,00,000 : Wages Rs. 17,000 : Stock salvaged Rs.4,000.The rate of gross profit on cost 30% Solution: Calculation of claim to be lodged: Closing stock as per Memorandum Trading a/c Rs. Less: Stock Salvaged Rs. Stock lost by fire & claim to be lodged Rs. Memorandum Trading A/c Particulars Amount Particulars Amount To Opening Stock 17,000 By Sales 2,00,000 To Purchases 1,70,000 By Closing Stock 50,154 To Wages 17,000 To Gross Profit 46,154 30/130x2,00,000 2,50,154 2,50,154  SECTION-C 5. Following balances are extracted from the books of as on 31/12/2014. Capital Rs.30,000 Purchases Rs.14,400 Bank O/d Rs. 5,000 Sales Rs.34,000 Cash Rs. 1,360 Provision for bad debts Rs. 740 Building Rs.31,200 Wages Rs. 2,500 Stock as onJan.,1 Rs.12,000 Salaries Rs.1,400 Rrent Rs. 320 Insurance Rs. 80 Advertisement Rs. 420 Discount allowed Rs. 600 Repairs to building Rs. 420 Discount received Rs. 600 Debtors Rs.12,840 General expenses Rs. 1,000 Creditors Rs. 8,200 Prepare Trial Balance. Solution: TRIAL BALANCE AS ON 31/12/2014 DEBIT CREDIT Particulars Amount Particulars Amount Purchases 14,400 Capital 30,000 Cash 1,360 Bank Overdraft 5,000 Building 31,200 Sales 34,000 Wages 2,500 Provision for bad debts 740 Opening Stock 12,000 Discount Received 600 Salaries 1,400 Creditors 8,200 Rent 320 Insurance 80 Advertisement 420 Discount allowed 600 Repairs to building 420 Debtors 12,840 General expenses 1,000 TOTAL 78,540 TOTAL 78,540 6. From the following particulars prepare Income & Expenditure A/cs. Fees collected (including Rs.80,000 : Purchases (including Rs.19,000 On a/c of previous year) 3,80,000 for books ) 29,000 Salary paid(including Rs.3,000 : Salary o/s at the end of year 1,000 On a/c of previous year) 28,000 : rent 10,000 Meeting expenses 18,000 : Entertainment expenses 3,000  Tournament expenses 12,000 : Postage 15,000 Donations received 20,000: Printing & stationary 4,000 Travelling expenses 6,000. Solution: INCOME & EXPENDITURE A/C EXPENDITURE Amount INCOME Amount To salary paid 28,000 By fees 3,80,000 Less o/s pevious yr. 3,000 Less:previous year 80,000 3,00,000 Add: o/s c.y 1,000 26,000 To meeting expenses 18,000 To Entertainment exp. 3,000 T o tournament exp. 12,000 To Rent 10,000 To Postage 15,000 To printing & stationay 4,000 To Travelling expenses 6,000 To purchases Less for 10,000 books To surplus 1,96,000 3,00,000 3,00,000 7. P,Q & R are partners sharing P7L in the ratio of 5:5:4.S is admitted as a partner and introduced with Rs.80,000 as capital for his 1/4th share. Goodwill of the firm is valued at 2 years purchase of 3 years profits which have been Rs.30,000,Rs.52,000 & Rs.44,000.Give journal entries if (a) There is no goodwill in the books of the firm. (b) The goodwill a/c appears at Rs.14,000 (c) The goodwill already standing in the books is Rs.1,12,000. Solution: Calculation of goodwill: Goodwill=2 years purchase of 3 years average profits 3 years average profits=30,000+52,000+44,000/3=42,000 Goodwill=2x42,000=84,000. (a) Goodwill a/c Dr 84,000 To P’s Capital a/c 30,000 To Q’s Captal a/c 30,000 To R’s Capital a/c 24,000 (Being goodwill raised and credited to partners capital a/c.) (b) Goodwill a/c Dr 70,000 To P’s Capital a/c 25,000 To Q’s Capital a/c 25,000  To R’s Capital a/c 20,000 (Being goodwill increased and credited to Partner’s capital a/c. P’s Capital a/c dr 10,000 Q’s Capital a/c Dr. 10,000 R’s Capital a/c Dr 8,000 To goodwill ac 28,000 32.Raj keeps his books on single entry system. Prepare a statement of affairs as on 31.10.2012 and a statement of profit or loss for the period ending 31.10.2012. 01.11.2011 31.10.2012 Bank Balance 1,120(Cr.) 700 (Cr.) Cash on hand 20 100 Debtors 9,000 7,200 Stock 5,400 5,800 Plant 8,000 8,000 Furniture 2,000 2,000 Raj had withdrawn Rs. 4,000 during the year and had introduced fresh capital of Rs. 8,4oo on 01.07.2012.Write off depreciation on plant at 10% and furniture at 15%a provision of 5% on debtors is necessary. Interest of capital to be allowed at 5%. Solution: Working note I: STATEMENT OF Affairs as on 01.11.2011 Bank Balance 1,120 Cash on hand 20 Debtors 9,000 Opening Capital 23,000 Stock 5,400 Plant 8,000 Furniture 2,000 ---------- ------- 24,420 24,420 ----------- ---------  STATEMENT OF Affairs as on 31.10.2012 Bank Balance 700 Cash on hand 100 Debtors7,200-5% 6,840 Closing Capital 20,940 Stock 5,800 Plant (8,000-10%) 7,200 Furniture(2,000-15%) 1,700 ---------- ------- 21,640 21,640 ----------- -------- Statement of Profit Or Loss. Closing Capital 20,940 Less: Opening Capital 23,000 --------- 2,060 Less: additional capital 8,400 --------- 10,460 Add Drawings 4,000 --------- 6,460 Add: interest on capital 23,000x5% 1,150 8,400x5% for9months 315 1,465 -------- --------- Loss 4,995 ---------- 8. The following is the trial balance of A. subbaraj as on 31.12.2010. CREDIT BALANCES DEBIT BALANCES Furniture 600 Capital 12,000 Motor Vehicle 6,500 Discount 200 Buildings 7,500 Sundry creditors 3,000 Insurance 300 Sales 15,000 Sundry Debtors 3,800 Bank o/d 3,000 Opening stock 3,500 Purchases returns 200 Purchases 5,500 Commission 600 Sales returns 200 Advertising 450 Interest 200 Cash 650 Taxes 1,000 General expenses 800 Salaries 3000 The following adjustments are to be made: (1) Closing stock Rs.3,200 (2) Depreciation on buildings 5%,Furnitue 10%,Motor Vehicles20% (3) Salaries o/s 300 & taxes o/s 200 (4) Insurance amounting to 100 prepaid Prepare Trading, Profit & Loss a/c. and a Balance Sheet. Solution: TRADING & PROFIT & LOSS A/C OF SUBBARAJ FOR THE YEAR ENDING 31.12.2010. To opening stock 3,500 By Sales 15,000 To Purchases 5,500 less; returns 200 14,800 Less: returns 200 ------- 5,300 By closing Stock 3,200 T Gross Profit 9,200 -------- -------- 18,000 18,000 --------- -------- To Insurance 300 Less: prepaid 100 200 By Gross profit 9,200 To Advertising 450 By discount 200 To Interest 200 To taxes 1,000 Add: o/s 200 1,200 To General Expenses 800 To Salaries 3,000 Add: o/s 300 3,300 To Depreciation: Building 375 Furniture 60 Motor Vehicle 1,300 1,735 To Net Profit 1515 -------- -------- 9,400 9,400 BALANCE SHEET OF SUBBARAJ AS ON 31.12.2010 LIABILITIES ASSETS Capital 12,000 Furniture 600 Add: 2,11 14,115 less: 60 540 Sundry Creditors 3,000 Motor Vehicle 6500 Bank o/d 3,000 Less 1300 5,200 Salry os 300 Building 7,500 Taxes o/s 200 Less: 375 7,125 Sundry debtors 3,800 Closing Stock 3,200 Insurance prepaid 100 Cash 650 -------- -------- 20,615 20,615 ---------- --------