CS Foundation : Financial Accounting - December 2005

CS Foundation • Financial Accounting • December 2005

This Paper has 20 answerable questions with 0 answered.

Roll No………………
Time allowed : 3 hours	Maximum marks : 100
Total number of questions : 8	Total number of printed pages : 3

Note:Answer SIX questions including Question No. 1 which is compulsory. All working notes should be shown distinctly.
Marks

Note:Answer SIX questions including Question No. 1 which is compulsory. All working notes should be shown distinctly.

Marks

Explain any four of the following :

5each

(i)

Cash system of accounting

(0)

(ii)

Convention of disclosure

(0)

(iii)

Special purpose subsidiary books

(0)

(iv)

Retiring a bill under rebate

(0)

(v)

Del credere commission.

(0)

(a)

What do you mean by the term 'depreciation'? What are its causes? Why do firms provide depreciation?

8each

(0)

(b)

What is 'single entry system' of accounting? What are its limitations? How does it differ from double entry system?

(0)

(a)

Distinguish between the following:

4each

(i)

'Profit and loss account' and 'income and expenditure account'.

(0)

(ii)

'Hire-purchase system' and 'installment system'.

(0)

(b)

How will you treat the following items while preparing the final accounts of a non–trading concern:

2each

(i)

Legacy;

(0)

(ii)

Entrance fees

(0)

(iii)

Specific donations; and

(0)

(iv)

Loss on sale of an old fixed asset?

(0)

(a)

On 31^st March, 2005, an accountant of a sole proprietorship concern could not agree his trial balance. He put the difference in a newly opened suspense account and closed the books of account for the year. In the subsequent accounting year, the following errors in the books for the year 2004-05 were located:

(i)	Rs. 8,000 paid for purchase of office furniture was posted to the purchases account.
(ii)	The sales book was overcast by Rs. 100.
(iii)	Wages paid for erection of machinery, Rs. 2,750 had been debited to wages account as Rs. 5,250.
(iv)	A cheque for Rs. 7,330 was received from Rao after allowing him a discount of Rs. 70. It was endorsed in favour of Sen in full settlement of Rs. 7,500. The cheque was dishonoured, but no entry for dishonour was passed in the books. Pass journal entries to rectify the above-mentioned errors. Also prepare the suspense account and profit and loss adjustment account assuming that all the errors have been located.

(0)

(b)

From the following information, prepare a bank reconciliation statement as on 30th September, 2005 :

(i)	Overdraft as per cash book, Rs.12,000.
(ii)	Cheques for Rs. 40,000 were sent to the bank for collection, but cheques for Rs. 25,000 only had been collected and credited.
(iii)	Cheques worth Rs. 30,000 were issued, but cheques for Rs. 18,000 only were presented for payment.
(iv)	Bill discounted with bank for Rs. 30,000 was dishonoured.
(v)	A customer paid Rs. 28,000 directly into bank account.
(vi)	Bank charged interest Rs. 250 on overdraft.
(vii)	A cheque for Rs. 5,000 from a customer correctly recorded in the cash book, but was omitted to be sent to the bank for collection.
(viii)	Fire insurance premium paid by bank under instructions, Rs. 2,000 not recorded in cash book.

(0)

(a)

What do you understand by 'self–balancing ledgers'? How would you differentiate them from 'sectional ledgers'?

(0)

(b)

On 1st April, 2004, a trader took out a fire insurance policy containing an average clause covering his stock for Rs.7,50,000. His practice was to place his selling price at cost plus 33%. He closes his books on 31st March, every year.

On 31st December, 2004, a fire broke out at the premises and destroyed much of his stock. The salvaged stock was valued at Rs.3,00,000. During the period of nine months preceding the fire, his purchases amounted to Rs.30,50,000 and sales to Rs.42,00,000. On 1st April, 2004, the stock was valued at Rs.10,00,000.

Prepare a statement showing the amount of claim.

(0)

From the following figures extracted from the books of Mohan, you are required to prepare a trading account and profit and loss account for the year ended 31^st March, 2005 and a balance sheet as on that date after making the necessary adjustments:

(Rs. in '000)

Mohan’s capital
Mohan’s drawings
Plant and machinery
Freehold property
Purchases
Returns outwards
Salaries
Office – expenses
Office furniture
Discount (Dr.)
Sundry debtors
Loan to Krishna @ 10% per annum, balance on 1^st April, 2004
Cash at bank
Bills payable
Stock on 1^st April, 2004
Wages
Sundry creditors
Gas and fuel
Bad debts
Freight
Loose tools on 1^st April, 2004
Factory lighting
Provision for doubtful debts
Interest on loan to Krishna
Cash in hand
Sales

22,880
1,320
9,900
6,600
11,000
110
1,320
715
550
132
2,926
4,400
2,926
550
3,850
3,520
4,400
297
66
990
220
286
88
110
264
23,144

Adjustments:

(i)	Stock on 31^st March, 2005 was valued at Rs.7,260 thousand;
(ii)	Depreciate plant and machinery by 331/3%, furniture by 10% and freehold property by 5%;
(iii)	Loose tools were valued at Rs.176 thousand on 31^st March, 2005; and
(iv)	Of the sundry debtors, Rs.6 thousand are bad and should be written off. Maintain a provision of 5% on sundry debtors for doubtful debts.

(0)

On 31^st March, 2005, the balance sheet of P, R and S sharing profits and losses in the ratio of 6:5:3 respectively stood as follows:

Liabilities	Rs.	Assets	Rs.
Sundry creditors Bills payable General reserve Capital accounts:	37;800 12,600 21,000	Cash Sundry debtors Stock Furniture	3,780 52,920 58,800 14,700
P R S	70,800 59,700 29,100 2,31,000	Land and buildings	1,00,800 2,31,000

On 1^st April, 2005, they agree to admit Q into partnership giving him l/8th share on the following terms :

(i)	Furniture be depreciated by Rs.1,840.
(ii)	Stock be valued 10% less than the balance sheet value.
(iii)	A provision of Rs.2,640 be made for outstanding repairs-bill.
(iv)	The value of land and buildings having appreciated be brought up to Rs. 1,47,840.
(v)	Q brings in cash Rs.29,400 as his capital and Rs.7,000 as his share of goodwill. The amount brought in by Q as goodwill be transferred to all the old partners in the appropriate ratio.

After making the above adjustments, the capital accounts of the old partners be adjusted on the basis of proportion of Q's capital to his share in the business by bringing in or taking out cash.

You are required to prepare revaluation account, capital accounts of all the partners and cash book. Also draw a balance sheet as at 1^st April, 2005 after Q's admission.

(0)

On 1st April, 2003, Turant Transport Ltd. acquired 3 trucks at the cash sale price of Rs.9,00,000 each on hire purchase from Hind Motors Ltd. The terms include cash down of Rs.5,40,000 and payment of the residue in two equal annual installments together with interest at 9% per annum at the end of the year. First year dues were paid, but Turant Transport Ltd. could not pay the next installment. Turant Transport Ltd. wrote off depreciation @ 20% annually on diminishing balance. Hind Motors Ltd., however, agreed to leave one truck with hire purchaser and adjust the value of two other trucks against the outstanding amount due. The trucks were valued on the basis of 30% annual depreciation on their written down value.

Show important ledger accounts in the books of both parties assuming that the acquired trucks were sold on 30th April, 2005 for Rs.9,75,000 after incurring repair expenses of Rs.68,000. Both the companies close their books of account on 31st March every year.

(0)

Disclaimer ♣ Privacy Policy ♣ Who We Are ♣ Terms of Service