Course : MFM/MMM/MHRDM –Supplementary Exam Semester : I

Div. Marks 60
Date: 09/08/2020 Time : 3 Hours
Subject : Financial Accounting

Instructions:-
1. Attempt overall five questions.
2. Question Number one is compulsory and carries 20 marks.
3. In addition to Q1, there would be six questions. Each question would carry 10 Marks.
Each of these Six Questions will have three sub – questions and each sub – question
would carry 05 Marks
4. Students have to attempt any four of the remaining six Questions and within each
question; students have to attempt any two out of three sub – questions.

Q. 1 a) From the following trial Balance as on 31st March ’13 ,prepare profit and Loss account and Balance 12
sheet in vertical format for the year ending 31st March ’13 after giving effect to under mentioned
adjustments :
Particulars Debit(Rs) Particulars Credit(Rs)
Wages 15,500 Share Capital (10000 Equity shares
Stock 12,800 @Rs 10 only) 19,000
Loan To X 4,000 Bank Overdraft 5,800
Rent 5,000 Interest on Investment 4,600
General Expenses 1,480 Bills Payable 320
Investments 60,000 Interest on Loan to X 1,00,000
Purchases 1,60,000 Reserve for Doubtful Debts 250
Freight and Carriage 2,100 Sales 2,30,000
Goodwill 40,000 Sundry Creditors 12,590
Bills Receivable 6,200
Rates and Taxes 1,800
Sales Return 2,100
Insurance 900
Cash and Bank Balance 3,700
Postage and Telegram 3,800
Land & Building 25,000
Plant and Machinery 10,000
Sundry Debtors 16,500
Packing Charges 400
Bad Debts 1,280

3,72,560 3,72,560
Adjustments:
1) Closing Stock as on 31.3.2013 Rs 16000
2)20% of the goodwill is to be written off.
3) Further Bad debts were estimated at Rs 350.Increase reserve for bad debts to the extent of Rs
1500.
4) Depreciate Land and Building by 3% and Plant and Machinery by 10%.
5) Goods worth Rs 800 were distributed as free samples.
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 b) Spectra Motors limited purchased a machinery for Rs 18,00,000 on April 1,2013.On October 08
1,2014 ,another machinery was purchased for Rs 800000 .On October 1,2015 ,a new machine was
purchased for Rs 650000.
Depreciation at 20% p.a on the WDV was accumulated in Provision for depreciation account.
On January 1,2017 ,machine no 2 (purchased on oct 1,2014 ) was damaged and had to be replaced
by a new machine costing Rs 850000.It was expected that damaged machine will fetch Rs 58000
but it was insured and an insurance claim for Rs 468000 was admitted by the insurers .Show for
the year ending 31 march ,2017 the machinery account .

Q.2 Answer Any two from the following.

a) The company deals in three products, A, B and C, which are neither similar nor interchangeable. 05
At the time of closing of its account for the year 2002-03. The Historical Cost and Net Realizable
Value of the items of closing stock are determined as follows:
Items Historical Cost Net Realizable Value
(Rs. in lakhs) Value (Rs.in lakhs)
A 40 28
B 32 32
C 16 24
What will be the value of Closing Stock?

b) Classify each as an operating activity, investing activity, financing activity, or non cash activity: 05
1) Proceeds from sales of permanent investments
2) An amount of Rs 2, 50,000 was raised from the issue of share capital and a further 2,
50,000 were raised from long term borrowings.
3) Cash collected from debtors amounting to Rs 3, 50,000.
4) Sold a plant of Rs 1, 00,000 in exchange for shares.
5) Preliminary expenses of Rs 10,000 written off.

c) Explain Funds Flow Statement? 05

Q.3 Answer Any two from the following.

a) Classify the following expenditure into capital, revenue and deferred revenue. 05
1) Freight, cartage, octroi duty, transportation, insurance paid on saleable goods of Rs
50,000.
2) An amount of Rs 10000 incurred in experimenting which finally result in the
acquisition of patent or other rights.
3) White washing of the factory building at the cost of Rs.5,000/-
4) Replace of the wooden floor by tiles in your office.
5) Paper purchased for used in the office as Stationery amount to Rs.1500/-

b) The client’s year end is 31st March, 2017. The board of director’s of Aspects Ltd at 31st March, 05
2017 decided to increase the sale price of certain items w.e.f January 1, 2017.In view of the price
revision ,the Aspects Ltd. has to receive Rs 9,50,000 from its customers for sales from 1.1.2017 to
31.3.2017.The Accountant cannot make up his mind ,whether to include Rs 9,50,000 in the sale of
2017-2018.Please advise.

c) What are provisions? Why are they created? Explain in Brief. 05

Q.4 Answer Any two from the following.

a) Modi Ltd incurred costs to modify its building and to rearrange its production line. As a result, 05
an overall reduction in production costs is expected .However, the modifications did not increase
the building’s market value, and the arrangement did not extend the production line’s life.
Should the building modification cost and production line rearrangement costs be capitalized?

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 b) A ltd .produces chemical, X which has following production cost per annum. 05
Raw Material =Rs 5
Direct Labour=Rs 2
Direct Expenses =Rs 3
During the year it had produced 60000 units of the chemical X.out of which 15000 units are unsold
.All the products are placed in the godown for which a fixed rent of Rs 16000 per annum was paid
.Further commission of Rs 70 per chemical was paid to the selling department. What is the value
of closing stock?

c) Write short notes on: 05

a) Matching Principle
b) Historical Cost Concept
c)
Q.5 Answer Any two from the following.
a) Prepare Trial Balance from the following balances of Mr. Akhtar as on 31.03.2018:
Capital Rs. 420,000 Cash in hand Rs.
25,000 Building Rs. 115,000 Cash at bank Rs.
84,700
Machinery Rs. 60,000 Sundry Creditors Rs. 68,000
Furniture Rs. 11,000 Rent Rs. 48,000
Car Rs. 68,000 Opening stock Rs. 86,000
Commission Rs. 1,400 Rates and Taxes Rs. 2,600
Purchases Rs. 94,000 Bad debts Rs. 3,200
Sales Rs. 196,000 Insurance Rs. 2,400
General Expenses Rs. 800 Sundry debtors Rs. 16,200
Reserve for doubtful debts Rs. 7,300
Salaries Rs. 94,000 Closing Stock Rs. 12,000
Unearned Revenue Rs. 16,000 Interest received Rs. 5,000

b) Use LIFO on the following information to calculate the value of ending inventory and the cost of 05
goods sold of March.

Mar 1 Beginning Inventory 60 units @ Rs 15.00

1 Purchase 140 units @ Rs 15.50
14 Sale 190 units @ Rs 19.00
27 Purchase 70 units @ Rs 16.00
30 units @ Rs 19.50
29 Sale
c) Write an explanatory note on Amortization & obsolescence? 05

Q.6 Answer Any two from the following.

a) Choose the correct Answer 05

i) A business firm is separate and distinct from its owners is the assumption under which of the
following accounting concepts:
1) Business Entity 2) Going Concern Entity
3) Money Measuring Entity 4) Accounting Period concept

ii) Under which of the following kinds of business concepts it is assumed that the organization
will last for a long time.
1) Accounting Entity 2) Going Concern Entity
3) Money Measuring Entity 4) Accounting Period

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 iii) Anticipate no profits and provide for all possible losses. This is essence of which of the
following accounting principles:
1) Dual Aspect Principle 2) Materiality Principle
3) Consistency Principle 4) Conservatism Principle

iv) An ink-stand has been purchased by a firm for a nominal amount that is to last for 4 year. It
should not be classified as a fixed asset under which of the following accounting principles:
1) Dual Aspect Principle 2) Materiality Principle
3) Consistency Principle 4) Conservatism Principle

v) Valuation of stocks is done by a business firm at cost price or market price, whichever is
lower basis, under
1) Convention Of Full Disclosure 2) Convention Of Materiality
3) Convention Of Conservatism 4) Convection Of Consistency

b) Mohan Pare purchased raw material at Rs 100 per kg. But due to a continuous decline in the prices, 05
the finished goods in which the raw material was used, are expected to be sold at below cost. The
replacement cost is RS 70 per kg. Mohan has 100 kg of raw material on 31st March’14.What will
be the value of his inventory?

c) Discuss the importance of accounting information to creditors and employees. 05

Q.7 Answer Any two from the following.

a) What do you understand by issue of Share Capital? 05
b) Write short notes on the contents of annual report. 05
c) What ethical issues are there in accounting? 05

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