d r .

s a NTOSH RAI INSTITUTE (PC)

196, Zonal Market, Sector-10, Major
Foundation Bhilai Test
PH - 0788-4012438
“Principles and Practice of Accounting”
Time : 3 Hours
OPTOUT January – 2020 (Series -1)
Course : 100%
Marks: 100

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Questions 1 is compulsory, attempt any 4 from the remaining
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1(a) State with reasons whether the following statements are True or False: 2x6 = 12
(i) Goods worth ` 600 taken by the proprietor for personal use should be credited to
Capital Account.
(ii) The Sales book is kept to record both cash and credit sales.
(iii) In the calculation of average due date, only the due date of first transaction must be taken
as the base date.
(iv) If a partner retires, then other partners have a gain in their profit sharing ratio.
(v) When shares are forfeited, the share capital account is debited with called up capital of
shares forfeited and the share forfeiture account is credited with calls in arrear of shares
forfeited.
(vi) Accrual concept implies accounting on cash basis.

(b) What are the difference between contingent liability and provision. 4

(c) Explain the differences between: 4

Money measurement concept and Matching Concept

2(a) A draws upon B three Bills of Exchange of ` 3,000, ` 2,000 and ` 1,000 respectively. A week later his 10
first bill was mutually cancelled, B agreeing to pay 50% of the amount in cash immediately and for
the balance plus interest `100, he accepted a fresh Bill drawn by A. This new bill was endorsed to C
who discounted the same with his bankers for `1,500. The second bill was discounted by A at 5%.
This bill on maturity was returned dishonoured (noting charge being `30). The third bill was
retained till maturity when it was duly met.
Give the necessary journal entries recording the above transactions in the books of A.

(b) From the following transactions in the books of Mr. Kumar, prepare an Account Current, by means 5
of product to be sent by him to Ms. Neena for the quarter ending 31st March, 2012. Interest is to be
charged and/or allowed @ 12% p.a.
2012 `
January 1 Balance in Neena’s Account (Credit) 3,500
January 12 Sold goods to Neena (due 1st February) 30,000
January 31 Sold goods to Neena (due 15th February) 27,500
February 15 Cash received 40,000
February 20 Cash received 7,500
March 10 Goods returned by Neena 7,000
March 25 Cash received 6,500

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(c) The following transactions took place between Thick and Thin. They desire to settle their account on 5
average due date.
Purchases by Thick from Thin (`)
9th July, 2013 7,200
14th August, 2013 12,200

Sales by Thick to Thin (`)

15th July, 2013 18,000
31st August, 2013 16,500
Calculate Average Due Date and the amount to be paid or received by Thick.
OR
(c) Pihu Ltd. issued 300 lakh 8% debentures of `100 each at a discount of 6%, redeemable at a 5
premium of 5% after 3 years payable as : ` 50 on application and ` 44 on allotment.
You are required to prepare the necessary journal entries for issue of debentures.

3 Bear Bar club was registered in a city and the accountant prepared the following Receipts and 20
Payments Account for the year ended 31st March, 2011 and showed a deficit of ` 14,520.
Receipts Amount Payments Amount
Subscriptions 62,130 Premises 30,000
Fair receipts 7,200 Honorarium to Secretary 12,000
Variety show receipt (net) 12,810 Rent 2,400
Interest 690 Rates & taxes 3,780
Bar collection 22,350 Printing & stationary 1,410
Excess cash spent 1,000 Sundry expenses 5,350
Deficit 14,520 Wages 2,520
Fair expenses 7,170
Bar purchases payments 17,310
Repair 960
New car (less proceeds of old car ` 9,000) 37,800
1,20,700 1,20,700
The following additional information are:
01-04-2010 31-03-2011
Cash in hand 450 -
Bank balances as per pass book 24,690 10,440
Cheque issued but not presented - for sundry expenses 270 90
Subscriptions due 3,600 2,940
Premises at cost 87,000 1,17,000
Accumulated depreciation on premises 56,400 -
Car at cost 36,570 46,800
Accumulated depreciation on car 30,870 -
Bar stock 2,130 2,610
Creditors for the bar purchases 1,770 1,290
Cash excess spent represent honorarium to secretary not withdrawn due to cash deficit. His
annual honorarium is ` 12,000.
Depreciation on premises and car is to be provided at 5% and 20% on written down value
method.
You are required to prepare the correct Receipts and Payments Account, Income and
Expenditure Account and Balance Sheet as on 31st March, 2011.

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4(a) The following errors were found in the book of Ram Prasad & Sons. Give the necessary entries 10
to correct them.
(1) ` 500 paid for furniture purchased has been charged to ordinary Purchases Account.
(2) Repairs made were debited to Building Account for ` 50.
(3) An amount of ` 100 withdrawn by the proprietor for his personal use has been debited
to Trade Expenses Account.
(4) `100 paid for rent debited to Landlord’s Account.
(5) Salary ` 125 paid to a clerk due to him has been debited to his personal account.
(6) ` 100 received from Shah & Co. has been wrongly entered as from Shaw & Co. ` 700
paid in cash for a typewriter was charged to Office Expenses Account.
(7) ` 700 paid in cash for a typewriter was charged to Office Expenses Account.

(b) M/s Kedar, Profit and loss account showed a net profit of ` 8,00,000, after considering the 10
closing stock of ` 7,50,000 on 31st March, 2017. Subsequently the following information was
obtained from scrutiny of the books:
(i) Purchases for the year included ` 30,000 paid for new electric fittings for the shop.
(ii) M/s Kedar gave away goods valued at ` 80,000 as free samples for which no entry was
made in the books of accounts.
(iii) Invoices for goods amounting to ` 5,00,000 have been entered on 27th March, 2017, but
the goods were not included in stock.
(iv) In March, 2017 goods of ` 4,00,000 sold and delivered were taken in the sales for April,
2017.
(v) Goods costing ` 1,50,000 were sent on sale or return in March, 2017 at a margin of profit
of 33-1/3% on cost. Though approval was given in April, 2017 these were taken as sales
for March, 2017.
You are required to determine the adjusted net profit for the year ended on 31.3.2017 and
calculate the value of stock on 31st March, 2017.

5(a) P, Q and R were carrying on a business in partnership, sharing profits and losses in the ratio of 10
5 : 3 : 2 respectively. The firm earned a profit of ` 3,60,000 for the accounting year ended 31st
March, 2012 on which date the firm's Balance Sheet stood as follows:
Balance Sheet as at 31st March, 2012
Liabilities ` Assets `
P's Capital 7,00,000 Freehold Land and Building 8,00,000
Q's Capital 5,70,000 Machinery 3,50,000
R's Capital 4,30,000 Furniture & Fixtures 1,02,000
Creditors 79,400 Stock 2,98,800
Outstanding Expenses 4,900 Debtors 1,60,000
Cash at Bank 73,500
Total 17,84,300 Total 17,84,300
P died on 31st August, 2012. According to firm's partnership deed, in case of death of a
partner:-
(i) Assets and Liabilities have to be revalued by an independent valuer.
(ii) Goodwill is to be calculated at two years' purchase of average profits for the last three
completed accounting years and the deceased partner's capital account is to be credited
with his share of goodwill.
(iii) The share of the deceased partner in the profits for the period between end of the
previous accounting year and the date of death is to be calculated on the basis of the
previous accounting year's profits. Post death of P, Q & R will share profit in the ratio of
3 : 2.
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 Profits for the accounting years 2009-2010 and 2010-2011 were as follows :-
`
For the year ended 31st March, 2010 2,90,000
For the year ended 31st March, 2011 3,40,000

Drawings by P from 1st April, 2012 to the date of his death totalled ` 46,000.
On revaluation, Freehold Land and Building was appreciated by ` 1,00,000; Machinery was
depreciated by ` 10,000 and a Provision for Bad Debts was created @ 5% on Debtors as on
31st March, 2012. P's sole heir was given ` 5,00,000 immediately and the balance along with
interest @ 12% per annum was paid to him on 31st March, 2013.
Prepare Revaluation Account, P's Capital Account and P's Heir Account, giving important
working notes.

(b) Miss Rakhi consigned 1,000 radio sets costing ` 900 each to Miss Geeta, her agent on 1st 10
July,2016. Miss Rakhi incurred the following expenditure on sending the consignment.
Freight ` 7,650
Insurance ` 3,250
Miss Geeta received the delivery of 950 radio sets. An account sale dated 30th November, 2016
showed that 750 sets were sold for ` 9,00,000 and Miss Geeta incurred ` 10,500 for carriage.
Miss Geeta was entitled to commission 6% on the sales effected by her. She incurred expenses
amounting to ` 2,500 for repairing the damaged radio sets remaining in the inventories.
Miss Rakhi lodged a claim with the insurance company which was admitted at ` 35,000. Show
the Consignment Account and Miss Geeta’s Account in the books of Miss Rakhi.

6(a) Prepare a Triple Column Cash Book from the following transactions and bring down the 10
balance for the start of next month:
2017 `
Nov. 1 Cash in hand 3,000
1 Cash at bank 12,000
2 Paid into bank 1,000
5 Bought furniture and issued cheque 1,500
8 Purchased goods for cash 500
12 Received cash from Mohan 980
Discount allowed to him 20
14 Cash sales 5,000
16 Paid to Amar by cheque 1,450
Discount received 50
19 Paid into Bank 500
23 Withdrawn from Bank for Private expenses 600
24 Received cheque from Parul 1,430
Allowed him discount 20
26 Deposited Parul’s cheque into Bank
28 Withdrew cash from Bank for Office use 2,000
30 Paid rent by cheque 800

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(b) The Cash-book of M/s ABC shows ` 27,570 as the balance at Bank as on 31st March, 2017. But 10
this does not agree with balance as per the Bank Statement. On scrutiny following
discrepancies were found:
(i) Subsidy ` 10,250 received from the government directly by the bank, but not
advised to the company.
(ii) On 15th March, 2017 the payments side of the Cash-book was under cast by ` 350.
(iii) On 20th March, 2017 the debit balance of ` 2,156 as on the previous day, was brought
forward as credit balance in Cash-book.
(iv) A customer of the M/s ABC, who received a cash discount of 5% on his account of
` 2,000, paid to M/s ABC a cheque on 24th March, 2017. The cashier erroneously
entered the gross amount in the Cash-Book.
(v) On 10th March, 2017 a bill for ` 5,700 was discounted from the bank, entered in Cash-
book, but proceeds credited in Bank Statement amounted to ` 5,500 only.
(vi) A cheque issued amounting to ` 1,725 returned marked ‘out of date’. No entry made in
Cash-book.
(vii) Insurance premium ` 756 paid directly by bank under a standing order. No entry made
in cash-book.
(viii) A bill receivable for ` 1,530 discounted for ` 1,500 with the bank had been dishonoured
on 30th March, 2017, but advice was received on 1st April, 2017.
Bank recorded a Cash deposit of ` 1,550 as ` 1,505. Prepare Bank Reconciliation Statement on
31st March, 2017.

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