2018 (NOV-DEC)

Name of the Paper : Financial Accounting

Name of the Course : B.Com. (Hons.)
Duration: 3 Hours Maximun Marks: 55
Atempt Allquestions. Including question no. 1 is compulsory.
Show your working notes clearly.
Q. 1. (a) Explain the Matching Principle'. When is revenue said to be
recognised? 4
(6) What is meant by International FinancialReporting Standards (|FRS3)?
Explain the need for IFRSs. 5
(c) Calculate the value of closing inventory, Cost of Goods Sold and Gross
Profit according to FIFO and Weighted Average Method on March 31, 2017: 6
01-03-17 Stock in hand 500 units @10per unit
07-03-17 Purchases 7,500 units @12 per unit
10-03-17 Sold 6,000 units @15 per unit
12-03-17 Sold 1,200 urnits @18 per unit
15-03-17 Purchased 5,000 units @13 per unit
25-03-17 Sold 3,500 units @23 per unit
30-03-17 Purchase returns 500 units (out of goods purchased on
March 15)
Ans. () Matching Principle. See Q.1 (Point 9), Chapter 4. Page T-28
(6) IFRSs. International Financial Reporting Standards (IFRSs). These are the
Accounting Standards which are accepted globally. Now these standards are
framed and brought out by the International Accounting Standards Board (LASB).
This Board was established in the year 2001and the "International Accounting
Standards Committee" (LASC) established long back in the year 1973 was
dissolved in the year 2001. All the Accounting Standards issued by the IASC are
called International Accounting Standards (IASs) and all these were adopted by
the IASB, i.e., Board of IASC.
But allthe earlier IASs still cöntinue to be called as IASs, though some of these
have been adopted as IFRSs. Not only this, the IASB has formulated and adopted
IFRSs on certain subjects for which there were no IASs earlier. In all till date, as
many as forty one (41) IASs have been issued. Some of these have been deleted
or cancelled and some have been changed to IFRSS with new numbers allotted to
them (Nine).
What is IFRS?
It means aprinciple based Accounting Standard (AS)drafted in comparatively
simple and clear language than most of our ASs. Our ASs are rule based.
Why IFRSs?
In today's world of globalisation, corporate entities operate and raise funds
globally. Now many of our companies have become multi-national corporations
(MNCs). There was a time (pre-economic reforms period) when India was averse
to MNCs but now the situation is quite different. Our economy or country now
needs to converge our own ASs with IFRSs. This is to make our financial statements
internationally comparable, transparent and uniform.
32
 Financial Accounting 2018 (Nov.-Dec.) 33
(c) Stores Ledger-FIFO Method
Date Receipts Issues Balance
2017 Units | Rate() Value ) Units Rte (3) Value ) unils Rate()| Value ()
1 Mar 500 10 5000
7 Mar 7,500 12 90,000 500 10 5,000
7,500 12 90,000
10 Mar 500 10 5,000
5,500 12 66,000 2,000 12 24,000
12 Mar 1,200 12 14,400 800 12 9,600
15 Mar 5,000 13 65,000 800 12 9,600
5,000 13 65,000
25 Mar 800 12 9,600
2,700. 13 35,100 2,300 13 29,900
30 Mar 500 13 6,500 1,800 13 23,400
{Purchase Return)
Closing Inventory (1,800 units @T13 per unit) =23,400
Cost of Goods Sold = Opening Inventory + Net Purchases -Closing nventory
=75,000 +(90,000 + 65,000 -6,500) - 23,400
= 1,30,100
Gross Profit = Sales - Cost of Goods Sold
=[(6,000 x 15)]+(1,200 ×18) + 3,500x 23)] -R1,30,100
=790,000 +21,600 +80,500 -1,30,100
=762,000
Stores Ledger-Weighted Average Method
Date Receipts Issues Balance
2017 Units | Rate () Value ().| Units Rate () Value (R) Units Rate(3) Value )
1 Mar 500 10 5,000
17 Mar 7.500 12 90,000 8,000 11.875 95,000
10 Mar 6,000 11.875 71,250 2,000 11.875 23,750
12 Mar 1,200 11.875 14.250 800 11.875 9,500
15 Mar 5,000 13 65,000
25 Mar
5,800 12.845 74,500
3,500 12.845 44,958 2,300 12.844 29,542
30 Mar 500 13 6,500 1,800 12.801 23,042
(Purchase Retum)
Closing Inventory (1,800 units'@ 12.801 per unit) =23,042
Cost of Goods Sold = Opening Inventory + Net Purchases - Closing Inventory
=5,000 +(90,000 +65,000 -6,500) 23,042
=1,30,458
Gross Profit = Sales - Cost of Goods Sold
=[(6,000 x{15)]+(1,200x*18) + (3,500×*23)]-*1,30,458
=790,000 + T21,600 + 80,500 -1,30,458
=61,642
Q. 2. You are required to prepare Trading and Profit and Loss Account for the
year ending March 31,2017 and Balance Sheet on that date from the following
Trial Balance after making the necessary adjustments: 10
34 Shiv Das DELHI UNIVERSITY SERIES
Particulars Debit () Credit ()
Stock (as on April 1;2016) 5,00,000
Purchases and Returns 30,00,000 50,000
60,000 42,00,000
Sales and Sales Returns 3,50,000
Cash in hand
Capital 10,00,000
Rates and Taxes 45,000
1,60,000
Drawings 2,55,000
Salaries
1,05,000
Insurance 15,000
Printing and Stationery 80,000
Advertisement
Car 5,00,000
Furniture 3,00,000
Discounts 40,000 60,000
Cariage Inward 35,000
65,000
Wages 6,00,000
Sundry Debtors/Creditors 8,00,000
61,10,000
.

Total 61,10,000

AdditionalInformation:
() Closing Stock as on 319t March 2017 was 145,000.
(ii) Salaries outstanding amounted to 15,000.
(iii) Bad Debts worth 740,000 to be written off.
(iv) Insurance prepaid is 25,000.
(o) Provision for Bad debts is to be created at 5% of Sundry Debtors.
(vi) Depreciate Furniture by 10% p.a. and Motor Car by 20% p.a.
Sol. Trading & Profit & Loss Account
Dr. for the year ended 31 March, 2017 Cr.
Particulars Particulars
Opening Stock 5,00,000 Sales 42,00,000
Purchases 30,00,000 Less: Sales Returns (60,000) 41,40,000
Less: Purchase Returns (50,000) 29,50,000 Closing Stock 1,45,000
Carriage Inward 35,000
Wages 65,000
Gross Profit cld 7,35,000
42,85,000 42,85,000
Rates &Taxes 45,000
Salaries 2,55,000 Gross Profit b/d 7,35,000
Add: Outstanding 15,000 2,70,000 Discount Received 60,000
Insurance 1,05,000
Less: Prepaid (25,000) 80,000
Printing &Stationery 15,000
Advertisement 80,000
Depreciation on:
Furniture (R3,00,000 x 10%)30,000
Car (5,00,000 x20%) 1,00,000 1,30,000
Discount Allowed 40,000
Bad Debts 40,000
Provision for Doubtful Debts 28,000
[(K6,00,000-40,000) x5/100)]
Net Profit 67,000
7,95,000
7,95,000
 Financial Accounting 2018 (Nov-Dec.) 35

Balance Sheet
as on 315 March, 2017
Liabilities Assets
10,00,000 Closing Stock 145,000
Capital Cash in Hand 3,50,000
Less: Drawings (1,60,000) 25,000
Add: Net Profit 67,000 9,07,000 Prepaid Insurance
Sundry Creditors 8,00,000 Car 5,00,000
15,000| Less: Depreciation (1,00,000) 4,00,000
Outstanding Salaries
Furniture 3,00,000
Less: Depreciation (30,000) 2,70,000
Sundry Debtors 6,00,00
Less: Bad Debts (40,000) 5,32,000
Less: Provision (28,000)
17,22,000 17,22,000
Or
and Payments Account for the
You are presented with the following Receipts
year ending 31st December 2016:
Receipts
Paymehts
3,00,000
Balance b/d 20,000 Salaries
80,000
Subscriptions: Stationery 12,000
2017 16,000 Telephone
Rent 15,000
2016 4,22,000 Upkeep of Lawn 15,000
2015 8,000 4,46,000
50,000 Furniture 60,000
Receipts from sports meet Balance cld 54.000
Interest on investments 20,000 5,36,000
5,36,000
available:
The following additional information is subscription per member is 1,000. At
(a) There are 450 members. The annual 2015.
the beginning of 2016, 79,000 was in arrear for
closing was 5,000.
(6) Stock of stationery (opening) was 3,500 and
prepaid. (Monthly rent 1,000)
(c) Atthe end of 2016, rent for 3 months was as on as on
Expenses were outstanding
(4) 31.12.2015 31.12.2016
3,000 6,000
Salaries of staff
1,000 1,800
Telephone bills 2,800
600
Upkeep of lawn
it is required to write off
(e) The buildings stood in the books at R20,00,000 and
depreciation at 5% p.a.
interest @6% p.a.
() Investments at 31.12.2016 were 74,00,000 carrying Account for the year
Expenditure
You are required to prepare Income and date.
Sheet on that 10
ending 31 December, 2016 and a Balance
Sol. Income & Expenditure Account.
Cr.
Dr. for the year ended 31 December, 2016
Income
Expenditue 4,22,000
Salaries 3,00,000 Subcriptions
Add: Outstanding (2016)E, 28,000 4,50,000
Less: Outstanding (2015) (3,000) 3,03,000- Receipts from Sports meet 50,000
Add: Outstanding (2016) 6,000
36 Shiy Das DELHI UNIVERSITY SERIES

3,03,000 5,00,000
Stationery consumed? 78,500 Interest on Investments 20,000
Telephone 12,000 Add: Accrued Interest 4,000 24,000
Less: Outstanding (2015) (1,000)
Add: Outstanding (2016) 1,800 12,800
Rent 15,000
Less: Prepaid (1,000 x3) (3,000) 12,000
Upkeep of Lawn 15,000
Less: Outstanding (2015) (600)
Add: Outstanding (2016) 2,800 17,200
Depreciation on Building 1,00,000
(720,00,000 x5%)
Surplus Excess Income Over
expenditure) (Balancing Figure) 500
5,24,000 5,24,000
Balance Sheee
as on 31st December, 2016
Liabilities Assets
Capital 24,27 900 Outstanding Subcriptions:
Add: Surplus 500 24,28,400 2015 (79,000-8,000) 1,000
Advance Subscription 16,000 2016* 28,000 29,000
Outstandirg Salaries 6,000 AcCrued lnterest on Investments*, 4,000.
Outstanding Telephone Bills 1,800 Investments 4,00,000
Outstanding Upkeep of Lawn 2,800 Stock of Stationery 5,000
Preaid Rent 3,000
Furniture 60,000
Buiding 20,00,000
Less: Depreciation (1,00,000) 19,00,000
Cash in Hand 54,000
24,55,000 24,55,000+
Working Notes:
*, There are 450.members, the annua< subscription per member is 1,000. Therefore this year's
subscription is 4,50,000 (i.e, 450 x1,000) out of which 4,22,000 is received,
(74,50,000-74,22,000=28,000) i.e, Subscription amournt of 28,000 is outstanding.
*, Calculation of Stationery consumed during the year:
Opening Stock +Purchased during the year - Closing stock of stationery
=73,500 +780,000-35,000 =*78,500
6
*, Interest on Investments p.a. =74,00,000 x =24,000
100
out of which 20,000 is received. Hence 4,000 (i.e., 24,000 T20,000) is accrued interest.
", Calculation of Capital Fund:
Balance Sheet
as on 31 December, 2015
Liabilities Assets
Outstanding Salaries 3,000 Cash in Hand 20,000
Outstanding Telephone Bills 1,000 Outstanding Subscriptions 9,000
Outstanding Upkeep of Lawn 600 Stock of Stationery 3,5004
Capital fund (Balancing figure) 24,27,900 Building. 20,00,000
Investments 4,00,000
24,32,500 24,32,500
 Financial Accounting 2018 (Nov.-Dec.) 37
Q.3. Question on Hire Purchase &Instalmentt Not in Current Syllabus.
Q. 4. Gupta & Sons, Delhi has a branch at Bulandshahar. Goods are invoiced
at cost plus 25% which is the selling price of the branch. From the following
prepare Branch Stock Account, Branch Debtors Account, Branch Cash Account
and Branch Profit and Loss Account for the year ending 31" December, 2016. 10
Details
Balance as on January 1,2016:
Branch Stock at Invoice Price 25,000
Branch Debtors 85,000
Branch Cash 5,000
Transactions during 2016:
Goods invoiced to Branch 3,35,000
Goods retumed by branch to head office 12,500
Credit sales at branch 1,75,000
Cash sales at branch 1,00,000
Cash received from debtors at branch 1,56,000
Cash expenses at branch 28,000
Discount allowed to branch debtors 500
Normal loss of stock at branch 1,000
Balance as on 31st December, 2016:
Branch stock 70,000
Branch Debtors ?
Branch Cash 20,000
Sol.
Dr.: Branch Stock Account Cr.
Particulars Particulrs
Balance b/d 25,000 Goods sent to branch Alc (Returmed) 12,500
Goods sent to Branch A/c 3,35,000Branch Debtors Alc 1,75,000
Branch Cash Alc 1,00,000
Branch Adjustment Alc (Nomal Loss) 1,000
Branch Adjustment Alc (Bal. fig.) 1,500
Balance cld 70,000
3,60,000 3,60,000
Dr. Branch Debtors Account Cr.
.Particulars Particulars
Balance bld 85,000 Branch Cash A/c 1,56,000
Branch Stock A/c 1,75,000 Branch Profit &LossAc 500
(Discount Allowed)
Balance cld (Balancing Figure) 1,03,500
2,60,000 2,60,000
Dr. Branch Cash Account Cr.
Particulars Particulars
Balance bld 5,000| Branch Expenses Ac: 28,000
Branch Stock A/c 1,00,000 Cash Alc (Remittance) (Bal. fig.) 2,13,000
Branch Debtors A/c 1,56,000 Balance cld 20,000
2,61,000 2,61,000
38 Shiv Das DELHI UNIVERSITY SERIES

Dr. Branch Adjusted Account Cr.

Particulars Particulars
Goods sent to Branch Alc 2,500 Stock Reserve
(Opening Stock Load R25,000 x1/5)
5,000
(Returned load 12,500 x 1/5)
Branch Srck A/c 1,000 Goods sent to Branch Alc 67,000
Branch Stock A/c 1,500 (R3,35,000 x 1/5)
Stock Reserve
(Closing Stock Load 70,000 x) 14,000
Branch P &LAc (Gross Profit) 53,000
72,000 72,000
Dr. Branch Profit & Loss Account Cr.
Particulars Particulars
Branch Expenses Ac 28,000 Branch Adjustment A/c 53,000
Branch Debtors Alc (Discount Allowed) 500 (Gross Profit)
Net Profit cld 24,500
53,000 53,000
Working note: Let Cost =100; So, Profit on Cost =25 .:. Selling Price =125
.:. Profit on Selling Price = 25
125
Or, A Delhi firm has two branches-one at Agra and the other at Meerut. The branches
maintain their own books of accounts. For the year ending December 31, 2016, the Agra
Branch showed debit balance of 731,450 and Meerut Branch a debit balance of 51,000
before taking into account the following information: : 10
(a) Goods valued at 3,000 were transferred from Agra Branch to Meerut Branch
under instructions from H.O.
(b) The Agra branch collected 3,500 from an Agra customer of the H.0.
(c) The Meerut branch paid 5,000 for goods purchased by H.0.in Meerut.
(a) 76,000 remitted by the Agra branch to H.O. on December 29th 2016 were received
on January 3rd 2017 by H.O.
(e) Goods sent by H.0. to Meerut branch during 2016 were in transit on December 31,
2016 to the extent of 4,300.
) The Agra branch showed a net profit of R5,400 and Meerut branch a net loss
of 2,600 for the year ending December 31, 2016. Write up the accounts of two
branches in the H.0. books.
Sol. In the Books of Head Office
Dr. Agra Branch Account Cr.
Particulars Particulars
Balance b/d 31;450 Meerut Branch Alc(Goods) 3,000
Sundry Debtors Alc 3,500 Cash Alc 6,000
Profit &Loss Alc (Net Profit) 5,400 Balance cld (Goods in Transit) (Bal. fig.) 31.350
40,350 40,350
Dr. Meerut Branch Account Cr.
Particulars Particulars
Balance b/d 51,000 Purchases Alc 5,000
Agra Branch Ac (Goods) 3,000 GÍods-in-Transit A/c 4.3003
.Profit &Loss Alc (Net Loss) 2,600
Balance cd (Cash-In-Transit) (b/ 42,100
54,000 54.000
Q. 5. Question on Partnership: Not in Current Syllabus.
Or, Question on Partnership: Not in Current Syllabus.
 2019 (NOV-DEC)
Name of the Paper Financial Accounting
Name of the Course : B.Com. (Hons.)
Duration: 3Hours Maximum Marks: 55
Attempt Allquestions, incuding question no. 1which is compulsory.
Show your working notes clearly. 5
Q.1. (a) Explain the need and importance of Accounting Standards.
Ans. Need of Accounting Standards. Generally, the need of accounting
standards is felt in order to avoid the variance which may arise between the
accounting principles and accounting practice and álso to find a uniformity among
diversity among the various underlying principles of accounting. Accounting
Standards are framed by the IASC or IAS (Indian Accounting Standards, based on
IASC) for maintaining accounting practices in our country.
However, thereasons for setting the Standards are:
follow the
(a) Comparison between two firms is possible if both the firms method
same principles. For exanmple, if. Firm A follows the FIFO of
valuation of stock whereas Firm B follows the LIFO method for valuing
stock, the comparison between the two firims becomes useless. The same
is possible only when both of them follow identical method of valuing
closingstock.
(b) The firms are not allowed to maintain and present their accounts according
to their own will or choice or cannot prepare report of financial statemnents
for various interested groups. The same is possible only when there is
some fixed standard of accounting practice.
(c) The Accounting Standards recognise the principle of equity applicable
for different users of acCcounting information, viz. creditors, investors,
shareholders etc. Thus the purpose of setting Accounting Standards is
nothing but to find a uniformity in accounting practice while formulating
financial reports and enabling proper comparison of data which are
contained in financial statements for the users of accounting information.
Practically, Accounting standards have been presented in order to
maintain fairness, consistency and transparency in accounting practice
which will satisfy the users of accounting.
Importance of AccountingStandards. See Q. 1,Chapter 5. Page T-32
Or
- (a) Explainthe convention of 'Materiality giving examples. Does Materiality
contradict Full Disclosure'? 5
Ans. Convention of Materiality. Convéntion of Materiality implies that the
transactions and events that have immaterial or insignificant effects should not be
recorded andreported in the Financial statements. An information isconsidered
to be material if the knowledge of this information is significant to the users of
accountingreports.Whatis material or immaterial depends upon the circumstances
and discretion of an accountant. The materiality of an event or transaction can
be decided in terms of its impact., on the financial position, results of operations,
change in the financial position of an organisation and on evaluation or decisions
made by users. Thus materiality places a restriction on what should be disclosed.
It is a modifying principle as it modifies 39
the principle of full disclosure.
40 Shiv Das DELHI UNIVERSITY SERIES

Examples, Small payments such as payment for postage, stationery and cleaning
expenses should not be disclosed separately. They should be grouped together
as sundry expenses. The cost of small-valued assets such as pencils, sharpeners
and paper clips should be mentioned in the profit and loss account as revenue
expenditure although they can last for more than one accounting periods.
Maieriality priciple requires that all relative items, knowledge of which might
influence the decision of users of financial statements should be disclosed in
the finarncial statements. It would be wrong to say that it is contradictory to full
disclosure but is treated as an exception to full disclosure priniple.
Convention of Full Disclosure. Apart from legal requirements, full disclosure of
all significant information should be made in the financial statements. For example,
the basis of valuation of fixed assets, investments and stock should be clearly stated
in the Balance Sheet. In other words, accounting statements should be honestly
prepared. There should be full, fair and adequate disclosure. This convention is
so important that the Companies Act makes ample provisions for the disclosure
of essential information so that significant information may not be left out to be
disclosed.
This convention does not express that the trade secrets or other necessary
information should also be disclosed. It should reveal simply the fulldisclosure of
all essential or significant material information to the users of financial statements.
The principle of full disclosure gains more significance in case of a joint stock
company because of separation of management and ownership.
Also, See Q. 3, Chapter 4. .[Page T-30
(b) From the following Trial Balance of Geeta, you are required to prepare:
() Trading and Profit and Loss Account for the year ended on 31st March,
2017, and
(ii) Balance Sheet as on that date.
Debit Balances Credit Balances
Stock on 01.04.2016 70,000|Capital 3,00,000
Plant and Machinery 3,50,000Wages Outstanding 4,000
Rent 30,000 Sales 5,00,00
Depreciation on Plant and Machinery 15,000Creditors 45,000
Wages 20,000 Bills Payables 16,000
Salary for 11 months 11,000 Discount 12,000
.Cash 27,000 Commission 8,000
Purchases 2,70,000
Debtors 80,000
Discount 2,000
Carriage lnwards 4,000
Bad debts 6,000
8,85,000 ,85,000
Adjustnents:
() Stock on 31st March, 2017 was 96,000.
(i1) Stock destroyed by fire was T6,000 and the Insurance Company accepted
aclaim for 73,600.
(iii) <1,600 paid as rent of the office was debited to Landlords account (included
in Debtors).
(iv) Write off further bad debts 74,000.
 Financial Accounting 2019 (Nov.-Dec.) 41
Sales include sales on return basis. Approval for sale of 2,500 has not been
10
received till31.03.2017. The rate of gross profit on this sale was 25% on cost.
Sol. () Trading and Profit &Loss Account of Geeta Cr.
Dr. for the year ended 31 March, 2017
Particulars Particulars
Opening Stock 70,000 Sales 5,00,000
Purchases 2,70,000 Less: Sale on Approval (2.500) 4,97,500
Less: Loss by Fire (6,000) 2,64,000 Closing Stock 96,000
98,000
Wages 20,000|Add: Goods Sent on Approval', 2,000
Carriage Inwards 4,000
Gross Profit cld 2,37,500
5,95,500 5,95,500
2,400 Gross Profit bd 2,37,500
Goods Lost by Fire (6,000-3,600) 12,000
Rent 30,000 Discount
Add: Rent Paid to Landlord 1,600 31,600 Commission 8,000.
Depreciation on Plant &Machinery 15,000
Salary 11,000
Add: Outstanding Salary*: 1,000 12,000
Bad Debts 6,000
Add: Further Bad Debts 4,000 10,000
Discount 2,000
Net Profit transferred to Capital Alcs 1,84,500
2,57,500 2,57,500

(i) Balance Sheet as on 31 March, 2017

Liabilities Assets
Capital 3,00,000 Closing Stock z(96,000 + 2,000)2. 98,000
Add: Net Profit 1,84,500 4,84,500 Plant &Machinery 3,50,000
Outstanding Salary 1,000Cash 27,000
Outstanding Wages 4,000 Debtors 80,000
Creditors 45,000| Less: Sale on approval (2,500)
Bils Payable 16,000 Less: Rent paid to landlord (1,600)
Less: Further Bad Debts (4,000) 71,900
Insurance Claims against
Goods Lost by Fire 3,600
5,50,500 5,50,500
Working Notes:
1 Salary is paid for 11 months, hence 1month's salary, i.e., 11,000/1 =1,000 is outstanding.
Rate of Gross Profit on Sale was 25% on Cost.
Let cost=100; Profit on Cost = 25; Selling Price = 125
:. Profit on Selling Price = 25/125 =1/5
Then, Profit on Goods Sent onApproval =2,500 x1/5 =500.
Therefore, Gross Value of Goods sent on Approval = (2,500 -3500) =2,000
Or
) Prepare an Income and Expenditure Account for a College for the year
ended 31st March, 2017 and a Balance Sheet as on that date fromn the following
information: 10
Receipts
Cash (01,04.2016) 50,000 Pay and Allowances
Payments
22,00,000
Postage Stamps (01.04.2016) 700Books for Library 50,000
LTuition Fees 2,00,000 | Postage and Stationery 12,000
42 Shiv Das DELHI UNIVERSITY SERIES
b/f 2,50,700
Fines 10,500 Newspapers
22,62,000
2,000
Annual Grant from Govemment 30,00,000 Science Lab Equipment 22,000
Interest on Securities 28,000 Repairs and Maintenance 18,000
Rent from use of Hal 70,000| Audit Fees 8,000
Grant for Building Fund 20,00,000 Additions to collegebuilding 30,00,000
Cash in hand (31.03.2017) 46,600
Postage Stamps (31.03.2017) 600
53,59,200 53,59,200
The College had the following assets on 31st March, 2016:
Furniture-3,00,000; College Building-4,00,00,000; Library Books-80,000;
Science Equipment --3,00,000; 10% Investments -3,00,000 and Outstanding
Tuition fees-22,000.
Provide for Depreciation on theclosing balances of the following assets:
Land and Buildings @5%; Furniture @15% and Library Books and Science
*Equipment @20%.
Sol. Income & Expenditure Account
Dr. for the year ended 31 March, 2017 Cr.
Expenditure Income
Pay &Allowances 22,00,000 Tuition Fees 2,00,000
Depreciation on: Léss: Outstanding (22,000) 1,78,000
Library Books (1,30,000 x2) 26,000 Fines 10,500
Science Equipment 64,400 Annual Grant From Government 30,00,000
College Building 21,50,000 Interest on Securities 28,000
Furniture 45,000 22,85,400 Add: Outstanding 2,000 30,00
Postage &Stationery 12,000 Rent from use of Hall 70,000
Newspapers 2,000 Deficit 12,36,900
Repair &Maintenance 18,000|(Excess of Experiditure over Income)
Audit Fees 8,000
45,25,400 45,25,400
Balance Sheet as on 31.March, 2017
Liabilities Assets
Capital Fund', 4,10,52,700 Library Books 80,000
Less: Deficit (12,36,900) 3,98,15,800-Add: Purchase 50,000
Grant for Building Fund 20,00,000 Less: Depreciation (20%) (26,000) 1,04,000
Science Equipment 3,00,000
Add: Purchase 22,000
Less: Depreciation (20%) (64,400) 2,57,600
College Building 4,00,00,000
Add: Additions 30,00,000
Less: Depreciation (5%) (21,50,000) 4,08,50,000
Furniture 3,00,000
Less: Depreciation (15%) (45,000) 2,55,000
10% Investrments 3,00,000
Add: Outstanding Interest 2,000 3,02,000
Cash in Hand 46,600
Postage Stamps N600
4,18,15,800 4,18,15,800
Working Notes;
1 Interest on 10% Investments of t300,000 willbe 30,000, out of which 28,000 is received, hence
2,000 is outstanding.
 Financial Accounting 2019 (Nov-Dec.) 43
Balance Sheet as on 31 March, 2016
Liabilities Assets
Capital Fund (Balancing Figure) 4,10,52,700| Cash 50,000
700
Postage Stamps
Furniture 3,00,000
4,00,00,000
College Building
Library Books 80,000
3,00,000
Science Equipment 3,00,000
10% Investments
Outstanding Tuition Fees 22,000
4,10,52,700 4,10,52,700

Q. 2. (a) X purchased a second-hand machinery on 1.2.2015 for 80,000; paid

*12,000 for its overhauling and 8,000 for its installation which was completed
by 31.03.2015. The company provides depreciation on its machinery at 20% p.a.
on diminishing balance method from the date it was put to use and closes its
books on 31 Dcember every year. On 1.10.2016, a repair work was carried out on
the machine and 5,000 were paid for the same. The machine was sold on 31.10.2017
for a sum of 21,000 and an amount of 2,000 was paid as dismantling charges.
Prepare Machinery Account and Provision for Depreciation on Machinery
6
Account from 2015 to 2017.
(6) What is the significance of inventory valuation? What is the difference4
between Periodic and Perpetual System of Inventory Valuation?
Cr.
Sol. (a) Dr. Machinery A/e
Date Particulars Date Particulars
2015 2015
Feb 1 Bank Alc 80,000 Dec. 31 Balance cld 1,00,000
Bank Alc (overhauling) 12,000
Bank Alc (Installation) 8,000
1,00,000 1,00,000
2016 2016
Jan 1. Balance b/d 1,00,000 Dec. 31 Balance dd 1,00,000
1,00,000 1,00,000
-2017 2017
Jan 1. Balance b/d 1;00,000 Oct. 31 Provision for Depreciation Alc 43,333
<(15,000+ 17,000 +11,333)
Bank Alc (Sale) <(21,000-2,000) 19,000:
P&LAC (Loss on Sale)" 37,667:
1,00,000 1,00,000:
Dr. Provision for Depreciation A/c Cr.
Date Particulars Date Particulars
31.12.15 Balance cd 15,000 31.12.15 Depreciation Ac (for 9 months) 15,000
15,000 15,000
31.12.16 Balance cld 32,000 01.01.16 Balance b/d 15,000
31.12.16 Deprecation Alc 17,000
32,000 32,000
31.10.17 Machinery Ac 43,333|01.01.17 Balance b/d 32,000
31.10.17 Depreciation Ac (for 10 months) 11,333
43,333 43,333
44 Shiy Das DELHI UNIVERSITY SERIES
Working Notes:
"1 Calculation of Profit & Loss on the sale of Machinery:

Cost of Machinery on 1Feb, 2015 80,000

Add: Overhauling & Installation expenses (12,000 +8,000) 20,000
Cost of Machinery 31 March, 2015 1,00,000
Les: Depreciation 20% for 9months (1,00,000x 20% *9/12) (15,000)
Book value as on 1 Jan, 2016 85,000
Less: Depreciation 20% (K85,000 x 20%) (17,000)
Book value as on 1 Jan, 2017 68,000
Less: Depreciation 20% for 10 months (T68,000 ×20% x10/12) (11,333)
Book value as on 31 Oct, 2017 56,667
Less: Sale value (21,000 - 2,000) (19,000)
Loss on Sale of Machinery 37,667
*2 Repairs done 01.10.2016 are in nature of revenue expenditure so it should not be included in cost.
(b) Significance of Inventory Valuation. See Q.1,Chapter 8. [Page T-44
Difference between Periodic &Perpetual System. See Q. 5, Chapter 8. [Page T-47
Or
(a) Kavita purchased a machine for 780,000 on 1st April 2015. She charges
depreciation on Straight Line Method and closes her books on December 31st
every year. The machine has a useful life of 8 years after which it can be sold for
Z8,000. She purchased another machine on May 1st 2016 for 45,000 with 5years
useful life and nilresidual value. In 2017, the first machine was sold for 750,000
on June 30th when a new machine was purchased for 30,000with 3years useful
life and 3,000 as residual value. Prepare the machinery account for the 3 years
ending December 31, 2017. 6
(0) Calculate the value of closing inventory according to Weighted Average
Method on March 31, 2019: 4
March 01 (Stock in hand) 600 units @12 per unit
March 05 Purchases 7,500 units @13 per unit
March 10 Sold 6,000 units @15 per unit
March 12 Sold 1,100 units @18 per unit
March 14 Purchased 5,000 units @13 per unit
March 22 Sold 4500 units @23 per unit
March 30 Purchase returns 500 units (out of goods purchased on March 14)
Sol. (a) Dr. Machinery Afe Cr.
Date Particulars Date Particulars
2015 2015
April 1 Bank A/c (M,) 80,000 Dec. 31 Depreciation Alc', 6,750
Balance cd 73,250
80,000 80,000
2016 2016
Jan 1 Balance bld (M4) 73,250 Dec. 31 Depreciation Alc:
May 1 Bank Alc (M,) 45,000 M1 9,000
M,(9,000", xp) 6,000 15,000
Balance cd
- M 64,250
M, 39,000 1,03,250
1,18,250 1,18,250
 Financial Accounting 2019 (Nov.-Dec.) 45
2017 2017
Jan 1 Balance b/d June 30 Depreciation Alc (M,)2 4,500
M, 64,250 Bank Alc (Sale) 50,000
M, 39,000 1,03,250 P&LAC (Loss on Sale) 9,750
June 30 Bank Alc (M,) 30,000Dec. 31 Deprecation Alc:
M3 9,000
M(9,000°, * p) 4,500 13,500
Balance cld
M 30,000
M3 25500 55,500
1,33,250 133,250
Working Notes:
*, Calculation of Depreciation offirst Machinery for full year (M)
Depreciation = (80,000-8,000)
8 =79,000
*, Calculation of Profit & Loss on Sale of Machinery:
Particulars
Cost of Machinery as on 1 April, 2015 80,000
Less: Depreciation for 9 months (9,000 x9/12) (6,750)
Book value on 1 Jan, 2016 73,250
Less: Depreciation; (9,000)
Book value on 1 Jan, 2017 64,250
Less: Depreciation for 6months on(9,000 x6/12) (4,500)
Book value on 30 June, 2017 59,750
Less: Sale Value (50,000)
Loss on Sale of Machinery 9,750
Calculation of Depreciation of Second Machinery (M) forfull year:
Depreciation = 745,000
5 =79,000
4 Calculation of Depreciatioin of third nachinery (M) for full year:
Depreciation =
(30,000 -3,000)
3 =79,000
(b) Stores Ledger AccountWeighted Average Method
Date Receipts/Purchases. Issues/Sales Balance
Qty. Rate Amt. Rate Amt. Qy. Rate
2019
Amt.
(Units) ) ) (Units) )
Mar.1
Mar. 5 7.500 13
e
97,500
(Units)
600
)
12
)
7,200
8,100 12.93 1,04,700
Mar. 1 0 . 6,000 12.93 77,580 2,100 12.93 27,153
Mar..12 1,100 12.93 14,223 1,000 12.93 12,930
Mar. 14 5,000 13 65,000 6,000 12.99 77,930
Mar. 22 4,500 12.99 58,455 1,500 12.99 19,485
Mar. 30 500 5 13 6,500 1,000 12.99 12,990
:. Closing Inventory =12,990 (i.e., 1,000 Units of 12.99 each)
Q.3. (a) Question on Hire Purchase & Instalment: Not in Current Syllabus.
(b) How is Operating Lease different from Financial Lease? 3
Sol. (b) Difference between Operating & Financial Lease. See Q. 1, Chapter 11.
[PageT-65
 46 Shiv Das DELHI UNIVERSITY SERIES
Or
(a) Question on Hire Purchase &Instalment: Not in Current Syllabus.
(b) Give Journalentries in the books of Lessee in case of Financial Lease. 3
Sol. (b) Journal Entries in Books of Lessee in case of Financial Lease are:
() For Asset taken on Finance Lease at the inception of Lease
Asset under Lease A/c Dr. XXX
To Lease Payable Alc XXX
(Asset taken on Lease)
(ü) For Initial Direct Cost
Asset Under lease A/c Dr. XXX
To Bank A/c XXX
(The initial direct cost capitalised)
For payment of lease rental at the time of inception of lease, if any.
Lease Payable Alc Dr. XXX
To Bank Ac XXX
(Payment of initial instalment of Lease rent)
(iv) For Depreciatiorn
Depreciation on Assèt under Lease Alc Dr. XXX
To Asset under lease Ac XXX
(Depreciation provided on Asset)
(v) For finance charges due on asset taken on finance lease
Finance charges Alc Interest expenses Ac XXX
To Finance charges payable A/c/Lessor Alc XXX
(The finance charges due for the period)
(vi) For payment of Finance lease rental
Lease Payable A/c Dr Xx (Capital portion)
Finance charges payable Alc/ Lessor Alc Dr. XXx (lnterest portion)
To Bank Ac
4 XXX
(The lease rent paid)
(vii) For transfer of Depreciation &Finance charges
Profit &Loss A/c Dr. XXX
To Depreciationon Asset under lease Alc XXX
ToFinance charges Alc /nterest Expense Alc XXX
(Depreciation &Finance charges transferred)
Q. 4. (a) Mrs. Lahiri & Daughters, Delhi has a branch at Jaipur. Goods are
invoicedat cost plus 25% which is selling price of the branch. From the following,
prepare Jaipur Branch Account (Debtors System) to calculate the profit for the
year ending 31st December, 2018: 7

Balances as on January 1, 2018: Branch Stock at Invoice Price 35,000

Branch Debtors 75,000
Branch Cash (for Petty expenses) 4,000
Transactions during 2018: Goods invoiced to Branch
3,00,000
Goods retuYned by branch to head office 12,500
Credit sales at branch 1,75,000
Cash sales at branch 90,000
Cash received from Debtors at branch
Cash sent for Rent and Salaries to branch
1,76,000
28,000
 Financial Accounting 2019 (Nov-Dec.) 47
Discount allowed to branch debtors 1,000
Petty Expenses at Branch 3,000
Balances as on 31st December, 2018: Branch Stock 60,000
Branch Debtors
(b) ACompany has 3 Departments for which the details are given as follows: 3
Department A Depart1ment B Department C
Floor Area occupied. 20% 30% 50%.
Sales 1,00,000 2,00,000 3,00,000
No. of Employees 100 120 150

· Allocate the following expenses to the 3 departments:

Rent-*80,000; Lighting-12,000; Selling Expenses-42,000; Labour Welfare
Expenses-*18,500.
Sol. (a) Dr. Jaipur Branch A/c Cr.
Particulars Particulars
Balance b/d Stock Reserve Alc (Load) 7.000
Stock 35,000 (Opening stock) (35,000 ×1/5)
Debtors 75,000 Goods Sent to Branch Alc 60,000
Cash 4,000 1,14,000 (Load) (3,00,000 x1/5)
Goods Sent to Branch Ac 3,00,000 Goods Sent to Branch Alc (Returo) 12,500
Coods Sent to Branch Ac 2,500 Bank Alc (Remittance):
(Load on RetumedGoods) (R12,500 x15) Cash Sales 90,000
Bank Alc (Rent &Salaris) 28,000 Cash Collected from Debtos 1,76,000 2,66,000
Stock ReserveAc (Load) 12,000 Balance cld
(Closing stock) (*60,000 *1/5) Stock 60,000
Net Profit transferredto General Debtors* 73,000
Profit&Loss Alc (Balacing Figure) 23,000 Cash (4,000 3,000) 1;000 1,34,000
4,79,500 4,79,500
Working Notes:
*, Let Cost = 100; Profit on Cost = 25; Selling Price = 100+ 25 = 125
So, Profit on Selling Price =25/125 =1/5 Cr.
* Dr. Memorandum Branch Debtors A/c
Particulars Particulars
Balance b/d 75,000 Cash A/c 1,76,000:
Credit Sales A/c 1,75,000 Discount A/c 1,000
Balance c/d 73,000
2,50,000 2,50,000
(b)
Departments
Particulars (expense) A) B) C)
0 Rent: 20 30
(Floor Area)
80,000 x 100 16,000 80,000 * 100 24,000 80,000 x 5U- 40,000
100
(ü) Lighting 20 = 2,400
12,0000n
30
12,000 %003,600 12,000
x6.000
(Floor Area) 100
(ü) Selling Expenses 42,000x=
6 7.000 42,00 =14,000 42,000 x=21,000
Sales)
(iv) Labour Welfare Expenses 18,500 x 100
370 5,000 120 6.000
18,500 x 370
150
18,500 x 370-7500
(No. of employees)
30,400 47,600 74,500
Total (A+B+C) =1,52,500
48 Shiv Das DELHI UNIVERSITY SERIES
Or
(a) M/s XYZ Ltd. has branches at Delhi and Agra and goods are invoiced at
cost plus a profit of 20% on sales. The following information is available of the
transactions at DelhiBranch for the year ending 31st March, 2018:
Stock at Invoice Price (01.04.2017) 40,000
Debtors (01.04.2017) 12,000
Petty Cash (1.04.2017) 150
Petty Cash (31.03.2018) 250
Debtors (31.03.2018) 1,000
Stock at Invoice price (31.03.2018) 50,000
Transactions during 2017-18:
Goods Sent to branch (at cost) 2,61,000
Goods retumed by branch to HO (at invoice price) 15,00
Cash sales 1,05,000
Credit sales 1,30,000
Normal loss at IP 350
Goods Pilfered at IP 3,000
Cash sent for petty expenses 32,000
Bad debts at Delhi branch 400
Goods returned by Debtors 500
You are required to calculate the profit by inaking the Branch Adjustment and
Profit and Loss Account under Stock and Debtors System.
(b) State the basis of allocation of common expenditures among different
departments.
Sol. (a) Dr. Branch Adjustment A/c Cr.
Particulars Particulars
Stock Reserve Alc (load) 10,000 Stock Reserve Ac(load) R8,000
(Closing Stock) (50,000 x 1/5) (Opening Stock) (R40,000 x1/5)
Goods Sent to Branch Alc (Return) 3,000 Goods Sent to Branch Alc (Load' 65,250
R15,000 x 1/5)
Branch Stock Alc (Normal Loss) 350
Branch Stock Alc (Piferage Load) 600
(3,000 x 1/5)
Gross Profit to P &LAc 59,300
73,250 73,250
Dr. Branch Profit & Loss A/c Cr.
Particulars Particulars
Branch Stock Alc 2,400 Gross Profit b/d 59,300
(Cost of Pifered goods 3,000 -Z600)
Bad debts 400
Branch Expenses Alc' 31,900
Net Profit transferred to General
Profit &LOss A/c 24,600
59,300 59,300
 49
Financial Accounting 2019 (Nov,-Dec)
Working Notes: Ct..
* Dr. Petty Cash A/c
Partiaulars Particulars
31,900
Balance b/d 150 Branch Expenses A/c
Cash A/c 32,000 (Balancing Figure) 250
Balance c/d 32,150
32,150
Profit = 20; Cost Price = 100-20 = 80
*, Let Selling Price = 100;
:: Profit on Cost Price = 8020 1
Goods sent to Branch A/c (Cost Price) =2,61,000 1
=2,61,000 + (2,61,000) =3,26,250
Goods sent to Branch A/c(InvoicePrice)
1
=3,26,250 x 5 =65,250
.:. Load on Goods sent to Branch
[T-86
(b) See Q.2, Departmental Accounting.
Question on Partnership: Not in Current Syllabus.
Q. 5.