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Accounts Answer
Accounts Answer
Accounts Answer
(a)
Merits of company form of organisation: (1) (2) (3) (4) (1) (2) (3) (i)
A company has perpetual existence unaffected by incoming / outgoing members. Companies can raise large amount of capital. The liability of the shareholders is restricted to the amount contributed by them. The ownership of the shares in a company is easily transferable.
(b)
(ii) True and fair view A true and fair view of financial statements normally results from the application of (i) principal qualitative characteristics and (ii) appropriate accounting standards.
Going concern: Going concern means that the entity will continue in operation for the foreseeable future and that it has neither the intention nor the need to liquidate or curtail materially the scale of its operations.
A joint stock public company has to fulfil a number of legal formalities which makes its actual management rather difficult and costly. Separation between ownership and control can sometime lead to problems. For example, if an unprincipled team comes in possession of management, it may create serious problems for the company. The size and the procedural handicaps in case of large companies can sometimes result in delay in important decisions.
(c)
(iii) Substance over form It means that the transactions are accounted for and presented in the financial statements in accordance with their substance and economic reality and not merely their legal form.
Disclosure of inventories The financial statements shall disclose: (i) the accounting policies adopted in measuring inventories, including the cost formula used; (ii) the total carrying amount of inventories along with classifications appropriate to the entity; (iii) the carrying amount of inventories carried at fair value less costs to sell; (iv) the amount of inventories recognised as an expense during the period; (v) the amount of any write-down of inventories recognised as an expense in the period; (vi) the reversal of any write-down that was recognised in the previous period. (vii) the circumstances or events that led to the reversal of the write-down of inventories; and (viii) the carrying amount of inventories pledged as security for liabilities.
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A.2
Goods sent to branch A/c Bank A/c (payment for furniture) Balance c/d - Stock reserve (1,560,000 x 1/6) - Outstanding expenses Profit and loss A/c (Net profit) Balance b/d Goods sent to branch A/c Branch debtors A/c returns customers Surplus on net credit sales 12/132 x (3,498,000 132,000) Balance b/d Branch stock A/c
14,200,000 100,000
2,105,000
12,682,000
2,350,000
200,000 100,000
Cr.
306,000 15,838,000
15,838,000
Balance b/d Bank Balance b/d Branch stock A/c Branch debtors A/c
Branch Furniture and Fittings Memorandum Account Dr. 500,000 100,000 600,000
3,893,000
Branch cash a/c Branch discount A/c Branch stock A/c (Returns) Branch Bad debts A/c Balance c/d Depreciation A/c (80,000 + 4,000) Balance c/d Branch expenses A/c Branch A/c (Remitts. to H.O)(Bal.)
Cr. 2,842,000 70,000 132,000 45,000 804,000 3,893,000 Cr. 84,000 516,000 600,000
13,532,000
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A.3
Computation of sales: Receipts from sales deposited in bank (41,850 960 200 480) Receipts from sale used to pay expenses: Salaries Drawings (12 100,000) Sundry expenses (12 20,000) Total sales Liabilities Capital (invested on 1.1.2010) Additional Capital (960+ 480) Add: Net Profit Less: Drawings Creditors
Staff salaries Rent, rates & taxes (1,750 - 400) Sundry Exp. (230+272) Lighting and Heating Repairs (460 36) Dep. on: Truck @ 25% for 6 months on Rs. 1,200 Motor Van @ 25% for 4 months on Rs. 240 Furniture and Fixtures @ 15% of Rs. 600 Deep freezers @15% for 6 months on Rs. 800 Loss on sale of van (24020200) Net profit
44,250 150
Rs. in 000
Cr.
150 20 90 60
7,400
Balance Sheet as at 31st December 2010 Rupees 3,960 1,440 2,084 7,484 3,196 4,288 1,900
Computation of drawings
6,188
Truck Less: Depreciation Fixture & Fittings Less: Depreciation Deep freezers Less: Depreciation Closing Stock Debtors Advance rent Cash Bank
Assets
Rupees 1,200 150 1,050 600 90 510 800 60 740 2,396 150 400 10 932 6,188
Rs. in 000
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A.4
Rs.
(Decrease) / Increase in current liabilities: Decrease in accounts payable Increase in wages payable Net (increase) / decrease in working capital Cash generated from operations Cash invested Proceeds from sale of: Land (2,500,000 1,810,000 + 64,000) Equipment (75,000 15,000) Long term investments (100,000 + 32,000) Fixed capital expenditure building (2,800,000 2,300,000) Long term investments (220,000 +100,000-170,000) Payment of long term loan (1,160,000 985,000) Drawings Net increase in cash Cash - opening Cash - closing
A.5 (a)
(176,000) (224,000) 12,000 (7,000) (395,000) (105,000) 16,000 754,000 60,000 132,000
equipments (1,200,000+105,000*1,150,000)
353,010
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A.6
Less: Omission of credit balance (i) Cash received from Shah and Company wrongly debited (540+450)(ix) Statement for Ascertaining correct gross and net profit
Gross Profit
650,000 10,000 -
Goods taken by owner for personal use Goods used for office repair (2,500*100/120)
(10,000) (3,000) (3,000) (30,000) (60,300) (50,000) (2,000) 953,783 24,500 500
(20,000) (10,000) (2,000) (3,000) (30,000) (60,300) (50,000) (2,000) 507,700 24,500 500
Sale on return basis [18,000 - (18,000 100/120)] Payment to creditor wrongly debited to purchases Purchase discount Over-casting of sales day book
Corrected figures
Goods wrongly included in closing stock (60,000 100 / 120) insurance claim short received (60,000 80% 50,000)
(THE END)
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