Accounts GKJ (1st Semester) 10-04-24

9874411552
Pg. No.
1 ACCOUNTS THEORY
CONTENTS
TABLE OF
9 INTRODUCTION
11 DEPRECIATION
15 SALE ON APPROVAL
17 SELF BALANCING
21 RECTIFICATION
25 INVENTORY
27 CAPITAL & REVENUE EXPENDITURE
29 SINGLE ENTRY
35 NON-TRADING
43 FINAL ACCOUNT
51 FINANCIAL ACCOUNTING - ISEMESTER - I
1st Semester 89
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Gobind Kumar Jha 9874411552
20 Marks
Accounts Theory Accounts

[20 Marks] Theory
1. Entity Concept:
The business entity concept (also known as separate entity and economic entity concept) states that the
transactions related to a business must be recorded separately from those of its owners and any other
business.
Entity concept, in nature, is just reverse of proprietary concept. In this concept enterprise is viewed as a
distinct unit completely separate from its owners and all the accounting activities are centered around the
enterprise instead of its own ₹ Even the proprietor who is the supplier of capital is identified as one of the
creditors of the entity (enterprise). So capital is treated as a liability like other liabilities of the business.
2. Money measurement Concept:

The money measurement concept states that a business should only record an accounting transaction if it
can be expressed in terms of money. This means that the focus of accounting transactions is on quantitative
information, rather than on qualitative information. Thus, a large number of items are never reflected in a
company's accounting records, which means that they never appear in its financial statements. Examples of
items that cannot be recorded as accounting transactions because they cannot be expressed in terms of
money include:
(a) Employee skill level
(b) Employee working conditions
(c) Expected resale value of a patent
(d) Value of an in-house brand
(e) Product durability
(f) The quality of customer support or field service
(g) The efficiency of administrative processes
3. Going concern Concept:

The going concern concept of accounting implies that the business entity will continue its operations in the
future and will not liquidate or be forced to discontinue operations due to any reason. A company is a going
concern if no evidence is available to believe that it will or will have to cease its operations in foreseeable
future.
An example of the application of going concern concept of accounting is the computation of depreciation
on the basis of expected economic life of fixed assets rather than their current market value.
Companies assume that their business will continue for an indefinite period of time and the assets will be
used in the business until fully depreciated. Another example of the going concern assumption is the
prepayment and accrual of expenses. Companies prepay and accrue expenses because they believe that they
will continue operations in future.
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4. Cost Concept (OR Historical Cost Concept) :

This accounting concept states that all assets of the firm are entered into the books of account at their purchase
price (cost of acquisition + transport + installation etc). In the subsequent years to, the price remains the same
(minus depreciation charged). The market price of the asset is not taken into consideration.
Example
For example, a business buys a building worth ₹ 1,00,000 in cash. In the accounting records, the value of
the building will be entered at its cost price, i.e. ₹ 1,00,000. After four years, the value of the building goes
up to ₹ 5,00,000. However, the accounting records would continue to show the value of the building at the
cost price of ₹ 1,00,000 less depreciation.
5. Realisation Concept:
According to the realization accounting concept, revenue is only recognized when it is realized. Now revenue is
the cash inflow for a business arising from the sale of goods or services. And we assume this revenue as
realized only when it legally arises to be received. So in simpler terms, the profit earned will be recorded when
it is actually earned.
Explanation
In case of sale of goods, revenue must be recognized when the seller transfers the risks and rewards associated
with the ownership of the goods to the buyer.
In case of the rendering of services, revenue is recognized on the basis of stage of completion of the services
specified in the contract.
6. Accrual Concept:
Accrual concept is the most fundamental principle of accounting which requires recording revenues when they
are earned and not when they are received in cash, and recording expenses when they are incurred and not
when they are paid.
At the end of each reporting period, companies pass adjusting journal entries to record any accruals, for
example accrual of utilities expense, interest expense, accrual of wages and salaries, adjustment of
prepayments, etc.
7. Periodicity Concept:
Each business chooses a specific time period to complete a cycle of the accounting process—for example,
monthly, quarterly, or annually—as per a fiscal or a calendar year.
Periodicity concept is the concept that each accounting period has an economic activity associated with it, and
that the activity can be measured, accounted for, and reported upon.
In accounting, periodicity means that accountants will assume that a company's complex and ongoing activities
can be divided up and reported in annual, quarterly and monthly financial statements.
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8. Matching Concept:
The matching concept is an accounting practice whereby firms recognize revenues and their related expenses in
the same accounting period. Firms report "revenues," that is, along with the "expenses" that brought them.
The purpose of the matching concept is to avoid misstating earnings for a period. Reporting revenues for a
period without stating all the expenses that brought them could result in overstated profits.
Note that applying the matching concept requires accrual accounting, by which companies recognize revenues
when they earn them and expenses in the period they incur them. Actual cash flows from these transactions
may occur at other times, even in different periods.
9. Consistency Concept:
In accounting, consistency requires that a company's financial statements follow the same accounting
principles, methods, practices and procedures from one accounting period to the next. This allows the readers
of the financial statements to make meaningful comparisons between years.
Consistency does allow a company to make a change to a more preferred accounting method. However, the
change and its effects must be clearly disclosed for the benefit of the readers of the financial statements.
The Financial Accounting Standards Board refers to consistency as one of the characteristics or qualities that
makes accounting information useful.
Example of Consistency
Let's assume that a U.S. corporation uses the FIFO cost flow assumption for valuing its inventory and
determining its cost of goods sold. Due to the increasing cost of its materials, it concludes that LIFO will better
indicate the company's true profit. In the year of the change from FIFO to LIFO (and in years when
comparisons are presented), the company must disclose the break in consistency.
10. Prudence (conservatism):

Prudence concept (convention, principle) of accounting is also well known as conservatism concept. This
concept defines and emphasizes that “the accountants are cautious people. Preparation of financial statements
need good professional command and exact estimates of future by the accountants”.
Traditionally, accountants do not anticipate profits, however, provide for all losses. Incomes are not accounted
for until they are earned. However, the accountants provide for all likely losses and expenses, when there is a
reasonable possibility that such losses and expenses will occur in future.
Explanation, Use and Application of Prudence Concept:
A typical use and application of prudence concept is to value inventories at lower cost or net realizable value.
In case of reduction in market value then the “anticipated loss” should be provided for but if the price in the
market is higher than cost which is usually the case then ignore the “anticipated profits”.
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11. Materiality Concept:

Materiality means that all material facts should be recorded in accounting. Accountants should record important
data and leave out insignificant information. The materiality principle states that an accounting standard can be
ignored if the net impact of doing so has such a small impact on the financial statements that a reader of the
financial statements would not be misled.
Under generally accepted accounting principles (GAAP), you do not have to implement the provisions of an
accounting standard if an item is immaterial.
In accounting, materiality refers to the relative size of an amount. Relatively large amounts are material, while
relatively small amounts are not material (or immaterial).
12. What do you mean by Accounting Standards?

Accounting Standards (i.e. AS 1~32) are issued/ amended by the Accounting Standards Board of ICAI from
time to time, to establish uniform standards for preparation of financial statements, in accordance with
generally accepted accounting practices (GAAP) in India and for better understanding of the use₹
These standards are mandatory on the dates specified either in the respective document or by notification
issued by the Council of the ICAI.
Accounting Standards (AS) are basic policy documents. Their main aim is to ensure transparency,
reliability, consistency, and comparability of the financial statements. They do so by standardizing
accounting policies and principles of a nation/economy. So the transactions of all companies will be
recorded in a similar manner if they follow these accounting standards.
13. What are the benefits of Accounting Standards?

Accounting Standards are the ruling authority in the world of accounting. It makes sure that the information
provided to potential investors is not misleading in any way. Let us take a look at the benefits of AS.
(a) Attains Uniformity in Accounting
(b) Improves Reliability of Financial Statements
(c) Prevents Frauds and Accounting Manipulations
(d) Assists Auditors
(e) Comparability
(f) Determining Managerial Accountability
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14. Discuss the procedure for issuing accounting

standards in India.
In India, the accounting standards are issued by the Accounting Standard Board (ASB) of the
ICAI. The Board adopts the following procedure for formulation of accounting standards:
1. Determination of the areas of accounting standard: Firstly, the ASB determines the broad
areas in which accounting standards need to be formulated, and also the priority in the
selection thereof.
2. Constitution of Study Group: In the process of development of accounting standards, ASB
constitutes a Study Group to consider the specific subject. The motive behind constitution
of this group is to assist the ASB in its activities.
3. Dialogue with various representatives: The ASB, thereafter, hold dialogues with the
representatives of the Government, public sector undertakings, industry and other
organisations for getting their views.
4. Preparation of Exposure Draft: On the basis of the work of the Study Group and the
dialogueswith the stakeholders, an exposure draft of the proposed standard is prepared.
5. Issuance for circulation: The exposure draft is thereafter issued for comments by members
ofthe ICAI and the public at large
6. Consideration of views and drafting the Standard: The comments received on the
Exposure Draft are taken into consideration, and thereafter the draft of the proposed
standard is finalised by the ASB and submitted to the Council of the ICAI.
7. Modification of proposed Standard: The Council of the ICAI considers the final draft of
the proposed standard, and if found necessary, modify the same in consultation with ASB.
8. Issuance of Accounting Standard: Finally, the Accounting standard gets issued under the
authority of the Council.
15. Write a short Note on IFRS

(a) International Financial Reporting Standards (IFRS) are accounting standards issued by the
International Accounting Standards Board (IASB).These are global accounting standards that
are issued with the intention of ensuring uniformity in accounting across the globe.
(b) These are intended to provide investors and other stake-holders the ability to compare the
financial performance of publicly listed companies.
1st Semester 5
(c) ‘IFRS’ is the trademark of the International Accounting Standards Committee Foundation.
The Foundation owns the copyright to IFRS in all languages.
(d) IFRSs are now mandated for use by more than 140 countries, including the European Union
and by more than two-thirds of the G20 nations. The G20 and other international
organisations including the World Bank, IMF, Basel Committee etc. have consistently
supported the work of the IASB and its mission of global accounting standards.
(e) The term ‘IFRS’ constitutes in its fold the International Accounting Standards (IAS),
International Financial Reporting Standards (IFRS), SIC Interpretations and IFRIC
Interpretations.
16. Write short notes on: GAAP
The accounting principles that are generally recognised by accountants and represents accepted
accounting practices are called generally accepted accounting principles (GAAP). They are general
guidelines for ensuring fair presentation of financial statements. They make financial statements
relevant, objective, comparable and dependable.
Benefits of GAAP:
Following benefits are derived from GAAP:
(a) Harmonization of Accounting Practices:
(b) Help in Daily Accounting Work:

(c) Quality in Accounting:
(d) Investment Planning:
(e) Deterrence to Window-dressing:
(f) Reduction of Fraud:
(g) Listing of Securities:
(h) Development of International Capital Market:
Disadvantages of GAAP
(a) Rigid Rules:
(b) Non-compatibility:
(c) Difficulty in Interpretation:
(d) Politicization in Standard-setting:
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17. Distinction between Reserve & Provisions**

Provisions Reserves
1. A provision is a charge against profit (a debit 1. A reserve is an appropriation of profit (a debit
in the profit & loss account) in the Profit & Loss Appropriation Account)
2. The creation of provisions has nothing to do 2. The creation of revenue depends on the
with the amount of net profit. In fact, amounts of profits earned by the business.
provisions are created in order to assist in the
calculation of a correct profit.
3. Provisions are created for future liabilities & 3. Reserves are created for safeguarding the
charges or for valuation adjustments of assets. business against unforeseen losses or with a
view to planning for further development of
the business.
4. Provisions are created for some specific 4. Reserves that are created are mostly general,
purpose and are utilized for that particular and/or in a few cases, particular (reserve
purpose. fund).
5. Provisions cannot be distributed as profits 5. Reserves, other than capital reserves, can be
except in cases where the actual liabilities or distributes as profits.
charges fall short of the amount provided for.
7. Provisions may appear in the liabilities side or 7. Reserves compulsorily appear in the liabilities
in the assets side of the balance sheet. side of the Balance Sheet alone.
8. Provisions are not earmarked against any 8. Reserves may be earmarked against a
particular asset. particular asset (reserve fund).
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Chapter
1 Introduction
Chapter 1: Introduction
[5 Marks]
1. Introduction
Mr. Anil Roy, a junior lawyer, provides the following particulars for the year ended 31st December,
2020:
₹
Fees received in cash in 2021 60,000
Salary paid to Staff in 2021 8,000
Rent of office in 2021 14,000
Magazine and Journal for 2021 1,000
Travelling and Conveyance paid in 2021 3,000
Membership Fees paid in 2021 1,600
Office Expenses paid in 2021 10,000
Additional Information:-
Fees include ₹ 3,000 in respect of 2020 and fees not yet received is ₹ 7,000. Office rent includes ₹
4,000 for previous year and rent of ₹ 2,000 not yet paid. Membership fees is paid for 2 years.
Compute his net income for the year 2021, under – (a) Cash Basis, (b) Accrual Basis.
2. Introduction
Using accounting equation, calculate total assets if ——
(i) Capital Rs 5,00,000 ;
(ii) Creditors ₹ 3,00,000 ;
(iii) Revenue during the period ₹ 5,20,000;
(iv) Expenses during the period ₹ 3,80,000.
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Chapter
Chapter 2: Depreciation
2 Depreciation
[10 Marks]
1. Depreciation: [S.L.M Method]

On 1st January, 2018, machinery was purchased by Raju for ₹ 80,000. On 1st July, 2019, additions were
made to the extent of ₹ 12,000. On 1st April, 2020, further additions were made to the extent of ₹ 8,400. On
30st June , 2021 machinery original value of which was ₹ 22,000 on 1st January, 2018, was sold for ₹ 11,500.
Depreciationis charged @ 10% p.a. on original cost. Show Machinery Account for the years from 2018 to 2021
in the booksof Raju. Raju closes his books on 31st December.
2. Depreciation: (Straight line Method)

Purchased a machine on 01.01.2014 at a cost of ₹ 2,00,000. The scrap value of the machine was estimated at ₹
20,000 and its life at 5 years on 01.01.2015, the machine was sold for ₹1,20,000. Another machine of same type
was purchased at a cost of ₹ 1,80,000 on that date . the Scrap value of the machine was estimated at ₹ 12,000
and its life at 10 years the installation cost of the first and second machine were ₹ 20,000 and 4,000
respectively.
Show Machinery Account for the years 2014 and 2015.
3. Depreciation: (Straight line Method)

Kalyani Industries depreciates its machinery at 10% p.a. on straight line basis. On 1st April, 2020 the balance in
Machinery Account was ₹ 8,50,000 (original cost ₹ 12,00,000). On 1st July, 2020 a new machine was
purchased for ₹ 25,000. On 31st December, 2020 an old machine having written down value of ₹ 40,000 on
1.4.2009 (original cost ₹ 60,000) was sold for ₹ 30,000. Show the Machinery Account for the year ended on
31st March, 2021.
4. Depreciation: (Straight Line Method)

A firm purchased a machinery worth ₹ 1,50,000 on 1st January, 2015. On 01.01.2016, another Machinery
Worth ₹ 30,000 was purchased.On 01.01. 2017 a Machine whose original value was ₹24,000 as on 01.01.2015
was sold for ₹ 18,000. Depreciation is charged at 10 on original cost. You are Requested to Preapare Machinery
Account for the Year 2015, 2016 and 2017. (Accounts of the business are closed on 31st December Every Year)
5.Depreciation: [Straight Line Method]
ABC Ltd. purchased the following machines:
₹
On 1st January, 2018 40,000
On 1st July, 2018 20,000
On 1st October, 2019 10,000
Depreciation was provided @ 10% p.a. under the diminishing balance method. The machine purchased on
1st July, 2018 was sold on 31st March, 2019 at ₹ 15,000.
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Show the Machinery accounts in the books of ABC Ltd. for the year 2018 and 2019 assuming that accounts
are closed on 31st December every year.
6.Depreciation: [Straight Line Method]

Mr. Vaid of Calcutta purchased the required machine on 01.04.2014 for ₹ 65,000. He engaged Kabul to erect
the units, who charged ₹ 5,000 and agreed to wait a month for his payment.
The machine was depreciated at 10% p.a. on the fixed Installment method— and accounting year being April-
March on 01.10.2016, Price of ₹ 7,000. On the Same date, a new machine costing ₹ 10,000 (Paid for by
Cheque) was installed.
Write out the Machine Account for the Year 2014-15, 2015-16, 2016-17 and Machinery Disposal Account.
7. Depreciation: [S.L.M Method]

On 1st January, 2018, machinery was purchased by X for ₹ 50,000. On 1st July, 2019, additions were made to
the extent of ₹ 10,000. On 1st April, 2020, further additions were made to the extent of ₹ 6,400. On 30th June,
2021, machinery, original value of which was ₹ 8,000 on 1st January, 2018, was sold for ₹ 6,000. Depreciation
is charged @ 10% p.a. on original cost. Show Machinery Account for the years from 2018 to 2021 in the books
of X. X closes his books on 31st December.
8. Depreciation: (Written down Value Method)

A firm purchased on 1st January, 2020 certain machinery for ₹ 5,82,000 and spent ₹ 18,000 on its erection.
On July 1, 2020 another machinery for ₹ 2,00,000 was acquired. On 1st July, 2021 the machinery purchased
on 1st January, 2020 having become obsolete was auctioned for ₹ 3,86,000 and on the same date fresh
machinery was purchased at a cost of ₹ 4,00,000. Depreciation was provided for annually on 31st
December at the rate of 10 per cent p.a. on written down value. Prepare machinery account.
9. Depreciation: (Change of Method)

M/s Anshul commenced business on 1st January 2017, when they purchased plant and equipment for ₹
7,00,000. They adopted a policy of charging depreciation at 15% per annum on diminishing balance basis and
over the years, their purchases of plant have been:
1-1-2018 ₹ 1,50,000
1-1-2021 ₹ 2,00,000
On 1-1-2021 it was decided to change the method and rate of depreciation to 10 % straight line Method.
Calculate the difference in depreciation to be adjusted in the Plant and Equipment Account till 31.12.2020 and
prepare Plant & Equipment Account for the year 2021.
10. Depreciation: [W.D.V Method]

Plant and Machinery having value of ₹1,00,000 was bought on 1st January, 2018. On 15th July, 2019 a new
machine was purchased for ₹ 40,000. Installation charges paid for this machine was ₹ 5,000. The machine
(bought on 15th July, 2019) was sold at a profit of ₹ 7000 on 1st September, 2021. Write up the Plant and
Machinery Account for the four years ended 31st December, 2021 providing 10% p.a. depreciation under
Diminishing Balance Method.
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The book value of plant and machinery of a firm shows ₹ 2,40,000 on 1st January, 2021. The same includes the
depreciated value of a machine purchased on 1st January, 2016 for ₹ 30,000. It was sold on 1st April, 2021 for ₹
14,900. On the same date a new machine was purchased for ₹ 40,000.
Show the plant and machinery account for the year 2021 assuming depreciation is charged @ 10% p.a. under
diminishing balance method.
12. Depreciation [W.D.V Method]

The book value of plant and machinery of a firm shows ₹ 2, 00,000 on 1st January, 2021. One of the machinery
which was purchased on 1st January, 2016 at ₹ 20,000 is sold for ₹ 9,000 on 30th June, 2021. In place of this
machine, another new machine was purchased at ₹ 30,000 on 30th September, 2021.
Show Plant & Machinery Account in the ledger for 2018 charging depreciation @ 10% p.a. on diminishing
balance method. (Year ending date 31st December).

Plant and Machinery to the value of ₹ 40,000 was purchased on 1st January, 2018. On 1st July, 2021 the
machinery was replaced by a new machine costing ₹ 52,000, the vendor taking the old Machine in part
exchange at a valuation of ₹ 8,200. Write up the Plant and Machinery Account for the four years ended 31st
December, 2021 providing for deprecation by writing 10% off the diminishing value of the Plant and
Machinery employed at the end of each year.
14.Depreciation: [Change of Method] [SLM to WDV]

A firm purchased a Motor Lorry for ₹ 1,80,000 on 1st April. 2019. They used to write off depreciation @ 15%
on the original cost. In 2021 the firm decided that the depreciation should be on the basis of 20% under reducing
balance method with effect from 1st April, 2019, any difference in depreciation upto 31st December, 2020
should be adjusted through Profit & Loss Account. Show Motor Lorry Account for the first three years ending
31st December, 2021.
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1st Semester 13
Note
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10 Marks
Chapter
3 4: Sale onSale
Ch. Approval [10 M]
on Approval
1.Sale or return
E Ltd. sends out its accounting machines costing ₹ 200 each to their customers on Sales or Return basis. All
such transactions are, however, treated like actual sales and are passed through the Day Book. Just before the
end of the financial year, i.e., on March 24, 2021, 300 such accounting machines were sent out at an invoice
price of ₹ 280 each, out of which only 90 accounting machines are accepted by the customers ₹ 250 each and as
to the rest no report is forthcoming. Show the Journal Entries in the books of the company for the purpose of
preparing Final Accounts for the year ended March 31, 2021.
2. Sale or return
CE sends goods to his customers on Sale or Return basis. The following transactions took place during 2021:
Sept. 15 Sent goods to customers on sale or return basis at cost plus 33 1/3 % ₹ 1,00,000
Oct. 20 Goods returned by customers ₹ 40,000
Nov. 25 Received letters of approval from customers ₹ 40,000
Dec . 31 Goods with customers awaiting approval ₹ 20,000
CE records sale or return transactions as ordinary sales. You are required to pass the necessary Journal
Entries in the books of CE assuming that accounting year closes on 31st December, 2021.
3.Sale or return
R & Co. sends out goods on approval to a few customers and includes the same in the Sales Account. On
31.3.2021 the Sundry Debtors balance stood at Rs 1,00,000 which included ₹ 7,000 goods sent on approval
against which no intimation was received during the year. These goods were sent out at 25% over and above
cost price and were sent to Mr. X — ₹ 4,000 and Mr. Y — ₹ 3,000.
Mr. X sent intimation of acceptance on 30th April and Mr. Y returned the goods on 10th April, 2021.
Make the adjustment entries and show how these items will appear in the Balance Sheet on 31st March, 2021.
Show also the entries to be made during April, 2021. Value of closing stock as on 31st March, 2021 was ₹
60,000.
4.Sale or return
A trader sends out goods on approval to some customers and includes the same in the sales account. On
31.12.20, the Sundry Debtors balance (₹ 2,50,000) includes ₹ 14,000 regarding goods sent on approval
against which no intimation was received as on 31.12.20. These goods were sent out at 25% above cost
price and were sent to A – ₹ 8,000 and B – ₹ 6,000. Stock in trade in godown was valued at ₹ 50,000
on 31.12.20. A sent intimation of acceptance on 31.01.21 and B returned the goods on 15.01.21.
Pass adjustment entries on 31.12.20. Show also the entries to be made during January, 21.
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5.Sale or return
A Trader sends out goods on approval basis to customers and includes the same in sales account. On
31.03.21 the stock in hand amounted to ₹ 80,000 and the sundry debtors balance stood at ₹ 1,50,000
which included ₹ 10,000 being invoice value of goods sent on ‘sale or return’ against which no intimation
was received during the year. These goods were sent out at 25% above cost and were sent to Mr. Amit ₹
4,000 and Mr. Ranjit ₹ 6,000.
Make necessary adjustment entries and show how these items will appear in the Balance Sheet on 31st
March, 2021.
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10 Marks
Chapter
4 Chapter 5: Self Balancing

Self Balancing
[10 Marks]
1. Self Balancing
From the following information prepare (1) Debtors Ledger Adjustment Account in the General Ledger,
and (2) General Ledger Adjustment Account in the Debtors Ledger:
Particulars Amount
₹
Opening balance of Sundry Debtors (Dr.) 40,000
(Cr.) 2,000
Cash and cheques receipts 1,60,000
Credit Sales as per Sales Day Book 2,00,000
Discount Allowed 6,000
Returns Inward 4,000
Bad Debts 3,000
Bills Receivable Received 20,000
Bills Receivable Discounted 2,000
Provision for Bad Debts 2,000
Closing Credit Balance of Sundry Debtors 6,000
Transfer from Debtors Ledger to Creditors Ledger 1,000

Transfer from Creditors Ledgers to Debtors Ledger 1,200
2. Self Balancing
Prepare the Creditors Ledger Adjustment Account as it would appear in General Ledger and General Ledger
Adjustment Account as it would appear in Creditors Ledger for the year ended 31st March 2021 from the
following particulars.
Particulars ₹ Particulars ₹
Sundry Creditors (on 1.4.2020) (Cr.) 10,000 Bills Payable issues during the year 4,000
(Dr.) 1,000 Bills Payable dishonoured 2,000
Purchases (including Cash 50,000 Bills Payable renewed 1,000
Purchase of ₹ 10,000)
Returns Outward 2,000 Interest on Bills Payable renewed 100
Cash paid to Creditors 20,000 Sundry Charges paid for dishonour of 100
Bills Payable
Discount allowed by Creditors 3,000 Total of set-off in Debtors Ledger 3,000
Trade Discount 1,000 Sundry Creditors (on 31.3.2021) (Dr.) 4,000
Bills Receivable endorsed to Creditors 2,000
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3. Self Balancing
From the following particulars for the year ended 31st March, 2021 extracted from the books of X Ltd.
prepare Sales Ledger Adjustment Account in the General Ledger:
₹
Sales Ledger Balances 1st April, 2020 (Dr.) 12,500
(Cr.) 300
Sales during the year (including cash sales of ₹ 2,000) 60,400
Cash received from customer 40,100
Return by customer 5,750
Bad debt written off 5,680
Bad debt previously written off recovered in cash during this year 900
Provision for Bad debts 5,950
Allowance to customers 740
Bills Receivable from customers 3,400
Bills Dishonoured 700
Transfer from sales ledger to purchase ledger 2,500
Payment to clear Credit Balance on sales ledger Accounts 100
Closing Credit Balance 1,440
4. Self Balancing:
Prepare Sales Ledger Adjustment Account as would appear in the General Ledger from the following
particulars:
2021 ₹
January 1 25.200 (Dr.)
800 (Cr.)
Dec. 31 Sales 62,400
Returns 6,340
Cash Received 40,100
Bad Debts written off 7,420
Provision for Doubtful Debts 11,000
Bad Debts previously written off, now received 600
Allowances 840
Bills Receivable 2,600
Bills Dishonoured 1,000
Trade Discount 300
Transfer from Bought Ledger 2,400
Dec. 31 Closing Balance of Debtors 27,980 (Dr.)
2,480 (Cr.)
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5. Self Balancing:
Following information have been extracted from the books of Bose & Co. for the year ended 31.12.2021 –
₹
01.01.21 Opening balance of creditors (Dr.) 3,000
(Cr.) 1,20,000
Transaction during the year 2021:
Total Purchase (including credit purchases ₹ 1,80,000) 2,00,000
Return to creditors 4,000
Cash & Cheque paid to creditors 1,75,000
Discount received 8,000
Allowances received 3,000
Bills payable accepted 5,000
Bills payable dishonoured 500
Out of cheque paid to creditors, cheque dishonoured 5,000
Interest charged by creditors 400
Transfer to sales ledger 500
Closing Balance (Dr.) on 31.12.21 1,000
Prepare Creditors Ledger Adjustment Account in General Ledger.
6.Self Balancing:
From the following particulars which have been extracted from the books of Mr. ‘D’, for the year
ended 31.03.21, prepare the ‘Nominal Ledger Adjustment’ Account in the ‘Bought Ledger’.
₹ ₹
Creditors Ledger balances on Acceptances renewed 2,000
01.04.20 (Dr.) 1,800 Interest on renewal of bills 500
(Cr.) 14,000 Sundry charges for dishonoured bills
Purchases (Including cash payable 100
purchases ₹ 2,000) 36,500 Bills receivable endorsed to
Cash paid to creditors 21,000 Creditors 4,500
Discount received 400 Bills receivable as endorsed
Return outward 1,500 dishonoured 1,000
Bills payable accepted Transfer from:
(including renewed bills and Debtors Ledger to Creditors Ledger 500
interest thereon) 14,000 Creditors Ledger to Debtors Ledger 700
Acceptances matured 5,000 Creditors Ledger balance on
Acceptances dishonoured 3,000 31.03.21 (Dr.) 1,200
21
1st Semester 19
7.Self Balancing:
From the following details prepare a General Ledger Adjustment Account in the Creditors Ledger of ABC &
Company:
Credit Purchases 2,80,000 Bills payable accepted 16,000
Cash Purchases 75,000 Bills payable renewed for two more 2,000
Month
Bills Receivable drawn 1,10,000 Payment to creditors 2,52,000
Cash Discount Received 5,000 Return Inward 10,500
Bills Payable Paid 6,500 Return Outward 5,000
Bills Receivable Endorsed to Creditor 10,000 Over Payments refunded by supplies 600
Opening Balance of Sundry Debtors 78,000 Endorsed Bills Receivable discounted 4,000
Opening Balance of Sundry Creditors 85,000
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20 ACCOUNTS
9874411552
10 Marks
Chapter
5 Rectification
Ch.7: Rectification [10 Marks]
1. Rectification of Errors:
Shastri could not agree his Trial Balance. He transferred to Suspense A/c an account of ₹ 296 beingexcess
of the debit side total. The following errors were subsequently discovered :
(a) Sales Book was overcast by ₹ 300.
(b) Purchase of Furniture for ₹ 615 passed through Purchase Book.
(c) An amount of ₹ 55 received from Jograj Singh was posted to his account as ₹ 550.
(d) Purchase Return Book total on a folio was carried forward as ₹ 221 instead of ₹ 112.
(e) A cash sale of ₹ 1,235 duly entered in the Cash Book but posted to Sales A/c as ₹ 235.
(f) Rest of the difference was due to wrong total in the Salaries Account.Give Journal entries to rectify the above
and prepare Suspense Account.
st
The Trial Balance of S.Kumar as on 31 December, 2021 did not agree and the differences were transferred
to Suspense Account. Subsequently, the following errors were disclosed:
(a) The total of one page of the Sales Book was carried forward to the next page as ₹ 4,513
instead of ₹ 4,531.
(b) The total of the Purchases Book was ₹ 400 short.
(c) A cash discount of ₹ 150 received from a Creditor was debited to Cash Discount.
(d) ₹ 1,450 spent on repairs to Delivery Van was debited to Motor Vehicles Account.
(e) ₹ 300 received from M. Ghosh was debited to the account of N. Ghosh in the Sales Ledger.
(f) Goods amounting to ₹ 700 returned by Islam were not entered in the books at all.
(g) ₹ 211 interest on overdraft was credited to Interest Account.
Give the correcting entries.
The following errors were discovered in the books of a trader for the year ended December 31, 2021:
a) The total of the Purchase Day Book had been undercast by ₹ 100.
b) The discount column of the debit side of the Cash Book had been posted to the credit of the Discount
Received Account ₹ 20.
c) ₹ 76 paid for Repairs of Motor Van had been taken to Motor Van Account.
d) A cheque received from B ₹ 39 had been debited in Cash Bank but the double entry had not been
completed.
e) The Returns Outward Book had been overcast by ₹ 50.
Show the Rectification entries considering that the Final Account had already been prepared and the net
profit arrived at amounted ₹ 24,320 (before corrections). Show the calculation of the net profit.
1st Semester
26
21
Rectify the following error before preparation of Trial Balance
(a) Cash withdrawn by proprietor ₹ 2,000 for personal use was debited to trade expenses A/c.
(b) ₹ 2500 spent on installation of wages was debited to Machinery Account.
(c) ₹ 170 Discount allowed was wrongly credited to Discount A/c and Debited to Creditors Account.
The Trial Balance of Mr. Saha did not agrees as on 31.3.2021 and the difference were put to suspense
account and the following mistakes were detected before preparation of final accounts:
(a) Purchases Day Book was over cast by ₹ 2,200.
(b) ₹ 12,000 paid to Sudipta was wrongly debited to Sudipta Account.
(c) ₹ 6,900 paid for replacement of a mother board of a desktop, debited to Repairing Charges Account
as ₹ 900.
You are requires to pass necessary journal entries to rectify the above errors
Pass journal entries to rectify the following errors detected after preparation of Trial Balance but before
preparation of Final Accounts :
(a) Return Inward Book was undercast by ₹ 800.
(b) ₹ 1,000 received from P was debited to the account of Q in the Sales Ledger.
(c) A purchase of ₹ 1,342 had been debited to supplier at ₹ 1,324.
(d) Salary paid ₹ 2,500 wrongly debited as Rent paid.
(e) An amount of ₹ 2,000 withdrawn by the proprietor for his personal use had been debited to
travelling expenses account.
7. Rectification of Errors: [After Trial Balance]

A trader agreed his Trial Balance by putting the difference in a Suspense Account. On subsequently
scrutiny, the books disclosed certain errors detailed below:
i. A credit sale of goods to X for ₹ 700 had been credited to his account.
ii. Goods purchased from Q for ₹ 1,500 was entered in the Purchase Day Book but omitted to be
posted to his account in the Creditor Ledger.
iii. Goods returned by Z of ₹ 1,000 were not debited to Return Inward Account.
iv. An office typewriter purchased for ₹ 3,000 had been debited to Purchase Account.
Pass necessary rectification entries.
8.Rectification of Errors: [After Trial Balance]

The following errors were detected after preparing the Trial Balance but before the preparation of Final
Accounts in the books of Mr. Basu:
a) The total of Return Inwards Book has been cast ₹ 1000 short.
b) A sum of ₹ 4000 written off from machinery has not been posted to Depreciation Account.
c) The purchase of an office furniture costing ₹ 13,000 has been passed through the Purchase day
book.
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9874411552
.
d) ₹ 600 received from Mr. Roy has been debited to Mr. Sen.
Show the Journal entries for rectifying the above errors.

Mr. P. Sen could not agree his Trial Balance on March 31, 2021. The difference has been carried to
suspense A/c. The following errors were subsequently discovered:
a) Sales Day Book was over cost by ₹ 6,000.
b) Purchase of machinery 12,300 was passed through Purchase Day Book.
c) An amount of ₹ 1,100 received from Mr. Dey was posted to his account as ₹ 11,000.
d) Purchase Return Book total on a page was carried forward as ₹ 4,420 instead of ₹ 2,240.
Rectify the above errors by passing necessary journal entries.

Shastri could not agree his Trial Balance. He transferred to Suspense A/c an account of ₹ 296 being
excess of the debit side total. The following errors were subsequently discovered :
(g) Sales Book was overcast by ₹ 300.
(h) Purchase of Furniture for ₹ 615 passed through Purchase Book.
(i) An amount of ₹ 55 received from Jograj Singh was posted to his account as ₹ 550.
(j) Purchase Return Book total on a folio was carried forward as ₹ 221 instead of ₹ 112.
(k) A cash sale of ₹ 1,235 duly entered in the Cash Book but posted to Sales Account as ₹ 235.
(l) Rest of the difference was due to wrong total in the Salaries Account.
Give Journal entries to rectify the above and prepare Suspense Account.
11.Rectification of Errors: [After Final A/c]

In the books of Harinath Bhandar for the year ended 31.3.21, the following mistakes were committed and
the final accounts were completed with the help of a Suspense Account:
(i) Purchase Day Book was overcast by ₹ 600.
(ii) A credit sales of ₹ 780 was debited to the customer Account as ₹ 870
(iii) Credit purchase of ₹ 825 was debited to Supplier's Account ₹ 850.
(iv) Repairs to building ₹ 500 was charged to Building A/c on which depreciation was charged @5%.
Show necessary Journal Entries and Suspense Account
12.Rectification of Errors: [After Final A/c]

The following mistakes were committed in the books of Manish for the year ended 31.3.2021 and the final
accounts were completed with help of ‘Suspense’ Account:
a. Sales Day Book was under cost by ₹ 2,000.
b. An office table was purchased for ₹ 5,000 but wrongly included in purchases.
c. Salary paid to the manager ₹ 10,000 but debited to his personal account.
d. A credit sale of ₹ 3,500 was debited to the customer’s account as ₹ 5,300.
Show necessary journal entries and prepare Suspense Account.
28
1st Semester 23
Note
24 ACCOUNTS
9874411552
Gobind Kumar Jha 987441155Marks
52
Chapter
6Chapter 8: Inventory
Inventory
[5 Marks]
1. Inventory: Example on NRV
Unsold units with Agent 1,000
Cost per unit ₹ 10
Estimated Selling Price per unit as at Balance Sheet date ₹8
Agent’s Commission on sales 5%
What should be the Value of Closing Stock?
2. Inventory: Stock Taking

X who was closing his books on 31.3.2021 failed to take the actual stock which he did only on 9th April,
2021, when it was ascertained by him to be worth ₹ 25,000. It was found that:
(a) Sales are entered in the sales book on the same day of dispatch and return inwards in the returns
book as and when the goods are received back.
(b) Purchases are entered in the purchases day book once the invoices are received.
(c) Sales between 31.3.2021 and 9.4.2021 as per the sales day book are ₹ 1,720.
(d) Purchases between 31.3.2021 and 9.4.2021 as per purchases day book are ₹ 120, out of these goods
amounting to ₹ 50 were not received until after the stock was taken.
(e) Goods invoiced during the month of March, 2021 but goods received only on 4th April, 2021
amounted to ₹ 100.
(f) Rate of gross profit is 33 1/3% on cost.
Ascertain the value of stock as on 31.3.2021.
3. Inventory: Valuation of Stock

From the following particulars for the year ended 31.03.21, determine the value of the closing stock at the
end of the year.
Opening stock on 01.04.20 ₹ 40,000
Purchases ₹ 2, 25,000
Sales ₹ 3, 00,000
At the end of the year goods purchased on credit for ₹ 25,000 were received but no entry passed for non-
receipt of invoice. Uniform rate of Gross Profit is 30%.
4. Inventory: Stock Taking

From the following data, calculate the value of closing inventory on 31st July, 2021 using FIFO method:
2021
July 1 Opening Stock 100 kg @ ₹ 10 per kg
July 6 Purchase 600 kg @ ₹ 11 per kg
July 15 Issued 450 kg
July 21 Purchases 800 kg @ ₹ 12 per kg
29
1st Semester 25
Note
26 ACCOUNTS
9874411552
10 Marks
Chapter
7 Capital
Chapter 9: & Revenue
Expenditure
Capital & Revenue Expenditure
Capital Expenditure
A capital expenditure is one which increases the value at which a fixed or capital asset may
properly be carried on in the books. The term capital expenditure is generally used to signify that
expenditure which
(i) Increases quantity of fixed assets;
(ii) Increases quality of fixed assets; or
(iii) Results in the replacement of fixed assets.
Following are the examples of capital expenditure:

a) Expenditure resulting in the acquisition of long-lived (fixed) assets, e.g., land, building,
machinery, furniture, motor car, trade marks.
b) Expenditure resulting in extension or improvement of fixed assets, e.g., amount spent on
increasing the seating accommodation in the picture hall.
c) Expenditure in connection with the purchase, receipt or erection of a fixed asset, e.g.,
wages paid or expenses on the erection of plant and machinery, expenses on cartage,
insurance of a fixed asset.
d) Major repairs and replacement of parts resulting in increased efficiency of a fixed asset.
e) Expenditure incurred or acquiring the right to carry on a business e.g., patent rights,
copyright, goodwill.
f) Legal charges and stamp duty paid for conveyancing on acquisition of a property.
g) Architect fees paid for supervising construction of a property.
Revenue Expenditure
An amount spent for earning or providing revenue is called revenue expenditure. Revenue
expenditure is one which constitutes a proper deduction from income or revenue. It is an expense.
Examples are:
a) Expenses incurred in the normal course of business, e.g., expenses of administration,
expenses incurred in manufacturing and selling products. Examples of such expenses are
salaries, rent, insurance, postage, stationery and repairs to assets.
b) Expenses incurred to maintain the business
c) Cost of goods purchased for resale.
d) Depreciation on fixed assets, interest on loans for business, loss from sale of fixed asset.
Deferred Revenue Expenditure

A heavy expenditure of revenue nature incurred for getting benefit over a number of years is
classified as deferred revenue expenditure. Preliminary expenses, brokerage on issue of shares and
debentures, discount on issue of shares or debentures, exceptional repairs, heavy advertisement,
expenses incurred in removing the business to more convenient premises, are examples of such
expenses which are essential for carrying on the business and thus revenue in nature.
30
1st Semester 27
1. Capital & Revenue Expenditure

State which of the following are Capital Expenditure and which are Revenue Expenditure giving
reasons in each case:
(a) Purchase of Machinery ₹ 50,000
(b) Paid customs duty of ₹ 10,000 for importing machinery from foreign country.
(c) Carriage paid for bringing the machine ₹ 3,000
(d) Wages paid for installation of the machinery ₹ 4,000
(e) Repairing cost for the machinery ₹ 2,000 after installation
(f) Insurance premium paid for machinery ₹ 1,000
(g) Paid office rent for ₹ 5,000
(h) Spent ₹ 30,000 for repairing of building.
(i) Paid ₹ 10,000 as registration fees for registering Patent Right.
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28 ACCOUNTS
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20 Marks
Chapter
8 Single
Chapter 10: Single Entry
Entry
[20 Marks]
Introduction
Many small businesses have neither the time nor the experience necessary to maintain a full set of
accounting records using the double entry system; and cannot afford the expense of outside staff to keep
such records. However, every business is interested to know its profit from time to time. Any set of
procedures for ascertaining profits that does not provide for the analysis of each transaction in terms of the
double entry system of bookkeeping is generally referred to as ‘Single Entry System’.
Conversion to double entry system

Step 1
If no Cash Account or Bank Account is maintained properly, a careful scrutiny of the Bank Statement of
pass book shall be made and enquiry should be done in respect of the amount of cash takings which has
been used by the trader for meeting personal expenses, business expenses or for cash purchase, etc.
After collecting information through enquiry and Scrutiny, a cash book (with cash & bank columns etc.)
should be prepared
Step 2:
Prepare Total Debtors Account, Total Creditors Account, Bills Receivable Account and Bills Payable
Account, Total sales Account and Total Purchases Account. The preparation of these accounts will help for
finding out different missing information regarding; (i) opening/closing debtors balance; (ii)
Opening/closing creditors balances; (iii) Credit purchases; and (iv) Credit sales, etc.
Step 6
Write up the Asset a/c from the information contained in the Cash Book and other accounts. Every account
should be carefully scanned; and the double entry effect of every transaction must be given.
Step 4
Prepare the Statement of Affairs (opening Balance Sheet) with the available information. The Balance of
the statement of Affairs represents opening capital.
Step 5
From the allied information, prepare Trading, Profit and Loss Account and Balance Sheet.
Calculation of Missing Figures

Cash Book: Closing Cash or any other missing Figure
Debtors & B/R: Credit Sales or any other missing Figure
Creditors & P/P: Credit Purchase or any other missing Figure
Assets A/c: Depreciation or any other missing Figure
Trading A/c: If GP % is given, there must be a missing figure in Trading A/c
Opening Balance Sheet: Opening capital
32
1st Semester 29
1. Single Entry:
A sole proprietor does not maintain complete books of account. From the following information, prepare
trading and profit and loss account for the year ended 31st December, 2021 and balance sheet as at that date:
On 31-12-2020 (₹) On 31-12-2021 (₹)
Debtors 9,000 12,500
Stock 4,900 6,600
Furniture 500 750
Creditors 3,000 2,250
Transactions during the year ended 31st December, 2021 :
₹
Cash collected from debtors 30,400
Cash paid to creditors 22,000
Salaries 6,000
Rent 750
Office expenses 900
Drawings 1500
Fresh capital introduced 1,000
Cash sales 750
Cash purchases 2500
Discount received 350
Discount allowed 150
Returns inwards 500
Returns outwards 400
Bad debts 100
He had ₹ 2,500 cash at the beginning of the year.
33
30 ACCOUNTS
9874411552
2. Single Entry:
Following information is obtained from the books of Vinay, who maintained his books of account
under Single Entry System:
I. Receipts for the year ended 31st March, 2021: ₹

From Debtors 88,125
Cash Sales 20,625
Paid by Vinay 12,500
1,21,250
2. Payments during the year:
New plant bought 3,125
Drawings 7,500
Salaries 5,625
Wages 33,625
Interest paid 375
Rent paid 6,625
Light and power 2,375
Sundry Expenses 10,625
Sundry Creditors 38,125
1,08,000
Vinay banks all receipts and makes payments by means of cheque.
As at 31st March,2020 As at 31st March, 2021

Assests and Liabilities (₹) (₹)
Sundry Creditors 12,625 12,000
Sundry Debtors 18,750 30,625
Bank 3,125 ?
Stock 31,250 15,625
Plant 37,500 36,575
From the above information, prepare Trading and Profit and Loss Account for the year ended 31st
March, 2021 and Balance Sheet as on that date.
34
1st Semester 31
3. Single Entry:
Surya does not keep a systematic record of his transactions. He is able to give you the following
information regarding his assets and liabilities:
31st March 2020 31st March, 2021

(₹) (₹)
Creditors for goods 21,000 19,000
Creditors for expenses 1,500 1,800
Bills Payable 8,700 11,500
Stock (At cost) 28,000 25,000
Furniture and Fittings 10,000 12,000
Cash 5,100 4,600
Following additional information is also avialable for the year ended 31st March, 2021:
₹
Bills Payable Issued 20,800
Cash Sales 15,000
Payment to Sundry Creditors 31,000
Expenses paid 6,600
Drawings 8,000
Bad Debts during the year were ₹ 900. As regards sale, Surya tells you that he always sells goods at
Cost plus 25%. Furniture and Fittings are to be depreciated at 10 % of the value in the beginning of the
year.
Prepare Surya's Trading and Profit and Loss Account for the year ended 31st March, 2021 and his Balance
Sheet on that date.
4. Single Entry: [Conversion into double Entry]

Imtiaz commenced business on 1st January, 2021, with a capital of ₹ 45,000. He immediately purchased
furniture for ₹ 24,000. During the year he received from his uncle a gift of ₹ 3,000 and he borrowed
from his father a sum of ₹ 5,000. He had withdrawn ₹ 600 per month for his household expenses.
He had no bank account and all dealings were in cash. He did not maintain double entry books but the
following information is obtained from his records:
₹
Sales (including cash sales ₹ 30,000) 1,00,000
Purchases (including cash purchases ₹ 10,000) 75,000
Carriage inwards 700
Wages 300
Discount allowed to debtors 800
Salaries 6,200
Bad debts written off 1,500
Trade expenses 1,200
Advertisements 2,200
He used goods worth ₹ 1,300 for personal purposes and paid ₹ 500 to his son for examination and
college fees. On 31st December, 2021, his debtors were worth ₹ 21,000 and creditors ₹ 15,000. Stock- in-
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32 ACCOUNTS
9874411552
trade was valued at ₹ 10,000. Furniture is to be depreciated by 10% p.a.

Prepare a trading, Profit & loss A/c and a balance sheet as on 31.12.2021.
5. Single Entry:
Mr. X does not maintain regular books of accounts. From his incomplete records, the following information
could be available for the year ended 31.03.2021:
(i) Cash Sales ₹ 9,600
(ii) Total cash collection from Debtors ₹ 15,000
(iii) A summary of the Bank Account for the year ended 31.12.2021:
To Deposits (cash) 23,955 By Balance (Overdraft on 1.4.2020) 2,400
By General expenses 4,755
By Interest & Bank charges 45
By salaries 5,100
By Drawings 1,200
By Creditors 9,000
By Balance on 31.12.2021 1,455
23,955 23,955
Other Balances as on 1.1.2021 were as follows: Stock ₹ 5,400; Debtors ₹ 13,200; Furniture ₹ 600;
Building ₹ 9,000; Creditors ₹ 4,800; Cash in hand ₹ 50.
(iv) He purchased an old Machine at ₹ 600 on 1.1.2021.
(v) Besides the cash balance as above, other balances on 31.12.2021 were; Creditors ₹ 3,300; Stock ₹
6,120 and Debtors ₹ 18,000.
Prepare a Trading and Profit and Loss Account for the year ended 31.03.2021 and the Balance Sheet on that
date after charging depreciation @ 10% p.a. on all fixed assets.
36
1st Semester 33
Note
34 ACCOUNTS
9874411552
20 Marks
Gobind Kumar Jha
Chapter
9874411552
9 Non-Trading
Chapter 11: Non-trading [20 M]
RECEIPTS AND PAYMENTS ACCOUNT
Receipt and Payment Account
for the period ending on……
Dr. Cr.
Receipts ₹ Payments ₹
To Balance B/D: By Balance B/D (Bank xxx
Overdraft)
Cash xxx By Annual Sports Expenses xxx
Bank xxx xxx By Salaries & Wages xxx
To Subscription: By Rent, Rates & Taxes xxx
For Previous Year xxx By Insurance xxx
For Current Year xxx By Furniture xxx
For Next Year xxx xxx By Sports Equipments xxx
To Entrance Fees xxx By Books & Periodicals xxx
To Donation For Building xxx By Audit Fees xxx
To General Donation xxx By Printing & Stationery xxx
To Life Membership Fees xxx By Honorarium xxx
To Legacy xxx By Bank Charges xxx
To Grant From Govt. xxx By Postage & Telegrams xxx
To Contribution For Annual Dinner xxx By Water & Electricity xxx

To Dividend xxx By Conveyance & Travelling xxx
To Interest xxx By Repairs & Maintenance xxx
To Rent xxx By Sundry Expenses xxx
To Receipt On Annual Sports xxx By 12% Investments xxx
To Sale Of Old Sports Material xxx By Balance C/D:
To Sale Of Old Magazines xxx Cash xxx
To Sundry Receipts xxx Bank xxx xxx
To Balance C/D (Bank Overdraft) xxx
xxx xxx
Note:
(a) It records all the receipts and payments whether they relate to previous, current or following accounting
year.
(b) It does not record non-cash items (e.g. depreciation).
37
1st Semester 35
Income and Expenditure Account

The ‘Income & Expenditure Account’ is a final account like Profit & Loss Account, which shows the
classified summary of revenue income, revenue expenses and losses for current accounting period
alongwith surplus (i.e. the excess of income over expenditure) or deficit (i.e. the excess of expenditure over
income) which is transferred to the Capital Fund.
Note:
(a) It records only those incomes, expenses and losses which are of revenue nature.
(b) It records only those incomes, expenses and losses which relate to current accounting year.
(c) It records non-cash items (e.g. depreciation).
Income & Expenditure Account

for the year ending on……
Dr. Cr.
Expenditure ₹ Income ₹
To Salaries & Wages Paid xxx By Subscription Received xxx xxx
Add: Outstanding At The End xxx Add: Outstanding At The End xxx xxx
Less: Prepaid At The End xxx xxx Less Advance At The End xxx xxx
Add: Prepaid In The Beginning xxx Add: Advance In The Beg. xxx xxx
Less: Outstanding In The Beginning xxx Less: Outstanding In The Beg xxx xxx
To Rents, Rates & Taxes xxx By Entrance Fees (Only That Portion Which Is xxx
To Be Treated As Revenue)
To Insurance Premium xxx By General Donations xxx
To Depreciation On Furniture & Sports xxx By Membership Fees (Only That Portion Which xxx
Equipments Is To Be Treated As Revenue)
To Books & Periodicals xxx By Profit From Annual Dinner Contribution xxx xxx
To Audit Fee xxx Less: Expenses xxx xxx
To Printing & Stationery xxx By Profit On Annual Sports (Receipt - Expenses) xxx
To Honorarium xxx By Profit On Sale Of Provisions (Sale + Closing xxx

Stock - Purchases - Opening Stock)
To Bank Charges xxx By Rent Of Club Hall xxx
To Postage & Telegrams xxx By Dividend & Interest xxx
To Water & Electricity xxx By Sundry Receipts xxx
To Conveyance & Travelling xxx By Deficit xxx
( I.E. Excess Of Expenditure Over Income)
To Sundry Expenses xxx
To Surplus xxx
(Excess Of Income Over Expenditure)
xxx xxx
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9874411552
Format of Balance Sheet
Balance Sheet of …. as at……..
Liabilities Rs Assets Rs
Capital Fund: Fixed Assets:
Opening Balance xxx Building
Add: Surplus xxx Opening Balance xxx
(Or Deficit) xxx Add: Additions xxx
Add: Entrance Fees Less: Depreciations xxx xxx
(To The Extent Capitalised) xxx
Add: Life Membership Subscription Furniture
(To The Extent Capitalised) xxx
Add: Amount Of Capital Expenditure Opening Balance xxx
Transferred From A Special Fund
(E.G. Building Fund) xxx xxx
Prize Fund: Add: Additions xxx
Opening Capital xxx Less: Book Value Of Assets Sold xxx
Add: Donation For Prizes xxx Less: Depreciations xxx xxx
Add: Income From Prize Fund Investments xxx Sports Equipments xxx
Less: Expenses xxx xxx Less: Depreciations xxx xxx
Building Fund: Investments:
Add: Donation For Building xxx Prize Fund Investments xxx
Add; Income From Building Fund Investments xxx Building Fund Investments xxx
Less: Transfer To Capital Fund xxx xxx 10% Govt. Securities xxx
Current Liabilities: Fixed Deposits xxx
Subscription Received In Advance xxx Current Assets
Outstanding Expenses xxx Sports Material xxx
Bank Overdraft xxx Outstanding Subscriptions xxx
Creditors xxx Accrued Interest xxx
Accrued Rent xxx
Cash In Hand xxx
Cash At Bank xxx
xxx xxx
39
1st Semester 37
Meaning of Accounting Treatment of Some Peculiar Items

Subscription:
Subscription is the major source of revenue income of a not-for-profit entity. Subscriptions are the amounts
paid by the members of such entity to maintain their membership. Subscriptions may be paid periodically
(usually on yearly basis).
Accounting Treatment – where the accrual basis of accounting is used, only that amount of subscription
which relates to current accounting period should be treated as revenue income of that period.
Particular ₹ ₹
A Subscription received during the current years XXX
B Add: (i) Outstanding subscription at the end of current year XXX
(ii) Advance subscription in the beginning of current year XXX XXX
C Less: (i) Outstanding subscription in the beginning of current year XXX
(ii) Advance subscription at the end of current year XXX XXX
Subscription income to be credited to Income & Expenditure Account
D (A + B - C) XXX
Example 1:
Compute the income from subscription for the year 2021 from the following particulars relating to a club:
1.1.2021 (₹) 31.12.2021 (₹)
Outstanding subscription 9,500 7,000
Advance subscription 2,800 5,200
Subscription received during 1,48,900
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9874411552
1. Non-trading
From the following particulars relating to RK Charitable Hospital, prepare Income and Expenditure
Account & for the year ended 31st December 2021 & Balance sheet as on 31/12/2021.
To Balance b/d 7,000 By Payments for Medicines 30,000
To Subscriptions 50,000 By Doctor's honorarium 10,000
To Donations 14,500 By Salaries 27,500
To Interest on Investments By Petty Expenses 500
(@ 7% for full one year) 7,000 By Equipment 15,000
To Proceeds from Charity Show 10,000 By Expenses on Charity Show 1,000
By Balance c/d 4,500
88,500 88,500
Additional Information: -
1.1.21 (in ₹ ) 31.12.21 (in ₹ )
Subscription Due 500 1,000
Subscription received in Advance 1,000 500
Stock of Medicine 10,000 15,000
Amount due to Medicine supplier 8,000 12,000
Value of Equipment 21,000 30,000
Value of buildings 40,000 38,000
2. Non-trading
The following Receipts and Payment account of recreation club for the year endedMar. 31, 2021.
Recreation Club
Receipts and Payment Account For the year ended Mar. 31, 2021
Receipts Amount Payment Amount
To Balance b/d ₹ 31,000 By Charity Expense ₹ 10,000
To Subscription 1,80,000 By Salaries Expense 2,20,000
To Legacy 40,000 By Printing & stationery 6,000
To Endowment Fund 2,00,000 By Postage 1,000
To Locker Rent 50,000 By Rent Expense 15,000
To Interest on Investment 15,000 By Upkeep of ground 20,000
To Procced from Sports 45,000 By Sports Materials 1,00,000
To Sale of newspapers 5,000 By Internet & telephone 34,000
By Investment in security 150,000
By Balance c/d: 10,000
5,66,000 5,66,000
41
1st Semester 39
Additional Information:
(i) The assets and liabilities were as follows:
Items Mar.31, 2020 Mar.31, 2021
Land & Building ₹ 5,00,000 ₹ 5,00,000
Furniture and Fittings ₹ 50,000 ₹ 40,000
Outstanding Subscriptions 20,000 ₹ 14,000
Advance Subscriptions ₹ 5,000 ₹ 14,000
Stock of Sport Materials ₹10,000
(ii) Legacies received is to be capitalised.
(iii) Investment in securities was made on May 1, 2021 at 12 % interest per year.
(iv) Stock of sport material is used during the year is ₹ 90,000.

(v) Depreciation is charged on Furniture on Straight line method @ 20% per year.
Prepare Income and Expenditure account and Balance sheet for the year ended March 31, 2021.
3. Non-trading
From the following particulars relating to RK Charitable Hospital, prepare Income and Expenditure
Account & for the year ended 31st December 2021 & Balance sheet as on 31/12/2021
To Balance b/d 7,130 By Medicines 30,590
To Subscriptions 47,996 By Doctor's honorarium 9,000
To Donations 14,500 By Salaries 27,500
To Interest on Investments By Petty Expenses 461
(@ 7% for full one year) 7,000 By Equipment 15,000
To Proceeds from Charity Show 10,450 By Expenses on Charity Show 750
87,076 87,076
1.1.21 (in ₹ ) 31.12.21 (in ₹ )
Subscription Due 200 240
Subscription received in Advance 64 100
Stock of Medicine 8,810 9,740
Value of Equipment 21,200 31,600
Value of buildings 40,000 38,000
42
40 ACCOUNTS
9874411552
4.Non-trading
A summary of Receipts and Payments of Calcutta Football Club for the year ended 31.12.2021
Cash in hand as on 1.1.21 2,500 Remuneration to coach 6,000
Cash at Bank as on 1.1.21 22,300 Groundman's Salary 2,500
Bank interest 500 Purchase of Equipments 15,500
Entrance fees 5,000 Bar Room Expenses 2,000
Subscriptions 25,000 Ground rent 4,500
Bar Room Receipts 4,000 Night Club Expenses 4,800
Sale of Equipments 800 Printing & Stationery 2,500
Proceeds of Night Club 10,800 Repairs to equipments 4,500
Cash at Bank as on 31.12.21 25,600
Cash in hand as on 31.12.21 3,000
70,900 70,900
1.1.21 31.12.21
Subscription Due 1,500 1,000
Sum Due for Printing & machinery 1,000 800
Estimated Value of Equipment 8,000 17,500
You are required to prepareAn Income & Expenditure Account& Balance Sheet.
5.Non-trading
From the following Receipts and Payments A/c Kolkata Cricket Club for the year ended 31.12.2021, you
are required to prepare Income and Expenditure A/c for the year 31.12.2021 and a Balance Sheet
To Balance b/d By Salaries 1,050
- Cash in hand 600 By Rent 1,800
- Cash at Bank 1,700 By Equipments 5,000
To Subscriptions 12,250 By Sports Expenses 2,350
To Entrance Fees 1,500 By Remuneration to coach 2,000
By Sundry Expenses 550
By Printing and Stationery 400
By Balance c/d
- Cash in hand 850
- Cash at bank 2,050
16,050 16,050
43
1st Semester 41
The following information are also available:

31.12.20 (₹ ) 31.12.21 (₹ )
Subscriptions received in advance 700 1,350
Outstanding Subscriptions 1,050 1,600
Outstanding Rent 300 150
Salaries paid in advance 600 450
Equipments 9,000 11,500
50% of the entrance fees is to be capitalised.
6. Non-trading
Prepare Income & Expenditure A/c for the year ended 31.12.2021 & Balance Sheet as on 31.12.2021:
Opening Balance Sheet as on 1.1.2021
Liabilities ₹ Assets ₹
Capital fund 3,00,000 Building 1,00,000
Outstanding expenses 10,000 Furniture 10,000
Library 50,000
Investments 1,00,000
Outstanding subscription 40,000
Cash in hand 10,000
3,10,000 3,10,000
Cash book during the year was as follows:
To Balance b/d 10,000 By Salaries 7,200
To Subscriptions 1,50,000 By Purchase of books 80,000
To Donations 1,00,000 By Rent and taxes 7,200
To Interest on Investment 1,200 By Outstanding expenses 10,000
To Sale of old furniture 1,000 By Insurance premium 3,000
By Printing and stationery 900
By Purchase of furniture 15,000
By Investment 1,34,000
By Sundry expenses 900
2,62,200 2,62,200
Additional Information:Accrued Subscription ₹ 30,000

i. Outstanding liabilities for expenses ₹ 15,000
ii. Insurance Premium amounting to ₹ 600 was paid in advance.
iii. Depreciated Building at 5% ; Library books is 10 % and Write off Investment by 5%.
iv. Depreciation is to be calculated on the opening balances of assets.
44
42 ACCOUNTS
9874411552
20 Marks
Chapter
10Chapter 12: Final Account

Final Account
[20 Marks]
1. Final Account:
From the following balances extracted from the books of a trader on December 31, 2021, prepare a Trading
and Profit and Loss Account for the year ended on that date and also a Balance Sheet as on same date:
Debit Balance ₹ Credit Balance ₹

Drawings Account 7,100 Capital Account 42,500
Plant and Machinery 9,500 Sales 1,19,060
Stock on 01.01.2021 14,600 Purchase Return 2,910
Purchases 1,03,620 Bank Overdraft 1,200
Sales Return 2,100 Creditors 10,000
General Expenses 2,000 Provision for Doubtful Debts 1,050
Wages 2,400
Rent and Rates 3,200
Bad Debts 1,720
Debtors 30,000
Cash in hand 480
1,76,720 1,76,720
Adjustments:
(a) Provide 10% depreciation on Plant and Machinery.
(b) Provision for Doubtful Debts is to be increased to 5% of Debtors.
(c) A credit sale of ₹ 2,000 has not been recorded in the books.
(d) Plant and Machinery worth ₹ 1,000 purchased during the year (on September 30, 2021) has been
included in Purchases.
(e) Rent paid in advance was ₹ 800.
(f) Stock on 31.12.2021 has been valued at ₹ 17,300. This does not include the value of the Plant and
Machinery bought on 30.09.2021.
(g) Wages includes ₹ 200 for installation of Plant.
45
1st Semester 43
2. Final Account:
From the following balances extracted from the books of a trader on March 31, 2021 prepare a Trading and Profit
and Loss Account for the year ended on that date and also a Balance Sheet as on same date:
Particulars Dr. Cr.
₹ ₹
X’s Capital - 10,000
Plant & Machinery 3,600 -
Depreciation on Plant & Machinery 400 -
Repairs to Plant 520 -
Wages 5,400 -
Salaries 2,100 -
Income Tax of Mr. X 100 -
Cash in hand and at Bank 400 -
Land & Building 14,900 -
Depreciation on Building 500 -
Purchases 25,000 -
Purchase Return - 300
Sales - 49,800
Bank Overdraft - 760
Accrued Income 300 -
Salaries Outstanding - 400
Bills Receivable 3,000 -
Provision for bad debts - 1,000
Bills Payable - 1,600
Bad Debts 200 -
Discount on Purchases - 708
Debtors 7,000 -
Creditors - 6,252
Opening Stock 7,400 -
70,820 70,820
Information:
(i) Stock on 31st March, 2021: Cost Price ₹ 6,000; Market Price ₹ 8,000
(ii) Write off further ₹600 for Bad debt and maintain a provision for Bad Debts at 5% on Debtors
(iii) Goods costing ₹ 1000 were sent to customers for ₹ 1,200 on 30th March, 2021 on sale or return
basis. This was recorded as actual sales.
(iv) ₹ 240 paid as rent of the office were debited to landlord account and were included in list of
Debtors
(v) General Manager is to be given commission at 10% of net profit after charging the commission of
the Works Manager and his own.
(vi) Works Manager is to be given commission at 12% of net profit before charging Commission of
General Manager and his own.
46
44 ACCOUNTS
9874411552
3. Final Account:
The following is the Trial Balance of Mr. Basu as on 31st March, 2021:
Opening Stock 60,000 Sales 3,82,000
Purchases 1,70,000 Purchase Return 3,200
Sales Return 3,000 Discount 800
Carriage on Purchases 2,000 Sundry Creditors 51,000
Wages 30,000 Bills Payable 15,000
Bills Receivable 21,000 Capital 1,30,000
Discount 1,600
Salary 18,800
Insurance 2,400
Rent 3,600
Sundry Debtors 86,000
Income Tax 1,800
Cash at Bank 13,400
Furniture 24,000
Plant and Machinery 1,30,000
Bad Debts 1,000
Freight and duty 3,400
Drawings 10,000
5,82,000 5,82,000
The following adjustments are to be made before preparing the final accounts :
(a) A credit sale of ₹ 2,000 has not been recorded in the books.
(b) Goods costing ₹ 1,000 has been taken by the proprietor for his personal use.
(c) Goods worth ₹ 500 distributed as free sample has not been recorded.
(d) Wages includes ₹ 3,000 for the year 2020 and Rent paid is for 9 months’ rent.
(e) Depreciate Plant & Machinery and Furniture at 10% and 5% respectively.
(f) Bad Debts to be written off ₹ 6,000 and a provision @ 5% to be made for Doubtful Debts.
47
1st Semester 45
4. Final Account:
The following is the Trial Balance of Mr. Roy as on 31st March, 2021:
Plant & Machinery 3,10,000 Capital 4,20,000
Opening Stock 30,000 Sundry Creditors 20,000
Sundry Debtors 40,000 Sales 2,10,000
Wages 10,000 Return Outward 20,000
Salaries 15,000 Provision for Doubtful debt 1,000
Rent (April 2020 to June 2021) 18,000 Interest 4,000
Purchases 1,50,000
Return Inward 10,000
Bad debt 9,000
Insurance 3,000
Office Expenses 5,000
Cash in hand 30,000
Cash at Bank 45,000
6,75,000 6,75,000
Additional information :
(i) Stock on 31st March, 2021 was valued at ₹ 35,000.
(ii) Further bad debt of ₹ 1,000 is to be written off and a provision for doubtful debts @ 5% on
Sundry Debtors is to be maintained.
(iii) Goods costing ₹ 5,000 have been distributed as free sample.
(iv) Purchase of machinery worth ₹ 20,000 on 01.10.2020 has been wrongly included in
Purchases Account. Depreciation @10 % p.a. is to be charged on machinery.
(v) Office expenses outstanding ₹ 500.

Prepare Trading Account, Profit & Loss Account for the year ended on 31.03.2021 and
Balance Sheet of Mr. Roy as on that date.
48
46 ACCOUNTS
9874411552
5. Final Account:
The following is the Trial Balance of Mr. H as at 31.3.2021
Drawings 10,000 Capital 1,70,000
Other Equipment 1,10,000 Sales 1,65,000
Purchases 84,000 Returns 4,000
Returns 5,000 Bad Debts recovered 26,450
Bad debts 5,000 Discount Received 1,000
Carriage inward 5,000 Creditors 2,02,000
Carriage outward 7,000 Bills Payable 5,600
Discount allowed 2,000 Bank Overdraft 29,000
Sale commission 4,000 Bank Loan (taken on 1.4.20) 30,000
Rent 4,000
Interest 1,500
Debtors 2,15,000
Bills Receivables 10,000
Investment 50,000
Opening Stock 54,000
Cash 50,550
6,33,050 6,33,050
(a) Closing Stock at market price as on 31.3.2021 was 61,500. (The cost of such stock was ₹
80,000)
(b) Provide for depreciation on office equipment @ 10% p.a.
(c) Goods costing ₹ 10,000 was destroyed due to fire on 30.3.2021, the insurance company
accepted a claim to the extent of 60% only and paid the claim money only on 10.4.2021.
(d) Of the bill receivables, a bill of ₹ 4,000 is dishonored. No entry has been made in the books
of account.
(e) Write off ₹ 9,000 as bad debt and maintain a provision for bad debt @ 5%.
(f) Manager is entitled to a commission of 5% of net profit before charging his commission.
You are required to prepare a Trading and Profit & Loss Account for the year ended on 31.3.2021 and
a Balance Sheet on that date.
49
1st Semester 47
Note
48 ACCOUNTS
R - I
E S T E
SEM 1552
1
98 7 4 4
Gobind
Kumar
Jha
For
CU
2022
N C I A L
Final
FI N A
Suggestions
I N G - I
O U N T
ACC
9874411552
Honours 2017
Financial
GOBIND KUMAR JHA GKJ.
Accounting
Financial Accounting: Honours 2017
9874411552
Group A: 5 Question of 5 Marks Each (out of 8): 25 Marks

Question 1 [Unit 1: Introduction]:
(a) What is ‘Accounting Cycle’? Mention the steps involved in an ‘accounting cycle’ (b)
What do you mean by cash basis of accounting?
Or
State the name of the accounting concept or convention applied in each of the following cases:
(a) Recording of capital contributed by the owner in a sole proprietorship business a liability.
(b) Valuation of inventories at lower of cost or net realizable value.
(c) Omission of paisa and showing the round figures in financial statements.
(d) Assets are classified into fixed assets and current assets. (e) Showing outstanding expenses in the
Balance Sheet.
Question 2 [Unit-2: Concepts for determination of business]: (a)

Define Revenue.
(b) How would you recognize revenue from the sale of goods?
Question 3 [Unit-3: Accounting theory]:

What do you mean by maintenance of Financial Capital? Why is it important to maintain capital for an entity?

State the limitations of ‘Historical Cost Accounting’.
Or
State the need for having a global financial reporting standard.
Question 5 [Unit- 5: Sale on Approval]:

M/s Bose Brothers, a trader sends goods to his customers on ‘Sale of Return’ basis. The following transactions
took place during 2021:
₹
25.9.2021 Sent goods to customers on sale or return basis at cost plus 30% 1,50,000
23.10.2021 Goods returned by customers 40,000
18.11.2021 Received letters of approval from customers confirming purchase 71,000
of goods
31.12.2021 Goods with customers awaiting approval (date of return has not yet 39,000
expired)
M/s Bose Brothers records sale or return transactions as ordinary sales.

You are required to pass necessary journal entries in the books of M/s Bose Brothers assuming that accounting
year closes on 31st December, 2021.
1st Semester 51
GOBIND KUMAR JHA GKJ. 9874411552
Group B: 4 Questions of 10 Marks Each (out of 6): 40 Marks

Question 6 [Depreciation]
Mr. X is engaged in car rental business. On 1.4.2019 he purchased 3 second-hand motor cars at 3,00,000 each
and paid ₹ 60,000 each for overhauling and reconditioning of each of the car purchased, which was completed
on 30.4.2019. these cars were put to use from 1.5.2019.
He writes off depreciation @ 20% p.a. on original cost from the date cars were put to use and close books on
31st December every year.
On 1.10.2021, one car is completely destroyed in a road accident and a sum of ₹ 1,70,000 is received from
the insurance company in settlement of the claim.
On the same day he purchased 3 new cars at ₹ 6,00,000 each and put to use from that date.
Prepare Motor car account from 2019 to 2021 in the books of Mr. Working notes should form part of the
answer.
Question 7 [Single Entry Question OR Non-trading]:

Mr. D, a trader maintains an incomplete record for his business. However, he keeps a detailed record of cash
and bank transactions and provides you the following summary of receipts and payments for the year ended
31.12.2021.
Cash in hand on 1.1.21 3,600 Payment to Creditors 2,30,000
Cash at bank on 1.1.21 62,000 Purchase of Furniture (on 1.9.21) 12,000
Cash Sales 70,000 Salaries 28,000
Capital Introduced 60,000 General Expenses 8,000
Interest received on Investment 5,000 Rent and Rates 15,000
Collection from Debtors 2,20,000 Drawings 36,000
Cash purchases 47,000
Cash in Hand on 31.12.21 1,600

Cash at Bank on 31.12.21 43,000
4,20,600 4,20,600
Particulars of other assets and liabilities are as follows:
1.1.2021 (₹) 31.12.2021 (₹)
Sundry Debtors 1,45,000 1,66,000
Sundry Creditors 2,90,000 2,23,000
Furniture 48,000 ?
Stock 57,000 70,000
Investment in 10% Bond 50,000 50,000
Debtors and Creditors balances on 31.12.2021 have been arrived at after considering discount allowed and
discount received amounting to ₹ 9,000 and ₹ 7,000 respectively. Furniture is to be depreciated @ 10% p.a.
and a provision for doubtful debts is to be created for 3,300.
Prepare a Trading and Profit & Loss Account for the year ended 31st December, 2021 and a Balance Sheet as
on that date.
52 ACCOUNTS
9874411552
OR
The following is the Receipts and Payments Account of Park view club in respect of the year ended 31.3.2021:
Receipts ₹ ₹ Payments ₹
Opening balance 1,02,500 Salaries 2,08,000
Subscription Received Stationery Purchased 40,000
2019-20 4,500 Rent 60,000
2020-21 2,11,000 Telephone Expenses 10,000
2021-22 7,500 2,23,000 investments 1,25,000
Net cash realized from Sundry Expenses 92,500
Sports Meet 1,55,000 Closing Balance 45,000
Income from Investments 1,00,000
5,80,500 5,80,500
(a) There are 450 members each paying an annual subscription at ₹ 500. On 1.4.2020,
outstanding subscription was ₹ 5,000.
(b) There was an Outstanding Telephone bill of R. 3,500 on 31.3.2021 (c) Outstanding
Sundry Expenses as on 31.3.2020 totaled ₹ 7,000.
(d) Stock of stationery: on 31.3.2020 – ₹ 5,000 and on 31.3.2021 – ₹ 9,000
(e) On 31.3.2020, Building stood in the books at ₹ 10,00,000 and it was subject to Depreciation at 5% p.a.
(f) Investment on 31.3.2020 stood at ₹ 20,00,000.
(g) On 31.3.2020, income accrued on Investments purchased during the year amounted to ₹ 3,750.
Prepare an Income and Expenditure Account for the year ended 31.3.2021 and a Balance Sheet as on that
date.
Question 8 [Consignment Or Self Balancing]:

M/s Poddar & Co. of Kolkata deals with ‘Body Oil’ which is sold in one litre plastic bottle. Poddar & Co.
consigned 2,500 bottles of ‘body oil’ costing ₹ 240 per bottle to Sharma & Co. of Jalandhar, to be sold at ₹
400 per bottle and paid ₹ 50,000 as freight and insurance.
Sharma & Co. took delivery of the remaining goods consigned and paid carriage inward and unloading charges
₹ 32,300. He is entitled to a commission of 10% on sales made by him. Sharma & Co. also incurred other
expenses covered under agreement amounting to ₹ 18,000.
Sharma & Co. reported that 100 bottles were lost due to leakage in the godown (loss due to leakage upto 5%
of goods received by the consignee is considered as normal loss) and 1,700 bottles were sold Sharma & Co.
paid a cheque of 5,50,000 in favour of poddar &Co. You are required to prepare consignment Account in the
books of M/s Poddar & Co.
Note: Working should for part of the answer.
Or
From the following details prepare a General Ledger Adjustment Account in the Creditors Ledger of ABC &
Company:
Credit Purchases 2,80,000 Bills payable accepted 16,000
Cash Purchases 75,000 Bills payable renewed for two more 2,000
month
Bills Receivable drawn 1,10,000 Payment to creditors 2,52,000
Cash Discount Received 5,000 Return Inward 10,500
Bills Payable Paid 6,500 Return Outward 5,000
1st Semester 53
Bills Receivable Endorsed to Creditor 10,000 Over Payments refunded by supplies 600
Opening Balance of Sundry Debtors 78,000 Endorsed Bills Receivable discounted 4,000
Sundry Creditors 85,000
Question 9 [Insurance claim]:

On 1.1.2021 there was a fire in the godown of M/s ABC & Co. destroying a part of stock. The entity furnished
the following information:
₹
Stock on 1.4.2019 56,000
Purchases during 2019-20 3,80,000
Sales during 2019-20 5,00,000
Stock on 31.3.20 30,000
Purchases from 1.4.2020 to 1.1.2021 2,00,000
Sale from 1.4.2020 to 1.1.2021 2,00,000
Stock on 31.3.2020 includes abnormal items costing ₹ 15,000 which was written down by ₹ 6,000. Two-third
of the abnormal items were sold on 30.6.2020 at a loss of ₹ 5,000. This amount is included in sales during the
relevant period. Balance of the abnormal items were valued at cost. Value of goods salvaged ₹ 7,000 and
policy value was ₹ 50,000. Compute the insurance claim to be made by M/s ABC & co.
Group C: 1 Question of 15 Marks:
Question 10 [Final A/c]:
The following is the Trial Balance of Mr. H as at 31.3.2021
Drawings 10,000 Capital 1,70,000
Other Equipment 1,10,000 Sales 1,65,000
Purchases 84,000 Returns 4,000
Returns 5,000 Bad Debts recovered 26,450
Bad debts 5,000 Discount Received 1,000
Carriage inward 5,000 Creditors 2,02,000
Carriage outward 7,000 Bills Payable 5,600
Discount allowed 2,000 Bank Overdraft 29,000
Sale commission 4,000 Bank Loan (taken on 1.4.20) 30,000
Rent 4,000
Interest 1,500
Debtors 2,15,000
Bills Receivables 10,000
Investment 50,000
Opening Stock 54,000
Cash 50,550
6,33,050 6,33,050
54 ACCOUNTS
9874411552
a) Closing Stock at market price as on 31.3.2021 was 61,500. (The cost of such stock was ₹ 80,000)
b) Provide for depreciation on office equipment @ 10% p.a.
c) Goods costing ₹ 10,000 was destroyed due to fire on 30.3.2021, the insurance company accepted a
claim to the extent of 60% only and paid the claim money only on 10.4.2021.
d) Of the bill receivables, a bill of ₹ 4,000 is dishonored. No entry has been made in the books of account.
e) Write off ₹ 9,000 as bad debt and maintain a provision for bad debt @ 5%.
f) Manager is entitled to a commission of 5% of net profit before charging his commission.
You are required to prepare a Trading and Profit & Loss Account for the year ended on 31.3.2021 and a
Balance Sheet on that date.
Financial Accounting: General 2017

From the following information, ascertain income for the year ended 31.03.21, according to accrual basis of
accounting:
i. Income received in cash for the year ended 31.03.21 ₹
50,000 ii. Accrued Income as on 31.03.21 ₹
25,000 iii. Income received in advance during the year ended 31.03.21 ₹
15,000 iv. Outstanding expenses as on 31.03.21 ₹
20,000 v. Prepaid expenses as on 31.03.21 ₹
10,000
Or
Write Short Notes on:
(a) Going Concern Concept
(b) Entity Concept
Question 2 [Depreciation]:
The book value of plant and machinery of a firm shows ₹ 2,50,000 on 1 st January, 2021. One of the machinery
which was purchased on 1st January, 2020 at ₹ 20,000 is sold for ₹ 10,000 on 30th June, 2021. In place of
this machine, another new machine was purchased at ₹ 40,000 on 30 th September, 2021.
Show Plant & Machinery Account in the ledger for 2021 charging depreciation @ 10% p.a. on diminishing
balance method. (Year ending date 31st December). Question 3 [Rectification of Errors Or P/B/D]:
Rectify the following error before preparation of Trial Balance
(a) Cash withdrawn by proprietor ₹ 2,000 for personal use was debited to trade expenses A/c.
(b) ₹ 2500 spent on installation of wages was debited to Machinery Account.
(c) ₹ 170 Discount allowed was wrongly credited to Discount A/c and Debited to Creditors Account.
Or
The following information has been extracted from the books of Das Enterprise.
Balance of Provision for Bad debts on 01.01.21 2,500 Bad debts
written off during the year 1,800
Sundry Debtors on 31.12.21 34,000
Of the Debtors ₹ 1,000 was bad and hence to be written off. Provision for Bad debts to be made @ 10% on
Debtors.
Question 4 [Capital & Revenue Expenditure OR Inventory]:
State which of the following are Capital Expenditure and which are Revenue Expenditure giving
reasons in each case:
(a) Purchase of Machinery ₹ 50,000
(b) Carriage paid for bringing the machine ₹ 3,000
(c) Wages paid for installation of the machinery ₹ 4,000
1st Semester 55
(d) Repairing cost for the machinery ₹ 2,000 after installation

(e) Insurance premium paid for machinery ₹ 1,000
Or
A trader prepared his accounts on 31/3/2021. However stock taking was done on 10/04/2021 amounting ₹
40,000. The following transactions took place between 1/4/2021 to 10/04/2021:
a) Sales amounted to ₹ 75,000
b) Purchases during the period ₹ 30,000
c) Purchases Return ₹ 5,000
d) Sales Return ₹ 2,000
e) Rate of Gross profit on sales 20 %.
Determine the value of closing stock as on 31/03/2021.
Question 5 [Sale on Approval]:
A trader sent out goods on approval Basis to customers and included the same in sales account.
On 31.3.2021 the stock in hand amounted to ₹ 1,60,000 and the sundry debtors balance stood on ₹ 3,00,000
which include ₹ 20,000 being invoice value of goods sent on ‘sale of return’ against which no intimation was
received during the year. These goods were sent out at 25% above cost and were sent to Mr. X ₹ 8,000 and
Mr. Y ₹ 12,000. Make necessary adjustment entries as on 31/3/2021.

Question 6 [Accounting Theory & Accounting Standard]
What is Financial Accounting Standard? Discuss the procedures for issuing Accounting Standard in India.
What is IFRS?
Or
Write short notes: (a) GAAP (b) Fair Value Accounting
Question 7 [Consignment or Insurance Claim]:

On 1st April, 2020, K of Kolkata sent 200 packets of rice to D of Delhi to be sold on consignment basis. The
cost price of each packet was ₹ 1,000. K incurred ₹ 1,200 for freight and ₹ 800 for insurance premium.
On 31st March, 2021, K received Account sales from D, which showed that he sold 180 packets @ ₹ 1,400
each out of which ₹ 5,000 was bad debt. D paid ₹ 6,000 as clearing charges, ₹ 1,000 for carriage to godown
and ₹ 2,000 for godown rent. D is entitles to get ordinary commission @ 10% and del-credere commission @
5% on sale proceeds.
Show consignment Account and D Account in the books of K.
Or
A fire occurred at the Godown of Royja Industries (P) Ltd. on 10.03.2021. The stock of the company was
fully insured against fire. From the following details, compute the amount of insurance claim:
₹
Stock on 1 January, 2020
st 50,000
Stock on 31st December, 2020 80,000
Purchases for the year 2020 5,40,000
Sales for the year 2020 6,80,000
Purchase for the period from 01.01.2021 to 10.03.2021 1,80,000
Sales for the period from 01.01.2021 to 10.03.2021 2,40,000
Gross profit rate was uniform and value of stock salvaged ₹ 15,500
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Question 8 [Self Balancing]:

From the following particulars, prepare Sales Ledger Adjustment Account in General Ledger and General
Ledger Adjustment Account in Sales Ledger in the books of K. Ray for the year ended 31st December,
2021: ₹
Sales Ledger balances on 01.01.2021 62,620 (Dr.)
Sales Ledger balances on 01.01.2021 620 (Cr.)
Total Sales 1,20,000
Cash Sales 10,000
Bills accepted by Debtor 12,500
Bill received dishonored 500
Cheque received from customers 86,200
Cheque dishonoured 1,200
Return – inward 4,800
Discount allowed 450
Carriage charged to customers 950
Bad debt recovered 600
Transfer from bought Ledger 800
Sales Ledger balances on 31.12.2021 300 (Cr.)
Question 9 [Non-trading]:
The following is the Receipts and Payments Account of a club on 31.12.2021.
To Opening Balance By Books 7,000
In Hand 500 By Salaries 7,000
At Bank 500 By Rent 2,000
To Subscription 15,000 By Newspaper 3,000
1st Semester 57
To Sale of old newspaper 3,000 By Balance c/d (at Bank) 2,000

To Donation 2,000
21,000 21,000
Other Information:
01.01.21 31.12.21
₹ ₹
Accrued Subscription 800 1100
Pre-received subscription 2500 1500
Outstanding Salary 600 900
Prepaid rent 200 100
Prepare Income and Expenditure Account of the club for the year ended 31 st December, 2021.

Following is the Trial Balance of Mr. R. Roy as on 31st December, 2021. You are required to prepare Trading
and Profit and Loss Account for the year ended 31st December, 2021 and a Balance Sheet as on that date.
Dr. (₹) Cr. (₹)
Capital --- 2,40,000
Plant and Machinery 1,20,000 ---
Furniture 40,000 ---
Stock on 01.01.21 30,000 ---
Debtors and Creditors 80,000 50,000
Drawings 20,000 ---
Purchase and Sales 2,40,000 3,60,000
Bank Overdraft --- 40,000
Wages 30,000 ---
Trade expenses 20,000 ---
Rent 24,000 ---
Salaries 34,000 ---
Bad debt 2,000 ---
Purchase and Sale Return 10,000 6,000
Cash 14,000 ---
Bank 36,000 ---
Provision for Bad debt --- 4,000
7,00,000 7,00,000
(a) Stock on 31.12.21: Cost price ₹ 36,000. Market price ₹ 40,000.
(b) A credit sale of ₹ 10,000 has not been recorded.
(c) Wages paid for installation of machinery included in wages account ₹ 5,000.
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(d) Provide depreciation on machinery @ 10% p.a.

(e) Provision for Bad debt to be maintained @ 5% on Debtors.

(a) Mention any two conventions that are followed in accounting.
(b) Shri Sarkar has mentioned his accounts under accrual basis. The profit for the year 2020-21 comes to ₹
88,500. After considering the following information, you are required to determine his profit for the same
period under cash basis:
(i) Office expenses outstanding for the year 2019-20 ₹ 12,500.
(ii) Rent paid in 2020-21 for the year 2021-22 ₹ 13,200
(iii) Interest earned on investment for the year 2020-21, but not yet received ₹ 5,100.
Or
(a) Name two users of Accounting Information. (b) What do you mean by ‘Expense’? (c) Write the
Accounting Equation with an example.
Question 2 [Unit-2: Rectification of Errors]:

The Trial Balance of Mr. Saha did not agrees as on 31.3.2021 and the difference were put to suspense account
and the following mistakes were detected before preparation of final accounts: (a) Purchases Day Book was
over cast by ₹ 2,200.
(b) ₹ 12,000 paid to Sudipta was wrongly debited to Sudipta Account.
(c) ₹ 6,900 paid for replacement of a mother board of a desktop, debited to Repairing Charges Account as
₹ 900.
You are requires to pass necessary journal entries to rectify the above errors

Briefly discuss the Procedure for issuing accounting standard in India.

What is Accounting theory? State the relation between Accounting Theory and Accounting Practice.
Or
(a) Write short note on GAAP.
(b) Write two reasons behind maintenance of Capital.
Question 5 [Unit- 5: Self Balancing or Sale on Approval]:
1st Semester 59
From the following information, prepare Sales Ledger Adjustment Account in the Nominal Ledger:
₹
01.04.20 Debtors Ledger Balance (Dr.) 45,000
01.04.21 Debtors Ledger Balance (Cr.) 1,000
31.3.21 Sales 4,10,000
Bad Debts 1,650
Miscellaneous charges debited 175
Cash received from Debtors 3,20,000
Return Inward 5,000
Bad debts recovered 450
Bills Received 30,000
Transfer from Bought Ledger 75
Or
On March 01, 2021 Mr. Basu sent goods valuing ₹ 1,50,000 at an invoice price (Cost plus 25%) to few
customers on sale or return basis having two months approval period. He records sale or return transactions
as ordinary sales transaction.
During March, goods having Invoice Price of ₹ 40,000 were returned by a customer and another customer
was willing to accept the goods at a price of ₹ 76,000 which was lower than the Invoice Price by 5%. It was
accepted by Mr. Basu. The other customers could not yet decide anything about the goods sent.
Show the relevant extracts in the final accounts on 31.3.2021, if the balances of the sales Account and Sales
Ledger as on such date were ₹ 15,00,000 and ₹ 7,35,000 respectively.

Question 6 [Depreciation OR P/B/D]
Plant and Machinery Raving value of ₹1,00,000 was bought on 1st January, 2018. On 15th July, 2019 a new
machine was purchased for ₹ 40,000. Installation charges paid for this machine was ₹ 5,000. The machine
(bought on 15th July, 2019) was sold at a profit of ₹ 7000 on 1st September, 2021.
Write up the Plant and Machinery Account for the four years ended 31st December, 2021 providing 10% p.a.
depreciation under Diminishing Balance Method.
Or
Saha Bros. has commenced a bakery business on 01.04.2019. During 2019-20 the firm was unable to recover
a considerable amount from its customer and subsequently at the end of the year; the firm has decided to
create Provision for Bad Debt@ 10 % to cope up with the future bad debt losses. The following information
was further obtained from its records:
₹
31.03.2020 Debtors balance 2,20,000
Bad debts written-off during the year 46,000
31.03.2021 Debtors balance 5,60,000
Bad debt to be written off 32,000
Recovery of Bad debts 6,000
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You are required to prepare Bad Debt A/c and Provision for Bad Debt A/c for two consecutive years 201920
and 2020-21.

Swati, a small trader, maintains her books under Single Entry system. From the following information you
are asked to prepare Trading Account, Profit & Loss Account and Balance Sheet as on 31st December, 2021
1st January, 2021 31st December, 2021
(₹) (₹)
Debtors 20,000 25,200
Creditors 15,000 14,100
Sewing Machine 15,000 14,200
Furniture 12,000 11,800
Bills Receivable 7,000 6,000
Bills Payable 3,000 5,000
Stock 4,000 3,000
Bank Summary
₹ ₹
Opening Balance 21,000 Payment to Creditors 42,000

Collection from Debtor 75,200 Bills Payable 2,800
Bills Receivable 5,600 Rent 2,000
Capital 13,000 Wages 2,000
Printing 2,000
Drawings 24,000
Salaries 12,000
Closing Balance 28,000
1,14,800 1,14,800
She allowed discount to debtors ₹ 2,400 and received discount from creditors for ₹ 3,900. She endorsed bill
receivable of ₹ 1,200 to her creditors.
Or
From the following information prepare Income and Expenditure Account of Hugli Club for the year ended
31st December, 2021 and a Balance Sheet as on that date.
a) Subscriptions in arrear for 2021 ₹ 900 and received in advance for 2021 ₹ 350.
b) Insurance Premium due ₹ 40.
c) Miscellaneous expenses prepaid ₹ 90.
d) 50% of the donation to be capitalized.
e) 75% of entrance fees are to be capitalized.
f) 8% interest is accrued on investment for five months.
g) Tennis Table was purchased in 2021 for ₹ 30,000. Only ₹ 22,000 was paid for it till 31 st December
2021.
1st Semester 61
Receipt and Payment A/c for the year ended 31.12.2021

Cash in Hand 4,000 Salary 2,000
Cash at Bank 10,000 Repairs 500
Donation 5,000 Furniture 6,000
Subscription 12,000 Misc. Expenses 500
Entrance fees 1,000 Investment 6,000
Interest on Investment 100 Insurance Premium 200
Interest received from Bank 400 Tennis Table 8,000
Sale of old Newspaper 150 Stationeries 150
Sale of Drama tickets 1,050 Drama Expenses 500
Cash in Hand 2,650
Cash at Bank 7,200
Question 8 [Consignment]:
Ganga consigned 5,000 kg of rice costing ₹ 32 per kg to Yamuna on February 01, 2021 by paying ₹ 5,000 as
freight. During transit 200 kg of rice were destroyed by an accident. Yamuna paid clearing charges ₹ 6,100,
Godown Rent ₹ 300 and Salesman’s salary ₹ 900. Yamuna is entitled to 6% ordinary commission and 4%
Del Credere Commission on sales.
Yamuna reported on June 30 that 4,000 kg were sold at ₹ 1,65,000 and 100 were lost due to some unavoidable
cause. Entire amount due was received except in case of a customer who bought rice for ₹ 1,500 could pay
only 40% of his amount. Yamuna sent a cheque for final settlement to Ganga along with the Account Sales.
Show Consignment Account and Yamuna Account in the books of Ganga.
On 09.11.21, the godown of ABC Ltd. Was destroyed by fire. The organization is insured for loss of stock
policy of ₹ 75,000 with an average clause. From the following information, prepare a Statement showing
claim to be lodged with the insurance company.
Stock on 01.04.20 72,000
Wages for the year 20-21 16,000
Purchase for the year 20-21 2,84,000
Sales for the year 20-21 4,06,800
Stock on 31.3.21 64,000
Purchase from 01.04.21 to 09.11.21 1,40,000
Wages from 01.04.21 to 09.11.21 8,000
Sales from 01.04.21 to 09.11.21 1,65,200
An items of stock purchased during 19-20 at a cost of ₹ 20,000 was valued at ₹ 12,000 on 31.3.20. half of
these goods were sold during 20-21 for Rs 6,800 and remaining stock was valued at ₹ 4,000 on to be worth
40% of original cost. Stock valued ₹ 18,000 was salvaged.
The following Trial Balance has been extracted from the books of Mr. Das as on 31st March, 2021:
Opening Stock 2,400 Capital 46,200
Building 2,10,000 Creditors 25,000
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Bad debts 3,500 10% Loan (Taken on 01.10.20) 24,000

Closing stock 24,000 Commission Received 200
Furniture 10,000 Sales 3,28,700
Drawings 4,500 Outstanding Salaries 3,000
Wages 1,800 Provision for Bad Debts 2,100
Purchases (Less Closing Stock) 1,18,000
Advertisement 1,400
Debtors 9,000
Cash 3,200
Interest on Loan 400
Commission Paid 600
Office Equipment 18,000
Miscellaneous Expenses 700
Insurance Premium 800
Salaries 10,000
Patent 7,200
Rent 2,400
Carriage Inward 1,300
4,29,200 4,29,200
Prepare Trading Account and Profit & Loss Account and a Balance Sheet as on date
(a) Furniture costing ₹ 12,000 purchased on 01.10.2020 on credit was recorded as credit purchase of goods.
(b) Mrs.. Samanta, Debtor for ₹ 2,000 was declared insolvent, only 40 paise in the rupee was expected to
realize from his estate. Create Provision for Doubtful Debts at 5% and Provision for Discount at 2% on
Debtors.
(c) Patent (acquired on 01.04.2019) having a useful life of ten years, is to be amortised in 10 equal
installments over the years.
(d) Depreciate relevant fixed assets at 10% p.a.

(a) Mention any two users of accounting information.
(b) Using accounting equation, calculate total assets if
(i) Capital ₹ 6,00,000 ;
(ii) Creditors ₹ 4,00,000 ;
(iii) Revenue during the period ₹ 5,00,000;
(iv) Expenses during the period ₹ 4,00,000.
Or
From the following information, ascertain income for the year ended 31.12.21, according to Cash basis of
accounting:
₹
(a) Income received in cash for the year ended 31.12.21 50,000
(b) Accrued income of 2020, received in 2021 6,000
(c) Income received in advance during 2021 8,000
(d) Accrued income as on 31.12.21 6,000
1st Semester 63
Question 2 [Inventory]:
Calculate the value of closing stock as on 31.12.21 from the following information:
i. Value of physical stock taken on 06.01.22 (for the year ended 31.12.17) was ₹ 25,600. ii.
Purchased during the period from 01.01.22 to 06.01.22 was ₹ 2,500
iii. Goods sold during the period from 01.01.22 to 06.01.22 was ₹ 3,800
iv. Goods were sold at a profit of 25% on cost.
Question 3 [Depreciation or Rectification of Errors]:

On 01.01.2019 Mr. A Purchased Machinery worth ₹ 1,50,000. On 01.07.2020 Mr. A Purchased another
Machinery worth ₹ 30,00. On 01.01.2021 Machinery Worth ₹ 24,000 purchased on 1.1.2019 was sold for ₹
18,000. Depreciation to be charged @ 10% under Straight line Method. Prepare Machinery Account For
2019, 2020 and 2021. (year ending for this enterprise is 31st December.)
Or
Rectify the following error after preparation of Trial Balance but before preparing Final Accounts by passing
necessary journals entries:
(a) Cash taken by proprietor ₹ 3000, were not recorded at all.
(b) ₹ 5,000 received from Bimal against debts previously written off as bad debts have been credited to his
personal account.
(c) A cheque received from Amal, a debtor, for ₹ 4,000 was directly received by the proprietor who
deposited it into his personal bank account.
Question 4 [P/B/D or Revenue Recognisition]:

The following is the extract from the Trial Balance of Mr. M. Roy as on 31st December 2021.
Dr. Cr.
₹ ₹
Bad debts 8,000 ---
Sundry Debtors 3,00,000
Provision for Bad and Doubtful debts --- 12,000
It is desired to maintain a provision of 5% for Bad and Doubtful Debts.
Prepare Bad debts Account and Provision for Bad and Doubtful Debts Account.
Or
What do you mean by Revenue? How is it recognized it accounts?
Sen Traders sends out its gas containers to dealers on ‘Sale or Return’. All such transactions are, however,
treated as actual sales and are passed through the Day Book. Just before the end of the financial year, 100 gas
Containers, which cost them ₹ 900 each, have been sent to a dealer on ‘Sale or Return’ and have been debited
to his account at ₹ 1200 each. Out of this only 20 gas containers are sold at ₹ 1500 each. Give the necessary
adjustment entries in the books of Sen Traders.

Question 6 [Accounting Theory & Accounting Standard] (a)
What is accounting theory?
(b) What are the limitations of Historic cost accounting?
Or
(a) What are the benefits of Financial Accounting Standard? (b)
What are the needs for a global standard?
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Question 7 [Consignment or Insurance Claim]:

On 01.04.2021 G & Co. of Kolkata sent 300 packets of a product to D & Co. of Delhi on consignment basis.
The cost of each packet was ₹ 1,500 only. G & Co. incurred the following expenses on consignment:
₹
Railways freight 1,500
Insurance Premium 900
Loading Charges 600
D & Co. incurred the following expenses:
Carriage to godown 400
Godown Rent 1,000
Selling expenses 600
Others 300
D & Co. sold 200 packets of the product at 2,400 per packet. While sending goods to D & Co. of Delhi, 20
packets were damaged in transit and insurance company settled a claim of ₹ 26,500. Commission payable to
D & Co. @ 10% on sales.
Show the following accounts in the books of G & Co.:
(a) Consignment Account
(b) D & Co. Account
(c) Loss in transit Account
Or
A fire occurred in the premises of A & Co. on 01.09.2021 but the stock of the company was insured. All the
goods were completely destroyed by fire except goods worth ₹ 50,500 (Salvaged). Determine the amount of
insurance claim on the basis of the following information:
₹
Purchases for the year ended 31.03.2021 3,50,000
Sales for the year ended 31.03.2021 5,50,000
Purchase from 01.04.2021 to 01.09.2021 1,20,000
Sales from 01.04.2021 to 01.09.2021 1,80,000
Stock on 31.03.2020 1,95,000
Stock on 31.03.2021 1,60,000
All the purchases and sales were made evenly throughout the year and gross profit rate remained uniform.

The following details were extracted from the books of Mr. Sen for the period ended 31st December, 2021:
Jan.1, 2021 ₹
Sales ledger Balances 12,400
Provision for Doubtful Debts 1,000
Dec. 31, 2021
Sales (including Cash Sales ₹ 4,000) 23,000
Cash received from Customers 18,500
Bills Receivable received 3,000
Return from Customers 380
1st Semester 65
Bills endorsed 480

Bills dishonoured 120
Cheque dishonoured 100
Bills receivable as endorsed, dishonoured 120
Bills receivable discounted 500
Bad debt written off 50
Interest charged to customers 10
Bad debts previously written off, recovered 60
Transfer from Bought Ledger 150
Sundry Charges debited to customers 20
Prepare the Sales Ledger Adjustment Account in the General Ledger. Question
9 [Single Entry]:
Mr. T. R. Sen keeps his books on single entry system. His capital on 01.04.20 was ₹ 1,70,000. An abstract of
his Cash transactions for the year ended 31.03.21 was as follows:
To Balance b/d 8,000 By Creditors 35,000
To Collection from Debtors 82,000 By Cash Purchases 18,000
To Cash Sales 18,000 By Wages 7,000
By Salaries 5,000
By Drawings 12,000
By Plant 10,000
By General Expenses 14,000
1,08,000 1,08,000
Following information in relation to Assets and Liabilities are available:
01.04.2020 (₹) 31.03.2021 (₹)
Sundry Creditors 22,000 25,000
Stock 25,000 35,000
Plant 30,000 40,000
Furniture 15,000 15,000
Building 80,000 80,000
Prepare a Trading and Profit and Loss Account for the year ended 31.03.21 and a Balance Sheet as on that
date after providing depreciation @ 10% on Plant, @ 5% on Furniture and Building. Provision for Doubtful
Debt to be created @ 5% on Sundry Debtors.
From the following Trial Balance prepare Trading and Profit & Loss Account for the year ended 31.03.2021
and a Balance Sheet as on that date:
₹ ₹
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Drawings 3,600 Capital 40,000

Plant and Machinery 10,000 Purchases Return 1,240
Stock (01.04.20) 13,750 Discount Received 680
Purchases 1,09,600 Sundry Creditors 15,000
Sales Return 1,800 Provision for Doubtful Debts 1,050
Carriage outward 2,300 Sales 1,30,450
General Expenses 1,100
Advertising 1,350
Wages 2,600
Rent taxes 3,000
Bad debts 970
Cash at Bank 2,500
Cash in hand 350
1,88,420 1,88,420
Adjustments:
(a) Depreciation to be charged @ 5% on Plant and Machinery.
(b) Outstanding expenses ₹ 250.
(c) Advance Rent and Taxes paid ₹ 100.
(d) Further bad debts of ₹ 500 to be written off.
(e) Provision for Doubtful Debts to be raised @ 5% on Debtors. (f) Closing stock 31.03.21 ₹ 19,500.
1st Semester 67

(a) Mention the names of accounting concept or convention being followed in the following instances:
(i) Unsold stock is valued at lower of cost or net realizable value.
(ii) A business will continue its operation for an indefinite period and will not be dissolved in the
near future.
(b) Using accounting equation, calculate total assets if – Capital – ₹ 5,00,000
Creditors – ₹ 2,00,000
Revenue during the period – ₹ 5,00,000 Expenses
during the period – ₹ 3,00,000.
(c) What do you mean by Revenue?

Or
From the following information, ascertain income for the year ended 31.03.2021 according to accrual
basis of accounting:
₹
(a) Income received in cash for the year ended 31.03.2021 2,00,000
(b) Accrued Income as on 31.03.2021 35,000
(c) Income received in advance during the year ended 31.03.2021 20,000
(d) Outstanding Expenses as on 31.03.2021 40,000
(e) Prepaid Expenses as on 31.03.2021 30,000
Question 2 [Unit-2: Rectification of Errors]:

Rectify the following errors after preparation of Trial Balance but before preparing Final Accounts by
passing necessary Journal Entries:
(a) Goods taken by proprietor of ₹ 5,000 for gift to his son were not recorded at all.
(b) ₹ 5,000 received from Bablu against debts previously written off as bad debts have been credited
to his personal account.
(c) A cheque received from Ashis, a debtor for ₹ 4,000 was directly received by the proprietor who
deposited it into his personal bank account.

State the objectives of issuing Accounting Standards.

(a) Discuss the concept of capital maintenance.
(b) What do you mean by GAAP?
Or
(a) What is fair value accounting?
(b) What is IFRS?
Question 5 [Unit- 5: Self Balancing or Sale on Approval]:
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A trader has credited certain items of sales on approval aggregating ₹ 10,000 to sales accounting. Of these,
goods to the value of ₹ 3,000 have been returned and taken in stock at ₹ 1,500 though record of return was
committed in accounts; and in respect of another parcel of ₹ 1,000 (cost being ₹ 500), the period of approval
did not expire on the closing date.
Show adjustment and correcting entries in the books of the trader.
Or
The following details were extracted from the books of ABC Ltd. for the year ended 30.06.2021:
₹
July 1, 2020
Sales Ledger balance total 40,000
July 30, 2021
Sales 90,000
Return from Customers 8,000
Cheque received from Customers 80,000
Cheque Dishonoured 300
Bills accepted by Customers 2,700
Bills dishonoured 400
Noting charges on the dishonoured bill 10
Interest on Customers overdue account 100
Carriage charged to Customers 200
Cash discount allowed 1,800
Show the General Ledger Adjustment Account as it will appear in the Sales ledger.

Question 6 [Depreciation OR P/B/D] ABC
Ltd. purchased of the following machines:
₹
On 1st January, 2020 40,000
On 1st July, 2020 20,000
On 1st October, 2021 10,000
Depreciation was provided @ 10% p.a. under the diminishing balance method. The machine purchased on 1st
July, 2020 was sold on 31st March, 2021 at ₹ 15,000.
Show the Machinery accounts in the books of ABC Ltd. for the year 2020 and 2021 assuming that accounts
are closed on 31st December every year.
Or
On 31st December, 2020 Sundry Debtors and Provisions for Bad debts stood at ₹ 90,000 and ₹ 6,750
respectively. During the year 2021 Bad Debts amounting to ₹ 4,560 were written off. On 30th June, 2021 an
amount of ₹ 580 was received on account of a debt written off as bad last year. The Debtors list on 31st
December, 2021 was verified and it was found that amongst Sundry Debtors amounting to ₹ 65,940, an
1st Semester 69
amount of ₹ 940 was to be written off as bad. It was decided to maintain the provision for bad debts at the
same percentage as it was on 31st December, 2020. Prepare Provision for Bad debts Accounts.
Subal keeps his books on single entry method. On 1st January, 2021 his assets and liabilities were as follows:
Capital ₹ 61,000, Sundry Debtors ₹ 20,000, Plant and Machinery ₹ 31,000, Furniture and Fittings ₹ 3,000,
Stock ₹ 10,000 and Sundry Creditors ₹ 15,000.
The following are the analysis of his Cash Book for the year 2021:
Cash in Hand 12,000 Payment to Creditors 20,000
Receipt from Debtors 15,000 Wages 5,000
Cash Sales 20,000 Sundry Expenses 10,000
Drawings 5,000
Cash in hand 7,000
47,000 47,000
On 31st December, 2021 his assets and liabilities were as follows:
Sundry Debtors ₹ 25,000, Sundry Creditors ₹ 10,000, Plant and Machinery ₹ 31,000, Furniture and fittings ₹
3,000, Stock ₹ 22,000.
You are required to prepare a Trading and Profit & Loss Account for the year ended 31 st December, 2021
after providing:
(a) Depreciation on Plant and Machinery @ 5% p.a. and Furniture and Fittings @ 2% p.a. (b)
Provision for Bad and doubtful debts @ 5% on Sundry Debtors.
Or
The following is the Receipt and Payments Accounts of Calcutta Football Club for the year ended 31.12.2021:
Cash in hand 2,500 Remuneration to Coach 6,000
Cash at bank 22,300 Ground man’s salary 2,500
Bank Interest 500 Purchase of equipments 15,500
Entrance Fees 5,000 Bar room expenses 2,000
Subscription 25,000 Ground Rent 4,500
Bar room receipts 4,000 Night Club exp. 4,800
Sale of equipments 800 Printing and Stationery 2,500
Proceeds of Night Club 10,800 Repairs to equipments 4,500
Cash at Bank 25,600
Cash in hand 3,000
70,900 70,900
Additional information:
01.01.2021 (₹) 31.12.2021 (₹)
Subscription due 1,500 1,000
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Outstanding exp. For Printing & Stationery 1,000 800

Equipments 8,000 17,500
You are required to prepare:
(a) An Income and Expenditure Account for the year ended 31.12.2021 (b)
A Balance Sheet as on that date.
On 7th June, 2021 the godown of a company was destroyed by fire. From the records following particulars
were extracted:
₹
Stock as on 01.01.2020 45,000
Stock as on 31.12.2020 60,000
Purchases less returns as per 31.12.2020 3,00,000
Sales less returns as per 31.12.2020 3,73,000
Purchases less returns from 01.01.2021 to 07.06.2021 1,25,000
Sales less returns from 01.01.2021 to 07.06.2021 1,80,000

Poor selling goods worth ₹ 5,000 were written off while valuing closing stock as on 31.12.2020. The original
cost of goods was ₹ 8,000. A portion of this stock (original cost of which was ₹ 4,000) was sold during March
2021 at a loss of ₹ 1,000. The balance of this stock is worth the original cost. Value of salvage goods was ₹
10,000. Gross profit remained at an uniform rate throughout. Compute the amout of claim to be lodged.
Shri Das of Kolkata sent on Consignment 1000 bottles of medicine costing ₹ 70 each to Shri Sen of Burdwan
and incurred ₹ 1000 for carriage and ₹ 600 for insurance.
Account sales from Shri Sen revealed the following:
(₹) (₹)
Sale proceeds of 600 bottles 60,000
Less: Carriage to godown 10,500
Rent of godown 500
Insurance 500
Commission 3,000 14,500

45,500
It is also revealed that 100 bottles were destroyed in godown and Shri Sen collected ₹ 6,000 from Insurance
Company. Prepare Consignment Account in the books of Shri Das.
1st Semester 71

The following is the Trial Balance of Mr. S.K. Sen as on 31 st December, 2021:
Debit Balances ₹ Credit Balance ₹
Drawings 5,800 Capital 60,000
Stock 28,000 Returns 3,200
Returns 4,200 Sales 2,10,000

Purchases 1,75,000 Sundry Creditors 25,500
Freight and Carriage 9,700 Bank Loan @ 6% p.a. 20,000

Rent and Taxes 3,600 Misc. Income 500
Salaries and Wages 15,300 Discounts 1,600

Interest on Bank Loan 1,000
Printing and Advertisement 7,800
Cash at Bank 6,000
Discounts 1,200
Furniture and Fittings 6,000
General Expenses 8,600
Insurance 2,800
Cash in hand 2,000
Postage and Telegram 480
Travelling Expenses 320
Machinery 8,000
3,20,800 3,20,800
(i) Included amongst the Debtors is ₹ 4,000 due from R.Das and included among the Creditors ₹ 3,000
due to him.
(ii) Provision for doubtful debts be created @ 10% and provision for discount @ 5% on Debtors.
(iii) Personal purchases amounting ₹ 2,000 had been included in the purchase day book.
(iv) Depreciate furniture & fittings and machinery @ 10% and 15% p.a. respectively.
(v) Interest on bank loan is outstanding for 2 months.
72 ACCOUNTS
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(vi) Stock on 31.12.2021 was ₹ 65,000.

Prepare Trading, Profit & Loss Account & Balance Sheet as on 31.12.2021.

(a) Mention two qualitative characteristics of accounting information.
(b) What is ‘Accounting Cycle’?
(c) Which accounting concept or convention is applicable in the following case?
“Closing stock is valued at lower of cost price or market price”.
Or
Fill in the blanks selecting the correct one out of words given in the bracket:
(a) Business goodwill is ………………(tangible / intangible fixed asset)
(b) Lenders are example of ……………. (external / internal) users of accounting information
(c) Purchase Day Book is a ……………..(Journal / Ledger)
(d) Depreciation is an example of …………………….(Expenses / Losses) (e) Profit under accrual
basis will be ……………..(₹ 10,000 / ₹ 20,000).
Question 2 [Unit-2: Rectification of Errors Or Depreciation]:

What factor should be considered for charging depreciation of Final Accounts:
Or
preparation of Final Accounts:
(a) Purchase of Furniture for ₹ 10,000 passed through Purchase Day Book.
(b) Rent paid ₹ 5,000 to Landlord debited to the personal account of landlord. (c) Sales Day
Book Cast short by ₹ 1,000.
Question 3 [Unit-2: P/B/D Or Capital & Revenue Expenditure]:

Sri Dulal Chatterjee maintains provision for doubtful debt @ 5% and Provision for discount on debtors @
2%. On 01.01.21 he had balances in these accounts ₹ 3,000 and ₹ 1,140 respectively. The following particulars
are available from his trial balances as on 31.12.2021.
₹
Bad Debt written off 3,600
Prepare Bad Debt Account and Provision for Bad Debt Account for the year 2021.
Or
Mention which of the following transactions is a capital expenditure and which one is revenue expenditure:
(a) Purchase of machinery worth ₹ 50,000
(b) Paid customs duty of ₹ 10,000 for importing machinery from foreign country. (c) Paid office
rent for ₹ 5,000
(d) Spent ₹ 30,000 for repairing of building.
(e) Paid ₹ 10,000 as registration fees for registering Patent Right.
1st Semester 73
Question 4 [Unit- 5: Sale on Approval]:

B.B.S. Electronics sends goods to their customers on Sale or Return basis. The following transactions took
place during 2021:
2021 ₹
Sept. 10 sent goods to customers on Sale or Return basic at cost plus 25% 1,25,000
Oct. 20 goods returned by customers Nov. 25 Received Letters of approval 40,000
from customers
Nov.25 Received Letters of approval from customers 60,000
Dec. 31 Goods with customers neither sold nor returned 20,000
B.B.S. Electronics records sale or return transactions as ordinary sales. You are required to pass the
necessary journal entries in the books of B.B.S. Electronics assuming that accounting year closes on
31.12.2021.
Question 5 [Unit-2: Inventory]:

From the following data, calculate the value of closing inventory on 31 st July, 2021 using FIFO method:
2021
July 1 Opening Stock 100 kg @ ₹ 10 per kg
July 6 Purchase 600 kg @ ₹ 11 per kg
July 21 Purchases 800 kg @ ₹ 12 per kg

Question 6 [Accounting theory]
(a) What do you mean by ‘Generally Accepted accounting principles?
(b) What is ‘Capital Maintenance in accounting?
(c) How Capital is maintained in accounting?
Or
(a) What is financial accounting standard?
(b) What is the procedure of issuing accounting standard in India? (c) What do you
mean by ‘IFRS’?
Question 7 [Consignment or Insurance claim]:

On 25th March, 2021 X & Co. of Kolkata sends 100 saree costing ₹ 1,500 each to Y & Co. of Mumbai to be
sold by the latter on consignment basis. Invoice price of the above saree has been arrived at after adding 33%
on cost. X & Co. spends railway freight ₹ 7,500, insurance ₹ 1,000 and loading charges ₹ 500 to send the
consignment. Y & Co. is entitled to a commission of 5% on gross sales. 5 sarees were lost – in –transit to
Mumbai for which a claim of ₹ 7,000 was received from the insurance company. On 31 st December, 2021 X
& Co. received an account sale from Y & Co. which shows the following:
₹ ₹
74 ACCOUNTS
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Gross Sale proceeds of 80 sarees 1,60,000

Less: Clearing charges 1,900
Godown expenses 3,100
Commission 8,000 13,000
1,47,000
Show the following accounts in the books of X & Co.

(i) Consignment Account
(ii) Y & Co. Account
(iii) Ascertain the quantum of loss in respect of saree lost – in – transit
OR
The godown of U. Ltd. caught fire on 01.02.2021 and business was partially disorganized up to 30.06.2021.
From the books of accounts, the following information was extracted.
₹
(a) Actual turnover from 01.02.21 to 30.06.21 1,50,000
(b) Turnover from 01.02.20 to 30.06.20 4,20,000
(c) Turnover from 01.02.20 to 31.01.21 9,00,000
(d) Net profit for the last financial year 1,40,000
(e) Insured standing charges for the last financial year 1,12,000
(f) Total standing charges for the last financial year 1,28,000
(g) Turnover for the last financial year 8,40,000
Additional information besides above are as follows:
(a)Saving in insured standing charges – ₹ 5,000
(b) Loss of profit policy with an indemnity period of 6 months – ₹ – 2,50,000 (c)
There is an upward trend in turnover by 15%. Compute claim for loss of profit under the
policy.

Following information have been extracted from the books of Bose & Co. for the year ended 31.12.2021 –
₹
01.01.21 Opening balance (Dr.) 3,000
(Cr.) 1,20,000
Transaction during the year 2021:
Total Purchase (including credit purchases ₹ 1,80,000) 2,00,000
Return to creditors 4,000
Cash & Cheque paid to creditors 1,75,000
Discount received 8,000
Allowances received 3,000
Bills payable accepted 5,000
Bills payable dishonoured 500
Out of cheque paid to creditors, cheque dishonoured 5,000
Interest charged by creditors 400
1st Semester 75
Transfer to sales ledger 500

Closing Balance (Dr.) on 31.12.21 1,000
Prepare Creditors Ledger Adjustment Account in General Ledger.
Question 9 Non-trading]:
The following Receipts and Payments Accounts has been prepared for the year ended 31.12.2021 by Burdwan
Cricket Club.
Receipts and Payments account for the year ended 31.12.2021
₹ ₹
To Balance b/d 7,600 By Sports Equipment 20,000
(purchased on 01.09.21)
To Subscription for: 2021 37,000 By Salary and wages 6,000
2020 2,000 By Printing and Stationery 600
2022 2,500 By Electricity Charges 1,000
To Interest of Govt. Securities @ 5% 1,000 By Tournament Expenses 13,000
To Entrance fees 5,000 By Balance c/d 14,500
55,100 55,100
Sports equipment ₹ 35,000, club Ground ₹ 15,000, Furniture ₹ 5,000, Capital Fund ₹ 84,600. Considering
the following information prepare an Income and Expenditure Account for the year ended 31.12.21 and a
Balance Sheet as on that date:
(i) Subscription for 2021 outstanding ₹ 1,000
(ii) Depreciation to be provided @ 20% p.a. on sports equipment and @ 5% p.a. on furniture.

From the following Trial Balance and additional information of Adhunika Stores, prepare a Trading and
Profit and Loss Account for the year ended 31.12.21 and a balance sheet as on that date:
Dr. (₹) Cr. (₹)
Purchases 1,44,000 Capital 1,20,000
Machinery 1,44,000 Sales 3,22,000
Wages 18,000 Provision for Doubtful Debts 6,000
Trade Expenses 8,800 Interest received on loan 400
Freight 7,200 Discount received 3,600
Opening Stock 16,000 Creditors 72,000
Rent 6,000 Bad debts recovery 2,400
Sundry Debtors 96,000 Bank interest 3,600
Stationery 6,000 Bills Payable 28,000
Repair and Maintenance 5,000 Miscellaneous Receipts 7,600
Bad debts 3,600
12% Loan to Arun (01.01.21) 20,000
Salary 22,000
76 ACCOUNTS
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Sales return 6,000

Cash at Bank 54,000
Cash in Hand 10,000
5,65,000 5,65,000
Additional information:
(a) Closing Stock values at ₹ 30,000
(b) Goods destroyed by fire ₹ 8,000, insurance claim received ₹ 6,000 (c) Salary for the
month of December, 2021 became due.
(d) Depreciate fixed assets by 10% p.a.
(e) Provide 10% as provision for Doubtful debts on Debtors.
Financial Accounting: Honours 2020 Group A:

Answer any 4 Questions (4 x 10 = 40 Marks)
Dr. R. K. Das started his profession on 1st January, 2021 as medical practitioner. His incomes and expenses
for the year 2021 relating to his profession were as under :
Amount (₹)
Fees received in cash 24,000
Fees accrued but not received 6,000
Rent paid for the Chamber 6,000
Outstanding Rent 2,000
Salary paid to Staff 6,000
Salary paid in advance to Staff (included 1,000
in the above)
Miscellaneous expenses paid 200
You are required to compute the net income of Dr. R. K. Das from his profession for the year ended 31.12.
2021 under (a) Cash Basis; (b) Accrual Basis.
ABC Industries depreciates its machines @10% p.a. on straight line basis. On 1st April, 2020 the balance in
Machinery Account was ₹ 17,00,000 (original cost ₹ 24,00,000). On 1st July, 2020 a new machine was
purchased for ₹ 50,000. On 31st December, 2020 an old machine having w.d.v of ₹ 80,000 on 01 04.2020
(original cost ₹ 1,20,000) was sold for ₹ 60,000. Show the Machinery Account for the year ended 31st March,
2021.

(a) What is GAAP?
(b) Explain Fair Value Accounting.
1st Semester 77
Sri Mehta of Bombay consigns 1,000 cases of goods costing ₹ 100 each to Sri Sundaram of Madras. Sri Mehta
pays the following expenses in connection with the consignment : carriage ₹ 1,000; freight ₹ 3,000 and
loading charges ₹ 1,000. Sri Sundaram sells 700 cases at ₹ 140 per case and incur the following expenses :
clearing charges ₹ 850; warehousing and storage ₹ 1,700; and packing and selling expenses ₹ 600. It is
found that 50 cases have been lost in transit and 100 cases are still in transit. Sri Sundaram is entitled to a
commission of 10% on gross sales.
Draw up Consignment Account and Sri Sundaram Account in the books of Sri Mehta.

A trader sends out goods on approval to some customers and includes the same in the sales account. On
31.12.21, the Sundry Debtors balance (₹ 2,50,000) includes ₹ 14,000 regarding goods sent on approval against
which no intimation was received as on 31.12.21. These goods were sent out at 25% above cost price and
were sent to A – ₹ 8,000 and B – ₹ 6,000. Stock in trade in godown was valued at ₹ 50,000 on 31.12.21. A
sent intimation of acceptance on 31.01.22 and B returned the goods on 15.01.22. Pass adjustment entries on
31.12.21. Show also the entries to be made during January, 22.

From the following information you are required to prepare the Sales Ledger Adjustment Account as on
31.03.21.
(₹)
Debtors as on 01.03.21 55,842
Transaction during the month were as follows :
Sales (including cash sales ₹ 10,000) 1,08,606
Cash received from Debtors 88,753
Discount allowed to Debtors 480
Acceptances received from Debtors 7,120
Return from Debtors 5,430
Bills receivable from Debtors 1,120
Sundry charges debited to customer 378
Transfer to bought ledger 100
Provision for doubtful debts 2,500
Bill endorsed 100

From the following particulars, prepare a claim for loss of profit under the consequential loss policy :
Date of fire 30.06.21
Period of indemnity 6 months
78 ACCOUNTS
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Sum insured ₹ 80,000
Turnover for the year ended June 30, 2021 ₹ 4,00,000
Net profit for the accounting year ending March 31, 2021 ₹ 25,000
Standing charges for the accounting year ending March 31, 2021 ₹ 57,000
Turnover for the year ending March 31, 2021 ₹ 4,10,000
Turnover for the period from 01.07.21 to 31.12.21 ₹ 1,12,000
Turnover for the period from 01.07.20 to 31.12.20 ₹ 2,20,000
Saving in standing charges because of fire ₹ 6,000
Increased cost of working during dislocation period ₹ 12,000

Question 8 [Provision for Bad debts]:
Trial Balance as on 31.12.2021 of Mr. R. Sen contains the following items :
Provision for doubtful debts ₹ 15,000
Bad debt ₹ 10,000
Sundry Debtors ₹ 1,40,000
On enquiry it was ascertained that Debtors include :
(i) ₹ 20,000 due from S. Roy and Creditors include ₹ 15,000 due to S. Roy.
(ii) ₹ 8,000 due on account of sale of furniture.
(iii) Bad debts ₹ 8,000.
Prepare Provision for doubtful debt Account and Bad debt Account. Provision for doubtful debts is to be
created at 5% on trade Debtors.
Group B:
Question 9 [Single Entry]:
Mr. T. S. Gupta kept no books of accounts for his business. An analysis of his rough Cash Book for the
calender year 2021 shows the following particulars :
Receipts Amount Payments Amount
₹ ₹ ₹
Received from Debtors 80,000 Overdraft (on. 01.01.2021) 5,000
Further Capital introduced 10,000 Paid to Creditors 42,000

Business expenses 12,000
wages paid 17,500
Proprietor’s drawings 5,000
Balance at bank (31.12.2021) 6,500
1st Semester 79
Cash in hand (31.12.2021) 2,000
90,000 90,000
The following particulars are also available :
31.12.20 31.12.21
₹ ₹
Debtors 60,000 90,000
Creditors 20,000 22,500

Stock in trade 16,000 18,000
Plant and Machinery 30,000 30,000
Furniture 2,000 2,000
All his sales and purchase were on credit.
From the above particulars, prepare Trading and Profit & Loss Account for the year ended 31 st December,
2021 and a Balance Sheet as on that date. Provide depreciation on plant and machinery @10% p.a. and on
furniture @5% p.a.
A summary of receipts and payments of Medical Aid Society for the year ended 31.12.2021 is given below :
To, Balance (01.01.2021) 7,000 By, Payment for medicines 30,000
To, Subscription 50,000 By, Honorarium to doctor 10,000
To, Donations 14,500 By, Salaries 27,500
To, Interest on Investments 7,000 By, Sundry expenses 500
@7% p.a.
To, Charity show proceeds 10,000 By, Equipment purchased 15,000
By, Charity show expenses 1,000
By, Balance (31.12.2021) 4,500
88,500 88,500
Additional information (in ₹) :

01.01.2021 31.12.2021
Subscriptions due 500 1,000
Subscriptions received in advance 1,000 500
80 ACCOUNTS
9874411552
Stock of medicines 10,000 15,000
Amount due to medicine suppliers 8,000 12,000
Value of equipments 21,000 30,000
Value of Buildings 40,000 38,000
You are required to prepare Income and Expenditure Account for the year ended on 31st December, 2021
and the Balance Sheet as on that date.
Question 11 [Final Accounts]:

The following is the Trial Balance of Mr. Roy as on 31st March, 2021:
Plant & Machinery 3,10,000 Capital 4,20,000
Opening Stock 30,000 Sundry Creditors 20,000

Sundry Debtors 40,000 Sales 2,10,000
Wages 10,000 Return Outward 20,000
Salaries 15,000 Provision for Doubtful debt 1,000
Rent (April 2020 to June 2021) 18,000 Interest 4,000
Purchases 1,50,000
Return Inward 10,000
Bad debt 9,000
Insurance 3,000
Cash in hand 30,000
Cash at Bank 45,000
6,75,000 6,75,000
(a) Stock on 31st March, 2021 was valued at ₹ 35,000.
(b) Further bad-debt of ₹ 1,000 is to be written off and a provision for doubtful debts @5% on Sundry
Debtors is to be maintained.
(c) Goods costing ₹ 5,000 have been distributed as free sample.
(d) Purchase of machinery worth ₹ 20,000 on 01.10.2020 has been wrongly included in Purchases
Account. Depreciation @10% p.a. is to be charged on machinery.
(e) Office expenses outstanding ₹ 500.
1st Semester 81
Prepare Trading Account, Profit & Loss Account for the year ended on 31.03.2021 and Balance Sheet of Mr.
Roy as on that date.
Question 12 [Theory]:
(a) What are the qualitative characteristics of accounting information?
(b) What are the limitations of Historical Cost Accounting?
(c) What is the procedure for issuing accounting standards in India?
Financial Accounting: General 2020 Group A:

Question 1 [Theory]: (a)
Define :
(i) Assets
(ii) Liabilities.
(b) Write the Accounting Equation.
(c) The financial year of M/s. A.B. Trading ends on 31 March, 2021 but actual stock is not taken until 5
April, 2021 when it is ascertained at ₹ 54,000. You find that :
(i) Sales between 1 April and 5 April are ₹ 3,000.
(ii) Purchases between 1 April and 5 April are ₹ 1,400. (iii) Sales return
between 1 April and 5 April are ₹ 200.
(iv) Purchases return between 1 April and 5 April are ₹ 300. All sales are made at 25% gross profit
on cost.
You are required to calculate the value of stock on 31 March, 2021.
A trader purchased a machine on 01.04.2018 at a cost of ₹ 2,00,000 and installed it at a cost of ₹ 20,000. The
scrap value of the machine was estimated at ₹ 20,000 and its effective life at 5 years. On 01.04.2020 the
machine was sold for ₹ 1,20,000 and another machine of the same type was purchased at a cost of ₹ 1,00,000
on that date. Installation cost of the machine is ₹ 4,000. The scrap value of this machine was estimated at ₹
14,000 and its life at 10 years. Show Machinery Account for the years 2018-19, 2019-20 and 2020-21 in the
books of the trader.
A & Co. of Kolkata sent goods of the invoice value of ₹ 80,000 on consignment basis to B. & Co. of
Kanpur. Invoice value was made by adding 331/3% on cost. A & Co. paid ₹ 1,800 for Railway Freight, ₹
360 for Carriage and ₹ 1,200 for Insurance for sending the goods. B & Co. sold ½ of the goods at ₹ 50,000,
incurring a bad debt of ₹ 8,400. B & Co. paid Landing Charges ₹ 600, Godown Rent ₹ 750 and Selling
expenses ₹ 840. B & Co. is entitled to an ordinary commission @5% and a Del Credere commission @2½%
on sales.
82 ACCOUNTS
9874411552
Show following accounts in the books of A & Co. – (a)

Consignment Account
(b) B & Co. Account.

The following transactions have been extracted from the books of M/S. B. & Co :
₹
Debtors balance on 01.04.2020 (Dr.) 1,00,000
Transactions during the year were :
Sales (including Cash Sales of ₹ 40,000) 2,56,000
Cash received from Debtors 1,80,000
Bills Receivable drawn 16,000
Bills Receivable endorsed 5,000
Returns from Debtors 12,000
Bills Receivable as endorsed dishonoured 2,000
Bill Receivable discounted (discount charges ₹ 200) 3,000
Bad Debts written off (after deducting bad debts recovery ₹ 2,000) 4,000
Sundry Charges debited to customers 1,200
Transfer from Creditors Ledger 600
Debtors Balance as on 31.03.2021 (Cr.) 2,000

Prepare a Sales Ledger Adjustment Account for the year ending on 31.03.2021.

On September 1, 2021, the godown of D. & Co. was destroyed by fire and stock of the value of ₹ 60,000
was salvaged. D. & Co. has a fire insurance policy of ₹ 1,50,000. Following information have been extracted
from the books of the company :
₹
Purchases for the year ended 31.03.2021 17,50,000
Sales for the year ended 31.03.2021 27,50,000
1st Semester 83
Purchases from 01.03.2021 to 01.09.2021 7,20,000

Sales from 01.03.2021 to 01.09.2021 10,80,000
Stock on 31 March, 2020 7,50,000
Stock on 31 March, 2021 3,00,000
You may assume that purchases and sales occur evenly over the months for last few years. Rate of Gross
Profit is to be based on the year ended on 31.03.2021.
Calculate the amount of claim to be presented to the Insurance Company in respect of Loss of Stock.
Question 6 [Introduction]:
Mr. Samir Roy, a sole proprietor of a small trading house determines profit under cash basis. The profit for
the year ended March, 31, 2021 was determined at ₹ 2,40,000. He provides the following additional
information for 2020-21.
₹
Credit Sales 41,000
Credit Purchases 24,000
Outstanding expenses 10,000
Income earned but not received 8,400
Rent paid in advance 5,000
Determine profit earned by Mr. Roy under ‘accrual basis’.
Question 5 [Capital & Revenue Expenditure]:

(a) What do you mean by Capital Expenditure and Revenue Expenditure?
(b) Distinguish between Capital Expenditure and Revenue Expenditure.
Question 8 [Rectification of errors]:

preparation of Final Accounts :
(a) Return Inward Book was undercast by ₹ 800.
(b) ₹ 1,000 received from P was debited to the account of Q in the Sales Ledger.
(c) A purchase of ₹ 1,342 had been debited to supplier at ₹ 1,324.
(d) Salary paid ₹ 2,500 wrongly debited as Rent paid.
An amount of ₹ 2,000 withdrawn by the proprietor for his personal use had been debited to travelling expenses
account.
84 ACCOUNTS
9874411552
Group B:
The following Receipts and Payments Account of the Tala Football Club for the year ended 31.12.2021
:
Receipts Payments
₹ ₹
01.01.2021 31.12.2021
Cash in hand 5,000 12,000

Remuneration to Coach
Cash at Bank 44,600 5,000
Groundman’s Salary
31.12.2021 31,000
Purchase of Equipment
Bank Interest 1,000 4,000
Bar Room Expenses
Entrance Fees 10,000 9,000
Ground Rent
Subscription 50,000 Night Club Expenses 9,600
Bar Room Receipts 8,000 Printing and Stationery 5,000
Sale of Equipments 1,600 Repairs to equipments 9,000
Proceeds of Night Club 21,600 Cash at Bank 51,200
Cash in hand 6,000
1,41,800 1,41,800
01.01.2021 31.12.2021
(₹) (₹)
1st Semester 85
Subscription due 3,000 2,000
Amount due for Printing and Stationery 2,000 1,600
Estimated value of Equipments 16,000 34,000
You are required to prepare :

(a) An Income and Expenditure A/c for the year ended 31.12.2021 (b) A
Balance Sheet as on that date.
Question 10 [Theory]:
(a) Briefly discuss the limitations of historical cost accounting.
(b) Mention the usefulness of applying accounting standards.
(c) State the main functions of Accounting Standard Board (ASB).
86 ACCOUNTS
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Question 11 [Single Entry]:
Mr. Souvik keeps his books of accounts under single entry system. The following details are obtained from
his books of account.
Furniture Debtors Creditors Cash Stock-in-Trade
31.03.2020 (₹) 50,000 30,000 20,000 84,600 32,000
31.03.2021 (₹) 45,000 ? 24,000 ? 28,000

The transactions during the year :
₹ ₹
Goods purchased for cash 24,000 Received from debtors 1,40,000
Total Sales during the year 2,28,600 Payment to creditors 85,000
[including Cash sales 35,800] Cash withdrawn for personal use 4,800
Expenses paid [including salary] 65,000
Mr. Souvik wants to maintain Provisions for Bad Debts @ 5% on closing Debtors.
Prepare :
(a) A Trading and Profit and Loss A/c for the year ended 31.03.2021 and (b)
A Balance Sheet as on that date.
Question 12 [Final Accounts]:

Following is the trial balance of Mr. X for the year ended 31.12.2021
Opening Stock 60,000 Sales 3,82,000
Purchases 1,70,000 Purchase Return 3,200
Sales Return 3,000 Discount 800
Carriage on Purchases 2,000 Sundry Creditors 51,000
Wages 30,000 Bills Payable 15,000
Bills Receivable 21,000 Capital 1,30,000
Discount 1,600
Salary 18,800
Insurance 2,400
Rent 3,600
Income Tax 1,800
Cash at Bank 13,400
Furniture 24,000
Plant and Machinery 1,30,000
Bad Debts 1,000
Freight and duty 3,400
Drawings 10,000
5,82,000 5,82,000
The following adjustments are to be made before preparing the final accounts :
1st Semester 87
(a) A credit sale of ₹ 2,000 has not been recorded in the books.
(b) Goods costing ₹ 1,000 has been taken by the proprietor for his personal use.
(c) Goods worth ₹ 500 distributed as free sample has not been recorded.
(d) Wages includes ₹ 3,000 for the year 2020 and Rent paid is for 9 months’ rent.
(e) Depreciate Plant & Machinery and Furniture at 10% and 5% respectively. (f) Bad Debts to be written
off ₹ 6,000 and a provision @ 5% to be made for Doubtful Debts.
88 ACCOUNTS

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Accounts GKJ (1st Semester) 10-04-24

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Accounts Theory Accounts

2. Money measurement Concept:

3. Going concern Concept:

4. Cost Concept (OR Historical Cost Concept) :

10. Prudence (conservatism):

11. Materiality Concept:

12. What do you mean by Accounting Standards?

13. What are the benefits of Accounting Standards?

14. Discuss the procedure for issuing accounting

15. Write a short Note on IFRS

16. Write short notes on: GAAP

(b) Help in Daily Accounting Work:

17. Distinction between Reserve & Provisions**

1. Depreciation: [S.L.M Method]

2. Depreciation: (Straight line Method)

3. Depreciation: (Straight line Method)

4. Depreciation: (Straight Line Method)

6.Depreciation: [Straight Line Method]

7. Depreciation: [S.L.M Method]

8. Depreciation: (Written down Value Method)

9. Depreciation: (Change of Method)

10. Depreciation: [W.D.V Method]

11. Depreciation: [W.D.V Method]

12. Depreciation [W.D.V Method]

13. Depreciation: [W.D.V Method]

14.Depreciation: [Change of Method] [SLM to WDV]

4 Chapter 5: Self Balancing

Transfer from Debtors Ledger to Creditors Ledger 1,000

Prepare Creditors Ledger Adjustment Account in General Ledger.

7. Rectification of Errors: [After Trial Balance]

8.Rectification of Errors: [After Trial Balance]

9.Rectification of Errors: [After Trial Balance]

10.Rectification of Errors: [After Trial Balance]

11.Rectification of Errors: [After Final A/c]

12.Rectification of Errors: [After Final A/c]

2. Inventory: Stock Taking

3. Inventory: Valuation of Stock

4. Inventory: Stock Taking

Following are the examples of capital expenditure:

Deferred Revenue Expenditure

1. Capital & Revenue Expenditure

Conversion to double entry system

Calculation of Missing Figures

Transactions during the year ended 31st December, 2021 :

I. Receipts for the year ended 31st March, 2021: ₹

As at 31st March,2020 As at 31st March, 2021

31st March 2020 31st March, 2021

4. Single Entry: [Conversion into double Entry]

trade was valued at ₹ 10,000. Furniture is to be depreciated by 10% p.a.

To Contribution For Annual Dinner xxx By Water & Electricity xxx

Income and Expenditure Account

Income & Expenditure Account

To Honorarium xxx By Profit On Sale Of Provisions (Sale + Closing xxx

Meaning of Accounting Treatment of Some Peculiar Items

(iv) Stock of sport material is used during the year is ₹ 90,000.

The following information are also available:

Additional Information:Accrued Subscription ₹ 30,000

10Chapter 12: Final Account

Debit Balance ₹ Credit Balance ₹