Attempt all the questions
Question1)
(a) Explain Accounting. Briefly describe accounting concepts that guide accountant at the recording stage.
(b) “Ledger is said to be principal book entry and transactions could even be directly entered into ledger account.” Elaborate and describe why journal is essential.
Question2)
Book of Deven Verma can’t be tallied. Accountant transferred difference of Rs. 1,270 in the suspense account on debit side. The following mistakes were found later on.
Rectify these errors by passing Journal entries and prepare Suspense Account.
(a) Purchase of Rs. 400 from Saran was entered into sales book but Saran’s personal account was rightly credited.
(b) Sales of Rs. 430 to Ramdas were credited in his account Rs. 340.
(c) Sales of old furniture of Rs. 540 was credited to sales account as Rs. 450.
(d) Goods worth Rs. 100 were taken by the proprietor which was not recorded.
(e) Sales of Rs. 296 to Kishan were entered in sales book as Rs. 269.
(f) Balance of Sales Return Book Rs. 210 was not included in accounts.
Question3) A of city X consigns goods to B of city Y to be sold at or above invoice price. B is entitled to get the commission of 8% on sales at invoice price plus 25% of any surplus price realized. B accepted the bill of exchange drawn by A amounting to 50% of invoice price. In year 2010 goods consigned by A were invoiced at Rs. 2, 50,000. These goods cost to A Rs. 2, 00,000 (including freight). Sales made by B during year amounted to Rs. 2, 35,000. At the end of the year, goods unsold with B represented an invoice value of Rs. 60,000. During the year, A had received from B Rs. 40,000 by bank drafts, certain remittances being in transit on 31st Dec., 2010. Create essential ledger accounts in books of both the parties.
Also demonstrate how the consignment stock would appear in the Balance Sheet.
Question4) A merchant keeps incomplete records. During 2010 analysis of his cash book was as under:
Rs. Rs.
Receipts from Debtors 4,000 Bank overdraft (1-1-2010) 600
Additional Capital Introduced Payments to Creditors 2,700
on 1-9-2010 300 General Expenses 900
Loan from C on 1-7 – 2010 Salaries 300
@ 6% interest p.a. 1,500 Drawings 400
Bank Balance (31-12-2010) 900
5,800 5,800
On 1st January, 2010 the following balances were recorded: Building Rs. 2,500; Stock Rs. 1,800; Debtors Rs 5,300 and Creditors Rs. 1,500.
The Balances on 31st Dec. 2010 were: Debtors Rs. 6,000; Building Rs. 2,500; Creditors Rs 1,900 and Stock Rs. 2,600.
Allow 5% depreciation on Building. Provide interest on C’s loan for six months. Create trading, Profit and Loss Account and Balance Sheet on 31-12-2010.
Question5)(a) What do you understand by Income & Expenditure Account? How does it vary from Receipts & Payments Account?
(b) Explain the methods of recording depreciation in books of accounts. How is the balance of the provisions for depreciation account shown in the Balance sheet?