accounts nchmct sem-2 question solved year-2013/14

accounts nchmct sem-2 question solved year-2013/14

  Q.1. Journalise the following transaction:

 2014

April 1 Rama started business with cash `2,00,000/-, Goods `50,000/- and Motorcar `2,50,000/-

 April 2 Deposited into bank `50,000/-

 April 5 Received a cheque of `10,000/- from Vivek and deposited to bank.

 April 8 Sold goods worth `30,000/- to Vivek on 10% Trade discount term.

 April11 Goods purchased from Rahim `70,000/-

 April18 Received from Vivek in full settlement of his account `25,000/-

 April 20 Paid to Rahim in full settlement `69,500/-

April 28 Loan given to Ramesh by cheque `50,000/-

 April 29 Purchased computer from HCL computer `45,000/-

April 30 Received a cheque of `5,000/- from Sita and paid to Gita.

JOURNAL A/C

OR

 Explain in brief Double Entry System of Book Keeping with suitable examples.

ANS: Double-entry bookkeeping, in accounting, is a system of bookkeeping so named because every entry to an account requires a corresponding and opposite entry to a different account. The earliest known written description of double-entry accounting comes from Franciscan friar Luca Pacioli. In deciding which account has to be debited and which account has to be credited, the golden rules of accounting are used. This is also accomplished using the accounting equation: Equity = Assets − Liabilities. The accounting equation serves as an error detection tool. If at any point the sum of debits for all accounts does not equal the corresponding sum of credits for all accounts, an error has occurred. It follows that the sum of debits and the sum of the credits must be equal in value.

Double-entry bookkeeping is not a guarantee that no errors have been made—for example, the wrong ledger account may have been debited or credited, or the entries completely reversed.

In the double-entry accounting system, at least two accounting entries are required to record each financial transaction. These entries may occur in asset, liability, equity, expense, or revenue accounts. Recording of a debit amount to one or more accounts and an equal credit amount to one or more accounts results in total debits being equal to total credits for all accounts in the general ledger. If the accounting entries are recorded without error, the aggregate balance of all accounts having positive balances will be equal to the aggregate balance of all accounts having negative balances. Accounting entries that debit and credit related accounts typically include the same date and identifying code in both accounts, so that in case of error, each debit and credit can be traced back to a journal and transaction source document, thus preserving an audit trail. The rules for formulating accounting entries are known as "Golden Rules of Accounting”. The accounting entries are recorded in the "Books of Accounts". Regardless of which accounts and how many are impacted by a given transaction, the fundamental accounting equation A = L + OE will hold, i.e. assets equals liabilities plus owner's equity.

 

Q.2. Prepare the Ledger Account of Mahesh and balance it.

 2014

May 1 Opening balance `5,000/- (Debit).

 May 2 Mahesh purchased goods from us `2,000/-

 May 3 Received cash `1,800/- from Mahesh and discount allowed Rs.200/-

May 5 Goods sold to Mahesh `5,000/-

May 8 Purchased old typewriter from Mahesh for `1,000/-

May 10 Received `8,800/- from Mahesh in full settlement of his account.

ANS:

       Journals can be done in rough.

       May2.  Mahesh alc………..dr,    2000

                            To sales alc                        2000

       May 3.  Cash a/c…………  dr,      1800

                     Discount  allowed a/c...dr,  200

                                To Mahesh a/c                 2000

       May 5.  Mahesh alc…………..dr,  5000

                              To sales a/c                         5000

       May 8   typewriter a/c………….dr,    1000

                               To Mahesh a/c                        1000

        May 10.      Cash a/c……………….dr,   8800

                             Discount allowed a/c….dr,  200

                                       To Mahesh alc                    9000

 

OR

Differentiate between Ledger and Journal. Give one ledger account, as an example.

ANS:

 

One example of ledger a/c is Account  receivable.

Q.3. Enter the following transactions in the three column cash book:

ANS:

*  note : the transaction on march 18 shell not be recorded on that date as the cheque is deposited on march 20.

 

Q.4. Define Bank Reconciliation Statement and list the cause of difference in the cash book and pass book balances..

ANS:

Bank reconciliation statement ensures the accuracy of the balances shown by the pass book and cash book. Bank reconciliation statement provides a check on the accuracy of entries made in both the books. Bank reconciliation statement helps to detect and rectify any error committed in both the books.

       Reasons for Differences between Cash Book and Pass Book

The causes of difference are basically of two types:

1.      Items appearing in Cash Book but not appearing in Pass Book

2.      Items appearing in Pass Book but not appearing in the Cash Book

I. Items appearing in Cash Book but not appearing in Bank Pass Book:

1.      Cheques issued but not debited by the Bank: The reason for this may be that the payee did not bank these cheques or they may still be under clearance. We make the entry in Cash Book immediately when we issue the cheques thereby reducing the Bank balance in the books. Hence, Bank balance as per Cash Book will be less, but as per Bank Pass Book, it will be more.

2.      Cheques deposited but not credited by the Bank: The business may deposit the cheque into the Bank for collecting the payment but the bank may not clear it immediately. But, the firm shall make an entry in the books immediately thereby increasing the balance. Thus, Bank balance as per Cash Book will be more than the balance as per Bank Passbook.

3.      Errors: The Bank may by mistake miss out any entry which results in the difference.

4.      Standing Instructions: The customer may give standing instructions to the Bank to make certain regular payments like telephone bills, insurance premium, loan repayment installment, transfer of funds, etc. The firm will make the entry regarding these immediately but the bank shall make an entry on after the payment.

II. Items not appearing in the Cash Book but appearing in the Pass Book:

1.      Bank interest, Bank charges, etc.: The Bank charges interest on the overdraft, charges for services, issue of demand draft, pay orders, etc. Similarly, the Bank also credits interest on fixed deposits. Here, the Bank records the transactions in the Pass Book immediately. But, these may be entered in business books at a later date.

2.      Direct deposits in Bank account: Sometimes customers or others directly deposit an amount in the Bank. The Bank enters it immediately, but the entry in Cash Book appears later.

3.      Bills for collection: The Bank collects the payment and credits the same in the passbook relating to any bills sent for collection. But, this is entered in Cash Book only after receipt of information from the Bank.

4.      Errors: The book-keeper or the accountant may miss any entry in the Cash Book by mistake.

 

OR

 Write short notes on (any four):

(a)   Capital expenditure

- Capital expenditure or capital expense is the money an organization or corporate entity spends to buy, maintain, or improve its fixed assets, such as buildings, vehicles, equipment, or land.

 

(b)   Cash discount 

- A cash discount, also called a purchase discount or sales discount , is a reduction in the purchase price of a good because of early cash payment. In other words, the seller of goods is willing to reduce the price of the goods if the buyer is willing to pay for the good earlier.

 

(c)     Fundamental accounting equation

- The fundamental accounting equation, also called the balance sheet equation, represents the relationship between the assets, liabilities, and owner's equity of a person or business. It is the foundation for the double-entry bookkeeping system. For each transaction, the total debits equal the total credits.

 

(d)   Compound entry

- A compound entry is actually a combination of two or more simple journal entries but instead of recording numerous separate journal entries, it is better to merge multiple journal entries of a single accounting event into a single compound entry because it saves time and keeps the related debits and credits in one 

 

       (e) Petty cash book

- It is another Cash Book which is maintained, generally,    in large business concerns to reduce the burden of 'Main Cash Book', in which numerous transactions involving petty (small) amounts are recorded. For this purpose, a Petty Cashier is appointed by the Chief Cashier. The Chief Cashier advances a sum of money to the Petty Cashier to enable him to meet petty expenses for a fixed period. The Petty Cashier will record this amount on the Debit Side of the Petty Cash Book while the Chief Cashier will record the same amount on the Credit Side of the Main Cash Book.

 

(e)   Opening entry

- An opening entry is the initial entry used to record the transactions occurring at the start of an organization. The contents of the opening entry typically include the initial funding for the firm, as well as any initial debts incurred and assets acquired.

 

Q.5. Explain in one or two lines (any five):

 (a) Contra entry

-In dual entry accounting system, a Contra Entry is an entry which is recorded to reverse or offset an entry on the other side of an account. If a debit entry is recorded in an account, contra entry will be recorded on the credit side and vice-versa

 

 (b) Debit note

- A debit note' or debit memorandum is a commercial document issued by a buyer to a seller as a means of formally requesting a credit note.

 

 (c) Deferred revenue

- Deferred income is, in accrual accounting, money earned for goods or services which have not yet been delivered

 

 (d) Goodwill

- Goodwill in accounting is an intangible asset that arises when a buyer acquires an existing business. Goodwill represents assets that are not separately identifiable.

 (e) Marshaling

- Marshaling is the process of arranging  liabilities  and assets in a proper order.

 (f) Business entity concept

- In accounting, a business or an organization and its owners are treated as two separately identifiable parties. This is called the entity concept.

 (g) Crossed cheque

- A crossed cheque is a cheque that has been marked specifying an instruction on the way it is to be redeemed

 

 (h) Intangible assets

- An intangible asset is an asset that lacks physical substance; in contrast to physical assets, such as machinery and buildings. Examples are patents, copyright, franchises, goodwill, trademarks, and trade names

 

 (i) Contingent liability

- Contingent liabilities are liabilities that may be incurred by an entity depending on the outcome of an uncertain future event such as the outcome of a pending lawsuit.

 

 (j) Double entry system of book keeping

- Double-entry bookkeeping, in accounting, is a system of book keeping where every entry to an account requires a corresponding and opposite entry to a different account.

 

Q.6. A Differentiate between Capital Expenditure and Revenue Expenditure.

ANS:

 

 B State whether the following items are Capital, Revenue or Deferred Revenue Expenditure:

(i)                Purchase of stationery of `5,000/-. (revenue expenditure)

(ii)              Purchase of motor car of `2,50,000/- (capital expenditure)

(iii)             Payment of salary `15,000/-. (revenue expenditure)

(iv)            Spent `5,00,000/- towards advertisement-(deferred revenue expenditure)

(v)              Payment of `10,000/- towards installation of a new machine. (capital expenditure)

(vi)             Paid `2,00,000/- towards repair and painting of building.(revenue expenditure)

(vii)          Commission and brokerage paid for issue of shares Rs.50,000/-(revenue expenditure)

(viii)         Legal expenses `1,00,000/- incurred at the time of purchase of an asset. (capital expenditure)

(ix)            Paid `5,000/- towards office expenses.(revenue expenditure)

(x)              Paid `3,000/- towards conveyance charges(revenue expenditure)

 

Q.7. Prepare a Trial Balance from the following:

TRIAL BALANCE

PARTICULARS	L.F	DEBIT	CREDIT
Capital			2,70,000
Interest allowed		11,880
Drawing		27,000
Octroi duty		21,600
Sales return		16200
Purchase return			5,400
Commission received			2,700
Discount allowed		1620
Loan			43,200
Repair & maintenance		59,400
Sales			7,02,000
Purchase		4,32,000
Cash		54,000
Bank overdraft			27,000
Creditors			32,400
Debtors		54,000
Furniture		27,000
Building		2,16,000
Machinery		1,62,000
total		1082700	1082700

Q.8. Prepare a Trading, Profit & Loss Account and a Balance Sheet from the following Trial Balance and adjustment: