BBA203 – FINANCIAL ACCOUNTING

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ASSIGNMENT

 

 

 

Note: Answer all questions. Kindly note that answers for 10 marks questions should be approximately of 400 words. Each question is followed by evaluation scheme.

 

Q.1 Journalize the following transactions in the books of Balu.

2004                                                       Rs.

Jan. 1 Commenced business with 25,000

Jan. 2 Goods purchased for cash 15,000

Jan. 3 Paid freight 500

Jan. 7 Goods sold to Raj Kumar on credit 5,000

Jan. 8 Paid for stationery 2,000

Jan.10 Paid for Rent 1,000

Jan.13 Cash received from Mohan Das 15,400

Allowed him discount 600

Jan.15 Paid Premium 4,000

Jan.20 Paid to postage 1,000

Jan.25 Paid for salaries 500

Jan.30 Commission received 1,000

Preparation of all the journal entries with the correct amount.

 

Ans :

 

date

particulars

Ledger’s folio

Debit amount

Credit amount

 

 

 

 

Q.2 Accountancy refers to a systematic knowledge of accounting. It explains ‘why to do’ and ‘how to do’ of various aspects of accounting. Explain the objectives of accounting and explain the categories of users.

 

Ans: Explanation of accounting objectives:

 

Accounting operates within a broad socio-economic environment, and so, the knowledge required of the accountant cannot be sharply compartmentalized. It is therefore, difficult to discuss one area without relating to other areas of knowledge.

 

Q.3 What do you understand by good will? Explain the accounting treatment of goodwill at the time of admission. Give journal entry for the below problem:

T and S are partners in a firm sharing profit in the ratio 5:3. They admitted G as a new partner for 1/4th share in the profit. G brings Rs.45,000 for her share of goodwill and Rs.1,20,000 for capital. They have withdrawn the goodwill from the firm. Make journal entries in the books of the firm after the admission of G. The new profit sharing ratio will be 2:1:1.

 

 

Ans : Meaning of good will with the formula

Accounting treatment of goodwill at the time of admission

Journal entry in the books of T,S and G

 

 

 

 

 

Q.4 Differentiate between trade discount and cash discount.  Enter the following transactions in Sadhana’s simple cash book.

2010 April  1st April Balance of cash in hand Rs.1500

                   8th April Purchased goods for cash from X for Rs.320

                  15th April  Sold goods for Rs. 480 to Y for cash   

                  20th April Received commission Rs.65

                  22nd April Paid Commission Rs.55

                 28th April  Paid to Reena on account Rs.715

                 30th April Paid salary to the office clerk Rs.100 and office rent Rs.60   

 

Ans :  Differences between trade discount and cash discount  :

 

1. Meaning:

 

Trade Discount is a discount allowed by the seller to the buyer in case of bulk purchases made by him.

Cash Discount is a reduction in the net amount payable by the buyer when prompt payment is made by the buyer.

 

 

Q.3 Final Accounts are prepared at the end of the accounting year with various adjustments. Explain the features and objectives of final accounts 

 

Ans : Explanation of objectives of final accounts :

 

1. Final accounts and balance sheets help investors make sense of a company’s financial condition. They show financiers whether the business is forthcoming with performance data, how it intends to marshal its resources to pound the competition, and the steps it is taking to repay its long-term loans and avoid lender exodus.

 

2. Final Accounts are prepared so that every entity

 

 

 

Q.5 Final Accounts are prepared at the end of the accounting year with various adjustments. Explain the features and objectives of final accounts.

 

Ans: Explanation of objectives of final accounts:

 

One of the main functions of financial accounting is the preparation of final accounts, also commonly referred to as financial statements. These consist of a profit and loss account and a balance sheet. In the case of companies, the final accounts are often referred to as published accounts. These are sent to shareholders in the form of a pamphlet known as the annual or corporate report. It is therefore usual to discuss the objectives of company final accounts

 

 

 

 

Q.6 Prepare Trading, Profit and Loss Account and Balance Sheet from the following particulars as on 31st March 2012.

Trial Balance

Particulars          Dr. (Rs) Cr. (Rs)

Capital / Drawings           1400       10000

Cash in hand      1500       –

Bank overdraft @ 5%     –              2000

Purchase and Sales         12000    15000

Returns                1000       2000

Establishments charges                2500       –

Taxes and Insurance       500         –

Provision for Doubtful Debts     –              1000

Bad Debts           500         –

Sundry Debtors and Creditors    5000       1850

Commission       –              500

Investments      4000       –

Stock on 1 April 2010      3000       –

Furniture             600         –

Bills Receivable & Bills payable                3000       2500

Collected Sales Tax         –              150

Total      35000    35000

Further, you are required to take into consideration the following information:

a) Salary Rs.100 and taxes Rs.400 are outstanding but insurance Rs.50 prepaid

b) Commission amounting to Rs.100 has been received in advance for work to be done next year.

c) Interest accrued on investments Rs.210

d) Provision for doubtful Debts is to be maintained at 20%

e) Depreciation on furniture is to be charged at 10% p.a.

f) Stock on 31st March 2012 was valued at Rs.4,500

g) A fire occurred on 25th March 2012 in the godown and stock of the value of Rs.1,000 was destroyed. It was fully insured and the insurance company admitted the claim in full.

Calculation of Trading and P/L a/c

Preparation of balance sheet

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