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PROGRAM:
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ASSIGNMENT A
Q 1. Define Accounting. How does it differ from book-keeping?
Accounting is the actual process of preparing and presenting the accounts. Book-keeping is part
of accounting and is concerned with record keeping or maintaining of book of accounting which
is often routine and clerical in nature.
Q 2 What is basic accounting equation?
Total liabilities = Total Assets
Q 3 What is Journalizing? Give a format of Journal & briefly explain its content.
Journalizing is the process of recording a business transaction in the accounting journal, including
identifying, analysing and recording business transactions
Journal Format:
DATE
PARTICULARS
L.F
DEBIT RS
CREDIT RS
The date on which transactions have taken place is entered in the date column. Two aspects of the
transaction are recorded in the particulars column. A brief description of the transaction is also
given in the particulars column. The ledger Folio (L.F) column is meant for writing the number of
the page I the ledger in which the particular transaction is entered in the debit column and the
amount to be credited is entered in the credit column.
Q 4 what are the advantages of special Journal & list them.
Time and labour saving in journalizing and posting
Facilitates division of work
Permits the installation of internal check system
Permits the installation of internal check system
Q 5 State the reasons for the difference between the cash book balance & pass book balance.
Cheques issued by the business to suppliers or other parties may not have been presented for
payment
Cheques received form customers and deposited may not have been collected by the banker
Deposits may have been directly made by the customers into the bank account of the enterprise
Collection charges by bank for the balance maintained with it and any other income such as
interest on securities, dividend collected by the bank on behalf of the business can be ascertained
only from the bank statement
Wrong entries made by the business in the cashbook or errors committed by the bank in its ledger
Collection charges, service charges and interest on overdraft are charged by the banker. The
business can ascertain the exact amount of charges and record them in the cashbook only after the
receipt of the bank statement.
Omission of entries in the two sets of books
Dishonour of customers cheques deposited in the bank account.
ASSIGNMENT B
Q1 Define depreciation. Differentiate, with suitable example, between Diminishing Balance
Method & Straight Line Method of charging depreciation.
Depreciation is the acquisition cost of an asset spread over the economic life of the asset.
Diminishing Balance Method, a fixed rate of depreciation is charged while in Straight line a fixed
amount of depreciation is charged
Q2 Define Bills of Exchange and explain the parties involved in it.
Bills of exchange is an instrument in writing, containing an unconditional order, signed by the
maker, directing a certain person to pay a certain sum of money only, or to the order of, a certain
person or to the bearer of the instrument.
The person who draws the bill is called the drawer. The person who accepts the order is known as
drawee and the person to whom the amount has to be paid is known as the payee. Drawer and the
payee can be the same person
Q3 Distinguish between capital expenditure & revenue expenditure
Capital expenditure is expenditure that the benefit of which is not fully derived in one year but
spread over several periods while revenue expenditure is an expenditure incurred and the benefit
of which is derived in the year in which the expenditure was incurred.
Q 4 Case Study:
The following is the Trial Balance of Gupta as on 30th June, 2001
Trial Balance of Gupta for the year ending
30th June, 2001
Dr. Cr. Particulars
Rs.
Particulars
Rs.
Cash
Cash at Bank
Purchases
Return inwards
Wages
Fuel and power
Carriage on sales
Carriage on
Purchases
Inventory (1st July,
2000)
Buildings
Freehold land
Machinery
Patents
Salaries
General expenses
Insurance
Drawings
Accounts
receivable
1,76,580
540
2,630
40,675
680
8,480
4,730
3,200
2,040
5,760
32,000
10,000
20,000
7,500
15,000
3,000
600
5,245
14,500
Sales account
Returns outwards
Capital
Accounts payable
Rent
98,780
500
62,000
6,300
9,000
1,76,580
TRADING AND PROFIT AND LOSS ACCOUNT FOR GUPTA AS AT 30TH JUNE 2001
K
Sales
98,780.00
Return inwards
(680.00)
98,100.00
5,760.00
Purchases
40,675.00
2,040.00
Return outwards
(500.00)
47,975.00
(6,800.00)
(41,175.00
)
56,925.00
Gross profit
Less expense
Wages
8,480.00
4,730.00
3,200.00
Salaries
15,000.00
General expenses
3,000.00
Insurance
600.00
Depreciation: Machinary
2,000.00
Patents
Accrual (Salaries)
1,500.00
1,500.00
Prepayment (Insurance)
(170.00)
725.00
Net profit
(40,565.00
)
16,360.00
Q5. From the books of Mr.Neelam, it was observed that cheques amounting to Rs.2,40,000 were
deposited in the bank, out of which cheques worth Rs.20,000 were dishonored and cheques worth
Rs.40,000 are still in the process of collection. The treatment of this while preparing Bank
Reconciliation Statement is
(a) Deduct Rs.60,000 from bank balance as per pass book
(b) Add Rs.20,000 and deduct Rs.40,000 from overdraft balance as per cash book
(c) Deduct Rs.60,000 from overdraft balance as per pass book
(d) Add Rs.60,000 to overdraft balance as per pass book
(e) Deduct Rs.40,000 and add Rs.20,000 from overdraft balance as per pass book
12. The impact on assets, profit and liabilities of a firm, on account of salary paid will be
Assets Profit Total Liabilities
(a) No effect Decreases Decreases
(b) Decreases No effect Decreases
(c) Decreases Decreases Decreases
(d) Increases No effect Increases
(e) Decreases Increases Decreases.
Q13. Which of the following is true?
(a) Discount columns in cash book are totaled and not balanced
(b) A petty cash book in which a separate column is provided to record payment under each head
is
called imprest system
(c) The total of purchases book is posted periodically on the credit side of sundry creditors
account
(d) The total of sales book is posted periodically on the debit side of sundry debtors account
(e) Petty cash book is used to record all cash transactions.
Q14. Total of sales day book at the end of the month indicates
(a) The total sales for the month
(b) The total credit sales for the month
(c) Total cash sales of the month
(d) Total amount due to suppliers
(e) Total amount receivable from credit sales.
Q16. Journal entry for receiving interest in cash from Mr. Prashant against the loan given to him
(a) Interest on loan account Dr.
To Prashant account
(b) Prashant account Dr.
To Interest account
(c) Cash account Dr.
To Prashant account
(d) Cash account Dr.
To Interest on loan account
(e) Cash account Dr.
To Loan account.
17. Which of the following entries recorded in the books of the drawee of a bill is false?
(a) When a bill is accepted, the account to be debited is drawers a/c
(b) When a bill is discharged, the account to be debited is bills payable a/c
(c) When a bill presented for payment by a bank is dishonored, the account to be debited is bills
payable a/c
(d) When noting charges of a dishonored bill is paid by the endorsee ,the account to be debited is
noting charges a/c
(e) At the time of retirement of a bill the account to be debited is the drawers a/c.
Q 18. Which of the following is true?
(a) A bill sent for collection by bank when dishonored, the drawer will credit bank a/c
(b) At the time of renewal of bill interest a/c is credited in the books of the drawee
(c) Accommodation bills are drawn, accepted and endorsed for some consideration
(d) Refusal by the acceptor to make payment of the bill on due date is called dishonor
(e) When a bill is endorsed, the drawer credits the drawees a/c.
Q19. Bills receivable account is a
(a) Nominal account
(b) Personal account
(c) Intangible asset
(d) Real account
(e) Representative Personal account.
Q20 . Closing stock is generally valued at
(a) Cost price
(b) Replacement cost
(c) Market price
(d) Realisable value
(e) Cost price or market price whichever is lower.
Q21. The provision for discount on debtors is calculated on the amount of debtors
(a) Before deducting the provision for doubtful debts
(b) Left after deducting the provision for doubtful debts
(c) Before deducting the actual bad debts
(d) After deducting the actual bad debts
(e) After deducting the actual bad debts and the provision for doubtful debts.
Q22. Consider the following information of Thumbs-up Company for the year 2006-2007:
Opening balance of provision for debtors account Rs. 20,000
Bad debts during the year Rs. 18,000
Closing balance of Sundry debtors Rs.2,65,000
Estimated provision for doubtful debts 4%
The amount to be debited to profit and loss account to make the estimated provision is
(a) Rs. 8,600
(b) Rs.10,400
(c) Rs.10,520
(d) Rs.10,600
(e) Rs.10,680.
Q23. At the time of preparation of final accounts, bad debts recovered account will be transferred
to
(a) Debtors account
(b) Profit & loss account
(c) Profit & loss adjustment account
(d) Profit & loss appropriation account
(e) Provision for discount on debtors account.
Q24. Which of the following is false about diminishing balance method of depreciation?
(a) Higher amount of depreciation is charged when the machine is more efficient
(b) It recognizes the risk of obsolescence by higher amount of depreciation in the early years
(c) The total amount of depreciation and repairs is almost uniformally distributed over the useful
life
(d) It results in better cash flow through tax deferral as taxable income is lower in the initial years
(e) Depreciation amount throughout the useful life will be uniform.
Q29. Which of following transactions does not change the total amount of liabilities in the
balance sheet?
(a) Purchase of office furniture on credit
(b) Payment of bank loan
(c) Issue of debentures
(d) Acceptance of bills from creditors
(e) Redemption of preference shares.
Q31. The expenses and incomes pertaining to full trading period are taken to the Profit and Loss
account of a business, irrespective of their actual payment or receipt. This is in recognition of
(a) Time period concept
(b) Business entity concept
(c) Going concern concept
(d) Accrual concept
(e) Duality concept.
Q32. Which of the following statements can be used to assess the liquidity of a company?
(a) Balance sheet
(b) Profit and loss account
(c) Profit and loss appropriation account
(d) Bank reconciliation statement
(e) Manufacturing account.
Q33 . Which of the following state that Anticipate no profit and provide for all possible losses?
(a) Convention of materiality
(b) Convention of consistency
(c) Convention of disclosure
(d) Convention of conservatism
(e) Convention of matching.
Q34. Which of the following statements is/are true?
Q35. RS Ltd., makes purchases on credit. If the purchases are not as per the specifications, the
company returns them to the suppliers. The book, that is used to record such returns is
(a) Returns inward book
(b) Returns outward book
(c) Cash book
(d) Journal proper
(e) Purchases day book.
Q36 . Which one of the following is not a reason for discrepancy in the balance as per cash book
and bank pass book of a company?
(a) Cheque issued to suppliers may not have been presented
(b) Cheque deposited in the account may not have been realized
(c) Bill discounted with bank is not due for payment
(d) Customers may have directly deposited money in the companys account
(e) Bank charges not accounted.
Q37. The bank balance in the cash book of Mr.Avinash, a proprietor showed a credit balance of
Rs.10,500 on March 31, 2008. On comparing it with his pass book he discovered the following
discrepancies.
i. Cheque No. 51 for Rs.540 in favour of Mr.Raman has not yet been presented.
ii. A bill of Rs.1,000 was retired by the bank under a rebate for Rs.15, but the full amount of the
bill was credited to bank account in cash book.
The balance as per pass book is
(a) Rs.11,025 (Dr.)
(b) Rs. 9,945 (Dr.)
(c) Rs. 9,945 (Cr.)
(d) Rs. 9,975 (Dr.)
(e) Rs. 9,975 (Cr.).
Q38. The total cost of goods available for sale with a company during the current year is
Rs.12,00,000 and the total sales during the period are Rs.13,00,000. If the gross profit margin of
the company is 25% on sales, the closing inventory during the current year is
(a) Rs.4,00,000
(b) Rs.3,40,000
(c) Rs.2,25,000
(d) Rs.1,60,000
(e) Rs.1,00,000
Q39. Unearned income account is
(a) A current asset
(b) A current liability
(c) An expense
(d) An income
(e) Deferred expense