NEHRU ARTS AND SCIENCE COLLEGE

DEPARTMENT OF BUSINESS ADMINISTRATION

Question Bank

SUBJECT: FINANCIAL SEMESTER: III

ACCOUNTING
CLASS: II BBA (CA) ACADEMIC YEAR: 2016- 2017

UNIT – I

Multiple Choice Questions.

1. what is book keeping

A. processing
B. Recording
C. Analysing
D. Interpreting
ANSWER: B

2. Which one is current assets?

A. land
B. furniture
C. cash
D. investment
ANSWER: C

3. Bank account is
A. personal
B. real
C. nominal
D. none of these above
ANSWER: A

4. Accounting rules contain

A. 3
B. 4
C. 5
D. 2
ANSWER: A

5. journalise this transaction, purchase return from ram

A. purchase return to ram
B. ram to purchase return
C. purchase to ram
D. both (A)and(B)
ANSWER: A
6. Drawings account is related to:
A. Nominal Account.
B. Personal Account.
C. Real Account.
D. Company drawings account.
ANSWER: B

7. Which of the following is related to nominal account?

A. Bank account.
B. Commission account.
C. Furniture account.
D. Interest received account
ANSWER: B

8. Goodwill account is related to:

A. Nominal account.
B. Personal account.
C. Real account .
D. Tangible account.
ANSWER: C

9. Prepaid insurance is:

A. Nominal account.
B. Personal account.
C. Real account.
D. Prepaid account.
ANSWER: B

10. According to the going concern concept, a business entity is assumed to have:
A. a long life.
B. a very short life.
C. an indefinite life.
D. a medium life.
ANSWER: A

11. Contingent liability is shown in the balance sheet because of:

A. Convention of consistency.
B. Convention of materiality.
C. Convention of disclosure.
D. Convention of adventure.
ANSWER: C

12. Revenue is considered as being earned when:

A. cash is received.
B. production is done.
C. sale is effected.
D. purchase is done.
 ANSWER: C

13. Accounting does not record non-financial transactions because of

A. Accrual concept.:
B. Entity concept.
C. Measurement concept.
D. Double entry concept.
ANSWER: C

14. According to which of the following concepts even the owner of the business who provides
capital treated as a creditor of the business?
A. Entity concept.
B. Cost concept.
C. Money measurement concept.
D. Convention of disclosure.
ANSWER: A

15. In book-keeping posting means:

A. to record the transactions from the journal to ledger.
B. to record the transactions in the journal.
C. to record the transactions in the subsidiary books.
D. to record the transactions in the cash book.
ANSWER: A

16. The basic rule of book keeping, debit the receiver and credit the giver is applicable to:
A. nominal account.
B. real account.
C. personal account.
D. a. drawing account.
ANSWER: C

17. Goods of the value of Rs. 1500 taken by the proprietor for his personal use should be debited to:
A. drawing account.
B. sales account.
C. purchases account.
D. stock account.
ANSWER: A

18. Goods destroyed by fire should be credited to:

A. purchases account.
B. sales account.
C. loss of goods by fire account.
D. insurance account.
ANSWER: A

19. The credit balance of bank account indicates:

A. amount payable by the bank.
B. amount payable to the bank.
 C. cash at bank.
D. loan from bank.
ANSWER: B

20. Which of the following accounts will invariably have a debit balance?
A. Bank account.
B. Accounts Receivable account
C. Accounts payable account.
D. Loan account.
ANSWER: B

21. Which of the following accounts will invariably have a credit balance?
A. Discount account.
B. Account payable account.
C. cash
D. Purchases account.
ANSWER: B

22. Which of the following accounts have only credit balance?

A. Accounts payable account.
B. Salaries outstanding account.
C. Reserve fund account.
D. All of the above accounts.
ANSWER: D

23. Which of the following accounts may have a debit or credit balance?
A. Discount Received account.
B. Sales account.
C. Trade expenses account.
D. Loan account.
ANSWER: D

24. Which of the following books should be used to record purchase of furniture on credit?
A. Cash book.
B. Journal proper.
C. Purchases book.
D. Sales book.
ANSWER: B

25. Which of the following accounts is increased by debit entries?

A. Machinery account.
B. Purchases return account.
C. Discount Received account.
D. Commission received account.
ANSWER: A
Answer the Following questions: (5 Mark)

1. Define accounting. What are the objectives of accounting?

2. Brief explains the methods of accounting?

3. State the rules of making entries under double entry system?
4. Explain the meaning of “Journal “and prepare format?
5. Prepare journal entries for the following transactions?

Answer the Following questions: (8 mark)

1. Distinguish between Book keeping and accounting?

2. Explain various accounting concepts briefly?
3. Explain the classification of JOURNAL?
 UNIT - II
1. The credit balance in the bank account
is : A. liability.
B. an expense.
C. contingent liability.
D. contingent
liability. ANSWER: B

2. Returns outward book makes a record of:

a. goods returned to the suppliers.
b. goods returned to customers.
c. goods returned to proprietor.
d. goods returned to
neighbors. ANSWER: A

3. Cash book prepared on imprest system is:

a. two column cash book.
b. cash book.
c. petty cash book
d. purchase book.
ANSWER: C

4. The statement sent along with purchase return is:

a. credit note.
b. bills payable book.
c. debit note.
d. purchases return book.
ANSWER: A

5. . A bank reconciliation statement is prepared by ____.

A. customer of the bank.
B. bank
C. neither of the above two.
D. reserve bank of India.
ANSWER: A

6. While preparing bank reconciliation statement, cheques paid into bank but not yet cleared are
_________.
a. added to the balance as per cash book to arrive at the balance as per pass book.
b. deducted to the balance as per cash book to arrive at the balance as per pass book.
c. divided to the balance as per cash book to arrive at the balance as per pass book.
d. multiplied to the balance as per cash book to arrive at the balance as per pass
book. ANSWER: B

7. Errors which affect one account can be:

a. errors of omission.
b. errors of principle.
c. errors of posting.
d. error of commission.
ANSWER: C
 8. Errors of carry forward from one year to another year affect:
a. personal account
b. real account.
c. nominal account.
d. both personal and real account.
ANSWER: A

9. Which of the following errors is an error of omission?

A. Sale of Rs. 800 was written in the purchase journal
B. Wages paid to Sohan have been debited to his account
C. The total of sales journal has not posted to the sales account.
D. The total of sales journal has posted to the sales account.
ANSWER: C

10. Which of the following errors in an error of principle?

a. Rs. 1000 received from Ganesh has been debited to his account.
b. Purchase of Rs. 3000 has been entered in the sales journal.
c. Repairs to machinery have been debited to machinery account.
d. Repairs to scooter have been debited to repairs
account. ANSWER: C

11. Error of commission do not allow:

a. correct totalling of the balance sheet.
b. correct totaling of the trial balance.
c. the trail balance to agree.
d. correct totaling of the day book.
ANSWER: C

12. Assets are held for the purpose of:

a. earning revenue.
b. Resale.
c. conversion into cash.
d. Stock is valued at:
ANSWER: A

13. cost price.

a. market price.
b. cost of market price whichever is lower.
c. odd price.
d. dual price
ANSWER: C

14. Unearned income account is:

a. asset.
b. Liability.
c. Expense.
d. income received in
advance. ANSWER: B
 15. Depreciation is provided on:
a. fixed assets.
b. outward charges.
c. current assets.
d. intangible
assets. ANSWER: A

16. Heavy advertising to launch a new product is a:

a. capital expenditure.
b. deferred revenue expenditure
c. other expenditure.
d. revenue expendture
ANSWER: C

17. Accounts receivable includes

a. sundry debtors.
b. bill receivable.
c. promissory note.
d. all of the
above. ANSWER:
D

18. Provision for bad debts is calculated on:

a. creditors.
b. Sales.
c. Purchases.
d. Debtors.
ANSWER: D

19. An example of revenue expenditure is:

a. Purchase of land.
b. Salaries.
c. Lease.
d. Purchase of buildings.
ANSWER: B

20. . When a bill is drawn by A on B, it is debited in the books of A to:

A. Cash account.
B. Bs account
C. Bills Receivable account.
D. Bills Payable account
ANSWER: C

21. When a bill drawn by A and B endorsed to C is dishonoured on the due date, it is credited in the
books of A to:
a. Bank account.
b. Bills Receivable account.
c. Bank for collection of bills account.
 .

D. Cash Account.
ANSWER: B

22. MWhen a bill is drawn by A on B and before the date of maturity, B becomes insolvent then in the
books of A it is debited to:
a. Bills Receivable account.
b. Bank Account.
c. Bs account
d. Bank for collection of bills.
ANSWER: D

23. MBills are drawn by:

a. Creditors.
b. Debtors.
c. Agent.
d. Broker
s. ANSWER:
C

24. Noting charges account is debited by ________.

a. the presenter of bill.
b. the discounting banker.
c. the acceptor.
d. the endorser.
ANSWER: A

25. While discounting the bill, debit should be given to:

a. bank account.
b. bill receivable account.
c. acceptors account.
d. cash account.
ANSWER: A

Answer the following Questions: ( 5 Marks)

1. What is trial balance? Explain its objectives and features?

2. Describe different types of errors in accounting with suitable examples?

3. What is B.R.S? Explain preparation of BRS?

4.

5. Define trial balance. How is it prepared?

Answer the following Questions: ( 8 Marks)

1.
2. Explain methods of rectification of accounting errors?

3. Explain the Rectification of errors through suspense Account?

UNIT – III

1. Cancelling the original bill and drawing a fresh acceptance is known as ________.
A. retiring under rebate.
B. Discounting.
C. Renewal.
D. bill sent to bank for collection .
ANSWER: C

2. At the time of endorsement of a bill, the drawer credits:

a. the .drawee.
b. endorsees personal account.
c. bills receivable account.
d. bills for collection account.
ANSWER: C

3. When a bill is discharged, the acceptor

debits A. Creditors account.
B. Cash account.
C. Bills payable account.
D. Bills receivable account.
ANSWER: C
4. Average due dare can be called as:
a. mean due date.
b. median due date.
c. mode due date.
d. zero date.
ANSWER: A

5. Account current is a journal:

a. True.
b. False.
c. Partly true.
d. Partly false.
ANSWER: B

6. When goods are sent on consignment the account to be debited is:

a. Consignees personal account.
b. Consignment account.
c. Consignors account.
d. Goods sent on consignment account.
ANSWER: B
 7. When goods consigned are sold by the consignee, the account to be debited is:
a. Cash account.
b. Bank account.
c. Consignment account .
d. Consignors personal account.
ANSWER: A

8. . The relationship between a consignor and consignee is that between _____.

A. a principal and an agent.
B. a creditor and a debtor.
C. Consignees account is a :
D. a seller and a
purchaser. ANSWER: A

9. Nominal account.
a. Personal account.
b. Real account.
c. Representative account.
d. expenses loss
account ANSWER: D

10. When Del credere commission is involved, the consignee will in his books, transfer bad debts to

_____ account.
A. del credere account.
B. ordinary account.
C. special commission.
D. brokerage .
ANSWER: A

11. When Del Credere commission is involved, loss on account of bad debts from credit sale of
consigned goods will generally fall on ________.
A. Consignee.
B. Consignor.
C. both consignor and consignee equally.
D. Endorser.
ANSWER: B

12. Goods sent on consignment account is of the nature of _______.

a. personal account.
b. nominal account.
c. real account.
d. representative account.
ANSWER: B

13. Del Credere commission is allowed to cover

a. normal loss.
b. abnormal loss.
c. loss due to bad debts.
 d. business loss.
ANSWER: C

14. The unsold stock is to be valued at ________ .

a. original cost of the goods.
b. original cost of the goods plus direct expenses incurred by both consignor and consignee.
c. original cost plus direct expenses incurred by the consignor.
d. original cost plus direct expenses incurred by the consignee.
ANSWER: B

15. . Joint venture relationship resembles closely:

A. a consignment.
B. a partnership.
C. the company
D. sole trading concern.
ANSWER: B

16. Joint bank account is opened, when the system adopted for joint venture transaction is _________.
a. complete record in existing books.
b. partial record in existing books.
c. separate set of the books.
d. no separate set of the books.

ANSWER: C

17. Joint venture account is in the nature of:

a. Personal account.
b. Nominal account.
c. Real account .
d. Venture account.
ANSWER: B

18. . Memorandum joint venture account is _______.

A. Personal account.
B. Real account.
C. Nominal account.
D. Representative account.
ANSWER: C

19. Which is the accounting concept that requires the practice of crediting closing stock to the
trading account?
a. Going concern.
b. Cost.
c. Realization.
d. Matching.
ANSWER: D
 20. . Assets in the balance sheet are shown at cost less depreciation rather than their
replacement cost because of the accounting convention ___________.
A. going concern.
B. Matching.
C. Realization.
D. money measurement.
ANSWER: A

21. According to money measurement concept, which one the following will be recorded in the
books of accounts_______.
a. excellent morale of workers.
b. quality control in the business.
c. managing ability of the manager.
d. cost of machinery
ANSWER: D

22. . Contingent liability appears as a footnote in the balance sheet. This is in accordance
with the accounting principle of _________.
A. Disclosure.
B. Materiality.
C. Conservatism.
D. Consistency.
ANSWER: B

23. . The policy of anticipate no profit and provide for all possible losses arises due to convention of
____________.
A. Consistency.
B. Disclosure.
C. Matching.
D. Conservatism.
ANSWER: D

24. Revenue is generally recognized being earned at the point of time when:
a. sale is effected.
b. cash is received.
c. production is completed.
d. goods are delivered.
ANSWER: A

25. Which one of the following arrangements represents the order of liquidity?
a. Cash, Bills Receivable, Stock, Debtors.
b. Cash, Bills Receivable, Debtors, cash, Stock.
c. Cash, Bills Receivable, Debtors, Stock.
d. Cash, Debtors, Bills Receivable, Stock.
ANSWER: B
Answer the following Questions: ( 5 marks)

1. What is trading account? Explain its needs?

2. Prepare the format of Trading Account?

3. Explain the Profit & Loss a/c and Balance sheet?

4. Prepare the format of Profit & Loss account?

5. What is Balance sheet? Explain its needs and format?

Answer the following questions: (8 Marks)

1. What is mean by FINANCIAL STATEMENT? Explain its OBJECTIVES?

2. Briefly explain different adjustments for preparation of final accounts?

3.
 UNIT – IV
1. Balance sheet is prepared primarily with the following group in view:
A. Owners.
B. Creditors.
C. Government.
D. Management.
ANSWER: A

2. Which one the following is an example of an intangible asset?

a. Preliminary expenses.
b. Discount on issue of debentures.
c. Investments.
d. Copyrights.
ANSWER: D

3. Both assets and owners equity would be increased by _______.

a. capital brought in.
b. purchase of an asset on credit.
c. payment of creditors.
d. proprietors drawings.
ANSWER: A

4. The excess of current assets over current liabilities is called ________.

a. Net tangible worth.
b. Networth.
c. Gross working capital.
d. Net working capital.
 ANSWER: C

5. The discount column of a triple column cash book records _______.

a. trade discount.
b. cash discount.
c. quantity discount.
d. seasonal discount.
ANSWER: B

6. Journal proper issued to record ________.

a. all purchases of goods.
b. all sales of goods.
c. all business expenses paid in cash.
d. all adjusting and rectification
entries. ANSWER: D

7. Which one the following entry is not recorded in the residuary journal?
a. Opening entry.
b. Closing entry.
c. Adjustment entry.
d. Credit sales.
ANSWER: D

8. When furniture is sold for cash, the entry should be made in __________.
a. sales book .
b. cash book.
c. Journal.
d. petty cash book..
ANSWER: B

9. Which one of the following is an example of personal account?

a. Capital account.
b. Building account.
c. Cash account.
d. Investment account.
ANSWER: A

10. The appropriate book to record credit purchase of machinery is ________.

a. purchases book.
b. journal .
c. cash book.
d. petty cash book
ANSWER: B
 11. Bills payable book is a ________.
a. subsidiary
b. principal book.
c. ledger.
D. memorandum book.
ANSWER: A

12. The balance of the petty cash book is _________.

a. an asset.
b. a liability.
c. an income .
d. an expenditure.
ANSWER: A

13. Sales A/c Dr To Trading A/c Is an example of:

a. closing entry.
b. adjusting entry.
c. opening entry.
d. transaction entry.
ANSWER: A

14. . The balance of cash account indicates __________.

A. net income for the period.
B. net loss for the period.
C. net cash on hand.
D. net worth of the business.
ANSWER: C

15. The process of transferring the credit and debit items form a journal to their respective accounts in
the ledger is termed as ___________.
a. Balancing .
b. Invoicing.
c. Double entry.
d. Posting.
ANSWER: D

16. Which account is generally used for rectification of errors?

a. Memorandum account.
b. Suspense account.
c. Rectification account.
d. Adjustment account .
ANSWER: B

17. Which one the following errors is an error of principle?

a. Debiting repairs account instead of furniture account.
b. Sale of Rs. 200 entered in the books as Rs. 2000.
c. Cash sale of Rs. 500 wrongly entered in sales book.
d. Purchase transaction entered in purchases return
book. ANSWER: A
18. Which one the following error will affect the agreement of the trial balance?
A. A sale of Rs. 20 to Ram entered in the sales book as Rs. 200.
B. Purchase of Rs. 500 credited to Ram instead of Shyam.
C. Sale returns of Rs. 1000 correctly entered in the sales returns book but posted to the debit of Sundar.
D. Cash sale of furniture credited to sales account.
ANSWER: C

19. Errors of principle arise when b.

a. a. proper distinction is not made between capital and revenue.
b. a. there is an omission of transaction.
c. a. wrong amounts are entered in the subsidiary books.
d. a. transactions are entered in the wrong subsidiary
books. ANSWER: A

20. Goods worth Rs. 200 returned by Mohan were taken into stock, but no entry was passed, is an error of:
a. commission.
b. Principle.
c. Omission.
d. Compensatory.
ANSWER: C

21. The main purpose of preparing a bank reconciliation statement is:

a. to know the bank balance.
b. to compare the entries in the cash and pass books.
c. to correct the cash after comparing with pass books.
d. to reconcile cash balance as per pass book with the balance in the pass
book. ANSWER: D

22. Bank Reconciliation statement is

a. ledger account.
b. part of the cash book.
c. separate statement.
d. a sub division of the journal.
ANSWER: C

23. A Cheque received and paid into the bank on the same day id recorded in the ________.
A. a. cash column of the cash book.
B. a. bank column of the cash book.
C. a. both the cash and bank columns of the book.
D. a. the credit balance as per pass book.
ANSWER: B

24. The payment side of the cash book is undercast by Rs. 200.When overdraft as per pass book is
the starting point, to get the overdraft as per cash book___________.
a. Rs. 200 will be deducted.
b. Rs. 200 will be added.
c. Rs. 400 will be added.
d. Rs. 400 will be deducted.
ANSWER: A
 25. Which one of the following is not taken into account in adjusting the cash balance?
A. Mistakes in the cash book.
B. Mistakes in the pass book.
C. Bank charges debited in pass book.
D. Interest and dividend credited in pass book.

ANSWER: B

Answer the following Questions: ( 5 Marks)

1. Difference between Capital Expenditure and Revenue Expenditure?

2. What do you mean by income and expenditure account and define the format?

3. Define and explain the terms "depreciation" or "accounting depreciation"?

4. Explain the characteristics of depreciation?

5. Brief about the needs of depreciation?

Answer the following Questions: (8 Marks)

1. Describe the causes for depreciation?

2. What do you mean by “Non Trading Organization”? Brief about its characteristics?

3. Distinguish between Receipts & payments a/c and Income & Expenditure a/c?
.

UNIT – V
1. amount of Rs. 1000 is debited twice in the pass book. When overdraft as per the cash book is
the starting point ___________.
A. An Rs. 1000 will be deducted.
B. Rs. 1000 will be added.
C. Rs. 2000 will be deducted.
D. Rs. 2000 will be added.
ANSWER: B

2. Amount spent on advertisement campaign, the benefit of which is likely to last for three years, is
__________.
A. capital expenditure.
B. deferred revenue expenditure.
C. revenue expenditure.
D. deferred capital
expenditure ANSWER: B
 3. Revenue expenditure is intended to benefit _________.
A. current period.
B. future period.
C. past period.
D. both (1) and (2).
ANSWER: A

4. The distinction between capital and revenue is necessary for the preparation of ______.
A. fund flow statement.
B. receipts and payment account.
C. final accounts.
D. cash flow statement.
ANSWER: B

5. Any expenditure incurred in order to reduce the operating expenses is ________.

A. capital expenditure.
B. revenue expenditure.
C. deferred revenue expenditure.
D. promotional expenditure.
ANSWER: A

6. Wages paid for erection of machinery are debited to __________.

A. Wages account.
B. Machinery account.
C. Profit and loss account.
D. Deferred wages account.
ANSWER: B

7. Premium received on issue of shares is a ____________.

A. capital receipt.
B. revenue receipt.
C. deferred capital receipt.
D. deferred revenue receipt.
ANSWER: A

8. Amount paid for acquiring goodwill is __________.

A. revenue expenditure.
B. deferred revenue expenditure.
C. capital expenditure.
D. deferred capital expenditure.
ANSWER: D

9. Where separate set of books are maintained, the ledger accounts required are:
A. a. Joint venture account and the personal account of the other party.
B. a. Joint bank account, co-venturer capital accounts and joint bank account.
C. a. Joint bank account and joint venture account with the other party.
D. Memorandum joint venture and joint venture account with the
other party. ANSWER: B
10. When A advances money to B in the course of joint venture then A debits such money to
__________.
A. Joint bank account.
B. Joint venture account.
C. Bs personal account.
D. Expenses account
ANSWER: B

11. The account current method in which the days are calculated from the date of transaction to
the commencement date is known as _________.
A. Forward method.
B. Epoch method.
C. Daily balance method
D. Backward method
ANSWER: B

12. The method of account current usually employed by the banker is known as _________.
A. Daily balance method.
B. Red ink interest.
C. Current account.
D. Product method.
ANSWER: A

13. . If payment is made on the average due date it results in:

A. loss of interest to the creditor.

B. loss of interest to the debtor.
C. no loss of interest to either of them.
D. loss of interest to both the creditor and
debtor. ANSWER: C

14. Overcasting of purchases journal would affect __________.

A. Sales account.
B. Purchase account.
C. Suppliers account.
D. Sales returns account.
ANSWER: B

15. Sales to Benson Rs. 500 posted to his account as Rs. 50 would affect ________.
A. Sales account.
B. Bensons account.
C. Cash account.
D. Purchases account
ANSWER: B

16. Sales to Mr. Gill recorded in purchase journal would affect _________.
A. Sales account.
B. a. Purchases account and sales account.
C. Journal proper.
D. Sales account, purchases account and Mr. Gills account.
ANSWER: B
 17. Purchases made on credit not recorded at all would affect ___________.
A. Purchases account.
B. Suppliers account.
C. Purchases account and suppliers account.
D. Wages account.
ANSWER: C

18. Purchase journal is kept to record ________.

A. cash sales.
B. credit sales of assets.
C. credit sales of goods.
D. credit purchases
ANSWER: C

19. A credit sale of goods to Shiva should be debited to _________.

A. Sales account.
B. Goods account.
C. Shiva account
D. Purchase account.
ANSWER: C
 20. A sale of goods to vidhya for cash should be debited to _________.
A. Vidhya account.
B. Cash account.
C. Sale of goods account
D. Purchases account.
ANSWER: B

21. The preparation of a Trial balance helps in ____________.

A. locating errors in principle.
B. locating errors of omission.
C. locating clerical errors.
D. locating compensatory errors.
ANSWER: C

22. A Cheque received and deposited in the bank on the same day is recorded in the _______.
A. cash column of the cash book.
B. bank column of the cash book.
C. credited in the cash book.
D. debited in the cash book
ANSWER: B

23. Insurance unexposed account is a _________.

A. Real account.
B. Personal account.
C. Nominal account.
D. Representative account.
ANSWER: B

24. Petty cash may be used to pay _________.

A. the expenses relating to postage and conveyance.
B. salaries and wages to the final staff.
C. for the purchase of furniture and fittings.
D. other recurring expenses
ANSWER: A

25. Which item is shown on the debit side of a trial balance?

A. Rent outstanding.
B. Prepaid expenses.
C. Purchases returns.
D. Excess of income over expenses
by the firm. ANSWER: B
Answer the following the questions: (5 Mark)

1. What is single entry system? Explain its salient features?

2. Explain two methods of ascertaining profit in single entry system?

3. What are the differences between single entry system and double entry system of book
keeping?
4. What is a “Statement of affairs”? How does it differ from Balance sheet?

5. What are the advantages and disadvantages of single entry system?

Answer the following the questions: (8 Mark)

1. Prepare the model of statement of affairs and Profit or Loss account?

2. Calculate the profit made by Mrs. Vandana during the year using statement of affairs method.

Mrs. Vandana runs a small printing firm. She was maintaining only some records, which she thought,
were sufficient to run the business. On April 01, 2004, available information from her records indicated that she
had the following assets and liabilities:

Printing Press Rs. 5, 00,000, Buildings Rs. 2, 00,000, Stock Rs. 50,000, Cash at bank Rs. 65,600,
Cash in hand Rs. 7,980, Dues from customers Rs. 20,350, Dues to creditors Rs. 75,340 and
Outstanding wages Rs. 5,000. She withdrew Rs. 8,000 every month for meeting her personal expenses.
She had also introduced Rs. 15,000 during the year as additional capital. On March 31, 2005 her position
was as follows: Press Rs. 5, 25,000, Buildings Rs. 2, 00,000, Stock Rs. 55,000, Cash at bank Rs. 40,380,
Cash in hand Rs. 15,340, Dues from customers Rs. 17,210, Dues to creditors Rs. 65,680.

3. Problem.

Mrs. Surabhi started business on Jan 01, 2005 with cash of Rs. 50,000, furniture of Rs. 10,000, goods of 2,000
and machinery worth 20,000. During the year she further introduced Rs. 20,000 in her business by opening
a bank account.
From the following information extracted from her books, you are required to prepare final accounts for the
ended December 31, 2005.
Mrs. Surabhi used goods worth 2,500 for private purposes, which is not recorded in the books. Charge
depreciation on furniture 10% and machinery 20% p.a. on Dec. 31, 2005 her debtors were worth 70,000 and
creditors Rs. 35,000, stock in trade was valued on that date at Rs. 25,000.