Major Financial Accounting Question Paper 2022, Dibrugarh University B.Com 1st Sem Question Papers
Sahil kumar
Financial Accounting 2022 solved
Questions paper Dibrugarh University
B.com 1st sem
*************
Full Marks: 80
Pass Marks: 32
Time: 3 hours
The figures in the margin indicate full marks for the questions
1. a) Select the correct answer: 1x4-4
(i) Accounting Standard deals with depreciation accounting is
1.5
2.6
3.7
Ans: 2. 6
(ii) Revenue is considered as being earn when
1. cash is received
2. production is done
3. sale is effected
Ans:
(ii) Unearned Income Account is
1. assets
2. liability
3. expenses
Ans: 2. Liability
(iv) Unrecorded liability paid at the time of dissolution of a firm is debited to
1. Current Account
2. Realization Account
3. Creditor's Account
Ans:2. RealizationAccount
(b) Fill in the blanks: 1x4-4
(i) Discarding the old machinery due to new invention is called ______.
Ans: obsolescence
(ii) Carriage incurred on purchases of an asset is debited to ______ Account.
Ans:
iii) A branch which does not maintain its own set of books is called _____ branch.
Ans: Dependent Branch
(iv) After making the payment to third parties, the ______ due to a partner is paid.
Ans:
2. Write short notes on any four of the following: 4x4-16
(a) Accounting period concept
Ans:According to the accounting period concept, the life of an enterprise can be broken into smaller periods, usually termed accounting periods, so that its performance is measured at regular intervals.
(b) Straight-line method of depreciation
Ans: • It is based on the assumption of equal usage of the asset over its entire useful life.
• The asset uniformly depreciates over its useful life, and the asset's cost is evenly spread over its useful and functional life.
• The amount of depreciation remains constant from year to year over the useful life of the asset.
• A fixed and an equal amount is charged as depreciation in every accounting period during the lifetime of an asset
• It is called straight line for a reason that if the amount of depreciation and corresponding time period is plotted on a graph, it will result in a straight line
• It is also called fixed installment method.
(c) Four rights of hire vendor
Ans : (i) Right to get the full payment for the goods sold under hire purchase system.
(ii) Right to terminate the hire purchase agreement for default in payment of hire or unauthorized act or breach of express conditions contained in the hire purchase agreement by the hirer.
(iii) Right to forfeit the initial deposit on termination of the hire purchase agreement.
(iv) Right to recover possession of the goods on termination of the hire purchase agreement.
(v) He has the right to charge hire charges (or interest) on the hire purchaser for the goods.
(vi) He has the right to repossess the goods on non-payment of any installment money by the hire purchaser.
(d) Causes of dissolution of a partnership firm
Ans: The firm or company dissolution shall occur due to the following reasons:
(i) Change in Profit-Sharing Ratio: Alterations to the agreed-upon ratio for distributing profits among partners.
(ii) Admission of a New Partner: Bringing a new individual into the partnership.
(iii) Retirement of an Existing Partner: A partner deciding to step down from their role in the firm.
(iv) Death of a Partner: The passing away of a partner necessitates restructuring.
(v) Insolvency of a Partner: A partner becoming legally incapable of contracting due to insolvency, thus disqualifying them from continuing as a partner.
(vi) Completion of a Specific Venture: In cases where the partnership was established solely for a particular project or venture, its completion marks the dissolution.
(vii) Expiry of the Partnership Term: Reaching the end of the predetermined duration for which the partnership was initially formed
(e) Branch Stock Account
Ans:
3. (a) What are Accounting Standards? Distinguish between Accounting Standard and Accounting Principles. 3+3-6
Ans: AS are a set of guidelines, i.e Generally Accepted Accounting Principles, that are followed for preparation and presentation of Financial statements.
They are accounting rules and procedures relating to measurement, recognition, treatment, presentation and disclosure of accounting transaction in the financial statements issued by the council of the Institute of Chartered Accountant Of India.
.
* scroll left to right to show full content
Basis of comparison | Accounting principles | Accounting standards |
|---|---|---|
Scope | Accounting principles are broad concepts and guidelines that guide the overall financial reporting process. | Accounting standards are specific rules and regulations that provide detailed guidance on how to apply the accounting principles. |
Level of Detail | Accounting principles are general concepts that provide a framework for financial reporting. | Accounting standards offer specific rules and guidelines that dictate the detailed procedures and methods for recording and reporting financial transactions. |
Authority | Accounting principles are established by various accounting bodies and are considered to be the foundation of financial reporting. | Accounting standards are developed by standard-setting bodies, such as the IFRS or GAAP, and have legal authority. |
Flexibility | Accounting principles allow for some degree of flexibility in their application, as they provide a broad framework. | Accounting standards are more rigid and specific, leaving little room for interpretation or variation. |
Enforceability | Accounting principles are not legally enforceable, but they are widely accepted and followed in practice. | Accounting standards are legally enforceable in many jurisdictions and must be followed by entities for financial reporting purposes. |
In summary, accounting principles provide a general framework for financial reporting, while accounting standards offer specific rules and guidelines for applying those principles. Accounting standards have legal authority and are more detailed and rigid compared to accounting principles.
(b) Write four points of necessity of accounting.
Ans: Accounting is essential for any business, regardless of size or industry. Here are four key reasons why accounting is necessary:
1. Tracks Financial Performance: Accounting helps businesses monitor their income, expenses, and profitability. This information is crucial for making informed decisions about resource allocation, pricing strategies, and future investments.
2. Ensures Legal Compliance: Businesses are required by law to maintain accurate financial records. Accounting helps businesses comply with these regulations and avoid potential fines or penalties.
3. Secures Funding: When seeking loans or investments, businesses need to provide potential lenders and investors with accurate financial statements. Accounting provides the information needed to demonstrate the financial health of a business and its ability to repay debts.
4. Supports Informed Decisions: Accounting data is essential for making sound business decisions. By analyzing financial statements, businesses can identify trends, assess risks, and develop effective strategies for growth and profitability.
5. Enabling Comparability: Accounting can help record consistent, standardised and accurate data. This helps stakeholders compare financial performance over the years and with different companies
4. (a) Distinguish between Capital Receipts and Revenue Receipts.
Ans:
Parameters | Capital Receipts | Revenue Receipts |
|---|---|---|
Meaning | Capital receipts refer to those related to the capital transactions of an organization or a government. | Revenue receipts refer to those related to the day-to-day operations of an organization or a government. |
Sources | Capital receipts come from sources such as the sale of assets, borrowing, and capital grants. | Revenue receipts come from taxes, fees, and fines. |
Purpose | Capital receipts are used for long-term investments, such as building infrastructure or acquiring fixed assets. | Revenue receipts are used for recurring expenses, such as salaries, maintenance, and services. |
Duration | Capital receipts have a long-term impact on an organization’s finances. | Revenue receipts have a short-term impact. |
Nature | Capital receipts are considered capital in nature. | Revenue receipts are considered revenue in nature. |
Treatment | Capital receipts are shown on an liabilities side of the balance sheet. | Revenue receipts are shown at the credit side oof the income statement. |
Effect | Capital receipts increase an organisation’s capital base. | Revenue receipts increase the revenue base of an organization. |
.
(b) Explain how expenses are recognized to match them against revenues.
Ans: In accounting, the matching principle is a fundamental concept that ensures expenses are recognized in the same period as the revenues they help to generate. This principle is part of the accrual accounting method and aims to provide a more accurate picture of a company’s financial performance.
Here’s how the matching principle works:
Identify the Revenue: Determine the revenue generated in a specific accounting period.
Match Expenses: Recognize all expenses that directly contributed to generating the identified revenue within the same period.
Record in Financial Statements: Report both the revenues and matched expenses in the income statement for that period.
For example, if a company incurs costs for raw materials that are used to produce goods sold in the same month, the cost of the raw materials should be recognized as an expense in the same month as the sales revenue from those goods.
The matching principle ensures that financial statements reflect the true costs associated with generating revenue, which helps stakeholders make more informed decisions.
Or
.
From the following Trial Balance of Mr. X and other additional information, prepare a Profit and Loss Account for the year ended 31st March, 2022 and a Balance Sheet as on that date:
.
Trial Balance of Mr. X
Dr | Amount | Cr | Amount |
|---|---|---|---|
Closing inventory | 40,000 | Creditors | 30,000 |
Repairs | 5,000 | Royalty received | 8,000 |
Factory | 30,000 | Reserve | 10,000 |
Debtors (including bills | 42000 | Capital | 45,000 |
Travelling expenses | 5000 | Profit on sale of investment | 5,000 |
Export duty | 2000 | Provision for bad debts | 2,000 |
Cash and bank balance bank balance | 12000 | Advance from bank | 53,000 |
Trademark | 10000 | Trading Account | 8,000 |
Advertisement | 12000 | ||
Drawings | 3000 | ||
Total | 1,61,000 | Total | 1,61,000 |
Adjustment:
(i) Bills receivable dishonoured is not realisable as the debtors become insolvent
(ii) Provide for bad and doubtful debts @ 10% on debtors
(iii) 50% of advertisement is to be carried forward
.
Ans:
In the books of Mr X
Profit & Loss A/c for the year ended 31st March 2022
Dr Particular s | Amount | Cr | Amount |
|---|---|---|---|
To Repairs | 5,000 | By gross profit | 8,000 |
To Travelling expenses | 5000 | By Royalty received | 8,000 |
To export duty | 2000 | By Profit on sale of investment | 5,000 |
To Advertisement 12,000 Less:prepaid Advertisement (6,000) | 6,000 | By Net Loss | 31,000 |
To Bills receivable insolvent | 2,000 | ||
To Provision for bad debts | 2,000 | ||
To factory expenses | 30,000 | ||
52,000 | 52,000 |
Balance Sheet
as on 31st March 2022
Liabilities | Amount | Assets | Amount |
|---|---|---|---|
Capital 45,000 Less: Drawings (3,000) Less: Net loss (31,000) | 11,000 | Debtors 42,000 Less: Bills receivable insolvent (2,000) Less: Provision for bad debts (4,000) | 36,000 |
Creditors | 30,000 | Cash and bank balance ince | 12,000 |
Reserve | 10,000 | Trademark | 10,000 |
Advance from bank | 53,000 | prepaid advertisement | 6,000 |
Closing inventory | 40,000 | ||
104,000 | 104,000 |
5. (a) Write a note on 'accounting as a measurement discipline'.
Ans: Accounting is often described as a measurement discipline. This means it’s a way to measure and keep track of a company’s financial activities using standardized methods. Here’s a simple breakdown:
Identification: First, accountants identify the transactions and events that need to be measured. This could be anything from sales, purchases, to expenses.
Measurement: Next, they measure these transactions in monetary terms. This means assigning a dollar value to each transaction based on certain rules or standards like historical cost or market value.
Recording: After measuring, these transactions are recorded in the books of accounts. This helps in keeping a systematic record of all financial activities.
Communication: Finally, the recorded information is communicated to users like managers, investors, and regulators through financial statements. This helps them make informed decisions about the company.
In essence, accounting translates complex business activities into understandable financial data. It’s like a language that helps everyone understand the financial health and performance of a business.
Or
(b) State which of the following receipts are of capital nature and which of revenue nature: 1×6=6
(1) Amount realized from sale of old furniture.
Ans: Capital receipts
(2) Amount received from debtors whose a/c was previously written-off.
Ans: Revenue receipts
(3) Amount of loan taken from a bank.
Ans: Capital receipts
(4) Fees received from apprentices.
Ans: Revenue receipts
(5) Amount contributed by the proprietor to augment his capital.
Ans: Capital receipts
(6) Rs. 10,000 received from sale of machinery which had w.d.v. Rs. 6,000.
Ans: Capital receipts
.
6. (a) (i) Explain two merits and two demerits of hire-purchase system. 4
Ans: H.P is a system under which the property is acquired by the payments made in instalments.
Under this system the possession of goods is transferred to the hire purchaser on signing the agreement but the hire purchaser does not become owner of goods till he has paid the stipulated number of instalements.
Merits:
Access to Better Equipment: It allows for the use of newer and better equipment that might be too expensive to purchase outright.
Fixed Payments: The payments are fixed, so you can budget accordingly without worrying about fluctuating costs.
No Taxes on Payments: Generally, there are no taxes charged on the installment payments, which can save money in the long run.
Flexibility: You have the option to shop around for better deals and choose the best vendor for your needs.
Demerits:
Repossession: If you fail to make payments, the item can be repossessed by the seller.
Long-Term Commitment: The payment plan often lasts for years, which can be a long-term financial commitment.
No Ownership Until Final Payment: You don’t own the item until all payments are made, which could be a downside if you want to sell or modify it.
Additional Costs: There might be additional costs like taxes and fees associated with ownership that are not included in the hire-purchase agreement.
.
(ii) Distinguish between Hire-purchase System and Instalment-purchase System. 6
Ans:
1. Nature of Contract
Hire Purchase System: It is a hiring goods agreement.
Installment System: It is an agreement of sale.
2. Ownership
Hire Purchase System: Ownership of goods is transferred after the payment of final installment.
Installment System: Ownership of the goods passes to the buyer just signing the agreement.
3. Right
Hire Purchase System: The buyer cannot sell, destroy or transfer the goods.
Installment System: The buyer can sell, destroy or mortgage or transfer as his/her wish.
4. Risk
Hire Purchase System: All the risks are borne by the vendor before the payment of final installment.
Installment System: All the risks are to be borne by the buyer from the date of agreement.
5. Right of Return
Hire Purchase System: The buyer can return the goods before making the final installment.
Installment System: The buyer cannot return the goods to the seller.
6. Repair and Maintenance
Hire Purchase System: The liability of repair and maintenance lies with the seller provided that the buyer takes the utmost good care.
Installment System: The buyer is responsible for repair and maintenance.
7. Forfeiture of Installment Paid
Hire Purchase System: In case of default in the payment of any of the instalments by the Hire-purchaser, the hire-vendor repossess the goods from the hire-purchaser without refunding him any amount.
Installment System: In case of default in the paymout of any of the instalment by the buyer, seller can not repossess the goods, but can file a claim in the court of Law against the buyer.
Or
(b) Dilip & Co. purchased a machine on hire-purchase basis on 01.01.2019. The payments were to be made as follows:
On signing the agreement. 10,000
At the end of first year. 12,000
At the end of second year. 7,000
At the end of third year. 4,400
Interest included in ₹ 33,400 was charged on the cash price @ 10% p.a.
You are required to ascertain the cash price of the machine and write up Machinery Account and Hire Vendors Account in the books of Dilip & Co.
3+4+3-10
.
Ans:
Calculation of cash price
Year | Installment | Interest | Principle |
|---|---|---|---|
31.12.2021 | 4,400 | 4,400×10/110=400 | 4,000 |
31.12.2020 | 7,000 | 4,000+7 000=11,000 11000×10/110=1,000 | 6,000 |
31.12.2019 | 12,000 | 4,000+7,000+12,000=22,000 22,000×10/110=2,000 | 10,000 |
01.01.2019 | 10,000 | - | 10,000 |
Total | 33,400 | 3,400 | 30,000 |
In the books of Dilip & Co
Machinery a/c
Date | particulars | Amount | Date | particulars | Amount |
|---|---|---|---|---|---|
1st Jan.2019 | To hire vendor | 30,000 | 31st Dec 2019 | By balance c/d | 30,000 |
30,000 | 30,000 | ||||
1st Jan 2020 | To balance b/d | 30,000 | 31st Dec 2020 | By balance c/d | 30,000 |
30,000 | 30,000 | ||||
1st Jan 2021 | To balance b/d | 30,000 | 31st Dec 2021 | By balance c/d | 30,000 |
30,000 | 30,000 |
In the books of Dilip & Co
Hire Vendor a/c
Date | particulars | Amount | Date | particulars | Amount |
|---|---|---|---|---|---|
1st Jan 2019 | To bank a/c | 10,000 | 1st Jan 2019 | By machinery a/c | 30,000 |
31st Dec 2019 | To bank a/c | 12,000 | 31st Dec 2019 | By Interest a/c | 2,000 |
31st Dec 2019 | To balance c/d | 10,000 | |||
32,000 | 32,000 | ||||
31st Dec 2020 | To bank a/c | 7,000 | 1st Jan 2020 | By balance b/d | 10,000 |
31st Dec 2020 | To balance c/d | 4,000 | 31st Dec 2020 | By Interest a/c | 1,000 |
11,000 | 11,000 | ||||
31st Dec 2021 | To bank a/c | 4,400 | 1st Jan 2021 | By balance b/d | 4,000 |
31st Dec 2021 | By Interest a/c | 400 | |||
4,400 | 4,400 |
7.(a) (i) What are the objectives of keeping Branch Accounts? 4
(ii) With respect to Branch Accounts, how will you deal with the following matters?2×3-6
(1) Depreciation of Branch Fixed Assets
(2) Cash-in-transit
(3) Inter-branch Transactions
Ans: this chapter is not included in B.com 2nd major financial accountancy syllabus.
Or
(b) X Ltd. of Kolkata has a Branch at Delhi. Goods are invoiced to the Branch at cost plus 334%. The Branch remits all cash received to the head office and all expenses paid by the head office. From the following particulars, prepare Branch Stock Account, Branch Debtors Account, Branch Adjustment Account and Branch Expenses Account : 3+3+4-10
Branch Debtors on 1st April, 2021. 6,000
Branch Stock on 1st April, 2021. 2,400
Sales:
Cash. 3,000
Credit 60,000
Goods from Head Office (Invoice Price) 72,000
Cash Received from Debtors. 57,600
Discount Allowed to Debtors 1,400
Bad Debts. 300
Branch Expenses paid by Head Office 10,000
Branch Stock on 31st March, 2022 11,400
Ans: this chapter is not included in B.com 2nd major financial accountancy syllabus.
8. (a) (i) State and explain the decisions and rules laid down in Garner vs. Murray Case. 5
Ans: Garner versus Murray rule tells about the settlement of losses between the partners at the time of the dissolution of a partnership firm, according to this rule, in the event when one or more partners become insolvent at the time of dissolutions then the loss should be shared between the partners at the last agreed capital balance before dissolution.
Decisions of the case (Garner Vs. Murray)
(i) In the absence of any agreement to the contrary, the Deficiency of the insolvent partner's capital account must be borne by Solvent Partners in Proportion to their last agreed Capitals.
(ii) If the Capital Accounts of the partners are fixed throughout the existence of the partnership, the Original Capitals of the Solvent Partners will be used as the basis for the division of the insolvent partner's deficiency.
(iii) If the Capital Accounts of the partners are fluctuating, the deficiency of the insolvent partner's capital account will be borne by the Solvent Partners in the ratio of those Capitals which were shown in their Capital Accounts at the end of the last accounting period before dissolution, after taking into consideration the adjustment of General Reserve and Undistributed Profits but before taking into consideration Loss on Realisation.
(iv) Another point of decision was that Solvent Partners will bring their share of Loss on Revaluation in Cash.
(v) The above decision was given by Justice Joyce.
(ii) Distinguish between Maximum Loss Method and Proportionate Capital Method of piecemeal distribution. 5
Ans:
Criteria | Maximum Loss Method | Proportionate Capital Method |
|---|---|---|
Definition | This method calculates the maximum possible loss after paying off outside creditors and partners’ loans. The loss is then transferred to the partners’ capitals. | Adjusts the capital of the partners to the profit-sharing ratio and pays excess contribution to the partners first as cash is realized. This is repeated until the capitals are proportionate to the profit-sharing ratio. |
Purpose | To determine the amount payable to each partner by calculating the potential maximum loss. | To ensure that any excess capital contributions are returned to the partners and the remaining cash is distributed according to the adjusted capital balances . |
When Used | When assets are realized gradually, and there is a need to distribute cash to partners before all assets are liquidated. | When the capital contributions and profit- sharing ratios are different, and there is a need to adjust the capitals before distribution. |
Distribution Basis | The loss is proportionally transferred to the partners' capital accounts, which then determines the distribution of cash. | Distribution is based on the adjusted capital accounts, which are made proportionate to the profit sharing ratio. |
Outcome | Ensures that no partner receives more than their capital contribution after considering the maximum possible loss. | Ensures that partners' capital accounts are aligned with their profit- sharing ratio before distribution. |