IMT – 57: FINANCIAL ACCOUNTING - MT2

PART – A

Q1. What is a Contingent Liability? Where is it shown in the Balance Sheet? Give three examples of Contingent Liabilities? 

Q2. State which of the errors will affect the agreement of the Trial Balance and which will not give rectifying journal entries(with full narration) assuming the difference in trial balance has been placed to suspense account

a.    Purchase of second hand Motor Car for Rs 10000/- has been debited to car maintenance account.

b.    A sale of Rs 7500/- to Mr A has been wrongly entered in sales day book as Rs 750/-

c.    An entry in the Purchase return book of Rs 3000/- has been omitted to be posted in the account of Mr B the supplier.

d.    An amount of Rs 12000 received from Mr X has been posted to the credit of Mrs X a/c as Rs 1200/-

e.    The total of sales Day Book for the month of December Rs 750000/- has been omitted to be posted

f.     Wages for installation of machinery has been debited to wages account Rs 10000/- 

Q3. a) Describe operating, financing and investing activities as per AS 3.

b) Discuss the provisions of AS 6 regarding the change in the method of Depreciation. 

Q4. Write short notes on the following:

a. Money Measurement Concept

b. Going Concern Concept

Q5. Differentiate between

a. Capital Expenditure and Revenue Expenditure

b. Cash System of accounting and Mercantile System of accounting

PART – B

Q1. ” If debits equal credits in the Trial Balance you can be assured that there are no errors in the Trial Balance” Comment. 

Q2. Show the effect of the following transactions on the assets, liabilities & capital of Mr Abhay Kumar through the accounting equation:

a.    He started business with cash of Rs 20000

b.    He purchased goods for cash Rs 10000

c.    Purchased goods on credit from Mr Mohal Lal for Rs 8000

d.    Sold goods for cash costing Rs 8000 for Rs 10000

e.    Withdrew Rs1000 from business in cash to pay for his private expenses

f.     Electricity bill paid for Rs100

g.    Rent outstanding Rs400

h.    He borrowed Rs 5000 from Mr Lalit

i.      Purchased goods for cash Rs 2000. 

Q3. The following is the extracts of financial information relate to Curious Ltd.

Balance Sheet

(a)   Calculate, for the two years Debt Equity Ratio, Quick Ratio and Working Capital Turnover Ratio; and

(b)   Find the sales volume that should have been generated in 2011 if the company were to have maintained its Working Capital Turnover Ratio.

Q4 What is a trial balance? Explain its objectives.

Q5 What do you understand by the expression Corporate Governance and discuss contents of the Report on Corporate Governance.

PART – C

Q1. a) Can depreciation be charged on capital work in progress ? Give reasons.

b). Discuss the triple column cash book. What are the contra entries 

Q2. ” Analysis and interpretation of financial data is the real challenge the financial managers face today”. Discuss

Q3. Define the following

a.    Price Earnings Ratio

b.    Debt Equity Ratio 

Q4. Explain the different categories in which the accounting transactions can be classified. Also state the rule of ‘debit’ and’ credit’ in this connection. 

Q5. Prepare the bank reconciliation statement from the following details:

a.    Balance as per pass book Rs.25000/- (Dr.)

b.    Cheque deposited but not credited Rs.7000/-

c.    Cheques issued but not presented for payment Rs.5000/-

d.    Bank charges and interest levied by bank Rs 250/-

e.    Dividend received credited by bank directly Rs 450/-

f.     Insurance premium paid by bank as per the standing instruction but not accounted for Rs 500/-

g.    Amount deposited directly by the customer Rs 2000/-

h.    A bill payable paid by bank on due date Rs 3000/-

i.      A bill receivable which was earlier purchased by bank,dishonoured on due date Rs 5000/-

CASE STUDY – I

From the following balance sheets of Alfa Ltd. make out Cash Flow Statement as per AS-3(revised) as on 31^st March 2011.

Net Profit for the year after providing Rs 20000 for depreciation was Rs 60000. During the year, company declared equity dividend @ 10%, and paid Rs 15000 as income tax.

CASE STUDY – II

The following is the Trial Balance of AL Manufacturers Ltd. Prepare (i) Trading Account, (ii) Profit & Loss Account and (iii) Balance Sheet in the form prescribed under the Companies Act, 1956.

Trial Balance of M/S ABC Ltd:

You are also to make provisions in respect of the following:

(i) Depreciation: @ 5% on Building

@ 15% on Plant & Machinery

@10% on Furniture & Fixtures

(ii) Make a provision of 5% on Sundry Debtors for bad debts.

(iii) Carry forward Rs. 120/- for unexpired insurance expenses 

(iv) Provide for the following outstanding liabilities:

(i) Wages: Rs. 3,200/-

(ii) Salaries: Rs. 500/-

(iii) Rates & Taxes: 200/-

(v) The value of closing stock as on 31-3-2011 is Rs. 30,000.