Term-End Examination: June, 2012
ECO-14: ACCOUNTANCY-II
Note: Attempt any four questions including question no. 1 which is compulsory.
1. Attempt any two of the following questions: 7, 7
(a) Define hire purchase agreement and state the legal position of a hire vendor in case of default in payment by the hire purchaser.
(b) Why is joint life policy needed by a partnership firm? Explain briefly any one method of treating joint life policy in accounts.
(c) What do you mean by preliminary expenses? State their treatment in final accounts of a company.
(d) Explain briefly the nature and uses of financial statements.
2. Aims Ltd., Delhi has a branch in Mumbai to 12 which the goods are sent at cost plus 25%. The branch keeps its own sales ledger and remits all cash received to the head office. All expenses of the branch are paid by the head office. The transactions of Mumbai branch during the year ending March 31, 2010 were as follows:
Particulars
|
Rs.
|
Opening Stock (invoice price)
Debtors on 1-4-2009
Petty Cash on 1-1-2009
Cash sales
Credit sales
Goods sent to branch by H.O. (Invoice price)
Goods returned to H.O. (invoice price)
Bad debts
Allowances to customers
Sales Returns
Cheques sent to branch :
Rent
Wages
Salary and other expenses
Stock (31-3-2010) at invoice price
Debtors (31-3-2010)
Petty cash (31-3-2010)
|
2,20,000
20,000
2,000
53,000
4,79,000
4,00,000
6,000
6,000
5,000
10,000
12,000
4,000
18,000
2,60,000
40,000
2,5000
|
Prepare Mumbai Branch Account in the books of the Head Office.
Ans:
Mumbai Branch Account
For the year ended on 31st March, 2010
Particulars
|
Amount
|
Particulars
|
Amount
|
To Opening Balance :
Opening Stock
Debtors
Petty Cash
To Goods sent Branch 4,00,000
Less : Goods return to Head Office 6,000
To Bank (Expenses.):
Rent
Wages
Salary & Other Exp.
To Stock reserve (2,60,000x25/125)
To Branch Profit for the year
|
2,20,000
20,000
2,000
3,94,000
12,000
4,000
18,000
52,000
1,94,300
|
By Cash (Remittances) :
- Cash Sales
- Collection from Debtors
By Stock reserve ( 2,20,000 x 25/125 )
By Goods sent to Branch (3,94,000x25/125 )
By Closing Balance :
- Closing Stock
- Debtors
- Petty Cash
|
53,000
4,38,000
44,000
78,800
2,60,000
40,000
2,500
|
9,16,300
|
9,16,300
|
Branch Debtors A/c
To Balance b/d
To Credit Sales
|
20,000
4,79,000
|
By Cash
By Bad Debts
By Allowances to customers
By Sales returns
By Balance c/d
|
4,38,000
6,000
5,000
10,000
40,000
|
4,99,000
|
4,99,000
|
3. A and B are equal partners in a firm. Following was the balance sheet of the firm as on March 31, 2010: 12
Liabilities
|
Rs.
|
Assets
|
Rs.
|
Creditors
Capitals :
A
B
|
1,48,000
8,00,000
6,00,000
|
Cash
Debtors
Stock
Furniture
Buildings
|
1,08,000
2,40,000
2,12,000
1,88,000
8,00,000
|
15,48,000
|
15,48,000
|
On April 1, 2010, C was admitted into partnership on the following terms:
(a) C will bring Rs. 2,00,000 as goodwill and Rs. 4,00,000 as capital for 1/5th share of the firm.
(b) Stock and furniture are to be depreciated by 10%.
(c) A provision of 5% on debtors is to be created to cover bad debts.
(d) The value of building is to be appreciated by 20%.
(e) An item of Rs. 12,000 in creditors is not likely to arise and hence should be deleted from the books.
Pass the necessary journal entries to give effect to the above and prepare the balance sheet of the new firm on April1, 2010.
Ans:
Journal Entries
In the books of Partnership Firm
Particulars
|
L.F.
|
Amount(Dr.)
|
Amount(Dr.)
|
Cash A/c Dr.
To C’s Capital A/c
To Premium for goodwill A/c
(Being the Capital and Premium for goodwill brought in by new partner C)
|
6,00,000
|
4,00,000
2,00,000
| |
Premium for goodwill A/c Dr.
To A’s Capital A/c
To B’s Capital A/c
(Being the premium for goodwill distributed between sacrificing partners in sacrifice ratio)
|
2,00,000
|
1,00,000
1,00,000
| |
Revaluation A/c Dr.
To Stock A/c
To Furniture A/c
To Provision for Bad debt A/c
(Being the loss on revaluation of sundry assets transferred to revaluation account)
|
52,000
|
21,200
18,800
12,000
| |
Building A/c Dr.
Creditors A/c Dr.
To Revaluation A/c
((Being the profit on revaluation of sundry assets and liabilities transferred to revaluation account)
|
1,60,000
12,000
|
1,72,000
| |
Revaluation A/c Dr.
To A’s Capital A/c
To B’s Capital A/c
(Being the profit on revaluation distributed between partners in old ratio)
|
1,20,000
|
60,000
60,000
|
Balance Sheet of the new firm
As on 1st April, 2010
Liabilities
|
Amount
|
Assets
|
Amount
|
Creditors
Capital :
A = 9,60,000
B = 7,60,000
C = 4,00,000
|
1,36,000
21,20,000
|
Cash ( 1,08,000 + 6,00,0000)
Debtors 2,40,000
Less : Provision for bad debts 12,000
Stock
Furniture
Building
|
7,08,000
2,28,000
1,90,800
1,69,200
9,60,000
|
22,56,000
|
22,56,000
|
4. (a) XYZ Ltd. invited applications for the issue of 20,000 equity shares of Rs.10 each at a premium of Rs.3 per share, payable Rs.3 on application, Rs.6 on allotment including premium and the balance as first and final call. Applications for 25,000 shares were received. The directors allotted 20,000 shares to all applicants on pro-rata basis adjusting the excess application money towards allotment. All the money due was received except the call amount on 250 shares which were forfeited. Give journal entries to record these transactions in the books of the company.
Journal Entries
In the books of XYZ Ltd.
Particulars
|
L.F.
|
Amount(Dr.)
|
Amount(Cr.)
|
Bank A/c Dr.
To Equity Shares application A/c
(Being the application money received on 25,000 shares @ Rs.3 each)
|
75,000
|
75,000
| |
Equity Share application A/c Dr.
To Equity share capital A/c
To Equity Shares allotment A/c
(Being the application money on 20,000 shares transferred to share capital and excess money transferred to allotment account)
|
75,000
|
60,000
15,000
| |
Equity share allotment A/c Dr.
To Equity share capital A/c
To Securities premium A/c
(Being the allotment money due on 20,000 shares @ Rs.6 per share including premium of Rs.3 per share)
|
1,20,000
|
60,000
60,000
| |
Bank A/c Dr.
To Equity share allotment A/c
(Being the allotment money received after adjusting excess application money)
|
1,05,000
|
1,05,000
| |
Equity share 1st and final call A/c Dr.
To Equity share capital A/c
(Being the 1st and final call money due on 20,000 shares @ Rs.4 each)
|
80,000
|
80,000
| |
Bank A/c Dr.
Calls in arrear A/c Dr.
To Equity share 1st & final call A/c
(Being the 1st and final call money received on 19,750 shares @ Rs.4 each)
|
79,000
1,000
|
80,000
| |
Equity share capital A/c Dr.
To share forfeiture A/c
To calls in arrears A/c
(Being the 250 shares forfeited due to non-payment of 1st and final call money)
|
2,500
|
1,500
1,000
|
(b) Describe the accounting treatment of debentures issued as a collateral security.
5. (a) From the following particulars of Krishna & Co., calculate stock Turnover Ratio and Debtors Turnover Ratio:
Net sales Rs. 2, 00,000; Margin of Gross Profit 20%; Opening Stock Rs. 12,000; Closing stock Rs. 8,000; Debtors Rs. 50,000.
Ans: Net Sales = 2, 00,000
Gross Profit = 20% on Sales
Cost of goods sold = 2, 00,000 – 20% of Sales = 1, 60,000.
Average Stock
Now,
Stock turnover ratio 
Debtor’s turnover ratio 
(b) Ascertain Funds from Operations from the following information:
Particulars
|
2008 – 09
|
2009 - 10
|
P & L A/c (cr. Balance)
General Reserves
Goodwill
Depreciation Prov.
Preliminary Expenses
Taxation Prov.
|
3,00,000
50,000
20,000
50,000
20,000
10,000
|
4,00,000
1,00,000
10,000
60,000
5,000
25,000
|
Ans: Calculation of funds from operations from
Particulars
|
2008-09
|
2009-10
|
Net Profit for the year
Add : Non-fund and non-operating Expenses
General reserve
Goodwill
Depreciation
Preliminary Expenses
Taxation Provision
|
3,00,000
50,000
20,000
50,000
20,000
10,000
|
4,00,000
1,00,000
10,000
60,000
5,000
25,000
|
Funds from operations
|
4,50,000
|
6,00,000
|
6. (a) Explain how goodwill is treated when the incoming partner does not bring in his share of goodwill in cash?
(b) State the purpose of preparing departmental accounts, and explain how inter-departmental transfers of goods are treated in Departmental Accounts?
7. What is Cash Flow statement? Explain the uses of Cash Flow statement.