Advance Financial Accounting
2016 (November)
Commerce (Speciality)
Course: 301: Advance Financial Accounting)
Full Marks: 80
Pass Marks: 32
The figures in the margin indicate full marks for the questions.
1. (a) Write True or False: 1x4=4
a)
Banking companies are governed by the Banking
Regulations Act, 1949.
b)
Life Assurance Fund represents profit of the
life insurance companies.
c)
General insurance includes all types of
insurance.
d)
Cum-dividend price is not the real price of
investment.
(b) Fill in the
blanks: 1x4=4
a)
A bank can open a branch only at the permission
of the ____.
b)
Consideration for annuities granted is a source
of ____ for a life insurance company.
c)
In case of marine insurance, the provision
against unexpired risk is maintained at ____% of the net premium.
d)
Investment Account is a ____ Account.
2. Write short
notes on any four of the following: 4x4=16
a)
Rebate on Bills Discounted.
b)
Valuation Balance Sheet.
c)
Fire Insurance Revenue Account.
d)
Cum-dividend.
e)
Ex-dividend.
3. (a) What is
investment? Is it treated as fixed asset? Discuss the various purposes of
maintaining an investment ledger. What journal entries are required to be
passed in the books of buyer, when an investment is purchases cum-dividend and
dividend is received by cheque? 2+2+6+4=14
Or
(b) On 1st
April, 2015, AB & Co. held 9% debentures in Star Ltd. of the face value of
Rs. 10,000 at a cost of Rs. 8,000, Market value on that date was Rs. 9,000.
Interest is payable on 31st December, 2015, debentures of nominal
value of Rs. 6,000 were purchased for Rs. 5,000 ex-interest and on 31st
December, 2015, debentures of nominal value of Rs. 2,000 were sold cum-interest
for Rs. 1,900. On 1st January, 2016, debentures of nominal value of
Rs. 6,000 were bought at Rs. 5,800. The market value of the debentures on 31st
March, 2016 was at Rs. 90. Make out
Investment Account in the books of AB & Co. showing profit or loss on sale
of investment. Stocks on 31st March each year are valued at lower of
cost (apply FIFO method) and market price. 14
4. (a) Give a
proforma of Balance Sheet of a banking company. Also distinguish between
performing and non-performing assets of a bank. 10+4=14
Or
(b) From the
following information, prepare Profit & Loss A/c of Good Luck Bank Ltd. for
the year ended on 31st March, 2016: 14
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Rs. (‘000)
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Interest on Loans
Interest on Fixed Deposits
Commission
Payment to Employees
Discount on Bills Discounted
Interest on Cash Credit
Rent, Taxes and Lighting
Interest on Overdrafts
Director’s Fees
Auditor’s Fees
Interest on Saving Bank Deposits
Postage and Telephone expenses
Printing and Stationery
Sundry Expenses
Additional Information:
Provide for Contingencies
Transfer to Reserves
Transfer to Central Government
|
5,180
6,340
164
1,080
2,120
4,460
360
3,080
60
24
1,360
28
58
34
400
300
400
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5. (a) What are
the statutory and subsidiary books maintained by a life insurance company? What
purposes do they serve? (6+6)+2=14
Or
(b) Prepare a
Revenue A/c of Ganpati Life Assurance Company for the year ended on 31st
March, 2016 from the following balances extracted from its books of account: 14
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Rs.
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Life Assurance Fund
Premium Received
Re-insurance Premium
Consideration for Annuities
Granted
Claims:
By Death
By Maturity
Re-insurance Claims
Management Expenses
Annuity Paid
Outstanding Premium on 01.04.2015
Interest, Dividend and Rent
Commission on Direct Business
Commission on Re-insurance
Accepted
Commission on Re-insurance ceded
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51,00,000
17,30,000
70,000
1,90,000
3,50,000
2,20,000
30,000
2,60,000
15,000
30,000
6,40,000
70,000
10,000
6,000
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Additional Information:
a)
Outstanding premium – Rs. 40,000
b)
Bonus in reduction of premium – Rs. 10,000
c)
Interest accrued – Rs. 15,000
d)
Net liability on all contracts in force:
As on 31st March, 2015
– Rs. 32,00,000
As on 31st March, 2016
– Rs. 38,00,000
e)
Transfer 30% of surplus to Shareholder’s A/c.
6. (a) What is
meant by ‘reserve for unexpired risk? Why is it created in general insurance?
What provisions should be made by a fire insurance company in regard to
unexpired risks at the end of each financial period? 3+6+5=14
Or
(b) Prepare a
Revenue A/c in respect of Seven-star Fire Insurance Co. Ltd. from the following
details for the year 2015-16: 14
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Rs.
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Reserve for Unexpired Risk on
01.04.2015 @ 50%
Additional Reserve
Estimated Liability for Claims
Intimated on:
01.04.2015
31.03.2016
Claims paid
Legal Expenses
Medical Expenses
Re-insurance Recoveries
Bad debts
Premium Recovered
Premium on Re-insurance Accepted
Premium on Re-insurance Ceded
Commission on Direct Business
Commission on Re-insurance
Accepted
Commission on Re-insurance Ceded
Expenses of Management
Interest, Dividend and Rent
Profit on sale of investments
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1,80,000
36,000
31,000
42,000
3,65,000
6,000
4,000
32,000
800
4,86,000
32,000
43,000
48,000
1,600
2,150
90,000
24,000
3,000
|
Create Reserve on
31st March, 2016 to the same extent as on 1st April,
2015.
(Old Course)
Full Marks: 80
Pass Marks: 32
Time: 3 hours
1. (a) Choose the correct answer: 1x5=5
a)
Rebate on Bills Discounted is an expired
discount/unexpired discount
b)
According to Insurance Regulatory and
Development Authority (IRDA) Regulations, 2002, every general insurance company
must prepare its Financial Statements as per Schedule B/C/D.
c)
In Insolvency Accounts, the Provincial
Insolvency Act, 1920 is applicable to Bombay, Calcutta and Madras/rest of
India.
d)
When investments are sold at cum-interest, the
amount of interest is deducted from/added to the quoted selling price.
e)
During inflation, the monetary unit shrinks in
value as the prices rise/fall.
(b) Fill in the blanks: 1x3=3
a)
In India, banking companies are governed by the
Banking Regulation Act, ____.
b)
As ____ deals with accounting for investments.
c)
As per the provisions of the IRDA Act, 2002, the
Revenue Account of the life insurance companies is to be prepared as per
Schedule ____.
2. Write short
notes on the following: 4x4=16
a)
Rebate on Bills Discounted.
b)
Revenue Account of Life Insurance Companies.
c)
Preferential Creditors in Insolvency Account.
d)
Limitations of Historical Cost Accounting.
3. (a) From the
following information, prepare P/L A/c of Assam Bank Ltd. for the year ended on
31st March, 2016:
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Rs.
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Commission
Interest on Loan
Interest on Fixed Deposits
Salaries & Allowances
Exchange & Brokerage
Discount on Bills (Gross)
Interest on Cash Credits
Interest on Temporary Overdraft
on Current A/c
Interest on Savings Bank Deposits
Postage, Telegram and Stamps
Printing and Stationery
Sundry Expenses
Rent
Taxes and Licenses
Audit Fee
|
10,000
3,00,000
2,75,000
1,50,000
20,000
1,52,000
2,40,000
30,000
87,000
10,000
20,000
10,000
15,000
10,000
10,000
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Additional
Information: 12
a)
Provision for income tax is to be maintained @
55%.
b)
Rebate on Bills Discounted – Rs. 30,000.
c)
Bad Debts – Rs. 40,000.
d)
Provide for Directors’ fees and allowances – Rs.
30,000.
e)
Transfer 20% net profit to Statutory Reserve and
provide Rs. 15,000 as dividends.
f)
Interest of Rs. 4,000 on doubtful debts was
wrongly credited to interest on Loan Account.
Or
(b) Explain the principal
provisions of the Banking Regulation Act, 1949. 12
4. (a) Jorhat
Fire Insurance Co. Ltd. commenced its business on 01.04.2015. It submits you
the following information for the year ended 31.03.2016:
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Rs.
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Re-insurance premium paid
Premium received
Claims paid
Expenses of management
Commission paid
Claims outstanding on 31.03.2016
Create reserve for unexpired risk
@ 40%
|
1,00,000
15,00,000
7,00,000
3,00,000
50,000
1,00,000
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Prepare Revenue A/c for the year
ended 31.03.2016. 11
Or
(b) What is Valuation Balance
Sheet? How is it prepared? 4+7=11
5. (a) From the
following Trial Balance of Mr. Ashok who commenced business on January 1, 2015,
you are required to prepare a Statement of Affairs and a Deficiency A/c: 11
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Rs.
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Rs.
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Cash
Stock-in-Trade
Debtors (all good)
Furniture
Investment in shares
Value of Securities held by
creditors
Loss (2015)
Drawings (up to December, 2015)
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2,300
6,660
1,30,000
2,820
5,000
35,000
25,000
69,160
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Creditors (unsecured)
Secured Creditors
Preferential Claims for Rent,
Rates & Taxes
Capital
Profit (2013, 2014)
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1,80,000
25,000
1,900
13,500
55,540
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2,75,940
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2,75,940
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Or
(b) (i) Who are preferential
creditors?
(ii)
Distinguish between Statement of Affairs and Balance Sheet. 5+6=11
6. (a)
Assam Investments Ltd. holds 1000, 15% debentures of Rs. 100 each in Udaipur
Industries Ltd. as on 1st April, 2010, at a cost of Rs. 1,05,000.
Interest is payable on 30th June and 31st December every
year. On 1st May, 2010, 500 Debentures are purchased cum-interest at
Rs. 53,500. On 1st November, 2010, 600 Debentures are sold
ex-interest at Rs. 57,300. On 30th November, 2010, 400 Debentures
are purchased ex-interest at Rs. 38,400. On 31st December, 2010, 400
Debentures are sold cum-interest for Rs. 55,000. Prepare Investment A/c valuing
holdings on 31st March, 2010 at cost. 11
Or
(b) Write
notes on the following: 5+6=11
a)
Cum-interest purchase and Ex-interest purchase.
b)
Cum-interest sale and Ex-interest sale.
7. (a) The
following data relate to ABC Company Ltd. You are required to compute cost of
sales and cost of sales adjustment: 11
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Rs.
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Opening Inventory
Purchases
Closing Inventory
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2,000
4,000
1,000
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Price Level during the year:
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Rs.
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Beginning
Closing
Average
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100
120
110
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Give you opinion on Monetary
Working Capital Adjustment (MWCA)
Or
(b) What do you mean by Inflation
Accounting? “Financial Statements based on historical cost basis are
meaningless and highly distorted.” Explain. 4+7=11
***