BCOC - 131: FINANCIAL ACCOUNTING | IGNOU SOLVED ASSIGNMENT 2020 - 21 | B.COM | FREE SOLVED ASSIGNMENT | CBCS PATTERN

IGNOU FREE SOLVED ASSIGNMENTS (2020-21)

TUTOR MARKED ASSIGNMENT
COURSE CODE: BCOC-131
COURSE TITLE: FINANCIAL ACCOUNTING
ASSIGNMENT CODE: BCOC-131/TMA/2020-21
COVERAGE: ALL BLOCKS
Maximum Marks: 100

Note: Attempt all the questions.

SECTION-A

Attempt all the questions. Each question carries 10 marks.

Q.1 Journalize the following transactions, Post them into ledger and prepare a Trial balance.    (10)

a) Business started with a capital of Rs 5,00,000

b) Furniture purchased from Jai sons on credit Rs. 2,00,000

c) Payment made to Silky brothers Rs. 10,000

d) Commission Received from Haryana Automobiles Rs. 8,000

e) Goods purchased from Ramlal and Sons Rs. 6,00,000

f) Interest paid to Ghanshyam and Sons Rs. 6,000

Ans:

Journal Entries

In the Books of _____________

Date	Particulars	L.F.	Amount (Dr.)	Amount (Cr.)
a)	Cash Account                                     Dr To Capital Account (For business started with cash)		5,00,000	5,00,000
b)	Furniture Account                            Dr To Jai and Sons (For Furniture purchased from Jai and Sons)		2,00,000	2,00,000
c)	Silky Brothers                     Dr To Cash Account (For payment made to silky brothers)		10,000	10,000
d)	Cash Account                          Dr To Commission Account (For commission received from Haryana Automobiles)		8,000	8,000
e)	Purchases Account                Dr To Ramlal & Sons (For goods purchased from Ramlal & Sons)		6,00,000	6,00,000
f)	Interest Account                      Dr To Cash Account (For interest paid to Ghanshyam & Sons)		6,000	6,000

Cash Account

Date	Particulars	L.F.	Amount	Date	Particulars	L.F.	Amount
	To Capital A/c To Commission A/c		5,00,000 8,000		By Silky Brothers A/c By Interest A/c By Balance C/d		10,000 6,000 4,92,000
			5,08,000				5,08,000
	To Balance b/d		4,92,000

Capital Account

	By Balance C/d		5,00,000		By Cash A/c		5,00,000
			5,00,00				5,00,000
					By Balance b/d		5,00,000

Furniture Account

	To Jai & Sons		2,00,000		By Balance C/d		2,00,000
			2,00,000				2,00,000
	To Balance b/d		2,00,000

Jai & Sons

	To balance C/d		2,00,000		By Furniture A/c		2,00,000
			2,00,000				2,00,000
					By Balance b/d		2,00,000

Silky Brothers

	To Cash A/c		10,000		By Balance c/d		10,000
			10,000				10,000
	To Balance b/d		10,000

Commission Account

	To Balance c/d		8,000		By Cash A/c		8,000
			8,000				8,000
					By Balance b/d		8,000

Purchases Account

	To Ramlal & Sons		6,00,000		By Balance c/d		6,00,000
			6,00,000				6,00,000
	To Balance b/d		6,00,000

Ramlal & Sons

	To balance C/d		6,00,000		By Purchases A/c		6,00,000
			6,00,000				6,00,000
					By Balance b/d		6,00,000

Interest Accounts

	To Cash Account		6,000		By Balance C/d		6,000
			6,000				6,000
	To Balance b/d		6,000

Trial Balance

AS on ___________

Particulars	Amount	Particulars	Amount
Cash Furniture Purchases Interest Silky Brothers	4,92,000 2,00,000 6,00,000 6,000 10,000	Capital Ramlal & Sons Commission Jai & sons	5,00,000 6,00,000 8,000 2,00,000
	13,08,000		13,08,000

 Q.2 On 1st April 2016, Chaudhary Harpal Singh purchased a Tractor of the cash price of Rs. 2,20,000 on hire-purchase system from Escorts Ltd. Rs. 20,000 were paid immediately and the balance in 4 annual installments of Rs. 50,000 each with interest at 8% per annum. The depreciation is to be charged at 10% p.a. on written down value method. Harpal Singh paid 2 installments and failed to pay the third installment. Escorts Ltd. took away the tractor by paying him Rs. 90,000 in cash. Make necessary ledger accounts in the books of Harpal Singh. Books are closed on 31st March every year.              (10)

 Solution:

Ledger Accounts

In the Books of Harpal Singh (Vendee)

Tractor Account

 

Q.3. Oswal Mills Barnala consigned 5000 kg of vanaspati ghee to Rajendra Dealers of Panipat. Each kg. Ghee costs Rs. 8. Oswal Mills paid Rs. 50 for carriage, Rs. 250 for freight and Rs. 200 for insurance in transit. During transit 500 kg. Ghee was accidentally destroyed for which insurance company paid directly to the consignor Rs. 2500 in full settlement of the claim. After 3 month from the date of consignment of goods to Panipat, Rajendra Dealers reported that 1500 kg. Ghee was sold at Rs. 9.5 per kg. The expenses were: On Godown Rent Rs. 500, On Salesman Salary Rs. 700. Rajendra dealers are entitled to a commission of 5% on sales. Due to leakage, Rajendra Dealers also reported a loss of 20 kg. Ghee. Prepare consignment account and abnormal loss account in the books of the Consignor.    (10)

Solution:

In the Books of Oswal Mills Barnala

Consignment to Panipat A/c

Abnormal Loss A/c

Working Notes:

 

Q.4. An Accountant finds the difference in the Trial Balance amounting to Rs. 210 and put it in the Suspense Account. Later on he detects the following errors. Rectify the errors and prepare the suspense Account.     (10)

a) Goods purchased from Ram Rs. 700 were passed through sales book.

b) Returned Goods to Shyam Rs. 1500 was passed through returns inward book.

c) An item of Rs. 450 relating to prepaid rent account was omitted to brought forward.

d) An item of Rs. 120 in respect of purchase returns, instead of being recorded in Returns Outward book has been wrongly entered in the purchase book and posted therefrom to the debit of personal account.

e) Amount payable to Subhash for repairs done to Radio Rs. 180 and a new Radio supplied for Rs. 1920 were entered in the Purchase book as Rs. 2000.

Solution:

Journal Entries

 

Q.5 Define Computerized Accounting and distinguish between manual and computerized accounting system.   (10)

Ans: Computerized Accounting System: A computerised accounting system is an accounting information system that processes the financial transactions and events as per Generally Accepted Accounting Principles (GAAP) to produce reports as per user requirements. Every accounting system, manual or computerised, has two aspects. First, it has to work under a set of well-defined concepts called accounting principles. Another, that there is a user-defined framework for maintenance of records and generation of reports. In a computerised accounting system, the framework of storage and processing of data is called operating environment that consists of hardware as well as software in which the accounting system, works. The type of the accounting system used determines the operating environment. Both hardware and software are interdependent. The type of software determines the structure of the hardware. Further, the selection of hardware is dependent upon various factors such as the number of users, level of secrecy and the nature of various activities of functional departments in an organisation.

Difference between Manual Accounting System and Computerized Accounting

a)      Recording of data: The recording of financial transactions, in manual accounting system is through books of original entries while the data content of such transactions is stored in a well-designed accounting database in computerised accounting system.

b)      Classification and processing of data: In a manual accounting system, transactions recorded in the books of original entry are further classified by posting into ledger accounting. This results in transactions data duplicity. In computerized account, no such data duplication is made to cause classification of transactions.

c)       Summarizing and updating of data: The transactions are summarized to produce trial balance in manual accounting system by ascertaining the balances of various accounts. The generation of ledger accounts is not a necessary condition for producing trial balance in a computerized accounting system because it is done automatically.

d)      Adjusting entries. In a manual accounting system, entries are made to the principle of cost matching revenue. These entries are passed to match the expenses of the accounting period with the revenues generated by them. However, in computerized accounting, journal vouchers are prepared and stored to follow the principle of cost matching revenue, but there is nothing like passing adjusting entries for errors and rectification, except for rectifying an error of principle by having passed a wrong voucher.

e)      Cost of reporting: Since with a manual system, the cost of preparing reports other than the basic financial statements is high. On the other hand, the cost of preparing specialized management reports in computerized systems is usually quite law.

f)       Financial Statements: In a manual system of accounting, the preparation of financial statements pre-supposes the availability of trial balance. However, in computerised accounting, there is no such requirement. The generation of financial statements is independent of producing the trial balance because such statements can be prepared by direct processing of originally stored transaction data.

SECTION-B

Attempt all the questions. Each question carries 5 marks.

Q.6 State the essentials features of a joint Venture. (5)

Ans: A joint venture is the combination of two or more persons into a single activity. It is a form of partnership which is limited to a specific venture. It is exactly the same as partnership, with the exception that it is one of a business that is to be terminated. Since the business is to be terminated after completion of the venture, a firm name is not generally used. Thus the joint venture is like a temporary partnership without a firm name.

Features of a Joint Venture:

1.       It is a specific partnership.

2.       It does not entail a continuing partnership since termination is certain.

3.       The business is dissolved after the venture is terminated.

4.       Many accounting concepts are not applicable such as the going concern concept.

5.       Ascertainment of income is relatively simple.

6.       Since the business is to be terminated after completion of the venture, a firm name is not generally used.

Q.7. What are the main causes of disagreement of a Trial Balance? Briefly explain. (5)

Ans: Trial balance is a statement which is prepared on a particular date to check the arithmetical accuracy of books of accounts. Agreement of both sides of trial balance shows that books of accounts are arithmetically correct. But sometimes, both the sides of trial balance do not agree. There are various reasons for disagreement of trial balance. Some of them are listed below:

a)      Errors of Omission: When a transaction is either wholly or partially not recorded in the books, it is an error of omission. It may be with regard to omission to enter a transaction in the books of original entry or with regard to omission to post a transaction from the books of original entry to the concerned account in the ledger. If omission is occurred in journal it does not affect trial balance but omission in one account is ledger causes disagreement of trial balance.

Examples:

1. Purchases goods worth Rs. 10,000 from B but omitted to be recorded.

2. Sold goods to Mr. C worth Rs. 15,000 but omitted to be posted in Mr. C’s account

b)      Errors of Commission: These errors arise at the time of recording transactions in the journal, ledger and / or subsidiary books. Agreement of trial balance may or may not be affected by these errors. Some of the errors of commission affect the two sides of trial balance, while others do not affect.

Examples: Wrong totaling of subsidiary books. Generally, subsidiary books are periodically totaled and their totals are posed to the relevant ledger account. If there is any mistake in totaling the subsidiary book, the trial balance will not agree e.g., Purchase book was totaled Rs. 8,050 instead of actual total of Rs. 8,500. It means purchase book is under cast by Rs. 450. Since posting to purchase account is made from the purchase book, it means purchase account will be given debit with Rs. 8,050 instead of Rs. 8,500. This error will not allow the trial balance to tally, because debit side of trial balance will be short by Rs. 450.

c)       Trial Balance Errors: So far, we have discussed those errors which occur in journal, ledger and subsidiary books. There may be errors which occur during the course of preparing trial balance.  These may be:

Ø  Omission of recording ledger balance in trial balance.

Ø  A debit balance is written in the credit column of trial balance or vice-versa.

Ø  The amount of a ledger balance is wrongly written in trial balance e.g., salaries account Rs. 625 is written in trial balance as Rs. 652.

Ø  Wrong totaling of two columns of trial balance.

Q.8 State the factors affecting the amount of depreciation. (5)

Ans: The word depreciation is derived from a Latin word “Depretium” where “De” means decline and “pretium” means price. Thus, the word “Depretium” stands for decline in the value of assets. It stands for gradual and continuous decline. In simple words, Depreciation may be defined as permanent decrease in the value of assets due to Use and /or the lapse of the time. For determining the amount of depreciation on fixed assets, following factors should be considered:

a)      Cost of asset: Original cost of asset including expenses incurred at the time of purchase is the amount on which the amount of depreciation is calculated.

b)      Estimated working life of the assets: Working life of any asset is to be taken into consideration while calculating the amount of depreciation. In case of SLM method, the amount of depreciation is calculated by dividing the cost of assets less scrap value by estimated working life of the assets.

c)       Scarp value: Estimated salvage/residual/ scarp value which is estimated to be realised when asset is sold is to be deducted from the cost of asset to find out the amount of depreciation.

d)      Provision for repairs: Provision for repairs and renewals required to keep the asset in good condition is also taken into consideration while calculating the amount of depreciation.

e)      Addition and subtraction: Any addition to the asset or sale of part of asset during the life of the asset is also taken into consideration while calculating the amount of depreciation.

f)       Obsolescence: In present technological world, change in technology can cause huge depreciation in the value of asset. So obsolescence is also a key factor while calculating the amount of depreciation.

Q.9. Explain the uses of post dated vouchers. (5)

Ans: Uses of post dated vouchers: Voucher means the document prepared for the purpose of recording business transactions in the books of accounts. Normally vouchers are prepared after the happening of transactions. But there are certain transactions which are regular in nature and paid monthly such as loan EMI, rent etc. For such transactions, there is a specific feature in Tally ERP 9 known as post dated vouchers. Post dated vouchers are those which are entered today in tally but will be updated in the ledger on the specified date. For example if I enter a transaction on 1-4-2020 and voucher date is 15-4-2020, then the voucher will be updated in ledger on 15-4-2020. This feature is very useful for recording fixed monthly payment type transactions and also prevents to some extent errors of omission.

Q.10. What are the different types of branches? Explain the need for branch accounting. (5)

Ans: Types of Branch: Branches may be classified into three broad categories

a)      Dependent Branch or Branch not keeping full system of accounting

b)      Independent Branch or Branch keeping full system of accounting

c)       Foreign Branch

Need and Objectives of Branch Accounting

Branch accounting system is necessary because of the following reasons:

a.       Profit or loss of each branch can be found out

b.      They help in controlling branches

c.       Actual financial position of the business can be found out on the basis of head office and branch accounting periods.

d.      Branch requirements of goods and cash can be estimated.

e.      Suggestions for increasing the efficiency of the branch can be sent on the basis of branch accounts.

f.        They help in complying with the requirements of law because acc to companies act 2013.

Q.11. Briefly explain the benefits of Accounting Standards. (5)

Ans: Benefits of Accounting Standards:: Accounting  standard  seek to  describe the  accounting  principles, the valuation  techniques  and  the  methods  of  applying  the accounting  principles   in the  preparation  and  presentation of  financial  statements  so that  they  may  give  a true  and  fair   view  .

By setting the accounting standards, the accountant has following benefits:

a.       Standards  reduce  to a reasonable  extent or  eliminate  altogether  confusing   variations   in   the  accounting  treatments  used  to prepare  financial  statements.

b.      There are certain areas where important information is not statutorily required to be disclosed. Standards may call for disclosure beyond that required by law.

c.       The  application   of  accounting standards  would ,to  a  limited  extent, facilitate  comparison  of  financial  statements  of  companies  situated in  different parts  of  the  world  and also of  different   companies  situated  in  the  same  country. However, it  should  be  noted  in  this  respect  that  differences in the institutions, traditions  and  legal  systems  from  one  country  to  another give rise  to  differences   in  accounting   standards  adopted  in  different  countries.

SECTION-C

Attempt all the questions. Each question carries 10 marks.

Q.12 Distinguish between the following: (10)

a) Cost of Goods Sold and Cost of Goods Produced

Ans: Difference between cost of goods sold and cost of goods produced:

a) Cost of goods sold also termed as cost of sales is the amount incurred on goods which are actually sold by the business during the period. It is calculated by the following two formulas:

Cost of goods sold = Net sales – Gross profit       or

Cost of goods sold = Opening stock + Net purchases + Direct expenses – Closing stock

In some cases indirect expenses termed as overheads are also added to find cost of goods sold. While calculating cost of goods sold, only finished goods stocks are taken into consideration.

b) On the other hand, cost of goods produced is the amount incurred on goods actually produced by the business during the period. It is calculated as:

Opening stock of raw materials + Net Purchase of raw materials + All manufacturing expenses – closing stock of raw materials.

While calculating, cost of goods produced, only stock of raw materials are taken into consideration.

b) Profit and Loss Account and Balance Sheet

Ans: Difference between Profit & loss account and Balance Sheet

Profit & Loss account	Balance sheet
Profit and loss account is prepared to find the operating efficiency of the business organisations.	Balance sheet is one of the financial statements prepared by the company to show the financial position of company at a particular time.
It is an account.	It is a statement.
Balance of profit and loss account is transferred to balance sheet i.e., added/deducted with capital.	Balance sheet is automatically tallied.
Only nominal accounts are shown in profit and loss account.	Only personal and real accounts are shown in balance sheet.
Profit and loss account is prepared before preparation of balance sheet.	Balance sheet is prepared after preparation of profit and loss account.
It is prepared mainly for internal users.	It is prepared for both internal and external users of financial statements.

Q.13 Write short notes on the following: (10)

a) Systems of Book-keeping

Ans: Book keeping is an activity concerned with the recording of financial data relating to business operation in a significant and orderly manner. There are primarily two book-keeping systems which are followed in our country:

a) Single Entry System

b) Double Entry System

a) Single Entry: It is an incomplete system of recording business transactions. The business organization maintains only cash book and personal accounts of debtors and creditors. So the complete recording of transactions cannot be made and trail balance cannot be prepared. This system is mainly followed by small business organisations. This system is easy to understand and less costly to maintain.

2. Double Entry: Double Entry is an accounting system that records the effects of transactions and other events in at least two accounts with equal debits and credits. Under this system all accounts i.e., Personal, real and nominal accounts are maintained. It is a complete system of recording business transactions. This system is followed by large organisations like companies. Double entry system started with recording of business transactions and ends with preparation of final accounts and reporting to the users of financial statements.

b) International Financial Reporting Standards (IFRS)

Ans: IFRS is a set of international accounting standards stating how particular types of transactions and other events should be reported in financial statements. IFRS are generally principles-based standards and seek to avoid a rule-book mentality. Application of IFRS requires exercise of judgment by the preparer and the auditor in applying principles of accounting on the basis of the economic substance of transactions. IFRS are issued by the International Accounting Standards Board (IASB). IASB issued only thirteen (13) IFRS which are as follows:

IFRS 1 - First-time adoption of International Financial Reporting Standards

IFRS 2 - Share-based payment

IFRS 3 - Business combinations

IFRS 4 - Insurance contracts

IFRS 5 - Non-current assets held for sale and discontinued operations

IFRS 6 - Exploration for and evaluation of mineral resources

IFRS 7 - Financial instruments: disclosures

IFRS 8 - Operating segments

IFRS 9 - Financial instruments

IFRS 10 - Consolidated financial statements

IFRS 11- Joint arrangements

IFRS 12- Disclosure of interests in other entities

IFRS 13- Fair Value measurement

The goal of IFRS is to provide a global framework for how public companies prepare and disclose their financial statements. IFRS provides general guidance for the preparation of financial statements, rather than setting rules for industry-specific reporting. Having an international standard is especially important for large companies that have subsidiaries in different countries. Adopting a single set of world-wide standards will simplify accounting procedures by allowing a company to use one reporting language throughout. A single standard will also provide investors and auditors with a comprehensive view of finances.