Financial Accounting Solved Question Papers November' 2017Dibrugarh University B.Com 1st Sem
COMMERCE (General / Speciality)
Course: 103
(New course)
Financial Accounting
Full marks: 80
Pass marks: 24
Time: 3 hours
1. (a) Write ‘True’ or ‘False’ 1x4=4
a)
Sales – Gross Profit = Cost of
goods sold True
b)
There is no difference between
Hire Purchase System and Installments Purchase system. False
c)
Under debtors system, Branch
Account discloses profit or loss of the branch. True
d)
Royalty account is closed by
transferring it to the Landlord’s account.
False, Production or P/L a/c
(b) Fill in the blanks: 1x4=4
a) Accounting Standard Board was set up in India in the year 1977.
b)
In hire purchase system, the
buyer charges depreciation on the cash
price.
c)
Selling expenses should be
divided among the different departments on the basis of net sales.
d)
Short working is the excess of Shortworking over actual
royalty.
2. Write short notes on (any
four) 4x4=16
a) The provisions of Accounting
Standard-6
b) Termination of hire purchase agreement
Ans: Where a hirer
makes more than one default in the payment of hire-purchase agreement then,
subject to the provisions of Section 21 and after giving the hirer notice in
writing of not less than -
a.
One week, in a case where the hire is
payable at weekly or lesser intervals; and
b.
Two weeks, in any other case,
The owner shall
be entitled to terminate the agreement by giving the hirer notice of
termination in writing.
Where a
hire-purchase agreement is terminated under this Act, then the owner shall be
entitled to retain the hire which has already been paid and to recover the
arrears of hire due.
c) Goods in transit
Ans: Goods
in transit: When
goods are dispatched by the head office to branch and the branch does not
receive it even upto the end of the year, it is known as goods in transit. In the
same way when goods are returned by branch to head office and the head office
does not receive it upto the end of the year it is also known as goods in
transit.
It is
quite understandable that a difference should arise in the balances of two
accounts due to these transactions. Therefore, to reconcile, the following
journal entry will be passed in head office books in both the circumstances:
Goods in
Transit a/c Dr.
To Branch
a/c
(Goods in
transit taken into books)
In the
Balance Sheet of Head office both the above items will be shown as an asset.
d) Objectives of Departmental
Accounts
e) Minimum rent
f) Independent branch
Ans: Independent
branches are those which act independently within the broad policies framed by
the Head office in conducting their day-to-day activities. These branches keep
full system of accounting. They can purchase goods from the market, supply
goods to the head office, pay cash expenses from the cash realised and deposit
cash in their own account.
The
main features of independent branches.
a)
They need not depend on the Head
office for their requirements of supplies of goods. They can make purchases
themselves. Of course, they can also obtain supplies of goods from the head
office as and when they want.
b)
They can sell goods only for cash and
credit at any price they consider profitable.
c)
They need not remit the money received
by them from cash sales and debtors to the Head office periodically. They can
retain the funds and meet their day-to-day expenses out of those funds. Finally,
if they have surplus cash in their hands, they can remit the same to the Head
office.
d)
They keep a complete set of books for
recording their transactions. So, they can prepare their own Trial Balance,
Trading and Profit and Loss Account and Balance Sheet.
e)
However, as they are ultimately
responsible to the Head office, at the end of every financial period, they are
required to submit a copy of their Trial Balance to the Head office.
3. (a) Das Co.
purchased two machines of Rs. 5,250 each from Bharat Machine Co. on 1st
January, 2011 on hire purchase system. As per agreement, payment to be made Rs.
3,000 down and the balance in three equal annual installments along with
interest @ 5% per annum. Das co. writes off depreciation @ 10% per annum on
written down value method. After having paid the first installment, the buyer
could not pay the second installment and the seller took possession of one
machine adjusting the value of other against the amount due taking the machine
@ 20% depreciation on diminishing balance method. Seller, after spending Rs.
100 on repairs, sold it away for Rs. 4,000. Show the Ledger A/c in the books of
both the parties. Books are closed on 31st December each year. 4+4+4+2=14
OR
(b) What is hire purchase system? Mention its chief
features. Should depreciation on assets be provided for under hire purchase
system? Discuss. 3+7+4=14
Ans:-
Hire
Purchase Meaning:
A trader could sell goods either for
cash or for credit. For goods sold on credit, the payments may be made by the
buyer in lump sum on a future date, or in installments spread over for a
specified period of time. When goods are sold on credit, for which payment is
made by the buyer in installments over a period of time, it is called purchase
system or installment system.
Hire Purchase System defers to the
system wherein, the seller of goods transfers the goods to the buyer without
transferring the ownership of goods. The payment for the goods will be made by
the buyer in installments. If the buyer pays all the installments, the ownership
of the goods will be transferred, on payment of the last installment. However,
if the buyer does not pay for any installment, the goods will be repossessed by
the seller and the money paid on earlier installments will be treated as hire
charges for using the goods. So, under this system, the transaction may result
in purchasing of goods by the buyer or in hiring the goods. Hence, the system
is called Hire Purchase System.
Features
and Characteristics of Hire Purchase System
The characteristics of hire-purchase system
are as under
a) Hire-purchase
is a system of credit sale.
b) The
price under hire-purchase system is paid in installments.
c) The
goods are delivered in the possession of the purchaser at the time of
commencement of the agreement.
d) Hire
vendor continues to be the owner of the goods till the payment of last
installment.
e) The
hire purchaser has a right to use the goods as a bailer.
f) The
hire purchaser has a right to terminate the agreement at any time in the
capacity of a hirer.
g) The
hire purchaser becomes the owner of the goods after the payment of all
installments as per the agreement.
h) If
there is a default in the payment of any installment, the hire vendor will take
away the goods from the possession of the purchaser without refunding him any
amount.
Depreciation
on assets in case of hire purchase
In case of hire
purchase depreciation is provided on cash price of the assets only in the books
of vendee or hirer. Depreciation is not provided in the books of the vendor.
The main reason for this is the provision of Accounting Standard – 6. As per AS
– 6, Depreciation is arises due to wear and tear of fixed assets.
In case of hire
purchase, goods sold is treated as revenue item by hire vendor and shown in
trading account. So depreciation cannot be calculated on goods.
But the vendee
treats goods purchased under hire purchase as fixed assets. So, depreciation is
provided only in the books of vendee.
4. (a) What do you mean by accounting Standards?
Mention the procedure for issuing Accounting Standards. Distinguish between
Accounting Standards and Accounting Principles 3+6+5=14
Ans:
ACCOUNTING STANDARDS
Accounting
Standards are the policy documents or written statements issued, from time to
time, by an apex expert accounting body in relation to various aspects of
measurement, treatment and disclosure of accounting transactions for ensuring
uniformity in accounting practices and reporting. These standards are prepared
by Accounting Standard Board (ASB). Accounting Standards are formulated with a
view to harmonies different accounting policies and practices in use in a
country.
Procedure
adopted in formulation of Accounting Standards:
Following
procedure will be adopted for formulating Accounting Standards:
a. Identification
of the broad areas by the ASB for formulating the Accounting Standards.
b. Constitution
of the study groups by the ASB for preparing the preliminary drafts of the
proposed Accounting Standards.
c. Consideration
of the preliminary draft prepared by the study group by the ASB and revision,
if any, of the draft on the basis of deliberations at the ASB.
d. Circulation
of the draft, so revised, among the Council members of the ICAI and 12
specified outside bodies such as Standing Conference of Public Enterprises
(SCOPE), Indian Banks’ Association, Confederation of Indian Industry (CII),
Securities and Exchange Board of India (SEBI), Comptroller and Auditor General
of India (C& AG), and Department of Company Affairs, for comments.
e. Meeting
with the representatives of specified outside bodies to ascertain their views
on the draft of the proposed Accounting Standard.
f.
Finalisation of the Exposure Draft of
the proposed Accounting Standard on the basis of comments received and
discussion with the representatives of specified outside bodies.
g. Issuance
of the Exposure Draft inviting public comments.
h. Consideration
of the comments received on the Exposure Draft and finalisation of the draft
Accounting Standard by the ASB for submission to the Council of the ICAI for
its consideration and approval for issuance.
i.
Consideration of the draft Accounting
Standard by the Council of the Institute, and if found necessary, modification
of the draft in consultation with the ASB.
j.
The Accounting Standard, so finalised,
is issued under the authority of the Council.
Difference
between Accounting Standard and Accounting Principles
Accounting
Standard is the set
of rules that should be applied for measurement, valuation, presentation and
disclosure of a subject matter. For example, measurement of deferred tax,
valuation of assets, intangibles and financial instruments etc. and presentation
and disclosure of such measurements and valuations.
Accounting
Principles however,
are the fundamental principles providing a framework within which accounting
should be done. These principles also govern the formulation of Accounting
Standards. For example, Accrual accounting, Substance over legal form, Prudence
etc.
|
Basis |
Accounting
Standard |
Accounting
Principles |
|
1.Nature |
Accounting standards are fixed in
nature. |
Accounting principles are flexible
in nature. |
|
2. Compulsory |
Following of accounting standards is
compulsory for every person. |
Following of accounting principles
is not compulsory. |
|
3. Responsibility |
Accounting standards creates more
responsibility in accountant and auditors. |
Accounting principles are less
responsible. |
|
4. Uniformity |
Accounting standard are uniform
rules. |
Accounting principles are various. |
OR
(b) The following is the trial Balance of M/s Arun and
Barun, a partnership firm, as on 31st march, 2017 and a Balance
Sheet as on that date 4+5+5=14
Trial balance
|
Dr. Balance |
Rs. |
Cr. balance |
Rs. |
|
Purchases Advertisement Wages Bills Receivable Printing and
Stationery Trade Expenses Machinery Sundry Debtors Goodwill Fuel Opening Stock Rent and Taxes Land and Building Interest on Loan Cash in Hand Depreciation on
Machinery Discount Bad Debts Furniture |
2,50,000 11,000 1,50,000 10,000 5,000 13,000 72,000 78,000 85,000 24,000 90,000 19,000 1,65,000 8,000 32,000 8,000 4,000 3,000 20,000 |
Sales Bills Payable 10% IDBI
Loan(01.10.2016) Sundry Creditors Capital: Arun Barun Commission |
5,50,000 47,000 2,00,000 48,000 1,00,000 1,00,000 2,000 |
|
|
10,47,000 |
|
10,47,000 |
Necessary
adjustment:
a)
Value of Closing Stock – Rs.
75,000
b)
Allow interest on capital of
the partners @ 5% pa
c)
During the year, goods worth
Rs. 10,000 has been destroyed by fire. But the insurance company agreed to a
claim of Rs. 7,000 only.
5.
(a) (i) Distinguish between Branch Accounts and Departmental Accounts 5
(ii)
How are the inter departmental transactions recorded in Departmental
Accounts? 3
(iii)
Explain the basis of allocation of common expenses over the various departments
in Departmental Accounts. 6
OR
(b) Dipali
Electronics Ltd. Opened a branch at Dibrugarh on 1st April, 2016.
From the following figures relating to Dibrugarh branch, prepare Dibrugarh
Branch a/c and Goods Sent to Branch A/c for the year ended 31st
March, 2017:
|
Particulars |
Rs. |
|
Goods
sent to branch Cash
sent to branch for: Rent Salaries Cash
Sales Credit
Sales Cash
collected from debtors Stock(31.03.2017) Petty
cash (31.03.2017) Goods
returned by customers Discount
allowed to customers |
42,000 1,800 4,000 15,000 29,000 23,000 5,200 120 1,700 1,300 |
6. (a) What is royalty? What are its different types? Why is
minimum rent important in Royalty A/c? Distinguish between Rent and Royalty. 2+3+4+5=14
OR
(b) Sri Amit
Phukan took a colliery on lease from Sri Mohan Singh for a period of 20 years
from 1st January, 2011 on a royalty of Rs. 16 per ton of coal raised with a
minimum rent of Rs. 80,000 per annum and power to recoup short workings was
first four years of the lease. The annual coal raised were: 4+5+5=14
|
Year |
Output(in tons) |
|
2011 2012 2013 2014 2015 |
3000 3500 5000 9000 10000 |
From the above particulars, prepare the
following in the books of Sri Amrit Phukan:
a)
Royalty A/c
b)
Short workings A/c
c)
Mohan Singh’s A/c
(Old
course)
Full
marks: 80
Pass
marks: 32
1. (a) Fill in the
blanks: 1x4=4
a)
Revenue is generally recognized
at the point of sale.
b)
In hire purchase system, the
buyer charges depreciation on Cash
price.
c)
Royalty paid on sales is
debited to profit and loss
Account.
d)
After making payment to third
parties, the loan due to a
partner is paid.
(b) Write True
and False: 1x4=4
a)
Accounting Standard Board was
set up in India in the year 1977. True
b)
The buyer has no option to
return the goods in case of hire purchase.
False
c)
Branch Stock A/c is always
prepared at cost price. False
d)
When a partner is not able to
meet his liabilities, he is said to be insolvent. True
2.
Write short notes on (any four): 4x4=16
a) IFR Standards
Ans:- International Financial
Reporting Standards (IFRS)
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 (17) IFRS.
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.
b) Features of installment Purchase System
Ans:- Features and Characteristics of Installment
Payment System:
a)
Under this system, there will be an
outright sale of goods/assets.
b)
The possession as well as the
ownership is passed to the buyer right at the time of signing the contract.
c)
The buyer can make the payment in
installments.
d)
IN case of default in payment, the
seller cannot repossess the goods, but he can sue the buyer for the recovery of
unpaid price.
e)
The buyer cannot exercise the option
of returning the goods and terminate the contract, unless the same becomes void
or voidable under the contract act.
c)
Sub lease
d) Independent Branch
Ans:- Independent
branches are those which act independently within the broad policies framed by
the Head office in conducting their day-to-day activities. These branches keep
full system of accounting. They can purchase goods from the market, supply
goods to the head office, pay cash expenses from the cash realised and deposit
cash in their own account.
The
main features of independent branches.
a)
They need not depend on the Head
office for their requirements of supplies of goods. They can make purchases
themselves. Of course, they can also obtain supplies of goods from the head
office as and when they want.
b)
They can sell goods only for cash and
credit at any price they consider profitable.
c)
They need not remit the money received
by them from cash sales and debtors to the Head office periodically. They can
retain the funds and meet their day-to-day expenses out of those funds.
Finally, if they have surplus cash in their hands, they can remit the same to
the Head office.
d)
They keep a complete set of books for
recording their transactions. So, they can prepare their own Trial Balance,
Trading and Profit and Loss Account and Balance Sheet.
e)
However, as they are ultimately
responsible to the Head office, at the end of every financial period, they are
required to submit a copy of their Trial Balance to the Head office.
e) Realisation Account
Ans:- Realisation Account
Realisation
account is prepared at the time of dissolution of firm. Realisation Account is
a nominal account. It is prepared to find out profit or loss on realisation of
assets and payment of liabilities when a firm is dissolved. Any profit or loss
on realisation is transferred to the capital accounts of all the partners in
their profit sharing ratio.
Realisation Accounts is prepared in
the following manner:
a)
All the realisable assets given in the
books of the firm are entered at their book values on the debit side of the
Realisation Account
b)
All the external liabilities are
entered at their book values on the credit side of the Realisation Account
c)
On the realisation of assets, the
actual amount of cash received is entered on the credit side of the account. -
Cash/bank account is debited
d)
On the payment of liabilities, the
actual amount of cash paid is entered on the debit side of the account.
Cash/bank account is credited
e)
Realisation expense if any, is also
debited to the Realisation Account and bank account is credited
f)
After making the above entries in the
Realisation Account, the account is balanced. The profit or loss on realisation
is transferred to the capital accounts of all the partners in their profit
sharing ratio.
3. (a) The following is the Trial Balance of Mr. Arup
Baruah’s business as on 31st march 2017
Trial Balance
|
Dr. balance |
Rs. |
Cr. balance |
Rs. |
|
Opening
stock Purchases Bills
Receivable Cash
in Hand Bad
Debts Machinery Advertisement Sundry
Debtors Goodwill Land
and Building Fuel Wages
and Salaries Rent
and Taxes Discount Interest Furniture |
1,60,000 4,00,000 4,000 26,000 2,000 16,000 1,00,000 1,40,000 4,50,000 30,000 80,000 40,000 17,200 20,000 30,000 |
Sundry
creditors Bank
Loan Sales Bills
Payable Commission
Capital |
1,50,000 87,200 8,40,000 40,000 10,000 5,20,000 |
|
|
|
|
16,47,200 |
From the
following additional information, you are required to prepare a Trading and
Profit & Loss A/c for the year ended 31st March, 2017 and a
Balance Sheet as on that date: 3+4+5=12
a)
Closing Stock as on 31st
March 2017 Rs. 1,20,000.
b)
Depreciation machinery by 10%
and furniture by 5%
c)
Create a reserve of 5% on
sundry debtors for doubtful debts
d)
Write off ¼ th of the
advertisement
OR
(b) What are Accounting Standards? State the
objectives and scope of Accounting Standards. 3+4+5=12
Ans:- ACCOUNTING STANDARDS
Accounting
Standards are the policy documents or written statements issued, from time to
time, by an apex expert accounting body in relation to various aspects of
measurement, treatment and disclosure of accounting transactions for ensuring
uniformity in accounting practices and reporting. These standards are prepared
by Accounting Standard Board (ASB). Accounting Standards are formulated with a
view to harmonies different accounting policies and practices in use in a
country.
Objectives or Purposes of Accounting
Standards:
The whole
idea of accounting
standards is centered
around harmonization of
accounting policies and practices
followed by different
business entities so
that the diverse
accounting practices adopted
for various aspects
of accounting can be
standardized. Accounting
standards standardizes diverse
accounting policies with a view to:
a. To
provide information to the users as to the basis on which the accounts have
been prepared and the financial statements have been presented.
b. To
serve the statutory purpose of eliminating the impact of diverse accounting
policies and practices and to ensure uniformity in accounting policies &
practices, i.e., to harmonize the diverse accounting policies & practices
which are in use the preparation & presentation of financial statements.
c. To
make the financial statements more meaningful and comparable and to make people
place more reliance on financial statements prepared in conformity with the
accounting standards.
d. To
guide the judgment of professional accountants in dealing with those items,
which are to be followed consistently from year to year.
e. To
provide a set
of standard accounting
policies, valuation norms and
disclosure requirements.
4. (a) Distinguish between Hire purchase system of
sales and Ordinary Credit sales. Mention any three rights of hire vendor and
three rights of hire purchaser as laid down in the Hire purchase act,1972. 5+3+3=11
Ans: Difference between
Hire Purchase system and Sale
Although hire purchase system could ultimately
result in sale of goods, the sale in normal sense and sale under hire purchase
system are not the same. The following are the differences between Hire
Purchase and Sale.
|
Hire
Purchase |
Sale |
|
Hire purchase is governed by the Hire
Purchase Act, 1972. |
A ‘sale’ is governed by the sale of Goods
Act, 1930. |
|
In case of Hire purchase, the ownership of
goods is transferred to buyer on payment of all installments. |
In case of sale, the ownership of the goods
is transferred to the buyer immediately. |
|
In case of hire purchase, the payment is
made in installments. |
In case of sale, the buyer makes payment in
lump sum. |
|
The hire purchaser pays for the price of
goods and also some amount of interest. |
The buyer pays only for the price of goods. |
|
On non-payment of any installment, the
seller can re-possess the goods. |
On non-payment of the consideration the
seller cannot take back the goods, but can only take legal action on buyer. |
|
Either the buyer or the seller can terminate
the contract at any point of time, until the payments of last installment. |
Once a sale has taken place, neither the
seller, nor the buyer can terminate the contract (unless it is for genuine
reason like damage of goods etc.) |
|
When the hire purchaser becomes insolvent, the
seller can reposes the goods, and hence need not undertake the risk of loss. |
When the buyer becomes insolvent, the seller
has to undertake the risk of loss. |
|
In this case, the sales tax will be leviable
at the time of ownership (i.e. on payment of last installment). |
A sale is subject to levy of sales tax at
the time of contract of sale. |
Rights and duties of the Hire vendor
RIGHTS OF THE HIRE VENDOR
(i) Rights of
owner to terminate hire-purchase agreement for default in payment of hire or
authorised act or breach of express conditions: Where a hirer makes more than
one default in the payment of hire-purchase agreement then, subject to the
provisions of Section 21 and after giving the hirer notice in writing of not
less than-
c.
One week, in a case where the hire is
payable at weekly or lesser intervals; and
d.
Two weeks, in any other case,
The owner shall
be entitled to terminate the agreement by giving the hirer notice of
termination in writing:
(ii) Rights of
owner on termination: Where a hire-purchase agreement is terminated under
this Act, then the owner shall be entitled to retain the hire which has already
been paid and to recover the arrears of’ hire due.
Rights
and duties of the Hire Purchaser
RIGHTS
OF THE HIRE PURCHASER
a)
Right of hirer to purchase at any time
with rebate: The hirer may, at may time during the continuance of the
hire-purchase agreement and after giving the owner not less than fourteen days
notice in writing of his intention so to do, complete the purchase of the goods
by paying or tendering to the owner the hire-purchase price or the balance
thereof as reduced by the rebate.
b)
Right of hirer to terminate agreement
at any time: The hirer may, at Dairy time before the final payment under
the hire-purchase agreement falls due, and after giving the owner not less than
fourteen days’ notice in writing of his intention so to do, terminate the
hire-purchase agreement.
c)
Right to appropriate payments in
respect of two or more agreements in such proportions as he thinks fit.
OR
(b) Dumdum store
purchased a generator from M/s Bimal Brothers on installment purchase system.
Rs. 12,000 was payable on delivery on 1st April, 2012 and the
balance in four annual installments of Rs. 12,000 each on 31st March
every year. The seller charges 5% interest per annum on the yearly balance. The
cash price of the generator on the date of delivery was Rs. 54,551.
Depreciation @ 10% per annum on diminishing balance was written off each year.
From the above particulars, prepare the following Ledger Accounts in the books
of Dumdum Store: 4+4+3=11
a)
Generator’s a/c
b)
M/s Bimal brothers A/c
c)
Interest Suspense A/c
5. (a) What do you mean by Branch Accounting? Discuss
the Objects and advantages of Branch Accounting. 3+4+4=11
Ans: The
dictionary meaning of the word branch is any subordinate division of a
business, subsidiary shop, office etc. According to the provisions contained in
sec2(14) of the Companies Act 2013 it would appear that a branch is any
establishment carrying on either the same or substantially the same activity as
that carried on by head office of the company.
A branch is a separate segment of a
business. In order to increase the sales, business houses are requires to
market their products over a larger territory and may generally split their
business into certain divisions or parts. These various parts or divisions may
be located in different part of the same city or in different cities of the
same country or in different countries in the world. These are known as
branches. The head office controls the activities of various branches.
Purpose or Objectives of Branch accounting
The main
objectives and purpose of Branch accounting system are listed below:
a)
To ascertain the profit or loss of
each branch separately.
b)
To ascertain financial position of
each branch on a particular date.
c)
To evaluate the progress and
performance of each branch.
d)
To have comparison of the results of a
particular branch with previous year and also with the other branch of the same
concern.
e)
To differentiate between profit making
and loss making branch so that necessary steps can be taken to improve the
performance of loss making branches.
Advantages of Branch Accounting
Importance and
Advantages of Branch Accounting are listed below:
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 accounts.
d)
Commission payable to the manager of
branch can be ascertained with the help of branch.
e)
Branch requirements of goods and cash
can be estimated with the help of branch accounting.
f)
Evaluation of progress and performance
of each branch can be done with the help of branch accounting.
g)
Inter branch and intra branch
comparison can be done to assess the performance of each branch.
h)
Suggestions for increasing the
efficiency of the branch can be sent on the basis of branch accounts.
i)
They help in complying with the
requirements of law because accounts are maintained as per the requirement of Company’s
act 2013.
OR
(b) Luit Ltd. Has a branch at Duliajan which sells
goods at cost plus 25%. From the following particulars, calculate the value of
closing stock and prepare Duliajan Branch A/c for the year ended 31st
March 2017: 3+8=11
|
|
Rs. |
|
Stock
at branch on 01.04.2016 Goods
sent to branch Cash
Sales at branch Expenses
paid by Head Office: Salaries
5,000 Advertisement 2,000 |
22,000 1,78,000 2,00,000 7,000 |
A commission of
10% on the net profit after charging such commission is to be created to Branch
Manager.
6. (a) A took a lease of a colliery
with a minimum rent of Rs. 30,000 per annum merging into a royalty of Rs. 5 per
ton of coal raised with a right to recoup short workings within the first four
years of lease. The output for first five years was given below:
|
Year |
Output (in tons) |
|
1st 2nd 3rd 4th 5th |
Nil 3000 5000 7000 8000 |
Prepare necessary Ledger A/c in the
books of the lessee. 11
OR
(b) What is royalty? State its different types. How does
royalty differ from rent? 3+3+5=11
7. (a) What do you mean by dissolution of a
partnership firm? How and under what circumstances a partnership firm may be
dissolved? Discuss 3+8=11
Ans: Dissolution of a firm
means discontinuation of the firm’s business and termination of relationship
between the partners. When all the partners stop carrying on the partnership
business, it is dissolution of the firm. According to Sec. 39 of Indian
Partnership Act 1932, “Dissolution of firm means dissolution of partnership
between all the partners in the firm."
In
other words, if some partners dissociate from the firm and remaining partners
continue the business of the firm, it is dissolution of partnership not the
dissolution of the firm. Therefore when a firm is dissolved, assets of the firm
are disposed off, liabilities are paid off and the accounts of all the partners
are also settled.
Various
modes of Dissolution of Firm
The dissolution of partnership between all the partners of a firm
is called the "dissolution of the firm". A firm may be dissolved with
the consent of all the partners or in accordance with a contract between the
partners. The Indian Partnership Act, 1932 provides that a partnership firm may
be dissolved in any of the following modes:
1.
Dissolution without Court’s order:
(i)
Dissolution by agreement (Sec. 40)
(ii)
Compulsory dissolution (Sec. 41)
(iii) Dissolution
on the happening of certain contingencies (Sec. 42)
(iv) Dissolution
by notice of partnership at will (Sec. 43)
2.
Dissolution by the court’s order
(i)
Dissolution by agreement (Sec. 40): A firm may
be dissolved with the consent of all the partners. A partnership is set up by
an agreement; similarly, it can be dissolved by an agreement. If there is any
contract between the partners about the mode of dissolution of the firm, it may
be dissolved accordingly.
(ii)
Compulsory Dissolution (Sec.41): A firm is dissolved compulsorily:
(a) If all the partners or a partner has been adjudicated as
insolvent, then the firm is dissolved as on the date of his insolvency.
(b) If any event of the business of the firm becomes unlawful,
then the firm is dissolved.
(iii)
Dissolution on the Happening of Certain Contingencies (Sec. 42):
Subject to contract between the partners, a firm is dissolved on the happening
of certain contingencies:
a)
On expiry of the term for which the
firm was constituted.
b)
If firm is constituted for a
particular venture and that venture is completed.
c)
On the death of a partner; and
d)
By the adjudication of a partner as an
insolvent.
(iv)
Dissolution by Notice of Partnership at Will (Sec. 43):
Where the partnership is at will, the firm may be dissolved by any partner
giving notice in writing to all the other partners of his intention to dissolve
the firm. The firm is dissolved as from the date mentioned in the notice as the
date of dissolution or, if no date is so mentioned, as from the date of the
communication of the notice.
(v)
Dissolution by Court (Sec. 44): A court may order a partnership firm
to be dissolved in the following cases:
a)
When a partner becomes of unsound
mind.
b)
When a partner becomes permanently
incapable of performing his/her duties as a partner.
c)
When partner deliberately and
consistently commits breach of partnership agreement.
d)
When a partner’s conduct is likely to
adversely affect the business of the firm.
e)
When a partner transfers his/her
interest in the firm to a third party;
f)
When the business of the firm cannot
be carried on except at a loss in future also.
g)
When the court considers it just and
equitable to dissolve the firm. The following are the cases for the just and
equitable grounds:
1. Deadlock in the management.
2. Where the partners are in talking terms
between them.
3. Loss of substratum.
4. Gambling by a partner on a stock exchange.
OR
(b) X and Y are
two sole traders. They desire to amalgamate their business and form a new form.
The Balance Sheets of their business as on 31st March,2017 were as
follows:
Balance
Sheet of X as on 31st March, 2017
|
Liabilities |
Rs. |
Assets |
Rs. |
|
Sundry
creditors Capital Profit
& Loss a/c |
50,000 2,00,000 30,000 |
Furniture Stock Cash |
1,10,000 1,20,000 50,000 |
|
|
2,80,000 |
|
2,80,000 |
Balance
Sheet of Y as on 31st March, 2017
|
Liabilities |
Rs. |
Assets |
Rs. |
|
Sundry
creditors Capital |
1,10,000 2,60,000 |
Furniture Stock Cash Profit
& Loss A/c |
1,60,000 1,80,000 6,000 24,000 |
|
|
3,70,000 |
|
3,70,000 |
You are required
to:
a)
Close the books of X;
b)
Close the books of y;
c)
Draw up the Balance Sheet of
the new firm 4+4+3=11
***
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