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Title Name Amity Solved Assign Hospital Administration for Financial Accounting
University AMITY
Service Type Assignment
Course PGDM-(Hospital-Administration)
Semister Semester-I Cource: PGDM-(Hospital-Administration)
Short Name or Subject Code Financial Accounting
Commerce line item Type Semester-I Cource: PGDM-(Hospital-Administration)
Product Assignment of PGDM-(Hospital-Administration) Semester-I (AMITY)

Solved Assignment


  Questions :-

                                                                                     Amity PGDM In Hospital Administration For Financial Accounting Assignment Sem 1

 Assignment A

1 .  Define Accounting. How does it differ from book-keeping?  
2 .  What is basic accounting equation?  
3 .  What is Journalizing? Give a format of Journal & briefly explain its content.  
4 .  what are the advantages of special Journal & list them.  
5 .  State the reasons for the difference between the cash book balance & pass book
balance.

                        

 

 

    Assignment B

 Case Detail :  

1.  Define depreciation. Differentiate, with suitable example, between Diminishing
Balance Method & Straight Line Method of charging depreciation.
2.  Define Bills of Exchange and explain the parties involved in it.
3.  Distinguish between capital expenditure & revenue expenditure.

 

 

 

Assignment C

OBJECTIVE QUESTIONS

In each of the following cases indicate the alternative which you consider to be correct:

Q1. Which of the following financial statements is prepared as of a particular date? (a) Profit and loss account

  1. Balance sheet
  2. Cash flow statement
  3. Income and expenditure statement
  4. Profit and loss appropriation account.

 

 

Q2. Based on which of the following concepts, share capital account is shown on the liability side of balance sheet?

  1. Business entity concept
  2. Money measurement concept
  3. Cost concept
  4. Going concern concept
  5. Conservatism concept.

 

 

Q3. Which of the following is not an accounting transaction? (a) Sale of goods for cash

  1. Payment of salary of office staff
  2. Agreement to sell
  3. Purchase of office furniture
  4. Repayment of bank loan.

 

 

Q 4. Which of the following is false?

  1. Taking the favourable balance as per pass book as the starting point, the amount in respect of charges made by the bank will be added to the pass book balance
  2. Taking the favourable balance as per pass book as the starting point, the amount in respect of dividends received directly will be deducted from the pass book balance
  3. Bank charges recorded twice in cash book will be added to the overdraft as per cash book in the preparation of reconciliation statement
  4. Cheque issued but not presented for payment will be added when favourable balance as per cash book is the starting point
  5. The amount of the undercasting of the credit side of the bank column of the cash book will be deducted from the overdraft as per pass book.

 

 

Q5. From the books of Mr.Neelam, it was observed that cheques amounting to Rs.2,40,000 were deposited in the bank, out of which cheques worth Rs.20,000 were dishonored and cheques worth Rs.40,000 are still in the process of collection. The treatment of this while preparing Bank Reconciliation Statement is

  1. Deduct Rs.60,000 from bank balance as per pass book
  2. Add Rs.20,000 and deduct Rs.40,000 from overdraft balance as per cash book
  3. Deduct Rs.60,000 from overdraft balance as per pass book
  4. Add Rs.60,000 to overdraft balance as per pass book
  5. Deduct Rs.40,000 and add Rs.20,000 from overdraft balance as per pass book.

 

 

Q6 . Which of the following is true?

  1. Bank account is a personal account
  2. Stock of stationery account is a nominal account
  3. Returns inward account is a personal account
  4. Outstanding rent account is a nominal account (e) Capital account is a real account.

 

 

Q7 . A sales day book is to record

  1. all credit sales only
  2. All cash sales only
  3. all credit and cash sales
  4. credit sales of goods and trade discount
  5. all cash and credit sales and trade discount.

 

 

Q8. Which of the following is a liability of a firm?

  1. Debit balance of discount column of cash book
  2. Credit balance of bank pass book
  3. Debit balance of bank column of cash book
  4.  Credit balance of bank column of cash book.

 

 

Q9. Which of the following accounts will invariably have a debit balance?

  1. Accounts receivable.
  2. Accounts payable.

III. Purchases account.

  1. Bank account.
  2. Prepaid expenditure.
  3. Only (I) and (III) above
  4. Both (II) and (III) above
  5. Both (I) and (III) above
  6. All of the above

 

 

Q10. The following is not a book of original entry

  1. Purchase book
  2. Journal proper
  3. Cash book
  4. General ledger
  5. sales book

 

 

Q11. The Accountant of a company is recording the transactions of the day in various Books of Original Entry. Which of the following transactions is recorded in the wrong book? (a) Goods purchased on credit - Purchase Book

  1. Goods purchased on credit - Purchase Book
  2. Goods sold on credit - Sales Book
  3. Wages paid in cash - Cash Book
  4. None of the above

 

 

Q12. The impact on assets, profit and liabilities of a firm, on account of salary paid will be

  1. Assets Profit               Total Liabilities (a)

No effect        Decreases               Decreases

  1. Assets Profit               Total Liabilities (a)

Decreases                No effect                Decreases

  1. Assets                               Profit               Total Liabilities (a)

Decreases                       Decreases              Decreases

  1. None of the above

 

 

Q13. Which of the following is true?

  1. Discount columns in cash book are totaled and not balanced
  2. A petty cash book in which a separate column is provided to record payment under each head is called impress system
  3. The total of purchases book is posted periodically on the credit side of sundry creditors account
  4. The total of sales book is posted periodically on the debit side of sundry debtors account
  5. Petty cash book is used to record all cash transactions.

 

 

Q14. Total of sales day book at the end of the month indicates

  1. The total sales for the month
  2. The total credit sales for the month
  3. Total cash sales of the month
  4. Total amount due to suppliers
  5. Total amount receivable from credit sales.

 

 

Q15. Which of the following is true?

  1. Cash book may be defined as the record of transactions concerning cash receipts and payments
  2. Discount account should be balanced in the cash book
  3. The ledger is the book of original entry
  4. Sales journal is used for recording cash sales
  5. Purchase return book is used for recording the return of goods purchased from suppliers against cash.

 

 

Q16. Journal entry for receiving interest in cash from Mr. Prashant against the loan given to him

  1. Interest on loan account Dr. To Prashant account
  2. Prashant account Dr. To Interest account
  3. Cash account Dr. To Prashant account
  4. None of the above

 

 

Q 17. Which of the following entries recorded in the books of the drawee of a bill is false?

  1. When a bill is accepted, the account to be debited is drawer’s a/c
  2. When a bill is discharged, the account to be debited is bills payable a/c
  3. When a bill presented for payment by a bank is dishonored, the account to be debited is bills payable a/c
  4. When noting charges of a dishonored bill is paid by the endorsee ,the account to be debited is noting charges a/c
  5. At the time of retirement of a bill the account to be debited is the drawer’s a/c.

 

 

Q 18. Which of the following is true?

  1. A bill sent for collection by bank when dishonored, the drawer will credit bank a/c
  2. At the time of renewal of bill interest a/c is credited in the books of the drawee
  3. Accommodation bills are drawn, accepted and endorsed for some consideration
  4. None of the Above

 

 

Q19. Bills receivable account is a

  1. Nominal account
  2. Personal account
  3. Intangible asset
  4. None of the Above

 

 

Q20. Closing stock is generally valued at

  1. Cost price
  2. Replacement cost
  3. Market price
  4. None of the Above

 

 

 

Q21. The provision for discount on debtors is calculated on the amount of debtors

  1. Before deducting the provision for doubtful debts
  2. Left after deducting the provision for doubtful debts
  3. Before deducting the actual bad debts
  4. None of the Above

 

 

Q22. Consider the following information of Thumbs-up Company for the year 2006-2007:

Opening balance of provision for debtors account

Rs. 20,000

Bad debts during the year

Rs. 18,000

Closing balance of Sundry debtors

Rs.2,65,000

Estimated provision for doubtful debts  4%

 

 

The amount to be debited to profit and loss account to make the estimated provision is

  1. Rs. 8,600
  2. Rs.10,400
  3. Rs.10,520
  4. None of the Above

 

 

Q23. At the time of preparation of final accounts, bad debts recovered account will be transferred to

  1. Debtor’s account
  2. Profit & loss account
  3. Profit & loss adjustment account
  4. None of the Above

 

 

Q24. Which of the following is false about diminishing balance method of depreciation?

  1. Higher amount of depreciation is charged when the machine is more efficient
  2. It recognizes the risk of obsolescence by higher amount of depreciation in the early years
  3. The total amount of depreciation and repairs is almost uniformally distributed over the useful life
  4.  None of the Above

 

 

Q25. The following is not an example of fixed asset

  1. Plant and machinery
  2. Land and building
  3. Patent
  4. None of the Above

 

 

Q26. Under depletion method, depletion per unit is calculated as

  1. Acquisition cost divided by average production units per annum
  2. Acquisition cost divided by actual production units in the year
  3. Acquisition cost minus residual value divided by average production units per annum
  4. None of the Above

 

 

Q 27. Which one of the following is a capital expenditure?

  1. Compensation paid to Directors on termination of their services
  2. Expenditure for renewal of trade mark
  3. Gratuity paid to employees
  4. None of the Above

 

 

Q28. Entries passed for outstanding expenses, depreciation, interest on capital etc. are

  1. Opening entries
  2. Journal entries
  3. Adjustment entries
  4. None of the above

 

 

Q29. Which of following transactions does not change the total amount of liabilities in the balance sheet?

  1. Purchase of office furniture on credit
  2. Payment of bank loan
  3. Issue of debentures
  4. None of the above

 

 

Q30. Which of the following is false?

  1. Capital plus liabilities will be equal to assets
  2. The difference between assets and liabilities is bank borrowing
  3. Capital account is a personal account
  4. None of the above

 

 

Q31. The expenses and incomes pertaining to full trading period are taken to the Profit and Loss account of a business, irrespective of their actual payment or receipt. This is in recognition of

  1. Time period concept
  2. Business entity concept
  3. Going concern concept
  4. None of the above

 

 

Q32. Which of the following statements can be used to assess the liquidity of a company?

  1. Balance sheet
  2. Profit and loss account
  3. Profit and loss appropriation account
  4. None of the above

 

 

Q33. Which of the following state that “Anticipate no profit and provide for all possible losses”?

  1. Convention of materiality
  2. Convention of consistency
  3. Convention of disclosure
  4. None of the above

 

 

Q34. Which of the following statements is/are true?

  1. Drawings account is a nominal account.
  2. Capital account is a real account.

III. Sales account is a nominal account.

  1. Outstanding salaries account is a nominal account.
  2. Patents account is a personal account.
    1. Only (I) above
    2. Only (III) above
    3. Both (II) and (IV) above
    4. None of the above

 

 

Q35. RS Ltd., makes purchases on credit. If the purchases are not as per the specifications, the company returns them to the suppliers. The book, that is used to record such returns is

  1. Returns inward book
  2. Returns outward book
  3. Cash book
  4. None of the above

 

 

Q36. Which one of the following is not a reason for discrepancy in the balance as per cash book and bank pass book of a company?

  1. Cheque issued to suppliers may not have been presented
  2. Cheque deposited in the account may not have been realized
  3. Bill discounted with bank is not due for payment
  4. None of the above

 

 

Q37. The bank balance in the cash book of Mr.Avinash, a proprietor showed a credit balance of Rs.10,500 on March 31, 2008. On comparing it with his pass book he discovered the following discrepancies.

  1. Cheque No. 51 for Rs.540 in favour of Mr.Raman has not yet been presented.
  2. A bill of Rs.1,000 was retired by the bank under a rebate for Rs.15, but the full amount of the bill was credited to bank account in cash book.

The balance as per pass book is

  1. Rs.11,025 (Dr.)
  2. Rs. 9,945 (Dr.)
  3. Rs. 9,945 (Cr.)
  4. None of the above

 

 

Q38. The total cost of goods available for sale with a company during the current year is Rs.12,00,000 and the total sales during the period are Rs.13,00,000. If the gross profit margin of the company is 25% on sales, the closing inventory during the current year is

  1. Rs.4,00,000
  2. Rs.3,40,000
  3. Rs. 225000
  4. None of the above

 

 

Q39. Unearned income account is

  1. A current asset
  2. A current liability
  3. An expense
  4. None of the above

 

 

Q40. The essentials of double entry book-keeping in sequential order are

  1. Passing journal entries, posting in ledger, appropriate adjusting entries, trial balance, Profit
  2. & Loss a/c and Balance-sheet
  3. Passing journal entries, posting ledger, trial balance, Profit & Loss a/c and Balance-sheet, passing adjusting entries.
  4. Passing journal entries, posting ledger, passing adjusting entries, Profit & Loss a/c and
  5. Balance sheet, trial balance
  6. Passing adjusting entries, passing journal entries, trial balance, posting in ledger, Profit & Loss a/c and Balance-sheet
  7. Passing journal entries, posting in ledger, trial balance, passing adjusting entries, Profit & Loss a/c and Balance-sheet.
 
  Answers :-

                                                                                                                              Financial Accounting

Assignment A                                                          

Q 1. Define Accounting. How does it differ from book-keeping?

Ans - The method of accounting is employed to take care of records for all businesses, whether or not a transnational corporation or a tiny low business.

To account for one thing suggests that to stay a record of one thing in your business by exploitation the method of accounting. Associate comptroller (or bookkeeper) collects documentation and records this data, categorizes it (i.e. organizes the various bits of knowledge below sure categories), and presents it in specific formats. Accounting data is finally given within the style of money statements – the key reports of a business.

Accountants will fulfill this role too, however a lot of typically lately area unit concerned in getting ready and presenting money statements, associated fulfilling an consultatory or consulting role. Accountants have even become business strategists, intimately concerned in guiding the operations of a business.

Okay, thus currently that you simply will outline accounting and connected terms, it´s time to be told regarding the noted, or disreputable basic accounting equation, the only most vital equation in accounting, the muse on that everything else rests.

One ‘official’ definition of accounting is provided by the yank Accounting Association that defines accounting as follows: “the method of distinguishing, activity and human activity economic data to allow familiar judgements and selections by users of the data.”

For the remainder folks, the definition and purpose of accounting can be anyone or a mixture of the following:

Professors of Accounting could decision it “The language of business.”

Economists could outline it because the utilization of theory in this it measures financial gain and values assets.

Corporate managers could outline it as a group of timely gauges that helps them really manage the organisation

Labor unions may even see it as a monitor of associate organisations activities and performance, notably in regard to the advantages secured by staff Vs homeowners.

A Board of administrators or a Chief officer (CEO) may even see accounting as an information method and reportage system that offer the data required for sound money or economic deciding for his or her organisation.

Banks associated alternative suppliers of loan funds may even see it as a method of providing reports showing the money position of an organisation in regard to the assets in hand, amounts owed to others and monies invested with still because the profitableness of the organisation’s operations in regard to repaying the loan with interest.

Governments may even see it as approach|how|some way|the way|the simplest way} of constructing organisations responsible to the overall community by way of taxation contributions and transparency within the outcomes from their deciding.

Potential investors may even see it as a technique of evaluating associate organisation’s effectiveness in regard to trade benchmarks and therefore the investor’s needed returns.

Investors in some unsuccessful enterprises could sadly decision it a technique of casual a number of the individuals, a number of the time with what has been dubbed ‘Creative Accounting’.

we will see from these definitions that accounting may be divided into 2 main elements:

  • An data method that identifies, classifies associated summarises the money events that occur inside an organisation and
  • a reportage system that communicates relevant money data to interested persons that permits them to assess performance, create selections and/or management the economic resources within the organisation.

Distinction between accounting and book keeping

Accounting is a crucial a part of the accounting data system as a result of it is the groundwork of accounting. Accounting may be a branch of accounting that is accountable in recording the money transactions of the business. it´s the place to begin of the entire accounting method. The author on the accounting method is commonly said as accountant or accounting clerk. They’re the one UN agency ensures the recording of business transactions within the book of accounts, like journals and ledgers, in written record manner. Book keeper area unit accountable in safeguarding the completeness and accuracy of the book of accounts. They assist accountants in getting ready reports, like money statements or tax returns, by providing outline and supporting documents of the recorded business transactions. Accounting is barely restricted to the recording method, though in cases of little businesses, bookkeepers may additionally do the preparation of reports. As such, accounting may be performed by non-accountants UN agency gained relevant trainings and knowledge in accounting. To be told a lot of regarding accounting job, browse our article entitled, Accounting, on the opposite hand, represent the entire accounting method, from recording till decoding business money data. Accounting is one in every of the foremost wide-ranging professions as a result of skilled accountants have totally different choices during which space of accounting they need to focus their career – like money accounting, social control accounting, tax accounting, auditing, etc. in contrast to accounting, accounting jobs area unit performed by accounting graduates or authorized skilled accountants. Accounting involves a lot of technical understanding and procedures compared to accounting. To be told a lot of regarding accounting job and careers

Q 2 What is basic accounting equation?

Ans - The basic accounting equation, conjointly known as the record equation, represents the connection between the assets, liabilities, and owner´s equity of a business. It’s the inspiration for the clerking system. For every group action, the overall debits equal the overall credits. It will be expressed as

ASSETS = LIABILITIES+CAPITAL

In a corporation, capital represents the stockholders´ equity. Since each business group action affects a minimum of 2 of a company’s accounts, the accounting equation can continually be “in balance,” that means the left aspect should equal the correct aspect. Thus, the accounting formula basically shows that what the firm owns (its assets) is purchased by either what it owes (its liabilities) or by what its house owners invest (its shareholders equity or capital).

Assets area unit a company´s resources—things the corporate owns. Samples of assets embody money, assets, inventory, postpaid insurance, investments, land, buildings, equipment, and goodwill. From the accounting equation, we tend to see that quantity|the quantity|the number} of assets should equal the combined amount of liabilities and owner´s (or stockholders´) equity.

Liabilities area unit a company´s obligations—amounts the corporate owes. Samples of liabilities embody notes or loans due, accounts due, salaries and wages due, interest due, and financial gain taxes due (if the corporate may be a regular corporation). Liabilities will be viewed in 2 ways:

(1) As claims by creditors against the company´s assets, and

(2) a source—along with owner or investor equity—of the company´s assets.

Owner´s equity or stockholders´ equity is that the quantity left over when liabilities area unit subtracted from assets:

Assets - Liabilities = Owner´s (or Stockholders´) Equity.

Owner´s or stockholders´ equity conjointly reports the amounts invested with into the corporate by the {owners|house house owners|homeowners} and the additive profits of the corporate that has not been withdrawn or distributed to the owners.

If a corporation keeps correct records, the accounting equation can continually be "in balance," that means the left aspect should equal the correct aspect. The balance is maintained becauseevery business group action affects a minimum of 2 of a company´s accounts. As an example, once a corporation borrows cash from a bank, the company´s assets can increase and its liabilities can increase by an equivalent quantity. Once a corporation purchases inventory for money, one plus can increase and one plus can decrease. As a result of their area unit 2 or a lot of accounts suffering from each group action, the method of accounting is cited as double-entry bookkeeping accounting.

A company keeps track of all of its transactions by recording them in accounts within the company´s account book. Every account within the account book is selected on its type: plus, liability, owner´s equity, revenue, expense, gain, or loss account.

Q 3 What is Journalizing? Give a format of Journal & briefly explain its content.

Definition of Journalizing:

"The act of debiting one account and crediting the other account is called Journalizing".

Each dealing is first of all recorded during a journal, that is an inspired entry book or beginning method in accounts. The journal contains written record or date wise record of business transactions, the account debited and attributable their various amounts. every entry is recorded in order that the duality or equilibrium or recording is maintained in equation form:

Assets = Liabilities + Owner´s Equity

And

Debits = Credit

Steps for the method of Journalizing:

Following ar the steps concerned within the method of journalizing a transaction:

(i) verify the titles of the accounts concerned.

(ii) perceive nature of the accounts.

(iii) Apply the rule of Debit & Credit delineate on top of.

(iv) And build the required journal entry.

Steps to Journalizing

The process of recording a dealing within the journal is named ‘Journalizing’. the assorted steps to be followed in journalizing the business transactions ar given below.

Step 1: Ascertain what accounts ar concerned during a dealing.

Step 2: ascertain what the character of accounts concerned is.

Step 3: Ascertain that rule of debit and credit is applicable for every of the accounts concerned.

Step 4: Ascertain that account is to be debited and that is to be attributable.

Step 5: Record the date of dealing within the ‘date column’.

Step 6: Write the name of the account to be debited terribly near the hand facet (i.e., the road demarcating the ‘date column’ and therefore the ‘particular column)’ beside the abbreviation ‘Dr.’ on constant line against the name of the account in ‘particulars column’ and therefore the quantity to be debited within the ‘debit quantity column’ against the name of the account.

Step 7: Write the name of the account to be attributable within the next line preceded by the word ‘To’ at many areas towards right in ‘particulars column’ and therefore the quantity to be attributable within the ‘credit quantity column’ against the name of the account.

Step 8: Write ‘narration’ (i.e., a short description of the transaction) inside brackets within the next line in ‘particulars column’

Draw a line across the complete ‘‘Particulars column’ to separate one Journal Entry from the opposite.

EXAMPLE –

On Gregorian calendar month five, grey Network Services paid registration and licensing fees for the business, $370.

First, we are going to debit the expense (to increase associate degree expense, you debit it); and so, credit money to record the decrease in money as a results of the payment.

                                       Date             Particulars                                                                      Dabit                 Cradit

                           Dec 5        Taxes and Licenses                                      370.00

                                                    Cash                                                                       370.00

(1) Amar started business with Rs. 10,000.

This means that Amar is a personal account and he is the giver of Rs. 10,000 to the business. Business has received Rs. 10,000 cash. As per the rules ‘debit what comes in and credit the giver.

Hence the journal entry is:

Cash account ….Dr.

To Amar’s capital account

(Being the commencement of business)

Rs.

10,000

Rs.

10,000

(2) Out of the above Rs. 2,000 are deposited in the bank.

This transaction results in opening an account with bank. Bank account may be considered as personal hence receiver is debited. Cash goes out therefore credited. Thus the journal entry is:

Bank account ….Dr.

To cash account

(Being Cash deposited in the bank)

Rs.

2,000

Rs.

2,000 


Q 4. What are the advantages of special Journal & list them.

Ans In a a lot of advanced system, there square measure a lot of repetitive transactions in line with sort like sales, purchases, money et al therefore the necessity to supply a separate special journal for every sort. Entries not of a repetitive nature like corrections, adjusting entries and shutting entries square measure entered into the final journal.

Examples of Special Journals square measure sales journal, purchases journal, money receipt journal and money disbursement journals.

So what square measure the benefits of exploitation the Special Journals?

They are as follows:

  • Reduces careful recording. exploitation the special journal construct, individual posting is eliminated. just one posting for the entire quantity is created to the acceptable ledger account at the tip of the accounting month. for instance, if an organization had five hundred purchases on account throughout the month, the purchases account would solely be debited one, not five hundred times
  • Permits higher division of labor. every special journal are often handled by a distinct person permitting specialization and creating the work a lot of economical.
  • Permits higher control. Allocation of labor of special journal to individual person make sure that nobody person has conflicting responsibilities just like the receipt and recording of money that guarantee higher control.

Q 5 State the reasons for the difference between the cash book balance & pass book balance.

Ans

Reasons of difference between cash book & pass book balance:

Cheque issued however not bestowed for payment: once cheque area unit issued then now build entry within the money book. The cheque issued may be bestowed for payment to the bank at intervals six month from the date of cheque as per banking law. The cheque area unit bestowed for payment when the end of the higher than amount then payment is refused by the bank. This cheque is additionally called stale cheque. it´s doable at the time once the balance of the 2 books area unit being compared, so a lot of probabilities of inflicting a disagreement b/w the 2 balances.

Cheque paid into the bank however not nevertheless cleared: As shortly because the cheque area unit deposited into the bank, the now entry is passed within the money book. this can build entry in pass book only if cheque area unit cleared. it´s doable at the time once the balance of the 2 books area unit being compared, so a lot of probabilities of inflicting a disagreement b/w the 2 balances.

Interest allowed by the bank: Bank might need attributable the account of the client with the interest and will have created the entry within the pass book. it´s doable that the entry of such interest might not are created by the client within the money book, so inflicting a disagreement b/w the 2 balances.

Interest and Bank charges debited by bank: someday bank charges interest from the client then now entry within the pass book however not in money book. so, during this case once check the balance b/w money and bank book then disagreement b/w the 2 balances. So, it´s the most reason to make distinction b/w 2 books.

Interest, dividend collected by the bank: someday interest on agency security or dividend on share is collected by the bank and is attributable to client account. If the entry doesn´t seem within the money book then balance can take issue.

Direct payment by bank: generally, understanding instruction from the shoppers sure payment like premium, club fees instalment etc. area unit created by the bank. Then this entry is recorded solely within the pass book. This entry is formed within the money book only if the mandatory intimation to it impact is received from the bank by the shopper. The entries within the money and pass book could also be on totally different dates.

Direct payment into the bank by a customer: generally, our client deposit cash direct into the account within the bank. it´s solely recorded within the pass book not within the money book. it´s doable at the time once the balance of the 2 books area unit being compared, so a lot of probabilities of inflicting a disagreement b/w the 2 balances.

Dishonour of bill discounted with the bank: generally, client get their bills discounted with the bank. If the bank isn´t able to get payment of those bills on the maturity date. it´ll debit the client account with the quantity of the bills beside the nothing charges if any. The client can pass the entry within the money book solely. once balance of the 2 books area unit being compared, so a lot of probabilities of inflicting a disagreement b/w the 2 balances.

Dishonour of cheque: once the received cheque area unit deposited into bank, these area unit now recorded within the money book. As a result money book balance is inflated. however the deposited cheque is dishonoured owing to lack of funds or owing to alternative reasons. Bank doesn´t credit the quantity of the investor. As a result disagreement b/w the 2 balances.

Error and commissions: If any error is committed either by the bank or by a client within the money book whereas recording a dealings in their various books, it inflicting a disagreement b/w the 2 balances. 

Assignment B

Q1 Define depreciation. Differentiate, with suitable example, between Diminishing Balance Method & Straight Line Method of charging depreciation.

Definition of ´Depreciation´

  1. a technique of allocating the value of a tangible plus over its helpful life. Businesses depreciate long-run assets for each tax and accounting functions.
  2. A decrease in Associate in Nursing asset´s price caused by unfavorable market conditions.
  3. For accounting functions, depreciation indicates what quantity of Associate in Nursing asset´s price has been wiped out. For tax functions, businesses will deduct the value of the tangible assets they purchase as business expenses; but, businesses should depreciate these pluss in accordance with Internal Revenue Service rules regarding however and once the deduction could also be taken supported what the asset is and the way long it´ll last.

Depreciation is employed in accounting to do to match the expense of Associate in Nursing plus to the financial gain that the plus helps the corporate earn. for instance, if an organization buys a chunk of apparatus for $1 million and expects it to own a helpful lifetime of ten years, it´ll be depreciated over ten years. each accounting year, the corporate can expense $100,000 (assuming straight-line depreciation), which can be matched with the cash that the instrumentation helps to create every year.

  1. Currency and realty square measure 2 samples of assets that may depreciate or lose price. throughout the notorious Russian ruble crisis in 1998, the ruble lost twenty fifth of its price in in some unspecified time in the future. throughout the housing crisis of 2008, owners within the hardest-hit areas, like city, saw the worth of their homes depreciate by the maximum amount as five hundredth.

There´s a lot of to depreciation than simply the definition - scan a lot of on Introduction to Depreciation and Depreciation: Straight-Line Vs. Double-Declining ways.

Between decreasing Balance methodology & line methodology of charging depreciation.

The following graph is taken from the way to decreasing Balance methodology . I actually have liked this graph to elucidate the distinction between line methodology and decreasing. each ways square measure of Calculation the quantity of depreciation in money accounting.

In line depreciation methodology , depreciation is charged on mounted plus with mounted rate. Suppose charge per unit is ten attempt to mounted plus is ten.


In the end of first year will be the depreciation = 1 and rest fixed asset will be 9
In the end of Second year will also depreciation = 1 and rest fixed asset will be 8
So, Graph will show the straight line. So, this method is famous with this name due to this reason. In other words we can say that the amount of depreciation will equal in first year or in end of asset.
In diminishing balance method , depreciation is charged on the amount of fixed asset after deducting previous year depreciation
Suppose fixed asset is 10
Then depreciation of first year at 10% = 1
balance of fixed asset at the beginning of second year =9
now depreciation will charge on 9 not on 10
So  9 X 10/100 = 0.9
now the balance fixed asset in the beginning of third year will be = 8.1
Now again depreciation will charge on the amount of 8.1
So , slop of curve under diminishing balance method  will not straight line but more upward in left side .

 

Q2 Define Bills of Exchange and explain the parties involved in it.

Ans- A written, unconditional order by one party (the drawer) to a different (the drawee) to pay a definite add, either straight off (a sight bill) or on a hard and fast date (a term bill), for payment of products and/or services received. The payer accepts the bill by language it, therefore changing it into a post-dated check and a binding contract.

A bill of exchange is additionally referred to as a draft however, whereas all drafts ar negotiable instruments, solely "to order" bills of exchange will be negotiated. in keeping with the 1930 Convention Providing a standardized Law for Bills of Exchange and commitment Notes command in Geneva (also referred to as Geneva Convention) a bill of exchange contains: (1) the term bill of exchange inserted within the body of the instrument and expressed within the language used in drawing up the instrument. (2) associate unconditional order to pay a determinate add of cash. (3) The name of the one who is to pay (drawee). (4) a press release of the time of payment. (5) a press release of the place wherever payment is to be created. (6) The name of the person to whom or to whose order payment is to be created. (7) a press release of the date and of the place wherever the bill is issued. (8) The signature of the one who problems the bill (drawer). A bill of exchange is that the most frequently used kind of payment in native and international trade, and features a long history- as long as that.

Q3 Distinguish between capital expenditure & revenue expenditure.

Following is the difference between capital and revenue expenditures.

Capital Expenditures

Revenue Expenditures

1

Its effect is long term i.e., it is not exhausted within the current account year. Its benefit is enjoyed in future year or years also. In a word, its effect is reduces gradually.

1

Its effect is temporary, i.e., it is exhausted within the current accounting year.

2

An asset is acquired or the value of an asset is increased as a result result of this expenditure.

2

Neither an asset is acquired nor is the value of an asset increased.

3

It does not occur again and again - it is non-recurring and irregular.

3

It occurs repeatedly - It is recurring and regular.

4

Generally, it has physical existence i.e., it can be seen with eyes.

4

It has no physical existence, i.e., it cannot be seen with eyes.

5

This expenditure improves the position of the concern

5

This expenditure helps to maintain the concern

6

A portion of this expenditure is shown in the trading and profit and loss account or income and expenditure account as depreciation.

6

The whole amount of this expenditure is shown in trading and profit and loss account or income and expense account. But deferred revenue expenditures and prepaid expenses are not shown.

7

It appears in balance sheet until its benefit is fully exhausted.

7

It does not appear in balance sheet. Deferred revenue expenditure, outstanding expenditure, outstanding expenses and prepaid expenses, however, temporarily shown in the balance sheet.

8

It does not reduce the revenue of the concern. Purchase of fixed assets does not affect revenue.

8

It reduces revenue. Payment of salaries to employees decreases

 

Q 4 Case Study:

The following is the Trial Balance of Gupta as on 30th June, 2001 Trial Balance of Gupta for the year ending 30th June, 2001

Dr.

Cr.

Particulars

Rs.

Particulars

Rs.

Financial Accounting

Cash

540

Sales

account

98,780

Cash

at

Bank

2,630

Returns  outwards

500

Purchases

40,675

Capital

62,000

Return

inwards

680

Accounts payable

6,300

Wages

8,480

Rent

9,000

Fuel

and

Power

4,730

Carriage

on

Sales

3,200

Carriage on Purchases

2,040

Inventory (1st July, 2000)

5,760

Buildings

32,000

Freehold  land

10,000

Machinery

20,000

Patents

7,500

Salaries

15,000

General

Expenses

3,000

Insurance

600

Drawings

5,245

Accounts receivable

14,500

1,76,580

1,76,580

Taking into account the following adjustments prepare the Trading, Profit and Loss account as on 30th June, 2001.

  1. Inventory on hand on 30th June, 2001 is Rs.6, 800.
  2. Machinery is to be depreciated at the rate of 10% and Patents at the rate of 20%.
  3. Salaries for the month of June 2001amounting to Rs.1, 500 were unpaid.

Copyright@Amity Universit

Financial Accounting

  1. Insurance includes an annual premium of Rs.170 on a policy expiring on 31st December, 2001.
  2. Bad debts to be written off are Rs.725.
  3. Rent receivable Rs.1, 000.

Ans:-                       

Trading, Profit and Loss account for Gupta  as on 30th June, 2001

Dr.

 

Cr.

Particulars

Amounts

Particulars

Amounts

To

Rs

By

RS

"Opeining Stock

5760

Sale=                        98780

"Purchase -               40675

Return inwards =     680

98100

Returns  outwards-500

40175

"Closing Stock

6800

Wages

8480

Fuel & Power

4730

Carriage on purchase

2040

Gross Profit Tra to PL A/c

43715

Rs

104900

Rs

104900

"Dep.On machinery 10%

2000

By Trading A/c

"Dep.on Patents

1500

Gross Profit

43715

Salary

1500

Insurance                      600

Bad Dept

725

(Insurance Inculde -85)

515

Rent

9000

Rent Receivable

1000

Carriage on sale

3200

Salary

15000

GE

3000

Insurance

600

Net Profit

26400

Rs

53715

Rs

54440

Assignment C

OBJECTIVE QUESTIONS

In each of the following cases indicate the alternative which you consider to be correct:

Q1. Which of the following financial statements is prepared as of a particular date? (a) Profit and loss account

  1. Balance sheet
  2. Cash flow statement
  3. Income and expenditure statement
  4. Profit and loss appropriation account.

Q2. Based on which of the following concepts, share capital account is shown on the liability side of balance sheet?

  1. Business entity concept
  2. Money measurement concept
  3. Cost concept
  4. Going concern concept
  5. Conservatism concept.

Q3. Which of the following is not an accounting transaction? (a) Sale of goods for cash

  1. Payment of salary of office staff
  2. Agreement to sell
  3. Purchase of office furniture
  4. Repayment of bank loan.

Q 4. Which of the following is false?

  1. Taking the favourable balance as per pass book as the starting point, the amount in respect of charges made by the bank will be added to the pass book balance
  2. Taking the favourable balance as per pass book as the starting point, the amount in respect of dividends received directly will be deducted from the pass book balance
  3. Bank charges recorded twice in cash book will be added to the overdraft as per cash book in the preparation of reconciliation statement
  4. Cheque issued but not presented for payment will be added when favourable balance as per cash book is the starting point
  5. The amount of the undercasting of the credit side of the bank column of the cash book will be deducted from the overdraft as per pass book.

Q5. From the books of Mr.Neelam, it was observed that cheques amounting to Rs.2,40,000 were deposited in the bank, out of which cheques worth Rs.20,000 were dishonored and cheques worth Rs.40,000 are still in the process of collection. The treatment of this while preparing Bank Reconciliation Statement is

  1. Deduct Rs.60,000 from bank balance as per pass book
  2. Add Rs.20,000 and deduct Rs.40,000 from overdraft balance as per cash book
  3. Deduct Rs.60,000 from overdraft balance as per pass book
  4. Add Rs.60,000 to overdraft balance as per pass book
  5. Deduct Rs.40,000 and add Rs.20,000 from overdraft balance as per pass book.

Q6 . Which of the following is true?

  1. Bank account is a personal account
  2. Stock of stationery account is a nominal account
  3. Returns inward account is a personal account
  4. Outstanding rent account is a nominal account (e) Capital account is a real account.

Q7 . A sales day book is to record

  1. all credit sales only
  2. All cash sales only
  3. all credit and cash sales
  4. credit sales of goods and trade discount
  5. all cash and credit sales and trade discount.

Q8. Which of the following is a liability of a firm?

  1. Debit balance of discount column of cash book
  2. Credit balance of bank pass book
  3. Debit balance of bank column of cash book
  4.  Credit balance of bank column of cash book.

Q9. Which of the following accounts will invariably have a debit balance?

  1. Accounts receivable.
  2. Accounts payable.

III. Purchases account.

  1. Bank account.
  2. Prepaid expenditure.
  3. Only (I) and (III) above
  4. Both (II) and (III) above
  5. Both (I) and (III) above
  6. All of the above

Q10. The following is not a book of original entry

  1. Purchase book
  2. Journal proper
  3. Cash book
  4. General ledger
  5. sales book

Q11. The Accountant of a company is recording the transactions of the day in various Books of Original Entry. Which of the following transactions is recorded in the wrong book? (a) Goods purchased on credit - Purchase Book

  1. Goods purchased on credit - Purchase Book
  2. Goods sold on credit - Sales Book
  3. Wages paid in cash - Cash Book
  4. None of the above

Q12. The impact on assets, profit and liabilities of a firm, on account of salary paid will be

  1. Assets Profit               Total Liabilities (a)

No effect        Decreases               Decreases

  1. Assets Profit               Total Liabilities (a)

Decreases                No effect                Decreases

  1. Assets                               Profit               Total Liabilities (a)

Decreases                       Decreases              Decreases

  1. None of the above

Q13. Which of the following is true?

  1. Discount columns in cash book are totaled and not balanced
  2. A petty cash book in which a separate column is provided to record payment under each head is called impress system
  3. The total of purchases book is posted periodically on the credit side of sundry creditors account
  4. The total of sales book is posted periodically on the debit side of sundry debtors account
  5. Petty cash book is used to record all cash transactions.

Q14. Total of sales day book at the end of the month indicates

  1. The total sales for the month
  2. The total credit sales for the month
  3. Total cash sales of the month
  4. Total amount due to suppliers
  5. Total amount receivable from credit sales.

Q15. Which of the following is true?

  1. Cash book may be defined as the record of transactions concerning cash receipts and payments
  2. Discount account should be balanced in the cash book
  3. The ledger is the book of original entry
  4. Sales journal is used for recording cash sales
  5. Purchase return book is used for recording the return of goods purchased from suppliers against cash.

Q16. Journal entry for receiving interest in cash from Mr. Prashant against the loan given to him

  1. Interest on loan account Dr. To Prashant account
  2. Prashant account Dr. To Interest account
  3. Cash account Dr. To Prashant account
  4. None of the above

Q 17. Which of the following entries recorded in the books of the drawee of a bill is false?

  1. When a bill is accepted, the account to be debited is drawer’s a/c
  2. When a bill is discharged, the account to be debited is bills payable a/c
  3. When a bill presented for payment by a bank is dishonored, the account to be debited is bills payable a/c
  4. When noting charges of a dishonored bill is paid by the endorsee ,the account to be debited is noting charges a/c
  5. At the time of retirement of a bill the account to be debited is the drawer’s a/c.

Q 18. Which of the following is true?

  1. A bill sent for collection by bank when dishonored, the drawer will credit bank a/c
  2. At the time of renewal of bill interest a/c is credited in the books of the drawee
  3. Accommodation bills are drawn, accepted and endorsed for some consideration
  4. None of the Above

Q19. Bills receivable account is a

  1. Nominal account
  2. Personal account
  3. Intangible asset
  4. None of the Above

Q20. Closing stock is generally valued at

  1. Cost price
  2. Replacement cost
  3. Market price
  4. None of the Above

Q21. The provision for discount on debtors is calculated on the amount of debtors

  1. Before deducting the provision for doubtful debts
  2. Left after deducting the provision for doubtful debts
  3. Before deducting the actual bad debts
  4. None of the Above

Q22. Consider the following information of Thumbs-up Company for the year 2006-2007:

Opening balance of provision for debtors account

Rs. 20,000

Bad debts during the year

Rs. 18,000

Closing balance of Sundry debtors

Rs.2,65,000

Estimated provision for doubtful debts  4%

 

The amount to be debited to profit and loss account to make the estimated provision is

  1. Rs. 8,600
  2. Rs.10,400
  3. Rs.10,520
  4. None of the Above

Q23. At the time of preparation of final accounts, bad debts recovered account will be transferred to

  1. Debtor’s account
  2. Profit & loss account
  3. Profit & loss adjustment account
  4. None of the Above

Q24. Which of the following is false about diminishing balance method of depreciation?

  1. Higher amount of depreciation is charged when the machine is more efficient
  2. It recognizes the risk of obsolescence by higher amount of depreciation in the early years
  3. The total amount of depreciation and repairs is almost uniformally distributed over the useful life
  4.  None of the Above

Q25. The following is not an example of fixed asset

  1. Plant and machinery
  2. Land and building
  3. Patent
  4. None of the Above

Q26. Under depletion method, depletion per unit is calculated as

  1. Acquisition cost divided by average production units per annum
  2. Acquisition cost divided by actual production units in the year
  3. Acquisition cost minus residual value divided by average production units per annum
  4. None of the Above

Q 27. Which one of the following is a capital expenditure?

  1. Compensation paid to Directors on termination of their services
  2. Expenditure for renewal of trade mark
  3. Gratuity paid to employees
  4. None of the Above

Q28. Entries passed for outstanding expenses, depreciation, interest on capital etc. are

  1. Opening entries
  2. Journal entries
  3. Adjustment entries
  4. None of the above

Q29. Which of following transactions does not change the total amount of liabilities in the balance sheet?

  1. Purchase of office furniture on credit
  2. Payment of bank loan
  3. Issue of debentures
  4. None of the above

Q30. Which of the following is false?

  1. Capital plus liabilities will be equal to assets
  2. The difference between assets and liabilities is bank borrowing
  3. Capital account is a personal account
  4. None of the above

Q31. The expenses and incomes pertaining to full trading period are taken to the Profit and Loss account of a business, irrespective of their actual payment or receipt. This is in recognition of

  1. Time period concept
  2. Business entity concept
  3. Going concern concept
  4. None of the above

 

Q32. Which of the following statements can be used to assess the liquidity of a company?

  1. Balance sheet
  2. Profit and loss account
  3. Profit and loss appropriation account
  4. None of the above

Q33. Which of the following state that “Anticipate no profit and provide for all possible losses”?

  1. Convention of materiality
  2. Convention of consistency
  3. Convention of disclosure
  4. None of the above

Q34. Which of the following statements is/are true?

  1. Drawings account is a nominal account.
  2. Capital account is a real account.

III. Sales account is a nominal account.

  1. Outstanding salaries account is a nominal account.
  2. Patents account is a personal account.
    1. Only (I) above
    2. Only (III) above
    3. Both (II) and (IV) above
    4. None of the above

Q35. RS Ltd., makes purchases on credit. If the purchases are not as per the specifications, the company returns them to the suppliers. The book, that is used to record such returns is

  1. Returns inward book
  2. Returns outward book
  3. Cash book
  4. None of the above

Q36. Which one of the following is not a reason for discrepancy in the balance as per cash book and bank pass book of a company?

  1. Cheque issued to suppliers may not have been presented
  2. Cheque deposited in the account may not have been realized
  3. Bill discounted with bank is not due for payment
  4. None of the above

 

Q37. The bank balance in the cash book of Mr.Avinash, a proprietor showed a credit balance of Rs.10,500 on March 31, 2008. On comparing it with his pass book he discovered the following discrepancies.

  1. Cheque No. 51 for Rs.540 in favour of Mr.Raman has not yet been presented.
  2. A bill of Rs.1,000 was retired by the bank under a rebate for Rs.15, but the full amount of the bill was credited to bank account in cash book.

The balance as per pass book is

  1. Rs.11,025 (Dr.)
  2. Rs. 9,945 (Dr.)
  3. Rs. 9,945 (Cr.)
  4. None of the above

Q38. The total cost of goods available for sale with a company during the current year is Rs.12,00,000 and the total sales during the period are Rs.13,00,000. If the gross profit margin of the company is 25% on sales, the closing inventory during the current year is

  1. 4,00,000
  2. 3,40,000
  3. 225000
  4. None of the above

Q39. Unearned income account is

  1. A current asset
  2. A current liability
  3. An expense
  4. None of the above

Q40. The essentials of double entry book-keeping in sequential order are

  1. Passing journal entries, posting in ledger, appropriate adjusting entries, trial balance, Profit
  2. & Loss a/c and Balance-sheet
  3. Passing journal entries, posting ledger, trial balance, Profit & Loss a/c and Balance-sheet, passing adjusting entries.
  4. Passing journal entries, posting ledger, passing adjusting entries, Profit & Loss a/c and
  5. Balance sheet, trial balance
  6. Passing adjusting entries, passing journal entries, trial balance, posting in ledger, Profit & Loss a/c and Balance-sheet
  7. Passing journal entries, posting in ledger, trial balance, passing adjusting entries, Profit & Loss a/c and Balance-sheet.

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