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Thursday, October 16, 2014

Dibrugarh University (Semester I - New Syllabus) - Financial Accounting Important Questions and Answers for Nov' 2017 Exam

Selected Questions for November 2017 Exam
Unit 1
Q. What are financial Statements? Explain its importance. Also point out limitations of financial statements.
Q. What are accounting Standards? What procedure adopted for formulating accounting standards? Discuss its objectives.
Q. List out the merits and limitations of accounting standards.
Q. What are accounting policies? What are the areas in which different accounting policies are encountered? Why disclosures of accounting policies are needed?
Q. What is Accounting Principles? What are its features? Distinguish between Accounting Standard and Accounting principles.
Q. Write short notes on:
Ø  Some Important Accounting Standards: 1,3,6
Ø  Some Important IFRS: 1 to 9
Ø  Consideration in selection of accounting policies
Ø  Condition for change in accounting policies
Ø  Difference between accounting principles and accounting standard
Ø  Difference between IFRS and GAAP
Ø  Fundamental accounting concepts and conventions
Unit 2

Q. Define Hire purchase system. What are its characteristics? Mention its advantages and disadvantages.
Q. Define Installment Purchase system. What are its characteristics? Distinguish between hire purchase and installment purchase system.
Q. Distinguish between Hire purchase and Credit sale and Hire purchase and an agreement to sale.
Q. What are the rights and obligations of Vendor and Vendee?
Q. What do you mean by repossession of goods? Write a note on complete and partial repossession of goods.

Unit 3
Q. What is the meaning of Departmental Accounts? What are the objectives and advantages of preparing such accounts? Explain the basis of allocation of expenses over various departments.
Q. What are various types of Branch? Explain various system of maintaining branch account.
Q. Define Branch and Branch accounting. Mention the objectives of Branch accounting. Explain its need and importance.
Q. Explain the treatment of following in case of Independent Branch:
Ø  Inter department transfer
Ø  Inter Branch Transactions
Ø  Difference between Department and Branch system of accounting
Ø  Cash in transit and Goods in transit
Ø  Expenses of branch paid by head office or vice-versa
Ø  Depreciation on fixed assets
Unit 4
Q. What is Royalty? What are its Various Types? Distinguish Between Royalty and Rent.
Q. What is Minimum Rent (Also Known as Rock rent, Dead Rent, Fixed Rent, Flat rent, and Contract rent)? Explain its importance.
Q. What are the entries passed in the books of Lessor and Lessee?
Q. Write Short Notes on:
Ø  Shortworkings
Ø  Surplus

Ø  Fixed and floating recoupment of shortworkings
Ø  Sub Lease
Ø  Nazrana
Ø  Ground or Surface Rent Account
Practical Problems:
1. Preparation of Final Accounts (Adjustments): Treatment of Depreciation, Closing Stock, Loss of goods, deferred expenses written off, credit sales and purchase omitted, Outstanding/accrued and Prepaid/advance, erection and installation expenses included in wages, purchase and sales of assets included in sales or purchase a/c, cheque and b/r dishonoured, endorsed dishonoured, treatment of bad debt – provision for bad debt increased by or increased to, lease of warehouse, interest on partner’s loan given in TB, interest on capital and drawings, partners salaries, manager’s commission. Both aspects (given in TB and given outside TB) must be studied for the above mentioned points.
2. Calculation of Cash Price – back calculation, when pv factor is given, when only last instalment is known. Calculation of interest when rate is missing. When both rate of interest and cash prices is mission. Partial and complete repossession. Journal entries and ledger accounts in the books of both the parties (HP system and Interest suspense system).  How HP transactions are shown in balance sheet.
3. Brach account under Debtors system and stock and debtors system. Main points – Prepaid and outstanding expenses, direct purchase by branch, treatment of goods in transit and cash in transit, cheque dishonoured, sale of assets, calculation of goods sent to branch, goods sent at invoice price but shown as cost in trial balance.
Or Preparation of Departmental trading and profit and loss account. (Main point transfer of goods and calculation of stock reserve)
4. Journal entries and ledger accounts in the books of both the parties: When MR account is not opened, when MR account is opened. Main points: Effect of Loss of output, Treatment of Strike and lockout (5 types of questions), cash subsidy, fixed and fluctuating recoupment, calculation of production or sales, Nazrana account, sub-lease.

Multiple choice questions for upcoming exams
1. Final Accounts of Sole Traders and partnership
Tick the correct answer to each of the following statement given below:
1.       Unearned income is classified as Current liability.
2.       The balance of petty cash is an asset.
3.       Goodwill is an Intangible asset.
4.       Fixed assets are kept in the business for use over a long period for earning income.
5.       Closing stock is valued at cost of market price whichever is Lower.
6.       Medicine given to the office staff by a manufacturer of medicines will be debited to Salaries account.
7.       The claim admitted in respect of stock destroyed by fire will be credited to Trading Account and will go to the assets side of the Balance Sheet.
8.       Manufacturing account is prepared to ascertain the cost of goods manufactured.
9.       The profit and loss account shows operating efficiency/ net profit earned during a particular period.
10.   Balance sheet shows the financial position of the concern.
11.   Deferred expenses to the extent not written off is shown as an asset in the balance sheet.
State whether the following statement is True or False:
1.       Trading and profit and loss account is prepared for a particular period.  T
2.       Balance sheet is prepared on a particular date.  T
3.       Sales – cost of goods sold = Gross Profit.  T
4.       The provision for doubtful debts is debited to Profit and Loss Account.  T
5.       The provision for discount on creditors is generally not provided in the books of account keeping in view the principle of conservatism. F
6.       If closing stock is appeared in trial balance, it is credited to Trading account.  F
7.       The bad debts previously written off, if recovered subsequently are credited to debtor account.  F
8.       Income tax paid on behalf of the proprietor is debited to profit and loss account.  F
9.       Income tax and life insurance premium is treated as drawings.  T
10.   Prepaid rent appearing in the trial balance is taken only to profit and loss account.  F
11.   The expression depreciation at 5% and 5% p.a. convey the same meaning.  F
12.   Heavy advertising to launch a new product is Deferred revenue expenditure.  T
13.   Unearned income is an asset.  F
2. Royalty Accounts
Ø  Royalty is a nominal account.
Ø  Royalty is calculated either on the basis of production or on sales.
Ø  Royalty paid on sales is debited to P/L Account and Royalty paid on production is debited to production account.
Ø  Shortworkings is the excess of minimum rent over royalty.
Ø  Surplus is the excess of royalty over minimum rent.
Ø  Shortworkings recoverable in future are shown in the balance sheet on the assets side.
Ø  Shortworkings not recouped is debited to P/L Account.
Ø  When shortworkings is recovered debit is given to either royalties account or landlord account.
Ø  When there is no provision for recoupment of shortworkings, then shortworkings of each of the years is to be treated as irrecoverable shortworkings and hence transferred to profit and loss account.
Ø  Recoupment of shortworkings can be restricted or unrestricted.

Ø  Lump sum payment for purchase of patent, mine or book is known as Nazrana, Lease premium or Goodwill.
Ø  Lump sum payment for purchase of patent, mine or book is not royalty, it is an asset which is shown in the balance sheet.
Ø  Ground rent or surface rent in the rent payable by the lessee in addition to minimum rent.
3. Branch Accounting
Q. State whether the following Statements are ‘True’ or ‘False’:
1.       Under the stock and debtors system Branch Stock Account is a Nominal Account.  F
2.       Under stock and debtors system branch profit is ascertained by opening Branch Adjustment Account.  T
3.       Under debtors system Branch Account discloses profit or loss of the branch.  T
4.       Under debtors system, Branch Account is credited with opening balances of branch assets.  F
5.       Under debtors system, no entry is required in Branch Account for branch expenses paid by the branch out of petty cash.  T
6.       Under stock and debtors system no entry is required for normal loss of stock.  F
7.       Branch stock account is always prepared at cost price.  F
8.       In the case of foreign branches current assets and current liabilities are converted at the rate prevailing on the date of trial balance.  T
9.       In the case of branch keeping full system of accounting, (when branch fixed assets account is maintained in head office account) depreciation for the year is debited to profit and loss account and credited to head office account in branch books.  T
10.   The balances shown by head office account in branch books and branch account in head office books are always equal although the natures of balances differ.  F
11.   Under Debtors System, bad debts and discount allowed figure in the Branch Account.  F
12.   Under Debtors System, Debtors at close are shown on the Debit Side of the Branch Account after adjusting for Bad Debts, discount allowed etc.  F
13.   Under Debtors System, Depreciation is not shown in the Branch Account.  T
14.   Reserve for Bad Debts and Reserve for Discount on Debtors will be recorded separately in the Branch account under the Debtors system.  F
15.   Actual petty expenses incurred by the Branch Account under the Debtors system will not be recorded in the Branch Account.  T
16.   Sales Returns will not appear directly in the Branch Account under the Debtors System.  T
17.   Branch Account under Debtors System is a Real Account.  F
18.   Under Debtors System Branch Account is debited with losses like bad debts, discounts allowed and depreciation.  F
19.   When the Branch Manager is allowed petty cash on Imprest System, the amount remitted by Head Office to reimburse the actual expenses will be debited to the Branch Account.  T
20.   Branch Account is a nominal account in nature and is prepared in the Branch Books.  F
21.   Under debtors system, losses due to pilferage, wastage and other losses of stock due to normal and abnormal reasons are completely ignored.  T
22.   Branch account is a nominal account under debtors system.  T
23.   Branch account is a personal account under final account system.  T
 Q. Fill in the Blanks:
1.       The main establishment located at the main place of activity is called the Head Office and the subsidiary establishments located at various places are called Branch.
2.       Goods supplied to Dependent Branches by the Head Office may be either at Cost or at Invoice price.
3.       The One Account System or Debtors System is generally adopted when the branch is fairly small in size.
4.       Stock and debtors system or Analytical method is generally adopted when the branch is Large.
5.       Branch Account is Nominal in nature and is prepared in the Head Office Books
6.       Under Debtors System, credit sales, bad debts, return inward, discounts allowed and depreciation are not takes in the Branch Account.
7.       Under Debtors System fixed assets is shown on the credit side only after deducting the amount of depreciation, if any.
8.       Under the Debtors System, the Head Office will record all the transactions relating to the branch in the Branch Account through Debtors and Creditors relationship between the Branch and the Head Office.
9.       Under the Debtors System, the Reserve for Doubtful Debts /Reserve for Discount on Debtors should be deducted from closing Debtors and only the good closing debtors will be recorded in the Branch Account.
10.   Actual petty expenses incurred by the branch will will not be recorded in the Branch Account under the Debtors System.
4. Departmental Accounts
Fill in the blanks:
(a) When inter-departmental transfer is based on market price and there are unsold goods out of the transferred goods at the end of the accounting period, provision must be made for the Unrealised Profit on unsold goods included in the stock lying with the transferee department.
(b) Department accounts are prepared to know separately the Profit of each department.
(c) Selling Expenses should be divided among the different departments on the basis of Sales.
(d) Building expenses should be divided among the different departments according to the Space occupied by each department.