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Wednesday, March 29, 2017

Book Keeping and Accountancy Solved Papers - 2015

Full Marks: 100
Time: 3 hours

The figures in the margin indicate full marks for the questions.
1. (a) Fill in the blanks:                   1x4=4
a)   Accounting records only the transactions of Quantitative nature.
b)   Assets = Liabilities + Capital.                
c)    Excess of Opening capital over closing capital represents loss.
(b) State whether the following statements are true or false:                     1x4=4
a)      Closing stock is usually not shown in the Trial Balance.            True
b)      A Bank Reconciliation Statement is prepared by customer of a bank.               True
c)       The full form of CPU is Current Processing Unit.                         Central Processing Unit               
d)      The SQL is used to access data in a database.                              True

 2. Write the meaning of Accounting.     2
Ans: Accounting is the analysis and interpretation of book-keeping records. It includes not only maintains of accounting records but also the preparation of financial and economic information Which involves the measurement of transaction and other events pertaining to a business.

3. What do you mean by Accounting Standard? 2
Ans: 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).

4. What is a Trial Balance?                           2
Ans: After posting the accounts in the Ledger, a statement is prepared to show separately the debit and credit balances and to check the arithmetic accuracy of the accounts of a certain periods such a statement is known as the Trial Balance.

5. Write any two distinctions between Provision and Reserves.               2
Ans: Difference between Provisions and Reserves:
a)      Provision is a charge on profits and reduces the amount of net profits. Whereas Reserves is an appropriation of profits and reflects undistributed profits.
b)      Provision is to be made even if there are no profits. On the other hand, Reserve is created only when there are profits.
c)       Provision creation is compulsory. But Reserves creation is at the discretion of Management.

6. Write any two features of incomplete records.                            2
Ans: Characteristics of Single Entry System
a)      This system is a mixture of (i) double entry (ii) Single entry and (iii) no entry.
b)      This system is suitable for small business.
c)       In this system, generally personal Account are kept but real and Normal Account are ignored.

7. Explain briefly about three users of accounting information.                 3
Ans: Users of accounting information:
a)      Owners: Owners are always interested in knowing the profitability and financial strength of the company.
b)      Management: It helps them in decision making as well as in controlling and self evaluation.
c)       Employees and Workers: Employees and workers are entitled to bonus at the year end besides the salary and wages which is directly linked with the profits of the enterprise.
Mention three qualitative characteristics of accounting information.    3
Ans: Accounting information must possess the following qualitative characteristics:
a)      Reliability: Reliability means the users must be able to depend on the information.
b)      Relevance: To be relevant, information must be available in time, must help in prediction and feedback.
c)       Understandability: Understandability means decision-makers must interpret accounting information in the same sense as it is prepared and conveyed to them.

8. Explain the going concern concept.    3
Ans: Under this concept, the transactions are recorded assuming that the business will exist for a longer period of time. Keeping this in view, the suppliers and other companies enter into business transactions with the business unit. This assumption supports the concept of valuing the assets at historical cost or replacement cost.    
Explain the money measurement concept.         3
Ans: According to this concept, only those events and transactions are recorded in accounts which can be expressed in terms of money. Facts, events and transactions which cannot be expressed in monetary terms are not recorded in accounting. Hence, the accounting does not give a complete picture of all the transactions of a business unit.

9. Mention three distinctions between Journal and Ledger.                       3
Ans: Difference between journal and ledger:
(i) Journal is a book of prime entry, whereas ledger is a book of final entry.
(ii) Transactions are recorded daily in the journal, whereas posting in the ledger is made periodically.
(iii) In the journal, information about a particular account is not found at one place, whereas in the ledger information about a particular account is found at one place only.
Mention three types of transactions recorded in Journal Proper.                             3
Ans: The following are some of the examples of transactions which are entered in this book:
a)      Opening entries: When a businessman wants to open the book for a new year, it is necessary to journalise the various assets and liabilities before the new accounts are opened in the ledger. The journal entries so passed are called “opening entries".
b)      Closing entries: At the close of the accounting period balances from the various accounts are transferred in order to balance the books of accounts. Thus, this process of transferring balances of the trading and profit and loss account at the end of year is called closing the books and entries passed at that time are called closing entries.
c)       Adjusting entries: Modification of the accounts at the end of an accounting period is called adjustments. If there be any event affecting the related period of accounts but left out of the books, the same should be incorporated in the books before the preparation of the final accounts. This is done by means of adjusting entries through the journal proper.

10. Explain briefly three advantages of Database Management System.                               3
Ans: Advantages of DBMS:
1.       Reduced Data Redundancy
2.       Protection of information
3.       Greater Consistency
4.       Reduced Costs
Write short notes on Structured Query Language. (SQL)                               3
Ans: Structured Query Language (SQL): It is a 4th generation Computer Programming language which greatly facilitates the writing of a program or application by the programmer in one tenth of time taken in older & third generation language like COBOL.

11. Mention three distinctions between Statement of Affairs and Balance Sheet.                      3
Ans: Difference between Balance Sheet and Statement of affairs:
Balance Sheet
Statement of affairs
It is a Statement of assets, Liabilities and Capital extracted from ledgers balances maintained under the double entry system.
It is a Statement of assets, Liabilities and Capital extracted from incomplete records.
In this system, Personal, Capital account is taken from the ledger.
In this system, Capital is the excess of assets over liabilities.
The basic purpose of Balance sheet is to show the financial position of the business on the last day of accounting period.
A statement of affairs is prepared to show the financial position as well as it helps in ascertaining trading profit or loss.
The financial position disclosed by a Balance Sheet is reliable.
The financial position as disclosed by a Statement of affairs is not as reliable as that disclosed by a Balance sheet.

How profit or loss is ascertained by Statement of Affairs method in case of incomplete records?                           3
Ans: Steps for ascertaining Profit under Statement of affairs Method:    
                     i.         A Statement of Affairs at the beginning of the year is prepared to determine the amount of capital of the proprietor at the beginning of the year.
                   ii.         Similarly, A Statement of Affairs at the end of the year is prepared to determine the amount of capital at the end of the year.
                  iii.         Drawings made by the proprietor during the year should be added to the amount of Capital at the end of the year.
                 iv.         Similarly, Capital introduced during the year should be deducted from the Capital at the end of the year.
                   v.         Capital at the beginning of the year should be deducted from the closing capital as adjusted in step (c) and (d) above and the difference will be either a trading profit or loss.

                 vi.         Interest on capital and interest on drawings (if any) are to be adjusted in profit or loss as derived in step (e) to arrive at the net profit or loss for the year.

12. What is a Bill of Exchange? Explain the terms ‘Drawer’, ‘Payee’ in connection with Bill of Exchange.      2+3=5
Ans: Bills of Exchange: A bill of exchange as, "an instrument in writing containing an unconditional order, signed by the maker, directing a certain person to pay a sum of money only to or to the order of a certain person or to the bearer of the instrument." A bill of exchange is also called a draft.
Drawer: Drawer is the maker of the bill of exchange. A seller/creditor that is entitled to receive money from the debtor can draw a bill of exchange upon the buyer/debtor.
Payee: A payee is the person to whom the payment is to be made. The drawer of the bill himself will be the payee if he keeps the bill with him till the date of its payment.
Write five distinctions between Bills of Exchange and Promissory Note.                              5
Ans: Difference between bill of exchange and Promissory Note
Bill of Exchange
Promissory Note
It is drawn by the creditor
It is drawn by the debtor
Order or Promise
It contains an order to make payment. There can be three parties to it, viz. the drawer, the Drawee and the payee.
It contains a promise to make payment. There are only two parties to it, viz. the drawer and the payee.
It requires acceptance by the Drawee or someone else on his behalf.
It does not require any acceptance.
Drawer and payee can be the same party
Drawer cannot be the payee of it
A bill of exchange can be drawn in sets.
Promissory note cannot be drawn in sets.

13. Mention five uses of computers in Accounting.                         5
Ans: Advantages of computers: 
1)      They can help us automate various tasks that you cannot do manually. 
2)      Permanent records of business transactions can be maintained.
3)      They can help us organize our data and information. 
4)      They may help our work to be a lot easier. 
5)      It saves your time. 
Define Computer. Mention three features of Computer.                             2+3=5
Ans: A computer is an electronic device or machine which performs various functions and helpful in accounting. A programmable machine that receipts input, stores and automatically manipulates data, and provide output in a useful format.
Features of computers:
1. It can store large amount of information within it and make available to use when required.
2. The computer can do various operations on the data.
3. It can perform calculation, such as addition, subtraction, multiplication and division.

14. On 1st January, 2014, a bill of Rs. 15,000 due after three months has been drawn by Madhur on Suresh. Suresh accepted the bill and returned the same to Madhur. On the due date, Suresh dishonoured the bill and noting charge payable was Rs. 200. Pass Journal entries in the books of Madhur in each of the following circumstances.
(i) Madhur endorsed the bill in favour of Nayan immediately.
(ii) The bill is discounted at 12 p.c. per annum immediately.                                          5
What is accommodation Bill? Mention three purpose of drawing an accommodation Bill.                           2+3=5
Ans: Accommodation Bills are those which are drawn and accepted without any consideration. The Bill, which is drawn without any trading activities, with sole intention of raising funds required by discounting the bill is known as Accommodation Bill.
Uses of accommodation bill:
a) Temporary finance can be raised by the parties.
b) Rate of interest charged by the banks are low as compared to others.
c) Both drawer and drawee are benefited by the accommodation bill.

15. Write five distinctions between Capital Expenditure and Revenue Expenditure.                  5
Ans: Capital Expenditure: The transactions of capital expenditure give benefits for more than one accounting period, such as acquisition and improvement of assets, acquisition of special rights, increasing of earning capacity, restoration of operating efficiency. It is non-recurring in nature.
Revenue Expenditure: It is incurred for generating revenue in the current accounting period and its benefit expires with such period. It helps to maintain the normal working condition of a business. It is charged as expenses in Trading / Profit & Loss Account on debit side.
The following are the points of distinction between Capital Expenditure and Revenue Expenditure :
Capital Expenditure
Revenue Expenditure
1. Benefits
More than one accounting period.
Benefits enjoyed within a particular accounting period.
2. Nature
Non-recurring (Irregular)
Recurring (Regular)
3. Conversion
All Capital Expenditures eventually become Revenue Expenditures like depreciation
Revenue Expenditures are not generally capital expenditures.
4. Matching
These are not matched with Capital Receipts.
These are matched with Revenue Receipts.
What is trading Account? Write three objectives of preparing trading Account.        2+3=5
Ans: Trading account is one of the financial statements prepared by the company to show the result of buying and selling of goods and services during an accounting period. Trading account is prepared to ascertain the gross profit or gross loss.
Objectives or Need for Trading Account: The trading account may be prepared with the following objectives:
1)      To ascertain gross profit or gross loss.
2)      To know the direct expenses.
3)      To make comparison of stock.
4)      To fix up selling price of goods.

16. From the following incomplete records of Mr. Bhuban, a trader, ascertain the profit or loss of his business for the year ended on 31.3.14. On 31st March, 2014, his position was follows:
Plant & Machinery
Furniture & Fixtures
Bills Receivable
Sundry Debtors
Sundry Creditors
Closing Stock
Cash in hand
Cash at bank

During the year, Mr. Bhuban introduced Rs. 12,000 as additional capital and withdrew Rs. 9,700 for personal use. His capital as on 1st April, 2013 was Rs. 99,750.                                          5
Write five limitations of incomplete records.                    5
Ans: Demerits of Single Entry System:-
a)      It is not a scientific method of accounting because it does not record the two-fold aspect of each transaction.
b)      No trial balance can be prepared under Single Entry System.
c)       The arithmetical accuracy of the books cannot be checked in the absence of trial balance.
d)      In the absence of various checks, Fraud is more easily committed and it is very difficult to detect.
e)      In the absence of Real and nominal accounts the true financial position of the business cannot be ascertained.
17. Pass necessary Journal entries to rectify the following errors.                              5
(i) Rs. 850 received from Saurav was debited to Gaurav Account.
(ii) Goods of Rs. 750 withdrawn for personal use was not recorded in the books.
(iii) Rs. 380 being Purchase return was posted to the debit of Purchase Account.
Write three advantages and limitations of Trial Balance.                              2+3=5
Ans: The uses of the trial balance as follows:
a)      It provides a check on the accuracy of the ledger account balances, ensuring that entries have been made correctly.
b)      It proves the arithmetical accuracy of accounts.
c)       It makes preparation of the final accounts easier.
Limitations of trial balance
a)      The Trial balance can be prepared only in those concerns where double entry system of book- keeping is adopted. This system is too costly.
b)      A Trial balance is not a conclusive proof of the arithmetical accuracy of the books of account.
c)       It the Trial balance is wrong, the subsequent preparation of Trading, P&L Account and Balance Sheet will not reflect the true picture of the concern.
18. From the following information of Mr. Das prepare a Trading Account for the year ended on 31st March, 2014.  5
Stock (As on 1st April, 2013)
Purchase Return
Sales Return
Carriage Inward
Carriage Outward

Additional Information:
(i) Stock on 31st March, 2014 Rs. 20,530.
(ii) Wages outstanding Rs. 250.

19. Explain with examples the following terms (i) Current Assets, (ii) Current Liabilities.   2 ½ +2 ½ =5
Ans: Current assets: Current Assets are assets held on a short-term basis such as debtors (accounts receivable), bills receivable (notes receivable), stock (inventory), temporary marketable securities, cash and bank balances.
Current liabilities: Current liabilities are obligations that are payable within a period of one year, for example, creditors, bills payable, bank overdraft.

20. Prepare a Bank Reconciliation Statement as on 31.3.14 from the following Particulars:              8
(i) Bank Balance (Dr.) as on 31.3.2014 was Rs. 90,000 as per Cash Book.
(ii) Out of Rs. 30,000 paid to creditors by cheques, cheques amounting to Rs. 14,000 were encashed by him after 31.3.2014.
(iii) Cheques of Rs. 16,000 deposited into bank on 28.3.2014 but not collected by bank before 31.3.2014.
(iv) Bank charges of Rs. 1,000 and interest on deposits Rs. 2,000 were recorded in the Pass Book only.
(v) Dividend collected and credited by the bank but not recorded in the cash book Rs. 1,500.
(vi) A cheque of Rs. 850 deposited and credited by the bank was recorded in the cash book Rs. 580.
What is Bank Reconciliation Statement? Discuss five causes of disagreement between the balances as per Pass Book and Cash Book.                          8
Ans: The statement which is prepared for verifying and reconciling the bank balances, shown by the cash book and pass book on a certain date and incorporates the reasons of disagreement between them is called a bank reconciliation statement.
The following are the causes of difference between balance as per cash book and pass book:
a)      Cheque issued but not yet presented for payment.
b)      Cheque deposited but not yet collected by the bank.
c)       Bank charges not entered in the cash book.
d)      Interest credited by bank but not debited in the cash book.
e)      Amount, directly deposited in the bank by debtor.

21. A company purchased 2 machines on 01.01.2012 at a total cost of Rs. 4, 00,000. On 01.07.2014, it sold one of the machine originally costing Rs. 2, 00,000 for Rs. 1, 80,000. Prepare Machinery Account and Depreciation Account for three years assuming that the company provides depreciation @ 10% p.a. on the original cost. The accounting year ends on 31st March each year.       4+4=8
What do you mean by depreciation? Discuss six causes of providing depreciation.         2+6=8
Ans: Depreciation: The word depreciation is derived from a Latin word “Depretium” where “De” means decline and “pretium” means price. Thus, the word “Depretium” stands for decline in the value of assets. It stands for gradual and continuous decline. In simple words, Depreciation may be defined as permanent decrease in the value of assets due to Use and /or the lapse of the time.          
Causes of Depreciation: The causes of decline on the book value of fixed assets may be divided into two categories:
1)      Physical: Physical causes may be as follows
a)      Wear and tear
b)      Destruction
2)      Functional: Functional causes may be as follows
a)      Obsolescence
b)      Inadequacy
c)       Effluxion of time
d)      Depletion
e)      Exhaustion
1)      Depletion: Depletion implies removal of available resources e.g. Coal from Coal mine, Oil out of Oil well.
2)      Amortisation: The process of writing off intangible assets such as goodwill, patents, and trademarks etc. is called amortisation.
3)      Dilapidation: The term Dilapidation reduces to damage done to a building or other property during tendency.
4)      Obsolescence: When an asset becomes out dated due to new or improved technology or invention, this is called Obsolescence.

22. Prepare a Triple Column Cash Book from the following information.                                 8
October 1
Cash in hand
Cash at bank
October 4
Cash Sales
October 7
Deposited into Bank
October 9
Received cheque from Mr. Baruah which is deposited into bank on the same day
October 10
Rent paid by cheque
October 18
Paid be cheque to Mr. Kishore Rs. 6,700 in full settlement of his debt
October 23
Withdraw from bank for office use
October 25
Withdraw from bank for personal use
October 30
Salaries paid
Explain the following terms:      (any four)            2x4=8
(i) Contra Entry.
(ii) Petty cash book.
(iii) Trade discount.
(iv) Cash discount.
(v) Imprest System.
(vi) Double column Cash Book.

(i)      Contra entry: When both the debit and credit aspects of a transaction are recorded simultaneously in the same book but in different columns, each entry on the debit side and on the credit side is called a contra entry.

(ii)    Large firms maintain their transactions through bank. They deposit cash and Cheques to meet their obligations to the creditors by issuing Cheques. Besides these transactions, the firm has to pay for petty and small expenses like postage, transportation, stationery that require very small amount, to pay these expenses through bank is very time consuming process. So, to facilitate immediate and easy payment, firms maintain a small amount of cash with them always. All the payments made through this amount and recorded in a separate cash book called ‘petty cash book’.

(iii)   Trade discount is an allowance or concession granted by the producers to the wholesalers or by the wholesalers to the retailers on bulk purchase. Trade discount is normally deducted in the purchase book, sales book or returns books, and the net amount is posted to the ledger accounts.

(iv)  Cash discount is a deduction allowed from amount receivable from a credit customer on his paying the same within a specified time. This cash discount is always associated with payment .A firm may allow cash discount when it receives payment from customers and may receives cash discount when it makes payment to suppliers.

(v)    Imprest System of Petty Cash book: In this system, petty cash requirements for a specific period of time, a week or month is estimated and that money is given to the petty cashier. The petty cashier makes payments for various expenses during the period and is reimburse exactly by the cashier at the end of the period. So, that he can start the next week or month with the full estimated money. This system of book keeping is called the ‘imprest system’.

(vi)  Double Column cash book: A double column cash book or two column cash book is one which consists of two separate columns on the debit side as well as credit side for recording cash and discount.
23. The following is the Trial Balance of Mr. Rajnish as on 31st March, 2014.                     8
Trial Balance
Cash at Bank
Cash in hand
Bills Receivable
Closing Stock
Bank loan
Interest Received
Provision for doubtful debt
Trading A/c
(Gross Profit)


Additional Information:
(i) Maintain Provision for doubtful debt 5% on debtors.
(ii) Depreciate Machinery @ 10% p.a.
(iii) Outstanding salary Rs. 1,200.

Prepare Profit & Loss Account of Mr. Rajnish for the year ended on 31.3.14 and a Balance Sheet as on that date.