## Saturday, June 03, 2017

### IGNOU Solved Question Papers: ECO - 14 (December' 2011)

BACHELOR'S DEGREE PROGRAMME
Term-End Examination December, 2011
ELECTIVE COURSE: COMMERCE ECO-14: ACCOUNTANCY-II
Time: 2 hours Maximum Marks: 50
Note: Attempt any four questions including question no. 1 which is compulsory.
1. Attempt any two of the following questions 7, 7
(a)Explain the three systems of maintaining accounts of a dependent branch by the head office.
(b)Distinguish between fixed and fluctuating capitals of partners and list the items that usually appear on the debit and credit sides of a partner's current account.
(c)State the legal provisions relating to issue of shares at a discount and its accounting treatment in the books of a company.
(d)What is profit prior to incorporation and how is it calculated?
2. PQR Ltd. sold a machine to RST Ltd. on 12 April 1, 2007 under a hire-purchase agreement. The payments were to be made in four annual instalments of Rs. 84,600 each at the end of each year which is inclusive of interest at 5% per annum. RST Ltd. paid two instalments on time but defaulted at the time of third instalment and PQR Ltd. repossessed the machinery. Calculate the cash price and prepare necessary accounts in the books of RST Ltd. who charged depreciation at 10% per annum on written down value method?
Ans: Working Notes:

 Year Closing Balance Amount of Instalment Total Interest ( 5/105 ) Opening Balance 4 3 2 1 Nil 80,571 1,57,306 2,30,387 84,600 84,600 84,600 84,600 84,600 1,65,171 2,41,906 3,14,987 84,600 x 5/105= 4029 1,65,171x5/105= 7,865 2,41,906x5/105=11,519 3,14,987x5/105=14,994 80,571 1,87,306 2,30,387 2,99,988
Required Cash Price = 2, 99,988
Ledger Amount in the Books of RST Ltd
PQR Ltd A/c
 Date Particulars Amount Date Particulars Amount 31.3.08 31.3.08 To Bank A/c (1st Instalment) To Balance c/d 84,600 2,30,387 1.4.07 31.3.08 By Machinery a/c By Interest a/c 2,99,988 14,999 3,14,987 3,14,987 31.3.09 31.3.09 To Bank A./c (2nd Instalment) To Balance c/d 84,600 1,57,306 1.4.08 31.3.09 By balance b/d By Interest A/c 2,30,387 11,519 2,41,906 2,41,906 31.3.10 To Machinery A/c 1,65,171 1.4.09 31.3.10 By balance b/d By Interest A/c 1,57,306 7,865 1,65,171 1,65,171

Machinery A/c
 Date Particulars Amount Date Particulars Amount 1.4.07 To PQR Ltd A/c 2,99,988 31.3.08 31.3.08 By Depreciation A/c By Balance c/d 29,999 2,69,989 2,99,988 2,99,988 1.4.08 To Balance b/d 2,69,989 31.3.09 31.3.09 By Depreciation A/c By Balance c/d 26,999 2,42,990 2,69,989 2,69,989 1.4.09 To Balance b/d 2,42,990 31.3.10 31.3.10 31.3.10 By Depreciation A/c By PQR Ltd A/c By P/L A/c (Loss) 24,299 1,65,171 53,520 2,42,990 2,42,990

3. Following is the balance sheet of a partnership 12 firm of 'A' and 'B’, who shared profits in the ratio of 3: 2 respectively as on 31 March, 2010:
 Liabilities Rs. Assets Rs. Creditors Bills Payable Mrs. A’s Loan Reserve Fund Capita : A = 40,000 B = 32,000 1,52,000 60,000 40,000 20,000 72,000 Cash in hand Stock Debtors Machinery Furniture Investments P & L A/c 46,000 24,000 76,000 1,12,000 16,000 40,000 30,000 3,44,000 3,44,000
The firm was dissolved on March 31, 2010; A took over investments at Rs. 32,000 and agreed to pay off Mrs. A's loan. Stock realised. Rs. 20,000; Debtors Rs. 74,000; furniture Rs. 18,000; and machinery Rs. 1, 00,000. The creditors were paid at a discount of 2.5%.  B agreed to realize assets and pay off the liabilities on a remuneration of Rs. 4,400. Give journal entries for closure of the books.

Ans:
Journal Entries
In the books of the firm
 Particulars L.F. Amount(Dr.) Amount(Cr.) Realisation A/c                                   Dr. To Stock A/c To Debtors A/c To Machinery A/c To Furniture A/c To Investments A/c (Being the sundry assets transferred to realisation account) 2,68,000 24,000 76,000 1,12,000 16,000 40,000 Creditors A/c                                      Dr. B/P A/c                                               Dr. Mrs. A’s Loan A/c                                Dr. To Realisation A/c (Being the sundry liabilities transferred to realisation account) 1,52,000 60,000 40,000 2,52,000 Reserve Fund A/c                              Dr. To A’s Capital A/c To B’s Capital A/c (Being the reserve fund distributed between partners in 3:2 ratio) 20,000 12,000 8,000 A’s Capital A/c                                   Dr. B’s Capital A/c                                   Dr. To P/L A/c (Being the dr. balance of p/l  distributed between partners) 18,000 12,000 30,000 A’s Capital A/c                                   Dr. To Realisation A/c (Being the Investments taken over by A) 32,000 32,000 Realisation A/c                                  Dr. To A’s Capital A/c (Being the Mrs. A’s loan taken over by A) 40,000 40,000 Cash A/c                                           Dr. To Realisation A/c (Being the sundry assets realised - 20,000 + 74,,800 + 18,000 + 1,00,000) 2,12,000 2,12,000 Realisation Account                         Dr.    To Cash A/c (Being the sundry liabilities paid off - 1,48,200 + 60,000) 2,08,200 2,08,200 Realisation A/c                                 Dr. To B’s Capital A/c (Being the remuneration paid to B for realisation of assets) 4,400 4,400 A’s Capital A/c                                 Dr. B’s Capital A/c                                 Dr. To Realisation A/c (Being the loss on realisation distributed amongst partners) 14,760 9,840 24,600 A’s Capital A/c                                 Dr. B’s Capital A/c                                 Dr. To Cash A/c (Being the final payment made to partners) 27,240 22,560 49,800

4. (a) Define fund flow statement, and state the main sources and application of funds. 8, 4
(b) State the factors that affect the goodwill of a firm.
5.The total capital employed in a company is Rs. 1,70,00,000 out of which Rs. 80,00,000 represents equity capital, Rs. 20,00,000 general reserves, Rs. 50,00,000 long term borrowings in the form of debentures and Rs. 20,00,000 bank overdraft. The current assets of the company are Rs. 85 lakh, make up of stock Rs. 30 lakh, debtors Rs. 35 lakh, advances Rs. 14 lakh and cash Rs. 6 lakh. Compute (a) Current Ratio (b) Quick Ratio and (c) Debt Equity Ratio. 4+4+4
Ans: Ans: (a) Current Ratio = Current Assets/ Current Liabilities
= 85 Lakhs/20 Lakhs
= 4.25: 1
(b) Quick ratio = Quick assets/Current Liabilities
= (85 Lakhs – 30 Lakhs)/ 20 Lakhs
= 55 Lakhs/20 Lakhs
=2.75: 1
(c) Debt Equity ratio = Debt (long term)/Equity
= 50 Lakhs/100 Lakhs
= 0.5: 1
Here, Equity = Capital + reserves = (80 + 20) = 100 Lakhs

6. (a) A Ltd. issued 5,000 14% debentures of 8, 4 Rs.100 each at a discount of 6% on January 1, 2007. The entire amount is payable on application. These debentures are redeemable at a premium of 5% on December 31, 2009. The interest is payable annually on December 31 each year and any loss on their issue is to be written off in three years. Give journal entries for the above in the books of the company for 2007, 2008 and 2009.
Ans:
Journal Entries
In the books of A Ltd
 Date Particulars L.F. Amount(Dr.) Amount(Cr.) 1-1-07 Bank A/c                                         Dr. Loss on issue of Debenture A/c To 14% Debentures A/c To Premium on redemption A/c (Being the debentures issued at discount of 6% but redeemable at a premium of 5%) 4,70,000 55,000 5.00,000 25,000 31-12-07 Debenture Interest A/c                   Dr. To Bank A/c (Being the debenture interest paid @ 14% p.a. on debentures) 70,000 70,000 31-12-07 P/L A/c                                           Dr. To Loss on issue of debenture A/c To Debenture Interest A/c (Being the debenture interest and loss on issue of debenture transferred to profit and loss account) 88,333 18,333 70,000 31-12-08 Debenture Interest A/c                   Dr.    To Bank A/c (Being the debenture interest paid @ 14% p.a. on debentures) 70,000 70,000 31-12-08 P/L A/c                                           Dr. To Loss on issue of debenture A/c To Debenture Interest A/c ((Being the debenture interest and loss on issue of debenture transferred to profit and loss account) 88,333 18,333 70,000 31-12-09 Debenture Interest A/c                   Dr. To Bank A/c (Being the debenture interest paid @ 14% p.a. on debentures) 70,000 70,000 31-12-09 14% Debentures A/c                      Dr. Premium on redemption A/c           Dr. To Bank A/c (Being the debentures redeemed at a premium of 5%) 5,00,000 25,000 5,25,000 31-12-09 P/L A/c                                            Dr. To Loss on issue of Debentures A/c To Debenture Interest A/c ((Being the debenture interest and loss on issue of debenture transferred to profit and loss account) 88,334 18,334 70,000

(b) Explain the concept of unrealised profit in relation to interdepartmental transfer and its accounting treatment.

7. Draw necessary journal entries relating to issue of shares (a) at par and (b) at premium. 6+6