Model questions on accountancy

6. What is Trial Balance? Discuss the errors which cannot be detected through Trial
Balance.
7. (i)
(ii)
(iii)

(2 + 10 = 12)

Distinguish between Capital expenditure and Revenue expenditure.

Distinguish between Reserve and Provision.
Distinguish between Reserve and Reserve Fund.

Answer Q.No.1 and any five (5) from the rest.

The figures in the margin indicate full marks.
Candidates are required to give their answers in their
own words as far as practicable.

(3 4 = 12)

1. Answer any ten questions:

8. Why should depreciation on fixed assets be brought into account?
On 1 January 1998, Max GB Limited, whose accounting year ends on 31 December,
purchased ten machines of Rs.2,000 each. On 31 March 1999, one machine was
sold for Rs.1,600 and, on 30 September 2000 another machine was sold for
Rs.1,500. A new machine was purchased on 30 June 2001 for Rs. 2,400. The
Company has adopted the practice of providing depreciation at 10 per cent per
annum on original cost of machines.
You are required to prepare machinery account, for the year 1998 to 2001.
(2 + 10 = 12)
9. The books of accounts of B.R.Chopra for the year ending 31st March, 2010 were
closed with a difference in books carried forward. The following errors were detected
subsequently: They are:
a) The Returns Outwards Book was overcast by Rs. 700.
b) Purchase of furniture Rs. 2000 was passed through the Purchases Book.
c) Wages to workmen for installation of machinery Rs.1250 was charged to
Wages A/c.
d) Payment of rent of Mr. Chopras house Rs. 750 was charged to Rent A/c.
e) Goods returned by a customer amounted to Rs. 950 were taken into stock but
no entry was made in the book.
f) Sale of goods worth Rs. 1700 has been passed through Purchases book. The
Customer's A/c has been however debited correctly.
Give journal entries to rectify the above errors and prepare the Profit & Loss
Adjustment A/c.
10. Write short notes on:
(i)
Journal
(ii)
Cash book
(iii)
Dual aspect concept
(iv)
Matching concept

(4 3 = 12)

2 x 10 = 20

a)

What do you mean by the term "Contra Entry"?

b)

What does the term obsolescence imply?

c)

What do you mean by Redeemable Preference share?

d)

Why miscellaneous expenditure appears in the asset side of a

Balance Sheet.

e)

Distinguish between 'Sinking Fund', and Sinking Fund Investment

Account.

f)

What do you mean by GAAP?

g)

Distinguish between 'Income & Expenditure' Account and Profit &

Loss Account.

h)

What do you mean by Notional Cost?

i)

Distinguish between Capital Reserve and Reserve Capital.

j)

Distinguish between bad debt and provision for bad debt.

k)

What do you mean by the terms debit and credit?

l)

What do you know by Going concern concept?

m) Distinguish between Profit & loss account and Profit & loss
Appropriation account.
n)

What is Financial Statement?

o)

Write two points of difference between Partnership and Joint

venture.
(Turn over)

2. The following is the Trial Balance extracted from the Books of Mr.X as at
31.12.2010.
Trial Balance as at 31st December, 2011

Ledger balances
Opening Stock

Debit.
(Rs.)
15,000

Ledger balances
Capital A/c

Credit
(Rs.)
100,000

Goodwill

8,000

Sales

Loose Tools

1,000

Returns

2,000

Investments

3,000

Bank Overdraft

9,000

Discounts

1,000

Land & Building

Drawings A/c
Purchases

90,000
2,000
70,000

Miscellaneous Receipts

90,000

1,000

Sundry Creditors

50,000
73,000

3. From the following, pass the journal entries, prepare the necessary ledger
accounts, and also show how these items will appear in Profit and Loss account and
Balance Sheet.
Extract of Trial Balance as on 31 Dec 2010.
Debit(Rs.) Credit(Rs.)
Debtors
40,000
Bad Debts
2,000
Discount Allowed
1,000
Provision for Doubtful Debts
2,500
Provision for discount on Debtors.
900
Additional information:
Write off further bad debts Rs. 2,000
Provide for Bad and Doubtful debts at 5% on Debtors and Provision for discount on
debtors at 2%.

Carriage Inward

3,000

Loan

Returns

2,000

Interest on Investments

1,500

Carriage outward

1,000

Provision for Doubtful Debts

1,450

Wages

6,000

Apprenticeship Premium (for the year)

2,000

Motive Power

2,000

4. Why is it considered better to make a partnership agreement in writing?

Salaries

5,000

Rent, Rate & Taxes

1,000

Insurance

1,000

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2,500

Simi and Sonu are partners in a firm, sharing profits and losses in the ratio of 3:1.
The profit and loss account of the firm for the year ending March 31, 2008 shows a
net profit of Rs. 1,50,000. Prepare the Profit and Loss Appropriation Account by
taking into consideration the following information:
(i) Partners capital on April 1, 2007: Simi Rs. 30,000: Sonu Rs. 60,000.
(ii) Current accounts balances on April 1, 2007: Simi Rs. 30,000 (cr.) Sonu Rs.
15,000 (cr.)
(iii) Simi and Sonu drew regularly @ Rs.2,000 and Rs.1,500 per month at the last
day of each month.
(iv) Interest on capital was allowed @ 5%p.a.
(v) Interest on drawings was to be charged @ 6% p.a.
(vi) Partners salaries: Simi Rs. 12,000 and Sonu Rs. 9,000.
(vii) 10% of the Net profit is to be transferred to General Reserve.
Also show the partners current accounts.
(2 + 10 = 12)

Printings

500

Bad Debt

500

Discounts

100

Furniture

20,000

Plant & Machinery

70,000

Interest on Loan
Cash in hand
Sundry Debtors
TOTAL

350
7,000
20,000
3,30,950

3,30,950

You are asked to prepare the Trading A/c and Profit & Loss A/c for the year ended
on 31st December, 2011 and a Balance Sheet as at that date taking into
consideration the following:
(a) Closing Stock has been valued at Rs.40, 000.
(b) Outstanding Wages Rs. 2,000.
(c) Depreciate Buildings @ 5%, Machinery @ 10% and Loose Tools @ 20% p.a.
(e) Adjust the provision for doubtful Debts @ 5% on Debtors and make a provision
for discount on Debtors @ 5%.
(f) Make a Provision for Discount on Creditors @ 5%.

5. What do you mean by the term 'share'?

Majestic Auto Parts Limited issued for public subscription 60,000 Equity shares of
Rs. 10 each at a premium of Rs. 2 per share payable as under:
With Application Rs. 2.50 per share
On allotment (including premium) Rs. 5 per share
On First Call Rs. 2 per share
On Final Call Rs. 2.50 per share
Applications were received for 1,80,000 shares. Allotment was made on pro-rata
basis. Excess money on application was adjusted against the amount due on
allotment. X, to whom, 2,400 shares were allotted failed to pay the two calls.
These shares were subsequently forfeited after the Final call was made. All the
shares forfeited were reissued to Mr. Z as fully paid at Rs. 7 per share.
Record journal entries in the books of the company.
(2 + 10 = 12)
(Turn over)