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    Assignment 3

    Uploaded by

    Anish
    The document contains examples of accounting principles and assumptions being applied to various situations. It then provides a balance sheet that was incorrectly classified by a company manager and asks the reader to correct it. Finally, it asks the reader to use the accounting equation to solve problems calculating owners' equity, liabilities, or total assets given values for two of the three items.

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    Assignment 3

    Uploaded by

    Anish
    26 views3 pages
    The document contains examples of accounting principles and assumptions being applied to various situations. It then provides a balance sheet that was incorrectly classified by a company manager and asks the reader to correct it. Finally, it asks the reader to use the accounting equation to solve problems calculating owners' equity, liabilities, or total assets given values for two of the three items.

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    Assignment-3.docx

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    The document contains examples of accounting principles and assumptions being applied to various situations. It then provides a balance sheet that was incorrectly classified by a company manager and asks the reader to correct it. Finally, it asks the reader to use the accounting equation to solve problems calculating owners' equity, liabilities, or total assets given values for two of the three items.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    26 views3 pages

    Assignment 3

    Uploaded by

    Anish
    The document contains examples of accounting principles and assumptions being applied to various situations. It then provides a balance sheet that was incorrectly classified by a company manager and asks the reader to correct it. Finally, it asks the reader to use the accounting equation to solve problems calculating owners' equity, liabilities, or total assets given values for two of the three items.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 3

    1.

    Given here are a few situations:


    a. Personal and business transactions are separately maintained.
    Ans :- True
    b. Inventory is recorded at its purchase price.
    Ans :- True
    c. The death of the chief executive officer of the company is not recorded in accounts.
    Ans :- True
    d. In case of doubt, it is considered better to understate rather than overstate income.
    Ans :- True
    e. Assets are not stated at their liquidation value.
    Ans :- False
    f. Financial Statements are prepared on an annual basis.
    Ans :- False
    g. Expenses are recognized in the same period as the related revenues.
    Ans :- False
    h. Revenue is recognized when it is earned and expense is recognized when it is incurred.
    Ans :- True
    i. The accounting records only events that affect the financial position of the entity and at
    the same time can be reasonably determined in monetary terms.
    Ans :- True
    j. Same treatment is given to comparable transactions from period to period.
    Ans :- False

    REQUIRED

    State the accounting assumption or principle that describes each of the given situations.

    2. The manager of a company who did not have proper accounting knowledge prepared the
    following balance sheet. He has wrongly classified the items under assets, liabilities and
    owners equity.

    Owners Equity and Assets


    Liabilities

    Share Capital 10,00,000 Retained Earnings 5,00,000

    Equipment 9,00,000 Land and Buildings 7,00,000

    Cash 2,00,000 Long term loan 4,00,000

    Accounts Payable 2,00,000

    Accounts 3,00,000
    Receivables

    21,00,000 21,00,000

    REQUIED:

    Prepare the correct Balance sheet.

    Ans:-

    Owner's Equity and Liabilities Assets


    10000 90000
    Share Capital 00 Equipment 0
    50000 20000
    Retained Earnings 0 Cash 0
    40000 Land and 70000
    Long term loan 0 Buildings 0
    20000 Accounts 30000
    Accounts Payable 0 Receivables 0

    21000 21000
    Total 00 00

    3. Using Accounting Equation, Answer the following independent Questions.

    a) New Companys assets are 250 lakh and its external liabilities are of 100 lakh,
    determine the amount of owners Equity.

    Ans:-
    Asset = Owners Equity + liabilities
    50 lakh = Owners Equity + 100 lakh
    250 lakh-100 lakh= Owners Equity
    251 Owners Equity = 150 lakh

    b) Royal Industries has total assets of 100 lakh and owners Equity of 70 lakh, Compute
    the amount of external liabilities.

    Ans:-
    Asset = Owners Equity + liabilities
    100 lakh = 70 lakh + liabilities
    100 lakh - 70 lakh = liabilities
    101 Liabilities = 30 lakh
    c) Small Enterprise has following amounts appearing in Balance Sheet as at 31 st December,
    2015:

    Capital 50 lakh, Reserves and undistributed profits 15 lakh, and total external
    liabilities 35 lakh, Determine the amount of total assets.

    Ans:-
    Asset = Owners Equity + Liabilities

    Asset = 50 lakh + 15 lakh + 35 lakh = 100 lakh

    Asset = 100 lakh

    4, Classify the following accounts under the head personal, real and nominal account:
    Ans:-
    Salaries Account -- Nominal Account

    Capital Account -- Personal


    Machinery Account Real Account

    Sales Account -- Nominal Account


    Loan Account - Nominal Account

    Discount Received Account Nominal Account


    Investment Account Real Account

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