Answer To MTP - Intermediate - Syllabus 2016 - June2020 - Set1: Paper 5-Financial Accounting

Answer to MTP_Intermediate_Syllabus 2016_June2020_Set1
Paper 5- Financial Accounting
Dos, The Institute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 1
Paper 5- Financial Accounting

Full Marks : 100 Time allowed: 3 hours
Section - A
1. Answer the following questions
(A) Multiple choice questions: [10x1=10]
(i) Income and Expenditure Account is a

(a) Nominal Account
(b) Real Account
(c) Personal Account
(d) Artificial Personal Account
(ii) Accounting standard in India are issued by

(a) Government of India
(b) Reserve Bank of India
(c) The Institute of Chartered Accountants of India
(d) The Institute of Accounting Standard of India
(iii) Creditors ledger adjustment account is opened in

(a) General Ledger
(b) Debtors Ledger
(c) Creditors Ledger
(d) Either (B) or (C)
(iv) If any stock is taken by a co-venturer, it will be treated as

(a) an income of the joint venture
(b) an expense of the joint venture
(c) to be ignored from joint venture
(d) it will be treated in the personal books of the co -venturer
(v) Which of the following is of capital nature?

(a) Commission on purchases
(b) Cost of repairs
(c) Rent of factory
(d) Wages paid for installation of machinery
(vi) If average inventory is ` 1,25,000 and closing inventory is ` 10,000 less than opening
inventory then the value of closing inventory will be
(a) ` 1,35,000
(b) ` 1,15,000
(c) ` 1,30,000
(d) ` 1,20,000
(vii)The cost of Fixed Assets of a business has to be written off over its
(a) Natural Life
(b) Accounting Life
(c) Physical Life
(d) Estimated Economic Life
(viii)Exception to consistency principle is

(a) Cost Principle
(b) Going Concern Principle

(c) Matching Principle
(d) Prudence Principle
(ix) Purchase of a laptop for office use wrongly debited to Purchase Account. It is an
error of
(a) Omission
(b) Commission
(c) Principle
(d) Misposting
(x) Canteen exp enses are apportioned among departments in the proportion of
(a) Departmental floor space
(b) Departmental direct wages
(c) Departmental sales
(d) Departmental No. of employees
Answer:
(i) — (a)
(ii) — (c)
(iii) — (a)
(iv) — (a)
(v) — (d)
(vi) — (d)
(vii) — (d)
(viii) — (d)
(ix) — (c)
(x) — (d)
(B) Match the following: [5x1=5]
Column ‘A’ Column ‘B’

1. Noting charges A Construction Contract
2. Work certified B Hire vendor
3. Repossession of goods C Royalty
4. Valuation of Inventories D AS-2
5. Ground Rent E Bills of exchange
Answer:
Column ‘A’ Column ‘B’

1. Noting charges E Bills of exchange
2. Work certified A Construction Contract
3. Repossession of goods B Hire vendor
4. Valuation of Inventories D AS-2
5. Ground Rent C Royalty
(C) Fill in the blanks: [5x1=5]
(i) The amount invested by owners into business is called _____________.

(ii) When Sales = ` 1,80,000, Purchase = ` 1,60,000, Opening Stock = ` 34,000 and rate of the
Gross Profit is 20% on cost, the Closing Stock would be___________.
(iii) __________is a person to whom the business owes money or money’s worth.
(iv) Depreciation account is ___________type of account .
(v) Salary debited to Income and Expenditure Account for the y ear was ` 48,000.
Outstanding salary paid in the beginning of the year and the outstanding salary at the
end of the year were ` 6,000 and ` 7,500 respectively. The amount of Salary to be
shown in Receipts and Payments Account will be__________.
Answer:
(i) capital
(ii) ` 44,000
(iii) creditor
(iv) nominal
(v) ` 46,500
(D) State whether the following statements are true or false: [5x1=5]
(i) A credit balance in the pass book indicates excess of deposits over withdrawals .
(ii) Under straight line method the cost of the asset written off in equal proportion ,during
its economic life.
(iii) According to AS-2 Inventories are held for sale in normal course of business.
(iv) Excess of hire purchase price over cash price is known as penalty imposed on hire
purchaser by the vendor.
(v) Branch Stock Account is always prepared at cost price.
Answer:
(i) True;
(ii) True;
(iii) True;
(iv) False;
(v) False.
Section - B
Answer any five questions out of seven questions.

Each question carries 15 marks. [5x15=75]
2. (a) Sumita & Co. purchased a ma chine for ` 2,00,000 on 1.1.2011. Another machine costing
` 3,00,000 was purchased on 1.7.2012. On 31.12. 2013, the machine purchased on
1.1.2011 was sold for ` 1,00,000. The company provides depreciation at 15% on Straight
Line Method. The company closes its accounts on 31st December every year.
Prepare – (i) Machinery A/c,
(ii) Machinery Disposal A/c and
(iii) Provision for Depreciation A/c. [6]
Answer:
a)
Sumita & Co.
Dr. Machinery Account Cr.
Date Particulars ` Date Particulars `
1.1.2011 To Bank A/c 2,00,000 31.12.2011 By Balance c/d 2,00,000
2,00,000 2,00,000
1.1.2012 To Balance b/d 2,00,000
1.7.2012 To Bank A/c 3,00,000 31.12.2012 By Balance c/d 5,00,000
5,00,000 5,00,000
1.1.2013 To Balance b/d 5,00,000 31.12.2013 By Machinery 2,00,000
Disposal A/c
31.12.2013 By Balance c/d 3,00,000
5,00,000 5,00,000
1.1.2014 To Balance b/d 3,00,000
Provision for Depreciation Account
Dr. Cr.
31.12.2011 To balance c/d 30,000 31.12.2011 By Depreciation A/c 30,000
30,000 30,000
31.12.2012 To balance c/d 82,500 1.1.2012 By balance c/d 30,000
31.12.2012 By Depreciation A/c 52,500
(30,000+22,500)
82,500 82,500
31.12.2013 ToMachinery 60,000 1.1.2013 By balance b/d 82,500
Disposal A/c
31.12.2013 To balance c/d 67,500 31.12.2013 By Depreciation A/c 45,000
1,27,500 1,27,500
1.1.2014 By balance b/d 67,500
Machinery Disposal Account

Dr. Cr.
31.12.2013 To Machinery 2,00,000 31.12.2013 By Provision for 60,000
A/c Depreciation A/c
By Depreciation 30,000
a/c
By Bank A/c 1,00,000
By P/L A/c 10,000
2,00,000 2,00,000
Working Notes
1. Depreciation for the machine purchased on 1.7.2012
For the year 2012 (used for 6 months) = ` 3,00,000 × 15% × 6/12 = 22,500
For the year 2013 (used for full year) = ` 3,00,000 × 15% = ` 45,000
2. Depreciation for the machine purchased on 1.1.2011

Depreciation = ` 2,00,000 × 15% = ` 30,000
So, Depreciation for 2 years = ` 30,000 × 2 = ` 60,000
(b) Sri Lakshami of Mumbai consigns 1,000 cases of goods costing `100 each to Sri Indu of
Chennai.
Sri Lakshami pays the following expenses in connection with the consignment:
`
Carriage 1,000
Freight 3,000
Loading Charges 1,000
Sri Indu sells 700 cases at ` 140 per case and incurs the following expenses:
`
Clearing charges 850
Warehousing and storage 1,700

Packing and selling expenses 600
It is found that 50 cases have been lost in transit and 100 cases are still in transit.
Sri Indu is entitled to a commission of 10% on gross sales. Draw up the Consignment Account
and Indu’s A/c in the books of Sri Lakshami . [9]
Answer:
Sri Lakshmi
Consignment to Chennai Account
Dr. Cr.
Particulars Amount Particulars Amount
(` ) (` )
To Goods sent on consignment 1,00,000 By Indu (sales) 98,000
To Bank (Expenses) 5,000 By Abnormal loss( loss-in-transit) 5,250
50 cases @ ` 105 each
To Indu (Expenses) 3,150 By Consignment Stock A/c 26,400
In hands :
150 @ ` 106 each : 15,900
In transit :
100 @ ` 105 each : 10,500
To Indu(Commission ) 9,800
To, Profit on consignment 11,700
transferred to
Profit & Loss A/c
1,29,650 1,29,650
Dr. Indu’s Account Cr.

Particulars Amount Particulars Amount
(` ) (` )
To Consignment to Chennai 98,000 By Consignment A/c 3,150
A/c (Expenses)
By Consignment A/c 9,800
(Commission)
By Balance c/d 85,050
98,000 98,000
Working Notes:
1. Consignor’s expenses on 1,000 cases are ` 5,000. It comes to ` 5 per case .The cost of
cases lost will therefore be computed at ` 105 (i.e. ` 100+ ` 5) per case
2. Indu has incurred ` 850 on cl earing 850 cases i.e. `1 per case . The consignment Stock
in hand has therefore been valued at ` 106 (`105 + `1) each.
3. From the following Receipts and Payments A/c of Mumbai Club, prepare Income and
Expenditure A/c for the year ended 31.3.2016 and its Balance Sheet as on that date:
Receipts ` Payments `
Cash in Hand 8,000 Salary 4,000
Cash at Bank 20,000 Repair Expenses 1,000
Donations 10,000 Purchase of Furniture 12,000
Subscriptions 24,000 Misc. Expenses 1,000
Entrance Fees 2,000 Purchase of Investments 12,000
Interest on Investments 200 Insurance Premium 400
Interest Received from 800 Billiard Table 16,000

Bank
Sale of Old Newspaper 300 Paper, Ink, etc. 300
Sale of Drama Tickets 2,100 Drama Expenses 1,000
Cash in Hand (Closing) 5,300
Cash at Bank (Closing) 14,400
67,400 67,400
Information:
(a) Subscriptions in arrears for 2015-2016 ` 1,800 and Subscription in advance for 2016 -2017
` 700,
(b) Insurance premium Outstanding ` 80, Misc. Expenses Prepaid ` 180,
(c) 50% of donation is to b e capitalized, Entrance Fees are to be treated as revenue
income,
(d) 8% Interest has accrued on Investment for five months,
Billiard Table costing ` 60,000 was purchased during the last year and ` 44,000 were paid
for it. [15]
Answer:
INCOME AND EXPENDITURE ACCOUNT
Dr. For the year ended 31st March, 2016 Cr.
Expenditure ` ` Income ` `
To Salary 4,000 By Subscriptions 24,000
To Repair Expenses 1000 Add: Outstanding in beg. 1,800
To Misc. Expenses 1000 25,800
Less: Prepaid 180 820 Less: Advance at end 700 25,100
To Insurance Premium 400 By Entrance Fees 2,000
Add: Outstanding 80 480 By Interest on Investment
To Paper, ink, etc. 300 (400 + 200) 600
To Drama expenses 1000 By Sal e of Drama Tickets 2100
To Surplus — Excess of By Interest received from 800
Income over 28,300 Bank
Expenditure By Sale of Newspaper 300
By Donation 10,000
Less: Capitalised (50%) 5,000 5,000
35,900 35,900
BALANCE SHEET OF MUMBAI CLUB AS AT 31ST MARCH, 2016
Liabilities ` ` Assets ` `
Outstanding 80 Billiards table 60,000
Expenses
Subscription in 700 Furniture 12,000
Advance
Capital Fund 72,000 Prepaid Expenses (Misc. ) 180
Add: Surplus 28,300 Subscription receivable 1800
Add: Donation 5,000 1,05,300 Investments 12,000
Interest accrued 400
Bank balance 14,400
Cash on hand 5,300
1,06,080 1,06,080
Working Note: Calculation of Opening capital Fund
Balance Sheet of Mumbai club as At 31st March, 2015

Liabilities ` Assets `
Creditors for Billiards table 16,000 Billiards table 60,000
Capital Fund (balancing 72,000 Bank balance 20,000
figure)
Cash on hand 8,000
88,000 88,000
4. The following was the Balance Sheet of Avinash and Bibha , who were sharing profits and
losses in the ratio of 2:1 on 31.12.19
Capital and Liabilities ` Properties and Assets `
Plant and Machinery 24,00,000
Capital Accounts: Building 18,00,000
Avinash 20,00,000 Stock 8,00,000
Bibha 10,00,000 30,00, 000 Debtors 6,00,000
Sundry Creditors 8,00,000
Reserve 18,00,000 Cash at Bank 2,00,000
Bills Payable 2,00,000
Total 58,00,000 Total 58,00,000
They agreed to admit Chintu into the partnership on the following terms –
(a) There was an unrecorded liability of ` 20,000.
(b) That the building account was to be appreciated by 20%.
(c) That a provision of 5% was to be created for doubtful debts.
(d) The value of stock and plant and machinery were to be reduced by 10%.
(e) The goodwill of the firm was fixed at ` 2,10,000.
(f) Investment worth ` 40,000 (not mentioned in the balance sheet)were taken into
account.
(g) That the value of reserve, the values of liabilities and the value of assets other than
cash are not to be altered.
(h) Chintu was to b e given ¼ share in profit and was to bring capital equal to his share of
profit after all adjustments.
Prepare the Memorandum Revaluation Account, Partners Capital Accounts and Balance
sheet of the newly reconstituted firm in columnar form. [15]
Answer:
Memorandum Revaluation Account

Dr. Cr.
Particulars ` Particulars `
To Plant & Machinery A/c 2,40,000 By Building A/c 3,60,000
To PDD A/c 30,000 By Investment A/c 40,000
To Stock A/c 80,000
To Unrecorded liability A/C 20,000
To Capital A/C(profit)
Avisash 20,000
Bibha 10,000
4,00,000
To Building 3,60,000 By Stock A/C 80,000
To Investment 40,000 By Plant & Machinery A/C 2,40,000
By PDD A/C 30,000
By Unrecorded Liability A/C 20,000
By Capital A/C
Avinash 15,000
Bibha 7,500
Chintu 7,500
Total 4,00,000 Total 4,00,000
Partners’ Capital Account

Dr. Cr.
Particula Avinash Bibha Chintu Particular Avinash Bibha Chintu
` ` ` ` ` `
To Mem. Rev. 15,000 7,500 7,500 By Bal B/d 20,00,000 10,00,000
A/c
To Reserve 9,00,000 4,50,000 4,50,000 By Reserve A/c 12,00,000 6,00,000
A/c
To Av inash 35,000 By Chintu A/c 35,000 17,500

A/c (WN 2)
( WN2)
To Bibha A/c 17,500 By Mem Rev 20,000 10,000
(WN2) A/c
To Bal C/d 23,40,000 11,70,000 11,70,000 By Cash A/c 16,80,000
(WN 1) (bal. fig)
32,55,000 16,27,500 16,80,000 32,55,000 16,27,500 16,80,000
Balance Sheet of newly reconstituted firm as on 31.12.19
Liabilities ` Assets `
Capital A/c Plant and Machinery 24,00,000
Avinash 23,40,000 Building 18,00,000
Bibha 11,70,000 Sundry Debtors 6,00,000
Chintu 11,70,000 Stock 8,00,000
Reserves 18,00,000 Cash 18,80,000
Bills Payable 2,00,000
Sundry Creditors 8,00,000
Total 74,80,000 Total 74,80,000
Working Notes :
1. Calculation of Chintu’s closing capital :

Closing balance of Avinash and Bibha aft er all adjustments :
Avinash = ` 23,40,000
Bibha = ` 11,70,000
Total capital of new firm = 35,10,000 × 4/3 = 46, 80,000
Hence , Chintu‘s closing capital should be ` 11,70,000 (1/4 of 46, 80,000)
2. Adjustment for Goodwill

Sacrifi cing Ration = 2:1
Chintu’s share of goodwill = 2,10,000 × ¼ = `52,500
Avinash Capital A/ c will be credited by = 52,500 × 2/3 = `35,000
Bibha Capital A /c will be credited by = 52,500 × 1/3 = ` 17,500

Chintu Capital A/c will be debited by 52, 500
3. Old profit sharing ratio is 2:1

After admitting Chintu as a partner , new profit sharing ration of the firm is 2:1:1..
5. (a) Trading and Profit and Loss Account of Fimat Gadget and Equipment Co. for the six
months end 31.3.2019 is presented to you in the following form :
Purchases : Sales :
Earphone (A) 3,51,750 Earphone (A) 3,75,000
Charger (B) 2,26,500 Charger (B) 2,50,000
Spare parts (C) 1,61,000 Spare parts (C) 62,500
Salaries and wages 1,20,000 Stock as on
31.3.2019
Rent 27,000 Earphone (A) 1,50,250
Sundry Expenses 27,500 Charger (B) 50,750
Profit 86,250 Spare parts (C) 1,11,500
Total 10,00,000 Total 10,00,000
Required: Prepare Departmental Accounts for each of the three departments A, B,C
mentioned above after taking into account the following :
i. Earphones and Chargers are sold at the showroom and spare parts at workshop.
ii. Salaries and wages comprises as follows :
Showrooms = ¾ and work shop =1/4. It was decided to allocate the showroom
salaries and wages in the ratio of 1:2 between the departments A and B.
iii. The work shop rent is ` 1,250 p er month. The rent of showroom is to be divided equally
between the department A and B.
iv. Sundry expenses are to be allocated on the basis of the turnover of each department.
[9]
Answer:
Dr. Departmental Trading and Profit and Loss Account for year ending 31.3.2019 Cr.
Particulars A B C Particulars A B C
` ` ` ` ` `
To Purchases 3,51,750 2,26,500 1,61,000 By Sal es 3,75,000 2,50,000 62,500

To Gross Profit 1,73,500 74,250 13,000 By Closing 1,50,250 50,750 1,11,500
c/d Stock
5,25,250 3,00,750 1,74,000 5,25,250 3,00,750 1,74,000
To Salaries & 30,000 60,000 30,000 By Gross 1,73,500 74,250 13,000
wages Profit b/d
To Rent 9,750 9,750 7,500
To Sundry 15,000 10,000 2,500
expenses
(6:4:1)
To Net profit 1,18,750 - - By Net Loss - 5,500 27,000
(Department (Department
al) al)
1,73,500 79,750 40,000 1,73,500 79,750 40,000
Dr. General Profit and Loss Account for the year ending 31.3.2019 Cr.
To P&L A/c 5,500 By P&L A/ c 1,18,750

( Deprt. B )
To P&L A/c 27,000
(Deprt. C)
To Profit (to be transferred to 86,250
balance sheet)
1,18,750 1,18,750
Working Notes:
1. Salaries and wages are to be allocated first between showroom 3/4 i.e , ` 90,000;
workshop 1/4 i.e. ` 30,000 . Workshop salaries are to be charged to Department C.
2. Since Earphone and Chargers are sold at showroom, salaries are to be allow ed to
Department A and Department B respectively in the ratio of 1:2.
3. Rent of workshop at ` 1,250 p.m. for six months , ` 7,500 is to be charged to
Department C first and then balance ` 19,500 is to be divided equall y between
Department A & B.
4. Turnover Ratio = 3,75,000 : 2,50,000 : 62,500 = 6:4:1.
(b) Prepare necessary adjustment accounts as they would appear in General Ledger of the
company:
` `
Credit Purchases 52,500 Paid to Creditors 26, 250
Discount Allowed 5,250 Bills payable 17,500
accepted
Discount Received 1,750 Received from 70,000
debtors
Bad Debts 17,500 Closing Debtor 2,10,000
because
Bills accepted by 10,500 Closing Creditors 1,05,000
customers Balance
Credit Sales 1,40,000
Discount allowed to debtors ` 1,750 was recorded as discount received from creditors. [6]
Answer:
Dr. Sales Ledger Adjustment Account Cr.

In General Ledger
To Balance b/d (bal. fig.) 1,73,250 By General
Adjustment A/c in
Sales Ledger
Cash 70,000
To General Adjustment B/R 10,500
A/c in Sales ledger
credit sales 1,40,000 Bad Debts 17,500
Discount allowed 7,000
(5,250 + 1,750)
By balance c/d 2,08,250
(2,10,000- 1,750)
3,13,250 3,13,250
Dr. Purchase Ledger Adjustment Account Cr.

In General Ledger
To General Adjustment A/c To balance b/d (bal. fig.) 98,000
in Purchase ledger
Cash 26,250 To General Adjustment A/c
in Purchase ledger
B/P 17,500 Credit Purchases 52,500
Discount Received -
(1,750-1,750)
To balance c/d 1,06,750
(1,05,000+1,750)
1,50,500 1,50,500
6. (a) A company maintains its reserve for bad debts @ 5% and a reserve for discount on
debtors @ 2%. You are given the following details :
2012 (` ) 2013 (` )
Bad debts 1,600 3,000
Discount allowed 2,400 1,000
Sundry debtors (before providing all bad debts and discounts ) amounted to
` 1,20,000 on 31.12. 2012 and ` 84,000 on 31.12.2013.
On 1.1.2012, Reserve for bad debts and Reserve of discount on debtors had
balance of ` 9,100 and ` 1,600 respectively.
Show Reserve for Bad Debts and Reserve for Discount on Debtors Account . [6]
Answer:
In the books of …………..
Reserve for Bad Debts Account
Dr. Cr.
Date Particulars Amount Date Particulars Amount
(`) (`)
31.12.2012 To Bad debt 1,600 1.1.2012 By bal. b/d 9,100
A/c
31.12.2012 To P/L A/c 1,700
(provision
found excess)
31.12.2012 To Bal. c/d 5,800
(5% on
1,16,000)
9,100 9,100
31.12.2013 To Bad debt 3,000 1.1.2013 By Bal b/d 5,800
A/c
31.12.2013 To Balance c/d 4,000 31.12.013 By P/L 1,200
(5% on ` (for the
80,000) provision
required )
7,000 7,000
Reserve for Discount on Debtors Account

Dr. Cr.
31.12.2012 To Discount 2,400 1.1.2012 By Bal b/d 1,600
Allowed A/c
31.12.2012 To balance c/d 2,204 31.12.2013 By P/L A/c 3,004
(2% on ` 1,16,000- (further
5,800) provision
required)
4,604 4,604
31.12.2013 To Discount 1,000 1.1.2013 By bal b/d 2,204
allowed
31.12.2013 To bal c/d 1,520 31.12.2013 By P/L A/c 316
(2% on ` 80,000- (further
4,000) provision
required)
2,502 2,502
(b) Dimpi Ltd took certain lands on lease from Sumpi Ltd for a period of 15 years, for mining
limestone with a stipulated royalty of ` 1.5 per ton and a minimum rent of ` 2,10,000 with a
clause to recoup shortcomings over three subsequent years. The actual working results were:
Year Output (Tonnes) Actual Royalty (`)

1998 80,000 1,20,000
1999 1,60,000 2,40,000
2000 1,30,000 1,95,000
2001 1,70,000 2,55,000
2002 4,38,000 6,57,000
You are required to show the Royalties A/c, Short Working A/c, Sumpi Co. A/c and all
calculations in the books of Dimpi Ltd . [9]
Answer:
Royalties Payment Statement
Year Actual Minimum Short Workings Amount
Royalties Rent Payable
Occurred Recoup ed Lapsed
1998 1,20,000 2,10,000 90,000 - 2,10,000

1999 2,40,000 2,10,000 - 30,000 2,10,000
2000 1,95,000 2,10,000 15,000 - 2,10,000
2001 2,55,000 2,10,000 - 45,000 15,000 2,10,000
2002 6,57,000 2,10,000 - 15,000 - 2,56,800
In the books of Dimpi Ltd.

Dr. Royalties Account Cr.
1998 To Sumpi Ltd 1,20,000 1998 By P&L A/ c 1,20,000
1,20,000 1,20,000
2,40,000 2,40,000
1,95, 000 1,95,000
2,55,000 2,55,000
6,57,000 6,57,000
Dr. Short working Account Cr.

1998 To Sumpi Ltd 90,000 1998 By Balance C/d 90,000
90,000 90,000
1999 To Balance B/d 90,000 1999 By Sumpi Ltd A/c 30,000
By Balance C/d 60,000
90,000 90,000
2000 To Balance B/d 60,000 2000 By Balance C/d 75,000
To Sumpi Ltd 15,000
75,000 75, 000
By Profit & Loss A/c 15,000
By Balance C/d 15,000
75, 000 75,000
15,000 15,000
Dr. Sumpi Ltd. Account Cr.

1998 To Bank A/c 2,10,000 1998 By Royalties 1,20,000
By Short Workings 90,000
2,10, 000 2,10,000
To Short Workings 30,000
2,40,000 2,40,000
By Short Workings 15,000
2,10,000 2,10.000
2,55,000 2,55,000
6,57,000 6,57,000
7. (a) BPL is leading distributor of petrol. A detail inventory of petrol in hand is taken when the
books are closed at the end of each month. At the end of month following information
is available : [9]
Sales = ` 23,62,500
General overhead cost = ` 62,500
Inventory at beginning 50,000 litres @ ` 15 per litre.
Purchases
June 1 : 1,00, 000 litres @ ` 14.25
June 30 : 50,000 litres @ ` 15.15
Closing inventory 65,000 litres.
Compute the following by the FIFO as per AS-2 :

(i) Value of Inventory on June 30.
(ii) Amount of cost of goods sold for June.
(iii) Profit/Loss for the month of June.
Answer:
i. Cost of closing inventory for 65,000 litres as on 30 t h June
`
50,000 litres @ ` 15.15 7,57,500
15,000 litres @ ` 14.25 2,13,750
Total 9,71,250
ii. Calculation of cost of goods sold
Opening inventories 50,000 litres @ `15 7,50,000

Purchases June 1 1,00,000 litres @ ` 14.25 14,25,000
June 30 50,000 litres @ ` 15.15 7,57,500
29,32,500
Less : Closing (9,71,250)
inventories
Cost of goods sold 19,61,250
iii. Calculation of profit :

Sales (Given ) (A) 23,62,500
Cost of goods sold 19,61,250
Add: General overheads 62,500
Total cost (B) 20,23,750
Profit (A-B) 3,38,750
(b) List the salient features of computerized accounting system. [6]
Answer:
Computer information system environment exists when one or more computer(s) of any
type or size is (are) involved in the processing of any information, whether those
computers are operated by the entity or by a third party. A computerised accounting
environment will therefore have the following salient features:
1. The pro cessing of information will be by one or more computers.
2. The computer or computers may be operat ed by the entity or by a third party.
3. The processing of financial information by the computer is done with the help of
one or more computer softwares.
4. A computer software includes any program or routine that performs a desired
function or set of functions and the do cumentation required to describe and
maintain that program or routine.
5. The computer software used for the accounting system may be an acquired
software or may be developed specificall y for the business.
6. Acquired software may consist of a spread sheet package or may be
prepackaged accounting software.
8. Write short notes on any three of the following: [3x5=15]
(a) Abnormal Losses;

(b) The Accrual Concept ;
(c) Bearer plant;
(d) Operating Cycle of Consignment Arrangement :
Answer:
(a) Abnormal Losses-
Abnormal Losses arises as a result of negligence/accident etc., e.g., theft, fire etc.
Before ascertaining the result of the consignment, value of abnormal loss should be
adjusted. The method of calculation is similar to the method of calculating unsold
stock. Sometimes insurance company admits the claim in part or in full. The same
should also be adjusted against such abnormal loss. While valuing the abnormal loss
the proportionate expenses are taken onl y upto the stage of the loss. For example, if
goods are lost in the transit on way to the consignee's place, the value of abnormal
loss will include the basic cost of the goods plus proporti onate expenses of the
consignor only and not the proportionate expenses of consignee because consignee
has spent nothing on account of these goods.
Treatment of Abnormal Loss

(i) For abnormal Loss –
Abnormal Loss A/c Dr
To Consignment A/c
(ii) For the insurance claim due / received by the consignor
Insurance Co./Bank A/c Dr
To Abnormal Loss A/c
(iii) If goods are not insured –
Profit & Loss A/c Dr
To Abnormal Loss A/c
(iv) For transferring the net loss –
Profit & Loss A/c Dr \
To Abnormal Loss A/
(b) The Accrual Concept-
The accrual concept is based on recognition of both cash and credit transactions. In
case of a cash transaction, owner's equit y is i nstantly affected as cash either is
received or paid. In a credit transaction, however, a mere obligation tow ards or by the
business is created. When credit transactions exist (which is generally the case),
revenues are not the same as cash receipts and expenses are not same as cash paid
during the period. When goods are sold on credit as per normally accepted tr ade
practices, the business gets the legal right to claim the money from the customer.
Acquiring such right to claim the consideration for sale of goods or services is called
accrual of revenue. The actual collection of money from customer could be at a la ter
date.
Similarly, when the business procures goods or services with the agreement that the
paym ent will be made at a future date, it does not m ean that the expense effect
should not be recognized. Because an obligation to pay for goods or services is
creat ed upon the pro curem ent thereof, the expense effect also must be recognized.
Today's accounting systems based on accrual concept are called as Accrual System
or Mercantile Syst em of Accounting.
(c) Bearer plant –
Bearer plant is a plant that

(a) is used in the production or supply of agricultural produce;
(b) is expected to bear produce for more than a period of twelve months; and
(c) has a remote likelihood of being sold as agri cultural produce, except for incidental
scrap sales.
The following are not bearer plants:
(i) plants cultivated to be harvested as agricultural produce;
(ii) plants cultivated to produce agricultural produce when ther e is more than a remote
likelihood that the entity will also harvest and sell the plant as agricultural produ ce,
other than as incidental scrap sales;
(iii) annual crops.
(d) Operating Cycle of Consignment Arrangement:
(i) Goods are sent by consignor to the consignee.

(ii) Consignee may pay some advance or accept a bill of exchange.
(iii) Consignee will incur expenses for selling the goods.
(iv) Consignee maintains records of all cash and credit sale.
(v) Consignee prepares a summary of results called as Account sales.
(vi) Consignor pays commission to the consignee. Sometimes, the consignor may send
the goods at a price higher than cost so that the consignee gets no knowledge of the
real cost of goods which is confidential for the consignor.

Answer To MTP - Intermediate - Syllabus 2016 - June2020 - Set1: Paper 5-Financial Accounting

Uploaded by

Copyright:

Available Formats

Answer To MTP - Intermediate - Syllabus 2016 - June2020 - Set1: Paper 5-Financial Accounting

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Answer To MTP - Intermediate - Syllabus 2016 - June2020 - Set1: Paper 5-Financial Accounting

Uploaded by

Copyright:

Available Formats

Answer to MTP_Intermediate_Syllabus 2016_June2020_Set1

Paper 5- Financial Accounting

Paper 5- Financial Accounting

1. Answer the following questions

(A) Multiple choice questions: [10x1=10]

(i) Income and Expenditure Account is a

(ii) Accounting standard in India are issued by

(iii) Creditors ledger adjustment account is opened in

(iv) If any stock is taken by a co-venturer, it will be treated as

(v) Which of the following is of capital nature?

(viii)Exception to consistency principle is

(b) Going Concern Principle

(B) Match the following: [5x1=5]

Column ‘A’ Column ‘B’

Column ‘A’ Column ‘B’

(C) Fill in the blanks: [5x1=5]

(i) The amount invested by owners into business is called _____________.

Answer any five questions out of seven questions.

Provision for Depreciation Account

Machinery Disposal Account

2. Depreciation for the machine purchased on 1.1.2011

Warehousing and storage 1,700

Dr. Indu’s Account Cr.

Interest Received from 800 Billiard Table 16,000

BALANCE SHEET OF MUMBAI CLUB AS AT 31ST MARCH, 2016

Balance Sheet of Mumbai club as At 31st March, 2015

Total 58,00,000 Total 58,00,000

Memorandum Revaluation Account

Partners’ Capital Account

To Av inash 35,000 By Chintu A/c 35,000 17,500

Balance Sheet of newly reconstituted firm as on 31.12.19

1. Calculation of Chintu’s closing capital :

2. Adjustment for Goodwill

Bibha Capital A /c will be credited by = 52,500 × 1/3 = ` 17,500

3. Old profit sharing ratio is 2:1

To Purchases 3,51,750 2,26,500 1,61,000 By Sal es 3,75,000 2,50,000 62,500

To P&L A/c 5,500 By P&L A/ c 1,18,750

Dr. Sales Ledger Adjustment Account Cr.

Dr. Purchase Ledger Adjustment Account Cr.

Reserve for Discount on Debtors Account

Year Output (Tonnes) Actual Royalty (`)

1998 1,20,000 2,10,000 90,000 - 2,10,000

In the books of Dimpi Ltd.

Dr. Short working Account Cr.

Dr. Sumpi Ltd. Account Cr.

Compute the following by the FIFO as per AS-2 :

i. Cost of closing inventory for 65,000 litres as on 30 t h June

ii. Calculation of cost of goods sold

Opening inventories 50,000 litres @ `15 7,50,000

iii. Calculation of profit :

(b) List the salient features of computerized accounting system. [6]

8. Write short notes on any three of the following: [3x5=15]

(a) Abnormal Losses;

(a) Abnormal Losses-

Treatment of Abnormal Loss

(b) The Accrual Concept-

(c) Bearer plant –

Bearer plant is a plant that

(d) Operating Cycle of Consignment Arrangement: