APER-1: Fundamental of Accountancy Page No: 9-100: June 2001, FOA/Foundation

EIA Scanner/CA Profession Level-I /ICAN/ Paper-1: Fundamental of Accountancy 9
PAPER-1: Fundamental of Accountancy Page no: 9-100

June 2001, FOA/Foundation
Attempt all questions.
1. Chatterjee, Mukherjee and Banerjee, who were sharing profits and losses in the ratio of 3:2:1 furnish their
Balance Sheet as at 31.3.2000: 20
Liabilities Rs Assets Rs
Partners Capital Fixed Assets 1,20,000
Chatterjee 1,00,000 Sundry Debtors 2,40,000
Mukherjee 1,50,000 Stock in trade 1,20,000
Banerjee 50,000 Joint Life Policy 15,000
General reserve 60,000 Cash on Hand/ Bank 5,000
Sundry Creditiors 1,40,000
5,00,000 5,00,000
On 31.12.2000, partner Mukherjee died. The terms of settlement are as under:
i) Goodwill to be valued at 3 years purchase of the average profit of 4 earlier years.
The profit were:
1996-1997-Rs 34,000 1997-1998-Rs 41,000
1998-1999- Rs 45,000 1999-2000-Rs 50,000
Partners decide that goodwill proportionate to Mukherjee should be borne by continuing partners in
gaining ration and goodwill hence should not be appear in the books.
ii) The deceased partner Mukherjee to be given share of profit upto the date of death on the basis of the
profit of the firm for the year ended 31.3.2000. The profit paid to Mukherjee is to be borne by the
continuing partners Chatterjee and Banerjee in 3:7 ratio.
iii) Fixed Assets and Sundry Debtors to be valued less by 10%.
iv) Joint Life Policy was for Rs 60,000 invoked upon Mukherjee’s demise.
v) Chatterjee and Banerjee to continue the business by sharing Profit and loss in 3:2 ratio.
2. X & Co. of Chennai sent on consignment goods to Y & Co. of Mumbai at an invoice price of Rs 30,000 and
paid Freight Rs 892, Cartage Rs 300 and Insurance Rs 1,000. 15
Half of the goods was sold by the agent for Rs 19,500 subject to agent’s commission of Rs 920, storage
expenses Rs 250 and other selling expenses of Rs 500. One fourth of the consignment was lost by
earthquake and a sum of Rs 3,500 was recovered from insurance company.
Show necessary accounts in the Books of X and Co and ascertain the profit or loss assuming the closing
stock to be one fourth of the consignment. A two months bill for the amount due was received from the
agent.
3. The Trial Balance of M/s S.B & Associates at 31.3.1999 did not agree. The accountant placed the difference
to the Suspense Account and carried forward this difference to the next period for necessary adjustments. 9
Later the auditor of the company found the following errors in 1999-2000:15
a. An item of purchase of Rs 262 was recorded in the Purchase Day book as rs 62 and posted to the debit
of the Supplier’s Account as Rs 26.
EIA CA Classes | Srijanachowk Pokhara, Email: inquiryca@eiapokhara.com, web: www.eiapokhara.com
b. Credit Sales of Rs 397 was posted to the credit of the Customer’s Account as Rs 79.
c. Rs 500 allowed as cash discount to a trade debtor was not debited to the discount Account.
d. Sales Day- book was overcast by Rs 1,000 in February, 1999.
e. Cycle purchased for Rs 3,500 in cash was posted to the purchase account in the ledger.
Show the necessary Journal Entries to rectify these errors and show Suspense Account and Profit & Loss
Adjustment Account in the books of the firm.
4. Following are the details furnished by Romen Club. You are required to prepare Balance Sheet at 31,3,
2000 and 3.3.2001:
Receipts and Payments Account for the Year Ended 31.3.2001
Receipts Rs Payments Rs
To Balance Cash 3,400 Salaries 12,100
Bank 12,400 Insurance 3,150
Entrance Fees 14,500 Furniture Purchased(30.9.2000) 5,300
Subscription Received: Postage 2,550
Year 1999-2000 3,200 Printings & Stationery 6,750
Year 2000=2001 44,500 Sundry Expenses 4,500
Sale of Old Newspaper 1,100 Member Meeting Expenses 25,100
Lecture meet fees 3,800 Closing Balance:
Sale of Old Furniture 5,650 Cash 13,500
(1.10.2000) Bank 15,600
88,550 88,550
5. State with reasons whether the following statements are ‘true’ or ‘false’: 20
a. The balance in the Cash book shows income.
b. In accounting, all business transactions are recorded as having dual aspect.
c. Depreciation cannot be provide in case of loss, in a financial year.
d. Amount paid for acquiring goodwill is deferred revenue expenditure.
e. Rectification of errors will not necessarily balance trial Balance.
f. If there appears a sports fund, the expenses on sports activities will be taken to Income and
Expenditure account.
g. Heavy advertising expenditure to introduce a new product is Capital Expenditure;
h. An expenditure intended to benefit the period is revenue Expenditure.
i. Amount spent for the replacement of worn parts os a machine is not a Capital Expenditure.
j. Finished Goods are normally valued at cost or market price whichever is lower.
6. Write short notes on nay three of the following:
a. Trade Discount 5 10
b. Del- credere Commission 5
c. Prepaid Expenditure and Deferred revenue Expenditure. 5
d. Intangible asset and fictitious Assets 5
December 2001, FOA/Foundation

Attempt all questions. Working should Form part of your answer.
1. The following is the Trial Balance of T on 31st July, 2001: 20
Particulars Dr. (Rs) Cr. (rs)
Capital - 6,00,000
Drawings 70,000 -
Fixed Assets (opening) 1,40,000 -
Fixed Assets ( Additions 1.2.2001) 2,00,000 -
Opening stock 60,000 -
Purchases 16,00,000 -
Purchase Returns - 69,000
Sales - 22,00,000
Sales returns 99,000 -
Debtors 2,50,000 -
Creditors - 2,20,000
Expenses 50,000 -
Fixed Deposit with Bank 2,00,000 -
Interest on Fixed Deposit - 20,000
Cash - 8,000
Suspense A/c - 2,000
Depreciation 14,000 -
Rent (17 months up to 17,000 -
31.12.2001)
Investments 12% (1.12.2000) 2,50,000 -
Bank Balance 1,69,000 -
31,19,000 31,19,000
Stock on 31st July 2001 was valued at rs 1,00,000. Depreciation is to be provided at 10% per annum on
fixed assets purchased during the year. A scrutiny of the books of account revealed the following matters:
(i) Rs 20,000 drawn from bank was debited to drawing account, but out of this amount with drawn Rs
12,000 was used in the business for day to day expenses.
(ii) Purchase of goods worth Rs 16,000 was not recorded in the books of account upto 31.7.2001, but the
goods were included in stock 11
(iii) Purchase returns of Rs 1,000 was recorded in Sales Return Journal and the amount was correctly
posted to the Party’s A/c on the correct side.

(iv) Expenses included Rs 6,000 in respect of the period after 31st July, 2001.
Give the necessary Journal Entries in respect of (i) to (iv) and prepare the Final Account for the year
ended 31st July , 2001.
2. P, O and R are equal partners and their Balance Sheet on 31st march 2001 is as under:
Balance Sheet
Bills Payable 45,000 Cash 20,000
Creditors 60,000 Debtors 40,000
Reserve 24,000 Stock 85,000
Capital: Furniture 30,000
P 75,000 Building 1,65,000
Q 69,000
R 67,000
2,11,000
3,40,000 3,40,000
S is admitted into partnership on 1st April, 2001 for 1/4th Share in the profits subject to the following:
(i) S should bring in Rs 30,000 for goodwill and rs 75,000 as capital.
(ii) ½ of the goodwill amount will be withdrawn by the old partners.
(iii) Furniture and Stock to be reduced by 10%
(iv) 5% provision for Doubtful debts to be created.
(v) A liability of Rs 4,000 in respect of an outstanding repair bill should be provided.
(vi) Building is to be revalued at Rs 2,20,000
(vii) Value of assets and liabilities other than cash are not to be altered.
Give the necessary Ledger Accounts to give effect to the above and the opening Balance Sheet of the firm
3. a. Rajeev commenced business in March, 1999. He acquired some machines for Rs 2,00,000 on 1.4.99. He
acquired another machine for Rs 50,000 on 1.3.2001. He sold machines, original cost of which was Rs
60,000 for Rs 35,000 on 31.10.2000. Assuming depreciation @ 15% under WDV basis, compute the
depreciation for the year ended 31.3.2000 and 31.3.2001. 9
Depreciation to be calculated to the nearest rupee.
b. Ramesh purchased in September, 2000 a machine for Rs 5,00,000. He obtained trade discount of Rs
10,000. The machine will have estimated useful life of 35000 hours. The scrap value of the machine was
estimated of Rs 35,000. Calculate the depreciation by machine- Hour rate method for the following
years on the assumption that it was put to use from 1.10.2000. 6
Machine used for:
2000-2001 (October, 2000 to March, 2001) = 2,000 hours
12
2001-2002 (April,2001 to March, 2002) =5,000 hours
2002-2003 (April , 2002 to March, 20030 =7,000 hours

4. On 1.4.2000, Raghav consigned 1,000 tins of Ghee@ Rs 1,800 per tin to Rahim. Raghav incurred Rs
10,000 towards packing and lorry charges. Rahim received delivery of goods and incurred Rs 3,000
towards unloading charges. Rahim incurred following expenses; Rent @ Rs 2,000 per month; Salary to
Staff@ rs 3,000 per month. General expenses@ Rs 2,000 per month. He was allowed to recover these
expenses from the consignor viz Raghav. 15
Up to 30.9.2000 Rahim sold 600 tins @ Rs 2,000 per tin. He was eligible for Rs 5% commission on sales.
Rahim retained the unsold goods. Prepare Consignment Account in the books of Raghav for the period
from 1.4.2000 to 30.9.2000.
5. State with reasons whether the following statements are True / False.
(i) Wrong casting of subsidiary books does not affect the Trial Balance.
(ii) Deferred Revenue Expenditure is current year’s revenue expenditure to be paid in later years.
(iii) Contingent liability is an ascertained liability, but its amount and due date are indeterminate.
(iv) patent Rights is in the nature of a Personal Account.
(v) Interest charged by bank will be deducted, when the overdraft as per Cash book is the starting point
for preparing a Bank Reconciliation Statement.
(vi) Higher depreciation charge does not affect the cash profit of the business.
(vii) X draws a bill on Y. Y accepts the same and discount it with his bank.
(viii) Expenditure on renovation of a transport vehicle, which has increased the seating capacity by 10%,
is revenue expenditure.
(ix) Heavy advertisement expenditure to introduce a new product is Capital expenditure.
(x) Purchase Book records all credit purchases of goods.
6. Briefly explain any three of the following:
(a) Self balancing Ledgers 5
(b) Trade Discount 5
(c) Account Current 5
(d) Red Ink Interest 5
Note:

Answer any all questions. Working notes should from part of your answer.
1) The following is the Trial Balance of A as on 31st March 2002;
Particulars Dr. Rs Cr. Rs
A’s Capital Account - 7,50,000 13
A’s Drawings Account 15,000 -

Bank Loan - 14,400

Sales - 9,45,000
Return Inward and Outward 15,000 -
Discount 3,000 -
12% Investment (1.7.2001) 75,000 -
Bad Debts recovered - 5,250
Fixed Assets 4,50,000 -
Opening Stocks 1,12,500 -
Debtors 3,07,500 -
Bank Balance 37,500 -
Interest - 4,500
Carriage Inwards 10,500 -
Rent 4,500 -
Insurance 5,400 -
Office Expenses 19,800 -
Bad Debts 7,500 -
Interest 3,750 -
Selling Expenses 23,700 -
18,78,150 18,78,150
Adjustment:
(i) Closing stock is Rs 85,800 on 31.3.2002
(ii) Rent is payable at the rate of Rs 450 p.m from 1.4.2001.
(iii) Insurance is paid for the year ending 30.6.2002.
(iv) Interest is receivable half yearly on 30th June and on 31st December on the Investment.
(v) Write off further bad debts Rs 7,500.
(vi)Provision for Doubtful Debts should be 10% and Provision for Discount on Debtors and Creditors
should be 2%
(vii) Depreciation fixed assets at 10%.
Prepare Trading, Profit and loss account for the year ending 31st March 2002 and a Balance Sheet as at
that date. 20
2. a) From the following information determine the value of stock for the Balance Sheet as on 31.12.2001
Rs
Value of stock on 23.12.2001 7,50,000
14
Transaction between 23.12.2001 up to 31.12.2001
(i) Purchases Rs 62,500 of which goods worth Rs 25,000 were delivered on 5.1.2002.
(ii) Of the goods sent on consignment goods worth Rs 37,500 were unsold.

(iii) Sales were Rs 212,500 out of which goods worth Rs 50,000 were sent on approval. Half of these
were returned before 31.12.2001 but regarding the remaining no intimation is received.
Normally goods are sold at cost plus 25%. However one lot of goods costing Rs 37,500 was sold for Rs.
18,750. 8
b) From the following information prepare the Bank Reconciliation Statement of B as on 31 st January
2002. 7
Balance as per Pass Book Rs 30,000
Cheque collected for B credited to C Rs 1,500
Cash Deposit of RS 4,770 recorded by Bank Rs 4,800
Pass Book withdrawal column under cost Rs 300
Credit entry of Rs 4,500 in Pass Book Wrongly entered on debit side
Cheque paid by bank recorded twice in pass book 1,050
D’s cheque of Rs 3,000 wrongly credited by bank to the account B
3. Mr. Green of New Delhi purchased 10,000 pieces of sarees at Rs 100 per saree, out of these 6,000 sarees
were sent on consignment to Mr. White of Calcutta at the selling price of RS 120 per saree. The consignor
paid Rs 3,000 for packing and freight. Mr. White sold 5,000 sarees at Rs 125 per saree and incurred Rs
1,000 for selling expenses and remitted rs 5,00,000 to New Delhi no account. Mr. White is entitled to a
commission at 20% of surplus price realized over invoice price. At the end of the year , owing to recession
in the market selling price of a saree has come down by 10% of Rs 120.
You are required to prepare the Consignment Account in the books of Mr Green and Mr Green’s account in
the books of agent Mr. White. 15
4. a) Mr. X and Mr. Y were partner of a firm X and Co. They share profit and losses in the ratio of 3:2. Their
Balance Sheet as on 31.3.2001 was as under. 7
Balance Sheet of X and Co. as on 31.3.2007
X’s Capital 1,80,000 Investments 1,00,000
Y’s Capital 1,20,000 Bills receivable 40,000
Sundry Creditors 60,000 Cash on Hand 1,80,000
Bills Payable 60,000 Cash at Bank 1,00,000
4,20,000 4,20,000
The partnership deed provides that on the death of a partner his legal heir be entitled to:
(i) The capital to his credit at date of death.
(ii)His (deceased Partner’s proportion of profit to the date of death based on the average profit of the
last three completed years.
(iii) He be entitled to his Share of Goodwill based on the average profits of the last three completed
years. The accounts are closed on 31st March every year.
15
(iv) Profit for the three years were as under.
Rs
2000-2001 84,000

1999-2000 78,000
1998-1999 90,000
Mr Y died on 1st July 2001. You are asked to prepare Mr Y’s Executors account after ascertaining his
shares of goodwill, his share in the profits of the firm up to the date of death of Mr.Y
b) On 1st January 2001,P draws a bill of Rs 50,000 on Q who accepts the same and returns it to P. Draw
up the necessary Journal entries in the books of P in the following cases when the following cases when
the bills is dishonored on the due date (1.4.2001) 8
(i) Bill has been retained till the due date and noting charges paid are Rs 500.
(ii) On 4.2.2001, P discount the bill with the Bank at 15% P.A.
(iii) P endorses the bill on 1.2.2001 infavour of his creditors R in fill settlement of his dues of Rs
51,000. R paid noting charges of Rs 500.
(iv) P had sent the bill to the bank for collection and bank paid noting charges of Rs 500.
5) State giving reasons whether the following statement are true or false. 2×10=20
(i) Assets are classified as current assets and fixed assets in a accordance with Accounting Period
Assumption.
(ii) A bank reconciliation statement is prepared to reconcile the Cash Balance as per Cash Book with the
Bank Balances as per Pass Book.
(iii) Gross Profit is the difference between Sales and Purchases.
(iv) Provision is an appropriation of profits.
(v) When a bill receivable is discounted the discount charges are debited to the Consignment Account.
(vi) The balance in petty cash book represents an asset.
(vii) Provision is an ascertained liability but the amount is indeterminate.
(viii) Unless otherwise stated the ratio of sacrifice in the profits of a partnership is the same as the old
profit sharing ratio.
(ix) Employees Provident Fund should be transferred to Partner’s Capital Accounts in case of dissolution
of a firm.
(x) Fixed costs remain relatively unaffected over a defined period of time.
6) Distinguish between (any THREE) of the following:
a)Revaluation A/C and Realization A/C 5
b) Revenue reserve and Capital Reserve 5
c) Joint Venture and Consignment A/C 5
d) Trade Bills and Accommodation Bills 5
December 2002, FOA/Foundation 16

Answer all questions. Working notes should form part of your answer.
1. The following is the Trial Balance of a firm, as no 31st March,2002. 20

Particulars Dr (Rs) Cr. (Rs)

Capital - 2,40,000
Plant & Machinery 1,80,000 -
Furniture 45,000 -
15% Bank Loan - 60,000
Bills Payable and Receivable 60,000 66,000
Accounts receivable & Payable 1,50,000 72,000
Inventories (1-4-2001) 1,05,000 -
Provision for Bad Debt - 3,600
Sales - 6,08,400
Cash in Hand 3,000 -
Rent and Taxes 30,000 -
Wages 48,000 -
Salaries 69,000 -
Total 10,50,000 10,50,000
Additional Information:
a) The value of inventories on 31st March2002 was estimated at rs 1,20,000.
b) Write off Rs 7,500 on Account Receivable as bad debt and increase the Provision for Bad debt on
Rs 4,500.
c) Unpaid expenses: Wages Rs 4,5000, Salaries Rs 13,500.
d) Write off 10% on Plant and 20% on Furniture’s as depreciation.
e) Inventory costing Rs 7,500 were destroyed by fire and Insurance Company admitted a claim for same
amount.
f) The proprietor has been taken inventory costing Rs 1,500 for personal use, for which no entry has
been made.
Required: Trading & Profit and Loss Account for the year ending 31st March.2002 and Balance Sheet as on
that date
2.a) Ram draws a bill for Rs 45,000 and and Shyam accepts the same for the mutual accommodation of both
Of them to the extent of Ram 1/3 and Shyam 1/3. Ram discounts the same for Rs 42,3000 and remits 1/3
Of the proceeds to Shyam. Before the due date, Shyam draws another bill for Rs 63,000 on Ram in order to
provide funds to meet the first bill. The second bill is discounted for Rs 61,200 with the help of which the
first bill is met and Rs 10,800 is remitted to Ram. Before the due date of the second bill, Ram became
bankrupt and Shyam receives a dividend of 50 paisa in the rupee in full satisfaction.
Pass necessary Journal entries in the books of Ram 7
b) Given below is the Receipt and Payment Account of a club, for the year ended 31st December, 2001.8 17
Receipt & Payment Account
Receipt Ra Payment Rs

To Balance b/d 35,000 By Charities 72,000

To Donation 40,000 By Staff Salaries 13,000
To Subscription 20,000 By Rent and Taxes 5,000
To Endowment Fund 75,000 By Printing & Stationery 3,000
To Legacies 30,000 By Postage 1,000
To Interest on Investment 47,000 By Advertisement 1,000
To Interest on Deposit 1,000 By Purchase of Furniture 4,000
To Sales of old furniture 1,000 By investment 75,000
By Premises 25,000
By Balance c/d 50,000
2,49,000 2,49,000
i. outstanding expenses: Rent Rs 1,000, Salaries Rs 2,000
ii. Interest on investment accrued Rs 1,000.
iii. One half of legacies and donation have been capitalized.
Required: Prepare an Income & Expenditure Account for the year ended 31st December 2001.
3. The following is the Balance Sheet of A and B on 31st March, 2000, profits being divided two third to A and
One third to B. 15
Sundry Creditors Cash a Bank 37,500
Bills Payable Sundry Debtors 75,000
Capital Account: Bills Receivable 25,000
A 1,50,000 Stock 75,000
B 1,00,000 Furniture 12,500
Land & Building 1,50,000
3,75000 3,75,000
On 1st April 2002 they decided to admit C as partner on the following terms:
a) That C pays Rs 75,000 as capital and Rs 30,000 for goodwill for a fourth share in the future profit.
b) That there is likely to be a claim against the firm for damage for which a provision to the extent of Rs
7,000 is to be made.
c) Stock is to be reduced to Rs 63,000 and furniture by Rs 1,500.
d) That 5% reserve for bad debt is to be created.
e) The value of land & building is to be appreciated by 20%.
f) That included in sundry creditors is an item or Rs 5,000 which is not to be paid and therefore has to be
written back. 18
You are required to show: i. Revaluation Account
ii. Partner’s Capital Account
iii. Opening Balance Sheet.
4. a) K of Kathmandu consigned the goods to P of Palpa. The total cost of the product is Rs 2,00,000. The
Invoice was made Performa so as to show a profit of 25% on cost. K paid insurance and transportation
Cost Rs 4,000. P sold part of consignment for Rs 1,76,000 at uniform price of 10% over invoice and
spent Rs 6,000 as warehouse charge and Rs 2,000 as selling expenses. P is entitled to a commission of
5% on Sales and 20% of the net profit after charging such commission on sales. P paid the amount due
by bank draft.
Required: Prepare Consignment Account in the books of K. 7
b) Give Journal entries to rectify the following errors: 8
i. A purchase of goods from Mr. X amounting to Rs 10,000 has been wrongly entered through sales book.
ii. An amount of Rs 5,000 due from Raj which had been written off as debt in previous year was recovered
and had been posted to the personal account of Raj.
iii. A credit sales of Rs 6,000 to Raju has been wrongly passed though the Purchase Book.
iv. A cheque of Rs 2,500 received from Rajesh and sent to bank at once, was entered in the cash column of
the Cash Book and was posted to credit of Rakesh Account.
5. State giving reasons whether the following statements are true or false. 10×2=30
a. According to money measurement concept only transactions that can be expressed in money are
recorded in accounts.
b. The purchase of machinery for the business is recorded in Purchase Journal.
c. The trial balance is a part of the ledger.
d. Legal fees to acquire property are revenue expenditure.
e. Computers of a firm should be classified as Fixed Assets.
f. In case of diminishing balance method of depreciation the assets gets reduced to zero.
g. Subscription received in advance is not shown is Receipt and Payment Account.
h. Total Creditors Account as the very name implies shows only credit balance.
i. No entry for self balancing is required when a transaction affects only on ledger.
j. Periodic inventory method makes into account physical count of stock as on the date of accounting
6. Briefly explain any three of the following: 3×5=15
a. Relationship of Account with Economics
b. Depreciation Fund Method.
c. Features of Joint Ventures
d. Calculation of interest by the use of Product Method.

Attempt all questions. Working notes should form part of your answer.
1. The following is the trial balance of Mr. Khanal as on 31st March, 2003: 20 19
Particulars Dr.(Rs) Cr.(Rs)

Capital - 1,50,000

Drawing 40,000
Stock (1-4-2002) 90,000
Purchases 6,50,000
Carriage Inward 10,000
Sales - 8,00,000
Return inward & outward 20,000 1,000
Rent and taxes 25,000
Wages 6,000
Salaries 18,000
Sundry Debtors & Creditors 52,000 32,000
Bank Loan@12% per annum - 40,000
Printing & Stationery 28,000
Expenses
Cash at Bank 16,400
Discount 4,000 9,000
Furniture and Fixtures 38,000
General expenses 22,000
Insurance 3,000
Travelling expenses 5,000
Cash in hand 1,000
Bank interest 3,600
Total 10,32,000s 10,32,000
i. Stock on 31.3.2003 was Rs 1,60,000.
ii. Write off Rs 2,000 bad debts and maintain a provision for bad debt at 5%.
iii. Goods of the value of Rs 3,000 have been destroyed by fire and the insurance company has admitted
the claim for Rs 2,000 only.
iv. Credit sale of Rs 10,000 had been omitted from the books.
v. A machine was installed during the year costing Rs 12,000. It was not recorded in the books and
payment was also not made for it.
vi. Wages paid for erection of plant Rs 2,000 and it has been debited to wages account.
vii. Depreciation furniture and machinery by 10%.
viii. The manager is entitled to a commission of 10% of the net profits after charging such commission.
Required: Prepare Trading and Profit & Loss Account for the year ended 31st April 2003 and Balance
Sheet as on that date. 20
2 a. A company purchased machinery as under: 8
1st June, 1999 Rs 8,00,000
1st July, 2000 Rs 6,00,000
Depreciation has been provided at 20% per annum on diminishing balance method. From the year 2002,
however the company changed the method of depreciation from diminishing balance to straight line
method with retrospective effect from 1st January,1999 at 15% per annum. Depreciation was provided for
annually on 31st December.
Required: Machinery Account from 199 to 2003.
b. B of Biratnagar was appointed by Raj & Co. of Pokhara. You are given the following particulars relating to
last year: 7
i. Cost of goods invoiced by the company on consignment to Rs 2,00,000 which was 25% above cost.
ii. Insurance and carriage expenses incurred for goods invoices were Rs 5,000 and Rs 3,000 respectively.
iii. Goods of the invoice price of Rs 1,50,000 were sold for Rs 2,40,000.
iv. Goods of the invoice price of Rs 20,000 were taken by agent.
v. Goods of the invoice price of Rs 5,000 were lost through negligence of agent.
vi. Selling expenses paid by agent Rs 5,000.
The agent is entitled to a commission of 10% on sales. Any goods taken by agent or lost through
consignee’s negligence would be valued at cost and no commission would be allowed on them. Agent
paid the amount due by bank draft on closing date.
Required: Consignment to Biratnagar Account in the books of Raj and Co.sss
3. Mr.Pradhan is a chartered accountant. He close his account on 31st Mach every year. The following was
his Balance Sheet as at 31st March,2002: 15
Capital Account 50,000 Furniture 10,0000
Audit fees collected in advance 5,000 Office machinery 7,000
Liability for salary 4,000 Library books 4,000
Provision against outstanding 23,000 Vehicles 30,000
audit fees
Outstanding audit fees 23,000
Cash in hand 7,000
Cash at bank 1,000
82,000 82,000
The following is the Receipt and Payment Account of Mr. Pradhan for the year ended 31st March, 2003.
Receipt Rs Payment Rs
Opening: Salary charges 1,10,000
Cash in hand 7,000 Vehicles expenses 17,000
Cash at bank 1,000 Travelling expenses 11,000
Audit fees 2,14,000 Printing & Stationery 9,000
Fees for other service 45,000 Postage expenses 1,000 21
Miscellaneous Income 2,000 Telephone charges 8,000
Library books 6,000

Membership fees 1,000

Drawing 60,000
Cash in hand 22,000
Cash in bank 24,000
2,69,000 2,69,000
The following further information is available:
a. Audit fees receivable Rs 40,000.
b. Audit fees collected in advance Rs 10,000
c. Outstanding salary Rs 10,000
d. depreciation to be provided on: Furniture 10%, Office machinery 20%, Library books 10% and
Vehicles 20%
e. 80% of audit fees and 40% of the fees for other services should be transferred to Income and
Expenditure Account.
Required: Income & Expenditure Account for the year ended 31st March, 2003 and Balance Sheet as on
that date.
4. a. A and B sharing profits in proportion of three- fourth and one- fourth showed the following as their
Balance Sheet on 31st December, 2002: 8
Capital Accounts: Furniture 1,00,000
A 1,20,000 Bills Receivable 12,000
B 60,000 1,80,000 Debtors 64,000
Creditors 1,50,000 Stock 80,000
Bills Payable 16,000 Cash 90,000
2,46,000 2,46,000
They admit C into partnership on 1st January, 2003 and give him a fifth share in the future profits in the
following terms:
i. That C should bring Rs 4,000 for goodwill in cash half of which is retained in the business.
ii. That C should bring Rs 40,000 as capital.
iii. The stock and furniture be depreciated by 10%.
iv. That a 5% reserve for doubtful debt be created on debtors.
v. That included in sundry creditors is an item of Rs 10,000 which is not to be paid and therefore has to
be written back.
Required: pass the necessary journal entries and prepare the revaluation Account.
b. Mr. Peeree’s financial year ends on 31st March, 2003, but actual stock is not taken until the following 3rd
April 2003, when it is ascertained at Rs 20,000. The transactions relating to stock between 31 st March and
3rd April are as follows: 4
i. Sales Rs 2,000
22
ii. Purchase Rs 1,000
iii. Sales Return Rs 200
iv. Purchase Return Rs 100

All sales are made at 20% profit on sales.

Required: Calculate the value of stock on 31st March 2003.
c. Pam owes Shyam the following sums of money due from him on the date stated: 3
Rs 5,000 due on Jan 10,2003
Rs 10,000 due on Feb 2,2003
Rs 2,000 due on Fed, 28, 2003
He wants to make the complete payment on Feb.28,2003. Ascertain average due date.
5. State giving reasons whether the following statements are true or false: 2×10=20
a. Accounting is not useful for making decisions regarding changes I the method of acquisition,
preservation, utilization and distribution and distribution of scarce resources.
b. “Money measurement” concept considers the changes in the value of monetary unit.
c. Bank loan accounts is a personal account.
d. The balance of cash account will be shown at the debit column of trial balance.
e. The amount spent on the repairs of machinery purchased second hand should be debited to repairs
account.
f. Errors of complete omission are detected by trial balance.
g. The difference in the trial balance is transferred on the debit of the Suspense Account when the debit
side of the trial balance is greater than the credit side.
h. A joint venture business has an indefinite life.
i. When a bill receivable is endorsed to some other party, an entry should be passed in the books of
drawee.
j. Two entries are required for self balancing form one ledger to another.
6. Briefly explain any THREE of the following: 5×3=15
a. Function of Accounting
b. Errors of Principles
c. Features of Joint Venture
d. Accommodation Bills

1) The accountant of Kantipur Club gave the following information about the receipts and payments of the
debt for the year ended 31st March 1994:
Receipt: Rs.
Subscriptions 762,130
Fair Receipts 7,200
Variety Show Receipts (net) 12,810
Interest 690
23
Bar Collection 32,350
Payments: Rs.

Premises 300,000
Rent 24,000
Rates and Taxes 3,780
Printing & Stationery 1,410
Sundry Expense 5,350
Wages 2,520
Fair Expenses 7,170
Honorarium to Secretary 11,000
Bar Purchase (Payments) 17,310
Repairs 960
New Car (less proceed of old car Rs 90,000) 378,000
01.04.1993(Rs) 31.03.1994(Rs)
Cash on hand 450 Nil
Bank Balance as per cash book 24,420 ?
Cheque issued for sundry expenses not presented 270 90
in the bank (entry has been duly made in the cash
book)
Subscription due 36,000 29,400
Premises-at cost 870,000 1,170,000
Provision for depreciation on Premises 564,000 -
Car at cost 365,700 468,000
Accumulated Depreciation on car 308,700 -
Bar stock 2,130 2,610
Creditors for Bar purchase 1,770 1,290
Annual Honorarium to Secretary is Rs 12,000. Depreciation on premises is to be provided at 5% on
written down value. Depreciation on new car is to be provided at 20%.
You are required to prepare the Receipts and Payments accounts and Income and Expenditure Account
for the year ended 31.3.1994. 20
2) X and Y are in partnership sharing profits and losses in the proportion of three- fourth and one- fourth
respectively. Their Balance Sheet on 16th July 2003(Ashadh 32,2060) was as follows:
Cash Rs 10,000, Sundry Debtors Rs 250,000, Stock Rs 220,000, Plant and Machinery Rs 40,000, Sundry
Creditors Rs 120,000, Bank Overdraft rs 150,000, X’s Capital Rs 150,000; Y’s Capital Rs 100,000. On 17 th
July 2003 (Shrawan 1,2061), they admitted Z into partnership on the following terms:
a. Z to purchase one third of the goodwill for Rs 20,000 and provide Rs 100,000 as capital Goodwill will
not appear in the books.
b. Future profits and losses are to be shared by X,Y and Z equally.
c. Plant and Machinery is to be reduced by 10% and rs 5,000 is to be provided for estimated bad debts. 24
Stock is to be taken at a valuation of Rs 249,400.
d. By bringing in or with drawing cash and capitals of X and Y are to be made proportionate to that of Z on
their profit sharing basis.

Set out entries relating to the above arrangement in the firm’s journal, give the partner’s capital Account
in tabular form and submit the opening Sheet of the new firm. 20
3. Happy Traders of Birgunj purchased 10,000 pieces of sarees@ Rs.100 per saree. Out pf these sarees, 6000
sarees were sent on consignment to Vastralaya of Janakpur at the selling price of Rs.120 per saree. Rs
3,000 was paid for packaging and freight. Vastralaya sold 5000 sarees@Rs 125 per saree and incurred Rs
1,000 for selling expenses and remitted Rs 5,00,000 to Birgunj on account. They are entitled to a
commission of 5% on total sales plus a further 20% commission on nay surplus price realized over Rs 120
per saree.3000 sarees were sold at Rs 110 per saree. Owing to depress in the market the selling price (Rs
120) of sarees has come down by 10%. Prepare the consignment Account and Trading, profit and loss
Account in the books of Happy Traders and their account in the books of the agent Vastralaya of Janakpur.
15
4. A book- keeper while preparing his trial balance finds that the debit exceeds by Rs 7,250. Being retried to
prepare the final account he places the difference to a Suspense Account in the next year, the following
mistakes were discovered.
a. A sale of Rs 4,000 has been passed through the purchase Day-book. The entry in customer’s account
has been recorded.
b. Goods worth Rs 2,500 taken away by the proprietor for his use has been debited to Repair Account.
c. A bill receivable for Rs 1,300 received from Krishna has been dishonored on maturity nut no entry
passed.
d. Goods worth Rs 2,500 taken away by the proprietor for his Personal Account.
e. A purchase of Rs 750 form Raghubir had been debited to his Personal Account. Purchase Account has
been correctly debited.
f. A sum of Rs 2,250 written off as depreciation on furniture has not been debited to Depreciation Account.
Draft the Journal entries for rectifying the above mistakes and prepare Suspense Account.
5. State the reasons whether the following statements are true or false: 1.5×10=15
i. Wrong casting of subsidiary books does not affect the trial balance.
ii. Joint life policy is taken by the partners in order to provide working capital for the firm.
iii. Copy rights is in the nature of Nominal Account.
iv. Wages paid to worker for installation of plant are debited to profit and loss account.
v. Contingent liability is an unascertained liability and its due date, amounts have been determined.
vi. In consignment, the goods are dispatched on the basis that the good will be said on behalf of at the
expenses of and at the risk of the consignee,
Vii. A profit and Loss Account is a point statement where as a Balance Sheet is a period statements.
viii. Providing depreciation ensures sufficient cash for assets replacement.
ix. A bill given to a creditor is called bills payable.
x. Under the self balancing system the general ledger adjustment account is always opened in general
ledger.
6. Distinguish between any THREE of the following: 5×3=15
i. Deferred Expenses and Prepaid Expenses
25
ii. LIFO method of valuation and FIFO method of valuation.
iii. Error of Principle and clerical error
iv. Bill of exchange and promissory note

Notes:

Attempt all questions. Working notes should form part of the answer.
1) From the following trial balance and additional information of a proprietor. Prepare Trading, Profit and
Loss Account for the year ending on 31st March 2004 and the balance sheet at that date: 20
Particulars Dr. Balance Rs. Cr .Balance Rs
Bad debt 2,310
Rent 11,000
Wages 20,960
Building 60,000
Machinery 16,000
Salaries 41,000
Debtors(including Shyam’s 33,700
dishonoured bills of Rs 800)
Purchase/Sales 57,458 1,00,700
Capital 1,38,428
Printing & Advertising 14,600
Commission Received 3,000
Creditors 19,000
a.) wages include (i) a sum of Rs 4,000 spent on the erection of a cycle shed for employees and customers,
(ii) RRRs 2,000 for erection of new machinery on 1st Januaaary 2004.
b.) Provide 5% depreciation on machinery & building.
c.) Remuneration of Rs 2,000 paid to Sh. B. Barua, a temporary employee, stands debited to his personal
account.
d.) Sundry creditors include an amount of Rs 2,000 received from Rahul and credited to his account. The
amount was written off as a bad debit in the previous year.
e.) Goods costing Rs 500 were taken by the proprietor for his personal use but no entry has been made in
the books of accounts.
f.) Goods costing Rs 600 were sent to a customer on sale or return for Rs 700 on 30 th March 2004 and has
been recorded in the books as actual sale. 26
g.) A fire occurred on 25th March, 2004 in the godown and stock of 1,000 was destroyed, it was fully
insured but the insurance company admitted the claim to the extent of 60% only.
h.) Half the amount of Shyam’s bill is irrecoverable.
i.) Create a provision of 5% on other debtors.

j.) 50% printing & Advertising is to be carried forward as a charge in the following year.
k.) One third of the commission received is in respect of work to be done next year.
l.) Rent has been paid for 11 months but has been received for 13 months.
m.) Included amount the debtors is Rs 3,000 due from Ram and included among the Creditors Rs 1,000
due to him.
n.) Provide for personal income tax@10% of net profit in excess of Rs 50,000.
o.) Stock I hand 31st March was valued at Rs 1,11,888.
2. a) A,B and C carried on partnership sharing profits as 4:3:2. Their Balance sheet on 31 st March 2004 was as
follows:
Capital: Business Premises 4,80,000
A Rs 3,48,000 Machinery 1,48,000
B Rs 2,64,000 Inventory 1,44,000
C Rs 1,80,000 7,92,000 Account receivable: Rs 1,00,000
Account Payable 1,68,000 Less:Provision: 2000
98,000
Cash in Bank 84,000
Cash in hand 6,000
9,60,000 9,60,000
B retried on the same date. For the purpose of his retirement the following forms and conditions were
agreed:
i. Provision for Accounts Receivable raised to 5% on Account receivable.
ii. Business premises to be appreciated by 10%.
iii. A provision of Rs 2,500 is to be made for outstanding legal charges.
iv. The goodwill of the firm has been valued ar rs 90,000 but no goodwill account is to be raised in the
books.
v. Inventory to be reduced to Rs 1, 28,500.
vi. A and C will continue to carry on the business. B agreed to leave the amount due to him by the firm as
loan to the firm carrying interest at 10% per annum.
Required: (a) Revaluation Account (b) Capital Accounts in tabular form. (4+6=10)
b) BInayak received from one of his customers a bill at three months for Rs. 20,000. He discounted it on the
same day for Rs 19,500 with his bankers. On the date of maturity, the bill was dishonoured. The bank
incurred noting charges of Rs 100. However, the customer paid him Rs 10,000 plus noting charges plus
interest for three months amounting to Rs 250 in cash and accepted a fresh bill at three months for Rs
10,000, being the balance amount. 27
Required; Journal entries in the book of Binayak. 5

c.) Ganesh prepares accounts annually on 31st March, but the stock taking takes place on the following
week end. The stock taking for the year ended 31st March 2004 was made on 6th April 2004. You
ascertain the following particulars:
i. Sales during the period from 1st April to 6th April 2004 Rs 40,000.
ii. Purchases during the same period as per Purchase Book Rs 30,000
iii. The above purchases includes goods worth rs 10,000 which were not actually delivered but the
invoice was received and accordingly entries made in the Purchase Book.
iv. The average rate of gross profit on turnover is 30%.
The value of closing stock came to Rs 1,00,000 without making the above adjustments.
Required: Compute the value of stock on 31st March 2004. 5
3. The following is the Income and Expenditure Account of the red Cross Club for the year ended on march
31,2004.
Expenditure Rs Income Rs
To Salaries 24,000 By Subscriptions 72,000
To Rent 10,800 By Entrance Fee 8,000
To Rates & Taxes 600 By Surplus in Publication on 4,500
brochure
To Postage & Telephone 720 By Profit on sale of old sports sets 1,200
To Affiliation fee to all Nepal 1,200 By Interest in 5 % Investments 600
Cricket Association
To Sports Materials 15,750 By Miscellaneous 225
To Electricity Charges 1,200
To Repair and Maintenance 9,600
To Depreciation (10% on gross 4,800
value at the end of year)
To Surplus Carried to Capital 17,855
Fund
99,825 99,825
The following further information is made available:
Balance as on 31.3.2004(Rs) 31.3.2003(Rs)
a) Sundry assets ? 44,000
Bank Balance ? 4.800
Subscription in Arrears 3,500 4,750
Subscription received in Advance 2,600 1,400
5% Investment 12,000 12,000
b) Expenses outstanding
28
Salaries 1,200 600
Rent 1,800 900
Rent & Taxes 600 Nil

Maintenance 320 780

c) Outstanding for purchase of sports material: 2,950 1,400
d) Prize fund 3,250 4,600
e.) The book value of sports materials sold as on 1.2.2003 was Rs 4000.
f.) Prize fund is separately maintained. All receipts are credited to it separately and expenditure id met
out of fund directly. During the year, credit to the account amounted to rs 2,800.
g.) Interest received this year was only fot two quarters.
h.) The club was admitted as a member of the All Nepal Cricket Association on 1.10.2003 when it paid
subscription till 30.09.2004.
i.) Advertisement charge on brochure yet to be collected Rs 450.
j.) A fixed deposit of Rs 25,000 was made on 31st March 2004.
Prepare the Receipt and Payments Account for the year ended on March 31.2004 and the balance sheet as
on that date of the Red Cross Club. 15
4. a) X Ltd purchased a machine for Rs 60,000 on 1st January,2001 and incurred Rs 20,000 towards freight,
insurance, carriage, carriage inward and installation charges. It was estimated that its life is 4 years
during which period a sum of Rs 30,000 is likely to be spent on its repairs and maintenance and at the end
of useful life, the scrap value will be Rs 10,000. Actual expenses were as under.
2001- Rs. Nil, 2002-Rs 5, 000, 2003-Rs 10, 000, 2004-Rs 15,000
At the end of useful life, the scrap value of the machine realized Rs 8,000 only.
Prepare machinery Account, and Provision for Depreciation and Repair Account. 5
b) A and B ,who are shareholders agree to enter into Joint Venture to underwrite 5,00,000 equity shares of
Rs 10 each of X Ltd, agree to allot as fully paid 4,000 shares in the company in consideration of the
underwriting arrangement. In connection with the venture, the following expenses are incurred.
A: Printing & Stationery (Rs 5,000); Postage (Rs 1,000); Advertisement (Rs 3,000)
B: Postage (Rs 750); Solicitor’s fee (Rs 3,500);
The public subscription was for 4,80,000 shares only and the underwriters were forced to take up to the
balance and pay for them. To enable them to do so the two persons approached the Bank which on the
security of the shares, advanced the required sum on 1st July, @15%p.a. The underwriters paid for the
shares on the same day and were also allotted the 4,000 shares by X Ltd. The underwriters through the
Bank unloaded their lot of holding in the market in equal lots and realized 90% of the face value of the
first lot on 30th September and 85% for the second lot on 31st October. The sale proceeds were applied in
full to discharge the bank loan and relative interest on the same dates. Shares transfer fee of Rs 1,006.25
was met from the Joint Venture Bank Account.
Required: Draw a Memorandum Joint Venture Account, the account of A appearing in B’s Books and the
account of B as appearing in A’s Books and also the settlement of account between the parties.
5) State whether the following statements are true or false: (1×15=15)
a) Accounting is concerned with monetary and non monetary transactions. 29
b) Withdrawn of goods from the business by a proprietor for his personal use is an event of business
transaction.
c) The”entry concept” of accounting cannot be applied to Sole trading concern and partnership concerns.

d) Revenue is matched with expenses accounting to the matching principles.

e) Knowledge of mathematics is pre-requisite of understanding accounting
f) Capital account is a nominal account.
g) Subsidiary books are also called books of original account.
h) Sales of office furniture should be credited to sales account.
i) Posting wrong amount in the subsidiary books will affect agreement of the trial balance.
j) Heavy legal expenses incurred by a company to defend a legal suit is a deferred revenue expenditure.
k) Balance sheet indicated that the accounts are arithmetically accurate.
l) All receipts of capital nature are not entered in receipt and Payments Account.
m) No entry for self balancing is required when a transaction affects only on ledger.
n) The relationship between the consignor and consignee is like that between a seller and a buyer.
o) If the consignee is authorized to get the del credere commission, he is liable for all losses on account of
non recovery of debts.
6) Briefly explain any THREE of the following: 5×3=15
a) Calculation of average due date.
b) Self balancing ledgers
c) Features of consignment
d) Compensating Error

Attempt all questions. Working note should form part of the answer..
1) The following is the trial balance of K on 31st July, 2004:
Dr.Rs Cr.Rs
Capital - 6,00.000
Drawings 70,000 -
Fixed Assets(opening) 1,40,000 -
Fixed Assets(Additional 01.02.2004) 2,00,000 -
Opening Stock 60,000 -
Purchase returns - 69,000
Sales - 22,00,000
Sales Returns 99,000 -
Debtors 2,50,000 - 30
Expenses 50,000 -
Fixed Deposit with Bank 2,00,000 -

Interest on Fixed deposit - 20,000

Overdraft - 8,000
Overdraft A/c - 2,000
Depreciation 14,000 -
Rent (17 months up to 31.12.2004) 17,000 -
Investment 12%(01.12.2003) 2,50,000 -
Bank Balance 1,69,000 -
31,19,000 31,19,000
Stock on 31st July,2004 was valued at Rs.1,00,000. Depreciation is to be provided at 10% per annum on
fixed assets purchased during the year. A scrutiny of the books of account revealed the following matters:
i. Rs. 20,000 drawn from bank was debited to Drawings account, but out of this amount withdrawn, Rs
12,000 was used in the business for day to day expenses.
ii. Purchase of goods worth Rs 16,000 was not recorded in the books of account upto 31.07.2004, but the
goods were included in stock.
iii. Purchase returns of Rs 1,000 was recorded in Sale Return Journal and the amount was correctly
posted to the Party’s A/c on the correct side.
iv. Expenses include Rs 6,000 in respect of the period after 31st July, 2004.
Give the necessary Journal entries in respect of (i) and (ii) and prepare the final Accounts of the year
ended 31st July, 2004.
2. a) Sharma, Shrestha and Pandey were in partnership sharing profit and losses in the ration of 3:2:1. The
Balance Sheet of the firm as on 31st December 2003 was as follows:
Capital Accounts Machinery 1.60.000
Sharma 3,00,000 Land & building 3,40,000
Shrestha 2,00,000 Stock 60,000
Pandey 1,00,000 6,00,000 Debtors 60,000
Creditors 72,000 Less: Provision for Bad
Debt 2000 58,000
Cash Bank 54,000
6,72,000 6,72,000
Shrestha retried on and from 1.1.2004 for which goodwill was valued at Rs 1,20,000. The remaining
partners decided to carry on firm on the following readjustments.
i. Shrestha’s share of goodwill adjusted in the accounts of remaining partners Sharma and Pandey, who
share future profits in the proportion of ¾ and ¼ .
ii. Out of the amount of insurance premium which was debited annually entirely to Profit and Loss 31
Account Rs 5,000 carried forward for unexpired insurance on 31st December, 2003.
iii. Revaluation was to be made in respect of Land and Building Rs 3,74,000 and Machinery Rs 1,52,000

iv. Provision for Bad Debt be brought up to 5% of debtors.

Required: Revaluation Account, the Capital Account of the partners and Balance Sheet of Sharma and
Pandey.
b) Following is the Receipt and Payment account of Siddharth Medical Society, for the year ended 31 st
March 2004.
Receipt and Payment Account
For the year ended 31st March 2004
Dr. Cr.
Receipt Rs Payments Rs
To Balance b/d 10,000 BY Payments for medicines 30,000
To Subscription 60,000 By Honorarium to doctors 20,000
To Donation 20,000 By salaries 35,000
To Interest on investment at 10,000 By Sundry Expenses 5,000
10% per annum By Equipment Purchased 20,000
To Charity show proceeds 20,000 By Charity show expenses 2,000
By Balance c/d 8,000
1,20,000 1,20,000
On 1.4.2003 On 31.4.2004
Subscription due 1,000 2,000
Subscription received in 2,000 1,000
advance 15,000 20,000
Stock of medicines 30,000 45,000
Value of equipments 1,00,000 95,00
Value of building 2,54,000 ?
Capital Fund
Prepare: (i) Income and Expenditure Account for the year ended 31st March, 2004.
(ii) Balance Sheet as on 31st March, 2004
3. On 30th September, 2003 a company’s Cash Book (Bank Column of Account No.1) showed a Bank
Overdraft of Rs 49,350. On going through the Bank Pass book for reconciling the Balance, the Account
found the following:
a. Out of cheque drawn on 26th September, those for Rs 3,700 were cashed by the bankers on 2nd October.
b. A crossed cheque for Rs 750 given to Binod was returned by him and a bearer cheque was issued to
him liew on 1st October.
c. Cash and cheques amounting to Rs 3,400 were deposited in the Bank on 29th September but cheques
worth Rs 1,300 were cleared by the Bank on 1st October only, and one cheque for Rs 250 were returned
by them as dishonored on the latter date.
d. According to the standing instructions, the bankers have in 30th September, paid Rs 320 as interest to 32
the creditors, paid quarterly premium amounting to RS 160 and have paid a second call of Rs. 600 on
shares held by the Company and lodged with the bankers for safe custody. The y have also received Rs
150 as dividend on the shares and recovered an Insurance Claim being Rs 15. On receipt of information
of the above transaction, the Accountant has passed necessary entries in my Cash Book on 1st October.
e. The bankers seem to have given a wrong credit for Rs 500 paid in by the Company in No.2 account and
wrong debit in respect of a cheque for Rs 300 drawn against No. account.
Prepared a Bank Reconciliation Statement as on 30th September, 2003.
4. a) There was an error in the Trial Balance of Mr. Hari on 31st December, 2003 and the difference in
books was carried to a Suspense Account. On going through the books, you find that:
i. Rs 5,000 received from Krishna was posted to the debit of his account.
ii. Rs 10,000 paid to Ram was debited to Raj Account.
iii. Rs 2,000 paid from repairing the machine has been debited to Machinery Account.
iv. A sale of Rs 15,000 to Mahesh has been passed through the purchase Account.
v. Rs 1000 being purchase return was posted to the debit of Purchase Account
vi. Old machinery sold for Rs 9,500 has been entered as rs 5,900 in sales account.
b) A company acquired a machine on 1.1.2002 for Rs 50,000 and spent Rs 5,000 on its installment.
Another machinery costing Rs 20,000 was purchased on 1st July 2002. The firm writes off depreciation
@ 10% per annum of the original cost every year. The books are closed on 31st December every year. On
1st July 2003, thw second machine got out of order and was sold for Rs 15,000.
Required: Machinery Account for 2002 and 2003
5. A and B entered into a joint venture agreement to share the profits and losses in the ration of 2:1. A
supplied goods worth Rs 60,000 to B incurring expenses amounting to Rs 2,000 for freight and
insurance. During transit goods costing Rs 5,000 became damaged and a sum of Rs 3,000 was recovered
from the insurance company. B reported that 90% remaining goods were sold at a profit of 30% of their
original cost. Towards the end of the venture, a fire occurred ans as a result the balance stock lying
unsold with B was damaged. The goods were not insured and B agreed to compensate B by paying in
cash 80% of the aggregate of the original cost of such goods plus proportionate expense incurred by A.
Apart from the joint venture share of profit, B was also entitled under the agreement to a commission of
5% of net profits of joint venture after charging such communication. Selling expenses incurred by B
totaled Rs 1,000. B had earlier remitted an advance of Rs 10,000. B duly paid the balance due to A by
Draft. 15
You are required to prepare in A’s books:
i. Joint Venture Account
ii. B’s Account
6. State with reasons whether the following statements are true or false: 20
a.) The value of human resources is generally shown as assets in the Balance Sheet.
b.) Provision for bad and doubtful debts is an appropriation of profits.
c.) Conservatism Principle is an exception to the consistency principle.
d.) The terms ‘Current Assets’ and ‘ Liquid Assets’ have synonymous meanings.
e.) Stock at the end, if appears in the Trial Balance, is taken only to the Balance Sheet.
f.) The rationale behind the opening of suspense account is to tally the trial balance.
g.) The terms ‘Expenditure’ and ‘Expenses’ have synonymous meanings.
h.) A trial balance is a list of all debit and credit balance of all ledger accounts.
i.) Assets=Capital-Liabilities
j.) Accounting treatment of Provision & Reserve is same. 33

June2005,FOA/Foundation
1) Bikash & Co. is a partnership firm with partners, A, B and C sharing profits and losses in the ratio of 5:3:2.
Their Balance Sheet as on 30th June 2004 was as under:-
Liabilities Amount(Rs) Assets Amount(Rs)
Capital Accounts: Land & building 210,000
A 80,000 Plant & Machinery 130,000
B 20,000 Furniture & Fittings 40,000
C 30,000 130,000 Investments 12,000
Stock 126,000
Un-appropriated Profit 20,000 Debtors 139,000
Long term Loan 300,000
Bank Overdraft 44,000
Trade Creditors 1,63,000
657,000 657,000
It was mutually agreed that Mr.B. will retire and in his place Mr.D will be admitted as a partner with effect
from 1st July 2004. For this purpose, following adjustments are to be made:
i) Goodwill is to be valued at rs 100,000 but the same will not appear as an assets in the books of the new
firm.
ii) Land & building and Plant & Machinery are to be depreciated by 10% and 5% respectively.
Investments are to be taken over by the retiring partner at Rs 15,000. Provision of 20% is to be made on
the debtors to cover doubtful debts.
iii) Total capital of the new firm will be Rs. 200,000 which will be contributed by A,C and D in their new
profit sharing ratio which is 2:2:1.
iv) The surplus funds, if any, will be used for repaying Bank Overdraft.
v) The amount due to retiring partner shall be transferred to his loan account.
Prepare Revaluation Account, Capital Account, Bank Account and Balance Sheet of the new firm.
2.a) A and B entered into a join venture of underwriting the subscription at par of the entire share capital of
the Kapil Mines Ltd. consisting of 1,00,000 equity shares of Rs 10 each and to pay all expenses up to
allotment. The profits were to be shared by them in proportion of 3/5ths and 2/5ths. The consideration
in return for this agreement was the allotment of 12,000 shares of Rs.10 each to be issued to them as
fully paid. A provided the funds for registration fees rs 12,000, advertising expenses Rs 11,000 for
expenses on printing and stationery expenses of Rs 2,000. B contributed towards payment of office rent
rs 3,000,legal charges Rs 13,750,salary to clerical staff Rs 9,000 and other petty disbursement of Rs
1,750. The prospectus was issued and application fell short of the issue by 15,000 shares. A took these
over on joint account and paid for the same in full. The ventures received the 12,000 fully paid shares as
underwriting commission. They sold their entire holding at Rs 12.50 less 50 paisa brokerage per share. 34
The net proceeds were received by A for 15,000 shares and B for 12,000 shares. Write out the necessary
accounts in the books of both the parties showing the final adjustments.
15

b) A drew upon B several bills of exchange due for payments on different due date as under:
Date Amount (Rs) Tenure
02.10.97 700 3months
20.10.97 800 2months
10.11.97 1,000 3months
27.11.97 750 3months
08.12.97 900 1months
16.12.97 1,200 2months
Find out Average Due Date on which payment may be made in one single amount with the days of grace
available. 5
3.a) Given below is the Balance Sheet of a Hospital as on 31st December 2003.
Liabilities Amount (Rs) Assets Amount (Rs)
Endowment 200,000 Building 213,000
Account Receipts from patients friends 1,500
Due Amount: 2,000 Cash balances 3,500
For drugs 5,200
For goods 800
For stores 10,000
Accumulated
Surplus
218,000 218,000
The Cash Book for the period is:
Receipts Amounts Rs. Payments Amount Rs
Cash balance (1.1.2004) 3,500 Drugs 14,000
Subscription 57,500 Food 50,000
Received from patients 28,000 Stores 10,000
friends Wages 12,000
Balance Cash (31.12.2004) 3,000
89,000 89,000
i) The outstanding for the period: Drugs Rs 2,400, food rs 5,000 and Stores Rs 1,000.
ii) Receivable from patients friends Rs 2,400.
Required:
i)Income and expenditure Account for the year ended 31.12.04
ii)Balance Sheet as on 31.12.2004. 10
35
b) Rajesh having accepted a bill for rs 10,000 is unable to meet the same. Before the due date he request
Ramesh to receive Rs 7,200 in cash and to draw on him a new bill for Rs 3,000 for a further period of 2
months and cancel the old bill. Ramesh agreed to his proposal.

Required: Journal entries in the books of Ramesh 5

4. a) On 1.1.2004, A sold goods for the same amount which B accepted on the same date. The bill was
discounted to Rs 1,970, On the due date, B notified his inability to meet the bill and requested A to take it
up and pay the noting charges of Rs 15, which A did. The following day B met his obligation with a bill at 2
months for the amount together with interest at 6% p.a. and paid cash for noting charges when the bill
became due, B paid Rs 1,000 and accepted a fresh bill at 3months foe Rs 1,050. B became insolvement
before this last bill became due and a first and final divided of 25 paisa in the rupee was realized from his
estate on 1.12.2004.
Pass journal entries in the books of A to record the above transactions. 15
b) Write a note on qualitative characteristics of Financial Statements 5
5. a) P of Pokhara consigns 1,000 cases of goods costing rs 200 each to K of Kathmandu. P pays the following
expenses in connection with consignment: Carriage Rs 8,000, Loading charge res 2,000. K sells 700 cases
at Rs 280 per case and incure the following expenses: Warehouse and storage Rs 5,100, packing and
selling expenses Rs 1,200. It is found that 50 cases have been lost in transit. K is entitled of 10% on gross
sale.
Required: Consignment Account and K’s account is the books of P. 10
b) Write a note on consideration in determining capital and revenue expenditure. 5
6) Write short note on the following: 10
a) Accounting Policies
Notes:

Attempt all questions. Working notes should form part of your answer.
1) Mr. Giriraj is the proprietor of the large business. The following balances were extracted from his books
as on 31st March 2005.
Particulars Amount(NRs) Particulars Amount(NRs)
Land & Building 40,000 Sales 4,68,100
Purchases 3,26,700 Dividend from investment 960
Return inwards 2,500 12% Bank loan secured on 40,000
Travelling expenses 6,900 fixed assets (no movements
during the year)
Printing expenses 1,600
Girija’s Capital Account
Cash at bank 30,790 80,000
Bills payable
Discount allowed to debtors 1,800 2,600 36
Sundry creditors
Miscellaneous expenses 18,620 63,130
Return outwards
Sundry debtors 64,000 3,700
Discount received

Postage 800 Bills receivable 1,200

Furniture 8,000 Stock (01.04.2004) 4,800
Joint Venture suspense 800 Interest on bank loan 63,680
account 4,900 Salaries (including advance 3,000
Cash in hand 16,000 NRs. 1,500) 22,000
Motor car 12,000 Entertainment expenses
Investments(market value Carriage inwards 1,800
NRs 14,000)
10,000 3,000
Drawings
16,000s
Advertisement expenditure
a) Sales included a sum of RRs. 32,000 received from sales of goods on behalf of Mr. Premraj was NRs.
20,000. Mr. Giriraj is entitled to a commission of 5% on sales, for which, effect should be given, and
reimbursement of selling expenses. Selling expenses NRs. 1000 were debited to Miscellaneous
Expenses account.
b) On 1st September 2004 Mr. Griraj entered into a joint venture with Mr. Hari with an agreement to
share the profits and losses a equally. Hari supplied goods totaling NRs. 33,000, which were wrongly
passed through the Purchase Day Book. These goods were sold for cash at a profit 25% on sale and
stood credited to Sales account. Hari had earlier incurred an amount of NRs 1,500 on account of freight
and insurance. Joint venture suspense account represents the selling expenses incurred by Giriraj on
joint venture.
c) During the year some goods (invoiced at NRs. 48,000) were sent to Sundry customers on “Sale on
approval” basis. On 31st March 2005 2005, 20% of theses goods remained with customers, as the
period of approval didn’t expire as yet. Proper adjustment should be made in respect of the above.
Giriraj makes his invoice at cost plus 25%.
d) Bills receivables for NRs 2,000 endorsed on1st December 2004 in favour of creditors became
subsequently dishonored but no entry for the dishonor has been passed.
e) 3/4th of the advertisement expenses is to be carried forward.
f) Two cheque of NRs. 1,200 and NRs. 1,800 issued to parties on 26th March 2005 were lying unpresented
on 31st March 2005.
g) Of the debtors a sum of NRs. 1,100 is irrecoverable and to be written off. Create a provision for doubtful
debts at 2%.
h) Depreciate fixed assets by 10% except motorcar, which is to be depreciated at 20%.
i) Stock on 31st March 2005 was NRs.45,000.
You are required to prepare the Trading and Profit & Loss A/c for the year ending on 31 st March 2005 and
Balance Sheet as on that date taking into consideration the above mentioned information. 20
2) From the following particulars prepare a bank reconciliation statement as on 31st December 2004:
i) On December 2004 the cash book of a firm showed a bank balance of Rs 6,000 (Debit balance).
37
ii) Cheques had been issued for Rs 5,000 out of which cheques worth Rs 4,000 were presented for
payments.

iii) Cheques worth Rs 1,400 were deposited in the bank on 28th December 2004 but had not been
credited by the bank. In addition to this, one cheque for Rs 500 was entered in cash book on 30 th
December,2004 but was banked on 31.1.2005.
iv) A cheque from Mohan for Rs 400 was deposited in the bank on 26th December 2004 but was
dishonored and the advice was received on 2.1.2005.
v) Pas book showed bank charges of Rs 500 in the bank account of the firm on 20 th December, 2004 but
the intimation in this respect was received from the bank on 2.1.2005.
vii) Bank pass book showed a credit balance of Rs 5,180 on 31st December 2004.
3.a) Mr.K of Kathmandu sent on 18.2.2005 a consignment of 1,000 LCD TV to P of Pokhara costing NRs. 100
each. The consignor met expenses of NRs 1,500. P spent NRs. 3,000 for clearance and selling expenses
were NRs.20 per LCD TV.
P sold 600 LCD TV on 15.3.2005@ NRs 160 per LCD TV and again on 20.04.2005, 300 LCD TV @ NRs 170
each. P entitled to a commission of NRs. 25 per LCD TV plus ¼ of the amount by which the gross sales
proceeds less total commission thereon exceeded a sum calculated at the rate NRs. 125 per LCD TV sold.
P sent the amount due to K on 30.06.2005.
You are required to show the Consignment Account and P’s Account in the book of K. 10
b) A trader having accepted the following several bills falling due on different dates, now desires to have
these bills cancelled and to accepts a new bill for the whole amount payable on the average due date.
S.No Date of bill Amount(NRs) Usance of the bill
1. 01.03.2005 400 2months
2. 10.03.2005 300 3months
3. 05.04.2005 200 2months
4. 20.04.2005 375 1months
5. 10.05.2005 500 2months
You are required to find the said average due date. 5
4) Prepare Receipt and Payments Account and Income and Expenditure Account of City Club for the year
ended 31st December 2004 from the following particulars. 15
Rs
Subscription collected (including Rs 4,000 for 2002) 30,000
Donation received (not to be capitalized) 2,000
Subscriptions outstanding at the end of the year 6,000
Rent Paid 1,800
Purchase of furniture (Life 10 years )on 1.1.2004 1,000
Purchase of sports equipments 2,500
Purchase of magazines and newspapers 1,200
Sale of old furniture on 1.1.2004 (book value Rs 300) 500
Cash and bank balance as on 1.1.2004 6,800 38
Investments purchased 4,000
Interest on investments received 1,000

Bank charges 20
Postage, telegrams and telephones 1,800
Printing and Stationary (one bill of Rs 300 for last year) 1,000
Printer’s bill not yet paid 500
Entrance fees (50% to be capitalized) 1,400
Legacies received (to be capitalized) 2,000
Secretary’s allowances (including Rs 200 for last year) 1,800
Outstanding allowances(secretary) 300
5) Briefly explain any THREE of the following: (5×3=15)

a) Calculation of due date when the day of maturity is a holiday.
b) Del-credere commission
c) Money measurement concept
d) Ex-ante and Ex-post incomes
e) Pari-passu charge
6) Indicate whether the following statements are ‘True’ or ‘False’: (1×20=20)
i) The “Dual Aspect” concept leads to the accounting equation: Assets=Capital+ liabilities
ii) According to consistency concept, the result of one accounting period of a business cannot be
compared with that in the past.
iii) Money measurement considers the changes I the value of monetary units.
iv) Bills payable account is a personal account.
v) Rent paid in advance is a nominal account.
vi) The debit balance of a personal account shows the amount payable.
vii) Trial Balance has little significant form the law point of view.
viii) Error of posting affects one account.
ix) Bad debts recovered are credited to the Bad Debts Account.
x) Any expenditure intended to benefit the current period is revenue expenditure.
xi) Stock should be valued either at historical cost or at replacement cost, which is lower.
xii) Inventory comprises all owned goods and unreceived purchases.
xiii) A co-venture has similar authority to a partner.
xiv) Goods purchased for joint venture should be debited to Purchase Account.
xv) Red ink interest is to be made when the due date of the transaction falls beyond the settlement
date.
xvi) Average due date is the median average of several due dates for Payments.
39
xvii) Total creditors account, as the very name implies, shows only credit balance.
xviii) No entry for self balancing is required when a transaction affects only one ledger.
xix. Subscription received in advance is not shown in Receipt & Payment Account.
xx) Income and expenses for the current year only are entered in Income and Expenditure Account.
December 2006, FOA

Attempt all question. Working notes should from parts of the answer.
1. The income and Expenditure account of the Bishnumati Yuba for the year 2062/63 is as follows:
Dr. Cr.
Rs. Rs.
To Salaries 9,50,000 By Subscription 15,00,000
To General expenses 1,00,000 By entrance fees 50,000
To Audit fees 50,000 By contribution for 2,00,000
To Secretary’s Honorarium 2,00,000 Annual dinner
To Stationery & printing 90,000 By profit on Annual 1,50,000

Sports meet
To Annual Dinner Expenses 3,00,000
To Interest and Bank Charges 30,000
To Depreciation 60,000
To Surplus 1,20,000
19,00,000 19,00,000
This account had been prepared after the following adjustment.
Substitution Outstanding at the end of Ashad 2062 Rs.1,20,000.
Substitution Received in Advanced on Ashad 31, 2062 Rs. 90,000
Substitution Received in Advanced on Ashad 32, 2063 Rs. 54,000
Substitution outstanding on Ashad 32, 2062 Rs. 1,50,000
Salaries outstanding at the beginning of 2062/63 and at the end of 2062/63 were respectively Rs. 80,000
and Rs. 90,000. General expenses include3 insurance prepaid to the extend of Rs. 12,000. Audit fees for
2062/63 are as yet unpaid. During 2062/63, audit fees accounting to Rs. 40,000 was paid for 2061/62.
The club had sports equipment on 1st Shrawan 2062 valued at Rs. 5,20,000. At the end of the year, after
depreciation, this equipment on 1st 5,40,000. In 2061/62, the club had raised a bank loan of Rs. 4,00,000.
This was outstanding throughout 2062/63. On Ashad 32, 2063, cash in hand amounted to Rs. 3,20,000.
Prepare Receipt and Payment Account for 2062/63 and the Balance Sheet as at the end of the year.
2. a) The following information is provided:
Rs.
Stock as on 1.4.2005 14,250
Purchase 76,250 40
Manufacturing expenses 15,000
Selling Expenses 6,000
Administration expenses 3,000
Financial Charges 2,150

Sales` 1,24,500
At the time of valuing stock as on 31st March, 2005, a sum of Rs. 1,750 was written off on a particular item,
which was originally purchased for Rs. 5,000 and was sold during the year at Rs. 4,500. Barring the
transaction relating to this item, the gross profit earned during the year was 20 percent on sales.
Required: i. Ascertained the value of stock as on 31st March, 2006
ii. Ascertained the profit for the year.
b) Mr. Anand consigned 80,000 soaps @ Rs. 9 each. He spent Rs. 1 per soap as cartage, freight, insurance and
forwarding charges. 100 units of soap were lost on the way and Mr. Anand lodged claim with the
insurance company and could get Rs. 570 as claim. Consignee took delivery of the rest and spent Rs.
39,950 as on non-recurring expenses and Rs. 22,500 as recurring expenses. He sold 74,000 units of soaps
@ Rs. 12 per soaps @ Rs. 12 per soap. He was entitled to 2% commission on sales plus 1% del-credere
commission.
Required: Consigned Account showing the cost of stock at the end abnormal loss and profit or loss on
consignment. 10
3.a) The profit and loss Account of a business for the year ended 16th July 2005 and its Balance Sheet as at
the date were prepared after making the following adjustments.
i. Depreciation, on time basis was charged on Machine and Furniture at 10% p.a. and on Motor car 20%
p.a.
ii. A provision for bad debts was credited at 2% on the outstanding debtors on the closing date.
iii. The difference in Trial Balance was carried to the Balance Sheet as a Suspense Account.
In the Subsequent year the following errors were discovered:
a) Wages included a sum of 5,000 for the installation of a new machine on 15th October, 2004.
b) A credit invoice of Rs. 2,000 was omitted to be passed through the Sales Day Book, Subsequently, a
cheque for Rs. 1,000 received from the part payment was credited to the Creditors Account.
c) Certain items of old Furniture whose book value on 16th July, 2004 was Rs. 2,500 were disposed off
for Rs. 1,300 on 15th April 2005. This sum of Rs. 1,300 was credited through the cash book, to Motor
Car Account.
d) Cash paid to Creditors Rs. 1,200 was posted to the Creditors Account as Rs. 200.
e) Rent of office building paid in advance for Rs. 1,500 was debited to Rent Account.
You are required to pass necessary rectification entries in respect to the above.
b) A draws upon B two bills of exchange of Rs. 10,000 and Rs. 5,000 respectively. The first bill was
discounted by A for Rs. 9,500. On the due date both were duly met.
Required: Journal entries in the book of A for the above transactions. 5
4. Mahesh & Shiva were partners sharing profit & losses in the ration 3:2. Their Balance Sheet as on 31st
March, 2006 was on follow:
Liabilities Rs. Assets Rs.
Sundry Creditors 12,000 Equipment 25,000
Outstanding liabilities 7,000 Furniture 6,000 41
Capital Account: Stock 10,000

Mahesh 30,000 Sundry Debtors 18,000

Shiva 20,000 50,000 Cash in hand 10,000

69,000 69,000
The partners have agreed to take Mr. Bhola as a partner with effect from 1st April, 2006 on the following
terms.
i. Mr. Bhola should bring Rs. 20000 towards his capital.
ii. The value of Stock should be increased by Rs. 1,000.
iii. Provision for bad debts should be provided at 10% of the debtors.
iv. Furniture should be depredated by 10%.
v. The value of goodwill be fixed at Rs. 14,000 and new profit sharing ratio of Mahesh, Shiva and Bhola
shall be 3:2:2.
vi. The goodwill account is raised in account.
Required: Prepare (a) Revaluation account
(b) Capital Account
(c) Balance sheet as on 1st April 2006
5. Briefly explain any four of the following : (5*4=20)
a) Advantages of Self Balancing ledger.
b) When premium paid is treated as an assets and reserve is maintained.
c) Receipt and Expenditure account for Professional Firms.
d) Importance of Bank Reconciliation Statement.
e) Advantages of Subsidiary Books.
6. State with whether the following statements are true of false.(10*2=20)
i. Accrual concept implies accounting on cash basis.
ii. Damaged inventory should value at cost or market price, whichever is lower.
iii. In consignment, the goods are dispatched on the basis that the goods will be sold on behalf of, at the
expense of and at the risk of the consignee.
iv. In the calculation of average due date; only the due date of first transaction must be taken as the base
date.
v. Goodwill in the nature of personal account.
vi. A bill given to creditors is called bills receivable.
vii. Rectification of errors is necessary to tally the trial balance.
viii. Refusal by acceptor to make payment of the bill on the maturity date is called retirement of the bill.
ix. Capital is equal to assets less external liabilities.
x. Receiving errors in subsequent accounting period always affects that profit or loss of that period.
June 2007 42
1. From the following trial balance and information, prepare trading and profit and loss account of Mr.
Ramesh for the year ended Ashad 32, 2063 and Balance Sheet as on that date. 20
Dr Cr
Capital 1,60,000
Drawings 19,200
Land and Building 1,44,000
Plant & Machinery 32,000 2,24,000
Furniture 8,000 6,400
Sales
Return Outward 48,000
Debtors 29,440
Loan form Roshan on Magh 1, 2062 @ 6% per annum
Purchases 1,28,000
Return inward 8,000
Carriage 16,000
Sundry expenses 960
Printing & Stationery 800 1,600
Insurance 1,600 608
Provision for bad and doubtful debts
Provision for discount on debtors 16,000
Bad debts 640
Profit of textile department
Stock of general goods on Ashad 32, 2063 34,080 19,200
Salary and wages 29,600
Creditors
Trade expenses 1,280
Stock of textile goods on 1.04.2062 12,800
Cash at bank 7,360
Cash in hand 2,040
Total 4,75,808 4,75,808
Additional information:
i.Stock of general goods on Ashad 32, 2063 valued at Rs. 43,680.
ii.Fire occurred on 23th Ashad 2063 and Rs. 16,000 worth of general goods was destroyed. The
insurance company accepted claim for Rs. 9,600 only and paid the claim money on 10th Shawan 2063.
iii.Bad debts amounting to Rs. 640 are to be written off. Provision for bad and doubtful debts is to be
made at 5% and for discount @ 2% on debtors. Make a provision of 2% on creditors for discount. 43
iv.Received of 9,600 worth of goods on Jestha 12.2063 but the invoice of purchase was not recorded in
the purchase book.
v.Mr. Ramesh took away goods worth Rs. 3,200 for personal use but no record was made there of.
vi.Charge depreciation @ 2% on land and building 20% on plant & Machinery and 5% on furniture.
vii.Insurance prepaid amounts to Rs. 320.
2.a) The bank statement of ABC Trading Ltd. Shows a credit balance of Rs. 16,985 and the cash book an
overdrawn of Rs. 4,605. During the investigation, the following facts have been found noted.
 Overdraft interest of Rs. 246 in the bank statements has not been posted to the cash book.
 Cheques issued amounting to Rs. 16,004 have not yet appeared on the bank statement.
 A cheque received for Rs. 19,060 was posted in the cash book for Rs. 16,090.
 Bank charges of Rs. 250 were incorrectly posted to the wrong side of the cash book.
 A cheque for Rs. 1,206 was paid in buy has not yet been credited in the bank statement.
 An inter company transfer in favor of ABC Trading Ltd. For Rs. 4,568 was made direct to the bank but
not recorded in the cash book.
Prepare:
i. A statement of the adjustment to be made to the cash book balance.
ii. A bank reconciliation statement as at June 30, 2007. 10
b) Gograha Limited has selling policy of 20% profit on sale, took its annual stock taking on Ashad 24, 2063
due to unlimited strike to from Ashad 25.The value was Rs. 1,500,000 under FIFO basis of costing. The
Strike was withdrawn on Ashad 31 and following sales were made on that date. Determine the value of
opening stock for 2063/64.
 Sales to Mr. Bakarid at Rs. 30,000 having 20% more than normal selling price.
 Sales to Mr. Rishiraj at Rs. 50,000 having 5% trade discount than normal selling price.
 Sales to Mr. Akkal Man at Ra. 50,000 having 5% less than normal selling price.
 Sold out quantity to Mr. Rishi Raj was laying in the store of company till Shrawan 15, 2063. 5
3. After calculating net profit for the year ended 31st March 2007, Mr. Laxman has the following trial balance.
Dr. Rs. Cr. Rs.
Land & building-cost 1,00,000
Land & building-depreciation on 31st March 2007 20,000
Plant-cost 1,20,000
Plant-depreciation on 31st March 2007 30,000
Inventories 25,000
Receivables 15,000
Bank 82,500
Payables 17,000
Rent prepaid 4,000
Wages accrued 3,000
Capital account 1,94,000
Profit for the year ended 31st March 2007 97,500
44
3,46,500 3,61,500
A suspense account was opened for the difference in the trial balance.
Immediately after production of the above, the following errors were discovered.
i. A supplier’s account had been debited with Rs. 3,000 sales invoice (which had been correctly
recorded in the sales account).
ii. The head and light account had been credited with gas paid Rs. 1,500
iii. R. Bahadur had been credited with a cheque received form M. Bahadur for Rs. 8,000. Both are
customers.
iv. The insurance account contained a credit entry for insurance prepaid of Rs. 5,000. But the
prepayment balance had not been carried down and hence had been omitted form the above trial
balance.
v. Purchase returns had been over cast by Rs. 7,000.
Required
a) Prepare journal entries to correct each of the above errors. (Note: Narratives are not required)5
b) Open the suspense account at 31 March 2007 and enter the relevant correction. 4
c) Name the type of error which has occurred in each of items (i), (ii) and (iii). 3
d) Recalculate the nit profit for the year ending 31 March 2007. 3
4. a) Yenla and Yen are two partners having profit sharing ratio of 16:17 since 2003 Khopa, another partner
has entered into the business in 2005 end, taking share of 3/11 from Yenla. In 2006, they decided to
give 1/11 share from each to khopa. Now on June 1, 2007, Kopa retired and his share is divided equally
to remaining partners. In the same day, Yenla give 1/66 shares of profit to Yenla without consideration
from the share so received from Khopa. They requested you to dig up the profit sharing ratio for each
year.
b) Dugdabinayak Limited purchased a machinery costing Rs. 20,000,000 in Shrawan 1, 2063and made an
installation cost of Rs. 1,000,000. Depreciation was provided under, straight line method at 5.33% per
annum basis. In 2064 Ashadh management decided to use written down value method for depreciation
at 15% p.a. on machinery. Pass necessary journal entries.
5. Write Short notes on (Any Three)
a.) Advantages of Double entry system
b.) Going Concern
c.) Kinds of Endorsement of a bill
d.) A bad debt and a doubtful debt and the accounting treatment of each
6. State with reasons whether the following statements are true or false.
i. The trial balance is a list of ledger balances external from accounts which can act as a balance sheet
for a business.
ii. The correct imprest account is an imperest petty cash system includes:
-Notes and coins in the cash box+IOUu-vouchers.
iii. A credit balance on a ledger account indicates liabilities or expenses.
iv. In time of rising prices the FIFO method of inventory valuation, when compared to the average cost
method of inventory valuation, will usually produce a higher closing inventory value and a lower
profit.
v. Sale of office furniture should be credited to sales Account.
vi. Higher depreciation will not affect the cash profit of the business.
vii. Trial balance ensures the arithmetic accuracy of the books. 45
viii. Incorrect allocation of expenditure or Receipt between capital and Revenue is an Error of commission.
ix. The Consignee has no right in the profit on Goods Sent on consignment.
x. Which one of the following is a reason for preparing receivable ledger reconciliation?
a. To calculate discounts accounts

b. To identify overdue accounts
c. To check the calculation of gross profit
d. To confirm the accuracy of postings
December 2007, FOA

Attempt all questions: Working notes should form part of the answer.
1. Miss Sudikshya Dulal is the proprietor of a medium sized business firm named S & D Pvt. Ltd. The
following balances were extracted from her books of account as on 32nf Ashad 2064.
Particulars Amount(Rs.) Amount(Rs.)
Land & building (Building 80,000) 135,000
10% secured loan (NO movement during the year) 50,000
Vehicle 20,000
Drawings 12,380
Purchases 236,800
Return inward 3,200
Printing expenses 2,400
Cash at bank 37,680
Income from investment 10,000
Insurances (for 1 year starting from 1, Ashoj 2063) 3,000
Bills payable 3,600
Advertisement 18,000
Miscellaneous expenses 12,920
Carriage inward 3,200
Wages ( for 9 months @ 1,000 per month) 10,100
Sales 434,200
Sundry Creditors 73,780
12% investment (same as on 01.04.2063) 120,000
Return outward 6,800
Traveling expenses 5,900
Sundry Debtors 42,000
Capital Account 190,000
Interest on bank loan 4,000 46
Opening stock 18,900

Communication expenses 14,000

Cash in hand 5,900

Salaries (for 13 months) 26,000
Furniture 25,600
Discount allowed 3,200
Bills receivable 8,200
768,380 768,380
a) Closing stock as physically verified as on 32 Ashad, 2064 was Rs. 60,000 (Market value 58,000).
b) Included against the debtors is Rs. 3,500 due from Ram and included amongst the creditors Rs. 1,000
due to him.
c) New furniture was purchased on 01 Magh 2063 costing Rs. 15,300 but it was not recorded in the books
as no payment was made for it. ; Wages Rs. 1,100 paid for its fittings & installation has been debited to
wages account.
d) Sundry creditors include an amount of Rs. 2,000 realized from Mr. Jeevan, a debtor whose account had
been written off two years ago. Also deposit of Rs. 5,000 received from one of the debtors was credited
to creditors account.
e) On 12 Magh 2063 a fire occurred in the godown of the firm and stock amounting to Rs. 12,000 at selling
price was destroyed. Insurance company admitted the claim at cost price and made the payment on 14
Shrawan, 2064 deducting Rs. 1,000 as excess clause to be borne by the insured (firm). Profit margin is
20% of cost.
f) Goods worth Rs. 2,400 at selling price distributed as free samples amount prospective customers were
not recorded anywhere. Profit margin is 20% of cost. The cost of distribution has to be expended under
advertisement expenses.
g) Depreciation to be provided as follows. Vehicles:20%, Furniture: 15%, Building: 5%
h) One of the debtors of Rs. 30,000 has become insolvent as only 50 paisa per rupee was realized and only
cash received was recorded. Provide provision for discount to debtors @ 2% and provision for bad
debt @ 5%
Required: Trading and Profit and Loss Account and Balance Sheet as on 32 Ashad, 2064
2.a) ABC Ltd. Which depreciated its machinery at 10% p.a. on Diminishing Balance Method had on 1 st January
2005 Rs. 972,000 on the debit side of Machinery Account? During the year 2005 machinery purchased on
1st January 2003 for Rs. 80,000 was sold for Rs. 45,000 on 1st July 2005 and a new machinery at a cost of
Rs. 150,000 was purchased and installed on the same date, installation charges being Rs. 8,000. The
company wanted to change the method of depreciation from Diminishing balance method to Straight line
method with effect from 1st January 2003. Difference of depreciation up to 31st December 2005 to be
adjusted. The rate of depreciation remains the same as before. Show Machinery Account in the books of
ABC Ltd.
b) Sunil and Binod who are share brokers agree to enter into a joint venture to underwrite 500,000 equity
balances and pay for them. To allot as fully paid 4,000 shares in the company in consideration of the
underwritten arrangement. The profit/losses were to be shared by them in proportion of 3/5 and 2/5. in
connection with the following expenses are incurred.
Sunil: Printing & Stationery (Rs. 1,000); Advertisement expenses (Rs. 40000) 47
The public subscription for 480,000 shares only and the underwriters were forced to take up the balance
and pay for them. To enable them to do so the two persons approached the bank which on the security of
shares advanced the required sum on 1 poush @ 15% interest p.a. The underwriters paid for the shares
on the same day and were also allotted 4,000 shares by X ltd. The under writers through the bank
unloaded their holdings in the market in equal lots and realized 95% of the face value of the first lot on 30
Falgun and 85% for the second lot on 31st Baisakh. The sale proceeds were applied to discharge the bank
loan and relative interest in full on the same date. Share transfer fees of Rs. 1,000 were met from the joint
Bank Account.
Required:
Draw Memorandum Joint Venture Account
The account of Sunil as appearing in the Books of Binod
The account of Binod as appearing in the Books of Sunil.
2. Dairy Development Corporation (DDC) of Kathmandu sent to Anmol Milk of Kagbeni kgs of baby food
packed in 2,000 tins of net weight 1 kg and 6,000 packets of net weight ⁄ kg for sale on consignment
basis. The consignee’s commission was fixed at 5% of sale proceed. The cost price and selling price of the
product were as under:
1 kg Tin (Rs.) ½ kg packet (Rs.)
Cost Price 10 6
Selling Price 15 7
The Consignment was booked on freight “To Pay” basis and freight charges comes to 2% of selling value.
On case containing 50-1 kgs tin was lost in transit and the transport carrier admitted claim of Rs. 450
only.
At the end of first year, the following information is gathered form the Account Sales” sent by the
consignee:
i. Sales Proceeds: Rs. 1,500 1-kg Tins
Rs. 4,000 ½ Packets
ii. Store rent and Insurance charges Rs. 600.
Find out the value of closing stock on consignment. Also show the Consignment A/c in the books of DDC
assuming that the consignee has paid the amount due from them. 15
3. The following is the statement of receipt and payment of Tilganga Eye Hospital for the year ending 32nd
Ashad 2064.
Receipt Rs. Payment Rs.
Opening balance Furniture purchased 200
Cash 1,000 Salary 86,000
Bank 16,000 Instrument purchased 1,000
Investment Receipts 360,000 Diet expenses 24,000
Subscription 250,000 Surgery expenses 82,000
Interest 40,000 Rent and Taxes 61,000
Donations 8,000 Insurance 2,400
48
Miscellaneous 600 Office expenses 19,400
Closing Balance

Bank 36,000
Cash 1,400
Investment 360,000
Total 675,000 Total 675,000

Prepare the income and expenditure account for the year 2063/64. Other assets on 1st Shrawan 2063
were: Furniture Rs. 4,000, Land Rs. 100,000, and Building Rs. 300,000 and Instruments Rs. 7,000. Provide
depreciation at 2.5% on building, 6% on furniture and 20% on instruments (including new). The
instruments for face value of Rs. 400,000 (cost Rs. 360,000) represent the endowment fund. Subscription
received include Rs. 20,000 for the 2062/2063 and Rs. 14,000 is outstanding for the year 2063/2064
Salaries paid include Rs. 8,000 for 2062/63 and Rs. 9,000 is payable for 2063/64. Interest received
includes Rs. 10,000 for 2062/63 and Rs. 10,000 is outstanding for 2063/64.
4. Write short notes on any three of the following. (3*5=15)
a) Accrual Basis of accounting
b) Historical cost and current cost concept
c) Distinguish between Consignment and Sale
d) State the different method of valuating goodwill.
5. State with reasons whether the following are true or false. (10*2=20)
a) Internal management is the only user of account and their information.
b) Going Concern Consistency and Accrual are fundamental accounting assumptions.
c) Advance received from debtors has been credited to creditors account. If you forget to rectify it total
d) The debts written off as bad, if recovered subsequently are credited to debtors account.
e) Bad debt and Provision for Bad and doubtful debt is one and same thing.
f) Damaged inventory should be valued at cost or market price, whichever is lower.
g) Omission in recording in the books of original entry will affect the trial balance.
h) The terms “Expenditure’ and ‘expenses” have synonymous meanings.
i) In calculation of average due date, only the date of first transaction must be taken as the base date.
j) Amortization, Depreciation and Depletion synonymous terms.
Notes:
49
June 2008, FOA

1. X, Y and Z are partners sharing profits and losses as 2:1:1. Their balance sheet as on 31 st March, 2008 is
as below:
Partner’ Capital
X 90,000 Goodwill 15,000
Y 60,000 Machineries 75,000
Z 10,000 Investments 5,000
Bills Payable 30,000 Current assets
Sundry Creditors 50,000 Cash at bank 5,000
Debtors 80,000
Stock 60,000
2,40,000 2,40,000
Repair Rs. 20,000 incurred three years ago was treated as capital expenditure and debited to machinery
account. Stocks is overvaluing by Rs. 10,000. Depreciation at 10% p.p. was charged on machinery on
diminishing balance. Rs. 10,000 collected from debtors was not recorded in books but taken by z.
The account are rectified and then XY. Ltd. is formed to taken over the business. Y is to take the
investments at Rs. 3,000, X will pay the creditors. Bills payable would be paid X and Y in their Profit
Sharing ratio.
Good will and stocks are valued at Rs. 12,000 and Rs. 42,580 respectively. Debtors are taken at 10%
below book value, whereas other assets except cash at bank are to be considered at their book values, XY
Ltd. is to pay the firm by issue of equity shares of Rs. 10 each. Z is insolvent. Y agreed to take 6,000 shares
and balance taken over by X. Show Profit and Loss adjustment account, realization account and partner’s
capital accounts in the books of the firm. 20
2. a) From the following information prepare the bank reconciliation statements of the B Pvt. Limited as on
32nd Ashad 2064.
 The bank statement of the company shows the debit balance of Rs. 1,02,570.
 Interest amounting to Rs. 27,870 debited by the bank on 26th Ashad 2064 but no advice received.
 A cheque from Sudarshan for Rs. 4,000 was deposited in the bank on 28th Ashad but was dishonored
and the advice was received on 2nd Shrawan 2061.
 Bills payable amounting Rs. 83,600 paid by the bank till 32nd Ashad as per the instruction of the
company but no advice received by the company till 2nd Shrawan 2064.
 VAT refunded by the Government directly to the bank but not advised to the company Rs. 42,500.
 Transfer by bank to another account of the company with no advice Rs. 2,100.
 Out of the cheque is worth Rs. 24,000 deposited for collection up to 32nd Ashad 2064, value of cheques
collected is Rs. 18,600 only.
b.)The under mentioned errors were discovered in the books of R Enterprises after the profit and loss 50
account had been prepaid for the year ending on 32nd Ashad 2064 and the net profit was transferred to
the Capital Account. The difference in trial balance was carried to the Suspense Account on the Balance
Sheet. The enterprises have provided depreciation on the plant and machinery @ 10% p.a. and on
furniture @ 5% p.a. You are required to pass the rectifying entry for the following errors.
i. A cheque received and deposited into bank account for Rs. 16,000 form a customer was not posted
to Ledger. The corresponding sales were for Rs. 24,000 which had been wrongly passed through the
sales Day Book as Rs. 4,000.
ii. Machinery purchased for Rs. 40,000 on 1st Shrawan 2063 was wrongly debited to furniture account.
iii. Sales included Rs. 25,000 for goods sold for cash behalf of 0 Private Limited. R enterprise was
entitled to a commission of 10% on sales plus expenses for which no adjustment was made. The
trade expenses included Rs. 2,500 as selling expenses in connection with the above sale.
iv. Some old furniture (Book value of 1st Shrawan 2063 of Rs. 6,000) was disposed off for 3,000 on 30th
poush 2064 but the proceeds had been wrongly credited to Sales account
3.a) Ajay of Ktm consigned to Vijay of Pokhara, goods to be sold at invoice price which represent 125% of
cost. Vijay is entitled to a commission of 10% on sales at invoice price and 25% of any excess realized
over invoice price. The expenses on freight and insurance incurred by Ajay were Rs. 10,000. The account
1,00,000 in respect of 75% of the consignment. His selling expenses to be reimbursed were Rs. 8,000.
10% of the consignment goods of the value of Rs. 12,500 were destroyed in fire at the Pokhara go down
and insurance company paid Rs. 12,000 net of salvage. Vijay remitted the balance in favour of Ajay.
Prepare Consignment Account and the Account of Vijay in the books of Ajay along with the necessary
calculations.
b) On 1st January 2007, Mohan draws on Ram a bill for 3 months for 40,000 which Ram duly accepts.
Mohan discount the bill for Rs. 38,000. On the same date Ram draws on Mohan a bill for 3 months for Rs.
40,000 which is accepted by Mohan. Ram gets the bill discounted with a bank at 18%. On the due date,
Mohan meets his bill, but fails to honors his acceptance, the bank having to pay Rs. 20 as noting charges.
Give journal entries in the books of Mohan.
4. KB Pvt. Ltd has purchased a machine for Rs.16,000 and spent Rs. 4,000 on its erection on 1 st Shrawan
2060. On 1st Magh 2062 the 1/10th part of machine purchased on 01.01.2060 was sold for Rs. 5,720 and
on the same date a new machine was purchased at a cost of Rs. 64,000. Depreciation was provided at the
rate of 10% p.a. however, on 32nd Ashad 2063 the company decided to charge the method of depreciation
from diminishing balance method to fixed installment method with effect from 1 st Shrawan, 2060.
Prepare the diminishing balance method to fixed installment method with effect from 1 st Shrawan, 2060.
Prepare the machinery account for the year ended 32nd Ashad 2063. 10
5. Write short notes on: (4*5=20)
a) Accounting Policies
b) Different methods of inventories valuation
c) Self Balancing Ledger
d) Define capital receipt and revenue receipts. Also state the accounting treatment of capital and revenue
receipts.
6. Comment with reasons whether following statement is True or False.(10*2=20)
a) In imprest system of petty cash amount always remains same throughout the period.
b) Due to accounting of sales of furniture as of goods, trial balance will not agree.
c) Receipt and Payment is real account.
d) The sale proceed of old fixed assets is shown in the Income & Expenditure a/c.
e) Provision is created to cover unforeseen abnormal losses.
f) Finished goods are valued at cost or replacement value which ever is lower.
g) If the market value of the machinery is much higher than the purchase then depreciation need not be 51
provided for the same.
h) In FIFO method value of the machinery is much higher than the coat of the purchase then depreciation
need not be provided for the same.

i) U &Me Pvt. Ltd, a renowned and well established Company’s directors decided to show the goodwill at
Rs. 1,00,000 on account of its popularity and reliability among the customers.
j) In accommodation bills, the discount amount on the bank is borne by both the party on the basis of the
amount received by them.
December 2008, FOA

1. Following is the trial balance of M/s R Enterprises as on 31st Ashad 2065. You are required to prepare the
Trading; Profit 7 loss a/c ended 31st Ashad 2065 and balance sheet as on the date after making the
necessary adjustments. 20
Particulars Dr(Rs.) Cr.(Rs.)
Stock(01.01.2064) 450,000
Purchase 2,025,000
Sales 2,935,000
Investment @ 10% on 1.10.2064 200,000
Wages 25,000
Discount 2,000
Carriage inward 40,000
Bills receivable & payable 225,000 185,000
Insurance (Starting from 01.07.2064) 35,000
Debtors & creditors 1500,000 932,000
Consignors Balance (1.04.2064) 500,000
Capital 795,000
Salaries 100,000
Commission 40,000
Cash sent to Consignors 800,000
Interest 35,000
Furniture (1.4.2064) 60,000
Consignment sales 640,000
Cash in hand 22,000
Cash at bank 200,000
Rent & taxes 127,500
Sales of furniture (31.3.2065) 10,000 52
Charge paid against Consignment 80,000

5,999,000 5,999,000
Adjustment Required:
i. Stock on 31st Ashad 2065 was valued at Rs. 860,000 that includes stock of stationery of Rs. 800.
ii. Stock in the beginning includes stationery stock of Rs. 1,800.
iii. Bills receivables include a dishonored bill of Rs. 8,000.
iv. Miscellaneous expenses include Rs. 22,500 for stationery purchased on cash.
v. On sales of furniture firm had make a loss of 2,350
vi. Purchase and creditors at the end includes dues for stationery purchase for Rs. 3,000.
vii. Commission receivable on sales of consignment is Rs. 40,000
viii. Stationery costing of Rs.2,000 were consumed by the proprietor of the form.
ix. Bad debt amounting to Rs. 400 is to be wr4ittewn off. Make provision for doubtful debts at 7.5% on
debtors.
x. Depreciate furniture @ 10% p.a.
xi. Stock valued at Rs. 2,000 was destroyed by fire on 25th Ashad 2065 but insurance company admitted a
claim for Rs. 1,500 only and paid the sum on Shrawn 2065.
Two cheques of Rs. 1,200 and Rs. 1,800 issued to parties on 26th Ashad 2064 were lying in-presented till
31 Ashad 2065.
2. A, B, C and D are partners in the firm sharing profits and losses in the ratio of 4:1:2:3.
The following is their Balance Sheet as at 31st Ashad 2065.
Sundry 3,00,000 Sundry Debtors 3,50,000
Creditors Less: Doubtful Debts 50,000
Capital A/C 3,00,000
A 7,00,000 Cash in hand 1,40,000
B 3,00,000 Stocks 2,00,000
Other assets
Capital assets A/c 3,10,000
B 2,00,000
C 1,50,000
3,50,000
13,00,000
13,00,000
On 31st Ashad 2065 the firm is dissolved and the following points are agreed upon:
A is the take over sundry debtors at 80% of book value.
D is to take over the stocks at 95% of the value and 53
C is to discharge sundry creditors.

Other assets realized Rs. 3,00,000 and the expenses of realization come to Rs. 30,000

B is found insolvent and Rs. 21,900 is realized from his estate.

Prepare realization account and capital of the partners. Show also the Cash A/c.
The loss arising out of capital deficiency may be distributed following the decision in Garner vs Murray.
3. a) During the course of the audit, the accountant could not match the trial balance of G Enterprises on
Ashad end 2065. the auditor scrutinized the books and found that;
 Rs. 400 paid to N was recorded in M’s account.
 Rs. 100 being purchase return was debited to purchase account.
 Rs. 274 paid to repairs of machine was debited to machine account as Rs. 174.
 Discount received Rs. 200 was posted to debit side of discount account.
 Rs. 540 received from Ms. S posted to debit side of her account.
Required: Give Journal entries to rectify the above error and the amount transferred to Suspense
Account as on Ashad end 2065 by preparing suspense account assuming that the suspense account is
balanced after the above corrections. 7
c) Find the net profit for the period ending Ashad end 2065 M\s MBS Trading Co. 8
Opening Stock 15,350
Purchases 59,000
Sales expenses 5,100
Administration expenses 6,400
Interest expenses 1,900
During Ashad, Damaged goods costing Rs. 1,200 was sold for Rs. 500
Apply gross profit margin 20%
Sales for the year 1,20,000
4. NH Pvt Ltd has purchased machinery on 1st Shrawan 2061 for Rs. 1,90,000 and spent Rs. 10,000 on its
erection. On 1st Puush 2061 additional machinery costing Rs. 1,00,000 was purchased. On 1st Puush 2063
the machinery purchased on 1st Shrawan 2061 having become obsolete and was auctioned for Rs.
1,00,000 and on the same date, a new machinery was purchased at a cost of Rs. 1,50,000. Depreciation
was provided annually at the end of the Ashad at the rate of 10% per annum on the original cost of the
machinery. In 2065, the company decided to change the method of providing depreciation and adopted
the method of writing off 15% p.a. on diminishing balance value. Show the machinery account for the
years 2061 to 2065 Ashad end. 10
5. Write short notes on:
a) Fundamental Accounting Assumptions
b) Advantages of Subsidiary Books
c) Differentiate between Intangible Fictitious Assets
d) Del credere commission and Overriding commission
e) Joint Venture 54
6. Comment with reasons whether the following statements are True or False. (10*2=2)
a) In non-profit organization, income and expenditure account is prepared to determine the cash/bank
position of the organization.
b) Average due data calculate means the date on which the payment of the transactions between the two
parties is to be made.
c) Inventory in the financial statement represents raw materials and finished goods only.
d) Reducing balance method of depreciation is followed to have uniform charges for depreciation and
repair maintenances together.
e) Inventories are valued of cost or net realizable value which ever is lower.
f) Goodwill is a personal account.
g) Fitting charges to install machinery is charged to profit and loss account.
h) Bank loan is a personal account.
i) Subscription received in advance is shown in receipt & payment account.
j) A draws bill on 1.2.2005 for 30 days. Maturity date of the bill is 2.3.2005
JUNE 2009, FOA/Foundation

1. From the following information of M/S r& Co, prepare Trading and Profit and Loss Account for the year
ended 31st Ashadh, 2065 and the Balance Sheet as on that date:
Liabilities & Assets 32-03-2064(Rs) 31-03-2065 (Rs)
Car 90,000 90,000
Furniture 10,000 10,000
Stock 70,000 90,000
Debtors 62,000 46,000
Bank 9,000 16,000
Creditors 60,000 ?
The following information is also available:
a) M/s R & Co. purchases goods for resale from manufactures who allows discount of 3% on goods
purchased in excess of Rs 500,000 in a year. The discount for the year ended 31 st Ashadh, 2065 was Rs
12,480.
b) All goods are sold at a gross profit margin of 30%.
c) Bank statement for the year reveals the following payments:
Particulars Rs.
Creditors 903,520
Salaries 60,000
Car expenses 23,000
Rent 30,000
Printing and stationary 6,400 55
Rates and Taxes 3,000
Carriage Outward 18,600

Travelling Expenses 14,900

Delivery Ban Purchases 170,000
Miscellaneous Expenses 9,580
Drawing 50,000
Depreciation on Car and Van@ 20% and Furniture @ 10% is to be provided on balances as on 32.03.2064.
20
2. a) From the following particulars, ascertain the balance that would appear in the Bank pass Book (Bank
Statement) of M/s BCD on May 31.2009: 10
i) The Bank overdraft as per Cash Book as on May 31,2009:Rs 240,000.
ii) Total cheques issued during May,2009 by M/s BCD: Rs 550,000 but presented for payments till May
31,2009: Rs 430,000.
iii) Interest charged by bank but not yet entered in the cash book: Rs 25,000.
iv) Cheques issued to Mr. Z for Rs 45,000 and duly presented for payments; however the same recorded
as Rs 54,000 I the cash book.
v) Interest on deposits collected by bank; not yet entered in cash book: Rs. 500
vi) On May 28,2009, the bank debited Rs 2,500 to M/s. BCD in error.
vii) Draft deposited on May 30,2009 but not yet credited by the bank; Rs 4000.
viii) Cheques issued to Ram Rs 10,000 wrongly recorded as issued to Shyam in cash book, the same was
presented for payment on May 15,2009.
b. A and B are partners sharing profits and losses in the ratio 3/4th and remaining to B. their Balance Sheet
as on Ashadh 31.2065 is as follows:
Partner’s Capital: Goodwill 5,000
A 50,000 Fixed Assets 40,000
B 30,000 Investments 3,000
Bills Payable 25,000 Inventories 30,000
Sundry Creditors 10,000 Debtors 20,000
Outstanding 5,000 Bills Receivable 10,000
Expenses Cash & Bank Balances 12,000
120,000 120,000
They agreed to take C into partnership and gave him a share of 20% as on Shrawan 01.2065 on the
following terms:
C shall bring Rs 20,000 as capital.
Goodwill to be valued at rs 30,000 but no goodwill is appear in the books.
Fixed Assets to be appreciated by 15%
56
Inventories to be reduced by 10%
5% provision for doubtful debts to be created on debtors.
Creditors to be reduced by Rs 3,000

Capital Accounts of the partners to be readjusted on the basis of their profit sharing ratios and any excess
or deficit to be adjusted in as cash.
Prepare revaluation Account. 5
3.a)The account sale received from an agent disclosed that the total sales effected by him during 2064/65
amounted to Rs 675,000. This included Rs 468,750 for sales made at invoice price which is cost plus 25%
and the balance at 10% above the invoice price. He incurred expenses to the tune of Rs 7,500 out of
which rs 2,700 is recurring in nature. Forwarding expenses of the Consignor totaled Rs 3,600. The agent
had remitted the balance due from him through Bank Draft after deducting the expenses, 5% commission
on gross sales, bad debts Rs 1,275 and bills payable accepted by him for Rs 15,000. The value of unsold
stock at original cost lying with the agent as on 31st Ashadh 2065 amounted to Rs 75,000. Coassignee has
been paid delcredere commission. Prepare Consignment Account and the Agent Account in the books of
the consignor. 8
b)SK Pvt. Ltd closes its books on Ashadh end every year. In the beginning of Ashadh, because of a proposal
for sale of business, the firm carried out stock taking on Ashadh 10. The figure of stock was established
as Rs 187,500 (cost) as on that date. The firm decided not to carry out any stock taking on 31 st Ashadh.
From the information given below, arrive at the value of stock as on that date:
i. Sales from 11th Ashadh to 31st Ashadh totaled Rs Rs 129,600 including Rs 9,000 sales of goods which
had cost Rs 10,800. The firm’s profit margin on cost is 25%.
ii. Purchases during the same period totaled Rs 87,600.
iii. Sales returns and purchase return were Rs 6,600 and Rs 3,600 respectively in this period.
iv. Goods with customers on sales or return basis were Rs 30,000 (Performa invoice value). The goods
had been sent on 9th Ashadh. The customers had the right of returning the goods within four weeks but
it was known that one customer who had goods worth Rs 12,000 has pledged them with a bank.
v. Net realizable value of the goods on 31st Ashadh was found to be Rs. 190,500.
4. Ram accepted on 1st April 2008 a bill for Rs.10,000 drawn by Shyam at three months. Shyam discounted
the bill at Bank at 7%. Ram failed to meet the bill in due time and at his request Shyam renewed the bill by
adding 12% interest to the current balance on Ram furnishing security, Ram endorsed two of his
customers’ bills for Rs 7,000 and 5,400 due on 21st August 2008 and 12th September 2008 respectively.
Shyam discounted all the three bills at 7% with the Bank but on the due date the second customer’s bill
was dishonored. Ram became bankrupt. Journalize the transaction in Shyam’s book.
10
5. Write short notes on:
a) Objective of providing depreciation
b) Fundamental Accounting Assumption
c) Objective and limitation of trial balance
d) Differentiate between reserve and provision
e) Define in one sentence each:
i. Expense
57
ii. Equity
iii. Liability
iv. Assets

6. Comment with reasons whether following statements are True or False.

a) Goods of worth Rs 50,000 is bought for Rs 55,000 on credit and no sale has been effected for this. The
owner’s equity has remained unchanged with this transaction.
b) Mr. A purchased goods costing rs 100,000 for 90,000 on cash and has remained in the closing stock.
Accountant says he made a profit of Rs 10,000.
c) Accountant of M/s BC Trading forgot to show a telephone bill of Rs 1,500 in the profit and loss account
instead showed in Assets side of balance sheet. He says two sides of balance sheet will tally with this
mistake.
d) Providing depreciation in the books reduces the amount of profit available for dividend.
e) A withdrawal of cash from business by the proprietor is credited to his capital account.
f) Purchase of fixed assets is capital nature expenditure and depreciation provided against it is of
revenue nature.
g) Any amount paid to discharge an unrecorded liability is credited in General Ledger Adjustment
Account in Sales Ledger.
h) Bad debts previously written off now recovered will be recorded in General Ledger Adjustment
Account in Sales Ledger.
i) Depreciation is also one of the components of expenses hence shown in payment side of Receipt &
Payment Account.
j) If overriding commission is paid to the consignee he will bear the risk of unrecovered from debtors.
December 2009,FOA/ Foundation

1) Prepare Trading and profit & Loss account for the year ended Ashadh 31.2066 and the Balance Sheet as
on that date from the following Trial Balance extracted from the books of M/s D’ Damas.20
Trial Balance as on Ashadh 31. 2066
Particulars Debit Credit
Purchase & Sale 6,000,000 4,500,000
Interest 125,000 18,000
Debtors & Creditors 140,000 225,000
Miscellaneous Expenses & Income 3,200 4,500
Goods Returned 90,000 12,000
Rent 36,000 4,000
Building 500,000 -
Furniture 100,000 -
Bank Loan - 300,000 58
Vehicles 300,000 -
Cash in hand 16,400 -

Bills Payable - 20,000

Cash at Bank 45,000 -
Wages 34,000 -
Capital - 3,000,000
Salaries 67,000 -
Insurance 17,000 -
Direct Electricity 20,000 -
Freight Outward 23,400 -
Postage & Telegram 3,400 -
Travelling & Conveyance 13,500 -
Office Electricity 12,000 -
Office Expenses 2,000 -
Life insurance Premium 5,600 -
Investment 230,000 -
8,083,500 8,083,500
Further Information:
a) Closing Stock as on Ashadh 31, 2066: Rs 2,520,000.
b) Interest accrued on investment Rs 5,000 and on loan Rs 12,000.
c) Charge depreciation at following rates Building @ 10% Furniture@ 15% and Vehicles @ 20%.
d) Prepaid Salaries amounts to rs 3,000.
e) Outstanding wages amounts to Rs 4,200.
2. a) The trial balance of ABC Concern as on 31st Ashadh 2066 did not agree. The difference were put to a
suspense account. During the next trading period, the following errors were discovered.
i) Total of the sales book from one page Rs 6,531 was carried forward to the next page as Rs 6,351.
ii) Goods returned by a customer for Rs 12,000, but entered in the purchase returned book.
iv) Rs 50 discount allowed by a supplier was wrongly posted to the debit side of discount account.
v) An item of purchase costing Rs 151 was entered in the purchase book as Rs 15 and posted to
suppliers account as Rs 51.
Required: Give journal entries to rectify the errors through Profit & Loss Adjustment A/c. 5
b) Bimal of Bhaktapur and Chandra of Chitwan entered into a joint venture to consign scrap iron to A of
Achham, to be sold at their risk. They share profit or loss equally. A is entitled to a commission of 10% of
the sales proceeds after charging such commission. Bimal sends 50 tons costing Rs 4,3000 per ton and
pays freight and other expenses of Rs 40,000. All the scraps are sold by A @ Rs 10,000 per ton and he
incurs selling expenses of Rs 12,000. He remits Rs 500,000 to Bimal and the balance of the net proceeds
to Chandra by bank draft. 59
Required: 10
i) Show the account in the books of Chandra and Bimal to records their own transaction, and
ii) prepare a memorandum joint venture account.

3. a) Prepare journal entries, in the books of M/s Theta Concern for rectification of following transactions: 7
i) Rs 2,000 paid by cheque to Mr. Peter was wrongly recorded as cash paid to Mr Pan.
ii) Rs 4,000 Sales return was wrongly recorded as Purchase return.
iii) Credit Purchases from Charles was wrongly recorded as Cash Purchases from Angles Rs 22,000.
iv) Credit Sales to Beta Rs 9,900 was omitted to record.
v) Cash Sales to mr. Morris for Rs 4,200 was recorded twice.
vi Rent Expenses for Rs 9,000 was only booked as expenses against net rent paid to Mr. Q Rs 9,000 after
deduction of TDS Rs 1,000.
b) Following are the Bank maintained by Tara Pvt.Lts and Bank Statement of MMM Bank Ltd. for the month
of November 2009:
In the books of Tara Pvt Ltd.
Bank Book (MMM Bank Ltd)
For the month of November,2009
Date Particulars Amount Date Particulars Amount
1/11/2009 To opening 450,000
balance
2/11/2009 To Cash 20,000 3/11/2009 By Cash 40,000
20/11/2009 To ABC 30,000 15/11/200 By PQR 38,000
9
24/11/2009 To Cash 34,000 24/11/200 By Cash 30.000
9
29/11/2009 To XYZ 42,500 29/11/200 By JKL 48,000
9
30/11/200 By balance C/F 420,500
9
Total 576,500 Total 576,500
1/12/2009 To Balance B/F 420,500
MMM Bank Ltd

Bank Statement of M/S Tara Pvt. Ltd
Period November 01,2009 to November 30,2009
Date Particulars Dr.Withdrawals Cr. Deposits Balance Dr./Cr/
1/11/2009 By Opening Balance 540,000 Cr

2/11/2009 By Cash 20,000 560,000 Cr
2/11/2009 To Cheque (CDE) 90,000 470,000 Cr
3/11/2009 To Cash 40,000 430,000 Cr 60
18/11/2009 To Cheque(PQR) 38,000 392,000 Cr
20/11/2009 By Cash 34,000 426,000 Cr

20/11/2009 By Cash 42,500 468,500 Cr

24/11/2009 To Cash 30,000 438,500 Cr
27/11/2009 To Bank Charges 310 438,190 Cr
28/11/2009 By Collection (XYZ) 8,500 446,690 Cr
30/11/2009 To Cheque (JKL) 84,000 362,690 Cr
30/11/2009 By Interest 1,200 363,890 Cr
Prepare Bank reconciliation Statement as on November 30,2009 8
4) Sony Pvt. Ltd. purchased a machine for Rs 880,000 on Shrawan 01,2064. Depreciation was charged @
15% p.a. on Straight Line Method.
On Kartik 01,2064 (i) a modification costing Rs 80,000 was made in the machine to improve its technical
efficiency which would enhance its life by 4 years & (ii) a damaged component of the machine was
replaced at a cost of Rs 100,000
On Shrawan 01, 2065 Rs 10,000 was incurred for routine maintenance of the machine
On Ashadh 31.2066 the machine was sold at a profit of Rs 200,000.
Prepare following accounts for F/Y 2064/65 and 2065/66. 10
a) Machinery Account
b) Profit & Loss Account ( Relevant Portion only)
5) Write short notes on: 5×4=20
a) Garner vs. Murray Rule
b) Joint Venture & Consignment
c) Capital & Revenue Expenditure
d) Advantages of Self balancing Ledgers
e) Promissory Note & bill of exchange
6) State with reasons whether the following statements are true of False: 10×2=20
a) Difference of the two sides of receipts & Payments Account represents either surplus (excess of
income over expenditure) or deficit (excess of expenditure over (income).
b) Joint Venture is entered into to run a business on long term basis.
c) Goods taken (withdrawn) by the proprietor from the business are debited to his Capital Account.
d) The profit sharing ration of partners may not necessarily be in proportion to their ratio of capital
contribution.
e) Trial Balance is prepared to show the financial position as on a particular date.
f) A grace period of 2 days is allowed in the case of payment of cheque.
g) Under the written down value of depreciation method, the rate (%) of depreciation decreases year by
year.
h) Inventories are valued at Cost or Sale price, as per management decision.
i) Sales book is kept to record both cash and credit sales
j) Salary paid is debited to employee’s personal account
61

1. From the following trial balance and additional information of ABC & Company, prepare Trading, Profit
and loss Account for the year ending on 31st Ashadh 2066 and the Balance sheet as on that date.
Particulars Debit (Rs) Credit (Rs)
Land & Building 104,000 -
Wages to Labor 86,000 -
Plant & Machinery 74,500 -
Office Equipment (including a fax 41,500 -
machine whose WDV is Rs 1,500
Investment 60,000 -
Salaries to Employees 101,600 -
Administrative Expenses 20,000 -
Debtors 116,700 -
Purchase 130,500 -
Sales - 300,700
Capital - 422,600
Creditors - 110,500
Advance Income tax 12,000 -
Other Current Assets 24,500 -
Cash in Hand 4,500 -
Cash at Bank 10,000 -
Miscellaneous Payables - 2,000
Total 835,800 835,800
a) Stock in hand on 31st Ashadh was valued at Rs 64,000.
b) Goods costing Rs 1,000 were taken by the proprietor for his personal use but no entry has been made
in the books of Account.
c) The firm has policy of writing off fixed assets whose written down value is below Rs 2,000.
d) Investments were made on 1st Shrawan 2063 comprising Rs 40,000 in Debenture and Rs 20,000 in
Equity Share of XYZ Ltd. Debentures were priced at 12% p.a. and interest has been received in cash on
regular basis. Entry for the interest received was omitted in the books hence physical cash balance is
higher by rs 4,800 than as shown by the Cash book. It is expected that XYZ Ltd. will give dividend at 5
percent but the same has not been approved till balance sheet date.
e) Received credit purchase invoice of Rs 6,000 on 27th Ashadh 2066 but the goods were received till the
end of the financial year.
f) Provide Depreciation 5% on Building, 10% on Plant & Machinery and 10% on Office Equipment. Book 62
value of Land is Rs 24,000 and its market price is found to be Rs 150,000.
g) Remuneration of Rs 3,000 paid to Sujan, a temporary employees , Stands debited to hid personal
account.

h) Sundry creditors include an amount of Rs 6,000 received from Abhik and credited to his account. The
amount was written off as a bad debt in the previous year.
i) As per Income Tax Act, the firm is not liable to pay Income Tax (Taxable profit is nil) for the financial
year.
j) Employees are entitled for Bonus at 10 percent on net Profit after charging such Bonus. 20
2. a) A pathologist, a gynecologist and a child specialist started a Polyclinic. A cardiologist, a general
practitioner radiologist and dentist were then in on payment Rs 5,000 ne each of them as goodwill and
also Rs 20,000 to be brought in by each of them as Capital. Goodwill is shared by the existing partners
equally. Each of the original partners also contributed rs 20,000 by way of Capital. The terms of sharing
profits or losses were as follows:
i) 60% of the visiting fee goes to the specialist concerned.
ii) 40%of the chamber fee will be payable to all individual specialist.
iii) 50% of the operation fees and the fees of pathological reports, X ray and ECG will accrue in favor of
doctor concerned.
iv) Balance of profit and loss is shared equally.
v) The proportion of fees and charges accruing in favor of individual doctors are to be with drawn then
and there.
vi) The charges for the year after the admission of new partners are:
Doctors Visiting Fees Chamber fees Fees for reports, operation etc
General Practitioner 60,000 80,000 -
Gynecologist 10,000 70,000 40,000
Cardiologist - 40,000 30,000
Child specialist 40,000 60,000 -
Pathologist - - 40,000
Radiologist - 16,000 80,000
Dentist - 10,000 60,000
110,000 276,000 250,000
vii) Expenses and charges for the year are as follows:

Particulars Rs Rs
Rent 31,000
Light 5,000
Nurses’ Salary 12,000
Attendants ’wages 6,000
Telephones 8,200
Printing and Stationery 2,000 63
Medicines, bandages, injections, etc 4,000

Depreciation:

Furniture 2,000
X-ray machine 10,000
ECG equipments 4,000
Dentist chairs 2,000
Surgical equipments 2,000 20,000
Prepare the profit and loss Account of the Polyclinic, also showing the final distribution of profit and loss
among the partners. 10
b) From the following information find out value of closing stock as on 31st Ashadh, 2066.
Total sales during the period Rs 150,000
Gross Profit margin on sales 20%
Sales of a broken item included in above sales Rs 10,000
Opening stock Rs 30,000
Cash purchases Rs 10,000
Credit Purchases Rs 90,000
Wages paid Rs 12,000
Wages Payable Rs 5,000
Sales of broken item realized only 50% of normal selling price. The item of goods was broken due to
mishandling by a labour.
There was loss of stock by fire which could be sold at Rs 6,000 had there been no fire. 5
3. a) Journalize the following transactions in the books of M/s DGBG.
i) Promissory Note for Rs 28,000 of DGBG in favour of PQR settled by sending them JKL’s acceptance
for Rs 28,000.
ii) DGBG’s promissory note in favour of ABC for Rs 32,000 returned unpaid due to lack of instruction to
the banker. ABC claimed Rs 32,320 which was paid by cheque.
iii) DGBG’s acceptance to XYZ for Rs 100,000 was retired before due date at a rebate of Rs 1,000.
iv) Sold goods to DEF for Rs 54,000 which was paid by a cheques for RS 4,000 and bill of exchange for
Rs 50,000 at two months; DGBG discounted the bill of exchange at the bank for rs 49,500. 8
b) A merchant’s trial Balance as on 31st March, 2010 did not agree. The difference of Rs 8,300 credit being
short, was put to a suspense Account in way to tally the trial Balance. During the next trading period,
the following errors were located.
i) A sale of Rs 23,000 to Mr. Kamal was posted to the credit of Mrs. Kamala.
ii) Freight paid on a machine Rs 56,000 was debited to the freight as Rs 65,000.
iii) While carrying forward the total in the Purchases Account to the next page, Rs 655,900 was write
instead of Rs 569,500.
iv) A sale of machine on credit to Mr Mehta for Rs 90,000 was not entered in the books at all. The book
value of the machine was Rs 75,000.
The merchant has the practice of writing off depreciation @ 12% on the balance at the year end. Pass 64
necessary journal entries to rectify the located errors. Have you any comments to make. 7
4. On 01.07.2006 a company purchased a machine for Rs 780,000 and spent Rs 20,000 on its installment. It
decided to provide depreciation@ 15% per annum, using written down value method. On 30.11.2009 the

machine was dismantled at a cost of Rs 10,000 and then sold for Rs 200,000. On 01.12.2009 the company
acquired and put into operation a new machine at a total cost of Rs 1,520,000. Depreciation was provided
on the new machine on the same basis as had been used in the case of the earlier machine. The company
closes its books of account every year on 31st march.
Prepare Machinery Account and Depreciation Account for four accounting year ended on 31.03.2010.
5. Write short notes on: 5×4=20
a) Straight Line Method and Reducing Balance Method of Depreciation
b) Earnings Per share
c) Limitation of Trial Balance
d) The reasons of difference in bank pass Book and Cash Book on a particular date.
e) Define in one sentence each:
i) Accrued Income
ii) Outstanding Expenses
iii) Prepaid expenses
iv) Creditors
6. Comment with reasons whether following statements are True or False. 10×2=20
a) The debit side of trial Balance will be increased by rs 500, if a debit of Rs 500 in rent expenses was
posted in Fixed Assets Account.
b) Retiring a bill under rebate means making payment for the bills after the due date.
c) In Partnership Firm profits and losses are to be shared equally in absence of any agreement to the
contrary.
d) Error of Principle never affects the agreement of trial Balance.
e) Current assets are borrowing and bank overdraft which falls due for payment in a relatively short
period, normally not more than twelve months.
f) An error in nominal account will affect the profit and loss Account but not the Balance Sheet.
g) Income Tax paid on proprietor’s income is debited to Profit & loss Account.
h) Under double entry system of accounting, if an asset account is debited its corresponding entry will be
credit to a liability account.
i) Goods sold for cash worth rs 1,000 but cash account debited with rs 100 and sales credited with
identical amount is an error of commission.
j) All fixed assets may not necessarily depreciate.
December 2010 FOA/Foundation

65
1. From the following list of account balance of Ms. Kedia and Company as at 31 st March, 2010, prepare
Trading, Profit & Loss Account for the year ending 31st March 2010 and also Balance Sheet as on that date.
20

Particulars Amount in Rs
10% Preference shares (1000 shares @ Rs 100 each) 100,000
Ordinary Shares (5000 Equity shares @ Rs 100 each) 500,000
12% Debenture 100,000
General Reserve 150,000
Retained Earning 313,000
Provision for Depreciation on:
Land & Building 60,000
Plant & Machinery 250,000
Bills Payable 200,000
Land & Building (Cost) 370,000 370,000
Plant & Machinery(Cost) 880,000
Bills Receivable 400,000
Cash 347,000
Inventory as on 1st April 2009 97,000
Sales 2,450,000
Purchases 2,050,000
Salaries & Wages 250,000
Electricity 35,000
Miscellaneous Expenses 98,000
Interest On Debenture 6,000
Dividend on Preference share 10,000
Dividend on Equity share (Interim)) 50,000
Suspense Account 470,000
Notes:
a) Miscellaneous Expense includes Rs 10,000 paid in relation to insurance for the year ended 30 th
September 2010. Electricity Expenses does not include a bill of Rs 2,000 for the month of March 2010,
which was paid in April 2010. Electricity Expense also includes rs 15,000 relating to Printing and
Stationery.
b) The suspense account represents the proceeds from following items:
Proceeds from issue of 1000 equity share of Rs 100 each 120,000
Proceeds from sale of plant 350,000
470,000
c) The plant which was sold had cost Rs 400,000 and net book value of Rs 310,000 as on 01-04-2009.
Depreciation to be charged Rs 4,000 on Building and Rs 50,000 on Plant and Machinery for current year.
66
d) Inventory as on 31st March 2010 was valued at Rs 250,000
e) The management wants to provide for:
Debenture interest due
Audit fee Rs 15,000

A transfer to General Reserve Rs 25,000
f) Taxation is to be ignored.
2.a) Determine the value of stock to be taken for balance sheet purpose of M/s Zig Zag Stationery as on
Ashadh end, 2067 on the basis of following date:
i) Market value of stock as on Shrawan 01,2006; Rs 300,000. (Market Price being cost plus 20% thereof)
ii) Purchases for the year Rs 1,450,000.
(Out of which goods worth Rs 150,000 was delivered on Shrawan 08,2067)
iii) Sales for the year Rs 1,480,000.
iv) Goods costing Rs 20,000 was taken by the proprietor for personal use.
v) Goods costing rs 10,000 was used for firm’s office stationery.
vi) Normally the firm sells goods on cost plus 40% however, one lot of goods costing Rs 100,000 was
sold at cost less 20%. 12
b) On January 01,2010; QQQ sold goods to ZZZ for Rs 20,000 and at the same day drew a bill on ZZZ for
the amount due payable after 3 months. ZZZ accepted the bill. On March 4,ZZZ retried the acceptance
receiving a rebate of 12% p.a. Pass entries in the books of ZZZ. 3
3. a) S.R. Ltd leased on 1st April 2005 for ten years a mine containing an estimated quantity of 60000 tones
of coal. The Company decided to provide depreciation on the Straight Line Basis. The amount paid for
lease was Rs. 900,000. The output was as follows:
For the year ended Tones
31-03-2006 4000
31-03-2007 4000
31-03-2008 5000
31-03-2008 7000
31-03-2010 7000
On 31-03-2010, the company decided to change over to the depletion Method and to give effect to it
retrospectively from the very beginning. On 01-04-2010, the mine was taken over by Local Government
and Paid rs 700,000 for it,
Prepare the lease account for the year ended 31-3-2010 and state the journal entry required to be passed
on the mine being taken over by Local Government. 10
b) Following errors were made in the books of XYZ during the year ended Ashadh 32, 2067:
i) The sales Book was over cast by Rs 24,000.
ii) Goods returned Rs 1,200 by ABC were not entered in the books.
iii) Goods sold to PQR for Rs 3,300 were not entered in the books.
iv) Rs 5,400 cash received from KLM was treated as having received from CCC.
Make necessary correcting journal entries on the assumption that the ledger are maintained on self
balancing system.
67
4. From the following, prepare receipt & payments Account of M/s Charity only for the year ended July
16,2010: 10
Income & Expenditure A/C

For the Year Ended July 16,2010

Incomes: Rs.
By Subscription Income 360,000
By Interest Income 43,000
By Sundry Income 14,300
Total 417,300
Expenses:
To Rent 78,000
To Remuneration 98,000
To Depreciation on building 20,000
To depreciation on Office Equipment 12,000
To Miscellaneous Expenses 6,000
To Annual Dinner Expenses 11,000
To Bank Charges 1,200
TO Honorarium 8,000
To Surplus (Excess of Income over Expenses) 183,100
Total 417,300
Balance Sheet
Particulars As on July 15,2009 As on July 16,2010
Liabilities
Capital Fund 370,000 553,100
Rent Outstanding 8,000 22,000
Subscription received in Advance 30,000 50,000
Total 408,000 625,100
Assets
Prepaid Remuneration 6,000 13,000
Accrued Subscription 3,000 12,000
Building 100,000 120,000
Office Equipment 80,000 58,000
Investment 180,000 280,000
Interest Earned but not yet received - 16,000
Cash & Bank Balance 39,000 126,000
Total 408,000 625,100
5. a) Write short notes on: 2×4=8 68
(i) Trade bill and Accommodation bill
(ii) Fundamental Accounting Assumptions
b) Distinguish between Joint Venture and Consignment
c) Briefly explain the meaning of cost in relation to inventory valuation

d) Define in one sentence each: 4×1=4
(i) Revenue
(ii) Expenses
(iii) Accounts Receivable
(iv) Tangible Assets
6. State with reasons whether the following statements are true of false: 10×2=20
a) Fixed Assets brought in to business by the proprietor is credited to his Capital Account.
b) Providing Depreciation decreases the net profit as well as cash profit of a firm.
c) Life Insurance Premium paid for proprietor does not reduce the profit of the firm.
d) Goodwill is a Fictitious Assets.
e) Revenue and Expenses accounts are temporary or normal accounts.
f) The preparation of Bank reconciliation Statement is a part of the double entry books keeping system.
g) Personal and real accounts are balanced whereas Nominal accounts are closed.
h) Petty cash system is designed to meet the needs of small business.
i) An error of commission occurs when commission received or paid is not recorded in books.
j) Ambition Limited Photocopier on 1st January 2007 at Rs 52,000. It is determined that the photocopier
would be depreciated under reducing balance method at 20% per annum. The depreciation expenses
for the year ended 31st December 2009 is rs 10,400.
Notes:
69

70

71

72

73

74

CAP-I Examination Questions

June 2009, FOA/CAP-I
1. From the following balance extracted from the books of Mr. B. Birat, prepare trading and profit & loss
account for the year ended Ashad 31, b2065 and the balance sheet as on that date:
Purchase 4,000,000 Land 1,000,000
Sales 4,300,000 Motor Car 200,000
Sundry Debtors 225,000 Return outward 12,500
Building 100,000 Return inward 22,000
Furniture 50,000 Cash in Hand 8,000
Wages 46,000 Bank loans 450,000
Salaries 56,000 Bills Payable 18,000
Insurance 18,000 Opening Stock 228,000
Rent 40,500 Freight inward 8,000
Investment 100,000 Freight outward 7,000
Postage & Telegram 1,800 Office electricity 8,000
Traveling & Conveyance 2,400 Office expenses 15,000
Interest on Bank Loans 25,000 Sundry Income 10,000
Adjustment required:
a) Stock as on Ashad 31.2065 was valued at NRs. 450,000
b) The market value of investment as on 31.03.2065 amounted to NRs. 120,000
c) Interest accrued on investment amounted to NRs. 5000.
d) Charge depreciation on building @ 5% furniture @ 25% and Vehicle @ 20%
e) Outstanding Salaries amounts to NRs. 5,500 whereas, Prepaid Rent amounts to NRs. 7,500.
f) Of the Sundry Debtors NRs. 2,000 is bad and should be written off.
2. a) On Shrawan 1, 2062 POR took a mining lease from GVK on a term that royalty was payable @NRs. 20
per ton of output within a minimum rent of NRs. 1,000,000 per annum. Short woeking, if any, of any
year, was recoupable during the subsequent year only.
The lease, however, stipulated that if in any year the normal rent was not attained due to strike, the
minimum rent was to be regarded as having been reduced proportionately having regard to the length
of stoppage. The output was as follows:
Financial year Output Remarks
2062-63 40,000 Tonnes-
2063-64 54,000 Tonnes-
75
2064-65 52,000 Tonnes-Stoppage due to Strike for 3 months
Pass journal entries in the book of the landlord GVK for all the three year. 7

b.) Ram and Hari enter a joint venture to prepare a film for the government. The Government agrees to
pay NRs. 200,000. Ram contributes NRs. 20,000 and Hari contributes NRs. 30,000. These amounts are
paid into a Joint Bank Account. Payments made of the joint account were:
Purchase of equipment NRs. 12,000
Hire of equipment NRs. 10,000
Wages NRs. 90,000
Materials NRs. 20,000
Office expenses NRs. 10,000
Ram paid NRs. 4,000 as licensing fees. On completion, the film was found defective and the Government
made a deduction of NRs. 20,000. The equipment was taken over by Hari at a valuation of Rs. 4,000.
Separate books were maintained for the joint venture whose profits were divided in the ratio of Ram
2/4 and Hari 3/5.
Prepare Joint Bank Account, Joint Venture Account and Co-Venture Accounts.
a) Minimax Ltd. purchase a machine for NRs. 400,000 on 01-04-2065. Depreciation was to be charged at
15% per annum on Straight line Method.
On 01-01-2065, following expenses were incurred:
NRs. 100,000 for a modification to improve its production capacity
NRs. 20,000 for replacement of a damaged part.
Prepare Machinery Account for the year ending 31-03-2065. 5
3. a) A, B,C commercial business on 1.4.2007 with the capital of NRs. 50,000, 40,000 and 30,000. Profit and
Losses are shared in the ration of 4:3:3. Capital carried interest @ 10% p.a. During 2007-08 and 2008-
09 they made profits of NRs. 35,000 and 45,000 before allowing interest on capital. Each partner
withdrew NRs. 12,000 per year for the personal use.
On 31st March, 2009, the firm was dissolved. Creditors on that date were Rs. 19,000. The assets realized
NRs. 13,000 net. Please prepare necessary ledger accounts to affect the dissolution of firm assuming
cutoff date is March-end. 10
b) PAD Concern issued a cheque of NRs. 2,500 to make payment to its suppliers on 5th January 2009. But
the cheque was dishonored from the bank and the cheque was referred to the drawer. The concern had
not prepared bank reconciliation statement since last week, so that it could not guess the exact amount
of balance in its bank account. You are required to find why the cheques dishonored?
Amt (Rs.)
Balance as per cash book 3,250
Wrong credit given by the bank 150
Cheques sent deposit on 31st December 2008
was cleared only on 2nd Jan 2009 3,000
Cheque received from customers dishonored by bank but not recorded in
the cash book 1,500
Dividend directly deposited in the bank account 2,500 76
Annual fee charged by the bank but omitted to recorded in the cash book 200
Telephone bill directly paid by the bank as per the standing instruction 750

A cheque amounting to NRs. 4,250 was issued which was recorded as NRs. 2,450 in the cash book.
4. a) Mr. X reports the following account on his income statement:
Sales NRs. 69000
Advertisement expenses NRs. 3500
Salaries expenses NRs. 39000
Rent expenses NRs. 10,000
These accounts represent two year of revenue and expenses. Mr. X provides the following :
Additional data:
i. Sales in 2nd year are double those of the first year.
ii. An advertisement expense of Rs. 500 is for opening promotion and balance for weekly
advertisement in the newspaper.
iii. Salaries represent one employee for the first nine month and then tow employees for reminder of
the time. Each is paid the same salary. No raise have been granted.
iv. Rent has not changed during the period.
Prepare income statements for year 1st and year 2nd.
b) From the following bills due on different dates, calculate the date on which a single payment of total
amount can be made.
Date NRs.
7th April due 17th May for 6,000
14th May due 22nd July for 12,000
5th June due 2nd August for 10,000
15th June due 30th August for 14,000
c) Briefly explain qualitative characters of financial statements. 5
5. Comment with reasons whither the following statements are true or false.
a) Valuation of assets of a business is dependent on going concern basis.
b) ‘All the expenses matched with the revenue of that period should only be taken into consideration’ is
the matching concept.
c) Inventories are valued using LIFO method as per Accounting Standard.
d) Ledger book is popularly known as subsidiary book of account.
e) Crossed cheque is not a negotiable instrument.
f) Patient rights are in the name of Personal Account.
g) The total of the sales is posted to credit of the purchase book.
h) The total of sales book was not posted to the ledger is error of commission.
i) Quick assets are also known as liquid assets.
j) Heavy advertising to introduce a new product is capital expenditure.
6. Write short notes on the following. (Any four) (4*2.5=10)
77
a) Users of financial statements
b) Accounting Equation
c) Prudence

d) Mortgage
e) Going concern
f) Straight line method
December 2009, FOA/CAP-I

Attempt all questions: Working notes should form part of the answer.
1. From the following Trial Balance of Atmaram as at 31st March, 2009, you are required to prepare a Trading
and Profit and Loss Account for the year ended 31st March, 2009 and a balance sheet as at that date:
20
Trial Balance for the year ended 31st March, 2009
Particulars Dr. Rs. Cr. Rs.
Atmaram’s Capital Account 1,81,000
Atmaram’s Drawing Account 36,000
Plant and Machinery (balance sheet as at 01.04.2008) 1,20,000
Plant and Machinery (purchase on 01.10.2008) 25,000
Stock on 01.04.2008 95,000
Purchases 7,82,000
Return inwards 12,000
Sundry Debtors 20,600
Furniture and fixtures 15,000
Freight and Duty 2,000
Carriage Outward 500
Rent, Rates and taxes 24,600
Printing and stationery 3,800
Trade Expenses 5,400
Sundry Creditors 40,000
Sales 9,80,000
Return Outwards 3,000
Postage and telegrams 800
Provision for doubtful debts 400
Discount 1,800
Rent of premises sub-let for a year up to 30.09.2009 7,200
Insurance Charges 2,700 78
Salaries and Wages 31,300

Cash Balance 36,700

Total 12,13,400 12.13.400

Other relevant information is as follows:
a) Stock on 31.03.2009, was valued at Rs. 94,600.
b) Write off Rs. 600 as bad debts.
c) The provision for doubtful debts to be maintained at 5% on sundry debtors.
d) Create a provision for discounts on debtors and reserve for discounts on creditors at 2%.
e) Provide for depreciation on furniture and fixtures at 5% per annum, and on plant and machinery at
20% per annum.
f) Insurance unexpired was Rs. 100.
g) A fire occurred on 25.03.2009 in the godown and stock of the value of Rs. 5,000 was destroyed. It was
fully insured and the Insurance Company admitted the claim in full.
2. a) On 01.07.2005 a company purchased a machine for Rs. 3,90,000 and spent Rs. 10,000 on its
installation. It decided to provide depreciation @ 15% per annum, using written down value method.
On 30.11.2008, the machine was dismantled at a cost of Rs. 5,000 and then sold for Rs. 1,00,000. On
01.12.2008 the company acquired and put into operation a new machine at a total cost of Rs. 7,60,000.
Depreciation was provided on the new machine on the same basis as had been used in the case of the
earlier machine. The company closes its books of account every year on 31st March. Prepare Machinery
Account and Depreciation Account for four accounting years ended on 31.03.2009.
b) Ram and Rahim starts business with capital of Rs. 5,00,000 and Rs. 3,00,000 on 01.04.2008. Rahin is
entitled to a salary of Rs. 4,000 per month. Interest is allowed on capital and is charged on drawings at
6% per annum. Profits are to be distributed equally after the above noted adjustments. During the year,
Ram withdrew Rs. 80,000 and Rahim withdrew Rs. 1,00,000. The profit for the year before allowing for
the terms of the partnership deed came to Rs. 3,00,000. Assuming the capitals to be fixed prepare the
profit and loss appropriation account and the Capital and the current accounts relating to the partners.
10
3.a) Dilip and Raj are doing business separately as engineering contractors. They undertake jointly to build
and install new machinery for a company for a contract price of Rs. 1,34,000. Out of total contract price
Rs. 84,000 payable in installments in cash and the balance as fully paid shares in the new company. A
joint bank account is opened depositing Rs. 45,000 by Dilip and Rs. 20,000 by Raj. Dilip and Raj are to
share profits and losses in the proportion of 3/5 and 2/5 respectively. Their transactions were as
follows:
Rs.
Advance payment to suppliers for supply of materials 52,000
Value of materials supplied by suppliers 89,000
Balance amount paid to suppliers in full settlement 35,500
Paid wages 36,000
Materials purchased in cash 2,500
Materials supplied by Dilip from stock 9,250
Engineering consultant fees paid 3,250
Value of stock loss by fire and not covered by insurance 3,500
The contract was completed and the price duly received. 79
Dilip took all the shares at an agreed value of Rs. 47,000 and Raj took the balance stock of materials
worth Rs. 3,500 at a agreed value of Rs. 2,750.

Prepare the joint venture account showing the resultant profit or loss, bank account and the accounts of
Dilip and Raj.
b) The Head Office sends goods to branch at 20% profit on cost. Freight and duties amounting to 10% on
invoice value being paid by branch. Branch sells at 20% gross margin on selling prices.
The stock taking date is 30.06.2009 but stock was taken on 10.07.2009. The value of stock was agreed to
be the cost to Head Office which is increased by actual expenses incurred by the Branch less Rs. 6,000.
The value of stock as on 10.07.2009 amounted to Rs.64,600 (at branch cost). Stock amounting to Rs.
6,000 (at invoice value) was received from Head office on 05.07.2009. Sales made on 06.07.2007 were
Rs. 10,000.
Ascertain the value of stock as on 30.06.2009
4.a) On 31st Ashad 2066, a book keeper finds the difference in the trial balance and he puts in the suspense
account. Later on he detects the following errors:
i. Rs. 50,000 received from A was posted to the debit of his account
ii. Rs. 20,000 being purchases returns were posted to the debit of purchase account.
iii. Discount of Rs. 8,000 received were posted to the debit of discount account.
iv. Rs. 9,060 paid for repairs of motor car account as Rs. 7,060.
v. Rs. 40,000 paid to B was debited to A’s Account.
Given journal entries to rectify the above errors and ascertain the account transferred to suspense
account on 31st Ashad, 2066 by showing the suspense account, assuming that the suspense account is
balanced after the above corrections. 5
b) Mr. Ram submits you the following information for the year ended 31.3.2066.
Rs.
Stock as on 1.4.2065 1,50,500
Purchases 4,37,000
Expenses on sales 33,000
Expenses on administration 18,000
Financial charges 6,000
Sales 6,25,000
During the year, damaged goods costing Rs. 12,000 sold for Rs. 5,000. Except the above transactions, the
gross profit has been @ 20% on sales.
Compute the net profit of Mr. Ram for the year ended on 31.3.2066. 5
c) On 1st Baisakh 2066, A sells goods for Rs. 10,000 to B and draws a bill at three months for the amount. B
accepts it and returns it to A. On 1st Ashad 2066, B retires his acceptance under rebate of 12% per
annum. Record these transactions in the journal of A and B. 5
d) From the following particulars prepare customers control account in general ledger. 5
Rs. 80
Opening balance in Customers ledger (Dr) 2,35,000
Opening balance in Customers ledger (Cr) 3,500

Goods sold during the year 7,65,000

Return inwards 15,000
Cash/cheque received 5,90,000
Bills received 1,10,000
Discount allowed 9,000
Cheque received dishonored ,6,000
Bills received dishonored 7,000
Bad debt 9,000
A debit of Rs. 1,500 is to be transferred from customer’s ledger to supplier’s ledger. Similarly, a credit of
Rs. 1,600 is to be transferred from suppliers ledger to customers ledger. Closing credit balance in
customer’s ledger is 3,000.
5. a) State with reasons whether the following statements are true or false: 5
i. Chartered Accountant in service does not have to follow the Accounting Standards/ guidelines by the
Institute of Chartered Accountant of Nepal.
ii. Custom duty paid on importing machinery is a capital expenditure.
iii. Receipt & payment account and income &expenditure account convey the same information.
iv. Government cannot be a user of financial statement.
v. Freight outwards is a selling expense.
b) Write short notes on the following: (2*2.5=5)
i. Statements of changes in equity
ii. Periodicity concept
6. Distinguish between any two of the following: (2*5=10)
a) Sales day book and sales account.
b) Charge against profit and appropriation of profit
c) Periodic & Perpetual System

Attempt all questions. Working notes should dorm part of the answer.
1. From the following figures extracted from the books of Mr. Narayan and further information given below,
you are required to prepare a Trading and Profit and Loss Account for the year ended 31st march 2010
and a balance Sheet as on that date after making the necessary adjustments.
NRs. NRs.
Narayan’s Capital Account 2,58,000 Bills Payable 5,000
Narayan’s Drawing Account 42,000 Stock-1st April 2009 49,175
81
Purchases 1,96,000 Wages 62,000
Sales 4,11,000 Sundry Creditors 40,000
Freehold Property 60,000 Postage and Telegrams 1,400

Plant & Machinery 1,00,000 Insurance Charges 3,200

Return Outwards 7,000 Gas and Fuel 2,700
Salaries 42,000 Bad debts 600
Office Expenses 12,500 Office rent 12,600
Office Furniture and Fixture 25,000 Freight and duty 9,000
Discount Debts 1,200 Loose tools 7,000
Sundry Debtors 26,600 Factory Lighting 1,600
Loan to Das-Bal-on 01-04-2009 40,000 Provision for Doubtful Debts 800
Cash at Bank 26,600 Interest on Loan to Mr. das 3,000
Cash on hand 3,625
Further Information:
a. Stock on 31st March 2010 was valued at Nrs 66,000.
b. Wages Nrs 4,600 and salaries Nrs 3,600 were outstanding.
c. Insurance prepaid was NRs. 800
d. A new machine was installed on 31st December 2009 costing NRs 14,000. But it was not recorded in
the books and no payment was made for it. Wages of NRs.1,000 paid for its erection have been debited
to wages account.
e. Loose tools were valued at NRs. 5,600 on 31st March, 2010.
f. Depreciate Plant and Machinery by 10% p.a, Furniture and Fixture by 7.5% p.a and Freehold Property
by 2% p.a.
g. Of the Sundry Debtors NRs. 600 are bad and should be written off.
h. Maintain a provision of 5% on Sundry debtors for doubtful debts and 2% for discount on Debtors and
also a reserve of 2% for discount on Sundry Creditors.
i. His manger is entitled to a commission of 5 % of Net Profit before charging such commission.
j. Rate of interest on Loan to Das is 15 % per annum. 20
2. (a) Weak,Able and lazy are in partnership sharing profits & losses in the ratio of 2:1:1. It is agreed that
interest on capital will be allowed @10% per annum and interest on drawing will ne charged @8%
per annum. (no interest will charged allowed on Current Account).
Weak Nrs Able Nrs Lazy Nrs
Capital(1.1.2009) 75,000 40,000 30,000
Current Account (1.1.2009) 10,000 5,000 (Dr) 5,000)
Drawings 15,000 10,000 10,000
The draft accounts for 2009 showed a net profit of NRs 60,000 before taking into account interest on
capital and drawings and subject to following rectification of errors.
i) Life Insurance premium of weak amounting to NRs 750 paid by the firm on 31 st December, 2009 has
been charged to Miscellaneous expenditure A/c.
ii) Repair of machinery amounting to NRs. 10,000 has been debited to plant account and depreciation
there on charge @ 20%.
82
iii) Travelling expenses amounting to NRs 3,000 of Able for a pleasure trip to U.K paid by the firm on
30the June 2009 has been debited to Travelling Expenses Account.
You are required to prepare Profit & Los Appropriation Account and partners Current Accounts for
the year ended 31st December 2009. 10
(b) An Engineer had patented a quick boiling kettle and gave the Domestic Appliance Co. the right to
manufacture and sell under a licence for seven years . The stipulated terms were as follows:
i. A royalty of Nrs. 4 to be paid on each kettle sold
ii. A minimum payment of NRs 20,000 per annum.
iii. The right to deducted in two following years any excess of minimum payments over the calculated
royalties in any year.
The number of kettle sold was:
Year ended 31st March 2006 4,000
Year ended 31st march,2007 4,500
Year ended 31st March,2008 5,400
Year ended 31st March ,2009 6,500
Give the ledger account as they would appear in the books of the domestic Appliances Co. to record
these transactions. 10
3. a) Green & Co. has two departments “P” and “Q” . Departments “P” sells goods to Department “Q” at
normal selling prices. From the following particulars prepare Departmental Trading and Profit and
Loss Account for the year ended 31st December, 2009.
Particulars Department “P” Department “Q”
(NRs.) (NRs.)
Stock on 01.01.2009 100,000 -
Purchases 2,300,000 200,000
Goods from Department “P” - 700,000
Wages 100,000 160,000
Travelling Expenses 10,000 140,000
Printing and Stationery 20,000 16,000
Stock on 31.12.2009 – At cost to the Department 500,000 180,000
Sales – Outside 2,300,000 1,500,000
The following expenses incurred for both the departments were not apportioned between the
Departments:
Salaries NRs. 270,000
Advertisement expenses NRs. 90,000
General expenses NRs. 800,000
Depreciation @ 25% on the machinery value of NRs. 48,000.
Advertisement expenses are to be apportioned in the turnover ratio. Salaries in 2:1 ratio and
Depreciation in 1:3 ratio between the departments “P” and “Q”. General expenses are to be apportioned
in 3:1 ratio. 10
b) From the following particulars prepare a Bank Reconciliation Statement as on 31 December.2009:
10
i) Cash book of a firm showed a balance of NRP. 10,000 (Debit balance).
ii) Cheques has been issued for NRP. 6,000, out of which cheques worth NRP. 4,500 were presented for
payment.
iii) Cheques Worth NRP. 1,500 were deposited in the bank on 28 December 2009 But had not been 83
credited by the bank. In addition to this, one cheque for NRs 500 was entered in the cash book on 30th
December, 2009 but was banked on 31st January,2010.
iv) A cheque from Mohan for NRs 800 was deposited in the bank on 26 th December, 2009 but was
dishonored and the advice was received on 2nd January, 2010.
v) Pass book showed bank charges of NRs 100 debited by the bank.
vi) One of the debtors deposited a sum of MRs,1000 in the bank account of the firm on 20 th December,
2009 but the intimation in this respect was received from the bank on 2nd January,2010.
10
4. (a) A firm purchased on 1st January, 2005, certain Machinery for NRs,19,40,000 and spent NRs. 60,000 on
its installation. On 1st July in the same year additional Machinery costing Nrs. 10,00,000 was acquired.
On 1st July, 2007 the Machinery purchased on 1st January, 2005 having become obsolete was auctioned
at a cost of NRs. 15,00,000.
Depreciation was provided for annually on 31st December at the rate of 10% per annum on the original
cost of the asset. In 2008 however, the firm has changed this method of providing depreciation and
adopted the method ofr writing off 20% on the written down value.
Give the Machinery account as it would stand at the end of each year from 2005 to 2009. 10
(b).The following information was available from the records of U & Me company,
Particulars At cost (NRs) At Retail (NRs)
Beginning Inventory 7,000 9,000
Purchases 34,000 53,000
Purchase Return & Allowance 1,000 2,000
Sales 47,000
Sales Return Allowances 5,000
Estimate the ending inventory of the company at cost. 5
(c) Describe the term “Accounting Policies.” 5
5. State with reasons whether the following statements are True or False: (5×2=10)
a. Entity concept says that business and its owners are separate from the accounting point of view.
b. In case of falling prices FIFO method of inventory valuation does not give current market value of
closing inventory.
c. Profit & Loss Account and Profit & Loss Appropriation Account are not the same.
d. Land ownership transfer charges/ fees are Capital Expenditure for real estate business enterprise.
e. In consignment account ownership of goods not transfer from consignor to consignee.
6. Explain any Four of the following: (4×2.5=10)
a. Accrual Basis of accounting
b. Account sales
c. Contingent Liability
d. Del-Credere Commission
e. Prepaid Expenses
December 2010, FOA/CAP-I

Attempt all questions. Working notes should form part of the answer. 84
1. From the following information relating to Joy Social club you are required to prepare bar Trading
account and Income & Expenditure Account for the year ended 31st march 2010 and Balance sheet as at
that date.

Receipt Rs Payments Rs
To Bank Balance on By Bar Supplies 12,56,100
1st April 2009 1,02,960
To Subscription 1,14,000 By Bar Wages and Salaries 95,000
To bar Takings 14,67,000 By office Salaries 72,300
To Sale of Investments in bonds 10,500 By Insurance 6,000
To Income from Investment in By Stationery 2,100
Bonds 6,200
To interest on bank Fixed Deposits By Electricity 11,340
8,920
By Repairs & Painting 23,500
BY Postage & Telephone 12,800
By Petty Office Expenses 710
By Municipal taxes 3,000
By Furniture purchased on 50,000
1st October 2009
By Bank Balance on 31st 1,76,735
march 2010
17,09,585 17,09,585
The Bank balance on 1st April 2009 represented fixed deposits for Rs 85,000 and current account balance
Rs 17,960. All the receipts shown to the above mentioned summary were paid into the current account
except that interest on bank fixed deposits was added to the principal amounts of the fixed deposits. All
payments were made from the current account. On 31st march 2010 a fresh fixed deposits amounting to
Rs 50,000 was made by transfer of the amount from the current account.
You have also to take into consideration the following balances of accounts:
On 31.3.2009 (Rs.) On 31.0.2010 (Rs.)
Subscriptions in Arrear 10,000 8,000
Office Salaries Outstanding 5,800 6,100
Unexpired Insurance 1,380 1,500
Stock of Stationery 250 1,400
Bar Salaries & Wages outstanding 7,600 8,000
Creditors for bar Supplies 15,410 17,200
Stock of Bar Supplies 44,200 46,770
Freehold Premises at cost 4,00,000 4,00,000
Furniture at cost 1,50,000 -
Investment in Bonds at cost 85,000 75,000 85
Provision for Depreciation on:
Freehold Premises 60,000 72,000

Furniture 37,500 ?
Depreciation is provided every year on Freehold premises@3% per annum and on Furniture @5% per
annum on straight line basis. 20
2. (a) The Balance Sheet of X,Y and Z who were sharing profits in the ratio of 4:3:2 respectively stood as
follows:
Balance Sheet
As on 31st March 2010
Capital Accounts: Sundry Debtors 30,450
X 1,20,000 Less: Provision 1,050 29,400
Y 90,000 Stock 48,000
Z 60,000 2,70,000 Plant & Machinery 51,000
Land & Building 1,50,000
3,11,400 3,11,400
Y having given notice to retire from the firm, the following adjustments in the books of the firm were
agreed upon:
i) Land and building be appreciated by 10%.
ii) The provision for doubtful debts is no longer required.
iii) The stock be appreciated by 20%.
iv) Adjustment be made in the accounts to rectify a mistake previously made where Y was credited in
excess by Rs 8,100 while X and Z were debited in excess by Rs 4,200 and Rs 3,900 respectively.
v) The goodwill of the firm be fixed at Rs 54,000 and Y’s share of the same be adjusted to that of X & Z
who are going to share in future profits in the ratio of 2:1.
Pass journal entries to give effect to above arrangements and prepare the Balance Sheet of new firm
showing due to Y as loan. 10
(b) Well Done Limited purchased on 1st January 2007 a plan for Rs. 10,00,000. On 1st July in the same year
additional plant costing Rs 5,00,000 was purchased . On 1st July 2008 the plant purchased on 1st January
2007 having become obsolete was sold for Rs 4,00,000. On 1st July 2007 was sold for Rs 4,20,000 on the
same date.
Depreciation is to be provided at 10% per annum on the WDV every year.
You are required to prepare Plant Account and Plant Disposal Account for three year ending 31st
December 2009. 10
3. (a) Anish and Manish entered into a joint venture to purchased, recondition and sell second hand cars.
Anish purchased for cash 100 cars at an average price of Rs 35,000 during the period from 1 st October
2009 to 31st march 2010. 86
Manish, during the same period reconditioned the cars by spending the following amounts
Rs
Spare parts 1,80,000
Painting 2,00,000
Air conditioning of 10 cars 3,00,000
Testing charges 20,000
Insurance charges 60,000
Labor charges 1,040,000
Anish and Manish sold the cars , the detail of which are as under:
Sold by
Anish Manish
A.C.cars 5 4
Non A.C.cars 35 46
A.C. Cars were sold for Rs. 1,75,000 each while non A.C. Cars were sold as follows:
i) 35 cars@ Rs. 1,25,000 each by Anish,
ii) 35 cars@ rs 1,10,000 each and 11 cars@ rs 80,000 each by Manish.
During testing, 1 Non A.C. car met with a major accident and the insurance company paid the actual
cost of the reconditioned car as amount of the claim: Manish receiving the amount.
Prepare Memorandum Joint Venture Account and Manish in Joint Venture Account in the books of
Anish. 10
(b) The trial balance of Mr W & H failed to agree and the difference Rs 20,750 was put into suspense
pending investigation which disclosed that:
i) Purchase returns day book had been correctly entered and totaled at Rs 6,160 but had not been
posted to the ledger.
ii) Discounts received Rs 1,320 had been debited to discounts allowed.
iii) The Sales account had been under added by Rs 10,000,
iv) A credit sale of Rs 1,479 had been debited to a customer account at Rs 1,740.
v) A vehicles bought originally for Rs 7,000 four years ago and depreciated to Rs 1,200 had been sold
for Rs 1,500 in the beginning of the year but no entries other than in the bank account had been
passed through the books.
vi) An accrual of Rs 560 for telephone charges had been completely omitted.
vii) A bad debt of Rs 1,560 had not been written off and provision for doubtful debts should have been
maintained at 10% of debtors which are shown in the trial balance at Rs 23,390 with a credit
provision for bad debts at Rs 2,320.
viii) Tools bought for Rs 1,200 had been inadvertently debited to purchases.
Pass rectification entries without narration to correct the above errors before preparing annual
accounts. 5
c) For goods sold, Nair draws the following bills on Roy who accepts the same as per terms:
Amount of the bill date of drawing Date of acceptance Tenor
Rs
8,000 6-1-2010 9-1-2010 3 months after date 87
9,000 15-2-2010 18-2-2010 60 days
8,000 21-2-2010 21-2-2010 2months
15,000 14-3-2010 17-3-2010 30 days after sight
Calculate the average due date.

4. (a) Sell Well Ltd. Supply goods to its Dharan Branch at cost plus 25% basis. All the cash sales at branch
are daily remitted to the head office. As per the arrangement all the branch expenses are directly paid
by head office. You are required to prepare Branch Account from the following information for the year
ended 32nd Ashadh, 2067.
Particulars Rs
Stock at branch 01-04-2066 (invoice price) 9,000
Goods sent to branch at invoice price 72,000
Remittance from branch 75,000
Expenses Paid by head office:
Salaries and wages 5,700
Rent and rates 1,800
Sundry expenses 6,000
Goods returned from the branch (invoice price) 450
Stock at branch (invoice price) 24,000
b. On 31st March 2009, the cash book of M/s Thin & Short showed a balance of Rs 2,760 at bank. They had
sent cheques amounting to Rs 90,000 to the bank before 31st March, but it appears from the Pass book
that cheques worth Rs 84m000 issued during the month of March, cheques for Rs 2,500 were presented
in April, the remaining having been in March itself.
The pass book also showed the following payments:
i) Rs 3,320 premium (on joint life policy) according to standing instruction ; and
ii) Rs 5,000 against a promissory note, as per instruction.
The pass book showed that bank had collected rs 6,000 as interest on Government Securities. The bank
had charged interest Rs 50 and bank charges Rs. 20. There was no entry in the cash book for the
payments, receipts, interests etc. It was found that total to the credit Bamk column in the cash book on
20th March was Rs. 110 short.
Prepare the Bank Reconciliation Statement as on 31st March 2009. 5
c.) The following information is supplied to you:
Provision for Doubtful Debts at the beginning of the year Rs 1,200
Provision for Discount on Debtors at the beginning of the year Rs 500
Bad debts written off during the year Rs 1,400
Discounts allowed during the year Rs 1,400
Sundry debtors at the end of the year Rs 20,000
The Provision for Doubtful Debts is maintained at 4% of debtors and the Provision for Discounts is
maintained @2% of the debtors. Give the accounts relating to the two provisions. 5
5.(a) Write short notes on the following (any four): (4×2.5=10)
i)Money Measurement Concept
ii) Statement of Changes in Equity
88
iii) Petty Cash Book
iv) Circumstances for changing accounting policy
v) Notes to accounts

(b)Difference between (any two): (2×2.5=5)

i) Statements of affairs and Balance Sheet
ii) Trade discount and Cash discount
iii) Fixed Capital and fluctuating capital
(c)State with reasons whether the following statements are True or False: ( 5×2=10)
i) Amount paid for acquiring Goodwill is deferred revenue expenditure.
ii) Perpetual Inventory System has a provision of stock ledger.
iii) Recently ICAN has issued guidelines on maximum fee for an audit for different categories of
auditors.
iv) Depreciable amount is always equal to the cost of depreciable assets.
v) Personal expense of a proprietor can be charged to his proprietorship business.

1. The following are the balances as at 31st December, 2010 extracted from the books of National Trading:
Rs Rs
Plant & machinery 40,500 Bad Debt 2,200
Furniture & Fittings 15,250 Bad debt recovered 1,250
Bank Overdraft 1,60,000 Salaries 32,650
Capital Account 1,15,000 Outstanding salaries 5,350
Drawings 15,000 Prepaid Rent 500
Purchases 2,30,500 Rent 6,500
Opening Stock 1,32,250 Carriage inward 2,350
Wages 22,325 Carriage outward 3,250
Provision for Doubtful Debts 5,700 Sales 2,90,600
Provision for discount on 1,375 Advertisement Expenses 6,750
debtors
Sundry Debtors 1,52,500 Printing & stationery 2,200
Sundry Creditors 77,500 Cash in hand 2,300
Cash at bank 7,250
a. Difference in the trial balance, if any, can be taken as miscellaneous expenses or miscellaneous income
b. Bank overdraft is secured against hypothecation of stock. The bank overdraft outstanding as on
31.12.2010 accounted for 80% of drawing power. Such drawing power is ascertained by deducting
20% as margin from the value of stock as on that date.
c. Purchases include sales return of Rs 5,500 and sales include purchase returns of Rs 4,750.
d. Goods withdrawn by proprietor of National Trading Rs 7,500 included in purchases. 89
e. Wages paid for installation of plant & machinery amounting to Rs 750 were included in wages account.
f. Depreciation is to be provided on plant & machinery @ 15% p.a. and on furniture & fittings @ 10% p.a.
g. Create a provision for doubtful debts @5% and provision for discount on debtors @2 %.

h. A debit balance of Rs 2,500 in the account of Ram, a creditor, is included in the list of sundry debtors.
i. Free samples distributed for publicity costing Rs 1,250.
Prepare a Trading and profit & Loss Account for the year ended 31st December, 2010. 20
2. a) A & B enter into a joint venture to prepare a film for the government. The government agree to pay Rs
2,00,000. A contributes Rs 20,000 and B contributes Rs 30,000. There amounts are paid into joint bank
account. Payments made out
purchase of equipment Rs 12000.
Hire of equipment Rs10,000
Wages Rs 90,000
Materials Rs 20,000
Office Rs 10,000
A paid license fees of rs 4,000. On completion the film was found defective and the government made a
deduction of Rs 20,000. The equipment were taken over by B at a valuation of Rs 4,000. Separate books
were maintained for the joint venture whose profits were divided in the ratio of A 2/5 and B 3/5.
Prepare Joint Bank Account , Joint Venture Account and co-venture Accounts. 10
b. A,B & C were partners, carrying on business under the name and style of ABC & Co, sharing profits and
losses in the proportion of 4:3:2. Their Balance Sheet as at 31st December,2010 was as under.
Balance Sheet
As on 31st December 2010
Sundry Creditors 4,00,000 Cash at Bank 20,000
Capital Accounts: Sundry Debtors 1,80,000
A 4,00,000 Stock in Trade 2,00,000
B 2,00,000 Motor Car 1,50,000
C 1,00,000 7,00,000 Land & Building 5,50,000
11,00,000 11,00,000
They agreed to dissolve the partnership on that date. A agreed to take over stock and debtors at a
discount of 10%. B took over the Motor Car for Rs 1,60,000. Land and Building was sold for Rs 7,50,000
and expenses of sale amounted to Rs 16,000. Creditors were settled at a discount of 1.5%.
Show the relevant ledger accounts to give effect to the above arrangement. 10
3. a. From the following particulars ascertain the value of stock as on 31st March, 2011.
Rs
Stock as on 1.4.2010 2,13,750
Purchases 11,43,750
Manufacturing Expenses 2,25,000
Administrative Expenses 45,000
Selling and Distribution Expenses 90,750
Financial Charges 32,250 90
Sales 18,67,500
At the time of valuing stock as on 31st March, 2010 a sum of Rs 26,250 was written off on a particular
item, which was originally purchased for Rs 75,000 and was sold during the year for Rs 67,500. Barring
the transaction relating to this item the gross profit earned during the year was 20 percent on sales.
5
b.) The Balance Sheet of a firm as at 31st March, 2011 stood as follows:
Capital & Liabilities Rs Assets Rs
Share Capital 1,00,000 Property, Plant & equipment 1,25,000
Reserves 40,000 Debtors 60,000
Trade Creditors 70,000 Cash at Bank 25,000
2,10,000 2,10,000
You are required to pass necessary opening entries and prepare Ledger accounts for next year. 5
c). A provision for Depreciation and Repairs and Renewals was made every year at 15% of the original cost
of a machine purchased at Rs 50,000. The provision for Depreciation and Repairs and Renewals
Account that was opened for the purpose was, therefore, debited with the actual costs of repair and
renewals which were as stated below.
1st year- Rs 1,500
2nd year- Rs 1,600
3rd year- Rs 3,000 and
5th year- Rs 4,200
At the end of 5th year, the machine was sold out at Rs 20,000 after utilizing a few of its parts value at Rs.
4,000 in installing in its place a new machine purchased at rs 75,000. The resulting loss in the disposal
of the old machine was debited to revenue.
Write up “ Provision for Depreciation and Repairs and Renewals Accounts” for the 5 years and the Old
and New Machine Account at the end. 10
4. Attempt any three from the following: (3×5=15)
a. Following errors were found in the books of Sri Ganesh Traders. Give the necessary journal entries to
correct them.
i) A purchase of goods from Mr. Ram amounting to Rs 15,000 has been wrongly entered through the
Sales Book.
ii) A credit sale of goods worth Rs 12,000 to Mr. Ramesh has been wrongly passed through the Purchase
book.
iii) On 32nd Ashadh, 2067 goods of the value of Rs 30,000 were returned by Mr. Hari Saran and were
taken into stock on the same date but no entry was passed in the books.
iv)An amount of Rs 20,000 due from Mr Mahesh, which had been written off as a bad debt in a previous
year, was unexpectedly recovered and had been posted to his personal account.
v) A cheque for Rs 10,000 received from Mr. Man Mohan was dishonoured and had been posted to the
debit of sales returns Accounts.
b. A draws upon B three bills of exchange of Rs 3,000, Rs 2,000 and Rs 1,000 respectively. A week later his
first bill was mutually cancelled and B agreeing to pay 50% of the amount in cash immediately and for
the balance plus interest Rs 10,. he accepted a fresh bill drawn by A. All these were retained till maturity
when all were duly met.
91
Give necessary journal entires recording the above transactions in the books of A.
c. Prepare a bank reconciliation statement from the following particulars:

The cash book of a firm showed a bank balance of Rs 30,000 as on 31st December 2010 and following
information were provided to you:
The cash book of a firm showed a bank balance of Rs 30,000 as on 31 st December, 2010 and following
information were provided to you:
i. Cheque have been issued for Rs 25,000 out of which cheque worth Rs 20,000 only were presented for
payment.
ii. Cheques worth Rs 7,000 were paid on 28th December but had not been credited by the bank. One
cheque for Rs 2,500 was entered in the cash book on 30th December but was banked on 3rd January,
2011.
iii. A cheque from Mohan for Rs 2,000 was paid in on 26th December but was dishonoured and the
advice was received on 2nd January, 2011.
iv.Bank Statement showed bank charges of Rs 100 debited by the bank. It also showed Rs 4,000
collected by the bank as interest.
v. One of the debtors deposited a sum of Rs 2,500 in the account of the firm on 20 th December.
Intimation in this respect was received from the bank on 2nd January, 2011.
d) On 1st January, 2008 Gadgets limited, patentees of new type of electric razor, issused a licence to
Domestic Utilities Limited for the manufacture and sale of the razors. On he same date, Domestic
Utilities Limited issued to Trimmers Limited a sub-license for the same purpose.
The licence issused by Gadgets Limited provided for a royalty of Rs 100 per razor sold, subject to a
minimum sum of rs 7,50,000 per annum, and the sub licence issused by Domestic Utilities Limited
provided for a royalty of Rs 150 per finished razor manufactured, subject to minimum sum of Rs
3,00,000 per annum. Both the licence and sub licence provided that, should the royalties for any
calendar year be less than he specified minimum, the short workings could be recouped out of
royalties in excess of the minimum for either of the two immediately following calendar year.
You are given the following information:
Year Salary by Domestic Sales by Trimmers Stock held by
Utilities Ltd. ltd Trimmers Ltd.
2008 4,520 Razors 1,220 Razors 340 razors
2009 6,180 Razors 2,790 Razors 60 Razors
2010 5,675 Razors 1,940 Razors 400 Razors
Prepare statements showing Royalty Payable A/c. Do not pass journal entries.
5. a. Sate with reasons whether the following statements are true or false: (5×2=10)
i. Expenses incurred on repainting of old house purchased before shifting to that old house is revenue
expenditure.
ii. Amortization of patent reduces the cash balance.
iii. Accrual basis of accounting does not record cash transactions.
iv. Relationship of principal and agent exists between consignor and consignee.
v. Error of principle does not affect the trial balance.
b) Describe the qualitative characteristics of financial statements. 5
92
6. Write short notes on any four of the following: (4×2.5=10)
a. Accrued revenue
b. Cash and Cash Equivalents
c. Endorsement
d. Capital Expenditure
e. Measurement Bases
Dec 2011, FOA/CAP-I

1. On 31st December 2010, the following balances appeared in the books of Mr. Ajit Baral of Janakpur.
Account Balance Rs Account Balance Rs
Capital Account 1,00,000 Carriage inward 2,000
Mr. Ajit’s Current Account 15,000 Wages 60,000
Drawings during the year 12,000 Interest paid on loan from Mrs 480
Ajit
Loan from Mrs Ajit taken on 1st 6,000 Salary of Works Manager 9,600
April 2010 bearing interest at 12
percent per annum
Investments (Market Value Rs 16,250 Rates & Taxes on Building 3,200
15,000)
Cash in hand 2,500 Royalties paid (payable at 1 3,000
percent on net sales
Cash at Bank 15,700 Advertisement 7,000
Sundry Creditors 66,156 Insurance of Plant and 3,000
Machinery (includes one
annual premium of Rs 12,00
paid on 30the June 2010)
Sundry Debtors 35,000 Printing & Stationery 2,000
Bad Debt reserve 1,000 Audit fee 2,000
Sales 3,25,700 Carriage outward 3,750
Purchase of Raw materials 1,15,000 Bad debts 3,000
Discount received 1,100 Loose tools 5,000
Purchase return 3,750 Repairs & Plant & Machinery 3,000
Bills Payable 15,300 Furniture & Fittings 7,000
Outstanding Sundry Expenses as 9,300 General Expenses 2,000
on 1st January 2010
Outstanding sundry expenses paid 9,000 Plant & Machinery 55,800
during the year.
Sundry Receipts 74 Land & Building(3/4 in use of 60,000
the
factory
93
Opening Balance as on 1st January Sales Return 2,300
2010
Raw Materials 25,000 Salaries 10,000

Work in Progress 9,800 Insurance of Building 2,000

Finished Goods 57,000
From the balances and the under mentioned information, prepare the manufacturing, trading and profit &
loss Account of Mr. Ajit Baral for the year ending 31st December,2010 and the Balance Sheet as on that
date. 20
a) Provide depreciation on land & Building at 5%, plant & machinery at 20%, loose tools at 25% and
furniture and fittings at 10%.
b) Sundry expenses outstanding as 31st December,2010 amounted to Rs 5,600
c) Closing balance as 31st December,2010 were:
Rs
Raw Materials 22,000
Working Progress 11,000
Finished goods 38,000
d) Provision for Bad Debts should be maintained at 5%.
e) Salaries include advance for the next period amounting t5o Rs 600.
f) Advertisement includes Rs 3,000 spent on Neon signs.
g) It was discovered that stock sheet of Finished goods as on 31st December 2010 were overcast to the
extent of Rs 1,000.
2.a) On 1st January 2008 Mr, Hari Om purchased 6 months costing Rs 1,50,000 each. His accounting year ends
on 31st December. Depreciation at the rate of 10% on initial cost has been charged to profit and loss
account and credited to a separate depreciation provision account.
On 1st January 2009 one machine was sold for Rs 1,25,000 and on 1st July of the same year, an improved
model costing Rs 2,80,000 was purchase. Again on 1st January, 2010 another machine (purchased on
2008) was sold for Rs 1,25,000. The depreciation rate for the new machine was decided to be same as old
machines. You are required to prepare for 3 years:
i) The Machinery Account
ii) The Machinery Disposal Account, and
iii) Provision for Depreciation Account
b) Cloud, Storm and Rain were partner in a firm sharing profits and losses in the ratio of 5:3:2. Due to
difference in opinion they decided to dissolve the partnership with effect from 1 st April, 2011 on which
the firms position was as under:
Balance Sheet
As on 1st April 2011
Sundry Creditors 1,20,000 Plant & Machinery 80,000
Capital Account: Furniture & Fixture 45,000
Cloud 60,000 Motor Car 25,000
Storm 40,000 Stock in Trade 30,000
94
Rain 30,000 1,30,000 Sundry debtors 71,000
Current Accounts: Cash at Bank 14,000
Cloud 8,000 Current Account:

Storm 10,000 18,000 Rain 3,000

2,68,000 2,68,000
The following information is given:
i) Plant costing Rs 40,000 was taken over by Cloud at an agreed valuation of Rs 45,000 and the
remaining machineries realized Rs 50,000.
ii) Furniture and Fixtures realized Rs 40,00
iii) Motor Car was taken over by Storm fro RS 30,000.
iv) Sundry Debtors included a bad debt for Rs 1,200 and the rest portion was realized subject to a cash
discount of 10%.
v) Stock worth Rs 5,000 was taken over by Rain for Rs 5,200 and the rest realized at 20% above their
book value.
vi) A creditors for Rs 2,000 was and other Creditors accepted payments allowing 15% discounts.
vii) Realization expenses amounted to Rs 5,000.
You are required to show the Realization Account and the Partner’s Capital Accounts on dissolution
showing final payments to them. 20
3.a) Following information are obtained from the books of a retail business for the year ended 31st
March,2011.
Rs
Goods received from suppliers(subject to trade discount & taxes) 15,75,500
Trade Discount: 3%
Sales tax:11%
Packaging & Transportation Charges 87,500
Sales during the year 22,45,500
Closing Inventories (at Sales Value) 2,35,000
Find out the historical cost of inventories using selling price method. 5
b) Progressive traders who carried on retail business opened a Butwal Branch on 1.1.2010 where all sales
were on credit basis. All goods required by the branch were supplied from the head office and were
invoiced to the branch at 10% above cost. The following were the transactions:
i) Goods sent to branch 1,50,000
ii) Sales from the branch 1,35,000
iii) Cash received from debtors & remitted to head office 1,06,000
iv) Return to head office (invoice price to branch) 4,200
The closing stock of goods at branch on December 31,2010 amounted to Rs 53,400 at invoice price to
Branch.Record these transaction in the head office books showing balances s on December 31,2010 and
the branch profit or Loss Accounts. 10
c) Amar draw upon Bikas three bills of exchange of Rs 30,000 Rs 20,000 and Rs 10,000 respectively which
were duly accepted by Bikas. A week later first bill was mutually cancelled, Bikas agreeing to pay 50% of
the amount in cash immediately and for the balance plus interest of Rs 1,000, he accepted a fresh bill
drawn by Amar. This new bill was endorsed to Chakra who discounted the same with his banker for Rs
15,000. The second bill was discounted by Amar at 5%. This bill on maturity was returned 95
dishonoured(Noting charges Rs 300). The third bill was retained till maturity when it was duly met.
Give the necessary journal entries for recording above transactions in the books of Amar. 5

4.a) Adarsh of Biratnagar and Laxman of Kathmandu entere into a joint venture for purchase and sale of one
lot of mopeds.The cost of each moped was Rs 3,600 and the fixed retail selling price Rs 4,500. The
following were the recorded transactions.
2010
Jan,1 Adarsh purchased 100 mopeds paying Rs 72,000 in cash on account Adarsh raised a loan from A
Bank for Rs 50,000 at 18% p.a. interest repayable with interest o 1.3.2010.
Adarsh forwarded 80 mopeds to Laxman incurring Rs 2,880 as forwarding and insurance charges.
Jan,2 Laxman received the consignment and paid Rs 720 as clearing charges.
Feb,1 Adarsh sold 5 mopeds for each. Laxman sold 20 mopeds for cash. Laxman raised a loan of Rs
1,50,000 from B. bank repayable with interest at 18% p.a. on 1.3.2010.
Laxman telegraphically transferred Rs 1,50,000 to Adarsh incurring charges of Rs 50.
Adarsh paid balance due for the mopeds.
Feb, 26 Adarsh sold the balance mopeds for cash.
Laxman sold balance mopeds for each
Adarsh paid selling expenses Rs 5,000
Laxman paid selling expenses Rs 20,000
Mar,1 Accounts settled between the ventures and loans repaid, profit being appropriated equally.
You are required to prepare the Memorandum Joint venture A/c 5
b) The following information is taken from the accounting records of Harinder Company on march 31
(year end):
Debtors Rs 54,82,000 Dr.
Provision for Doubtful debts: Rs9,380 Cr.
The ageing analysis of the debtors at March 31 is as follows:
Age category Amount (Rs)

Not yet due 2,75,400
1-30 days past due 1,10,900
31-60 days past due 87,500
Over 120 days past due 15,300
Total 5,82,000
The company uses the % of receivable Method to estimate bad debts. Based on its analysis of customers
account on March 31 and past experience with collections, the company estimate the following
percentages of debtors to be uncollectible in the various age categories:
96
Age Category % Estimated Uncollectible

Not yet due 3

1-30 days past due 6

Over 120 days past due 50
Required: Calculate the amount that should appear in the March 31 Balance Sheet as the provision for
doubtful debts. 5
c) The April 30 bank statement for Binay Company showed a balance of Rs 6,873,40. On this data the cash
Account in the conmpany’s ledger was Rs 2,994,70. You review reveals:
i) Cheque under collection on April 30 Rs 29879
ii) Outstanding cheques Rs 1,718
iii) A cheque for Rs 219490 issued to a supplier was recorded by the bank as Rs 2,914,9-.
iv) A bill receivable of Rs 5,000 and interest of Rs 300 collected by the bank have not been recorded in
the company’s accounts.
v) A cheque for Rs 73060 received from a customer was returned by the bank owing to lack of funds
with the bank.
vi) Bank service charges Rs 90.
vii) In accordance with the company’s standing instruction on April 23 the bank paid insurance
premium of Rs 1,300 for the company’s car.
Required: 5
a) Prepare a Bank Reconciliation statement for Binay Company for April.
b) Prepare any journal entries necessary for Binay Company as on April 30.
5.a) State with reasons whether the following statements are true or False.. 5×2=10
i) Provision an Revenue both are charge against profit.
ii) The meaning of the term “Capital” is same to economists and accountants.
iii) Reliability is one of the qualitative characteristics of financial statements.
iv) In the preparation of financial statements, accounting policies are applied consistently.
v) Heavy advertising to introduce a new product or to explore a new market is capital expenditure.
b) Briefly describe the various users of accounting information. 5
6. Distinguish between any Two of the following: 2×5=10
a. Cash Basis & Accrual Basis of Accounting
b. Periodic and Perpetual Inventory System
c. Consignment and Joint ventures
Notes:
97

98

99

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EIA Scanner/CA Profession Level-I /ICAN/ Paper-1: Fundamental of Accountancy 9

PAPER-1: Fundamental of Accountancy Page no: 9-100

December 2001, FOA/Foundation

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June 2002, FOA/Foundation

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Bank Loan - 14,400

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December 2002, FOA/Foundation 16

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Particulars Dr (Rs) Cr. (Rs)

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To Balance b/d 35,000 By Charities 72,000

June 2003, FOA/Foundation

Particulars Dr.(Rs) Cr.(Rs)

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Membership fees 1,000

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All sales are made at 20% profit on sales.

December 2003, FOA/Foundation

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June 2004, FOA/Foundation

i.) Create a provision of 5% on other debtors.

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Maintenance 320 780

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d) Revenue is matched with expenses accounting to the matching principles.

December 2004, FOA/Foundation

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Interest on Fixed deposit - 20,000

Cash Bank 54,000

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iv. Provision for Bad Debt be brought up to 5% of debtors.

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Required: Journal entries in the books of Ramesh 5

December 2005, FOA/Foundation

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Postage 800 Bills receivable 1,200

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5) Briefly explain any THREE of the following: (5×3=15)

December 2006, FOA

To Stationery & printing 90,000 By profit on Annual 1,50,000

Financial Charges 2,150

Capital Account: Stock 10,000

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Shiva 20,000 50,000 Cash in hand 10,000

a. To calculate discounts accounts

December 2007, FOA

Opening stock 18,900

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