2021 (March)

Name of the Paper Financial Accounting

Nameof the Course B.Com. (Hons.)
Duration: 3 Hours
Maximum Marks: 55
Attempt any four questions out of six questions.
Working notes should form part of the answer.
Q.1. State with reason whether the following statements are true or
false (No Marks
shallbe awarded without valid reason):
() Branch Account prepared under Debtors Method of Branch (1.5x5=7.5)
nominal account. Accounting is a
(i) Fundamental Assumptions are always required to be disclosed in the
statements. financial
(ii) Change in Accounting Estimate has to be given retrospective effect.
(iv) Economic life is 6 years, lease ternm is 2.5 years, but the asset is of a special
has been procured only for use of lessee. This is an operating lease. nature, and
(o) Change in Method of Depreciation is regarded as change in
the entity. Accounting Policy of
(b) Distinguish between Finance Lease and Operating Lease.
(c) Explain in brief the relevant accounting assumption or (3)
in Classification of Expenditure as Capital Expenditure and Revenue principle which is applied
Ans. (a) () True. Because the purpose of preparing this account is calculation Expenditure. (3.25)
of profit
earned by the branch for an accounting period.
(i1) False. Certain fundamental accounting assumptions
underlie the preparation of
financial statements. They are usually not specifically stated because their acceptance
or uses are assumed, Disclosure is necessary if they are not followed.
(iüi) False. Change in accounting policies and correction of
errors are generally
given retrospective effect whereas change in accounting estimates are generally
accounted for on prospective basis.
(iv) False. Since the asset is. of a special nature and has been
procured only for use of
lessee, further the lease term is for major part of the economic life of the asset. It is
a finance lease.
(v) False, Change in method of depreciation is regarded as change in an
estimate. accounting
(b) See Q2, Chapter 11.
[Page T-65
(c) See Q 1(Point 3), Chapter 4.
Q.2. Question on Hire Purchase & Instalment: Not in Current Syllabus. Page T-27
Q.3.OM Ltd., Delhi invoices goods to its Mumbai and Kolkata branch
less than the list price which is cost plus 50% with instructions that cash
offices at 20%
sales are to be
made at invoice price and credit sales at list price.
Opening Stock at Mumbai at ite ust 76,800
Goods Sent to Mumbai (at cost to Delhi) 1,10,000
Cash Sales 74.8% of Net Credit Sales
Gross Credit Sales
Goods returned by Credit Customers to Mumbai 145,000
Goods returned by Mumbai to Delhi 45,000;
36,000
Loss of Goods by fire (at invoice price) 3,000 against which 80% of cost
recovered from the insurance Company. was

50
 Financial Accounting 2021 (March). 51
3,000
Loss of Goods at Mumbaí through normal pilferage (at list price) 10,000
Opening Debtors al Mumbai:
Cash renmitted by. Mumbai Eranch to HO: 1,62,/435
Discount Allowed to Debtors 13,365
Goods received by Mumbai till close of the year 1,27,000
Provision is to be made for discount on Debtors at 15% on promptpayments at
year end on the basis of years trend of prompt payments. 29,000
Cash remitted by HO to Branch for Expenses
Branch Expenses still outstanding 3741
Manager isentitled to a commission@ 6% of net profits after charging such commission.
Required: Prepare Mumbai Branch Debtors A/c, Mumbai Branch Stock Account,
Mumbai Branch Adjustment A/c, Mumbai Branch Expenses Account and Mumbai
Branch Profit & Loss Account under Stock and Debtors Method.
(13.75)
Mumbai Branch Stock Account Cr.
Sol. Dr.
Particulars Particulars
Balance b/d 76,800 Goods Sent to Branch Ac(Returned) 36,000
1,32,000 Branch Adjustment Alc 500
Goods Sent to Branch Alc
(R1,10,000 +12°1001) (Load on Goods lost by fire)
Branch Debtors Alc 45,000 K3000/120 x20)
Branch Profit &Loss Alc 2,500
(Retums to branch by debtors)
Branch Adjustment Alc 29,000 (Cost of goods lost by fre (3,0 x100/120)1
Branch Adjustment Alc 2,400
(Surplus on credit sale)
K1.45,000 x3150) (Normal Piferage at Invoice Price)
(3,000 x 120,50)
Branch Debtors Alc (Credit Sales) 1,45,000
Branch Cash Alc 74,800
(Cash sales)'2
Branch Adjustment Alc 9,000
(Decrease inTrading Surplus
on Goods returned by Credit
Customers [45,000x30450)
Balance cld:
Stock at Branch (Bal. fig) 7,600
Stockin Transit5,000 12,600
(R1,32,000-1,27,000)
2,82,800 2,82,800
Dr. Mumbai Branch Debtors Account. Cr.
Particulars Particulars.
Balance bld 10,000 Branch Stock Alc(Returns) 45,000
Branch Stock A/c (Credit Sales) 1,45,000 Branch Expenses Alc (Discount) 13,365
Branch Cash Acta 85,635
Balance cld (Balancing Figure) 11,000
1,55,000 1,55,000
52 Shiv Das IDELHI UNIVERSITY SERIES
Dr. Mumbai Branch Adjustment Account Cr.
Particulars Particulars
6,000 Stock Reserve Alc
Goods Sent to Branch Alc
((76,800 x20/,p0) 12,800
(Returmed Goods Load (R36,000 x20/120) (Opening Stock Load)
Branch Stock Alc (Loss by Fire) 500
Branch Stock Alc 2,400 Goods sent to Branch Alc (load) 22,000
(Pilferage: Nomal Loss) (1,32,000 x20/120)
Branch Stock A/c 9,000| Branch Stock Ac 29,000
Stock Reserve Alc 2,100 (Surplus on Credit Sales)
Load on Closing Stok (12,600/20 x120)]
Gross Profit cld (Balancing Figure) 43,800
63,800 63,800
Dr. Mumbai Branch Expenses Account Cr.
Particulars
Particulars
13,365 Branch Profit & Loss A/c 23,108
Branch Debtors A/c (Discount)
Bank Ac (Expenses) 9,000
Outstanding Expenses 741
23,106 23,106
Dr. Mumbai Branch Profit & Loss Account Cr.
Particulars
Particulars
Branch Stock Ac 2,500 Gross Profit b/d 43,800
(Cost of goods lost by fire) Insurance claim A/c 2,000
Prov. for discount on debtors Alc'4 1,485 (Cost 2,500 x80/40)
Branch Expenses Alc 23,106
Manager's Commission 1,059
°l406(45,800-2,500-1,485-23,106))
Net Profit transferred to General
Profit &Loss A/c 17,650
45,800 45,800

Working notes:
*, Let cost = 100 Profit on cost = 50, i.e., 50% of 100
So, List Price = 100 + 50 = 150, Invoice Price = 150- 30 (i.e., 20% of 130,=120
", Calculation of Cash Sales: 145,000
Credit Sales (Gross) 45,000
Less: Goods returned by Credit Customers
Net Credit Sales 1,00,000
Cash Sales (1,00,000×74.8/100) 74800
Branch Cash Account Cr.
* Dr.
Particnlc's Particulars
Bank A/c 9,000 Bank Alc (Remittance to H.O.) 1,62,435;
Branch Stock Alc (Cash Sales)' 74,8001 Branch Expenses Adc 9,000
Insurance Claim Alc 2,000
Branch Debtors Alc (Cash received 85,635
from debtors) (Balancing figure)
1.71435
1,71,435
*, Calculation of provision for discount on debtros.
Total amount of Debtors settled = 85,635 + 13,365 =799,000
Total Debtors outstanding during the year = Opening Debtors + Net Credit Sales
799,000
Trend of prompt payements = 1 10.000×100 =90%
Provision for discount on Debtors = 11,000 x 90/100 x 15/100 =1,485
* Stock at branch at its cost means stock at invoice price.
 Financial Accounting 2021 (March) 53
Q.4. (a)Question on Partnership: Not in Current Syllabus.
(b) Question on Partnership: Not in Curent Syllabus.
Q. 5. (a) RAJASTHALI Ltd. manufactures a product 'OM using a raw material M1.
The company took Bank Overdraft at an interest rate of 15% p.a. specifically for the
purpose of purchasing 10,000 kg of material M1 at 100 per kg. The purchase price
includes GST @ 10 per kg, in respect of which full credit is admissible. Freight,
loading and unloading charges incurred amounted to 40,800. Interest on such Bank
Overdraft amounted to 25,000. Normal Transit Loss is 2%. The company actually
received 9,760 kg and consumed 9,500 kg. One unit of Finished product requires five
units of Raw Material. Direct Labour Cost amounted to 2,28,000, Direct Overheads
Cost amounted to 57,000. Total Fixed Overheads for the year were 1,20,000 on normal
capacity of 20,000 units of Finished Goods. During the year Sales of product 'OM were
7,50,000 @750.There were no ópening inventories. With reference to AS 2 "Valuation
of Inventory", Calculate the amount of Abnormal Loss (if any), Closing Inventory of
Finished Goods and Raw Material if
() Finished units can be sold @7800 subject to payment of 10% brokerage on
selling price, Replacement Cost of Raw Material is 790 per kg.
(i) Finished units. can be sold @700 subject to payment of 10% brokerage on
selling price, Replacement Cost of Raw Material is 90per kg. (6)
(b) XLtd. purchased machinery from YLtd. on 30/09/2019. The price was 522.50
lakhs after charging 10% GST and getting a trade discount of 5% on the quoted price.
Transport charges were 0.25% on the quoted price and installation charges come to 1%
on the quoted price. To Finance the purchase of the machinery, company took a term
bank loan of 7500lakhs at an interest rate of 15% per annum. Fees of Consultants used
for advice on the acquisition of the Machine 7650,000, Cost of site preparation 4,50,000.
Estimated dismantlingcosts to be incurred after 10 years 2,50,000. Expenditure incurred
on the rial run was: Material 75,00,000, wages 74,00,000 and overheads 73,00,000. Sale
Proceeds of Goods produced during the trial run 2,00,000.
Machinerywas ready for use on 01/12/2019. However, it was actually put to use only
on 01/05/2020. The entire loan amount remained unpaid on 01/05/2020. X Ltd. does not
intend to utilize the input tax paid on capital good.
() Find out the cost of the machine. (3)
(i) Suggest the accounting treatment for the cost incurred during the period
between the date the machine was ready for use and the actual date the machine
was put to use. (1)
(c) SHEENALtd. acquired machinery on lease from BHARAT Ltd. on the following
terms:
Lease Term 5 Years, Fair Value of Machinery (useful life 15 years) *30 lakhs, Annual
Lease Rental payable at 75 lakhs, t4 lakhs,73 lakhs, 72 lakhs, 1 lakh at the end of each
year, Implicit Rate of Return (IRR) 15%.
Required:
() State with reason whether the Lease is Operating Lease or Finance Lease.
Present value Factors @15% for years 1 to 5 are 0.8696, 0.7561, 0.6575, 0.5718
and 0.4972 respectively. (2)
(i) What. will be the amount of Depreciation for the First year? What will be the
amount of Rental Expense for the First year?
Lessee. follows Depreciation rate @10% p.a. on straight line basis. Lessor
follows Depreciation rate @6-2/3% p.a. on straight line basis. (1.75)
 54 Shiv Das DELHI UNIVERSITY SERIES
Ans. (a) Raw Material purchased 10,000 kg
Normal Loss @2% 200 kg
Actual quantity received
Abnormal Loss of Raw Materials 9,800 kg -9,760 kg=40kg
9,760 kg
Raw Material consumed
Closing Inventory (Stock) of raw material 9,760 kg -9,800 kg =260 kg
9,500 kg
Calculation Cost of Raw Material per kg:
Purchase Price 10,00,000
Less: Input Tax Credit (i.e., GST) 10,000 x *10 (1,00,000)
9,00,000
Add: Freight, Loading and Unloading Charges 40,800
Cost of Material 9,40,800 940,800
Cost per kg (Normal Cost) = Total kg - Normal Loss 10,000- 200 =796 per kg
Calculation of Cost of Finished Goods per unit:
Raw Material Cost (96 x 5) 480
Direct Labour Cost (2,28,000/1,900)* 120
Direct Overhead Cost (757,000/1,900)* 30
Fixed Overhead Cost (T1,20,000/20,000) 6
636
Unsold Units of Finished Goods
9,500 75,000
5 =1,900* (Units Produced) -1,000 (sold) =900 Units
750
Calculation of Closing Inventory of Finished Goods and Raw Materials. According
to Para 24 of AS-2 "Valuation of Inventories", materials and other supplies held for use
in production of inventories are not written down below cost. If the finished products in
which they will be incorporated are expected to be sold at or above cost.
However, when their has been a decline in the price of materials and it is estimated that
the cost of the finished products will exceed NRV (Net Realisable Value), the materials are
written down to NRV. In such circumstances, the replacement cost of the måterials may be
the best available measure of their NRV.
Case (): When finished goods can be sold @800 subject to payment of 10%o brokerage
on selling price. Replacement Cost of Raw Material is 90 per kg.
(a) Calculation of Closing Inventory of Finished Goods:
NRV of finished goods per unit =800 - 10% of T800 =720
NRV > Cost of finished goods per unit =7636
Therefore,Closing Inventory of finished goods will be valued at cost, i.e., at 636
per unit.
Value of Closing Inventory of finished goods = 900 x 636 = 5,72,400
(b) Calculation of Closing Inventory of Raw Material:
Since the finished goods are èxpected to be sold at more than cost, the raw materials
are not valued below cost as per AS-2.
Therefore, raw material will be valued at cost = 260kg x 96 =24,960
Case (i): When finished goods can be sold @700 subject to payment of 10%brokerage
on selling price. Replacement Cost of Raw Material is 90 per kg.
(a) Calculation of Closing Inventory of FinishedGoods:
NRV of finished goods per unit =*700- 10% of 700 =Z630
NRV <Cost of finished goods per unit=636
Therefore, Closing Inventory of finished goods will be valued at:.NRV, i.e, at R630
per unit.
Value of Closing Inventory of finished goods =900 x 630 =5,67,000
 Financial Accounting 2021 (March) 55
(b) Calculation of Closing Inventory of Ratw Material:
Sinc the cost of finished goods > estimated NRV and there is decline in the
price of raw material, the raw material will be valued at its replacement cost, i.e,
z90 per kg
Closing inventory of raw material = 260 kg x 90=23,400
(b) () (a) Calculation of Quoted price: 100.00
LetQuoted price before GST and Trade Discount
Less: Trade Discount 5% 5.00
Price after Trade Discount 95.00
Add: Input GST since it is not to be availed @10% of 95 9.50
Price as per Invoice 104.50
IfInvoice Price is 104.50, thern quoted price =100
100
If Invoice Price is 1, then quoted price = 104.50
100
If Invoice Price is 522.50 lakhs, then quoted price = 104.50 x 522.50 500 lakhs
Calculation of Cost of the machine () in lakhs
Quoted price 500.00
Less: Trade discount @5% 25.00
Price after trade discount 475.00
Add : GST @10% as the input tax credit is not
47.50
to be availed (475 x10/100) lakhs 522.50
Purchase price
Add: Transportcharges @0.25% of Quoted price 100 ×100 x 7500 lakhs 1.25
1
Installation charges @1% of Quoted price =00 x 500 lakhs 5.00
Fee for Consultants 6.50
Cost of site preparation 4.50
Estimated dismantling cost 2.50
Expenditure on trial runs: Materials 5,00,000
Wages 74,00,000
Overheads 73,00,000
12,00,000
Less: Sale proceeds from production (trial runs) 2,00,000 10.00

Borowing cost R500 lakhs x100 12,50

Cost of Machine 564.75
It is assunmed that the machine is a qualifying asset as per AS-16.
Borrowing Cost. 500 lakhs have been specially borrowed for the purposeof obtaining a
qualifying asset. A qualifying asset is an asset that necessarily takes a substantial period of
tine to get ready for its intendd use. of sale.
(i)(a) Depreciation will be charged on the machine from the date the machine is ready for
Use.

(6) Interest on borrowing will be treated as revenue expenditure from the date the
machine is ready for use and therefore, it will be transferred to Profit and Loss
Account.
(c) () Present Value (5,00,000 x 0.8696) +<(4,00,000 x 0.7561) + (3,00,000 x 0.6575)
+(2,00,000 x0.5718) + (1,00,000 x 0.4972)
= 434,800 + 73,02,440 + 1,97,250 + 1,14,360 + 49,720
= 10,98,570
56 Shiv Das DELHI UNIVERSITY SERIES
Therefore, the given lease is Operating Lease because its Present Value is
substantially lower than the fair value, i.e., 730 lakhs
20 1
(i1) Amount of Depreciation @6% for the first year = 30,00,000 x 3100
=2,00,000
Amountof Rental Expense for the first year
(5,00,000 + 4,00,000 +3,00,000+ 2,00,000 + 1,00,000)
5 =3,00,000
Q. 6. Following are the extracts from the Trial Balance of OM T¤T SAT as at 31#
March, 2020:
Particulars Particulars
Purchase 5,70,000 Sales 7,77,500
12% Investments (purchased on 1,00,000 Capital 7,98,100
01.07.2019) Provision for Doubtful Debts (1.4.2019) 10,000
Bad Debts [after recovery of bad Provision for Díscount on Debtors 1,800
debts of 2,500 wlo during 2018-19] 500 (1.4.2019)
Trade Debtors 2,56,000 Outstanding Liabilities for Expenses (Dr) .55,00
Plant and Machinery 4,88,200 Income Tax paid 10,000
(before rectification)
Discount Allowed 2,000
Additional Information:
() Stock in hand was not taken on 31st March but only on 7th April. Following
transactions had taken place during the period from 1st April to 7th April:
Sales 2,50,000, Purchases 1,50,000, Stock on 7th April, was 1,80,000.Goods are
normally sold at 25% profit on cost.
Market Price on 31st March, 2020 was 64% of Selling Price, Estimated Realisable
Expenses 5%.
(i) Goods (Sale Price 25,000) were taken by the proprietor for his personal use
but not recorded. Goods (Sale Price 37,500) were given away as free samples
to Mahesh, a customer recorded in the sales book. On 31st March Goods (Sale
Price 12,500) were destroyed by fire, goods were fully insured but the insurance
company admitted the claim to the extent of 60% of cost only and paid the
claim mnoney on 10th April, 2020. On 31st March, Goods for 750,000 were sent to
acustomer on 'Sale or Return' basis and were recorded as actual sales. Goods
are normally sold at 25%. profit on cost. On 1st Jan. 2020 Investmnents were sold
at 10% profit, but the entire sale proceeds have been taken as Sales.
(iii) Write off further 74,000as bad. Additional discount of 1,000 given to debtors.
Maintain Provision for Discount on Debtors @ 29%. Maintain a Provision for
Doubtful Debts @10%. Included amongst the Debtors is 3,000 due from Z and
included among the Creditors 1,000 due to him.
(iv) It was discovered during 2019-2020 that 25,000 being repairs to Machinery
incurred on 1st July, 2017 had been capitalized and 45,000 being the cost of
Machinery purchased on 1st Oct, 2016 had been written off to Stores and Wages
5,000 paid for its Installation had been debited to Wages Account. A Machine
costing 1,90,000 was purchased on 1st July 2019. Wages 10,000 paid for its
Installation have been debited to Wages Áccount. Rate of depreciation on Plant
&Machinery is 20% p.a. on reducing balance basis.
(v) Printing and Stationery expenses of 55,000 relating to previous year had not
been provided in that year but was'paid in current year by debiting Outstanding
Liabilities for Expenses.
 Financial Accounting 2021 (March) 57
Answer the following:
(a) Calculate the amount of Net Purchases, Net Sales and Closing Stock to be
shown in the Trading Account for the year ending 31t March, 2020. (6)
(b) Calculate the total amount to be debited to the Profit & Loss Account for the
year ending 31st March, 2020 in respect of Bad Debts, Discount on Debtors and
Provision for Doubtful Debts & Discount on Debtors. (3.75)
(c) Calculate the amount of Closing' Balance of Debtors to be shown in the Balance
Sheet as at 31st March, 2020. (1)
(d) Calculate the amount of Closing Balance of Plant and Machinery to be shown
(2)
in the Balance Sheet as at 31st March, 2020.
(e) Calculate the amount of Closing Capital (before making an adjustment for
CUrrent year's Net Profit/Loss) to be shown in the Balance Sheet as at 315t
March, 2020. (1)
Note: Financial Statements are not required to be prepared.]
Ans. (a) Calculation of Net Purchases, Net Sales and Closing Stock:
() Calculation of Net Purchases:
Purchase 5,70,000
Less: Cost of goods taken by proprietor 20,000
[R25,000 x 100/125]
Cost of goods given away as free sample 30,000
R37,500 x 100/125]
Cost of goods destroyed by fire 10,000 (60,000)
R12,500 x 10/125]
Net Purchases 5,10,000
(i) Calculation of Net Sales:
Sales 7,77,500
Less: Goods given as free sample 37,500
Goods sent on approvat 50,000
Sale of Investment included in Sales 1,10,000 (1,97,500)
Net Sales 5,80,000
(ii) Calculationof Stock as at 31st March, 2020:
Stock as at 7th April, 2020 1,80,000
Add: Cost of goods sold during 1st April, 2020
to 7th April, 2020 [*2,50,000 x100/1253] 2,00,000
3,80,000
Less: Purchases during 1st April, 2020 to 7th April, 2020 (1,50,000)
2,30,000
Add: Stocksent on approval at Cost [50,000x100/125] 40,000
Stock at cost as on 31st March, 2020 2,70,000
Stock is to be .valued at lower of Cost or Net Realisable Value. Realisable Value is 64%
of the normal selling price and realisable expenses are 5%.
Let Cost be 100, Selling price is 100+ 25 =125
If Cost is 100then normal selling price is 125.
64% of the normal selling price = 125 x 64/100 =80
Realisable expenses =80 x 5/100 = 4
Net Realisable Value (NRV) =80 -74 = 76
Therefore, NRV of Closing Stock =2,70,000 x 76/100 = 2,05,200
NRV S Cost, soClosing Stock will be shown in Trading Account as 2,05,200
 58 Shiv Das DELHI UNIVERSITY SERIES

(b) Dr. Provision for Doubtful Debts Account

Particulars
Cr.
Particulars
Bad Debts Alc 7,000| Balance bld 10.000
K500 +2,500 +4,000] Profit &Loss Alc (Bal, figure) 13,250
Balance cid [See(c)"] 16,250
R1,62,500 x1°/400]
23,250 23,250
Recovery of Bad Debts should be debited to Cash Account and credited to Profit &e Loss
Account not deducted from Bad Debts.
Dr. Provision for Discount on Debtors Account Cr.
Particulars Particulars
Discount Allowed A/c 3,000 Balance bld 1,800
R2,000 +1,000] Profit &Loss Alc (Bal. figure) 4,125
Balance cld [See (c)"1 2,925
Zyoo1,62,500 -16,250]
5,925 5,925
Dr. Profit & Loss Account (Extract) Cr.
Particulars Particulars
Provision for Doubtful Debts 13,250
Provisionfor Discount on Debtors AWc 4,125
Total amount to be d ited to Profit & Loss Accóunt in respect of above two accounts
=13,250+ 74,125 =17,375.
(c) Calculaton of closing balance of debtors to be shown in the Balance Sheet as at
31st, 2020.
Sundry Debtos as per trial Balance 2,56,000
Less: Amount included in debtors in respect of
'Sale or Return' basis 50,000
Goods given as free sample and included
in sales book 37,500
Further discount allowed 1,000
Further Bad Debts 4,000
Mutual owing 1,000 (93,500)
Sundry Debtors. (Closing Balance) 1,62,500
Sundry Debtors to be shown in the Balance Sheet as at 31st March, 2020
Closing Balance of Sundry Debtors 1,62,500
Less: Provision for Doubtful Debts {10% of 1,62,500] (16,250)
1,46,250
Less: Provision for Dsicount on Debtors [/10*1,46,250] (2925)
1,43,325
(a) Closing Balance of Plant and Machinery to be shown in the Balance Sheet as at
31st March, 2019:
=74,88,200- 13,600", + 23,040*, + 10,000 (Wages wrongly debited to wages
A/c) =75,07,640
 Financial Accounting 2021 (March) 59
L. Book Value as on April 1, 2019 of repair to Machinery 25,000 which had beern wrongly
capitalized on 1st July, 2017:
1 July, 2017 Repair 25,000
Less: Depreciation 20% p.a. (25,000 x 20/100×/12 (3,750)
21,250
Balance on 31st March, 2018
Less: Depreciation 20% p.a. (4,250)
Balance on 31st March, 2019 17,000
2 Book Value of Machinery purchased on 1st October, 2016 written off to Stores and
Wages 5,000 paid for it. 45,000
Capitalized Machine purchased on 1st Oct., 2016 5,000
Add: Installation
50,000
(5,000)
Less: Depreciation 20% p.a. for 6months (31st March, 201) 45,000
(9,000)
Less: Depreciation 20%, 31st March, 2018 36,000
(7,200)
Less: Depreciation 20%,31st March, 2019 28,800
3. Balance of Plant and Machinery as per Trial Balance
=4,88,200 (before rectification)
Machinery purchased during the year 2019-20 = 1,90,000
Balance of Plant and Machinery Account (before rectification) as on 1st April, 2019 =
74,88,200-1,90,000 =2,98,200
4. Balance of Plant and Machinery as on 31st March, 2020
=4,18,000 (as shown below)
Dr. Plant & Machinery Account
Particulars Particulars
4,88,200 Profit &LOSS A/c 17,000
Balance b/d
t Profit &Loss Alc 28,800 (Prior period adjustment, 2016)
(Prior periodadjustment, 2017) Balance dd 5,10,000
Wages A/c 10,000 (Including New Machinery)
5,27,000 5,27,000
Balance b/d 5,10,000 Depreciation A/c:
(For 2019-20 on existing machine
73,10,000 x20/40a] 62,0007
On new machine
(2,00,000 x20/00 x2) 30,000
Balance cdd 4,18,000
5,10,000 5,10,000
(e) Closing Capital before adjustemnt for Current Year's Net Profit/Loss
= 798,100 20,000+ 10,000 (Income Tax paid) = 768,100
Working note:
* Goods (Sale Price 25,000) were taken by the proprietor.
Profit =25,000 x 1/5 =5,000; Cost=25,000 75,000 =20,000
 2022 (March)
Name of the Paper : Financial Accounting
Name of the Course : B.Com. (Hons.)
Duration: 3 Hours Maximum Marks: 55
(1. Attempt any Four Questions out of given Six Questions
2. Simple Calculators are allowed to be used.
3. Working Notes should form part of the answer.
4. Answers to theory questions should be brief and to the point.
Q.1. (a) The Cost of the Closing Stock'was 10,00,000. Realizable value 120%.
Realizable Expenses 5%. At what amount stock will be shown in the Income
Statement of Mallaya Co. which is not a going concern. 2
(b) Property, Plant &Equipment appeared at 100,00,000in the Trial Balance
of Nirav Co. which is not a going concern. Property, Plant &e Equipment are
subject to depreciation @10% on WDV basis. Realizable value of Property, Plant
& Equipment 80%. Realizable Expenses 5%. At what amount depreciation will
be shown in the Income Statement of Nirav Co. 2
(c) X Ltd. entered into an agreement with Y Ltd. for sale of goods costing
*4,00,000 at a profit of 20% on sale. The sale transaction took place on 1t
February, 2021. On the same day X Ltd. entered into another agreemnent with
Y Ltd. for repurchasir the same goods at 75,60,000 on 1* August, 2021. The
predetermined repurchasing price covers, inter alia, the holding cost of Y Ltd.
Calculate the anount of revenue as per AS9 for the financial statements of X
Ltd. for the year 2020-2021, 3
(d) BHARAT Advertisers obtained, advertisement rights for One Day World
Cup Cricket Tournament to be held in May 2021 for 1,600 lakhs in February
2021. By 31/3/2020, they had paid 1,000 lakhs to secure these advertisement
rights. The balance T600 lakhs was paid in April 2021,By March 2021, they
procured advertisement for 75% of the available time for 2,000 lakhs. The
advertisers paid 60% of the amount by that date. The balance 40% was received
in April 2021. Advertisements for balance 25% time were procured in April
2021 for 200 lakhs. The advertisers paid the full amount while, booking the
advertisement. 25% of the advertisement time is expected to be available in May
2021 and balance in June 2021. Calculate the amount of net revenue as per AS-9
to be recognised in June 2021. 3
(e) Give any four differences between Finance lease and Operating Lease.3.75
Sol. (a) In this, case, the Closing Stock will. be shown in the Income Statement
at Net Realisable Value. It is calculated as follows:.
Valuation of Stock 8)
Cost of Closing stock 10,00,000
Realisable value of Closing stock (120% of *10,00,000) 12,00,000
Less: Realisable Expenses (5% of 12,00,000) (60,000)
Net Realisable Value of closing stock 11,40,000

60
 Financial Accounting 2022 (March) 61
(b) Calculation of amount of depreciation to be shown in Income statement:
)
Cost of.Property, Plant and Equipment 1,00,00,000
Realisable value (80% of 1,00,00,000) 80,00,000
Less: Realisable Expernses (5%of 80,00,000) (4,00,000)
Net Realisable Value of Property, Plant and Equipment 76,00,000
Cost of Property, Plant and Equipment 1,00,00,000
Les: . Net Realisable Value of Property, Plant and Equipment (76,00,000)
Anount of Depreciation .24,00,000
Note: As Nirav Co. is not a going concern and written down value of Property, Plant and Equipment
is not given, therefore given rate of depreciation and method of charging depreciation are irrelevant
in this situation. In such a case depreciation on Property, Plant and Equipment will be the difference
between the Carrying cost and the Net Realisable Value of Property, Plant and Equipment, as Net
realisable value is less.
(c) The transaction that took place between XLtd. and YLtd. on 19 February, 2021
should not be considered as Revenue' as per AS-9, because the said transaction
further contains a Repurchasing Agreement of the samne goods on a future date
(ie, 1*August, 2022). Therefore, the resultant figure of 5,00,000 (ie, 4,00,000 +
25% of 4,00,000) should be treated as Financing transaction rather than Sale and
not be recognised as Revenue, In other words; Revenue IS NIL, as per AS-9.
(a) Calculation of Net Revenue to be recognised in June 2021:
(n lakhs)
Total Revenue received by June 2021 (2,000+ 200). 2,200
Less: Total Expenses by June 2021 (1,000 + 600) (1,600)
Net Revenue 600
The advertisement time expected to be available in June 2021 would be 75%.
Hence Revenue recognised for June 2021 would be 75% of Net revenue i.e., R450
Lakhs (75% of <600 Lakhs).
Note: As per AS-9 for Advertising agencies, media commission is normally
recognised when the related advertisements or commercials appear before the
public and the necessary intimation is received by the Agency.
(e) Sometimes, leases are for specific time whereas sometimes these are without
any timne limit or constraint, say perpetua.
Such leass are of two types:
) Finance lease or (i) Operating lease.
Finance lease is one whereby the Lessor transfers all the rights and obligations
connected with the asset to the other party namely the Lessee involving all the
rewards as well as risks attached with the ownership of the asset.
Operating lease is one which.is not finance lease. In Finance lease, the
agreement is for a relatively longer period or for most of the useful life of the
asset whereas in Operating lease the rights are transferred only for a relatively
shorter period. Even the responsibility to maintain the asset still remains that
of the Lessor. Operating lease agreement usually is revocable also in nature as
compared to the Finance lease.
62 Shiv Das DELHI UNIVERSITY SERIES

Difference between Operating Lease and Financial Lease

Operating Lease Financial Lease
() Shorter durationwith no relation to Normally. coinciding with economic
the economic life of the asset. useful life of the asset
(ii) Can be revoked. Normally non-revocable.
() Lessee protected against the risk of |Lessee not protected against the risk
obsolescence. of obsolescence.
(rv) Cost of repairs and maintenance of Lessee normally bears such expenses.
asset are borne by the Lessor.
(0) Lease rentals are not sufficient to Lease rentals are normally equal
cover the cost of asset. to cost of asset to the Lessor plus a
reasonable return on investment
made by the Lessor in the asset.
Q. 2. Question on Hire Purchase &Instalment: Not in Current Syllabus.
Q.3. PARMATMA Ltd. Delhi invoices goods to its Mumbai and Kolkata
offices at 20% less than the list price which is cost plus 50% with instructions
that cash sales are to be made at invoice price and credit sales at list price.
Opening Stock at Mumbai at its cost 3,07,200.
Goods Sent to Mumbai (at cost to Delhi) 74,40,000.
Cash Sales 74.8% of Net Credit Sales
Credit Sales 5,80,000.
Goods returned by Credit Customers to Mumbai 1,80,000.
Goods returned by Mumbai to Delhi 1,44,000.
Loss of Goods by fire. (at invoice price) 12,000 against which 80% of cost was
recovered from the insurance Company.
Loss of Goods at Mumbai through normal pilferage (at list price) 12,000.
Debtors at Mumbai Opening 740,000
Cash remitted by Mumbai Branch to HO. 76,49,740.
Discount Allowed to Debtors 753,460.
Goods received by Mumbai till close of the year 75,08,000.
Provision is to be made for discount on Debtors at 15o on prompt payments
at year end on the basis of year's trend of prompt payments.
Cash remitted by HOto Branch for Expenses 36,000.
Branch Expenses stilloutstanding 2,964.
Manager is entitled to commission @6% of Net profits after charging such
commission.
(a) Calculate Net Credit Sales.
(b) Calculate Cash Sales.
(c) Calculate the Provision for discount to be made.
(d) Calculate the Closing Stock in hand at Mumbai Branch. 4.75
[Note: Detailed Ledger Accounts are not required.]
Sol. (a) Net Credit Sales =Credit Sales - Sales Return
=5,80,000 - 1,80,000=4,00,000.
 Financial Accounting 2022 (March) 63
(b) Cash Sales = 74.8% of NetCredit Sales
=74.8% of 4,00,000
=2,99,200
(c) Calculations for Provision of Discount to be
Dr. made:
Mumbai Branch Debtors Account Cr.
Particulars Particulars
Balance b/d 40,000 Sales Returm 1,80,000
Branch Stock (Credit Sales) 5,80,000 Cash received from debtors 3,42,540
Discount allowed 53,460
Balance cld (Bal. Fig.) 44,000
6,20,000 6,20,000
(i) *Cash Received from Debtors = Casli reitted by Mumbai Branch to H.O.
- Cash Sales - Insurance claim
= 6,49,740 -2,99,200 - 8,000 =73,42,540
(ii) Let Cost Price =100
List Price =100+ 50% of 100 = 150
Invoice Price 150 20% of 150= 120
Loading = 120 - 100 = 20 or 20% of Cost Price
1
i.e, of IP and ;1 of CP
Cost value of Loss by fire would be = 12,000 -(x12,00- ti0,00
Calculation of Provision for Discount on Debtors:
Debtors which are making prompt payment availing discount @15%
=53,460 x 100
15R3,56,400
Amount of Gross Debtors who máde payments during the year
=753,460 + 3,42,540 =3,96,000
Likely Percentage of Debtors who made prompt payment
3,56,400 x 100 = 90%
3,96,000
Likely Prompt paying debtors included in Closing Debtors.:
= 44,000 x 90% = 739,600
Provision for discount on Debtors = 15% of 39,600 =5,940
(a) Calculation of Closing Stock at Mumbai Branch:
Dr. Mumbai Branch Stock Account Cr.
Particulars Particulars
Balance b/d 3,07,200 Sales:
Goods sent to Branch Alc Cash Sales 2,99,200
Add: Credit sales 5,80,000
4,40,000 + *4,40,00
x 5,28,000 Less: Return (1,80,000) 6,99,200
Branch Adjustment Account Goods Returned by Branch to H.0. 1,44,000
(Excess of Catalogue price of Net Branch Adjustment A/c (Load on
Credit sales i.e., Credit sales - goods destroyed by fire)
Sales Returm over Invoice price (R12,000 x2°Ln) 2,000
(4,00,000 x 30 80,000
150
64 Shiv Das DELHI UNIVERSITY SERIES
bf 9,15,200 8,45,200
Branch Adjustment Alc Normal loSs
120 9,600
(P) 12,00 M
150
Branch Profit &Loss Alc (Cost of 10,000
goods by fire)
destrO
(R12,000 x1°9)
Balance d:
Stock In transit
(K5,28,000-75,08,000) 20,000
Stock In Hand (Bal. Fig.) 30,400 50,400
9,15,200 915,200
Closing Stock =50,400.
provides you
Q. 4. RAJASTHAN CLUB which is also running a Restaurant
the following information:
1. Opening and Closing Balances
Particulars As on 1 April 2020 As on 31 Mar 2021
4,40,000
Furmiture
4,40,000
Sports Equipment
China Class, Cutlery etc. 50,000
5,00,000 2
6% Govt Securities (Face value 73,00,000)
6,000 1,000
Stock of Spots Materials
Advances to Suppliers of Sports Materials 2,000 1,000
Due to Suppliers of Sports Materials 6,000 3,600
Stock of Stationery 4,000
1,800 600
Unpresented cheques being payment for Stationery
Subscipion Outstanding 9,500 7,000
2,800 5,200
Subscipion Received in-Advance
Outstanding Miscellaneous Expenses 9,500 7,000
Miscellaneous Expenses paid in advance 2,800. 5,200
10,000 8,000
Outstanding Wages
Cash Balance 20,000 60,000
Bank Balance as per Pass Book 10,00,000
Stock of Provisions 60,000 7,60,000:
Debtors for Provisions 60,000 80,000
Creditors for Provisions 2,00,000 1,00,000
2. Payments: Suppliers of Sports Materials 21,600, Miscellaneous Expenses
1,48,900, Wages 1,02,000,Stationery 3,200.
Furniture (Purchased on 1st October, 2020) 3,00,000, Sports Equipment
(purchased on 1 October 2020) 73,00,000, 8% R.B.I Tax-Free Bonds (Purchased
on 1* January, 2021) [Face Value 2,00,000] *1,58,400, Creditors for Provisions
21,00,000, Cash Purchases of Provisions 1/11th of the Purchases.
3. Receipts: Subscription 148,900, Interest on 6% Govt. Securities (After T.D.S.
@ 10%)16,200, Collection from Debtors for Provisions 17,80,000. Cash Sales of
Provisions 10% of Total Sales.
4. Other Information: Deprecation Rates: On China Glass & Cutlery - 20%.
On Furniture - 10% p.a. On Sports Equipment - 10%. The cost of the boarding
 Financial Accounting 2022 (March) 65

expenses 55,000(including 740,000 for Restaurant staf). Furniture (havinga book

value of 340,000) as on 1 April, 2020 was sold at a loss of 20% on 31* December,
2020. Write 25% off Stationery.
Answer the following:
(a) Calculate the amount of Profit/Loss as per Restaurant Trading Account
3
for the year ending on March 31, 2021.
(b) Calculate the amount of Subscription to bé credited to Income and2
Expenditure Account for the year ending on March 31, 2021
(c) Calculate the amount of the Misc. Expenses to be debited to Income and
2
Expenditure Account for the year ending on March 31, 2021.
(a) Calculate the Sports Materials consumed to be debited to Income and2
Expenditure account for the year ending on March 31, 2021.
(e) Calculate the Stationery consumed to be debited to Income and2
Expenditure account for the year ending on March 31, 2021.
() Calculate the Bank Balance to be shown in the Closing Balance Sheet as
2.75
at 31 March 2021.
Sol. (a) Profit/Loss as per Restaurant Trading Account
Restaurant Trading Account
Particulars Particulars
Opening Stock of Provisions 60,000 Sales of Provisions:.
Purchase of Provisions: Cash Sales 2,00,000
Cash Purchase 2,00,000 Credit Sales 18,00,000 20,00,000
Credit Purchase 20,00,000 22,00,000 Boarding Expenses 55,000
2
1,02,000 Closing Stock of Provisions 7,60,000
Wages
Less: Opening Wages O/s (10,000)
Add: ClosingWages O/s 8,000 1,00,000
Boarding Expenses 40,000
Dep. on China Glass, Cutlery etc. 10,000
Profits 4,05,000
28,15,000 28,15,000
- (b) Subscription to be credited to the Income and Expenditure Account.
=2,800 +1,48,900 +7,000 - 9,500 -5,200 =*1,44,000
Alternate way: Subscription to be credited to Income and Expenditure Account
can also be determined by preparing Subscription Account.
Dr. Subscription A/c Cr.
Particulars Particulars
Subscription Outstanding (Opening) 9,500 Subscription Received in Advance
Income &ExpenditureAc (Bal. Fig:) 1,44,000 (Opening) 2,800
Subscription Received in Advance Cash/Bank Ac 1,48,900
(Closing) 5,200 Subscription Outstanding (Closing) 7,000
1,58,700 1,58,700
(c) Misc. Expenses to be debited to Income and Expenditure Account
-2,800 +148,900 +7,000 -29,500 -5,200 =*1,44,000
() Sports Materials Consumed to be debited to Income and Expenditure Account.
Sports Materials Purchased - 2,000 +21,600 +73,600 - 6,000-1,000
=(20,200.
66 Shiv Das DELHI
UNIVERSITY SERIES
Dr.
Alternate way:
Creditors for Sports Materials Account Cr.
Particulars Particulars
Advances to Suppliers of Sports Due to Suppliers of Sports Materials
Materials Ac
Cash/Bank Ac 2,000 Ac (Beginning) 6,000
Due to Suppliers of 21,600 Credit Purchases ofSports Materials
Sports Materials Alc Alc (Bal. Fig.) 20,200
3,600 Advances to Suppliers of Sports
Materials Alc (at the end) 1,000
27,200 27,200
Sports Materials Consumed =6,000 + 720,200 - F1,000 =25,200
Dr.
Alternate way:
Stock of Sports Materials Account Cr.
Balance b/d
Particulars Particulars
6,000 Sports Materials Consumed A/c
Credit Purchases of Sports (Bal. Fig.)
Material A/G 25,200
20,200| Balanc cld 1.000
26,200 26,.200
Working Notes:
* Dr. Debtors for Provisions Account
Cr.
Balance b/dParticulars 60,000 Cash/ Bank A/c
Particulars
Credit Sales A/c (Bal. Fig.) 18,00,000
17,80,000
Balance C/d 80,000
18,60,000 18,60,000
Credit Sales = 10% of Total Sales; Credit Sales of
If Credit Sales 90 then Cash Sales = 10 Provisions = 90% of Total Sales
If Credit Sales 18,00,000, then Cash Sales = 10/
90 x18,00,000 =2,00,000
*, Dr. Creditors for Provisions Account
Cr.
Particulars Assets
Cash/ Bank A/c 21,00,000 Balance b/d
Balance c/d 2,00,000
1,00,000 Credit Purchase A/c "20,00,000
22,00,000
Cash Purchases of Provisions =/ of total 22,00,000
Purchases
Credit Purchases of Provisions = 10/,, of total Purchases
If Credit Purchases10, then Cash
IfCredit Purchases T20,00,000 then Purchases
=1
Cash Purchases =/o X20,00,000 = 2,00,000
(e) Stationery Consumed to be debited to
Income and Expenditure Account.
Stationery Purchased =3,200 as per Pass Book+ <600-1,800 =2,000
Stationery Consumed =25% of
() Calculation of Bank Balance to (R4,000 +*2,000) =1,500
be shown in the
on March 31, 2021. Closing Balance Sheet as
Dr. Cash & Bank Account Cr.
Particulars Particulars
Balance b/d: Cash 20,000 Creditors for Provisions Alc
Bank Balance (T10,00,000-*1,800) 21,00,000
Debtors for Provisions Ac 9,98,200 Wages Alc. 1,02,000
Interest on Govt. Securities 17,80,000 Suppliers of Sports Materials AWc 21,600
16,200 Furniture Alc 3,00,000
Subscription 1,48,900 Miscellaneous Expenses Alc
Cash Sales of Provisions 1,48,900
Furniture 2,00,000 Sports Equipment 3,00,000
29,600
 Financial Accounting 2022 (March) 67
bf 31,92,900 28,72.500
Balance cid: Stationery Ac 2,000
Bank Overdraft (Bal. Fig.) 2,00,000 Cash Purchases of Provisions 2,00,000
8% RBI Tax-free Bonds 1,58,400
Balance cld (ash) 60,000
33,92,900 33,92,900
Q.5. NEEL &SHANKH provides you the following information for theyear
ending 31$*March, 2021.
Particulars Dr. () Cr. )
Capital 36,16,000
Fixed Assets 6,00,000
Opening Stock: DepartmentA 1,20,000
Department B 1,60,000
Purchases: Department A 28,00,000
Department B 52,00,000
Sales: Department A 72,00,000
Department B 1,16,00,000
General Expenses 72,48,000
Debtors 40,00,000
Bank 12,20,000
Creditors 4,00,000
Drawings. 11,20,000
Discount Received 1,00,000
Discount Allowed 2,08,000
Rent &Rates. 2,40,000
2,29,16,000 2,29,16,000
AdditionalInformation:
(a) Closing Stock: Department A5,20,000, Department BT10,40,000. 30% of
the Opening and Closing Stocks at each department represented goods
received from the other department.
(b) Goods of 10,00,000 were transferred by Department A to Departmnent B
at selling price. Goods of T15,00,000 were transferred by Department B
to A Department A at selling price. 20% of such transferred goods were
returned by transferring department to transferee department. Both these
transfers and returns have not yet been recorded.
(c) Depreciate Fixed Assets @10% p.a. The Area occupied by Department A
and Department Bis 6,000 square feet and 4,000 square feet respectively.
Share of Departments in General Expenses is half of the share of General
Office and is to be charged to Department A and Department B in the ratio
of Departmental Gross Profit.
Answer the following:
(a) Calculate the Gross Profit of each Department. 2 x2= 4
(b) Calculate the Gross Profit Ratio of each Department. 2 x2 = 4
(c) Calculate the Stock Reserve on Closing Stock of each Department. 4
(a) Calculate the Net Profit of each Department. 1.75
68 Shiv Das DELHI UNIVERSITY SERIES
Sol. (a) Calculation of Gross Profit.
Calculation of Net Sales & Net Purchases (Including transfers)
Particulars Departiment
A() B)
Sales: 72,00,000 1,16,00,000
Add: Transfer 10,00,000 15,00,000
82,00,000 1.31,00,000
Less: Retuns (2,00,000) (3,00,000)
Net Sales (including transfer) 80,00,000 1,28,00,000
Purchase: 28,00,000 52,00,000
Add: Transter 15,00,000 10,00,000
43,00,000 62,00,000
Less: Retums (3,00,000) (2,00,000)
40,00,000 60,00,000
Net Purchase (including transfer)
Calculation of Net Gross Profit
Particulars Department
A) B ()
Calculation of COGS: Opening stock 1,20,000 1,60,000
Purchases 40,00,000 60,00,000
Closing stock (5,20,000) (10,40,0000)
Cost of Goods Soid (COGS) 36,00,000 51,20,000
Sales 80,00,000 1,28,00,000
Gross Profit =(Sale COGS) 44,00,000 76,80,000
(b) Calculation of Gross Profit Ratio
Gross Profit 44,00,000 x 100 =55%
Gross Profit Ratio = Net Sales
x 100; Department (A) = 80,00,000
76,80,000 x 100 = 60%
Department (B) = 1,28,00,000
(c) Calculation of Stock Reserve on Closing Stock of each department.
30 60
Department A = 5,20,000 x X
100
=93,600
100
30 55
Department B = 10,40,000 x 100 X
100
=1,71,600
Calculation of Net Profit
(a)
Department Department
Particulars Particulars
A K). B) A) B)
1,44,000 96,000 Gross Profit 44,00,000 76,80,000
Rent & Rates (3:2) -65,000,
General Expenses 8,80,000| 15,36,000 Discount Received 35,000
1/3 (55 :96) (28: 52)
Discount Allowed", 79,660 1,28,340
(72: 116)
Net Profit 33,31,340 59,84,660
44,35,000 77,45,000 |44,35,000 77,45,000
Working Notes: *, General Expenses of Departments : General Expenses of Office. (1:2)
General Expenses of Departments =72,48,000 x1/3 =24,16,000.
Q.6. Question on Partnership. Not in Current Syllabus.