F-2,Block, Amity Campus

Sec-125, Nodia (UP)

India 201303
ASSIGNMENTS
PROGRAM: BACHELOR OF FINANCIAL & INVESTMENT ANALYSIS
SEMESTER-I
Subject Name
Study COUNTRY
Permanent Enrollment Number (PEN)
Roll Number
Student Name

: FINANTIAL ACCOUNTING
: SOMALIA
: BFIA01512010-2013019
:
: Mohamed Abdullahi Khalaf

INSTRUCTIONS
a) Students are required to submit all three assignment sets.
ASSIGNMENT
Assignment A
Assignment B
Assignment C

DETAILS
Five Subjective Questions
Three Subjective Questions + Case Study
45 Objective Questions

MARKS
10
10
10

b)
c)
d)
e)

Total weight age given to these assignments is 30%. OR 30 Marks

All assignments are to be completed as typed in word/PDF.
All questions are required to be attempted.
All the three assignments are to be completed by due dates (specified from
time to time) and need to be submitted for evaluation by Amity University.
f) The evaluated assignment marks will be made available within six weeks.
Thereafter, these will be destroyed at the end of each semester.
g) The students have to attach a scanned signature in the form.

Date: 18/11/2010

Signature: _________________

( ) Tick mark in front of the assignments submitted

Assignment A

Assignment B

Assignment C

FINANCIAL ACCOUNTING
ASSIGNMENT A
Q 1. Define Accounting. How does it differ from book-keeping?
Answer:
a.

Accounting is a systematic process of identifying, recording, classifying,

analyzing, summarizing, and reporting the economical events of a business to
provide useful information to those who make economic decisions.

b.

Accounting and bookkeeping are both financial tools used for the recording
of business transactions. The differences between accounting and
bookkeeping are; that bookkeeping is the process of recording business
transactions, its relations, and keeping these records. And accounting is the
systematic recording of business transactions; it includes reports and financial
analysis of transactions. It is true to say that the bookkeeping is part of the
accounting, hence accounting uses bookkeeping information, interprets it,
compiles it, and presets it in a form of reports to those who use accounting
information. The diagram below shows the relationship between accounting
and bookkeeping:

Bookkeeping
Accounting
Accountancy

Q 2 What is basic accounting equation?

Answer:
The basic accounting equation is a formula which represents the relationship
between the assets, liabilities, and owner's equity of a business. It shows that what
the firm owns (its assets) are purchased by either what it owes (its liabilities) or by
what its owners invests (its shareholders equity or capital). This relationship is
expressed in the form of an equation:
Assets = Liabilities + Owner's Capital
This equation has to balance because everything the firm owns (assets) has to be
purchased with something, either a liability or owner's capital.
The accounting equation can be expressed in two other ways:
Liabilities = Assets - Owner's Equity

Owner's Equity = Assets - Liabilities

Q 3 What is Journalizing? Give a format of Journal & briefly explain its
content.
Answer:
Journalizing is the process of recording transactions and economical events of an
organization chronologically into a statement (book) called journal. The journal
looks like this:
Date

Particulars

L.F.

Debit

Credit

The journal consists of five columns;

Date: in this column, the date of the transactions is entered.
Particulars: in this column, a brief description of the transaction and the
accounts affected by it is entered.
L.F: in this column, the page number of general ledger in which the transaction
was transferred is entered. The (L.F) means Ledger Folio.
Debit: The amount to be debited is entered in the debit column.
Credit: The amount to be credited is entered in the credit column.
Q 4 what are the advantages of special Journal & list them.
Answer:
Preparing general journal entries for each transaction is a laborious, time-consuming
process. Because of this, accountants have devised streamlined journalizing
procedures that make use of special journals, which refer to journals meant for
specific transactions of similar nature. Special journals are also known as subsidiary
books or day books. Special journals are constructed to achieve great efficiencies in
journalizing transactions. Examples include sales journals, cash receipts journals, and
cash payments journals.
Advantages of Special Journals are:
1.
2.
3.
4.

Facilitates division of work

Permits the installation of internal check system
Permits the use of specialized skills.
Time & labour saving in journalizing & posting.

Q 5 State the reasons for the difference between the cash book balance & pass
book balance.
Answer:
The relationship between the customer and the banker is that of a creditor and a
debtor. So, if the bank column of the Cashbook shows a debit balance as on a
specified date the bank statement should show an equal amount of credit balance as
on that date and vice versa. However, the balances shown by the two independent
records may not always equal, due to some the following reasons:
4

1. Cheques issued by the business but not presented for payment.

2. Cheques received from customers and deposited may not have been
collected by the banker.
3. Deposits made by the customer directly to the bank account.
4. Collection charges, service charges and interest on overdraft are charged
by the banker.
5. Interest credited by bank for the balance maintained with it and any other
income such as interest on securities, dividend, etc. collected by the bank
on behalf of the business can be ascertained only from the bank
statement.
6. Wrong entries made by the business in the Cashbook or errors
committed by the bank in its ledger.
7. Omission of entries in the two sets of books.
8. Dishonor of customers cheques deposited in the bank account.

ASSIGNMENT B
Q1 Define depreciation. Differentiate, with suitable example, between
Diminishing Balance Method & Straight Line Method of charging
depreciation.
Answer:
Depreciation is a measure of the wearing out, consumption or other loss of value of
a depreciable asset arising from use, effluxion of time or obsolescence through
technology and market changes. It also includes amortization of assets whose useful
life is predetermined.
It is the measure of the cost or revalued amount of the economic benefits of the
tangible fixed asset that have been consumed during the period.
There are number of methods of charging depreciation, but the most used two are:
straight line method and reducing balance method.
Example:
Under the Straight Line Method,
Depreciation =

Asset value Salvage Value

Estimated Useful life (in no of years)

If the cost of a tangible asset is $ 15,000, and its expected salvage value is $ 2,000
and the estimated useful life is 5 years.
In this case the annual depreciation would be
Depreciation=

Year
1
2
3
4
5

$15,000 $2,000
5 years

Asset Value
Salvage Value
$ 15,000 $ 2,000
$ 10,400
$ 7,800
$ 5,200
$ 2,600

$13,000
5 years

= $2,600

17.33 %

Depreciation Written Down Value

$ 2,600
$ 2,600
$ 2,600
$ 2,600
$ 2,600

$ 10,400
$ 7,800
$ 5,200
$ 2,600
$ 0.00

Under the Reducing Balance Method, the depreciation rate is calculated.

1 (s/c)1/n

If the cost of a tangible asset is $ 15,000, and its expected salvage value is $ 2,000
and the estimated useful life is 5 years.
In this case the annual depreciation rate would be
6

1 ($2,000/$15,000)1/5 = 33 %
Year
1
2
3
4
5

Dep. Calculation
$ 15,000 x 33 %
$ 10,050 x 33 %
$ 6,733.5 x 33 %
$ 4,511.5 x 33 %
$ 3,022.7 x 33 %

Depreciation
$ 4,950
$ 3,316.5
$ 2,222
$ 1,488.8
$ 997.5

Written Down Value

$ 10,050
$ 6,733.5
$ 4,511.5
$ 3,022.7
$ 2,025.2

Q2 Define Bills of Exchange and explain the parties involved in it.

Answer:
Definition: Bills of Exchange is a written, unconditional order by one party to
another to pay a certain sum, either immediately or on a fixed date, for payment of
goods and/or services received.
Parties involved are:

a. Drawer: He/She is the person who draws the bill and writes it.
b. Drawee: He/She is the person who accepts the order.
c. Payee: He/She is the person to whom the amount is to be paid. Sometimes
Drawer and the payee can be the same person.
Q3 Distinguish between capital expenditure & revenue expenditure.
Answer:
A capital expenditure is an amount spent to acquire or improve a long-term asset
such as equipment or buildings. Usually the cost is recorded in an account classified
as Property, Plant and Equipment. The cost (except for the cost of land) will then
be charged to depreciation expense over the useful life of the asset.
Revenue expenditure is an amount that is expensed immediatelythereby being
matched with revenues of the current accounting period. Routine repairs are
revenue expenditures because they are charged directly to an account such as
Repairs and Maintenance Expense. Even significant repairs that do not extend the
life of the asset or do not improve the asset (the repairs merely return the asset back
to its previous condition) are revenue expenditures.

Q 4 Case Study:
The following is the Trial Balance of Gupta as on 30th June, 2001
Trial Balance of Gupta for the year ending
30th June, 2001
Dr.

Cr.

Particulars

Rs.

Particulars

Rs.

Cash
Cash at Bank
Purchases
Return inwards
Wages
Fuel and power
Carriage on sales
Carriage on Purchases
Inventory (1st July, 2000)
Buildings
Freehold land
Machinery
Patents
Salaries
General expenses
Insurance
Drawings
Accounts receivable

540
2,630
40,675
680
8,480
4,730
3,200
2,040
5,760
32,000
10,000
20,000
7,500
15,000
3,000
600
5,245
14,500

Sales account
Returns outwards
Capital
Accounts payable
Rent

98,780
500
62,000
6,300
9,000

1,76,580

1,76,580

Taking into account the following adjustments prepare the Trading, Profit and Loss
account as on 30th June, 2001.
1. Inventory on hand on 30th June, 2001 is Rs.6,800.
2. Machinery is to be depreciated at the rate of 10% and Patents at the rate of
20%.
3. Salaries for the month of June 2001amounting to Rs.1,500 were unpaid.
4. Insurance includes an annual premium of Rs.170 on a policy expiring on 31st
December, 2001.
5. Bad debts to be written off are Rs.725.
6. Rent receivable Rs.1,000.

Answer:
1. Trading Account:
Trading Account of Gupta
for the year ending 30th June, 2001
Particulars
To Opening Inventory
Add: Purchases
Less: Returns Outwards
To: wages
To: Carriage on purchases
To: Fuel and Power
To: Gross profit

R.s
5,760
40,675
(500) 40,175
8,480
2,040
4,730
43,715
104,900

Particulars
R.s
By Sales
98,780
Less Returns
(680) 98,100
By Closing inventory
6,800

104,900

2. Profit And Loss Account

Profit and Loss Account of Gupta
for the year ending 30th June, 2001
Particulars
To Salaries
15,000
Add: Outstanding Salaries
1,500
To: Carriage on Sales
To: General Expenses
To: Bad Debts
To: Insurance
600
Less Prepaid
(85)
To: Depreciations
On Machinery (10%)
2,000
On Patent (20%)
1,500
To Net Profit (Transferred to
Capital Account)

R.s
16,500
3,200
3,000
725

Particulars
R.s
By Gross profit
43,715
By Rent
9,000
Add Acc. Rent 1,000 10,000

515

3,500
26,275
53,715

53,715

3. Balance Sheet
Balance Sheet of Gupta
for the year ending 30th June, 2001
Liabilities
Capital
Add Net profit

R.s
62,000
26,275
-----------(5,245)

Assets
Fixed Assets:

Account Payable

6,300

Machinery
20,000
Less Depreciation (2,000)
Building
Freehold Land

Outstanding Salary

1,500

Current Assets:

Less Drawings

83,030

90,830

10

R.s

18,000
32,000
10,000

Cash on hand
Cash at Bank

540
2,630

A/c Receivable
14,500
Add Rents Receivable 1,000
Less Bad Debts
(725)

14,775

Prepaid Insurance

85

Patent
7,500
Less Depreciations 1,500

6,000

Closing Inventory

6,800
90,830

ASSIGNMENT C OBJECTIVE QUESTIONS

In each of the following cases indicate the alternative which you consider to be
correct:
Q1. Which of the following financial statements is prepared as of a particular date?
(a) Profit and loss account
(b) Balance sheet (
)
(c) Cash flow statement
(d) Income and expenditure statement
(e) Profit and loss appropriation account.
Q2. Based on which of the following concepts, share capital account is shown on the
liability side of balance sheet?
(a) Business entity concept (
)
(b) Money measurement concept
(c) Cost concept
(d) Going concern concept
(e) Conservatism concept.
Q3. Which of the following is not an accounting transaction?
(a) Sale of goods for cash
(b) Payment of salary of office staff
(c) Agreement to sell (
)
(d) Purchase of office furniture
(e) Repayment of bank loan.
Q4. Which of the following is false?
(a) Taking the favourable balance as per pass book as the starting point, the amount
in respect of charges made by the bank will be added to the pass book balance
(b) Taking the favourable balance as per pass book as the starting point, the amount
in respect of dividends received directly will be deducted from the pass book balance
(c) Bank charges recorded twice in cash book will be added to the overdraft as
per cash book in the preparation of reconciliation statement (
)
(d) Cheque issued but not presented for payment will be added when favourable
balance as per cash book is the starting point
(e) The amount of the undercasting of the credit side of the bank column of the cash
book will be deducted from the overdraft as per pass book.

11

Q5. From the books of Mr.Neelam, it was observed that cheques amounting to
Rs.2,40,000 were deposited in the bank, out of which cheques worth Rs.20,000 were
dishonored and cheques worth Rs.40,000 are still in the process of collection. The
treatment of this while preparing Bank Reconciliation statement is
(a) Deduct Rs.60,000 from bank balance as per pass book
(b) Add Rs.20,000 and deduct Rs.40,000 from overdraft balance as per cash book
(c) Deduct Rs.60,000 from overdraft balance as per pass book (
)
(d) Add Rs.60,000 to overdraft balance as per pass book
(e) Deduct Rs.40,000 and add Rs.20,000 from overdraft balance as per pass book.
Q6. Which of the following is true?
(a) Bank account is a personal account (
)
(b) Stock of stationery account is a nominal account
(c) Returns inward account is a personal account
(d) Outstanding rent account is a nominal account
(e) Capital account is a real account.
Q7. A sales day book is to record
(a) all credit sales only
(b) All cash sales only
(c) all credit and cash sales
(d) credit sales of goods and trade discount (
)
(e) all cash and credit sales and trade discount.
Q8. Which of the following is a liability of a firm?
(a) Debit balance of discount column of cash book
(b) Credit balance of bank pass book
(c) Debit balance of bank column of cash book
(d) Debit balance of cash column of cash book
(e) Credit balance of bank column of cash book. (
)
Q9. Which of the following accounts will invariably have a debit balance?
I. Accounts receivable.
II. Accounts payable.
III. Purchases account.
IV. Bank account.
V. Prepaid expenditure.
(a) Only (III) above
(b) Both (II) and (III) above
(c) Both (I) and (III) above
12

(d) (I), (III) and (V) above (

)
(e) (I), (III), (IV) and (V) above.
Q10. The following is not a book of original entry
(a) Purchase book
(b) Journal proper
(c) Cash book
(d) General ledger (
)
(e) sales book
Q11. The Accountant of a company is recording the transactions of the day in various
Books of Original Entry. Which of the following transactions is recorded in the
wrong book?
(a) Goods purchased on credit - Purchase Book
(b) Goods sold on credit - Sales Book
(c) Wages paid in cash - Cash Book
(d) General Stationery purchased on credit - Purchase Book (
)
(e) Office Equipment purchased on credit - Journal Proper
Q12. The impact on assets, profit and liabilities of a firm, on account of salary paid
will be
Assets
(a) No effect
(b) Decreases
(c) Decreases
(d) Increases
(e) Decreases

Profit Total
Decreases
No effect
Decreases
No effect
Increases

Liabilities
Decreases
Decreases
Decreases (
)
Increases
Decreases.

Q13. Which of the following is true?

(a) Discount columns in cash book are totaled and not balanced (
)
(b) A petty cash book in which a separate column is provided to record payment
under each head is called imprest system
(c) The total of purchases book is posted periodically on the credit side of sundry
creditors account
(d) The total of sales book is posted periodically on the debit side of sundry debtors
account
(e) Petty cash book is used to record all cash transactions.
Q14. Total of sales day book at the end of the month indicates
(a) The total sales for the month
13

(b) The total credit sales for the month (

)
(c) Total cash sales of the month
(d) Total amount due to suppliers
(e) Total amount receivable from credit sales.
Q15. Which of the following is true?
(a) Cash book may be defined as the record of transactions concerning cash
receipts and payments (
)
(b) Discount account should be balanced in the cash book
(c) The ledger is the book of original entry
(d) Sales journal is used for recording cash sales
(e) Purchase return book is used for recording the return of goods purchased from
suppliers against cash.
Q16. Journal entry for receiving interest in cash from Mr. Prashant against the loan
given to him
(a) Interest on loan account Dr.
To Prashant account
(b) Prashant account
Dr.
To Interest account
(c) Cash account
Dr.
To Prashant account
(d) Cash account
Dr.
To Interest on loan account (
)
(e) Cash account
Dr.
To Loan account.
Q17. Which of the following entries recorded in the books of the drawee of a bill is
false?
(a) When a bill is accepted, the account to be debited is drawers a/c
(b) When a bill is discharged, the account to be debited is bills payable a/c
(c) When a bill presented for payment by a bank is dishonored, the account to be
debited is billspayable a/c
(d) When noting charges of a dishonored bill is paid by the endorsee, the account to
be debited is noting charges a/c
(e) At the time of retirement of a bill the account to be debited is the drawers
a/c. (
)
Q18. Which of the following is true?
(a) A bill sent for collection by bank when dishonored, the drawer will credit bank
a/c
14

(b) At the time of renewal of bill interest a/c is credited in the books of the drawee
(c) Accommodation bills are drawn, accepted and endorsed for some consideration
(d) Refusal by the acceptor to make payment of the bill on due date is called
dishonor (
)
(e) When a bill is endorsed, the drawer credits the drawees a/c.
Q19. Bills receivable account is a
(a) Nominal account
(b) Personal account
(c) Intangible asset
(d) Real account (
)
(e) Representative Personal account.
Q20 . Closing stock is generally valued at
(a) Cost price
(b) Replacement cost
(c) Market price
(d) Realisable value
(e) Cost price or market price whichever is lower. (
)
Q21. The provision for discount on debtors is calculated on the amount of debtors
(a) Before deducting the provision for doubtful debts
(b) Left after deducting the provision for doubtful debts
(c) Before deducting the actual bad debts
(d) After deducting the actual bad debts
(e) After deducting the actual bad debts and the provision for doubtful debts.
(
)
Q22. Consider the following information of Thumbs-up Company for the year 20062007:
Opening balance of provision for debtors account
Rs. 20,000
Bad debts during the year
Rs. 18,000
Closing balance of Sundry debtors
Rs.2,65,000
Estimated provision for doubtful debts
4%
The amount to be debited to profit and loss account to make the estimated provision
is
(a) Rs. 8,600 (
)
(b) Rs.10,400
(c) Rs.10,520
(d) Rs.10,600
(e) Rs.10,680.
15

Q23. At the time of preparation of final accounts, bad debts recovered account will
be transferred to
(a) Debtors account
(b) Profit & loss account (
)
(c) Profit & loss adjustment account
(d) Profit & loss appropriation account
(e) Provision for discount on debtors account.
Q24. Which of the following is false about diminishing balance method of
depreciation?
(a) Higher amount of depreciation is charged when the machine is more efficient
(b) It recognizes the risk of obsolescence by higher amount of depreciation in the
early years
(c) The total amount of depreciation and repairs is almost uniformally distributed
over the useful life
(d) It results in better cash flow through tax deferral as taxable income is lower in the
initial years
(e) Depreciation amount throughout the useful life will be uniform. (
)
Q25. The following is not an example of fixed asset
(a) Plant and machinery
(b) Land and building
(c) Royalty (
)
(d) Patent
(e) Office furniture.
Q26. Under depletion method, depletion per unit is calculated as
(a) Acquisition cost divided by average production units per annum
(b) Acquisition cost divided by actual production units in the year
(c) Acquisition cost minus residual value divided by average production units per
annum
(d) Acquisition cost minus residual value divided by the actual production units in the
year
(e) Acquisition cost minus residual value divided by the total production units
over the useful life. (
)
Q27. Which one of the following is a capital expenditure?
(a) Compensation paid to Directors on termination of their services
(b) Expenditure for renewal of trade mark
(c) Gratuity paid to employees
16

(d) Installments paid for the purchase of patent for manufacture and sale of
medicine (
)
(e) Compensation paid to workers on retirement.
Q28. Entries passed for outstanding expenses, depreciation, interest on capital etc.
are
(a) Opening entries
(b) Journal entries
(c) Adjustment entries (
)
(d) Rectification entries
(e) Closing entries.
Q29. Which of following transactions does not change the total amount of liabilities
in the balance sheet?
(a) Purchase of office furniture on credit
(b) Payment of bank loan
(c) Issue of debentures
(d) Acceptance of bills from creditors (
)
(e) Redemption of preference shares.
Q30. Which of the following is false?
(a) Capital plus liabilities will be equal to assets
(b) The difference between assets and liabilities is bank borrowing (
)
(c) Capital account is a personal account
(d) Investment account is a real account
(e) Outstanding rent account is a representative personal account.
Q31. The expenses and incomes pertaining to full trading period are taken to the
Profit and Loss account of a business, irrespective of their actual payment or receipt.
This is in recognition of
(a) Time period concept
(b) Business entity concept
(c) Going concern concept
(d) Accrual concept (
)
(e) Duality concept.
Q32. Which of the following statements can be used to assess the liquidity of a
company?
(a) Balance sheet (
)
(b) Profit and loss account
17

(c) Profit and loss appropriation account

(d) Bank reconciliation statement
(e) Manufacturing account.
Q33. Which of the following state that Anticipate no profit and provide for all
possible losses?
(a) Convention of materiality
(b) Convention of consistency
(c) Convention of disclosure
(d) Convention of conservatism (
)
(e) Convention of matching.
Q34. Which of the following statements is/are true?
I. Drawings account is a nominal account.
II. Capital account is a real account.
III. Sales account is a nominal account.
IV. Outstanding salaries account is a nominal account.
V. Patents account is a personal account.
(a) Only (I) above
(b) Only (III) above (
)
(c) Both (II) and (IV) above
(d) (II), (IV) and (V) above
(e) (I), (II), (III) and (IV) above.
Q35. RS Ltd., makes purchases on credit. If the purchases are not as per the
specifications, the company returns them to the suppliers. The book, that is used to
record such returns is
(a) Returns inward book
(b) Returns outward book (
)
(c) Cash book
(d) Journal proper
(e) Purchases day book.
Q36. Which one of the following is not a reason for discrepancy in the balance as per
cash book and bank pass book of a company?
(a) Cheque issued to suppliers may not have been presented
(b) Cheque deposited in the account may not have been realized
(c) Bill discounted with bank is not due for payment (
)
(d) Customers may have directly deposited money in the companys account
(e) Bank charges not accounted.

18

Q37. The bank balance in the cash book of Mr.Avinash, a proprietor showed a credit
balance of Rs.10,500 on March 31, 2008. On comparing it with his pass book he
discovered the following discrepancies.
i. Cheque No. 51 for Rs.540 in favour of Mr.Raman has not yet been presented.
ii. A bill of Rs.1,000 was retired by the bank under a rebate for Rs.15, but the full
amount of the bill was credited to bank account in cash book.
The balance as per pass book is
(a) Rs.11,025 (Dr.)
(b) Rs. 9,945 (Dr.) (
)
(c) Rs. 9,945 (Cr.)
(d) Rs. 9,975 (Dr.)
(e) Rs. 9,975 (Cr.).
Q38. The total cost of goods available for sale with a company during the current
year is Rs.12,00,000 and the total sales during the period are Rs.13,00,000. If the gross
profit margin of the company is 25% on sales, the closing inventory during the
current year is
(a) Rs.4,00,000
(b) Rs.3,40,000
(c) Rs.2,25,000 (
)
(d) Rs.1,60,000
(e) Rs.1,00,000
Q39. Unearned income account is
(a) A current asset
(b) A current liability (
)
(c) An expense
(d) An income
(e) Deferred expense.
Q40. The essentials of double entry book-keeping in sequential order are
(a) Passing journal entries, posting in ledger, appropriate adjusting entries, trial
balance, Profit & Loss a/c and Balance-sheet
(b) Passing journal entries, posting ledger, trial balance, Profit & Loss a/c and
Balance-sheet, passing adjusting entries.
(c) Passing journal entries, posting ledger, passing adjusting entries, Profit & Loss a/c
and Balance sheet, trial balance
(d) Passing adjusting entries, passing journal entries, trial balance, posting in ledger,
Profit & Loss a/c and Balance-sheet
(e) Passing journal entries, posting in ledger, trial balance, passing adjusting
entries, Profit & Loss a/c and Balance-sheet. (
)
19