OMTEX CLASSES

“THE HOME OF SUCCESS”

OMTEX CLASSES I ST PRELIMINARY EXAMINATION BOOK KEEPING & ACCOUNTANCY GROUP: B

TIME: - 3 HRS DATE: - 16.11.2010 DAY - TUESDAY MARKS: -100

Q1. Attempt any four of the following. (20 marks)

A. Answer in one sentence each. (5 marks)

1. Which types of expenses are debited to trading account?

Ans. The direct expenses related to purchase of goods are debited to trading account.

2. What is Reserve Fund?

Ans. Reserve fund is the accumulated profit which is kept a side as a reserve to serve the firm for
the future needs.

3. Who is an endorser?

Ans. A person who endorses the ownership of the bill he is known as endorser.

4. What is goodwill?

Ans. Goodwill is the monetary value of the business expressed in terms of money.

5. Why is Joint Bank Account opened?

Ans. Joint bank account is opened to record the coventurers bank transaction relation to the joint
venture business.

B. Write the word/term/phrase which can substitute each of the following statement: (5 marks)

1. A statement showing financial position of the business.

Ans. Balance sheet

2. Making the payment of bill before its due date.

Ans. Retirement of the bill of exchange

3. List of debit and credit balances of the ledger accounts.

Ans. Trial balance

4. The relationship between persons who have agreed to share profit or loss in Joint Venture
Business.

Ans. coventurers

5. A Partner who only lends his name to the firm.

Ans. Nominal partner

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C. Match the following pairs. (5 marks)

Group A Group B

1. Partnership deed a. Written agreement between the partners

2. Fixed capital method. b. Current a/c of partners
3. Unexpired expenses c. Assets
4. Temporary Partnership d. Joint venture
5. Pure Single Entry System e. Only personal account

D. Select the most appropriate alternative from hose given below each statement. (5 marks)

1. Reserve for discount on ______________ has a debit balance.

a. Debtors

b. Creditors
c. Bills Receivable

d. Loan advanced.

2. Income Statements and Balance Sheet are prepared in a systematic and scientific manner under
________________

a. Double Entry System.

b. Single Entry System

c. Partial Entry System.

d. Indian System.

3. Before accepting a bill, it is called a _________

a. Note

b. Draft
c. Hundi

d. Request.

4. Valuation of goodwill depends upon ________ capacity of business.

a. Normal

b. Repaying

c. Earning
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d. Capital

5. If two or more persons come together to carry on a business activity for a short period, it is
known as ___________

a. Joint venture
b. Consignment

c. Partnership

d. Stock exchange

E. State with reason whether the following statements are true of false. (5 marks)

1. Scrap value of asset reduces the amount of annual depreciation.

Ans. The above statement is true because of the following reasons.

i. When we calculate the depreciation amount the expected scrap value of the asset is
reduced from the total cost of the assets.
ii. Therefore, the total amount of depreciation per annum will also be get reduced.

2. When the amount of the bill is paid on the due date, it is said to be retired.

Ans. The above statement is false because of the following reasons.

i. When the amount of the bill is paid on the due date, then it is called as honour of the bill
of exchange.
ii. When the amount of the bill is paid before the due date, then it is called as retirement of
the bill of exchange.
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F. Prepare bill of exchange from the following details. (5 marks)

Drawer - Shekhar Desai, Shastri Road, Mahad.

Drawee – Sharad Verma, Narayan Peth, Pune.

Amount - Rs. 3500/-

Period - 3 months.

Payee - Mukund Pande, Panvel

Date of Bill Drawn – 21st June, 2007

Date of Acceptance - 23rd June, 2007

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Q2. On 1 April, 2004 Saikripa enterprises purchased two computers of Rs. 40,000 each. On 1st October, 2004
st

they purchased one more computer for Rs. 40,000. On 1st October, 2006 they sold one of the computers,
which was purchased on 1st April, 2004 for Rs. 18780.

Depreciation on computers was provided @ 10% p.a. on Diminishing Balance Method and the financial year
closes on 31st March every year.
Prepare: computer A/c and Depreciation A/c for years 2004 – 2005, 2005 – 2006, 2006 – 2007. (September,
2008 board exam question)

Ans.

M/s Saikripa enterprises

Computer Account.
Date Particulars J Amount Date Particulars J Amount
F F
1.4.2004 To cash / bank a/c 40000 31.3.2005 By Depreciation a/c 10000
1.4.2004 To cash/ bank a/c 40000
1.10.2004 To cash/ bank a/c 40000 31.3.2005 By Balance c/d 110000
120000 120000
1.4.2005 To balance b/d 110000 31.3.2006 By depreciation a/c 11000
31.3.2006 By balance c/d 99000
110000 110000
1.4.2006 To balance b/d 99000 1.10.2006 By depreciation a/c 1620
1.10.2006 By cash/ bank a/c 18780
[Machinery sold]
1.10.2006 By profit / loss a/c 12000
[ loss on machinery sold]
31.3.2007 By depreciation a/c 6660
31.3.2007 59940 49500
99000 99000
1.4.2007 To balance b/d 59940

Depreciation account
Date Particulars J Amount Date Particulars J Amount
F F
31..3.2005 To machinery a/c 10000 31.3.2005 By profit & loss a/c 10000
10000 10000

31.3.2006 To Machinery a/c 11000 31.3.2006 By profit & loss a/c 11000
11000 11000
1.10.2006 To Machinery a/c 1620
31.3.2007 To Machinery a/c 6660 31.3.1999 By profit & loss a/c 8280
(balancing figure)
8280 8280

OR
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Q2. (A) For the purpose of valuation of goodwill it was agreed to consider net profits of the last 4 years and
goodwill is to be calculated at one year’s purchase of average net profits of last 4 years. The profits were
IST YEAR IIND YEAR IIIRD YEAR IVTH YEAR
Rs. 80,000 Rs. 90,000 Rs. 1,05,000 Rs. 1,10,000

Ans.

&
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Q2. (B) Explain the importance of computer in modern age.
Ans.

Today computers are put to a variety of uses. They have been designed with highly improved
performances. Computers can be used to process voluminous data at a high speed. As regards its
application in the field of accounting, a computer should be able to deal with routine accounting. It
means all normal accounting processes such as financial transactions should be dealt with the use of a
computer. All cash and bank transactions, handling of accounts of debtors and creditors and
calculation of wages and salaries etc should be handled with the use of computer. In addition,
computers can be put to other popular uses such as production, programming and control, flexible
budgetary control, variance analysis, sales and forward trends etc.
Following points explain the importance of computer in modern age.
SPEED - In the modern world, the desire of a man to complete tasks within the stipulated time
limits has been, to a large extent, fulfilled by using a computer. Computers enable us to do
arithmetical computations with a high degree of speed and ease. It has enables us to do things, which
would have been almost impossible earlier. The speed which computers functions are measured in
Pico seconds (1/1000 of Nano – second). Thus, computers are capable of making millions of
computations per second. Hence, a powerful computer is capable of completing the tasks in less than
an hour, which could have taken a year for a group of people to compute.
ACCURACY: - Computers are not only fast in completing a job at a great speed, but it is also
performed with a high degree of accuracy. Sometimes, it is common to say that there is a “Computer
error”. As a matter of fact, it is “Human error” and not a “Computer error” since a computer carries
out the instructions efficiently given by the programmer. As such, if the instructions are faulty, the
errors creep in the computer’s output.
DILIGENCE: - By doing similar job continuously, human beings get tired which results into some
mistakes. As against this, a computer is capable of doing the same job continuously error free. A
computer takes the same time to complete the first calculation as well as the 10000 th calculation.
Thus, the degree of diligence possessed by a computer is impossible in case the same job is done by
human beings.
STORAGE: - Another advantage offered by a computer is that of its enormous capability to store
data. A computer is capable of storing data along with the instructions given by the programmer in
the primary (main) memory. In case, the primary memory is not sufficient it can be stored in its
secondary (auxiliary) memory. There are various devices used for storing the secondary memory.
Some of the common devices used in secondary memory are Compact Disks, Tapes, Drums, pen
Drives etc. Having large capacity to store data.
VERSATILITY: - A computer possesses great versatility, which is capable of performing arithmetic
calculations, logic operation of comparison and moving data within different sections of the computer
and in input and output operations. Although, a computer lacks a brain of its own, it can be put to a
varied uses such as preparation of mark – lists, financial accounting, share analysis etc.

MISCELLANEOUS: - In addition to the above – mentioned advantages, a computer can offer

economies in the form of effective managerial control, saving in labour cost because it is fully
automatic.
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Q3. Anjali of Nagpur sold goods worth Rs. 25,000 to Rupali of Amaravati. On next day Ruapali paid Rs. 10,000
in cash and accepted two months bill for the balance drawn by Anjali. Anjali discounted the bill at 12% p.a.
with her bank. Before due date, Rupali finds herself unable to make payment of the bill; and requests Anjali to
renew it. Anjali accepts the proposal on the condition that Rupali should pay Rs. 5,000 in cash and accept new
bill for one month along with interest Rs. 200 for the balance. These arrangements were carried through. The
new bill was met on due date. Give journal entries in the books of Anjali.

Journal of Anjali

Date Particulars L Debit Credit

F
?1 Rupali’s A/c………Dr. 25000
To Sales A/c 25000
(Being the goods are sold)
2 Cash / bank a/c ………Dr 10000
Bills Receivable A/c ……… Dr. 15000
To Rupali’s A/c 25000
(Being the part payment is made and bill is drawn)
3 Cash/ Bank A/c ……… Dr. 14700
Discount A/c ………… Dr. 300
To Bills Receivable A/c 15000
(being the bill is discounted)
4 Rupali’s A/c ……… Dr 15000
To Cash/Bank A/c 15000
(being the bill is dishonored)
5 Cash/ bank a/c………… Dr 5000
To Rupali’s A/c 5000
(being the part payment is made)
6 Rupali’s A/c ……… Dr. 200
To Interest a/c 200
(being the interest is charged on balance amount)
7 Bills Receivable A/c ………… Dr. 10200
To Rupali’s A/c 10200
(being the new bill is drawn along with interest)
8 Cash/ bank a/c ……… Dr. 10200
To Bills receivable a/c 10200
(being the new bill is honored)

OR
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Q3. Journalize the following transactions in the books of M/s Tirupati:
1. Kailas informed Tirupati that Ameet’s acceptance for Rs. 1,000/- endorsed to him, has been
dishonoured. Noting Charged amounted Rs. 40/-.
2. Vilas renews his acceptance to Tirupati for Rs. 800/- by paying Rs. 400/- in cash and accepting a fresh
bill for the balance plus interest at 12% p.a. for 3 months.
3. Kalpana’s acceptance to tirupati for Rs. 6,000 retired one month before due date at a discount of 10%
p.a.
4. Bank informs Tirupati the dishonor of Kavita’s acceptance of Rs. 2,500 discounted with Bank. Noting
charges Rs. 50/-.

Journal entries in the books of Tirupati

Date Particulars L Debit Credit

F
a Amit’s’s A/c ……… Dr. 1040
To Kailas’s’s 1040
(being the endorsed bill is dishonored along with noting charges)
b i. Vila’s A/c ……… Dr. 800
To Bills Receivable a/c 800
(being the bill is dishonored)
ii. Cash / bank a/c ……… Dr. 400
To Vila’s a/c 400
(being the part payment is made)
iii. Vila’s A/c ……… Dr. 12
To Interest A/c 12
(being the interest is charged on balance amount)
iv. Bills receivable a/c ……… Dr. 412
To Vila’s A/c 412
(being the new bill is drawn along with interest)
c Cash/ bank a/c ……… Dr. 5950
Rebate’s A/c ……… Dr. 50
To Bill’s Receivable A/c 6000
(being the bill is retired)
d Kavita’s A/c ………… Dr. 2550
To Cash/ bank A/c 2550
(bein the discounted bill is dishonored along with noting charges)
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Q4. Harsha and Varsha entered into a joint venture to buy and sell computers and share the profit or loss in
the proportion of 2:1 respectively. Harsha purchased 10 computers @ Rs. 40000 each and paid Rs. 12,000 for
transport charges, insurance charges, etc. Varsha bought 8 computers @ 42000 each and spent Rs. 10000 on
freight and insurance. Harsha sold 8 computers @ 48,000 each and paid selling expenses Rs. 2000 and took
over one computer at an agreed price of Rs. 32000 for personal use. Remaining computer were sold by varsha
@ Rs. 45000 each and spent Rs. 2500 on miscellaneous expenses. The co – ventures closed their venture and
settled their accounts. Prepare the Joint venture A/c and the co – venture’s account in the books of Harsha.

In the books of Harsha

Joint venture account

Particulars Amount Amount Particulars Amount Amount
To Goods a/c 400000 By Cash / bank a/c 384000
To cash / bank account 12000 By varsha’s a/c 405000
To Varsha’s account 336000 By cash /bank a/c 32000
To Varsha’s Account 10000
To Cash/ Bank account 2000
To Varsha’s Account 2500
To profit on joint venture transferred to
Profit / loss A/c 39000
Varsha’s account 19500 58500
821000 821000

Varsha’s Account

Particulars Amount Amount Particulars Amount Amount

To Joint venture a/c 405000 By Joint venture a/c 336000
By Joint venture a/c 10000
By Joint venture a/c 2500
By Joint venture a/c 19500
(profit)
By cash/ bank a/c 37000
(balancing figure)
46000 46000
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Q5. Following is the records of Mr. Raj were kept on single entry system. ( March 2009 board exam
questions)

Particulars 31.3.2006 31.3.2007

Stock 15000 14000
Furniture 53500 44000
Plant and machinery 42500 55500
Loan taken 21000 21000
Bank balance 1900 2100
Debtors 43000 35000
Creditors 18000 14900

Mr. Raj invested Rs. 4000 in the business. Also he had withdrawn Rs. 15000 for his private expenses from
business. Rs. 500 to be provided for bad debts. Depreciate plant and machinery @5% and furniture @ 5%.

Prepare : (1) statement of affairs as on 31.3.2006. (2) statement of affairs as on 31.3.2007. (3) statement of
profit and loss for the year ended on 31.3.2007.

In the books of Mr. Raj

Statement of affairs as on 31st March, 2006

Liabilities Amount Assets Amount

Loan taken 21000 Stock 15000
Creditors 18000 Furniture 53500
Capital at the beginning of the year 116900 Plant and machinery 42500
Bank balance 1900
Debtors 43000
155900 155900
st
Statement of affairs as on 31 March, 2007

Liabilities Amount Assets Amount

Loan taken 21000 Stock 14000
Creditors 14900 Furniture 44000
Capital at the end of the year 114700 Plant and machinery 55500
Bank balance 2100
Debtors 35000
150600 150600
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Statement of profit or loss for the year ended 31st March, 2007

Particulars Amount
Capital at the end of the year 114700
Add: Drawings 15000
129700
Less: Additional capital introduced (4000)
125700
Less: Capital at the beginning of the year (116900)
GROSS PROFIT 8800

Less: Depreciation
On Machinery = (55000)(5/100)(12/12) = 2775
On Furniture = (44000)(5/100)(12/12) = 2200 (4975)
3825
LESS: BAD DEBTS (500)
NET PROFIT 3325
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Q6. Ashok, kishor and Anup undertook the construction of office building at a contract price of Rs.
10,00,000. The contract price is to be received in cash Rs. 6,00,000 and Rs. 4,00,000 in shares of that company.

They opened a Joint bank account and contributed the following amounts: Ashok – Rs. 3,00,000, Kishor – Rs.
3,00,000 and Anup Rs. 2,00,000. Ashok pays Rs. 10,000 towards an Architect’s fee, Kishor brings into the
venture mixer of Rs. 25,000. Anup brings into venture a truck worth Rs. 55,000.

The following transactions were made from the joint bank account

1. Purchase of material Rs. 4,50,000.

2. Payment of wages Rs. 1,50,000.
3. Purchase of plant Rs. 30,000.

At the close of the venture. Ashok took over the unused material worth Rs. 8,000. Kishor took back the mixer
worth Rs. 15,000. Anup took back truck worth Rs. 35,000. The scrap value of plant realised Rs. 6,000.

The contract price was received as agreed and Kishor took over shares at a value of Rs. 4,10,000.

Prepare : (1) Joint venture account (2) Joint bank account (3) Co – venturer’s account. (October 2006 , board
exam questions)

In the books of Joint venture

Joint venture account
Particulars Amount Amount Particulars Amount Amount
To Join bank a/c By Joint Bank a/c 600000
Materials 450000 (contract price)
Wages 150000 By Shares a/c 400000
Plant 30000 630000 (contract price)
To Ashok’s A/c 10000 By joint bank a/c 6000
(architect fees) (plant sold)
To Kishor’s A/c 25000 By Ashok’s A/c 8000
(venture mixture) (Materials taken
To Anup’s A/c over)
(truck) 55000 By Kishor’s A/c 15000
To profit on joint venture (Mixer taken over)
transferred to By Anup’s A/c 35000
Ashok 118000 (truck taken over)(
Kishor 118000
Anup 118000 354000
1074000 1074000
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CO – VENTURERS’ ACCOUNT

Particulars Ashok Kishor Anup Particulars Ashok Kishor Anup

To Joint venture a/c 8000 15000 35000 By joint bank a/c 300000 300000 200000
To shares a/c 410000 By joint venture A/c 10000 25000 55000
To joint bank a/c 420000 18000 338000 By joint venture A/c 118000 118000 118000
428000 443000 373000 428000 443000 373000

Joint Bank A/c

Particulars Amount Particulars Amount

To Ashok’s A/c 300000 By joint venture a/c 630000
To Kishor’s A/c 300000 By Ashok’s A/c 420000
To Anup’s A/c 200000 By Kishor’s A/c 18000
To joint venture A/c 6000 By Anup’s A/c 338000
To Joint Venture A/c 600000
1406000 1406000

Shares A/c

Particulars Amount Particulars Amount

To Joint venture A/c 400000 By Kishor’s A/c 410000
To Joint venture a/c 10000
(Bal. Fig.) 410000 410000
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Q7. Following is the Trial Balance of Kalavati and Lilavati as on 31st March, 2005 who share profits and
losses in the ration of 3:2. Interest on capital was allowed @5% p.a.

Trial balance as on 31st March, 2005

Particulars Amount Particulars Amount

Opening stock 10000 Return outwards 1250

Sundry debtors 14100 Sundry creditors 15800
Purchases 20000 Sales 35000
Wages 4250 R.D.D. 200
Salaries 1350 Capital accounts : Kalavati 35000
Office expenses 1223 Lilavati 10000
Discount 650 Loan @ 9% p.a. (taken on 1-10-2004) 2000
Rent, rates and taxes 900 Bills payable 12000
Plant and machinery 15000
Return inwards 1750
Land and buildings 32000
Cash at bank 4327
Current account :Kalavati 2100
Lilavati 600
Government bonds 3000
1,11,250 1,11,250
Additional information:

1. Closing stock was valued at Rs. 20,500.

2. Unpaid wages Rs. 750; outstanding salary Rs. 657.
3. Write off Rs. 100 as bad debts and provide R.D.D. at 5% on debtors.
4. Provide depreciation and plant and machinery at 10% p.a. and on Land and building at 5% p.a.
5. Rent, Rates & Taxes were prepaid Rs. 100.
6. Bills payable included a dishonoured bill of Rs. 3000.

Prepare Trading account and profit and loss account for the year ending 31 st March, 2005 and a balance sheet
as on that date. (October 2006 board exam questions.)
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In the books of Kalavati & Lilavati

Trading account for the year ended 31st March, 2005.

Particulars Amount Amount Particulars Amount Amount

To opening stock 10000 By sales 35000
To purchases 20000 (-) return (1750) 33250
(-)return (1250) 18750 By closing stock 20500
To wages 4250
(+) outstanding 750 5000
To Gross profit c/d 20000
53750 53750
Profit and loss account for the year ended 31st March, 2005

Particulars Amount Amount Particulars Amount Amount

To Salaries 1350 By gross profit b/d 20000
(+) outstanding 657 2007
To Office expenses 1223
To discount 650
To rent, rates & taxes 900
(-) prepaid 100 800
To Bad debts -----
(+) FBD 100
(+) NRDD 700
(-) ORDD 200 600
TO Depreciation
Plant & machinery 1500
Land & buildings 1600 3100
To interest on loan 90
To interest on capital
Kalavati 1750
Lilavati 500 2250
To current a/c
Kalavati 5568
Lilavati 3712 9280

20000 20000

Partners’ current accounts

Particulars Kalavati Lilavati Particulars Kalavati Lilavati

To balance b/d 2100 600 By interest on capital 1750 500
To balance c/d 5218 3612 5568 3712
7318 4212 7318 4212
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Balance sheet as on 31st March, 2005

Liabilities Rs. Rs. Assets Rs. Rs.

Capital account Land & building 32000
Kalavati 35000 (-) depreciation@5% 1600 30400
Lilavati 10000 45000 Plan & Machinery 15000
Current account (-) depreciation @10% 1500 13500
Kalavati 5218 Sundry debtors 14100
Lilavati 3612 8830 (-) F.B.D. 100
Sundry creditors 15800 14000
(+) bills payable dishonoured 3000 18800 (-) N.R.D.D. 700 13300
Bills payable 12000 Closing stock 20500
(-) bills payable dishonoured 3000 9000 Prepaid rent, rates, & tax 100
Outstanding Cash at bank 7327
Salaries 657
Wages 750 1407
Load @ 9% 2000
(+) interest 90 2090
85127 85127