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Accounting for Managers V5

QUESTION 1.

Write Short notes on any three of the following.

a. Dual Aspect Concept

b. Cash book is Journal as well as Ledger. Explain

c. Accrued Income and Outstanding Expenses

d. Convention of Conservatism

e. Accounting Cycle

QUESTION 2

Anil sent on 1 st July,2006 to Rahul goods costing Rs.50,000 and spent Rs.1,000 on
packing

etc. On 3 rd July 2006, Rahul received the goods and sent his acceptance to Anil
for Rs.30,000

payable at 3 months. Rahul spent Rs.2,000 on freight and cartage,Rs 500 on godown
rent

and Rs.300 on insurance. On 31 st December, 2006 he sent his Account Sales (along
with the

amount due to)Showing that 4/5 of the goods had been sold for Rs.55,000.Rahul is
entitled to

a commission of 10%.One of the customers turned insolvent and could not pay Rs.600
due

from him. Show the necessary ledger accounts.

QUESTION 3

a) Explain the nature ,uses and limitations of Financial Statements

(b) Prepare a Trading Account of Mr. Anil for the year ending 31 st March, 2009

Rs.

Purchases 3, 00,000

Sales 5, 00,000

Stock (April 1, 2008) 40,000

Wages 30,000
Return Outwards 3.000

Return inward 2,500

Freight and clearing charges 5.000

Additional information:-

Stock on 31 st March, 2009 42,000

QUESTION 4

Shakti International invited applications for 100,000 shares of Rs 10 each issued

at a discount

of 10% payable as follows:

Application Rs 4 per share

Allotment Rs 3

First call Re 1

Final call Balance amount

The company received applications for 140,000 shares and pro rata allotment was
made

for applications for 120,000 shares who had applied for 600 shares failed to pay
amount

due on allotment and his shares were forfeited after the first call. Subsequently
after the

final call, half of his shares were re-issued to K for Rs 11 per share. Journalize
and

prepare balance sheet in the books of Shakti International

QUESTION 5

B and C enter a joint venture to prepare a film for the Government. The Government
agrees to

pay Rs.1, 00,000.B contributes Rs.10, 000 and C contributes Rs. 15,000.These
amounts are

paid into a Joint Bank Account. Payments made out of the joint account were:

Purchase of equipment Rs.6000

Hire of equipment Rs.5, 000

Wages Rs.45, 000

Materials Rs.10, 000

Other expenses Rs.5, 000

B paid Rs.2, 000 as licensing fees. On completion, the film was found defective and

Government made a deduction of Rs.10, 000.The equipment was taken over by C at

a valuation of Rs.2, 000. Prepare P&L account in respect of the company.

ASSIGNMENT B

Case Study

X, Y and Z were partners in a firm sharing profits in the proportions of 1/2, 1/3
and 1/6 respectively. The

Balance Sheet of the firm on 31 st March 2001 was as follows:

Liabilities Amt. Assets Amt.

Trade Creditors

Employees Provident Fund

Reserve Fund

Capitals

X 65,000

Y 30,000

Z 20,000

Z retired on the above date on the following terms:

a) Goodwill of the firm was valued at Rs. 30,000

b) Value of patents was to be reduced by 20% and that of plant & machinery
to 90%.

c) Provision for doubtful debts was to be raised to 6 %.

d) Z took over the investments at a value of Rs.17,600.

e) Liability for workmen�s compensation to the extent of Rs. 375 is to be

created.

f) Trade creditors to the extent of 2.5 % are not likely to claim their dues.

g) Amount due to Z is to be settled on the following basis:

50 % on retirement, 50 % of the balance to be paid in 2 equal half yearly
installments carrying

interest at 5 % p.a. and the balance by a Bill of Exchange (without interest) at 3

months. The entire

capital of the firm as newly constituted is fixed at Rs.100, 000 and the partners�
capital accounts

are to be adjusted in the profit sharing ratio. Any excess is to be transferred to

current account

and any deficit is to be brought in cash

QUESTION 1

Prepare Revaluation account, Partners� Capital accounts and Balance Sheet of X

& Y after Z�s retirement. Also

prepare Z�s Loan account till it is fully paid.

ASSIGNMENT C

Which of the following is the activity which finance people are involved?

Investing decisions

Operation decisions

Promotion decisions

Marketing decisions

Question No: 2

Refers to part of current assets that fluctuates directly with changes in sales
level.

Financing

Investment

Permanent assets

Temporary assets

Question No: 3

Profit and Loss Account is--

Real Account

Nominal Account

Personal Account
None of the above

Question No: 4

According to the accounting profession, which of the following would be considered

a cash-flow item from a

"financing" activity?

A cash outflow to the government for taxes.

A cash outflow to repurchase the firm's own common stock.

A cash outflow to lenders as interest.

A cash outflow to purchase bonds issued by another company

Question No: 5

Which of these items would be accounted for as an expense?

Repayment of a bank loan.

Dividends to stockholders

The purchase of land.

Payment of the current period's rent.

Question No: 6

Which of the following would not be included on a balance sheet?

Accounts receivable.

Accounts payable

Sales.

Cash.

Question No: 7

The requirement that only transaction data capable of being expressed in terms of
money be included in the

accounting records relates to the --

Cost principle
Monetary unit assumption

Economic entity assumption

Both a & b

Question No: 8

Revenue is generally recognized at the point of sales .Which principle is applied

herein--

Consistency principle

Matching principle

Revenue recognition principle

Cost principle

Question No: 9

Petty cash fund is--

Used to pay relatively small amounts

Reimbursed when the amount of money in the fund is reduced to a predetermined

minimum amount

Established by estimating the amount of cash needed for disbursement of relatively

small amounts during a specified period

All of the above

Question No: 10

Which of the following errors will be disclosed in the preparation of a trial

balance?

Recording transactions in the wrong account.

Duplication of a transaction in the accounting records

Posting only the debit portion of a particular journal entry

Recording the wrong amount for a transaction to both the account debited and the
account credited.

Question No: 11

1. Book Value is--

The amount that is due at the maturity or due date of a note.

The process of transferring the cost of natural resources to an expense account.

The cost of a fixed asset minus accumulated depreciation on the asset

The estimated value of a fixed asset at the end of its useful life.

Question No: 12

An examination of the sources and uses of funds is part of--

a forecasting technique

A funds flow analysis

a ratio analysis

calculations for preparing the balance sheet

Question No: 13

Which of the following is not a cash outflow for the firm?

Depreciation.

Dividends

Interest payments

Taxes

Question No: 14

What must be known or estimated in order to calculate depreciation?

The estimated useful life of the asset to the company

The acquisition cost of the asset.

The estimated residual value of the asset.

All of the above

Question No: 15

Information that goes into __________ can be used to help prepare __________.

a forecast balance sheet; a forecast income statement

forecast financial statements; a cash budget

a cash budget; forecast financial statements

a forecast income statement; a cash budget

Question No: 16

Which of the following terms best relates to natural resources?

Depreciation.

Depletion.

Amortization.

Accrual

Question No: 17

A debit may signify--

An increase in an asset account

A decrease in an asset account

An increase in a liability account

An increase in the owner's capital Account

Question No: 18

When a partnership firm is to be dissolved, the following account is opened in the

ledger--

Revaluation Account

Profit and Loss Adjustment Account

Realisation Account

Profit and Loss Appropriation Account

Question No: 19

Settlement of accounts on the dissolution of a partnership firm is governed by the

following section of the Indian
Partnership Act ,1932

49

48

10

Question No: 20

A new partner brings in cash as his share of goodwill, this amount will be
distributed among the old partners--

In the old profit sharing ratio

In the ratio of their capital

Equally

In the ratio of sacrifice of profit by them

Question No: 21

In the absence of an agreement to the contrary, on drawings--

No interest is to be charged

Interest @5% per annum is to be charged

Interest @6% per annum is to be charged

Interest @12% per annum is to be charged

Question No: 22

For a charitable institution, subscriptions by its member constitute its-- -- -.

Asset

Income

Expenditure

Liability

Question No: 23
The most suitable method for providing depreciation on mines, oil wells and
quarries--

Straight line method

Depletion method

Annuity method

Machine hour rate method

Question No: 24

In income and expenditure account, the excess of income over expenditure is

called--

Surplus

Deficit

Gross Profit

Net Profit

Question No: 25

In consignment the risk of loss is borne by--

The consignor only

The consignee only

The consignor as well as the consignee

Neither the consignor nor the consignee

Question No: 26

Carriage Outward Account will appear on the--

Debit side of the Trading Account

Debit side of the Profit and Loss Account

Credit side of the Trading Account

Credit side of the Profit and Loss Account

Question No: 27

At the end of an accounting year, trade debtors total Rs.50, 000. Provisions for
bad debts and discount on debtors

are made @5% and @% respectively. Provisions on discount on debtors will be made
for--

Rs.1000

Rs.2,500

Rs.950

Rs.975

Question No: 28

The primary record of a credit purchase of a fixed asset is made in--

Cash Book

Sales Book

Purchases Book

Journal Proper

Question No: 29

Which one of the following assets could be described as a current asset?

Machinery to manufacture goods for resale

Stock of goods for resale

Buildings to house the machinery

Land on which the buildings stand

Question No: 30

Which of the following equations properly represents a derivation of the

fundamental accounting equation?

Assets + Liabilities = Capital

Assets + Capital = Liabilities

Assets = Liabilities + Capital

Assets = Capital � Liabilities

Question No: 31
 If we take goods for own use we should --

Debit Drawings Account: Credit Stock Account

Debit Purchases Account: Credit Drawings Account

Debit Sales Account: Credit Stock Account

Debit Drawings Account: Credit Purchases Account

Question No: 32

Forfeited Shares Account is finally closed by the transfer of its balance to--

Securities Premium Account

General Reserve Account

Debenture Sinking Fund Account

Capital Reserve Account

Question No: 33

Capital Expenditure is--

The costs of running the business on a day-to- day

Money spent on selling fixed assets

The extra capital paid in by the proprietor

Money spent on buying fixed assets or adding value to them

Question No: 34

If it is required to maintain fixed capitals then the partners� shares of profits

must be--

Credited to capital accounts

Debited to partners� current accounts

Debited to capital accounts

Credited to partners� current accounts

Question No: 35
According to the money measurement concept, the following will be recorded in the
books of accounts of the

business--

Health of the managing director of the company

Quality of the company� goods

Value of plant and machinery

Dedicated and trusted employees

Question No: 36

Sales made to Mahesh for cash should be debited to--

Cash account

Mahesh account

Sales account

Purchase account

Question No: 37

A bank reconciliation is prepared so that the difference in the under-mentioned

balance is reconciled

The difference in the balance of the bank and cash balances

The difference in the balance in the Pass Book in the beginning and at the end

The difference in the Pass Book and Cash Book balance

None of the above

Question No: 38

In the absence of any provisions in the partnership agreement, profits and losses
are shared by the partners--

In the ratio of their capitals

Equally

In the ratio of loans given by them to the partnership firm

None of the above

Question No: 39

Under the Written down value method, the amount of depreciation goes on _________
from year to year

Decreasing

Increasing

Fluctuating

None of the above

Question No: 40

How will the purchase of an asset on credit affect the accounting equation?

It will decrease the assets and decrease the capital

It will decrease the assets and decrease the liabilities

It will increase the assets and decrease another asset

It will increase the assets and increase the liabilities

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