OMTEX CLASSES

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Accounts Preliminary Examination Total Marks 100
2007 - 08 OMTEX - CLASSES Preliminary Examination – 006
ACCOUNTS
Time – 3 hrs. 4 PAGES Max. Marks : 100

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

A. Answer in one sentence each. (5 marks)
1. What do you mean by scrap value?
2. What are noting charges?
3. What is the relationship between coventurers?
4. What is partnership deed?
5. State the formula for calculating Normal Profit?
Ans. 1.Market value of the asset after its use or when it becomes obsolete is known as scrap value. 2. The fees
charged by the notary public for noting and protesting the dishonoured bill are termed as noting charges. 3. The
relation between coventurers is that of partners. 4. Partnership deed is a written document in which terms of
agreement are given in writing. 5. Formula for calculating normal profit = Capital employed x Normal rate of return.

B. Write the word/term/phrase which can substitute each of the following statement: (5 marks)
1. Goods returned to the supplier.
2. It is a stick or lever used to change the position of the cursor on a screen.
3. A bill in which the period of the bill is counted from the date of the bill accepted.
4. The receipts that are an unusual nature not arising through named activities of the business.
5. A fixed asset which is not essential for conduct of business.

C. Match the following pairs. (5 marks)

Group A Group B
1. Partner’s Salary a. Balance sheet asset side.
2. Subscription received in advance b. Current asset.
for the current year. c. Deducted from gross profit.
3. Dishonour of bill. d. Credited to joint venture account.
4. Cash in hand. e. Credited to coventurers A/c
5. Unsold goods taken over by co – f. Noting Charges.
ventures g. Closing balance sheet liability side.
h. Fixed assets.

D. Select the most appropriate alternative from hose given below each statement. (5 marks)
1. Partner’s drawings are transferred to his __________ a/c under fixed capital method.
a. Capital A/c
b. Current A/c
c. Trading A/c
d. Profit and loss A/c
2. Sale of old materials must be shown on credit side of ____________
a. Cash book
b. Income and expenditure account
c. Balance sheet
d. Receipt and Payments account
3. Cost of asset = _____________
a. Purchase price + scrap value
b. Purchase price + depreciation
c. Purchase price + incidental cost
d. None of the above
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4. A person in whose favour the bill is endorsed is called ___________
a. Endorsee
b. Endorser
c. Drawer
d. None of the above
5. Expenses incurred by coventurers is debited to ___________
a. None of the below
b. Consignee’s account
c. Co venturers account
d. Joint venture account.

E. State with reason whether the following statements are true of false. (5 marks)
1. Balance sheet is a statement and not an account.
Ans. True: - Balance sheet takes into consideration balance of real and personal accounts which are to be
carried forward. Nominal accounts are closed by transferring their balances either to trading account or
profit & loss account. So balance sheet is a statement prepared on the last date of accounting year and not
an account. It is prepared to know the financial position of the concern.
2. Partnership firm enjoys business continuity.
Ans. False: - Partnership firm is a personal organisation. Hence it stands dissolved in case of insolvency,
insanity or death of any partner. Hence partnership firm does not enjoy business continuity.
3. When the bill is sent to bank for collection, bank A/c is credited.
Ans. False: - When bill is sent to bank for collection, bills receivable account is credited. Bills receivable
account being a real account the rule applicable is credit what goes out. Hence when bill is sent to bank
for collection, bank account is not credited.

F. Drawer: Shekhar Desai, Spastic Road, Mahad. (5 marks)

Drawee – Sharad Verma, Narayan Peth, Pune.
Payee – Mukund Pande, Panvel.
Amount - Rs. 5775/-
Period - 50 days
Date of Bill Drawn – 15th March, 1995
Date of Acceptance – 19th March, 1995 (Accepted for only Rs. 5700)
Q2. On 1-1-2002 Champaklal & Sons purchased furniture for Rs. 15000. On 1-7-2002 additional furniture was
purchased for Rs. 8000. On 30-6-2003 the furniture purchased on 1-1-2002 was skid for Rs. 12,000.
The firm charges depreciation @ 10% p.a. under the reducing balance method.
Prepare Furniture account, for the years 2002, 2003, 2004 assuming that accounting year of the firm is calendar year
and depreciation account for the year ending 31 – 12 - 2003. (10marks)
OR
A. Find out value of goodwill from the following. Net profits for last 5 years are Rs. 30,000; Rs. 36,000; Rs.
24,000; Rs. 4,000; Rs. 14,000. Goodwill to be valued at 3 years purchase of average net profit. (5 marks)

B. Explain 'Abacus’ as a phase in the history of computer. (5 marks)

Ans. It was in about 400 B.C., that a sort of adding machine called ABACUS was invented in China. It
consists of a rectangular frame. The rods or wires are fitted to the frame which carry sound beads. Abacus is
still being used in some countries. Counting id done by shifting the beads from one side to another. It is
proved that an expert operator of abacus is faster in calculations than a clerk using a calculator.

Q3. Softy accepted a bill of Rs. 20,000 drawn by Kwality at 3 months. Kwality got the bill discounted with his bank
for Rs. 19,500. Before the due date softy approached Kwality for renewal of the bill. It was agreed to pay Rs. 15,000
immediately together with interest on the remaining amount a 10% for 3 months and for the balance Softy should
accept a new bill for 3 months. These arrangements were carried through. But afterwards softy became insolvent and
only 40% of the amount could be recovered from his estate. Pass necessary Journal entries in the books of Softy &
show Kwality’s account in Softy’s ledger. (12 marks)
OR
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Q3. Raj sold goods worth Rs. 7,000 to Dev & Rs. 9,500 to Chetan on credit on 31-1-2004. On 1-2-2004,
Dev accepted a bill of Rs. 5,000/- at 2 months paid cash Rs. 1,900 in full settlement of his account. On the
same date Chetan accepted a bill for the due amount at 3 months.
Raj discounted the first bill at 6% p.a. and sent the second bill to bank for collection. On the due
date of the first bill, Dev approached bank for renewal of bill. Raj accepted on the condition that Rs. 3000
be paid immediately, along with the interest on the balance Rs. 40 & accepts a fresh bill for the balance
amount. These arrangements were carried through.
Raj honoured his acceptance on the due date. However Dev became insolvent & dividend of 20%
could be recovered from his estate. (12 marks)
Q4. Ram and Shyam entered into joint venture to prepare building for a private firm who agree to pay Rs.
2,00,000 on the completion of the work. A bank account was opened in their joint names Ram contributing Rs.
25,000 and Shyam Rs. 25,000. They share the profits and losses in the ration 2:3 respectively. Payments made
out of the joint bank account where:
Purchase of equipments Rs. 15,000 Hire Charge for equipments Rs. 12,000
Wages Rs. 85,000 Materials Rs. 20,000
Office Expenses Rs. 68,000
Ram paid Rs. 5,000 and Shyam Paid Rs. 3,000 for the other expenses. The building was completed and
government paid the amount by cheque. Sham took equipments at a valuation of Rs. 6,000 and Ram took
material of Rs. 5,000.
Prepare: Joint venture account, Joint bank account and coventurers account. (12 marks)
Q5. Miss Mary keeps her books under single entry, giving the following information:
Particulars 31-12-2005 31-12-2006
Stock 18700 23400
Debtors 12000 14000
Creditors 9000 1500
Bills Receivable 4000 5000
Bills Payable 1000 200
Furniture 600 600
Building 12000 12000
Bank balance (Cr.) 4350 3350
1. Drawings of Miss Mary amounted to Rs. 7520 during the year on which interest amounts Rs. 75.
2. O/S expenses amounted to – Wages – Rs. 3000 Salaries – Rs. 1200 & legal expense – Rs. 700.
3. Insurance has been prepaid for Rs. 250
4. R.D.D. is to be provided at Rs. 1450
5. Depreciation is to be charges @ 5% on building and furniture.
Prepare
i. Statement of affairs as on 31 – 12 – 2005 & 31 – 12 – 2006
ii. Statement of profits / loss during the year.
iii. Revised statement of affairs as on 31 – 12 – 2006.
Q6. From the following information prepare Income and Expenditure account for the year ended 31st March, 2008 of
Youth Association and a balance sheet as on that date. (16 marks)
Receipts Amount Payments Amount
To Bal. b/d – 3500 By Salaries
To Subscriptions 1500 2007 250
2006 - 07 250 2008 2 2500
2007 - 08 3 250 4300
500 4500 By Rent 300
2008 - 09 750 1600 By Postage 3000
To Entrance Fees 2000 By Printing and Stationary 2400
To interest on investments 12500 By Balance C/d 12500
Adjustments
1. Salaries unpaid Rs. 250, printing unpaid includes Rs. 600 for the year.
2. Printing paid includes Rs. 500 pertaining to the previous year.
3. Subscriptions outstanding Rs. 650 for the year.
4. Balances on 1st April 2007, Furniture – Rs. 6000, Investment – Rs. 50,000, Building - Rs. 2000
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5. Provide 5% depreciation on furniture and building.

Q7. Govindan & Mukul are partner sharing profits and loses in the ratio 3:2. Following is the trial balance as on 31st
Match 2006. (20 marks)
Trial Balance as on 31 – 3 – 2006
PARTICULARS DR. CR.
Capital
Mr. Govindan 50000
Mr. Mukul 50000
Stock on 1st April 2005 20000
Machinery 70000
Bills Receivable & 10000 8000
Payable 10000 12000
Purchase & Sales 0
Furniture 6000 5000
Returns 2000
Current Account
Mr. Govindan 2000
Mr. Mukul 1000
Customers Account 30000 40000
Supplies Account
Salaries (11 months) 11000
Productive Wages 10000
Office Insurance 3000
General Expenses 2000 3000
Commission 10000
10% Bank Loan
Interest on Loan 400
Bad debts 1000
Advertisement 8000 1000
R.D.D.
Land & Building 10600
28700 287000
0
Adjustments:
1. Closing stock is valued at market price Rs. 55000 which is 10% above cost.
2. Machinery includes Rs. 10000 purchased on 31st March 2006.
3. Depreciate Machinery @ 10% p.a.
4. Provide R.D.D. Rs. 2,000 on debtors & provide 2% for reserve for discount on debtors.
5. Mr. Govindan is entitled to a salary of Rs. 400 p.m. from 1st August 2005.
6. Provide 10% for reserve for discount on creditors.
7. Mr. Mukul is entitled to get 2% commission on gross profit.
Prepare Trading Account and Profit or loss account for the year ended 31st March 2006 and Balance sheet as
on that date.

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