F-2, Block, Amity Campus

Sec-125, Nodia (UP)

India 201303

ASSIGNMENTS
PROGRAM:
SEMESTER-I
Subject Name
: Master of Finance and Control
Study COUNTRY
: Zambia
Permanent Enrollment Number (PEN) :
Roll Number
: MFC001412014-2016002
Student Name
: DERICK MWANSA
INSTRUCTIONS
a) Students are required to submit all three assignment sets.
ASSIGNMENT
Assignment A
Assignment B
Assignment C

DETAILS

MARK
S
Five Subjective Questions
10
Three Subjective Questions + Case Study 10
40 Objective Questions
10

b)
c)
d)
e)

Total weightage 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 scan signature in the form.

Signature
:
__
____
Date
:
__19/01/2015____
( ) Tick mark in front of the assignments submitted

Assignment A

Assignment B

Assignment C

FINANCIAL ACCOUNTING
ASSINGNMENT A
Question one
Answer
Defining Accounting
In simple terms accounting may be defined as an information system which includes the process
of recording, classifying, summarizing, reporting, analyzing and interpreting the financial
condition and performance of a business in order to communicate it to stakeholders for
business decision making.
According to the American Institute of Certified Public Accountants, Accounting is the art of
recording, classifying and summarizing in a significant manner and in terms of money
transactions and events which are, in part at least, of a financial character, and interpreting the
results thereof.
This definition brings out the following three attributes of accounting:
(1) Events and transactions of a financial nature are recorded while the events of a nonfinancial nature cannot be recorded.
(2) The record should reflect the importance of the transactions so recorded both individually
and collectively, which includes summarization, thereby making it amenable to analysis.

(3) The users of the financial statements should be able to obtain the message encompassed in
such financial statements.
The term accounting is much broader; going into the realm of designing the bookkeeping system,
establishing controls to make sure the system is working well, and analysing and verifying the
recorded information. Accountants give orders; bookkeepers follow them.
Accounting encompasses the problems in measuring the financial effects of economic activity.
Furthermore, accounting includes the function of financial reporting of values and performance
measures to those that need the information. Business managers, investors, and many others
depend on financial reports for information about the performance and condition of the entity.

Accountants design the internal controls for the bookkeeping system, which serve to minimize
errors in recording the large number of activities that an entity engages in over the period. The
internal controls that accountants design are also relied on to detect and deter theft,
embezzlement, fraud, and dishonest behaviour of all kinds.
Accountants prepare reports based on the information accumulated by the bookkeeping process:
financial statements, tax returns, and various confidential reports to managers. Measuring profit
is a critical task that accountants perform a task that depends on the accuracy of the
information recorded by the bookkeeper. The accountant decides how to measure
sales revenue and expenses to determine the profit or loss for the period.
Differences between accounting and book keeping
Accountants are qualified to handle the entire accounting process, while bookkeepers are
qualified to handle recording financial transactions. To ensure accuracy, accountants often serve
as advisers for bookkeepers and review their work. Bookkeepers record and classify financial
transactions, laying the groundwork for accountants to analyze the financial data.
Below is a detailed summary of the differences between accountants and bookkeepers as
provided by Agrawal (2009).
Distinction between Accounting and Book-keeping
Basis of Distinction
Book-keeping
It
involves
identification,
1
Scope
measurement, recording and
classification of transaction

Accounting
In
addition
it
involves
summarizing
classified
transactions.
Analyzing,
interpreting & communicating the
same.
Its a secondary stage, starts
where book-keeping ends
To ascertain net results of
operations and financial position
of the company

Stage

Its a primary stage

Basic Objective

To maintain systematic records

Who Performs

Performed by junior staff

Knowledge level

6
7

Analytical Skill
Nature of Job

Not required a high level of It needs a

knowledge
knowledge
Not required
Required
Routine & clerical
Analytical

By senior staff
high

level

of

ASSIGNEMENT A
Question two
Answer
Basic Accounting Equation
The basic accounting equation, also called the balance sheet equation, represents the relationship
between the assets, liabilities and owner's equity of a business. It is the foundation for
the double-entry bookkeeping system. For each transaction, the total debits equal the total
credits. It can be expressed as

Assets = Capital + Liabilities

A=C+L
In a corporation, capital represents the stockholders' equity. Since every business transaction
affects at least two of a companys accounts, the accounting equation will always be in
balance, meaning the left side should always equal the right side. Thus, the accounting formula
essentially shows that what the firm owns (its assets) is purchased by either what it owes (its
liabilities) or by what its owners invests (its shareholders equity or capital).
The following is an illustration of how the accounting equation works.
Obama started business with $ 500,000.
Step 1- Variables affected

Asset & Capital

Step 2- Effect of transactions on affected variables

Increase in asset & Capital

Step 3- Accounting equation

Asset = Liability + Capital

500,000 = 0+ 500,000

It follows that in the balance sheet when preparing final accounts, the assets of a company must
equal its liabilities plus owners equity or capital.

ASSIGNEMENT A
Question three
Answer
Journalizing
Journalising is entering of financial data (taken usually from a journal voucher), pertaining to a
specific transaction,
in
a journal under
a double
entry
bookkeeping system.
It
involves recording of five aspects of a transaction:
(1) Its date,
(2) Ledger account to be debited and amount,
(3) Ledger account to be credited and amount,
(4) Brief description of the transaction, and its
(5) Cross-reference to the general ledger.
Journal format
Below is a journal format.
Date

Particulars

Ledger Folio

Debit ($)

Credit ($)

The following is a brief explanation of the journal format contents.

Date.
The date on which transaction has taken place is entered in the date column.
Particulars
The description of the transaction and narration are entered in this column.
Ledger folio
It is used to record the page number in the ledger in which a particular transaction has been
entered

Debit column
Amount to be debited is entered in this column
Credit column
Amount to be credited is entered in this column

ASSIGNEMENT A
Question four
Answer
Special Journal
Special Journals are designed to facilitate the process of journalizing and posting transactions.
They are used for the most frequent transactions in a business. For example, in merchandising
businesses, companies acquire merchandise from vendors, and then in turn sell the merchandise
to individuals or other businesses. Sales and purchases are the most common transactions for the
merchandising businesses.
The types of Special Journals that a business uses are determined by the nature of the business.
Special journals are designed as a simple way to record the most frequently occurring
transactions. There are four types of Special Journals that are frequently used by merchandising
businesses: Sales journals, Cash receipts journals, Purchases journals, and Cash payments
journals.
Advantages of Special Journal
(1) A major advantage of the special journals is that their use permits division of labour which
is very necessary in a large organization. When the transactions are recorded in different books
of original entry, the recording step in the accounting cycle can be divided among several
persons, each of whom is responsible for particular types of transactions.
(2) The amount of space required for the record of same transactions is reduced. When
transactions are recorded in chronological order in the general journal, a complete narration must
be given. But if the transactions are classified and are recorded in a separate book, it is possible
to
avoid
repeating
much
information
that
is
same
in
all
cases.

(3) The most significant advantage of using special journals instead of general journal only is
perhaps, the time saving gained in posting from journals to the ledger(s). The number of postings
to ledger accounts is significantly reduced.
(4) Proper internal control as there is no conflicting responsibilities.
(5) Individual postings are eliminated for example, if the company had 100 sales transactions in
a month, only one posting at the end of the month will be made to the sales ledger and not 100.

Below are some of the special journals:Purchases Journal

The Purchases journal is used for recording credit purchases such as merchandise for resale to
customers, business supplies, equipment, and other such purchases.
Cash Payments Journal
The Cash Payments Journal is used to record all cash payments made by a company.
All transactions in the cash payments journal involve the disbursement of cash, so you'll find a
column for crediting cash (Cash CR.). There is also a credit column for purchases discounts in
case the transaction involves a discounted purchase.
Cash Receipts Journal
A Cash receipts journal is a specialized accounting journal used in an accounting system to keep
track of the sales of items when cash is received, by crediting sales and debiting cash. Sales on
account are booked instead in the sales journal.
Sales Journal
The sales journal is used to record all of the company sales on credit. Most often these sales are
made up of inventory sales or other merchandise sales. Notice that only credit sales of inventory
and merchandise items are recorded in the sales journal. Cash sales of inventory are recorded in
the cash receipts journal.
Cash Journal

Rrecord items sold or purchased with cash and they also record income received (debtor
payment, interest) and daily expenses. If the transaction is of a cash nature, you must be
convinced that money or cheque or credit card was also exchanged at the time that the good or
service was exchanged.
Credit Journal
Record purchases or sales on credit. If the transaction is of a credit nature, you will assume that
the cash will be exchanged after the exchange of the good or service. At this stage, these will
only be concerned with your firm acquiring stock and the selling of that stock to customers who
will pay later.

ASSIGNMENT A
Question five
Answer
Reasons for Disagreement between Cash Book and Pass Book Balances
The following are the important causes or reasons for the disagreement between
the balances shown
by
the
pass
book
and
cash
book.
1.
Cheques
issued
but
not
presented
for payment.
2. Cheques paid or deposited but not collected and credited by the bank.
3.
Interest
credited
by
the
bank
but
entered
in
cash
book.
4. Bank charges, commission and interest in overdraft debited by the bank but not entered in cash
book.
.
5. Expenses directly paid by the bank on behalf of customer but not recorded in cash book.
6. Incomes directly collected by the bank on behalf of customer but not recorded in cash book.
7. Amount directly deposited into the bank by debtors but not entered in cash book.
8. Cheque deposited into the bank but dishonoured.
9.
Dishonour
of
bill
discounted
with
the
bank.
10. Errors committed in the cash book and pass book.
ASSIGNEMENT B
Question one
Answer

Depreciation
The gradual conversion of the cost of a tangible capital asset or fixed asset into an operational
expense (called depreciation expense) over the asset's estimated useful life.
The objectives of computing depreciation are to:(1) Reflect reduction in the book value of the asset due to obsolescence or wear and tear.
(2) Spread a large expenditure (purchase price of the asset) proportionately over a fixed period to
match revenue received from it, and
(3)
reduce
the taxable
the company's total income.

income by charging the amount of

depreciation

against

In effect, charging of depreciation means the recovery of invested capital, by gradual sale of the
asset over the years during which output or services are received from it. Depreciation is
computed at the end of an accounting period (usually a year), using a method best suited to the
particular asset. When applied to intangible assets, the preferred term is amortization.
Straight Line Depreciation
A method of calculating the depreciation of an asset which assumes the asset will lose an
equal amount of value each year. The annual depreciation is calculated by subtracting the salvage
value of the asset from the purchase price, and then dividing this number by the estimated useful
life of the asset.
In straight line depreciation method , depreciation is charged on fixed asset with fixed rate.
Suppose depreciation Rate
is
10
%
and
Fixed
Asset
is
10
At the end of first year the depreciation will be = 1 and the fixed asset will reduce to 9
At the end of Second year depreciation will be = 1 and the fixed asset will reduce to 8
So, Graph will show the straight line. So, this method is famous with this name due to this
reason. In other words we can say that the amount of depreciation will equal in first year or in
end of asset.
Diminishing Balance Method
Under this method the depreciation charged in the various years will not be equal over the useful
life of the asset. This is because the depreciation charge every year is calculated as a percentage
of the outstanding balance of the asset as at the beginning of that particular year and not on the
original cost of the asset.
In diminishing balance method , depreciation is charged on the amount of fixed asset after
deducting
previous
year depreciation
Suppose

fixed

asset

is

10

Then depreciation of
balance

of

first

fixed

now depreciation will

So
now

asset

Now

balance

at

the

charge

9
the

year

asset

again depreciation will

in

10%

beginning

on

X
fixed

at
of

second
not

10/100
the
charge

beginning
on

of

year

=9

on

10

=
third
the

year

0.9
will

amount

be
of

8.1
8.1

So , slop of curve under diminishing balance method will not straight line but more upward in
left side .
The graph below shows the behaviour of the two methods of depreciation.

ASSIGNMENT B
Question two
Answer
Bill of Exchange
The Negotiable Instruments Act, 1881 defines a bill of exchange as an instrument in writing
containing an unconditional undertaking, signed by the maker, directing a certain person to pay a
certain sum of money only to, or to the order of, a certain person or the bearer of the instrument
There are five important parties to a Bill of Exchange:

The Drawer:
The drawer is the person who has issued the bill. In an export transaction, exporter draws the bill
as money is owed to him.
The Drawee:
The drawer is the person on whom the bill is drawn. Exporter draws the bill on the importer who
is the drawee. Drawee is the debtor who owes money the exporter (creditor).
The Payee:
The payee is the person to whom the money is payable. The bill can be drawn by the exporter
payable to the drawer (himself) or his banker.
The Endorser:
The endorser is the person who has placed his signature on the back of bill signifying that he has
obtained the title for the bill on his own account or on account of the original payee.
The Endorsee:
The endorsee is the person to whom the bill is endorsed. The endorsee can obtain the payment
form the drawer.
ASSIGNEMENT B
Question three
Answer
Capital and Revenue Expenditure
Expenditure on fixed assets may be classified into Capital Expenditure and Revenue
Expenditure. The distinction between the nature of capital and revenue expenditure is important
as only capital expenditure is included in the cost of fixed asset.
Capital Expenditure
Capital expenditure includes costs incurred on the acquisition of a fixed asset and any subsequent
expenditure that increases the earning capacity of an existing fixed asset.
The cost of acquisition not only includes the cost of purchases but also any additional costs
incurred in bringing the fixed asset into its present location and condition (e.g. delivery costs).
Capital expenditure, as opposed to revenue expenditure, is generally of a one-off kind and its
benefit is derived over several accounting periods. Capital Expenditure may include the
following:(1) Purchase costs (less any discount received)
(2) Delivery costs
(3) Legal charges
(4) Installation costs
(5) Up gradation costs
(6) Replacement costs
As capital expenditure results in increase in the fixed asset of the entity, the accounting entry is
as follows:
Debit

Fixed Assets

Credit

Cash or Payable

Revenue Expenditure
Revenue expenditure incurred on fixed assets includes costs that are aimed at 'maintaining' rather
than enhancing the earning capacity of the assets. These are costs that are incurred on a regular
basis and the benefit from these costs is obtained over a relatively short period of time. For
example, a company buys a machine for the production of biscuits. Whereas the initial purchase
and installation costs would be classified as capital expenditure, any subsequent repair and
maintenance charges incurred in the future will be classified as revenue expenditure. This is so
because repair and maintenance costs do not increase the earning capacity of the machine but
only maintains it (i.e. machine will produce the same quantity of biscuits as it did when it was
Revenue costs therefore comprise of the following:(1) Repair costs
(2) Maintenance charges
(3) Repainting costs
(4) Renewal expenses
As revenue costs do not form part of the fixed asset cost, they are expensed in the income
statement in the period in which they are incurred. The accounting entry to record revenue
expenditure is therefore as follows:Debit
Credit

Revenue Expense (Income Statement)

Cash or Payable

ASSIGNMENT B
Question four
Case Study
Answer
Gupta
Trading , profit and Loss Account for the year ended June 30, 2001
$
$
Sales
Less: Return inwards
Net Sales
Cost of Sales
Opening Inventory
5,760.00
Purchases
40,675.00
Carriage on Purchases
2,040.00
Less: Return outwards
(500.00)
Closing inventory
(6,800.00)
Total Cost of sales
Gross Profit
Add other incomes: Rent receivable
Total Income
Expenses
Carriage on Sales
3,200.00

98,780.00
(680.00)
98,100.00

(41,175.00)
56,925.00
1,000.00
57,925.00

Wages
Bad Debts
Fuel and Power
Insurance (600- 170/2)
General Expenses
Depreciation: Machinery
: Patent
Salaries
Total Expenses
Net Profit

8,480.00
725.00
4,730.00
515.00
3,000.00
2,000.00
1,500.00
15,000.00
(39,150.00)
18,775.00

ASSIGNMENT C
Multiple choice
Answer.
1
2
3
4
5
6
7
8

B
A
C
C
C
A
D
E

9
10
11
12
13
14
15
16

D
D
D
C
A
B
A
D

17
18
19
20
21
22
23
24

E
D
D
E
E
A
B
E

25
26
27
28
29
30
31
32

C
E
D
C
D
B
D
A

33
34
35
36
37
38
39
40

D
B
B
C
B
C
B
E