ASSIGNMENT QUESTIONS

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 IMT CENTRE FOR DISTANCE LEARNING
GHAZIABAD
Distance Learning Programme

FINANCIAL ACCOUNTING
Notes:
a. Write answers in your own words as far as possible and refrain from copying from the text books/handouts.
b. All answers should be of 200 words.
c. Write on one side of the paper.
d. Answers of Assignments I, II, III and IV (Case Study) must be sent together.
e. Mail the answer sheet along with the copy of the assignment for evaluation and return.

FIRST SET OF ASSIGNMENTS Assignment-I = 5 Marks

ASSIGNMENT-I
1. Comment on the relationship between accounting and some other disciplines.
2. Journalize the following transaction:
1996 Rs
Jan. 1 Assets Cash 630
Cash at bank 23,100
Stock of goods 26,000
Mohan and Co. 6,750
Rs
Jan. 1 Liabilities: Marathi and Co. 3,880
Ram 3,000
Jan. 2 Received cheque from Mohan and Co. in full settlement,
cheque deposited in bank 6,650
3 Sold goods to Dass 1,400
4 Sold goods to Jai Chand 1,440
Carriage paid 35
Sold goods to Govind for cash 3,120
" 5 Bought goods from Ram 4,000
Paid Marathi and Co. by cheque in full settlement 3,800
" 6 Bought goods from Chatterjee 6,300
" 7 Dass returned goods, not being up to standard 100
Travelling expenses paid to salesman 147
Goods sold for cash 800
" 10 Paid for stationery 66
" Postage stamps 15
" 13 Returned goods to Chatterjee (not being up to specifications) 300
(Chatterjee also admits claim for breakage of goods) 100
" 15 Paid for furniture by cheque 700

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 " 16 Goods used personally by proprietor 50
17 Sold goods to Mohan and Co. 5,000
" 19 Dass pays by cheque 1,300
" 20 Cheque received from Jai Chand 1,440
" 22 Bank advises Jai Chand’s cheque returned unpaid
23 Sold goods for cash 800
24 Cash deposited with bank 2,000
" 27 Cheque sent to Chatterjee (discount allowed Rs 50) 5,850
" 29 Paid telephone charges 23
31 Paid salaries 600
Paid rent 300
Bank charges 10
Drew for personal use from bank 500
Received claim from Mohan & Co. for defects in goods
supplied to them: claim admitted 150
3. Explain the dual aspect concept of accounting.
4. From the following Trial Balance, prepare a Trading, Manufacturing and Profit and Loss Account as well as
Balance Sheet as on 31 December 1995.
TRIAL BALANCE
(as on 31 December 1995)
Particulars Dr. Cr.
Rs Rs
Stock on 1.1.1995:
Raw materials 2,000
Work-in-process 5,000
Finished goods 10,000
Manufacturing wages 10,000
Purchases of raw materials 30,000
Factory rent 5,000
Carriage of raw materials 3,000
Salary of the works manager 2,000
Office rent 2,000
Printing and stationery 1,000
Bad debts 1,000
Sales 60,000
Land and buildings 30,000
Plant and machinery 20,000
Depreciation on plant 2,000
Sundry debtors 5,000
Sundry creditors 30,000
Cash in hand 5,000
Capital 43,000
1,33,000 1,33,000

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 Closing Stock on 31 December, 1995 was as follows:
Rs
Raw materials 5,000
Work-in-process 4,000
Finished goods 10,000
5. Based on the following information of the financial ratios, prepare the Balance Sheet of Star Enterprises Ltd as on
31 December 2005. Explain your working and assumptions:
Current ratio 2.5
Liquidity ratio 1.5
Net working capital Rs 6,00,000
Stock turnover ratio 5
Ratio of gross profit to sales 20%
Turnover ratio to net fixed assets 2
Average debt collection period 2.4 months
Fixed Assets to Net Worth 0.80
Long-term debt to capital and reserve 7.25

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SECOND SET OF ASSIGNMENTS Assignment-II = 5 Marks

ASSIGNMENT-II
1. What is trial balance? How is a trial balance prepared and what are the objectives of preparing one?
2. The following entries have been passed by a student. You have to state whether these entries are correctly
passed. If not, pass the correct journal entries.
Particulars L.F. Rs Rs
Rs Rs
(i) Cash A/c Dr. 7,000
To Interest A/c 7,000
(Being interest paid)
(ii) Mohan Dr. 10,000
To Purchases A/c 10,000
(Being purchase of goods from Mohan)
(iii) Hari Dr. 5,000
To Sales A/c 5,000
(Being credit sale of goods to Hari)
(iv) Mukesh Dr. 1,000
To Bank A/c 1,000
(Being salary paid to Mukesh)
(v) Freight A/c Dr. 1,000
To Cash A/c 1,000
(Being freight paid)
(vi) Repairs A/c Dr. 1,000
To Cash A/c 1,000
(Being charges paid for overhauling
an old machine purchased)
(vii) Cash A/c Dr. 200
To Rakesh 200
(Being an amount of debt which was
written off as bad debt last year, is
received during the year)
(viii) Purchases A/c Dr. 1,000
To Hari 1,000
(Being goods sold to Hari earlier, now
returned by him)

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3. Why and how is a bank reconciliation statement prepared?
4. From the following particulars taken on 31 December, 1995, you are required to prepare a bank reconciliation
statement to reconcile the bank balance shown in the Cash Book with that shown in the Pass Book:
(i) Balance as per Pass Book on 31 December, 1995, O/D Rs 1,027.
(ii) Four cheques drawn on 31 December but not cleared till January are as follows:
Rs 12; Rs 1,021; Rs 98; and Rs 113.
(iii) Interest on O/D not entered in Cash Book Rs 51.
(iv) Three cheques received on 30 December and entered in the bank column of the Cash Book but not lodged
in bank for collection till 3 January next: Rs 1,160; Rs 2,100; and Rs 2,080.
(v) Cost of cheque book, Pass Book, etc; Rs 1.50 entered twice erroneously in Cash Book in November.
(vi) A Bill Receivable for Rs 250 due on 29 December, 1995 was passed to the bank for collection on
28 December, 1990 and was entered in Cash Book forthwith whereas the proceeds were credited in the
Pass Book only in January following.
(vii) Chamber of Commerce subscription Rs 10 paid by bank on 1 December, 1990 had not been entered in the
Cash Book.
(viii) Bank charges of Rs 5 had been debited in the pass book twice erroneously.
5. A firm had the following Balances on 1 January 1994:
(i) Provision for bad and doubtful debts Rs 2,500
(ii) Provision for discounts on debtors Rs 1,200
(iii) Provision for discounts on creditors Rs 1,000
During the year, bad debts amounted to Rs 2,000, discounts allowed were Rs 100 and discounts received were
Rs 200. During 1995 bad debts amounting to Rs l,000 were written off while discounts allowed and received were
Rs 2,000 and Rs 5,000 respectively.
Total debtors on 31 December, 1995 were Rs 48,000 before writing off bad debts, but after allowing discounts. On
31 December, 1995, this amount was Rs 19,000 after writing off the bad debts, but before allowing discounts.
Total creditors on these two dates were Rs 20,000 and Rs 25,000 respectively.
It is the firm’s policy to maintain a provision of 5% against bad and doubtful debts and 2% for discount on debtors
and a provisions of 3% for discount on creditors.
Show the accounts relating to provisions on debtors and provisions on creditors for the year 1994 and 1995.

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THIRD SET OF ASSIGNMENTS Assignment-III = 5 Marks

ASSIGNMENT-III
1. From the following details, compute the amount of current assets to be shown in the company’s balance sheet as
per schedule VI:
Cash 48,000
Debtors 50,000
Stock 60,000
Trade-creditors 60,000
Land 20,000
Investments 40,000
Interest accrued on investments 5,000
Loose tools 10,000
2. What is meant by financial reporting and what are its main objectives?
3. Calculate the following for the years 2005 and 2006 using figures made available:
(i) Return on capital employed
(ii) Current ratio
(iii) Debt/equity ratio
(iv) Fixed assets turnover ratio
(v) Inventory turnover ratio
(vi) Earning per share
(vii) Dividend cover
BALANCE SHEET
(as on 31st December)
(Rs in lakh)
Particulars 2004 2005 2006
Liabilities
Share Capital: Shares of Rs. 10 each 800 1,000 1,000
Reserves and Surplus 700 800 1,000
Secured Term Loans 800 2,000 2,400
Cash Credits from Banks 800 1,000 1,500
Sundry Creditors 1,200 900 1,100
_______ _______ _______
4,300 5,700 7,000
_______ _______ _______
Assets
Fixed Assets: Gross Block 2,800 3,000 4,000
Less: Depreciation 920 1,400 2,000
_______ _______ _______
1,880 1,600 2,000
_______ _______ _______
Stock 1,520 2,400 2,800
Debtors 480 500 900
Other Current Assets 420 1,200 1,300
_______ _______ _______
2,420 4,100 5,000
_______ _______ _______
Total Assets 4,300 5,700 7,000
_______ _______ _______

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 EXTRACTS FROM PROFIT AND LOSS ACCOUNT
Particulars For year ended
31st Dec. (Rs lakh)
2005 2006
Sales 4,800 7,200
Profit before Depreciation and Interest on Term Loans 1,500 2,400
Depreciation 480 600
Interest on Term Loans 420 600
Tax 300 600
Dividends 100 150

4. The following figures relate to the trading activities of M/s ABC Traders Ltd for the year ending 31 March 2004.
Particulars Amount (Rs)
Sales 5,20,000
Opening stock 76,250
Purchases 3,22,250
Closing stock 98,500
Sales return 20,000
Selling and Distribution Expenses
Salaries 15,300
Advertising 4,700
Travelling 2,000
Administrative Expenses
Salaries 27,000
Rent 2,700
Stationery 2,500
Depreciation 9,300
Other charges 16,500
Provision for tax 4,000
Non Operating Income
Dividend on shares 9,000
Profit on sales of shares 3,000
Non Operating Expenses
Loss on sale of fixed asset 4,000
You are required to:
(i) Arrange the above figures in a form suitable for analysis.
(ii) Show separately the following ratios.
Net profit ratio
Operating ratio
Stock turnover ratio
5. On 1 January 1996, the following were the ledger balances of Rajan and Co.: Cash in hand Rs 900; Cash in bank
Rs 21,000; Soni (Cr.) Rs 3,000; Zahir (Dr.) Rs 2,400; Stock Rs 12,000; Prasad (Cr.) Rs 6,000; Sharma (Dr.)
Rs 4,500; Lall (Cr.) Rs 2,700; Ascertain capital. Transactions during the month were:
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Date Particulars Rs
1996
Jan. 2 Bought goods of Prasad 2,700
" 3 Sold to Sharma 3,000
" 5 Bought goods of Lall for cash payment made by cheque 3,600
" 7 Took goods for personal use 200
" 13 Received from Zahir in full settlement 2,350
" 17 Paid to Soni in full settlement 2,920
" 22 Paid cash for stationery 50
" 29 Paid to Prasad by cheque 2,650
Discount allowed by him 50
" 30 Provide interest on capital 100
30 Rent due to Landlord 200
Journalize the above transactions and post to the ledger and prepare a Trial Balance.
FOURTH SET OF ASSIGNMENTS Case Studies = 5 Marks

CASE STUDY - I

The Alfa Limited is registered with a nominal capital of Rs 6,00,000 in equity shares of Rs 10 each . The following is the
list of balances extracted from its books on 31 March 2003:

Calls in arrears 7500

Premises 300000
Plant and Machinery 330000
Interim dividend paid on August 2002 37500
Stock 1 April 2002 75000
Fixtures 7200
Sundry debtors 87000
Goodwill 25000
Cash in hand 750
Cash at bank 39900
Purchases 185000
Wages 84865
Preliminary expenses 5000
General expenses 16835
Freight inward 13115
Salaries 14500
Directors fees 5725
Bad debts 2110
Debentures interest paid 9000
Subscribed and fully paid up capital 400000
6% Debentures 300000
Profit and loss A/C (Cr) 14500
Bills payable 38000
Sundry creditors 50000
Sales 415000
General reserve 25000
Provisions for doubtful debts as on 1/4/2002 3500

Prepare Trading and Profit and Loss account, Profit and Loss Appropriation account as well as Balance Sheet as per
the format given in Schedule VI of the Companies Act, 1956 after making the following adjustments:
Depreciation on plant and machinery @ 10%. Write off Rs 500 from preliminary expenses. Provide half years Debenture
Interest due. Provision for doubtful debts has to be maintained at 5% of sundry debtors. Stock as on 31 March 2003 is
Rs 95000.
 CASE STUDY - II

Fine Products Ltd was registered with a nominal capital of Rs 5,00,000 divided into equity shares of Rs 100 each. The
following Trial Balance is extracted from the books on 31 March, 2006:

Details Rs. Credits Rs.

Buildings 2,90,000 Sales 5,20,000
Machinery 1,00,000 Salaries Outstanding 2,000
Closing Stock 90,000 Provision for Bad Debts
Purchase (adjusted) 2,10,000 (1.4.2005) 3,000
Salaries 60,000 Equity Share Capital 2,00,000
Directors’ Fees 10,000 General Reserve 40,000
Rent 26,000 Profit and Loss 25,000
Depreciation 20,000 Sundry Creditors 92,000
Bad Debts 6,000 Depreciation on:
Interest Accrued on 2,000 Building 50,000
Investment Machinery 55,000 1,05,000
12,000 Shares of A Ltd of 1,20,000 14% Debentures 2,00,000
Rs.10 each Rs.8 paid-up
Debenture Interest 28,000 Interest on Debentures
Loose Tools 23,000 accrued but not due 14,000
Advance Tax 60,000 Interest on Investment 12,000
Sundry Expenses 18,000 Unclaimed Dividend 5,000
Sundry Debtors 1,25,000
Bank 30,000 _________
_________
12,18,000 12,18,000

You are required to prepare Trading and Profit and Loss Account for the year ending 31 March, 2006 and Balance
Sheet as at that date after taking into consideration the following information:
(i) Closing stock is more than opening stock by Rs 30,000
(ii) Provide for doubtful debts @ 4% on debtors
(iii) Make a provision for income tax for Rs76,000
(iv) Depreciation expenses includes depreciation of Rs 8,000 on buildings and that of Rs 12,000 on machinery
(v) The directors recommended a dividend @25%