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BHARATI VIDYAPEETH
(Deemed to be University)

SCHOOL OF ONLINE EDUCATION

Name of Student: Sanu Kumar

Date of submission: 28/06/21

Registered Email ID: kumar.sanu568@gmail.com

MASTER OF BUSINESS ADMINISTRATION

BATCH -: JANUARY 2021
SEMESTER - I

Subject: Financial and Management Accounting

Registration No:
BVP20212891
(Starting with BVP)
Q.1 what is accounting cycle? List the sequential steps involved in Accounting cycle.

Ans. Accounting cycle:-

1. Identification: This is the first stepa of accounting cycle. It identifies the transaction of financial
character that is required to be recorded in the books of accounts. Transaction is the transfer of
money or goods or services from one person or account to another person or account.
2. Measuring: This denotes expressing the value of business transactions and events in terms of
money.
3. Recording: It deals with recording of identifiable and measurable transactions and events in
systematic manner in the books of original entry that are in accordance with the principles of
accountancy.
4. Classifying: It deals with periodic grouping of transactions of similar nature that appear in the
books of original entry into appropriate heads by posting or transfer of entries.
5. Summarizing: It deals with summarizing or condensing transactions in a manner useful to
others. This function involves the preparation of financial statements such as income statement,
balance sheet, statement of changes in financial position and cash flow statement.
6. Analyzing: it deals with the establishment of relationship between the various items or group of
item taken from income statement or balance sheet or both. Its purpose to identify the financial
strengths and weaknesses of the enterprise.
7. Interpreting: It deals with explaining the significance of those data in a manner that the end
users of the financial statements can make a meaningful judgment about the profitability and
financial position of the business. The accountants should interpret the stamen in a manner useful
to the users, so as to enable the user to make reasoned decision out of the alternative course of
action.
8. Communicating: It deals with communicating the analyzed and interpreted data in the form of
financial reports/statements to use the users of financial information.

Q. 2 A. Bring out the differences between Indian GAAP and US GAAP norms.
B. What is the matching principle? Why should a business concern follow this principle?

Ans. Differences between Indian GAAP and US GAAP:-

 US GAAP INDIAN GAAP

It is established under FASB and AICPA It is established under ICAI

Balance sheet, income statement & funds flow Balance sheet and income statement are alone
statement are mandatory mandatory

Any change in foreign exchange fluctuations Any difference in foreign exchange can be
cannot be capitalized but the difference can be capitalized
shown or debited to income statement.

Financial accounting, Management accounting and Only financial accounting and income tax
income tax accounting are prepared separately accounting are prepared

The basic tenets is globalization of business The basic tenet is localization

Any long term loan repayable is the current Long term loans maturing in the current financial
financial year is shown separately year need not be disclosed separately

In lease contract, lessee is more beneficiary In lease contract, lessee is eligible for depreciation
because he can claim depreciation allowance allowance and not the lessee

It is more transparent and accepted worldwide. It is comparatively less transparent. For listing the
More disclosure is required securities in other country’s stock exchange US
GAAP is mandatory

Principle of matching Cost and Revenue

Revenue earned during a period is compared with the expenditure incurred to earn that income, whether
the expenditure is paid during that period or not. This is matching cost and revenue principle, which is
important to find out the profit earned for that period. Here costs are reported as expenses in the
accounting period in which the revenue associated with those costs is reported. A business concern should
follow this principle to know his actual earnings and growth for the year.

Q.3 Prove that the accounting equation is satisfied in all the following transactions of Mr. X
 a) Commence business with cash Rs. 50000
b) Paid rent in advance Rs. 1000
c) Purchase goods for cash Rs. 18000 and Credit Rs. 20000
d) Sold goods for cash Rs. 25000 costing Rs. 22000
e) Paid salary Rs. 5000 and salary outstanding is Rs. 3000
f) Bought moped for personal use Rs. 20000
Ans. Accounting equation for the transactions of Mr. X

Assets Liabilities + Owner's Equity

Transaction X's
Cash Goods Advance Rent Salary Moped Outstanding Salary Creditors Capital
A 50000 50000
B -1000 1000
-
C 18000 38000 20000
-
D 25000 22000 3000
E -5000 5000 3000 -3000
-
F 20000 20000
End 31000 16000 1000 5000 20000 3000 20000 50000
Equation Total=73000 Total=73000

Q.4 Following are the extracts from the Trial Balance of a firm as on 31st March 2007.

Dr Cr

Sundry Debtors 205000

Provision for Doubtful Debts 10000

Provision for Discount on Debtors 1800

 Bad Debts 3000

Discounts 1000

Additional Information:
1) Additional Bad Debts required Rs. 4000
2) Additional Discount allowed to Debtors Rs. 1000
3) Maintain a provision for bad debts @ 10% on debtors
4) Maintain a provision for discount @ 2% on debtors
Required: Pass the necessary journal entries and show the relevant accounts including final
accounts.

Ans. Journal Entries:-

Journal Entries
Date Particulars Dr. Cr.
31/3/2007 Bad Debts a/c Dr 4000
To Debtors a/c 4000

31/3/2007 Provision for Bad Debts a/c Dr 4000

To Bad Debts a/c 4000

31/3/2007 Discount on Debtors a/c Dr 1000

To Debtors a/c 1000

31/3/2007 Provision for Discount a/c Dr 1000

To Discount on Debtors a/c 1000

Debtors A/c
Particulars Amount Particulars Amount
To Balance b/d 205000 By Dis. On Debtors 1000
 By Bad Debts 4000
By Balance c/d 200000

205000 205000

Provision for Bad Debts A/c

Particulars Amount Particulars Amount
To Debtors 4000 By Balance b/d 10000
To Balance c/d 20000 By P & L 14000

24000 24000

Provision for Discount A/c

Particulars Amount Particulars Amount
To Bad Debts 1000 By Balance b/d 1800
To Balance c/d 3600 By P & L 2800

4600 4600
Bad Debts A/c
Particulars Amount Particulars Amount
To Provision for Bad Debts 4000 By Debtors 4000

4000 4000

Discount A/c
Particulars Amount Particulars Amount
To Provision for Discount 1000 By Debtors 1000

1000 1000

P & L A/c
Particulars Amount Particulars Amount
 To Provision for Bad Debts 14000
To Provision for Discount 2800

Balance Sheet
Particulars Amount Particulars Amount
Debtors 200000
Less: Provision 20000
Less: Provision 3600 176400

Q. 5 (A) Bring out the differences between trade discount and cash discount.
(B) Explain the term (a) Asset (b) Liability with help of examples.

Ans. Differences between trade discount and cash discount:-

1. Trade discount is a reduction granted by a supplier from the list price on goods or services on
business consideration such as quantity bought, trade practice etc while cash discount is a reduction
granted from the invoice price in consideration of immediate payment or payment within a
stipulated period.
2. Trade discount is allowed to promote the sales while cash discount is allowed to encourage early or
prompt payment.
3. Trade discount is shown by the way of deduction in the invoice itself. Hence no further entry is
required in the books of accounts. Cash discount is shown as an expense in Profit and Loss account.
4. Trade discount may vary with the quantity purchased while cash discount varies with the period.

Assets
 An asset is a resources legally owned by the enterprises as a result of past events and from which
future economic benefits are expected to flow to the enterprises. Ex. Land and buildings, plant and
machinery, furniture and fixtures, cash in hand and at bank, debtors and stock etc. are regarded as
assets, Assets may be fixed, current, liquid or fictitious.
Fixed Assets are those which are held for use in the production or supply of goods and services, Ex.
Plant and machinery which is used fairly for long period.
Current Assets are those which are held or receivable within a year or within the operating cycle
of the business. They are intended to be converted into cash within a short period of time, Ex. Stock
in trade, debtors, bills receivable, cash at bank etc.
Liquid Assets are those which can be easily converted into cash and for instance cash in hand, cash
at bank, marketable investments etc.
Fictitious Assets are in the form of such expenses which could not be written off during the period
of their incidence For example promotional expenses of a company which could not be treated as
expenditure in the year of incidence are shown as fictitious assets.

Liability
It is financial obligation of an enterprise arising from past even the settlement of which is expected
to result in an outflow of resources embodying economic benefit. Ex. Loans payable, salaries
payable, term loans.
Current Liability is that obligation which ahs to be satisfied within a year. For example payment o
be made sundry creditors for the goods supplied by them on credit; bills payable accepted by the
businessman; overdraft raised by the businessman in a bank etc.

Q. 6. A fresh MBA student joined as trainee was asked to prepare Trail Balance. He was unable to
submit a correct Trial Balance. You, as a senior accountant find out the errors and rectify them.
After redrafting the Trial Balance, prepare trading and P&L account.

Adjustments:

1) Stock on hand on 31st March 2008 was valued at Rs. 1800

2) Depreciate fixtures and fittings by Rs. 25
3) Rs. 35 was due and unpaid in respect of salaries
4) Rates and insurance has been paid in advance to the extent of Rs. 40

Particulars Debit Credit

Capital 7670

Cash in Hand 30

Purchases 8990

Sales 11060

Cash at Bank 885

Fixtures and Fittings 225

Freehold Premises 1500

Lighting and Heating 65

Bills Receivable 825

Returns Inward 30

Salaries 1075

Creditors 1890

Debtors 5700

Stock at 1st April 2007 3000

Printing 225

Bills Payable 1875

Rates, Taxes and Insurance 190

 Discount Received 445

Discount Allowed 200

22940 22940

Trading A/c
Particulars Amount Particulars Amount
To Opening Stock 3000 By Sales 11060
To Purchase 8990 Less: S/R 30 11030
To Lighting & Heating 65 By Closing Stock 1800
To Gross Profit 775

12830 12830

Profit & Loss A/c

Particulars Amount Particulars Amount
To Salaries 1075 By Gross Profit 775
Add: O/S 35 1110 By Discount Received 445
To Fixtures & Fittings 225 By Loss 490
T0 Rate, Tax & Ins 190
Less: Advance paid 40 150
To Discount Allowed 200
To Depreciation 25

1710 1710
 Balance Sheet as on 31st March, 2008
Particulars Amount Particulars Amount
Capital 7670 Cash in hand 30
Creditors 1890 Stock in hand 1800
Bills Payable 1875 Cash at Bank 885
Outstanding Salary 35 Fixture & Fitting 225
Less: Depreciation 25 200
Freehold Premises 1500
Debtors 5700
Advance Rate & Ins 40
Loss 490
Bills Receivable 825

11470 11470