ACCOUNTS-TEST -FULL TEST-1

Question No. 1 is compulsory.

Attempt any four questions from the remaining five questions.
Wherever necessary, suitable assumptions should be made and disclosed by way of note
forming part of the answer.

Working Notes should form part of the answer (3 Hours)

Question 1

a. State with reasons, whether the following statements are true or false:

i. Under sum of Years digit method the interest to be amortized every year every increases year to
year.
ii. At the time of forfeiture securities premium not received should be cancelled by debiting
Securities Premium account.
iii. If the effect of errors committed cancel out, the errors will be called compensating errors and
the trial balance will disagree.
iv. Red in interest is made when the due date fall before the accounts closing date ways of
preparing an account current.
v. Under Inflationary condition when FIFO method is followed Profit will be decreasing.
vi. Discount/rebate at the time of retirement of a bill before maturity date is a gain for the
drawee.(6 statements x 2 Marks = 12 Marks)

b. Explain the limitations of Trail Balance? (4 Marks)

c. Give journal entries (narrations not required) to rectify the following:

i. Purchase of Furniture on credit from Nigam for Rs. 3,000 posted to Subham account as
Rs.300 .
ii. A Sales Return of Rs. 5,000 to Jyothy was not entered in the financial accounts though it was
duly taken in the stock book.
iii. Investments were sold for Rs. 75,000 at a profit of Rs. 15,000 and passed through Sales
account.
iv. An amount of Rs. 10,000 withdrawn by the proprietor (Darshan) for his personal use has
been debited to Trade Expenses account. (4 Marks)

Question 2
a. Ram draws a bill for Rs. 18,000 on Rahim on 5th April, 2011 for 3 months, which Rahim returns
it to Ram after accepting the same. Ram gets it discounted with the bank for Rs. 17,640 on 8th
April, 2011 and remits Rs.7056 amount to Rahim. On the due date Ram fails to remit the
amount due to Rahim, but he accepts a bill for Rs. 20,000 for three months, which Rahim
discounts @ 12% on same date and remits Rs. 1,200 to Ram. Before the maturity of the
renewed bill Ram becomes insolvent and only 30% was realized from his estate on 15th October,
2011. Prepare Rahim Accounts in Rams Book and Ram account in Rahims Book. (10 Marks).

b. M/s Kedar, Profit and loss account showed a net profit of Rs. 8,00,000, after considering the
closing stock of Rs. 7,50,000 on 31st March, 2017. Subsequently the following information was
obtained from scrutiny of the books:
(i) Purchases for the year included Rs. 30,000 paid for new electric fittings for the shop.
(ii) M/s Kedar gave away goods valued at Rs. 80,000 as free samples for which no entry was
made in the books of accounts.
(iii) Invoices for goods amounting to Rs. 5,00,000 have been entered on 27th March, 2017, but
the goods were not included in stock.
(iv) In March, 2017 goods of Rs. 4,00,000 sold and delivered were taken in the sales for April,
2017.

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(v) Goods costing Rs. 1,50,000 were sent on sale or return in March, 2017 at a margin of profit
of 33-1/3% on cost. Though approval was given in April, 2017 these were taken as sales for
March, 2017.

You are required to determine the adjusted net profit for the year ended on 31.3.2017 and
calculate the value of stock on 31st March, 2017 (5 Marks).

c. Kishanlal has made the following sales to Babulal. He allows a credit period of 10 days
beyond which he charges interest @ 12% per annum.

Date of Sales Amount (Rs.)

26.05.14 12,000
18.07.14 18,000
02.08.14 16,500
28.08.14 9,500
09.09.14 15,500
17.09.14 13,500
Babulal wants to settle his accounts on 30-9-2014. Calculate the interest payable by him using
Average Due Date (ADD). If Babulal wants to save interest of Rs.588, how many days before
30.9.2014 does he have to make payment? Also find the payment date in this case. (5 Marks)

Question 3

a. The following the trial balance of Shri OM as on 31.03.2018 ,prepare trading ,Profit and loss
accounts for the year ended 31.03.2018 and a balance sheet as on that date after making
Necessary adjustment:

Particulars Debit Rs. Credit Rs.

Sundry Debtors 5,00,000
Sundry creditors 2,00,000
Provision for Doubtful debts 13,000
Outstanding Liability for expenses 55,000
Wages 1,00,000
Carriage outwards 1,10,000
Carriage inwards 50,000
General expenses 70,000
Cash discount 20,000
Bad debts 10,000
Motor car 2,40,000
Printing & stationary 15,000
Furniture and fittings 1,10,000
Advertisement 85,000
Insurance 45,000
Salesmen’s Commission 87,500
Postage and Telephone 57,500
Salaries 1,60,000
Rates and Taxes 25,000
Drawings 20,000
Capital account 14,30,000
Purchases 15,50,000
Sales 19,87,500
Stock on 1.4.2017 2,50,000

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Cash at bank 60,000
Cash in hand 10,500
36,30,500 36,30,500
The following adjustment is to be made:-
a) Stock as on 31.3.2018 was valued at Rs. 7, 25,000.
b) A provision for Bad and Doubtful debts is to be maintained @ the rate 5% on sundry debtors.
c) Depreciate –furniture and fitting by 10%, Motor car by 20%.
d) Shri om Had withdrawn good worth Rs.25000 during the year.
e) Sale include goods worth Rs. 75,000 send out to shanthi & company @ profit 33 1/3 % cost
on approval basis and remaining unsold on 31.3.2018.
f) The salesmen are entitled to a commission of 5% on total sales.
g) Further bad debt Rs 25,000 to be written off as from debtors.
h) Printing stationary expenses of Rs.55,000 relating to Rs.2016-17 had not been provided in
that year but was paid in this year by debiting outstanding liabilities.
Purchases include purchase of Furniture worth Rs.50,000 (10 Marks)

b. R had the following Bills receivable and Bills payable against S.Calculate average due date when
the payment can be made or received without any loss or gain of interest to either Party.
Bills Receivable Bills Payable
Date of Bill Amount Tenure in Months Date of Bill Amount Tenure

1.6.18 9000 3 29.5.18 6000 2

5.6.18 7500 3 03.6.18 9000 3
9.6.18 10000 1 10.6.18 10000 2
12.6.18 8000 2 13.6.18 70000 2
20.6.18 12000 3 27.6.18 11000 1
Holiday intervening in the period 15th August 2018,16th August 2018 and 6th September 2018 ( 6
Marks)
c. On 31st December, 2016 goods sold at a sale price of Rs. 6,000 were lying with customer, Ram
to whom these goods were sold on ‘sale or return basis’ were recorded as actual sales. Since no
consent has been received from Ram, you are required to pass adjustment entries presuming
goods were sent on approval at a profit of cost plus 20%. Present market price is 10% less than
the selling price (4 Marks)

Question 4
a. A, B and C were partners of a firm sharing profits and losses in the ratio of 3:4:3. The Balance
Sheet of the firm, as at 31st March, 2009 was as under: -
Balance Sheet Liabilities Rs Assets Rs
Capitals: Fixed Asset 1,00,000
A 48,000 Stock 30,000
B 64,000 Debtors 60,000
C 48,000 1,60,000 Cash and Bank 30,000
Reserve 20,000
Creditors 40,000
Total 2,20,000 Total 2,20,000
The firm had taken a Joint Life Policy for Rs. 1, 00,000; the premium periodically paid was charged
to Profit and Loss Account. Partner C died on 30th September, 2009. It was agreed between the
surviving partners and the legal representatives of C that:
a) Goodwill of the firm will be taken at Rs. 60,000.
b) Fixed Assets will be written down by Rs. 20,000.
c) In lieu of profits, C should be paid at the rate of 25% per annum on his capital as on 31st
March, 2009.
Policy money was received and the legal heirs were paid off. The profits for the year ended 31st
March, 2010, after charging depreciation of Rs. 10,000 (depreciation upto 30th September was
agreed to be Rs. 6,000) were Rs. 48,000.

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Partners’ Drawings Accounts showed balances as under:
A Rs. 18,000 (drawn evenly over the year)
B Rs. 24,000 (drawn evenly over the year)
C (up-to-date of death) Rs. 20,000
On the basis of the above figures, please indicate the entitlement of the legal heirs of C, assuming
that they had not been paid anything other than the share in the Joint Life Policy. (15 Marks)

b. On 1st January, 2011 Suri’s account in Puri’s ledger showed a debit balance of Rs. 2,500.
The following transactions took place between Puri and Suri during the quarter ended 31st
March, 2011:

2011 Rs.
Jan 11 Puri sold goods to Suri 3,000
Jan 24 Puri received a promissory note from Suri at 3 months 2,500
date
Feb 01 Suri sold goods to Puri 5,000
Feb 02 Puri endorsed the Promisory note to Kiri 2,500
Feb 04 Puri sold goods to Suri 4,100
Feb 05 Puri sold goods to Suri for cash 1,000
Feb 07 Suri returned goods to Puri 500
March 01 Suri sold goods to Puri 2,800
Mar 18 Puri sold goods to Suri 4,600
Mar 23 Suri sold goods to Puri 2,000

Accounts were settled on 31st March, 2011 by means of a cheque. Prepare an Account
Current to be submitted by Puri to Suri as on 31st March, 2011, taking interest into account @
10% per annum. Calculate interest to the nearest rupee (5 Marks)

Question 5
a. D Ltd. issued 2,00,000 shares of Rs.100 each at a premium of Rs.20 per share payable as
follows
Particulars Rs.
On application 20
On allotment 50(including Premium)
On first call 30
On second and final call 20
Applications were received for 3,00,000 shares and pro rata allotment was made to
applicants of 2,40,000 shares. Money excess received on application of 2,40,000 shares was
employed on account of sum due on allotment as part of share capital. E, to whom 4,000
shares were allotted, failed to pay the allotment money and on his subsequent failure to pay
the first call, his shares were forfeited and F, the holder of 6,000 shares failed to pay the two
calls and his shares were forfeited after the second call. Of the forfeited shares, 8,000 shares
were reissued to G at a discount of 10%, the whole of E’s forfeited shares being reissued.
Pass Journal Entries (12 Marks)

b. Manoj of Noida consigned to Kiran of Jaipur, goods to be sold at invoice price which represents
125% of cost. Kiran is entitled to a commission of 10% on sales at invoice price and 25% of any
excess realised over invoice price. The expenses on freight and insurance incurred by Manoj
were Rs. 15,000. The account sales received by Manoj shows that Kiran has effected sales
amounting to Rs. 1,50,000 in respect of 75% of the consignment. His selling expenses to be

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reimbursed were Rs. 12,000. 10% of consignment goods of the value of Rs. 18,750 were
destroyed in fire at the Jaipur godown. Kiran remitted the balance in favour of Manoj.
You are required to prepare consignment account in the books of Manoj along with the
necessary calculations. (8 Marks)

Question No .6

a. On 30th December, 2017 the bank column of A. Philip’s cash book showed a debit balance of Rs.
4,610. On examination of the cash book and bank statement you find that:
i. Cheques amounting to Rs. 6,30,000 which were issued to trade payables and entered in the cash
book before 30th December, 2017 were not presented for payment until that date.
ii. Cheques amounting to Rs. 2,50,000 had been recorded in the cash book as having been paid
into the bank on 30th December, 2017, but were entered in the bank statement on1st January,
2018.
iii. A cheque for Rs. 73,000 had been dishonoured prior to 30th December, 2017, but no record of
this fact appeared in the cash book.
iv. A dividend of Rs. 3,80,000, paid direct to the bank had not been recorded in the cash book.
v. Bank interest and charges amounting to Rs. 4,200 had been charged in the bank statement but
not entered in the cash book.
vi. No entry had been made in the cash book for a trade subscription of Rs. 10,000 paid vide
banker’s order in November, 2017.
vii. A cheque for Rs. 27,000 drawn by B. Philip had been charged to A. Philip’s bank account by
mistake in December,2017.
You are required:
(a) to make appropriate adjustments in the cash book bringing down the correct balance, and
(b) to prepare a statement reconciling the adjusted balance in the cash book with the balance shown
in the bank statement. (8 Marks)

b. From the following data, prepare an Income and Expenditure Account for the year ended 31st
December 2017, and Balance Sheet as at that date of the Jeevan Hospital:
Receipts and Payments Account for the year ended 31 December, 2017

RECEIPTS Rs. PAYMENTS Rs.

To Balance b/d By Salaries:
Cash 800 (Rs. 7,200 for 2016) 31,200
Bank 5,200 6,000 By Hospital Equipment 17,000
To Subscriptions: By Furniture purchased 6,000
For 2016 5,100 By Additions to Building 50,000
For 2017 24,500 By Printing and Stationery 2,400
For 2018 2,400
To Government Grant: By Diet expenses 15,600
For building 80,000 By Rent and rates
For maintenance 20,000 (Rs. 300 for 2018) 2,000
Fees from sundry By Electricity and water
Patients 4,800 charges 2,400
To Donations (not to be 8,000 By office expenses 2,000
capitalized) By Investments 20,000
To Net collections from By Balances:
benefit shows 6,000 Cash 1,400
Bank 6,800 8,200

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1,56,800
1,56,800
Additional information : Rs.
Value of building under construction as on 31.12.2017 1,40,000
Value of hospital equipment on 31.12.2017 51,000
Building Fund as on 1.1. 2017 80,000
Subscriptions in arrears as on 31.12.2016 6,500
Investments in 8% Govt. securities were made on 1st July, 2017.
(12 Marks)

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