RAMAKRISHNA MISSION VIVEKANANDA COLLEGE (AUTONOMOUS)

SEMESTER END EXAMINATIONS, NOVEMBER - 2020

20UAFAM01 / BM01 / 20UBMAM01
PRINCIPLES OF FINANCIAL ACCOUNTING
TIME: 3 HRS. MAX. MARKS : 75
Section – A (5 X 5 = 25 Marks)
Answer any FIVE Questions.

1. What do you mean by accounting concept? Explain any two accounting concepts.
2. Shine& Co. purchased a machine for Rs. 8,000 on 1st April 2010 and spent Rs. 3,500 on its
installation. Depreciation was written off @10% p.a. on the original cost. On 30th June 2013, the
machine was found to be unsuitable and sold for Rs. 6,500. Prepare the Machine account from 2010
to 2013 assuming that the accounts are closed on 31st Dec. every year.
3. Elvinan accountant of a trading concern could not agree the Trial Balance. There was an excess
credit of Rs. 100 which he transferred to the suspense A/c.The following errors were then
subsequently discovered :
a. Received Rs. 550 from Sherwin, were posted to the debit of his account.
b. Rs. 100 being purchase return were posted to the debit of purchases A/c.
c. Discount received Rs. 200 correctly entered in the Cash Book but posted to the debit of the
Discount A/c.
d. Salary paid Rs. 3,500 to Ashwin were posted to the Salary A/c as Rs. 2,500.
e. A purchase of Rs. 400 has been passed through Sales Book. However the customer's account
has been correctly credited.
Give Rectifying Entries.
4. Prepare a Bank Reconciliation Statement as on 31.12.2019 from the following details:
a. Balance as per cash book Rs. 7,225
b. Cheque deposited into bank but not collected Rs. 675
c. Cheque issued but not presented for payment Rs. 879
d. Bank charges debited in the pass book Rs. 20
e. Interest credited in the pass book Rs. 15
5. Fire broke out in a trader’s business premises on 31.12.2018. The following information were
extracted from the records saved from fire:
Goods sold from 1.1.2018 to 31.12.2018 Rs. 6,00,000
Goods purchased from 1.1.2018 to 31.12.2018 Rs. 4,00,000
Value of stock as on 31.12.2017 Rs. 1,10,000
Average of past four year’s gross profit on sales was 25%. Salvage value of stock has been accepted
at Rs. 10,000. Calculate the amount of claim to be lodged with insurance company.
6. A and B are partners in a firm sharing profits and losses in the ratio 3:2. A new partner C is
admitted. A surrenders 1/5th of his share and B surrenders 2/5th of his share in favour of C. For the
purpose of C’s admission, goodwill of the firm is valued at Rs. 75,000 and C brings in his share of
goodwill in cash which is retained in the firms’ books. Journalise the above transaction.
7. From the following information prepare bills receivable account and total debtors account of the year
ended 31.12.2008.
Particulars Rs. Particulars Rs.
Total Debtors as on 1.1.2008 36,000 Sales (including cash sales Rs. 3,00,000
20,000)
Bills receivable as on 1.1.2008 10,000 Cash received from debtors 2,00,000
Bills receivable as on 31.12.2008 15,000 Discount allowed to debtors 10,000
Returns inward 15,000 Bad debts written off 3,000
Cash received on bills receivable 15,000 Bills receivable endorsed to 10,000
matured creditors
 Section – B (5 X 10 = 50 Marks)
Answer Any FIVE Questions.

8. Explain the different persons interested in Accounting Information.

9. Ironwood Ltd. which depreciates its machinery at 10% on diminishing balance method, had on 1st
Jan 2016, Rs. 4,05,000 to the debit of machinery account. During the year 2016, part of machinery
purchased on 1/1/2014 for Rs. 1,00,000 was sold for Rs. 75,000 on 1/7/2016, and a new machinery at
a cost of Rs. 1,00,000 was purchased and installed on the same date. The firm decided to change its
method of depreciation from diminishing balance method to straight line method with effect from
1/1/2014 and adjust the difference in the accounts of 2016. The rate of depreciation remains the same
as before. Show the machinery account for the year 2016.
10. Oscar does not maintain his accounts books in double entry system. Following particulars were
extracted from his books.
Particulars 01.01.2018 31.12.2018
Machinery 2,50,000 2,50,000
Stock 2,20,000 1,95,000
Sundry debtors 80,000 2,55,000
Sundry creditors 1,25,000 1,00,000
Cash in hand 4,000 8,000
Cash at bank 62,500 (Dr.) 70,000 (Cr.)
Cash book of 2018 shows the following transactions:
Cash received through cash sales Rs. 3,12,500; cash received from sundry debtors Rs. 16,00,000;
cash paid for purchases Rs. 2,88,500; cash paid to sundry creditors Rs. 13,20,000; general expenses
of business Rs. 2,14,500; wages paid Rs. 1,50,000; drawings Rs. 68,000.
Oscar has taken goods worth Rs. 19,500 from business for his personal use. He didn’t pay any
amount for that.
After writing off 10% depreciation on machinery prepare Trading and Profit and Loss Account for
the year ending 31.12.2018 and also Balance Sheet as on that date.
11. The details of transaction which Mr. Murugan had with Mr. Palani are as follows:
2019 January 20 Sold to Palani Rs. 200
2019 February 10 Purchases from Palani Rs.125
2019 March 5 Cash received from Palani Rs. 100
2019 March 10 Cash paid to Palani Rs. 200
2019 April 10 Sold to Palani due date May 31 Rs. 50
2019 May 5 Purchases from Kannan Rs. 50
2019 June 15 Murugan drew a bill on Palani for which amount is to be paid after two day. It
was accepted by Palani Rs. 100
Prepare the Palani’s Account Current with Murugan as on 30.06.2019. Calculate the interest @ 20%
p.a.
12. Following was the Balance Sheet of A and B who were sharing profits in the ratio of 2:1 as at 31st
March, 2019:
Liabilities Rs. Assets Rs.

Capital A/C Building 25,000

A 15,000 Plant and Machinery 17,500
B 10,000 25,000 Stock 10,000
Sundry Creditors 32,950 Sundry Debtors 4,850
Cash in Hand 600

57,950 57,950

They admit C into partnership on the following terms:

a) C was to bring 7,500 as his capital and Rs. 3,000 as goodwill for 1/4th share in the firm.
b) Values of the stock and Plant and Machinery were to be reduced by 5%.
 c) A provision for doubtful debts was to be created in respect of sundry debtors Rs. 375.
d) Building was to be appreciated by 10%

Pass necessary journal entries to give effect to the arrangements. Prepare revaluation account,
capital accounts and Balance Sheet of the new firm.
13. A fire occurred in the business premises of Raghavan on 19.7.2019. From the following particulars
ascertain the loss of stock and prepare a claim for insurance.
Particulars Amount
Stock on 1.1.2018 36,720
Stock on 31.12.2018 32,400
Sales for 2018 2,16,000
Purchases for 2018 1,46,400
Purchases from 1.1.2019 to 19.7.2019 1,76,400
Sales from 1.1.2019 to 19.7.2019 1,80,000
The stocks were always valued at 90% of cost. The stock saved from fire was worth Rs. 21,600.
The amount of the policy was Rs. 75,600. There was an average clause in the policy.
14. A book-keeper failed to balance his trial balance, the credit side exceeding the debit side by Rs.
1,750. This amount was entered in a suspense account. Later the following errors were discovered:
a. Goods worth Rs. 6,200 sold to Rahim were correctly entered in the Sales Book, but posted to
Rahim’s account as Rs. 2,600.
b. A credit balance of Rs. 7,550 of Rent Receivable account was shown as Rs. 5,700.
c. The total of Returns outward book amounting to Rs. 2,000 was not posted to the ledger.
d. Goods worth Rs. 1,000 purchased from Prema were wrongly entered in the sales book. The
account of Prema was correctly credited.
e. The sales book was under cast by Rs. 1,000.
f. The total of the credit side of Dravid’s account was overcast by Rs. 1,000.
Give the journal entries to rectify the above errors and prepare the suspense account.
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