B.

com First Semester (NEP) Valuation Script (Financial Accounting -1)

B.com Examination (March-April 2022)
Section A
a. Royalty is the Rent or Consideration amount payable by one person to another person for
using Rights belongs to another person. It is payable by 1.Tenant to the land lord.
2. Publisher to Author. 3. Manufacturer to patentee. 4. Lessee to Lesser
b. It is a Nominal A/c which is prepared outside the books of Account to ascertain Profit or Loss
on Joint Venture. All the expenses paid by each co-ventures are debited and income (sales)
made by each co-ventures are credited in the respective co-ventures name.
c. The following are the Demerits of Single entry system:
a) Method of accounting: Since the two-fold aspects of each and every transaction are not
recorded it is defective and unscientific.
b) Trial balance: Since the two-fold aspects of each and every transaction are not recorded,
the trial balance cannot be prepared; hence, the arithmetical accuracy cannot checked.
d. The person who receives goods from his principal to be sold on commission basis on the risk
of the sender is called consignee. He is the Commission agent.
e. Methods of Consignment.
1. Cost Price Method 2. Invoice Price method
f. Landlord A/c……….Dr XXX
To Short workings A/c XXX
(Short Working Recouped)
g. 1. Debtors Ledger 2. Creditors Ledger. 3. General Ledger.

Section B
2. Difference between Single Entry System and Double Entry System
Sl Single Entry System Double Entry System
1 Tells about cash, debtors and creditors Tells about every business financial
cash balances only. entity.
2 Records transactions related to business. Records all effects of transactions.
3 Incomplete system of recording the Complete system of recording the
transactions. transactions.
4 Can easily record fraud transactions. Difficult to record fraud transactions.
5 Hard to find errors. Easy to identify errors.
6 Suitable for small business. Suitable to all types of business.
7 Not accepted by taxation department. Accepted by taxation department.
8 Takes lot of time in calculation profit/loss. Easy to calculate profit/loss.

3. ROYALTY PAYABLE CHART

Year Output Minimum Actual Short Recouped Irrecouped Cash
Rent Royalty Working Paid
2017 1,000 1,00,000 50,000 50,000 -- -- 1,00,000
2018 1,500 1,00,000 75,000 25,000 -- -- 1,00,000
2019 2,000 1,00,000 1,00,000 -- -- -- 1,00,000
2020 3,000 1,00,000 1,50,000 -- 50,000 25,000 1,00,000
2021 4,000 1,00,000 2,00,000 -- -- -- 2,00,000
4. In te Books of Akash
Dr Joint Venture A/C Cr
To Bank A/C By Bharat’s A/C 5,00,000
Good Purchased 2,00,000 Goods sold
Expenses 10,000 2,10,000
To Bharat’s A/C
Good Purchased 1,00,000
Expenses 20,000
Commission @ 10% 50,000 1,70,000
General P &L A/C
Bank 60,000
Bharat 60,000 1,20,000
5,00,000 5,00,000

Dr Bharat’s Ac Cr
To Joint Venture A/c 5,00,000 By Joint Venture A/c 1,70,000
By Joint Venture A/c 60,000
By Bank DD (Fin Settlement) 2,70,000
5,00,000 5,00,000

5. In General Ledger Adjustment A/c

Dr Debtors Ledger Adjustment A/c Cr
Particulars Amount Particulars Amount
To Balance …..b/d 50,000 By Balance …..b/d 2,000
To Gen. Ledg Adjustment A/c By Gen. Led.Adjus A/c
To Credit Sales 5,00,000 By Bills Receivable 1,50,000
By Cash Received 2,00,000
By Bad debts 10,000
By Balance ….C/d 1,88,000
5,50,000 5,50,000

6. Calculation of Abnormal Loss and Closing Stock

Particulars Quantity Value
Goods Consigned 5,000 5,00,000
Add: Non Recurring expenses -- 5,000
5,000 5,05,000
Less: Abnormal Loss 500 50,500
Consignment reached to Consignee’s Godown 4,500 4,54,500
Less: Sales 4,000 --
Closing Stock 500 50,500

Abnormal Loss of 500 kg of Oil is Rs. 50,500

Closing Stock of 500 Kgs of Oil is Rs. 50,500
 Section C

7. JOURNAL ENTRIES IN THE BOOKS OF LESSOR

SL NO PARTICULARS DR CR
1 Lessee’s A/c ………………………….Dr XXX --
To Royalty Receivable A/C XXX --
To Short working Allowable A/C XXX
(Being Royalty Due from Lessee & Short working Allowed)
2 Bank A/C ………………..………………………..…..DR XXX --
To Lessee’s A/C. -- XX
(Being Cash Received from Lessee)
3 Short working Allowable A/C……………………….…..DR XXX --
To Lessee’s A/C. -- XXX
(Being Short working recouped from Lessee.)
4 Short working Allowable A/C……………………….…..DR XXX --
To P & L A/C. -- XXX
(Being Amount of Short working Lapsed.)
5 Royalty Receivable A/C ……………………………….…..DR XXX --
To Trading A/C/ P & L A/C/ Manufacturing A/c. -- XXX
(Being Royalty Received Transferred)
8. Dr Joint Venture A/c Cr
Particulars Amount Particulars Amount
To Joint Bank A/c 5,00,000 By Amit’s A/c 9,00,000
Machinery Purchased Machinery Sold

To Joint Bank A/c 50,000 By Sunl’s A/c 10,00,000

Expenses Paid Machinery Sold

To Amit’s A/c 3,00,000 By Anil’s A/c 1,00,000

Machinery Purchased Machinery Taken over
To Sunl’s A/c
Machinery Purchased 2,00,000

To Venturer’s A/c
Amit 1/2 4,75,000
Sunil 1/2 4,75,000 9,50,000
20,00,000 20,00,000

Dr Venturer’s A/c Cr
Particulars Amit Sunil Particulars Amit Sunil
To Joint Venture 9,00,000 10,00,000 By Joint Bank A/c 10,00,000 5,00,000
To Joint Venture 1,00,000 -- By Joint Venture A/c 3,00,000 2,00,000
Machinery Supplied
To Joint Bank A/c 7,75,000 1,75,000 By Joint Venture A/c 4,75,000 4,75,000
Share of Profit
17,75,000 11,75,000 17,75,000 11,75,000

Dr Joint Bank A/c Cr

Particulars Amount Particulars Amount
To Amit’s Ac 10,00,000 By Joint Venture A/c 5,00,000
To Sunil’s A/c 5,00,000 By Joint Venture A/c 50,000
By Amit’s A/c 7,75,000
By Sunil’s A/c 1,75,000
15,00,000 15,00,000

Note:
In the above Problem Profits can also be distributed to Venture’s in
their Capital Ratio i.e 2 : 1
9. In the books of General Ledger Adjustment A/c
DEBTORS LEDGER ADJUSTMENT A/C
Date Particulars Amount Date Particulars Amount
To Balance B/d 1,00,000 By Balance B/d 5,000
To Debtors Ledger A/c By Debtors Ledger A/c
Credit Sales 5,00,000 By Cash Received 3,00,000
By Bills Receivable 90,000
By Bad debts 5,000
To Balance C/d By Balance ….C/d 2,00,000
6,00,000 6,00,000

In the books of General Ledger Adjustment A/c

CREDITORS LEDGER ADJUSTMENT A/C
Date Particulars Amount Date Particulars Amount
To Balance B/d 6,000 By Balance B/d 75,000
To General Ledger Adj A/c By General Ledger Adj A/c
Cash Paid 2,00,000 Credit Purchases 2,75,000
Bills Payable Issued 50,000
Discount Earned 10,000 By Balance C/d
To Balance C/d 84,000
3,50,000 3,50,000

10. Dr TRADING A/C for the year ending 31-03-20___ Cr

To Opening Stock 36,000 By Sales (24,000 + 96,000) 1,20,000
To Purchases (20,200 + 69,800) 90,000
To Gross profit…………….c/d 28,600 By Closing stock 34,600
1,54,600 1,54,600

Dr Profit and loss A/C for the year ending 31-03-20___ Cr

Expenses & Losses Amount Income and Gains Amount
To Office Expenses 12,000 By Gross Profit-b/d 28,600
To RDD 600 By Sundry Income 600
To Net Profit 16,600
29,200 29,200

Balance Sheet as on 31-03-20____

Liabilities Rs Assets Rs
Equity/Net worth Non Current Assets
Capital 55,400 Furniture 13,200
Add Net Profit 16,600 Current Assets
Less Drawings - 8,000 64,000 Closing Cash 3,600
Closing Debtors
Current Liabilities Less: RDD 29,600 29,000
Closing Creditors 18,600 Closing B/R - 600 9,600
Closing B/P 11,200 Closing Stock 34,600
93,800 90,000
Question Mistake (To Tally Balance sheet don’t take Cash sales and Cash Purchase)
Gross Profit = 24,800 Net Profit = 12,800 Balance-Sheet = 90,000
11. Case Study: 1 Cost Price Method
Dr Consignment A/C Cr
To. G.S.O.C. A/C 400 x 2,000 8,00,000 By. Abnormal Loss A/C 20,625

To Bank A/C (Freight ) 25,000 By. Channappa’s A/C

(Goods Sold by Consignee) 14,00,000
To. Mohan’s A/C
Carriage 10,000 By. Closing Stock A/C 83,525
Godown Rent 10,000
Selling Expenses 20,000
Commission @ 10% 1,40,000 1,80,000

To. General P&L A/C 4,99,150

(Profit Transferred)
15,04,150 15,04,150

Case Study: 2 Invoice Price Method

Dr Consignment A/C Cr
To. G.S.O.C. A/C 400 x 2,400 9,60,000 By. Abnormal Loss A/C 20,625

To Bank A/C (Freight ) 25,000 By. Channappa’s A/C

(Goods Sold by Consignee) 14,00,000
To. Mohan’s A/C
Carriage 10,000 By. Closing Stock A/C 99,525
Godown Rent 10,000
Selling Expenses 20,000 By G.S.O.C. A/C 400 x 400 1,60,000
Commission @ 10% 1,40,000 1,80,000

To. Stock Reserve 40 x 400 16,000

To. General P&L A/C

(Profit Transferred) 4,99,150
16,80,150 16,80,150

Calculation of Abnormal Loss and Closing Stock

Particulars Radios Cost Price Invoice Price
Goods Consigned 400 8,00,000 9,60,000
Add: Non Recurring expenses (Consignor) -- 25,000 25,000
400 8,25,000 9,85,000
Less: Abnormal Loss 10 20,625 24,625
Consignment reached to Consignee’s Godown 390 8,04,375 9,60,375
Add: Non Recurring expenses (Consignee) 10,000 10,000
390 814,375 9,70,375
Less: Sales 350 -- --
Closing Stock 40 83,525 99,525

Invoice Price = Cost Price + Loading = 2,000 + 20% x 2,000 =2,000 + 400 = 2,400
Therefore Cost Price/ Radio = 2,000 Invoice Price/ Radio = 2,400 Loading/ Radio = 400