2007 Alagappa University M.B.A Investment Management FINANCIAL ACCOUNTING Question paper
DISTANCE EDUCATION
M.B.A. (I.M.) DEGREE EXAMINATION, DECEMBER 2007.
First Semester
FINANCIAL ACCOUNTING
(2005 onwards)
Time : Three hours Maximum : 100 marks
SECTION A — (5 ? 8 = 40 marks)
Answer any FIVE questions.
1. Briefly describe the different accounting concepts.
2. What is meant by an Accounting Standards? Describe the procedure which is followed for formulating accounting standards.
3. Explain the relation between journal and ledger.
4. What is purchase consideration? Explain various methods of its calculation.
5. Differentiate between computerized accounting and manual accounting.
6. Enter the following transactions in the proper subsidiary books :
2005 Rs.
July 1 Purchased goods from Mr. A 4,500
2 Sold goods to Mr. B 2,000
July 4 Returned goods to Mr. A 1,000
5 Sell goods to Mr. C 500
6 Goods returned by Mr. B 500
8 Sold goods to Mr. D 400
10 Bought goods from Mr. E 3,000
11 Bought goods from Mr. F 1,500
13 Goods returned to Mr. E 500
7. A and B started business on 1st January with capitals in the ratio of 3 : 2. The assets and liabilities on 1st January 1998 and on 31st December 1998 were as follows :
Rs. Rs.
Cash in hand and at bank 20,025 15,000
Bills receivable 10,000 17,500
Sundry debtors 75,000 1,25,000
Stock in trade 18,500 19,000
Fixed assets 3,00,000 3,27,000
Creditors 28,525 33,500
The partners share profits in the ratio of 3 : 2 after charging interest on capital at the beginning at 5% p.a. and after providing for interest on drawings @ 6% p.a. Drawings are Rs. 40,000 for A and Rs. 30,000 for B. Calculate profits and prepare statement of affairs at the end.
8. Nathiya Ltd. has a credit balance on P & L a/c of
Rs. 3,00,000 on 1.4.2000 and the net profit for the year 2000–01 is Rs. 30,00,000. It was decided that the following decisions be carried out regarding provisions, reserves and dividends :
(a) General reserve Rs. 3,50,000
(b) Investment allowance reserve Rs. 3,50,000
(c) Provision for taxation @ 50%
(d) Dividend equalisation fund a/c Rs. 2,00,000
(e) Dividends on 10% preference shares of
Rs. 20,00,000
(f) Dividend at 15% on 3,00,000 equity shares of Rs. 10 each fully paid.
You are required to give P and L appropriation a/c and give journal entries for payment of dividend.
SECTION B — (4 ? 15 = 60 marks)
Answer any FOUR questions.
9. How will you prepare final accounts using accounting software?
10. Distinguish between :
(a) Single entry and double entry system
(b) Trial balance and Balance sheet.
11. The following is the Trial Balance of Shree Ganesh on 30th June 2005 :
Rs. Rs.
Capital - 1,86,000
Drawings 15,735 -
Stock 17,280 -
Sundry creditors - 18,900
Sundry debtors 43,500 -
Machinery 60,000 -
Patents 22,500 -
Freehold land 30,000 -
Buildings 96,000 -
Sales - 2,96,340
Purchases 1,22,025 -
Sales returns 2,040 -
Purchase returns - 1,500
Cash at bank 7,890 -
Cash in hand 1,620 -
Insurance 1,800 -
General expenses 9,000 -
Salaries 45,000 -
Wages 25,440 -
Factory power 14,190 -
Carriage on purchases 6,120 -
Carriage on sales 9,600 -
Rent - 27,000
5,29,740 5,29,740
The following adjustments are to be effected :
(a) Stock on 30th June 2005 Rs. 20,400
(b) 5% on sundry debtors is to be written off and bad
(c) Salaries for the month of June 2005 amounting to
Rs. 4,500 were unpaid
(d) Insurance include a premium of Rs. 510 on a policy expiring on December 31, 2005.
(e) Rent Rs. 3,000 is accrued but not received
(f) Depreciate machinery % 50% and patents @ 20%
You are required to prepare trading and profit and loss account and the Balance Sheet as on 30th June 2005.
12. Mr. Ram kept his books on single entry system. From the following prepare trading and profit and loss account for the year ended 31.3.2005 together with balance sheet on that date :
Rs.
Cash in hand on 31.3.2005 75
Balance of bank on 31.3.2005 2,425
Received from debtors 25,000
Cash sales 15,000
Interest charges 100
Personal withdrawals 2,000
Staff salaries 8,500
Offer business expenses 7,900
Payment to creditors 15,000
Further details available are :
On 1.4.2004 On 31.3.2005
Rs. Rs.
Stock 9,000 10,220
Creditors 8000 5,500
Debtors 22,000 30,000
Furniture 1,000 1,000
Office premises 15,000 15,000
Provide 5% interest on capital. Provision for doubtful debts required is Rs. 1,500. Depreciate fixed assets at 5% staff salaries outstanding to Rs. 1,500.
13. Big Bull Ltd., has a nominal capital of Rs. 6,00,000 divided into shares of Rs. 10 each. The following Trial Balance is extracted from the books of the company as on 31.12.2006 :
Rs. Rs.
Calls in arrears 75,00 6% debentures 3,00,000
Premises (Rs. 60,000 3,60,000 P & L A/c (1.1.2006) 14,500
added on 1.7.2006) Creditors 50,000
Machinery 3,00,000 General reserve 25,000
Interim dividend 7,500 Share capital 4,60,000
Purchases 1,85,000 Bills payable 38,000
Preliminary expenses 5,000 Sales 4,15,000
Freight 13,100 Provision for
Director's fees 5,740 bad debts 3,500
Bad debts 2,110
4% Govt. securities 60,000
Stock (1.1.2006) 75,000
Furniture 7,200
Sundry debtors 87,000
Goodwill 25,000
Cash 750
Bank 39,000
Wages 84,800
General expenses 16,900
Salaries 14,500
Debenture interest 9,000
13,06,000 13,06,000
Prepare final accounts of the company for the year ending 31.12.06 in the prescribed form after taking into account the following adjustments :
(a) Depreciate machinery by 10% and furniture by 5%
(b) Write off half of the preliminary expenses
(c) Wages includes Rs. 10,000 paid for the construction of a compound wall to the premises and no adjustment was made
(d) Provide 5% for bad debts on sundry debtors
(e) Transfer Rs. 10,000 to general reserve
(f) Provide for income tax Rs. 25,000
(g) Stock on 31.12.2006 was Rs. 1,01,000.
14. Ganguly Ltd. was formed with an authorised capital of Rs. 12,00,000 divided into equity shares of Rs. 10 each to acquire the business of ‘A’ and ‘B’ whose balance sheet on the date of acquisition was as follows :
Liabilities Rs. Assets Rs.
Capital 6,00,000 Freehold premises 7,00,000
General reserve 4,00,000 Stock 2,00,000
Sundry Sundry debtors 1,60,000
creditors 2,00,000 (–) provision for bad debts 10,000 1,50,000
Cash at bank 1,50,000
12,00,000 12,00,000
The purchase consideration was agreed upon at
Rs. 14,00,000 to be paid in Rs. 12,00,000 fully paid equity shares of Rs. 11 and the balance in cash.
Give journal entries to record the above and prepare the balance sheet of Gauguly Ltd. assuming the vendor's account is finally settled.
15. Lala Co. Ltd. decided to reconstruct and went into liquidation with the following assets and liabilities.
Liabilities Rs. Assets Rs.
Preference shares Fixed assets 4,99,200
capital of Rs. 10 each 2,00,000 Stock 73,500
Equity share capital Debtors 1,31,000
of Rs. 10 each 8,00,000 Cash 400
General reserve 12,100 Profit and Loss A/c 4,12,700
Bank loan 18,600
Creditors 86,100
11,16,800 11,16,800
A new company called Bala Co. Ltd. was formed to acquire the fixed assets and stock of Lala Co. Ltd. at
Rs. 3,40,000 and Rs. 60,000 respectively. The purchase price is to be paid by issue of 10% preference shares and equity shares of Rs. 10 each for equal amounts.
Debtors realised Rs. 1,22,750 and the creditors were paid Rs. 81,340 in full settlement. Bank loan was paid in full. The expenses of liquidation come to Rs. 10,710.
Close the books of Lala Co. Ltd. and give the balance sheet of Bala Co. Ltd.
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