Financial Accounting for Managers

SECTION A

1. (a) Explain the nature, uses, and limitations of Financial Statements.

(b) Prepare a Trading Account of Mr. Anil for the year ending 31st March 2009

Q2. B and C enter a joint venture to prepare a film for the Government. The Government agrees to pay Rs.1, 00,000.B contributes Rs.10, 000 and C contributes Rs. 15,000. These amounts are paid into a Joint Bank Account. Payments made out of the joint account were:

Qus.3    Write short notes on any three of the following:-

4. Explain what is Bank Reconciliation statement? Draw a Proforma of a Bank Reconciliation statement with favorable balance as per cash book. Illustrate with the help of an example.

Qus.5   Prepare a Trial   Balance of Mohan & Co. as on March 31 2003

 
Capital    9,20,000       
Sundry creditors     1,88,520       
Bills Payable    69,300       
Sales    12,18,500       
Provision  for doubtful debts    13,200       
Interest(Cr.)    3,400       
Building    7,00,000       
Machinery     1,20,000       
Sundry debtors                                          1,56,000       
Cash in hand    9,880       
Cash at bank    1,45,340       
Bills Receivable    58,440       
Purchases    8,55,220       
Carriage outwards    12,910       
Bad Debts    6130       
Discount(Dr.)    6200       
Sales Return    2850     
                                                                      

Q6.  For the following transactions in ABC Ltd, prepare Accounting Equation.     

ASSIGNMENT B

Case Study 1

Q1      X, Y and Z were partners in a firm sharing profits in the proportions of 1/2, 1/3 and 1/6 respectively. The Balance Sheet of the firm on 31st March 2001 was as follows:

 
Liabilities    Amt.    Assets    Amt.       
Trade Creditors
Employees Provident Fund
Reserve Fund
Capitals
X             65,000
Y             30,000
Z              20,000
     15,000
6,000
18,000
 
 
 
115000    Cash at bank
Debtors                40,000
Less: Provision     2,000
Stock
Investments
Patents
Plant & Machinery
Goodwill 
     5,000
 
38,000
30,000
15,000
10,000
50,000
6,000        
     1,54,000         1,54,000     

Z retired on the above date on the following terms:
a)     Goodwill of the firm was valued at Rs. 30,000
b)    Value of patents was to be reduced by 20% and that of plant & machinery to 90%.
c)     Provision for doubtful debts was to be raised to 6 %.
d)    Z took over the investments at a value of Rs.17,600.
e)     Liability for workmen’s compensation to the extent of Rs. 375 is to be created.
f)     Trade creditors to the extent of 2.5 % are not likely to claim their dues.
g)   Amount due to Z is to be settled on the following basis:
50 % on retirement, 50 % of the balance to be paid in 2 equal half yearly installments carrying interest at 5 % p.a. and the balance by a Bill of Exchange (without interest) at 3 months.
h)     The entire capital of the firm as newly constituted is fixed at Rs.100, 000 and the partners’ capital accounts are to be adjusted in the profit sharing ratio. Any excess is to be transferred to current account and any deficit is to be brought in cash.

Question
Prepare Revaluation account, Partners’ Capital accounts and Balance Sheet of X & Y after Z’s retirement. Also prepare Z’s Loan account till it is fully paid.

Case study 2
Qus.1.Anil sent on 1st July,2006 to Rahul goods costing Rs.50,000 and spent Rs.1,000 on packing etc. On 3rd July 2006, Rahul received the goods and sent his acceptance to Anil for Rs.30,000 payable at 3 months. Rahul spent Rs.2,000 on freight  and cartage,Rs 500 on godown rent and Rs.300 on insurance. On 31st December, 2006 he sent his Account Sales (along with the amount due to)Showing that 4/5 of the goods had been sold for Rs.55,000.Rahul is entitled to a commission of 10%.One of the customers turned insolvent and could not pay Rs.600 due from him. Show the necessary ledger accounts

SECTION C

Question No.  1
Which of the following is the activity which finance people are involved?

 
Options    
Investing decisions    
Operation decisions    
Promotion decisions    
Marketing decisions
Question 2
Refers to part of current assets that fluctuates directly with changes in sales level.          

Options               
Financing            
Investment      
Permanent assets          
Temporary assets           

Question 3
Profit and Loss Account is--        

Options               
Real Account     
Nominal Account            
Personal Account            
None of the above

Question 4
According to the accounting profession, which of the following would be considered a cash-flow itemfrom a "financing" activity?              

Options               
A cash outflow to the government for taxes.     
A cash outflow to repurchase the firm's own common stock.     
A cash outflow to lenders as interest.    
A cash outflow to purchase bonds issued by another company

Question No.  5
Which of these items would be accounted for as an expense?  

Options               
Repayment of a bank loan.         
Dividends to stockholders           
The purchase of land.   
Payment of the current period's rent.

Question No.  6
Which of the following would not be included on a balance sheet?          

Options               
Accounts receivable.     
Accounts payable           
Sales.   
Cash.

Question No.  7
The requirement that only transaction data capable of being expressed in terms of money be included in the accounting records relates to the --               

Options               
Cost principle    
Monetary unit assumption         
Economic entity assumption      
Both a & b

Question No.  8
Revenue is generally recognized at the point of sales .Which principle is applied herein--              

Options               
Consistency principle    
Matching principle          
Revenue recognition principle  
Cost principle

Question No.  9
Petty cash fund is--        

Options               
Used to pay relatively small amounts     
Reimbursed when the amount of money in the fund is reduced to a predetermined minimum amount
Established by estimating the amount of cash needed for disbursement of relatively small amounts during a specified period  
All of the above

Question No.  10             
Which of the following errors will be disclosed in the preparation of a trial balance?        

Options               
Recording transactions in the wrong account.    
Duplication of a transaction in the accounting records    
Posting only the debit portion of a particular journal entry          
Recording the wrong amount for a transaction to both the account debited and the account credited.

Question No.  11             
Book Value is-- 

Options               
The amount that is due at the maturity or due date of a note.   
The process of transferring the cost of natural resources to an expense account.             
The cost of a fixed asset minus accumulated depreciation on the asset 
The estimated value of a fixed asset at the end of its useful life.               

Question No.  12             
An examination of the sources and uses of funds is part of--      

Options               
a forecasting technique               
A funds flow analysis     
a ratio analysis  
calculations for preparing the balance sheet

Question No.  13             
Which of the following is not a cash outflow for the firm?

Options               
Depreciation.    
Dividends           
Interest payments         
Taxes

Question No.  14             
What must be known or estimated in order to calculate depreciation?  

Options               
The estimated useful life of the asset to the company   
The acquisition cost of the asset.             
The estimated residual value of the asset.          
All of the above

Question No.  15
Information that goes into __________ can be used to help prepare __________.       

Options               
a forecast balance sheet; a forecast income statement 
forecast financial statements; a cash budget      
a cash budget; forecast financial statements      
a forecast income statement; a cash budget

Question No.  16             
Which of the following terms best relates to natural resources?               

Options               
Depreciation.    
Depletion.          
Amortization.   
Accrual

Question No.  17             
A debit may signify--     

Options               
An increase in an asset account
A decrease in an asset account 
An increase in a liability account               
An increase in the owner's capital Account          

Question No.  18             
When a partnership firm is to be dissolved, the following account is opened in the ledger-- 

Options               
Revaluation Account     
Profit and Loss Adjustment Account      
Realisation Account       
Profit and Loss Appropriation Account  

Question No.  19             
Settlement of accounts on the dissolution of a partnership firm is governed by the following section of the 
Indian Partnership Act, 1932    

Options               
2             
49 
48          
10

Question No.  20             
A new partner brings in cash as his share of goodwill, this amount will be distributed among the old 
Partners-- 

Options               
In the old profit sharing ratio     
In the ratio of their capital           
Equally 
In the ratio of sacrifice of profit by them              

Question No.  21
In the absence of an agreement to the contrary, on drawings--

Options               
No interest is to be charged       
Interest @5% per annum is to be charged           
Interest @6% per annum is to be charged           
Interest @12% per annum is to be charged

Question No.  22             
For a charitable institution, subscriptions by its member constitute its-----.          

Options               
Asset    
Income
Expenditure      
Liability

Question No.  23             
The most suitable method for providing depreciation on mines, oil wells and quarries--

Options               
Straight line method      
Depletion method          
Annuity method              
Machine hour rate method        

Question No.  24             
In income and expenditure account, the excess of income over expenditure is called-- 

Options               
Surplus
Deficit  
Gross Profit       
Net Profit

Question No.  25             
In consignment   the risk of loss is borne by--     

Options               
The consignor only         
The consignee only        
The consignor as well as the consignee 
Neither the consignor nor the consignee             

Question No.  26             
Carriage Outward Account will appear on the-- 

Options               
Debit side of the Trading Account            
Debit side of the Profit and Loss Account             
Credit side of the Trading Account          
Credit side of the Profit and Loss Account

Question No.  27             
At the end of an accounting year, trade debtors total Rs.50, 000. Provisions for bad debts and discount on debtors are made @5% and @% respectively. Provisions on discount on debtors will be made for-- 

Options               
Rs.1000
Rs.2,500              
Rs.950  
Rs.975

Question No.  28             
The primary record of a credit purchase of a fixed asset is made in-- 

Options               
Cash Book          
Sales Book         
Purchases Book               
Journal Proper

Question No.  29             
Which one of the following assets could be described as a current asset?             

Options               
Machinery to manufacture goods for resale       
Stock of goods for resale             
Buildings to house the machinery            
Land on which the buildings stand

Question No.  30             
Which of the following equations properly represents a derivation of the fundamental accounting equation?    

Options               
Assets + Liabilities = Capital        
Assets + Capital = Liabilities        
Assets = Liabilities + Capital        
Assets = Capital – Liabilities

Question No.  31             
If we take goods for own use we should --          

Options               
Debit Drawings Account: Credit Stock Account  
Debit Purchases Account: Credit Drawings Account         
Debit Sales Account: Credit Stock Account           
Debit Drawings Account: Credit Purchases Account         

Question No.  32             
Forfeited Shares Account is finally closed by the transfer of its balance to--         

Options               
Securities Premium Account      
General Reserve Account           
Debenture Sinking Fund Account            
Capital Reserve Account

Question No.  33
Capital Expenditure is--

Options               
The costs of running the business on a day-to-day          
Money spent on selling fixed assets       
The extra capital paid in by the proprietor           
Money spent on buying fixed assets or adding value to them    

Question No.  34
If it is required to maintain fixed capitals then the partners’ shares of profits must be-- 

Options               
Credited to capital accounts       
Debited to partners’ current accounts   
Debited to capital accounts        
Credited to partners’ current accounts

Question No.  35
According to the money measurement concept, the following will be recorded in the books of accounts 
of the business--               

Options               
Health of the managing director of the company              
Quality of the company’ goods 
Value of plant and machinery    
Dedicated and trusted employees

Question No.  36             
Sales made to Mahesh for cash should be debited to--

Options               
Cash account    
Mahesh account             
Sales account    
Purchase account

Question No.  37             
A bank reconciliation is prepared so that the difference in the under-mentioned balance is reconciled   

Options               
The difference in the balance of the bank and cash balances      
The difference in the balance in the Pass Book in the beginning and at the end 
The difference in the Pass Book and Cash Book balance
None of the above                         

Question No.  38             
In the absence of any provisions in the partnership agreement, profits and losses are shared by the partners-- 

Options               
In the ratio of their capitals         
Equally 
In the ratio of loans given by them to the partnership firm          
None of the above

Question No.  39             
Under the Written down value method, the amount of depreciation goes on _________ from year to year       

Options               
Decreasing         
Increasing          
Fluctuating         
None of the above

Question No.  40             
How will the purchase of an asset on credit affect the accounting equation?       

Options               
It will decrease the assets and decrease the capital         
It will decrease the assets and decrease the liabilities    
It will increase the assets and decrease another asset   
It will increase the assets and increase the liabilities