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Institute for Future Education, Entrepreneurship and Leadership (iFEEL), Karla, Lonavala

Subject: Financial Accounting

PGDM-2017-19 (Semester-1) Mid Term Exam

Date: 17 Sep, 2017

Maximum Marks: 30

Duration

: 1 Hour 30 Minutes

Q.1

a) Explain in brief the ‘Business Entity Concept’ in accounting (2 marks)

Business enterprise is considered as a separate legal entity. It is distinct from its owners. Results of the operations (profit or loss) belong to business entity itself and cannot be ascribed to any single person (such as owner).

b) Determine the Account Types (Asset, Liability, Equity, Revenue or Expenses) for the following accounts. (2 marks)

i) Deferred Revenue Liability ii) Outstanding Expenses -- Liability iii) Interest Receivable -- Asset

iv) Buildings -- Asset

Q.2

transaction with the related amount(s). (6 marks)

The following accounts contain five transactions keyed together with letters. Write a short description of each

Dr

Sales

Cr

 

(a)

12,000

(d)

9,000

Dr

Sales return

Cr

(b)

600

 

Dr

Discount Allowed

Cr

(e)

90

 

Dr

Debtors

Cr

(a)

12,000

(b)

600

(d)

9,000

(c)

11,400

 

(e)

9000

Dr

Cash

Cr

(

c)

11,400

 

(

e)

8910

Answer: The transactions are as follows:

a) Sold merchandise on credit, Rs 12,000

b) Accepted merchandise returned by customer, Rs 600

c) Collected amount due on invoice, Rs 11400

d) Sold merchandise on credit, Rs 9000

e) Collected cash from the customer on account, Rs 8910, after allowing cash discount of Rs 90.

Q.

3

a)

A company has bought machine worth Rs 5000 on April 1, 2015. The life of the machinery is 5 years. Consider straight line method of depreciation.

(i)

Write a depreciation journal entry for the year ending March 31, 2017. (1 mark)

 
 

Date

Particulars

Debit

Credit

March 31,

     

2017

Depreciation Expenses To Accumulated Depreciation

1000

 

1000

 

(ii)

What will be the book value of the machinery as on March 31, 2017. (1 mark)

 

Cost of Machinery: Rs 5000

 

Less: Accumulated Depreciation (till March 31 2017): 2000

 

Book Value of the Machinery: Rs 3000

b)

A company has Debtors worth Rs 5,000 as on March 31. They believe that 5% may not be received.

(i)

Write a journal entry for the year ending March 31, 2017. (1 mark)

 
 

Date

Particulars

 

Debit

Credit

 

March 31,

     

2017

Bad Debts Expense To Provision for Bad Debts

 

250

 

250

 

(ii)

Explain ‘Bad Debts’ in brief. (1 mark)

 

Bad debts are accounts receivable that a company does not expect to collect.

 

Q.

4 AllClear Pvt Ltd company was formed on Aug 1, 2017. The company will be offering washing and dry cleaning

services. The following transactions occurred during Aug 2017.

Aug 1

- Mr Raj, the owner of the AllClear Pvt Ltd, infused capital of Rs 200,000 into the company

Aug 3

- Company bought an equipment of Rs 50,000 in cash for washing and dry cleaning services

Aug 4

- Paid an advance of Rs 10,000 to Nav Bharat Traders to supply washing powder and chemicals

Aug 10

- Received cash of Rs 5000 from Modern School for providing washing services for next two months

Aug 12

- Received powder and chemicals of Rs 8000 from Nav Bharat Traders

Aug 17

- Provided services to the local society and received cash of Rs 2000 for the services

Aug 30

- Billed Modern School for Rs 2500

Aug 31

- Paid wages of Rs 500 to the workers for month of August

You are required to

(a)

Journalise the transactions

(b)

Post to ledger accounts

(c)

Prepare a trial balance as on Aug 31, 2017 (16 marks)

Journal Entries

Date

Particulars

Debit

Credit

 

Aug 1

Cash

200000

 
 

To Capital

 

200000

Aug 3

Washing & Cleaning Equipment

50,000

 
 

To Cash

 

50000

Aug 4

Nav Bharat Traders (Advance to Supplier)

10000

 
 

To Cash

 

10000

Aug 10

Cash To Modern School (Advance from Customers)

5000

5000

Aug 12

Purchases (Powder & Chemicals)

8000

 
 

To Nav Bharat Tradres

 

8000

Aug 17

Cash To Washing & Cleaning Services (Revenue)

2000

2000

Aug 30

Modern School To Washing & Cleaning Services (Revenue)

2500

2500

Aug 31

Wage Expense

500

 
 

To Cash

 

500

T Accounts

Dr

Cash

 

Cr

Date

Particulars

Amount

Date

Particulars

Amount

Aug 1

To Capital To Modern School (Advance from Customers) To Washing & Cleaning Services (Revenue)

2,00,000

Aug 3

By Washing & Cleaning Equipment

50000

Aug 10

5000

Aug 4

By Nav Bharat Traders

10000

Aug 17

2000

Aug 31

By Wage Expense

500

 

Aug 31

By Balance b/d

1,46,500

 

2,07,000

2,07,000

 

To Balance c/d

1,46,500

Dr

Capital

 

Cr

Date

Particulars

Amount

Date

Particulars

Amount

Aug 31

To Balance b/d

200000

Aug 1

By Cash

200000

 

200000

200000

 

By Balance c/d

200000

Dr

Washing & Cleaning Equipment

Cr

Date

Particulars

Amount

Date

Particulars

Amount

Aug 3

To Cash

50,000

Aug 31

By Balance b/d

50,000

 

50,000

50,000

 

To Balance c/d

50,000

Dr

Nav Bharat Traders (Advance to Supplier)

 

Cr

Date

Particulars

Amount

Date

Particulars

Amount

       

By Purchases (Powder &

 

Aug 4

To Cash

10000

Aug 12

Chemicals)

8000

Aug 31

By Balance b/d

2000

 

10000

10000

 

To Balance c/d

2000

Dr

Modern School (Advance from Customer)

 

Cr

Date

Particulars

Amount

Date

Particulars

Amount

Aug 30

To Washing & Cleaning Services (Revenue)

2500

Aug 10

By Cash

5000

Aug 31

To Balance b/d

2500

 

5000

5000

 

By Balance c/d

2500

Dr

Purchases (Powder & Chemicals)

Cr

Date

Particulars

Amount

Date

Particulars

Amount

Aug 12

To Nav Bharat Tradres

8000

Aug 31

By Balance b/d

8000

 

8000

8000

 

To Balance c/d

8000

Dr

Washing & Cleaning Services (Revenue)

 

Cr

Date

Particulars

Amount

Date

Particulars

Amount

Aug 31

To Balance b/d

4500

Aug 17

By Cash

2000

Aug 30

By Modern School

2500

 

4500

4500

 

By Balance c/d

4500

Dr

Wage Expense

 

Cr

Date

Particulars

Amount

Date

Particulars

Amount

Aug 31

To Cash

500

Aug 31

By Balance b/d

500

 

500

500

 

To Balance c/d

500

Trial Balance for the period Aug 1 to Aug 31, 2017

Account Name

Debit

Credit

 

Cash

1,46,500

 

Capital

200000

Washing & Cleaning Equipment

50,000

Nav Bharat Traders (Advance to Supplier)

2,000

Modern School (Advance from Customer)

2500

Purchases (Powder & Chemicals)

8,000

Washing & Cleaning Services (Revenue)

4500

Wage Expense

500

 

2,07,000

2,07,000