Beruflich Dokumente
Kultur Dokumente
[8]
Answer:
1. Does not cover A standard package may not be able to take care of
Peculiarities of Specific the complexities of a specific business.
Business
2. Does not cover all These packages may not cover all functional areas
Functional Areas such as production process.
3. Customisation may not be These packages may not be customised as per needs
Possible: is not Sufficient or of customers.
Serve the Purpose:
4. Reports Generated All reports required for exercising management control
may not be available in a standard package.
5. Lack of Security Security is generally missing in a pre-packaged
accounting package since any person can view data
of all companies with common access password.
6. Bugs in the software Certain bugs may remain in the software which takes
long to be rectified by the vendor and is common in
the initial years of the software.
Answer:
(i) In sale the property in goods is transferred to the buyer immediately whereas in
consignment the property is transferred to the buyer only when goods are sold by
the consignee. The ownership of goods remains with the consignor when goods are
transferred to the consignee by the consignor.
(ii) In sale, the risk attached with the goods passes with ownership to the buyer. In case
of a consignment, the risk attached with the goods does not pass to the consignee
who acts as a mere agent. If there is any damage or loss to the goods it is borne by
the consignor provided the consignee has taken reasonable care of the goods
and the damage or loss is not due to his negligence.
1
(iii) The relationship of consignor and consignee is that of a principal and an agent as
in a contract of agency whereas the relationship of buyer and seller is governed by
the Sale of Goods Act.
(iv) Unsold goods on consignment are the property of the consignor and may be
returned if not saleable in the market whereas goods sold on sale basis are normally
not returnable unless there is some defect in them.
Wear and tear: Wear and tear is an important cause of depreciation in case of
tangible fixed assets. Any asset will gradually break down over a certain usage
period, as parts wear out and need to be replaced. It is due to use of the asset.
Other assets, such as buildings, can be repaired.
Maintenance: The value of machine generally deteriorates rapidly because of
lack of proper maintenance.
2
Depletion: The utility or resources of wasting assets (like mines etc.) decreases with
regular extractions. With the raising of coal from coal mine the total deposit
reduces gradually and after sometime it becomes fully exhausted. Then its value
reduces to nil. It refers to the physical deterioration by the exhaustion of natural
resources eg., mines, quarries, oil wells etc.
(b) (i) State any four advantages of pre-packaged accounting software?
(ii) Discuss the matters to be considered for selection of pre-packaged accounting
software. [4+6=10]
Answer:
Easy to Install — The CD containing set up file is to be inserted and run to complete
the installation according to instructions as per user’s manuals.
Relatively Inexpensive — These packages are available at very cheap prices.
Easy to Use — These packages are mostly menu driven with the help options. Further
the user manual provides most of the solutions to problems that the user may face
while using the software.
Simple Backup Procedure — Housekeeping section provides a menu for backup. The
backup can be taken on CD or hard disk.
(ii) The following factors should be considered while selecting pre-packaged accounting
software:
Answer:
3
(a) Basic features of a Joint Venture business are :
(i) It is done for a specific purpose and hence has a limited duration.
(ii) The partners are called co-venturers.
(iii) The profit or loss on joint venture is shared between the co-venturers in the agreed
ratio.
(iv) The co-venturers may or may not contribute initial capital.
(v) The Joint Venture is dissolved once the purpose of the business is over.
(vi) The accounts of the co-venturers are settled immediately on dissolution.
(vii) A joint venture has no name.
The amount which is receivable from a person or a concern for supplying goods or
services is called Debt.
Debts may be classified into :
(i) Bad debts; (ii) Doubtful debts and (iii) Good debts
(i) Bad Debts: Bad debts are uncollectable or irrecoverable debt or debts which are
impossible to collect is called Bad Debts. If it is definitely known that amount
recoverable from a customer cannot be realized at all, it should be treated as a
business loss and should be adjusted against profit. In short, the amount of bad
debt should be transferred to Profit and Loss Account for the current year to
confirm the principles of matching.
(ii) Doubtful Debts: The debt which will be receivable or cannot be ascertainable at
the date of preparing the final accounts (i.e., the debts which are doubtful to
realise) is known as doubtful debts. Practically it cannot be treated as a loss on
that particular date, as such, it cannot be written off. But, it should be charged
against Profit and Loss Account on the basis of past experience of the firm.
(iii) Good Debts: The debts which are not bad i.e., there is neither any possibility of
bad debts nor any doubts about its realization, is called good debts. As such, no
provision is necessary for it.
4
A business transaction will always be recoded if it can be expressed in terms of money.
The advantage of this concept is that different types of transactions could be recorded
as homogenous entries with money as common denominator. A business may own ` 3
Lacs cash, 1500 kg of raw material, 10 vehicles, 3 computers etc. Unless each of these is
expressed in terms of money, we cannot find out the assets owned by the business. When
expressed in the common measure of money, transactions could be added or
subtracted to find out the combined effect. In the above example, we could add values
of different assets to find the total assets owned. The application of this concept has a
limitation. When transactions are recorded in terms of money, we only consider the
absolute value of the money. The real value of the money may fluctuate from time to
time due to inflation, exchange rate changes, etc. This fact is not considered when
recording the transaction.
Answer:
Easy to Install — The CD containing set up file is to be inserted and run to complete
the installation according to instructions as per user‘s manuals.
Relatively Inexpensive — These packages are available at very cheap prices.
Easy to Use — These packages are mostly menu driven with the help options.
Further the user manual provides most of the solutions to problems that the user
may face while using the software.
Simple Backup Procedure — Housekeeping section provides a menu for backup.
The backup can be taken on CD or hard disk.
(ii) The following factors should be considered while selecting pre-packaged accounting
software:
5
(e) Write about cash basis and accrual basis of accounting;
(f) Bills of Exchange;
Answer:
Based on the above definition the following features of a bill of exchange are noticed:
a It‘s an instrument in writing.
b It contains an unconditional order.
c It‘s signed by the drawer.
d It‘s drawn on a specific person.
e There is an order to pay a specific sum of money.
f It must be dated.
g It specifies to whom the payment is to be made e.g. to the maker or to person
mentioned by him or to the bearer.
h The amount of money to be paid must be certain.
i It must be properly stamped
j It may be made payable on demand, or after a definite period of time. Whereas, a
bill of exchange is drawn by seller and accepted by buyer; a promissory note, on
the other hand, is created by the buyer as an undertaking to pay to the seller.
6
As per AS – 7 (Construction Contract) Contract revenue consists of the following —
Revenue/price agreed as per Contract.
Revenue arising due to escalation clause.
Claims - Claims is the amount that contractors seek to collect from the customer as
reimbursement of cost not included in contract price.
Increase in revenue due to increase in units of output.
Increase or decrease in revenue due to change or variation in scope of work to be
performed.
Answer:
Computer information system environment exists when one or more computer(s) of any
type or size is (are) involved in the processing of any information, whether those computers
are operated by the entity or by a third party. A computerised accounting environment
will therefore have the following salient features:
The processing of information will be by one or more computers.
The computer or computers may be operated by the entity or by a third party.
The processing of financial information by the computer is done with the help of
one or more computer softwares.
A computer software includes any program or routine that performs a desired
function or set of functions and the documentation required to describe and
maintain that program or routine.
7
The computer software used for the accounting system may be an acquired
software or may be developed specifically for the business.
Acquired software may consist of a spread sheet package or may be
prepackaged accounting software.
Answer:
8
(i) If ledgers are maintained under self-balancing system it becomes very easy to
locate errors.
(ii) This system helps to prepare interim account and draft final accounts as a
complete trial balance can be prepared before the abstraction of individual
personal ledger balances.
(iii) Various works can be done quickly as this system provides sub-division of work
among the different employees.
(iv) This system is particularly useful (i) where there are a large number of customers or
suppliers and (ii) where it is desired to prepare periodical accounts.
(v) Committing fraud is minimized as different ledgers are prepared by different clerks.
(vi) Internal check system can be strengthened as it becomes possible to check the
accuracy of each ledger independently.
(d) Examples of items not included within the definition of ―revenueǁ for the purpose of AS
–9:
(i) Realised gains resulting from the disposal of, and unrealised gains resulting from the
holding of, non-current assets e.g. appreciation in the value of fixed assets;
(ii) Unrealised holding gains resulting from the change in value of current assets, and
the natural increases in herds and agricultural and forest products;
(iii) Realised or unrealised gains resulting from changes in foreign exchange rates and
adjustments arising on the translation of foreign currency financial statements;
(iv) Realised gains resulting from the discharge of an obligation at less than its carrying
amount;
(v) Unrealised gains resulting from the restatement of the carrying amount of an
obligation.
9
6. Acquired software may consist of a spread sheet package or may be
prepackaged accounting software.
Answer:
(i) As principle of double entry is not followed, the trial balance cannot be prepared. As
such, arithmetical accuracy cannot be guaranteed.
(ii) Profit or loss can be found out only by estimates as nominal accounts are not
maintained.
(iii) It is not possible to make a balance sheet in absence of real accounts.
(iv) It is very difficult to detect frauds or errors.
(v) Valuation of assets and liabilities is not proper.
(vi) The external agencies like banks cannot use financial information. A bank cannot
decide whether to lend money or not.
(vii) It is quite likely that the business and personal transactions of the proprietor get
mixed.
Businessman expects that he would receive discounts from suppliers (creditors), when
the businessman remits cash to them. Anticipating some percentage of creditors which
may be received as discount in the coming year, the business proprietor makes a
provision for the expected income in the current year itself. Discount on creditors is an
income and therefore reserve for discount on creditors is debited and profit and loss
account is credited to show it as anticipated profit. In the subsequent year, when
discount on creditors is actually received, it is first set of against provision for discount
on creditors and the difference between the new provision for discount on creditors
and the balance of old provision left over is carried to Profit and Loss Account.
Payment to Creditors —
10
Closing or Transfer Entry —
11
FIFO/LIFO/SLM/ WDV
Answer:
(c) The following factors should be considered while selecting pre-packaged accounting
software:
12
6. Regular updates It should be ensured whether the vendor is
prepared to give updates.
Answer:
While ascertaining losses, revenue losses are differentiated from capital losses, just as
revenue profits are distinguished from capital profits. Revenue losses arise from the
normal course of business by selling the merchantable at a price less than its purchase
price or cost of goods sold or where there is a declining in the current value of
inventories. Capital losses may result from the sale of assets, other than inventory for less
than written down value or the diminution or elimination of assets other than as the
result of use or sale (flood, fire, etc.) or in connection with raising capital of the business
(issue of shares at a discount) or on the settlement of liabilities for a consideration more
than its book value (debenture issued at par but redeemed at a premium). Treatment
of capital losses are same as that of capital profits. Capital losses arising out of sale of
fixed assets generally appear in the Profit and Loss Account (being deducted from the
net profit). But other capital losses are adjusted against the capital profits. Where the
capital losses are substantial, the treatment is different. These losses are generally shown
on the balance sheet as fictitious assets and the common practice is to spread that
over a number of accounting years as a charge against revenue profits till the amount
is fully exhausted.
Since personal and impersonal accounts are maintained under the double entry
system, both the effects of the transactions are recorded.
It ensures arithmetical accuracy
It prevents, minimizes and detects frauds.
Errors can be detected and rectified easily.
The balances of receivables and payables are determined easily.
The current year’s financial position of the business can be compared with that of
the past years.
Helps in decision making.
Helps in determining the net operating results by preparing the Trading and Profit
and Loss A/c.
The financial position can be ascertained by the preparation of the Balance Sheet.
13
Helps the Government to decide the tax and to decide sickness of business units
and extend help accordingly.
The other stakeholders like suppliers, banks, etc. take a proper decision regarding
grant of credit or loans.
(v) The basic features of a Joint Venture business are :
The basic principles of this concept are that business is assumed to exist for an
indefinite period and is not established with the objective of closing it down. So unless
there is good evidence to the contrary, the accountant assumes that a
business entity is a ‘going concern’ - that it will continue to operate as usual for a
longer period of time. It will keep getting money from its customers, pay its creditors,
buy and sell goods, use assets to earn profits in future. If this assumption is not
considered, one will have to constantly value the worth of the assets and resource. This
is not practicable. This concept enables the accountant to carry forward the values of
assets and liabilities from one accounting period to the other without asking the
question about usefulness and worth of the assets and recoverability of the
receivables. The going concern concept forms a sound basis for preparation of a
Balance Sheet.
(b) Discuss the disadvantages of customized accounting package. [8]
Answer:
14
(xiv) There may be delay in completion of the software due to problems with the
vendor or inadequate project management.
The choice of customised accounting packages is made on the basis of evaluation of
vendor proposals. The proposals are evaluated as to the suitability, completeness, cost and
vendor proposals. Generally preference is given to a vendor won has a very good track
record of deliverables
Answer:
Features of Single Entry System: Single Entry System has the following features.
(a) Maintenance of books by a sole trader or partnership firm: The books which are
maintained according to this system can be kept only by a sole trader or by a
partnership firm.
(b) Maintenance of cash book : In this system it is very often to keep one cash book
which mixes up business as well as private transactions.
(c) Only personal accounts are kept : In this system, it is very common to keep only
personal accounts and to avoid real and nominal accounts. Therefore, sometimes,
this is precisely defined as a system where only personal accounts are kept.
(j) Collection of information from original documents : For information one has to
depend on original vouchers, example, in the case of credit sales, the proprietor may
keep the invoice without recording it anywhere and at the end of the year the total
of the invoices gives an idea of total credit sales of the business.
(k) Lack of uniformity : It lacks uniformity as it is a mere adjustment of double entry system
according to the convenience of the person.
(l) Difficulty in preparation of final accounts : It is much difficult to prepare trading, profit
and loss account and balance sheet due to the absence of nominal and real
accounts in the ledger.
15
Various works can be done quickly as this system provides sub-division of work among
the different employees.
This system is particularly useful
7. where there are a large number of customers or suppliers and
8. where it is desired to prepare periodical accounts.
Answer:
Computer information system environment exists when one or more computer(s) of any
type or size is (are) involved in the processing of any information, whether those
16
computers are operated by the entity or by a third party. A computerised accounting
environment will therefore have the following salient features:
The processing of information will be by one or more computers.
The computer or computers may be operated by the entity or by a third party.
The processing of financial information by the computer is done with the help of
one or more computer softwares.
A computer software includes any program or routine that performs a desired
function or set of functions and the documentation required to describe and
maintain that program or routine.
The computer software used for the accounting system may be an acquired
software or may be developed specifically for the business.
Acquired software may consist of a spread sheet package or may be
prepackaged accounting software.
Answer:
Unsold goods on consignment are the property of the consignor and may be
returned if not saleable in the market whereas goods sold on sale basis are normally
not returnable unless there is some defect in them.
While ascertaining losses, revenue losses are differentiated from capital losses, just as
revenue profits are distinguished from capital profits. Revenue losses arise from the
17
normal course of business by selling the merchantable at a price less than its purchase
price or cost of goods sold or where there is a declining in the current value of
inventories. Capital losses may result from the sale of assets, other than inventory for
less than written down value or the diminution or elimination of assets other than as the
result of use or sale (flood, fire, etc.) or in connection with raising capital of the business
(issue of shares at a discount) or on the settlement of liabilities for a consideration more
than its book value (debenture issued at par but redeemed at a premium). Treatment
of capital losses are same as that of capital profits. Capital losses arising out of sale of
fixed assets generally appear in the Profit and Loss Account (being deducted from the
net profit). But other capital losses are adjusted against the capital profits. Where the
capital losses are substantial, the treatment is different. These losses are generally
shown on the balance sheet as fictitious assets and the common practice is to spread
that over a number of accounting years as a charge against revenue profits till the
amount is fully exhausted.
(a) its purchase price, including import duties and non –refundable purchase taxes,,
after deducting trade discounts and rebates.
(b) any costs directly attributable to bringing the asset to the location and condition
necessary for it to be capable of operating in the manner intended by
management.
(c) the initial estimate of the costs of dismantling, removing the item and restoring
the site on which it is located, referred to as ‘decommissioning, restoration and
similar liabilities’, the obligation for which an enterprise incurs either when the
item is acquired or as a consequence of having used the item during a
particular period for purposes other than to produce inventories during that
period.
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(b) (i) List the advantages of Pre-packaged Accounting Software.
(ii) What is the significance of a Computerised Accounting System? [6+3=9]
Answer:
The speed with which accounts can be maintained is several fold higher.
Automatic Correct Balancing of Ledger Accounts
Automatic Talied Trial balance unless some mistake is made while recording
the opening balance.
Automatic Income Statement
Automatic Balance Sheet
Answer:
19
(e) Following are the features of Trial Balance:
It is a list of debit and credit balances which are extracted from various ledger
accounts.
It is a statement of debit and credit balances.
The purpose is to establish arithmetical accuracy of the transactions recorded in the
Books of Accounts.
It does not prove arithmetical accuracy which can be determined by audit.
It is not an account. It is only a statement of account.
It is not a part of the final statements.
It is usually prepared at the end of the accounting year but it can also be prepared
anytime as and when required like weekly, monthly, quarterly or half-yearly.
It is a link between books of accounts and the Profit and Loss Account and Balance
Sheet.
Renewal of Bills
Sometimes the drawee of a bill is not able to meet the bill on due date. He may request
the drawer to draw a new Bill for the amount due. Sometimes he pays a certain amount
out and accepts a first bill for the balance for which he has to pay a certain amount of
interest which is either paid in cash or is included with the fresh bill. This bill is known as
Renewal of Bills. That, the amount of the new bill will be face value of the original bill
minus cash payment, if any, plus interest for the renewed period.
Retirement of Bill
Sometimes the drawee pays the bill before the date of maturity. Under the
circumstances, the drawer allows certain amount of rebate or discount which is
calculated on certain percentage p.a. basis. The rebate is calculated from the date of
payment to the date of maturity.
(b) Differences between Receipts and Payments Account and Income and Expenditure
Account
20
excluded. Outstanding amounts of current period
are added.
5 It records both Capital and Revenue It records Revenue transactions only.
transactions
6 It serves the purpose of a Real It serves the purpose of a Nominal
Account. Account
7 It starts with opening Cash and Bank It does not record such
Balances and ends with closing Cash balances,rather its final balance shows
and Bank Balances a surplus or a deficit for the period
8 It does not record notional loss or It considers all such expenses for
noncash expenses like bad debts, matching against revenues
depreciations etc.
9 Its closing balance is carried forward Its closing balance is transferred to
to the same account of the next Capital Fund or General Fund or
accounting Period. Accumulated Fund in the same
period’s Balance Sheet.
10 It helps to prepare an Income & It helps to prepare a Balance Sheet
Expenditure A/c.
Answer:
21
(f) Frequent changes made to the system with inadequate change management
procedure may result in system compromise.
(g) Vendor may not be unwilling to give support of the software due to other
commitments.
(h) Vendor may not be willing to part with the source code or enter into an escrow
agreement.
(i) Control measures may be inadequate.
(j) There may be delay in completion of the software due to problems with the vendor or
inadequate project management.
The only concerns that has increased today are concerns for controls, security and
integrity of the computer system as more and more information is stored not in the hard
print but as soft copies inside the computer. Issue like unauthorised access to the data
either through the local area network or through the internet by hacking into the
company server are becoming potential threat to the computer usage.
Answer:
22
is capital expenditure but dividend interest is paid until its repayment.
received on shares is a revenue
receipt.
(ii) Find out the rate of Gross Profit [after considering trend of business etc.]
(iii) Find out the short sales [Standard turnover – Actual turnover of the period of
dislocation]
(iv) Find out Gross Profit on short sales.
(v) Find out the Amount Admissible for Additional Expenses
It should be the minimum of: (a) Actual expenses (b) Gross profit on additional sales
generated by additional expenditure
(xv) Add (3) and (4). From the total deduct saving in any insured standing charge during
the period of indemnity. The result is gross claim.
(xvi) Under average clause : Net Claim =
Answer:
23
13. There may be delay in completion of the software due to problems with the
vendor or inadequate project management.
Answer:
24
Control It is not possible to control all Effective control is possible by the
branch by the Head Office departmental supervisors who is
closely related and who is to
keep a constant watch over the
departments.
• GAAP :
A widely accepted set of rules, conventions, standards, and procedures for reporting
financial information, as established by the Financial Accounting Standards Board are
called Generally Accepted Accounting Principles (GAAP). These are the common set of
accounting principles, standards and procedures that companies use to compile their
financial statements. GAAP are a combination of standards (set by policy boards) and
simply the commonly accepted ways of recording and reporting accounting information.
As principle of double entry is not followed, the trial balance cannot be prepared. As
such, arithmetical accuracy cannot be guaranteed.
Profit or loss can be found out only by estimates as nominal accounts are not
maintained.
It is not possible to make a balance sheet in absence of real accounts.
It is very difficult to detect frauds or errors.
Valuation of assets and liabilities is not proper.
The external agencies like banks cannot use financial information. A bank cannot
decide whether to lend money or not.
It is quite likely that the business and personal transactions of the proprietor get mixed.
Answer:
Computer information system environment exists when one or more computer(s) of any
type or size is (are) involved in the processing of any information, whether those
25
A computer software includes any program or routine that performs a desired
function or set of functions and the documentation required to describe and maintain
that program or routine.
The computer software used for the accounting system may be an acquired software
or may be developed specifically for the business.
Acquired software may consist of a spread sheet package or may be prepackaged
accounting software.
26
Answer:
27
(i) Types of Accounts:
Natural Persons
Representative
Account
Real Accounts
28
(Tangible &
Impersonal
Nominal Accounts
29
Let us see what each type of account means:
• Personal Account: As the name suggests these are accounts related to persons.
These persons could be natural persons like Suresh’s A/c, Anil’s A/c etc.
The persons could also be artificial persons like companies, bodies corporate or
association of persons or partnerships etc. Accordingly, we could have Infosys
Technologies A/c, Charitable Trust A/c, ABC Bank A/c, etc.
called as ‘Salary Payable A/c’. Similar examples are rent payable, Insurance
prepaid etc.
Tangible Real Account – Assets that have physical existence and can be seen,
and touched. e.g. Machinery A/c, Stock A/c, Cash A/c the like.
Nominal Account: These accounts are related to expenses or losses and incomes or gains
e.g. Salary and Wages A/c, Rent of Rates A/c, Travelling Expenses A/c etc.
30
Answer:
Computer information system environment exists when one or more computer(s) of any
type or size is (are) involved in the processing of any information, whether those computers
are operated by the entity or by a third party. A computerised accounting environment
will therefore have the following salient features:
(vii) The processing of information will be by one or more computers.
(viii) The computer or computers may be operat ed by the entity or by a third party.
(ix) The processing of financial information by the computer is done with the help of
one or more computer softwares.
(x) A computer software includes any program or routine that performs a desired
function or set of functions and the documentation required to describe and
maintain that program or routine.
(xi) The computer software used for the accounting system may be an acquired
software or may be developed specifically for the business.
(xii) Acquired software may consist of a spread sheet package or may be
prepackaged accounting software.
Answer:
Abnormal Losses arises as a result of negligence/accident etc., e.g., theft, fire etc. Before
ascertaining the result of the consignment, value of abnormal loss should be adjusted. The
method of calculation is similar to the method of calculating unsold stock. Sometimes
insurance company admits the claim in part or in full. The same should also be adjusted
against such abnormal loss. While valuing the abnormal loss the proportionate expenses
are taken only upto the stage of the loss. For example, if goods are lost in the transit on
way to the consignee's place, the value of abnormal loss will include the basic cost of the
goods plus proporti onate expenses of the consignor only and not the proportionate
expenses of consignee because consignee has spent nothing on account of these goods.
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(iii) If goods are not insured –
Profit & Loss A/c Dr
To Abnormal Loss A/c
(iv) For transferring the net loss –
Profit & Loss A/c Dr \
To Abnormal Loss A/
The accrual concept is based on recognition of both cash and credit transactions. In case
of a cash transaction, owner's equit y is instantly affected as cash either is received or
paid. In a credit transaction, however, a mere obligation tow ards or by the business is
created. When credit transactions exist (which is generally the case), revenues are not the
same as cash receipts and expenses are not same as cash paid during the period. When
goods are sold on credit as per normally accepted tr ade practices, the business gets the
legal right to claim the money from the customer. Acquiring such right to claim the
consideration for sale of goods or services is called accrual of revenue. The actual
collection of money from customer could be at a la ter date.
Similarly, when the business procures goods or services with the agreement that the paym
ent will be made at a future date, it does not m ean that the expense effect should not
be recognized. Because an obligation to pay for goods or services is created upon the
procurement thereof, the expense effect also must be recognized.
Today's accounting systems based on accrual concept are called as Accrual System or
Mercantile Syst em of Accounting.
c Bearer plant –
32
(g) Consignee prepares a summary of results called as Account sales.
(h) Consignor pays commission to the consignee. Sometimes, the consignor may send the
goods at a price higher than cost so that the consignee gets no knowledge of the real
cost of goods which is confidential for the consignor.
(b)(i) Discuss the disadvantages of Pre-Packaged Accounting Software. [5]
Answer:
b Does not cover Peculiarities of Specific Business -A standard package may not be able
to take care of the complexities of a specific business.
(e) Does not cover all Functional Areas -These packages may not cover all functional areas
such as production process.
(f) Customisation may not be Possible: is not Sufficient or Serve the Purpose -These
packages may not be customised as per needs of customers.
(g) Reports Generated -All reports required for exercising management control may not be
available in a standard package.
(h) Lack of Security- Security is generally missing in a pre-packaged accounting package
since any person can view data of all companies with common access password.
(i) Bugs in the software - Certain bugs may remain in the software which takes long to be
rectified by the vendor and is common in the initial years of the software.
Answer:
Some computerised accounting softwares support a coded accounting system and some
support even a non-coded accounting system. A coded accounting system is more
convenient where there are numerous account heads and the complexity is high. It also to
some extent reduces the possibility of the same account existing in several names due to
spelling mistakes or abbreviations used.
A proper codification requires a systematic grouping of accounts. The major groups or heads
could be Assets, Liabilities, Revenue Receipts, Capital Receipts, Revenue Expenditure, Capital
Expenditure. The sub -groups or minor heads could be ―Cash‖ or ―Receivables‖ or ―Payables‖ and
so on. The grouping and codification is dependant upon the type of organisation and the
extent of sub -division required for reporting on the basis of profit centres or product lines. There
could a classification based on geographical location as well.
The main unit of classification in accounts should be the major head which should be divided
into minor heads, each of which should have a number of subordinate heads, generally shown
as sub -heads. The sub-heads are further divided into detailed heads. Sometimes major heads
may be divided into ‗sub-major heads‘ before their further division into minor heads. The Major
heads, Minor heads, Sub -heads and Detailed heads together may constitute a four tier
arrangement of the classification structure of Accounts.
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8. Write short notes on any three of the following: [3x5=15]
Answer:
(i) Maintenance of books by a sole trader or partnership firm: The books which are
maintained according to this system can be kept only by a sole trader or by a
partnership firm.
(ii) Maintenance of cash book : In this system it is very often to keep one cash book
which mixes up business as well as private transactions.
(iii) Only personal accounts are kept : In this system, it is very common to keep only
personal accounts and to avoid real and nominal accounts. Therefore,
sometimes, this is precisely defined as a syst em where only personal accounts are
kept.
(iv) Collection of information from original documents : For information one has to
depend on original vouchers, example, in the case of credit sales, the proprietor
may keep the invoice without recording it anywhere and at the end of the year
the total of the invoices gives an idea of total credit sales of the business.
(v) Lack of uniformity : It lacks uniformity as it is a mere adjustment of double entry
system according to the convenience of the person.
(vi) Difficulty in preparation of final accounts : It is much difficult to prepare trading,
profit and loss account and balance sheet due to the absence of nominal and
real accounts in the ledger.
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of their total costs may be charged against periodic revenues. This is known as
amortization.
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