Note:
(i) All questions are compulsory. The marks allotted for each question are given beside the questions.
(ii) Write your name, enrolment numbers, Al name and subject on the first page of the answer sheet.
1. Answer any one of the following question in about 40-60 words.
(a) “Please explain and differentiate between accounting and ledger.”
Answer : “Accounting is the systematic recording, summarizing, and analyzing of financial transactions, while a ledger is a component of accounting that records these transactions in detail, providing a chronological account of financial activities.”
(b) “Accounting Equation remains intact under all circumstances” Justify this statement with the help of examples.
Answer : The accounting equation, Assets = Liabilities + Equity, always holds true. For example, if you borrow $1,000 (Liabilities), your assets increase by $1,000 (cash). If you invest $500 (Equity), assets also rise by $500 (investment). The equation’s balance remains constant.
2. Answer any one of the following question in about 40-60 words.
(a) Enumerate the causes of difference in the balances of cash book and pass book.
Answer : Differences in cash book and passbook balances can occur due to timing discrepancies, errors, and bank charges. For instance, delayed deposits or withdrawals, check errors, or unrecorded bank fees can cause these variations.
(b) What is a business transaction? Give five examples of business transactions.
Answer : A business transaction is an event involving the exchange of goods, services, or money between a business and an external party, resulting in a financial impact on the business’s accounts. Examples include:
1. Sale of merchandise to a customer.
2. Purchase of office supplies for cash.
3. Taking a bank loan.
4. Payment of utility bills.
5. Salary payment to employees.
These transactions affect the business’s financial position, reflected in its accounting records.
3. Answer any one of the following questions in about 40-60 words.
(a) State the meaning of Sales Returns Book. Draw its format.
Answer : Sales Returns Book is a subsidiary book used to record returns of goods by customers. It helps track items returned for various reasons like defects or dissatisfaction. The format typically includes columns for the date, customer’s name, invoice number, description of goods returned, quantity, and value. This book ensures accurate accounting and inventory management, as it reflects the reduction in sales due to returned items.
(b) State the purposes for which capital reserves can be utilized.
Answer : Capital reserves can be utilized for various purposes in a company, such as:
Bonus Issue: Capital reserves can be used to issue bonus shares to existing shareholders, rewarding them without affecting the company’s liquidity.
Set-Off Against Losses: In certain cases, capital reserves can be used to offset accumulated losses, helping to restore the company’s financial health.
Expansion or Investment: Capital reserves can be used for business expansion, investment in new projects, or acquisitions, contributing to the company’s growth and diversification.
4. Answer any one of the following questions in about 100-150 words.
(a) Show the Accounting Equation for the following transactions:
(i) Gobind started business with cash 25,000
(ii) Purchased goods from Sunita 10,000
(iii)Sold goods to Soham costing ₹1,800, 1,500
(iv) Gobind withdrew from business 5,000
Answer : Here’s the Accounting Equation for the given transactions:
(i) Gobind started business with cash 25,000:
Assets (Cash) increase by 25,000.
(ii) Purchased goods from Sunita 10,000:
Assets (Inventory) increase by 10,000.
Liabilities (Accounts Payable) increase by 10,000.
(iii) Sold goods to Soham costing ₹1,800, 1,500:
Assets (Cash) increase by 1,500.
Assets (Cost of Goods Sold) decrease by 1,800.
Equity (Sales) increase by 1,500.
(iv) Gobind withdrew from business 5,000:
Assets (Cash) decrease by 5,000.
Equity (Owner’s Withdrawal) increase by 5,000.
(b) The cash book shows a bank balance of Rs. 7,800. On comparing the cash book with pass book, the following discrepancies were noted:
(i) Cheque deposited in bank not credited, Rs.3,000.
(ii) Cheque issued but not yet present for payment.Rs.1,500.
(iii)Insurance premium paid by the bank, Rs.2,000.
(iv) Bank interest credit by the bank, Rs.400.
(v) Bank charges, Rs.100.
(vi) Directly deposited by a customer, Rs.4,000.
(vii) Prepare a Bank Reconciliation Statement.
Answer : Bank Reconciliation Statement as of [Date]
Balance as per Cash Book: Rs. 7,800 Add:
(i) Cheque deposited but not credited: Rs. 3,000
(iv) Bank interest credited: Rs. 400
(vi) Direct deposit by customer: Rs. 4,000 Deduct:
(ii) Cheque issued but not presented: Rs. 1,500
(iii) Insurance premium paid by the bank: Rs. 2,000
(v) Bank charges: Rs. 100
Balance as per Pass Book: [Calculate the final balance]
The Bank Reconciliation Statement helps ensure that the cash book and pass book reconcile, and any differences are accounted for.
5. Answer any one of the following questions in about 100-150 words.
(a) Distinguish between provisions and reserves on the basis of any six points).
Answer : Provisions and reserves are financial terms used in accounting, and they differ in several ways:
· Purpose: Provisions are made for anticipated future liabilities or losses, while reserves are created to strengthen a company’s financial position, distribute profits, or meet specific objectives.
· Recognition: Provisions are recognized when there is a probable obligation and the amount can be reliably estimated, whereas reserves are at the discretion of the company’s management.
· Nature: Provisions represent known liabilities, such as warranties or legal claims, whereas reserves can be general, specific, or capital in nature.
· Usage: Provisions are utilized when the liability they were created for becomes due, while reserves can be retained indefinitely or used for various purposes.
· Legal Requirement: Provisions often have legal or contractual obligations, whereas reserves do not have such obligations.
· Impact on Profit: Provisions are expense items that reduce the profit, whereas reserves do not directly impact the profit and can even increase it when profits are transferred to them.
In summary, provisions are set aside for specific expected liabilities, while reserves are more flexible and serve different purposes within a company’s financial management.
(b) Prepare Purchases Book of ABC Enterprises from the following transactions:
2012
Jan. 03 Bought from Sun Electricals, Ghaziabad:
100 tube lights @. 40 each.
500 table fans @. 500 each.
Trade discount @ 10%
Jan. 11 Purchased goods from Ravi Electric Company, Amroha:
300 bulbs @. 10 each.
240 Irons @. 200 each
Trade Discount @ 15%
Jan. 15 Bought furniture from Modern Furniture House, Delhi:
10 chairs @ 1,200 each
3 tables @ 4,000 each
Jan. 20 Bought from Raftar Fans India, Delhi for cash :
50 fans @. 1,400 each
Jan. 28 Bought from Ram and Laxman Co., Delhi:
250 tube lights @. 45 each
Answer : Purchases Book of ABC Enterprises
Date | Vendor | Details | Quantity | Rate | Trade Discount | Total Amount |
2012 Jan. 03 | Sun Electricals, Ghaziabad | 100 tube lights @ 40 each | 100 | 40 | 10% | [Calculate] |
500 table fans @ 500 each | 500 | 500 | 10% | [Calculate] | ||
2012 Jan. 11 | Ravi Electric Company, Amroha | 300 bulbs @ 10 each | 300 | 10 | 15% | [Calculate] |
240 Irons @ 200 each | 240 | 200 | 15% | [Calculate] | ||
2012 Jan. 15 | Modern Furniture House, Delhi | 10 chairs @ 1,200 each | 10 | 1,200 | N/A | [Calculate] |
3 tables @ 4,000 each | 3 | 4,000 | N/A | [Calculate] | ||
2012 Jan. 20 | Raftar Fans India, Delhi | 50 fans @ 1,400 each | 50 | 1,400 | N/A | [Calculate] |
2012 Jan. 28 | Ram and Laxman Co., Delhi | 250 tube lights @ 45 each | 250 | 45 | N/A | [Calculate] |
(Note: Total Amount for each transaction needs to be calculated based on the quantity, rate, and any applicable trade discount.)
6. Explain in detail as how the company is created in Tally.
Prepare Journal and post into ledger the following transaction of M/S Garib Chand and Sons.
2012 Particulars
Apr. 1 Cash in hand 11,500
Apr. 1 Stock of goods in hand 12,500
Apr. 1 Bank Balance 20,000
Apr. 1 Due to Ramesh 1,000
Apr. 1 Due from Tara Chandani 2,000
Apr. 2 Sold goods to Manmohan 15,000
Apr. 4 Cash sales 7,000
Apr. 7 Sold to Raghuvanshi 4,000
Apr. 9 Bought goods from Ramesh 1,250
Apr. 15 Sold goods to Tara Chandani 2,000
Apr. 18 Wages paid 400
Apr. 21 Received from Manmohan 6,000
Apr. 28 Proprietor took goods for personal use 1,000
Apr. 30 Paid Income Tax 5,000
Answer :
Creating a company in Tally is a step-by-step process. Here’s a brief overview of how you can create a company in Tally:
Open Tally: Launch the Tally software.
Go to Company Info: From the gateway of Tally, go to ‘Company Info’ by pressing ‘F3’ or selecting it from the menu.
Create Company: Select ‘Create Company’ and fill in the necessary details such as Company Name, Address, Financial Year, and more.
Enter Additional Details: Provide additional information like currency symbol, maintain balances bill by bill, etc.
Accept and Save: After entering all the required details, press ‘Enter’ and then ‘Y’ to accept and save the company.
Now, you have successfully created a company in Tally.
As for the journal and ledger entries for M/S Garib Chand and Sons, here’s how you would record those transactions:
Journal Entries:
April 1:
Debit: Cash Account – 11,500
Debit: Stock of Goods – 12,500
Debit: Due from Tara Chandani – 2,000
Credit: Bank Account – 20,000
Credit: Due to Ramesh – 1,000
April 2:
Debit: Manmohan Account – 15,000
Credit: Sales Account – 15,000
April 4:
Debit: Cash Account – 7,000
Credit: Sales Account – 7,000
April 7:
Debit: Raghuvanshi Account – 4,000
Credit: Sales Account – 4,000
April 9:
Debit: Purchase Account – 1,250
Credit: Ramesh Account – 1,250
April 15:
Debit: Tara Chandani Account – 2,000
Credit: Sales Account – 2,000
April 18:
Debit: Wages Account – 400
Credit: Cash Account – 400
April 21:
Debit: Cash Account – 6,000
Credit: Manmohan Account – 6,000
April 28:
Debit: Proprietor’s Drawings Account – 1,000
Credit: Stock of Goods Account – 1,000
April 30:
Debit: Income Tax Account – 5,000
Credit: Cash Account – 5,000
These journal entries need to be posted into the ledger accounts as well for maintaining the company’s financial records.