Accounts Preliminary Paper 6

OMTEX CLASSES “The home of text” Accounts Preliminary Examination 2007 - 08

Total Marks 100

OMTEX - CLASSES

Preliminary Examination

–

006

ACCOUNTS Time – 3 hrs.

4 PAGES

Max. Marks : 100

Q1. Attempt any four of the following. (20 marks) A. Answer in one sentence each. (5 marks) 1. What do you mean by scrap value? 2. What are noting charges? 3. What is the relationship between coventurers? 4. What is partnership deed? 5. State the formula for calculating Normal Profit? Ans. 1.Market value of the asset after its use or when it becomes obsolete is known as scrap value. 2. The fees charged by the notary public for noting and protesting the dishonoured bill are termed as noting charges. 3. The relation between coventurers is that of partners. 4. Partnership deed is a written document in which terms of agreement are given in writing. 5. Formula for calculating normal profit = Capital employed x Normal rate of return.

B. Write the word/term/phrase which can substitute each of the following statement: (5 marks) 1.

Goods returned to the supplier. It is a stick or lever used to change the position of the cursor on a screen. A bill in which the period of the bill is counted from the date of the bill accepted. The receipts that are an unusual nature not arising through named activities of the business. A fixed asset which is not essential for conduct of business.

2. 3. 4. 5.

C. Match the following pairs. 1. 2. 3. 4.

5.

Group A Partner’s Salary Subscription received in advance for the current year. Dishonour of bill. Cash in hand. Unsold goods taken over by co – ventures

a. b. c. d. e. f. g.

h.

(5 marks) Group B Balance sheet asset side. Current asset. Deducted from gross profit. Credited to joint venture account. Credited to coventurers A/c Noting Charges. Closing balance sheet liability side. Fixed assets.

D. Select the most appropriate alternative from hose given below each statement. (5 marks) 1.

2.

3.

Partner’s drawings are transferred to his __________ a/c under fixed capital method. a. Capital A/c b. Current A/c c. Trading A/c d. Profit and loss A/c Sale of old materials must be shown on credit side of ____________ a. Cash book b. Income and expenditure account c. Balance sheet d. Receipt and Payments account Cost of asset = _____________ a. Purchase price + scrap value b. Purchase price + depreciation c. Purchase price + incidental cost d. None of the above

OMTEX CLASSES “The home of text” 4.

5.

A person in whose favour the bill is endorsed is called ___________ a. Endorsee b. Endorser c. Drawer d. None of the above Expenses incurred by coventurers is debited to ___________ a. None of the below b. Consignee’s account c. Co venturers account d. Joint venture account.

E. State with reason whether the following statements are true of false.

(5 marks) 1. Balance sheet is a statement and not an account. Ans. True: - Balance sheet takes into consideration balance of real and personal accounts which are to be carried forward. Nominal accounts are closed by transferring their balances either to trading account or profit & loss account. So balance sheet is a statement prepared on the last date of accounting year and not an account. It is prepared to know the financial position of the concern. 2. Partnership firm enjoys business continuity. Ans. False: - Partnership firm is a personal organisation. Hence it stands dissolved in case of insolvency, insanity or death of any partner. Hence partnership firm does not enjoy business continuity. 3. When the bill is sent to bank for collection, bank A/c is credited. Ans. False: - When bill is sent to bank for collection, bills receivable account is credited. Bills receivable account being a real account the rule applicable is credit what goes out. Hence when bill is sent to bank for collection, bank account is not credited.

F.

Drawer: Shekhar Desai, Spastic Road, Mahad. (5 marks) Drawee – Sharad Verma, Narayan Peth, Pune. Payee – Mukund Pande, Panvel. Amount Rs. 5775/Period 50 days Date of Bill Drawn – 15th March, 1995 Date of Acceptance – 19th March, 1995 (Accepted for only Rs. 5700) Q2. On 1-1-2002 Champaklal & Sons purchased furniture for Rs. 15000. On 1-7-2002 additional furniture was purchased for Rs. 8000. On 30-6-2003 the furniture purchased on 1-1-2002 was skid for Rs. 12,000. The firm charges depreciation @ 10% p.a. under the reducing balance method. Prepare Furniture account, for the years 2002, 2003, 2004 assuming that accounting year of the firm is calendar year and depreciation account for the year ending 31 – 12 - 2003. (10marks) OR A. Find out value of goodwill from the following. Net profits for last 5 years are Rs. 30,000; Rs. 36,000; Rs. 24,000; Rs. 4,000; Rs. 14,000. Goodwill to be valued at 3 years purchase of average net profit. (5 marks)

B. Explain 'Abacus’ as a phase in the history of computer.

(5 marks) Ans. It was in about 400 B.C., that a sort of adding machine called ABACUS was invented in China. It consists of a rectangular frame. The rods or wires are fitted to the frame which carry sound beads. Abacus is still being used in some countries. Counting id done by shifting the beads from one side to another. It is proved that an expert operator of abacus is faster in calculations than a clerk using a calculator.

Q3. Softy accepted a bill of Rs. 20,000 drawn by Kwality at 3 months. Kwality got the bill discounted with his bank for Rs. 19,500. Before the due date softy approached Kwality for renewal of the bill. It was agreed to pay Rs. 15,000 immediately together with interest on the remaining amount a 10% for 3 months and for the balance Softy should accept a new bill for 3 months. These arrangements were carried through. But afterwards softy became insolvent and only 40% of the amount could be recovered from his estate. Pass necessary Journal entries in the books of Softy & show Kwality’s account in Softy’s ledger. (12 marks) OR

OMTEX CLASSES “The home of text” Q3. Raj sold goods worth Rs. 7,000 to Dev & Rs. 9,500 to Chetan on credit on 31-1-2004. On 1-2-2004, Dev accepted a bill of Rs. 5,000/- at 2 months paid cash Rs. 1,900 in full settlement of his account. On the same date Chetan accepted a bill for the due amount at 3 months. Raj discounted the first bill at 6% p.a. and sent the second bill to bank for collection. On the due date of the first bill, Dev approached bank for renewal of bill. Raj accepted on the condition that Rs. 3000 be paid immediately, along with the interest on the balance Rs. 40 & accepts a fresh bill for the balance amount. These arrangements were carried through. Raj honoured his acceptance on the due date. However Dev became insolvent & dividend of 20% could be recovered from his estate. (12 marks) Q4. Ram and Shyam entered into joint venture to prepare building for a private firm who agree to pay Rs. 2,00,000 on the completion of the work. A bank account was opened in their joint names Ram contributing Rs. 25,000 and Shyam Rs. 25,000. They share the profits and losses in the ration 2:3 respectively. Payments made out of the joint bank account where: Purchase of equipments Rs. 15,000 Hire Charge for equipments Rs. 12,000 Wages Rs. 85,000 Materials Rs. 20,000 Office Expenses Rs. 68,000 Ram paid Rs. 5,000 and Shyam Paid Rs. 3,000 for the other expenses. The building was completed and government paid the amount by cheque. Sham took equipments at a valuation of Rs. 6,000 and Ram took material of Rs. 5,000. Prepare: Joint venture account, Joint bank account and coventurers account. (12 marks) Q5. Miss Mary keeps her books under single entry, giving the following information: Particulars 31-12-2005 31-12-2006 Stock 18700 23400 Debtors 12000 14000 Creditors 9000 1500 Bills Receivable 4000 5000 Bills Payable 1000 200 Furniture 600 600 Building 12000 12000 Bank balance (Cr.) 4350 3350 1. Drawings of Miss Mary amounted to Rs. 7520 during the year on which interest amounts Rs. 75. 2. O/S expenses amounted to – Wages – Rs. 3000 Salaries – Rs. 1200 & legal expense – Rs. 700. 3. Insurance has been prepaid for Rs. 250 4. R.D.D. is to be provided at Rs. 1450 5. Depreciation is to be charges @ 5% on building and furniture. Prepare i. Statement of affairs as on 31 – 12 – 2005 & 31 – 12 – 2006 ii. Statement of profits / loss during the year. iii. Revised statement of affairs as on 31 – 12 – 2006. Q6. From the following information prepare Income and Expenditure account for the year ended 31st March, 2008 of Youth Association and a balance sheet as on that date. (16 marks) Receipts Amount Payments Amount To Bal. b/d – 3500 By Salaries To Subscriptions 1500 2007 250 2006 - 07 250 2008 2 2500 2007 - 08 3 250 4300 500 4500 By Rent 300 2008 - 09 750 1600 By Postage 3000 To Entrance Fees 2000 By Printing and Stationary 2400 To interest on investments 12500 By Balance C/d 12500 Adjustments 1. Salaries unpaid Rs. 250, printing unpaid includes Rs. 600 for the year. 2. Printing paid includes Rs. 500 pertaining to the previous year. 3. Subscriptions outstanding Rs. 650 for the year. 4. Balances on 1st April 2007, Furniture – Rs. 6000, Investment – Rs. 50,000, Building - Rs. 2000

OMTEX CLASSES “The home of text” 5.

Provide 5% depreciation on furniture and building.

Q7. Govindan & Mukul are partner sharing profits and loses in the ratio 3:2. Following is the trial balance as on 31st Match 2006. (20 marks) Trial Balance as on 31 – 3 – 2006 PARTICULARS DR. CR. Capital Mr. Govindan 50000 Mr. Mukul 50000 Stock on 1st April 2005 20000 Machinery 70000 Bills Receivable & 10000 8000 Payable 10000 12000 Purchase & Sales 0 Furniture 6000 5000 Returns 2000 Current Account Mr. Govindan 2000 Mr. Mukul 1000 Customers Account 30000 40000 Supplies Account Salaries (11 months) 11000 Productive Wages 10000 Office Insurance 3000 General Expenses 2000 3000 Commission 10000 10% Bank Loan Interest on Loan 400 Bad debts 1000 Advertisement 8000 1000 R.D.D. Land & Building 10600 28700 287000 0 Adjustments: 1. Closing stock is valued at market price Rs. 55000 which is 10% above cost. 2. Machinery includes Rs. 10000 purchased on 31st March 2006. 3. Depreciate Machinery @ 10% p.a. 4. Provide R.D.D. Rs. 2,000 on debtors & provide 2% for reserve for discount on debtors. 5. Mr. Govindan is entitled to a salary of Rs. 400 p.m. from 1st August 2005. 6. Provide 10% for reserve for discount on creditors. 7. Mr. Mukul is entitled to get 2% commission on gross profit. Prepare Trading Account and Profit or loss account for the year ended 31st March 2006 and Balance sheet as on that date.

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