M.com(Banking) Examination May 2006 - FINANCIAL ACCOUNTING

[ganeshbala]

OCTOBER 2006 PAPER – 3 FINANCIAL ACCOUNTING

(For those who joined in July 2003 and after)

Time: Three hours Maximum: 100 marks
SECTION A -(4 x 10 =40 marks)


Answer any FOUR questions. Answer to theory questions not to exceed 2 pages.


1. Define a bill of exchange and explain its special features.
2. Explain the reasons on account of which the balance as shown by the Pass Book does not agree
with the balance as shown by the Bank column of the Cash Book.
3. How cash flow statement differs from funds flow statement?

4. Rectify the following errors:
(a) Rs. 3,000 sale proceeds of machinery, has been posted to the sales Alc.
(b) A builder's bill for Rs. 7,200 for the erection of a small shed was debited to repair's account.
(c) A sum of Rs. 570 drawn by the proprietor for his own use was debited to travelling expenses
account.
(d) A sale of Rs. 350 to Kishore was entered in the Sales Book as Rs. 530.
(e) Purchased goods from Dinesh Rs. 800 passed through Sales Book.



5. From the following calculate funds from operation:
Rs. Rs.
To Operating expenses 1,00,000 By Gross profit 2,00,000
To Depreciation 40,000 By Profit on sale of plant 20,000
To Loss on sale of building 10,000
To Discount allowed 500
To Preliminary expenses written-off 5,500
To Goodwill written-off 12,000
To Net Profit 52,000
-------------- ---------------
2,20,000 2,20,000
------------- --------------



6. Amar sold goods to Babu for Rs. 1,000. Babu accepted a bill for Rs. 1,000 drawn by Amar. On
the due date, Babu approached Amar and requested him to cancel the original bill and to draw a
new bill for Rs. 1,025 (including interest) which is agreed by Amar. On the due date, the second
bill was honoured. Show the journal entries in the books of Amar.


7. A company issued 10000 equity shares of Rs. 10 each, payable Re. 1 on application, Rs. 2 on
allotment, Rs. 3 on first call and Rs. 4 on final call. All shares were subscribed and amounts duly
received. Pass entries in the books of the company.



8. From the following Profit and Loss Account of X industries Ltd prepare a comparative income
statement.
Profit and Loss Account
(Rs. in Lakhs)
2003 2004 2003 2004
Rs. Rs. Rs. Rs.
To Cost of goods sold 500 640 By Sales 700 900
To Operating expenses:
Administrative expenses 20 20
Selling expenses 30 40
To Net Profit 150 200
------ ----- ------- --------
700 900 700 900
------- ------- ------- --------

SECTION B - (3 x 20 =60 marks)
Answer any THREE questions. Answer to th~ory questions need not to exceed 4 pages.


9. Explain the errors which are disclosed and not disclosed by the Trial Balance.
10. State the difference between Receipts and Payments Account and Income and Expenditure
Account.



11. Following is the Trading and Profit and Loss Account of a concern for the year ending
31.3.2004.
Rs. Rs.
To Opening stock 76,250 By Sales 5,00,000
To Purchases 3,15,250 By Closing stock 98,500
To Wages 7,000
To Gross profit 2,00,000
------------ -----------
5,98,500 5,98,500
------------- -------------
To Administration expenses 1,01,000 By Gross profit 2,00,000
To Selling expenses 12,000 By Profit on sale of investments 6,000
To Non Operating expenses 9,000
To Net Profit 84,000
--------- ----------
2,06,000 2,06,000
----------- -----------
Calculate:
(a) Gross Profit Ratio (b) Net Profit Ratio (c) Operating Ratio and (d) Operating Profit Ratio.



12. Prepare a Trading and Profit and Loss Account for the year ended 31.12.2003 and a Balance
Sheet as on that date from the following Trial Balance.
Rs. Rs.
Drawings 45,000 Capital 1,60,000
Goodwill 90,000 Bills payable 35,000
Buildings 60,000 Creditors 70,000
Machinery 40,000 Purchase Returns 2,650
Bills Receivable 6,000 Sales 2,18,000
Opening stock 40,000
Purchases 51,000
Wages 26,000
Carriage outwards 500
Carriage inwards 1,000
Salaries 35,000
Rent 3,000
Discount allowed 1,100
Repairs 2,300
Bank 25,000
Cash 1,600
Debtors 45,000
Bad debts 1,200
Sales Returns 2,000
Furniture 6,000
Advertisement 3,500
General expenses 450
------------ ----------
4,85,650 4,85,650
----------- ---------
Adjustments:
(a) Closing stock was Rs. 35,000
(b) Depreciate Machinery and Furniture by 10%
(c) Outstanding wages Rs. 1,500
(d) Prepaid Advertisement Rs. 500
(e) Create 5% on debtors for bad debts as provision.





13. Bata Ltd supplies you the following balance on 31st December 2003 and 2004.
Liabilities 2003 2004 Assets 2003 2004
Rs. Rs. Rs. Rs.
Share capital 70,000 74,000 Cash balance 9,000 7,800
Debentures 12,000 6,000 Bills Receivable 4,900 17,700
Bills payable 11,060 12,640 Stock 49,200 42,700
Profit and Loss Alc 10,040 10,560 Land 20,000 30,000
Goodwill 10,000 5,000
-------- ------- -------- --------
1,03,100 1,03,200 1,03,100 1,03,200
Following additional information has also been supplied to you:
(a) Dividends amounting to Rs. 3,500 were paid during the year 1986.
(b) Land was purchased for Rs. 10,000.
(c) Rs. 5,000 were written off on Goodwill during year.
(d) Debentures of Rs. 6,000 were paid during the course of the year.
You are required to prepare a cash flow statement.



14. From the following Receipts and Payments Account of a club and from the information
supplied, prepare an Income and Expenditure Account for the year ended 31.12.2004 and the
Balance Sheet as on that date.
Receipts and Payments Account
Rs. Rs.
To Balance 350 By Salaries 1,400
To Subscription: By General
2003 250 expenses 300
2004 1,000 By Electric charges 200
2005 200 1,450 By Books 500
To Rent received from the use of hall 700 By Newspapers 400
By Balance 200
To Profit from entertainment 400
To Sale of Newspapers 100
------- -------
3,000 3,000
-------- -------
(a) The club has 50 members each paying an annual subscription of Rs. 25. Subscription
outstanding on 31.12.2003 were Rs. 300.
(b) On 31.12.2004 salaries outstanding amounted to Rs. 100. Salaries paid in 2004 included
Rs. 300 for the year 2003.
(c) On 1.1.2004 the club owned Building valued Rs. 10,000, Furniture Rs. 1,000 and Books
Rs. 1,000.
(d) Provide depreciation on furniture at 10%.