ICSI Previous Question papers Financial Accounting Dec 2012

ICSI Previous Question papers

Financial Accounting

Dec 2012

Time allowed : 3 hours

Maximum marks : 100
Total number of questions : 8
NOTE : Answer SIX questions including Question No.1 which is compulsory. 

All working notes should be shown distinctly.

1. (a) Explain any two of the following :
(i) Branches of accounting
(ii) General journal
(iii) Users of accounting information.
(5 marks each)
(b) State, with reasons in brief, whether the following statements are true or false :
(i) Outstanding rent is a nominal account.
(ii) Profit and loss account is a point statement whereas balance sheet is a period
statement.
(iii) A balance in an asset account always signifies a debit balance.
(iv) Compensatory errors do not disturb agreement of trial balance.
(v) If the business carried on by a partnership firm becomes illegal, the partnership
firm stands dissolved.
(2 marks each)
2. (a) Re-write the following sentences after filling-in the blank spaces with appropriate
word(s)/figure(s) :
(i) The value of goods withdrawn by proprietor for personal use is debited to
_____________ account.
(ii) Under accounting equation approach, all accounts are divided into three categories
namely assets, liabilities and _____________.
(iii) If partners’ capital accounts are fixed, drawings made by a partner will be
recorded in his _____________ account.
(iv) The maximum number of partners in a partnership firm engaged in other than
banking business is _____________.
Financial Accounting

(v) Fee paid for registration of a building is a _____________ expenditure.
(vi) The three parties to a bill of exchange are drawer, drawee and _____________.
(vii) The concession given by the seller to the buyer on the list price at the time of
sale is known as _____________.
(viii) The bank reconciliation statement is prepared on a particular date to reconcile the
bank balance as per cash book and bank balance as per _____________ book.
(1 mark each)
(b) Distinguish between any two of the following :
(i) ‘Partnership’ and ‘joint venture’.
(ii) ‘Double entry system’ and ‘single entry system’.
(iii) ‘Consignment’ and ‘sale’.
(4 marks each)
3. (a) Write the most appropriate answer from the given options in respect of the following :
(i) Profit and loss account is prepared by transfer of —
(a) Nominal accounts
(b) Real accounts
(c) Personal accounts
(d) Real and nominal accounts.
(ii) Cash book contains —
(a) All cash receipts only
(b) All cash payments only
(c) All cash receipts and cash payments
(d) All transactions for which no special journal has been kept by the business.
(iii) Bills receivable book is a part of —
(a) Journal
(b) Ledger
(c) Trial balance
(d) Profit and loss account.

(iv) An account to make the trial balance tally temporarily is called —
(a) Suspense account
(b) Profit and loss adjustment account
(c) Trading account
(d) Profit and loss account.
(v) When the goods are returned to the supplier, the statement sent to him by the
buyer is called —
(a) Debit note
(b) Credit note
(c) Invoice
(d) Bill of exchange.
(vi) Income and expenditure account —
(a) May have a debit opening balance
(b) May have a credit opening balance
(c) May have either a debit or a credit opening balance
(d) Does not have an opening balance.
(vii) Name of the principal book of accounts is —
(a) Journal
(b) Ledger
(c) Subsidiary book
(d) Cash book.
(viii) General reserve is created on the basis of convention of —
(a) Conservatism
(b) Uniformity
(c) Materiality
(d) Full disclosure.
(1 mark each)
2/2012/FA Contd ……..
153
: 4 :
(b) Explain any two of the following statements :
(i) Average clause is applicable only when the amount of insurance policy is less
than the value of asset insured.
(ii) Posting is the process of recording transactions in the ledger accounts based on
the entries in the journal.
(iii) Dissolution of a partnership is different from dissolution of a firm.
(4 marks each)
4. On 31st March, 2012 the following trial balance was extracted from the books of
Prakash, a trader :
Debit balances `                                                                        Credit balances `
Drawings                                         30,000                              Capital                                          2,80,000
Sundry debtors                           2,01,000                            Sundry creditors                    1,04,010
Interest on loan                           3,000                                Loan on mortgage                   95,000
Cash in hand                                 20,500                                Provision for bad debts        7,100
Stock on 1st April, 2011          8,390                                 Sales                                               21,02,430
Motor vehicles                           1,00,000                                Purchases return                     13,460
Cash at bank                                 35,550                                     Discount earned                      5,500
Building                                         1,20,000                                   Bills payable                             26,140
Bad debts                                       5,250                                         Rent received                          2,400
Purchases                                     16,64,580
Sales return                                 78,210
Carriage outwards                     24,040
Carriage inwards                      29,290
Salaries                                        90,970
Rates and taxes                       28,000
Insurance                                 910
Advertising                              32,640
General expenses                  34,890
Bills receivables                      68,820
26,36,040                                                                                      26,36,040

Prepare trading and profit and loss account for the year ended 31st March, 2012 and a balance
sheet as on that date after making the following adjustments :
(i) Depreciate building @2½% and motor vehicles @20%.
(ii) Interest on loan @6% per annum is due for six months.
(iii) Prepaid insurance on 31st March, 2012 was `150.
(iv) On 31st March, 2012, the outstanding expenses were :
Salaries `                                  7,500
Rates and taxes `                  3,500
(v) Provision for bad debts is to be maintained @5% on sundry debtors.
(vi) Manager’s commission is to be provided @10% on net profit after charging such
commission.
(vii) Stock on 31st March, 2012 was `                                                  62,500.
(16 marks)
5. (a) On 15th September, 2012, the premises of a firm was destroyed by fire but sufficient
records were saved from which the following information was gathered :
Stock at cost on 1st April, 2011                                                                                     73,500
Stock at cost on 31st March, 2012                                                                               79,600
Purchases less return during the year ended 31st March, 2012                      3,98,000
Sales less return during the year ended 31st March, 2012                                  4,87,000
Purchases less return during the period from 1st April, 2012
to 15th September, 2012 1,                                                                                                 62,000
Sales less return from 1st April, 2012 to 15th September, 2012                        2,31,200
While valuing the stock for preparation of balance sheet as on 31st March, 2012, `2,300
had been written-off on a certain stock which was of a poor selling line, having cost
of `6,900. Half of these goods were sold in June, 2012 at a loss of `250 on the original
cost of `3,450. The remainder of this stock was now estimated to be worth the original
cost, subject to the above exception, gross profit remained at a uniform rate throughout.
The stock salvaged was `                                                                                                                      5,800.
Show the amount of the insurance claim for the loss of goods by fire.
(8 marks)

(b) The trial balance of Mohan showed a difference which was posted to a newly opened
suspense account. Later, the following errors were detected :
(i) The total of travelling expenses account has been written as `18,500 instead of
`17,500.
(ii) Goods purchased for `5,000 have been posted from the purchases book to the
supplier’s account as `3,000.
(iii) The sales return of `2,000 from Jayant has been correctly credited to Jayant’s
personal account, but the transaction has not been recorded in sales return book.
(iv) A cheque of `6,000 issued to a supplier towards amount due has been debited
to purchases account.
(v) A credit sale of `1,000 to Ramesh has been recorded in sales book as `10,000.
Pass the necessary journal entries for rectifying the above errors. Assuming that there
are no other errors, prepare a suspense account as it would appear in the ledger.
(8 marks)
6. (a) On 31st March, 2012 the cash book of Gopal showed a bank overdraft of `38,200.
On examination of cash book and bank statement, the following differences were noted :
`
Cheques deposited with bank but not collected by the bank 50,000
Interest on securities collected by the bank, but not yet recorded
in the cash book 6,400
In March, 2012 dividends receivable were credited directly to the bank
account, but no entries have been passed in the cash book yet 5,000
Cheques issued, but not presented to the bank for payment 1,87,000
Bank charges appearing in the bank statement, but not yet
entered in the cash book 1,700
You are required to —
(i) Show the adjustments required in the cash book.
(ii) Prepare a bank reconciliation statement as on 31st March, 2012.
(8 marks)

(b) Jolly, a trader prepares his accounts on the basis of single entry system. He furnishes
you the following information :
Assets and Liabilities                    On 31st March, 2011                   On 31st March, 2012
(` ) (` )
Cash at bank                                          4,500                                                3,000
Cash in hand                                            300                                                   4,000
Stock in trade                                        40,000                                              45,000
Debtors                                                    12,000                                               20,000
Office equipments                               5,000                                                   5,000
Sundry creditors                                  30,000                                               20,000
Furniture                                                4,000                                                     4,000
During the year, Jolly introduced `8,000 as further capital and withdrew `500 every
month for his household expenses. Write-off depreciation on furniture @10% and on
office equipments @5%.
Prepare a profit and loss account for the year ended 31st March, 2012 and statement
of affairs as on that date.
(8 marks)
7. Anand, Vineet and Manmeet were equal partners in a business. Their balance sheet as on
31st March, 2012 was as under :
Liabilities `                                                                                        Assets `
Bills payable                              2,00,000                                  Bank                                         2,00,000
Creditors                                     4,00,000                                 Stock                                        2,00,000
Profit and loss account       60,000 `
General reserve                      3,00,000                                     Debtors                                 4,50,000
Capital accounts :                                                                             Less : Provision for
bad debts                           50,000                                                                                                  4,00,000
Anand 6,00,000                                                                             Furniture                           2,80,000
Vineet 4,00,000                                                                             Land and building          12,00,000
Manmeet 3,20,000           13,20,000
  22,80,000                                                                                         22,80,000
Vineet retired from business on 1st April, 2012. Anand and Manmeet decided to continue
the business as equal partners on the following terms :
(i) Goodwill of the firm was valued at `1,50,000. An adjustment entry was passed without
raising goodwill account.

(ii) Provision for bad debts on debtors was to be maintained @  10%.
(iii) The book value of land and building was to be increased to `                      13,20,000.
(iv) Furniture was to be reduced by `80,000.
(v) Rent outstanding `15,000, not provided for as yet, was to be provided.
The remaining partners decided to bring in an equal amount of cash sufficient to pay off
Vineet and to maintain the bank balance of `2,00,000.
Prepare revaluation account, partners’ capital accounts and cash book. Also prepare the initial
balance sheet of the new firm.
(16 marks)
8. (a) The following figures appear in the books of Gaurav :
Provision for bad debts as on 1st April, 2011                                                 8,000
Provision for discount on debtors as on 1st April, 2011                             6,000
Discount allowed during the year ended 31st March, 2012                      8,000
Bad debts written-off during the year ended 31st March, 2012               4,000
Sundry debtors as on 31st March, 2012 9                                                         8,000
Create the provision for bad debts @5% and provide for discount allowed on
debtors @10%.
Show the bad debts account, provision for bad debts account, discount allowed account
and provision for discount allowed account.
(8 marks)
(b) Ramesh sells goods for `2,00,000 to Mukesh on 1st January, 2012. On the same day
Ramesh draws a bill on Mukesh for three months for the amount. Mukesh accepts it
and returns it to Ramesh who discounts it on 4th January, 2012 with his bank @12%
per annum. The acceptance is dishonoured on due date and the bank pays `50 as noting
charges. However, Mukesh requests Ramesh to accept `6,050 as interest and reimbursement
of noting charges and renew the bill for a further period of three months. Ramesh agrees
and on the due date, the bill is met by Mukesh.
Pass necessary journal entries in the books of Ramesh.
(8 marks)

 

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