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GU BCom Sixth Sem Advanced Corporate Accounting Solved Question Paper 2022
COMMERCE (Honours Elective)
Paper: COM-HE-6036
(Advanced Corporate Accounting)
Full Marks: 80
Time: Three hours
The figures in the margin indicate full marks for the questions.
1. Answer the following as directed: (any ten) 1 x 10=10
(1) The full form of IFRS is _______.
Ans: The full form of IFRS is International Financial Reporting Standards.
(2) IASB stands for Indian Accounting Standard Board. (State whether the statement is true or false)
Ans: False. IASB stands for International Accounting Standards Board.
(3) Accounting Standard is mandatory for _______. (Fill in the blanks)
Ans: Accounting Standard is mandatory for companies.
(4) In case of compulsory winding up liquidator is appointed by court. (State whether the statement is true or false)
Ans: True.
(5) A contributory in winding up of a company is a creditor. (State whether the statement is true or false)
Ans: False. A contributory in winding up of a company is a person who is liable to contribute towards the assets of the company in the event of winding up, such as a shareholder or a past member.
(6) As per section 17 of the Banking Regulation Act, every bank has to transfer _______% of profit to statutory reserve fund. (Fill in the blanks)
Ans: As per section 17 of the Banking Regulation Act, every bank has to transfer 20% of profit to statutory reserve fund.
(7) Banking companies are governed by the Banking Regulation Act, _______. (Fill in the blanks)
Ans: Banking companies are governed by the Banking Regulation Act, 1949.
(8) What is surrender value in life insurance?
Ans: Surrender value in life insurance refers to the amount that an insurer pays to the policyholder if the policy is surrendered before its maturity date.
(9) Rebate on bills discounted for a banking company is an income. (State whether the statement is true or false)
Ans: False. Rebate on bills discounted for a banking company is a deduction, not an income.
(10) Commission on reinsurance ceded is an income. (State whether the statement is true or false)
Ans: False. Commission on reinsurance ceded is an expense, not an income.
(11) Face value of the investment is always equal to the capital value. (State whether the statement is true or false)
Ans: False. The face value of an investment is the amount that will be paid at maturity, whereas the capital value is the current value of the investment, which may be higher or lower than the face value.
(12) What is reinsurance?
Ans: Reinsurance is a type of insurance that insurance companies purchase to protect themselves from the risk of large losses on policies they have underwritten.
(13) The first item in order of payment to be made by liquidator is _______. (Fill in the blanks)
Ans: The first item in order of payment to be made by liquidator is the cost of winding up.
(14) What is the meaning of cum-interest in Investment Accounts?
Ans: Cum-interest in Investment Accounts refers to an investment account on which interest has been earned but not yet paid to the investor. The investor is said to be investing cum-interest.
(15) Profits earned during the pre-incorporation period are transferred to _______. (Fill in the blanks)
Ans: Profits earned during the pre-incorporation period are transferred to the credit side of the profit and loss account.
2. Answer the following questions: (any five) 2 x 5=10
(a) What is Accounting Standard?
Answer: Accounting Standard refers to a set of guidelines and rules that dictate how financial transactions and events should be recorded, presented, and disclosed in the financial statements of an organization.
(b) What is winding up of companies?
Answer: Winding up of a company refers to the process of dissolving a company or closing it down, which involves the realization of assets, payment of debts and liabilities, and distribution of remaining assets to shareholders.
(c) Mention two distinctions between IFRS and Ind AS.
Answer: Two distinctions between IFRS and Ind AS are:
1. IFRS is a global accounting standard developed by the International Accounting Standards Board (IASB), while Ind AS is the accounting standard adopted by companies in India based on the IFRS framework.
2. IFRS covers a wide range of accounting issues and topics, while Ind AS focuses primarily on significant accounting issues relevant to Indian companies.
(d) What is XBRL filling?
Answer: XBRL filing refers to the process of submitting financial statements or other business reports in an electronic format using the eXtensible Business Reporting Language (XBRL) to facilitate easier and more efficient analysis, comparison, and dissemination of financial data.
(e) What are non-performing assets?
Answer: Non-performing assets (NPAs) are loans or advances that have stopped generating income for the lender, usually because the borrower has defaulted on the loan repayment for a specific period.
(f) Who are the preferential creditors in respect of winding up of companies?
Answer: Preferential creditors in respect of winding up of companies are those creditors who are given priority over the unsecured creditors in the distribution of assets during the liquidation process, such as employees' unpaid wages, taxes owed to the government, and secured creditors.
(g) Mention any two features of Investment Accounting.
Answer: Two features of Investment Accounting are:
1. It involves the acquisition and management of investments, including stocks, bonds, mutual funds, and other securities.
2. It requires the measurement and reporting of the value of investments in the financial statements, including unrealized gains or losses, dividends, and interest income.
(h) What is profit or loss prior to incorporation?
Answer: Profit or loss prior to incorporation refers to the profit or loss earned by a company from the date of its incorporation until the end of its accounting period. It is usually carried forward to the next accounting period and is shown separately in the financial statements.
3. Answer the following questions as directed: (any four) 5x4=20
(a) Question: Give an overview of Accounting Standard in India.
Answer: Accounting standards in India are a set of guidelines that prescribe the principles and procedures to be followed in the preparation and presentation of financial statements. These standards ensure uniformity, consistency, and transparency in the financial reporting of various entities. The Institute of Chartered Accountants of India (ICAI) is the body responsible for formulating accounting standards in India.
(b) Question: Write a note on IASB.
Answer: The International Accounting Standards Board (IASB) is an independent organization that sets accounting standards that are followed by companies and organizations around the world. It was founded in 2001 and is based in London, UK. The IASB develops and publishes International Financial Reporting Standards (IFRS), which are a set of accounting standards that provide a common financial language for businesses and investors across the world.
(c) Question: How is profit or loss made prior to incorporation treated in accounts?
Answer: Profit or loss made prior to incorporation is treated as a capital reserve and is shown on the liability side of the balance sheet. This is because the profit or loss was made before the company was incorporated and, therefore, belongs to the company's shareholders. This capital reserve is not available for distribution as dividends but can be used to offset any future losses of the company.
(d) Question: State the features of liquidator’s Final Statement of Account.
Answer: The liquidator's final statement of account is a summary of the liquidation process, and it includes the following features:
- A summary of the liquidator's receipts and payments.
- A statement of the company's assets and liabilities at the beginning and end of the liquidation process.
- A list of creditors and the amount they are owed.
- A summary of any legal action taken during the liquidation process.
- Any fees or expenses incurred by the liquidator.
(e) Question: Point out the features of accounts of life insurance companies.
Answer: The features of accounts of life insurance companies include:
- The use of actuarial methods to calculate premiums and reserves.
- The classification of policies as either participating or non-participating.
- The treatment of policyholder funds separately from shareholder funds.
- The disclosure of policyholder bonuses and profits.
- The recognition of income over the life of a policy rather than at the time of receipt of premiums.
(f) Question: Mention the statutory books to be maintained by banking companies.
Answer: The statutory books to be maintained by banking companies include:
- Cashbook
- General ledger
- Daybook
- Journal
- Deposit register
- Borrowings register
- Investment register
- Safe custody register
(g) Question: Write a short note on Valuation Balance Sheet in respect of insurance companies.
Answer: The valuation balance sheet is a financial statement that shows the assets and liabilities of an insurance company at market value rather than at historical cost. This is done to provide a more accurate picture of the company's financial position. The valuation balance sheet is used by insurance regulators to assess the solvency of the company and to ensure that it has adequate reserves to meet its obligations.
(h) Question: Explain the special features of bank book-keeping.
Answer: The special features of bank book-keeping include:
- Maintaining a cash book to record all transactions in cash.
- Recording all deposits and withdrawals in a deposit register.
- Maintaining a separate ledger for each customer's account.
- Reconciling bank statements with the bank's records.
- Adhering to strict security and confidentiality protocols.
4. Answer the following as directed: (any four) 10 x 4=40
(a) Tiskon Ltd. went into voluntary liquidation having the following liabilities:
Prepare Liquidator’s Final Statement of A/c showing the proportion paid to unsecured creditors. 10
(b) Discuss the scope and process of issuing IFRS in India. 10
Ans: The International Financial Reporting Standards (IFRS) are a set of accounting standards developed by the International Accounting Standards Board (IASB) with the objective of achieving a single set of high-quality accounting standards that can be applied consistently across the world. In India, the process of issuing IFRS involves a number of stakeholders and follows a well-defined process.
Scope of issuing IFRS in India:
The Institute of Chartered Accountants of India (ICAI) is responsible for the implementation of IFRS in India. The scope of issuing IFRS in India includes the following:
1. Adoption: ICAI has the authority to adopt IFRS and issue Indian Accounting Standards (Ind AS) based on IFRS for application in India.
2. Interpretation: ICAI is also responsible for interpreting and issuing guidance on the application of IFRS and Ind AS in India.
3. Education and training: ICAI provides education and training on IFRS and Ind AS to ensure that professionals in India are equipped with the knowledge and skills to implement these standards.
Process of issuing IFRS in India:
The process of issuing IFRS in India involves the following steps:
1. Adoption: The ICAI evaluates new or amended IFRS issued by the IASB and decides whether to adopt them in India.
2. Localization: If IFRS is adopted, ICAI reviews and modifies it to ensure its relevance and applicability in the Indian context. This process is known as localization.
3. Public comment: Once the Ind AS is developed, it is released for public comment to gather feedback from stakeholders.
4. Approval: Based on the feedback received, ICAI finalizes the Ind AS and obtains approval from the Ministry of Corporate Affairs (MCA) before it is made mandatory for application in India.
5. Implementation: Once approved, the Ind AS becomes mandatory for application by companies in India.
In conclusion, the process of issuing IFRS in India is a well-defined process that involves multiple stakeholders and is designed to ensure the adoption of high-quality accounting standards that are relevant and applicable in the Indian context. The process includes adoption, localization, public comment, approval, and implementation, and is overseen by ICAI with the support of the MCA.
(c) What is Corporate Annual Report of a company? Explain its needs and objectives. 4+6=10
Ans: A Corporate Annual Report is a comprehensive report that provides a summary of a company's financial performance and activities over the previous fiscal year. It is typically prepared by a company's management and is intended for shareholders, stakeholders, and the general public.
The Corporate Annual Report has the following needs and objectives:
1. Financial disclosure: One of the primary objectives of the Corporate Annual Report is to provide financial disclosures about the company's performance, including financial statements, cash flow statements, and balance sheets. This information helps shareholders and stakeholders evaluate the company's financial health and make informed decisions.
2. Performance review: The report also provides a review of the company's performance over the previous year, highlighting significant achievements, challenges, and future plans.
3. Transparency and accountability: The Corporate Annual Report aims to provide transparency and accountability to the company's shareholders, stakeholders, and the general public by disclosing key financial and non-financial information about the company.
4. Communication and marketing: The report is also an important communication and marketing tool for the company, as it provides an opportunity to showcase the company's strengths, achievements, and future prospects.
5. Compliance: The Corporate Annual Report also serves a regulatory compliance function, as it is required by law in many jurisdictions. The report must comply with various legal and accounting standards and regulations.
In conclusion, the Corporate Annual Report is a critical document that provides a comprehensive overview of a company's financial performance, activities, and future prospects. The report aims to provide transparency and accountability to stakeholders, comply with regulatory requirements, and serve as an important communication and marketing tool for the company.
(d) Write a background of convergence of Indian Accounting Standard with IFRS. 10
Ans: The convergence of Indian Accounting Standards (Ind AS) with International Financial Reporting Standards (IFRS) was initiated by the Ministry of Corporate Affairs (MCA) in 2009. The MCA realized that a single set of high-quality accounting standards would help Indian companies to raise capital from global markets, improve transparency and comparability of financial statements, and increase investor confidence.
The convergence process involved significant changes to the existing Indian accounting standards to align them with the IFRS. The MCA constituted a high-level committee, the National Advisory Committee on Accounting Standards (NACAS), to oversee the convergence process. NACAS was responsible for developing Ind AS based on IFRS and monitoring the implementation of the new standards.
The convergence process was carried out in a phased manner. In the first phase, the MCA mandated the adoption of Ind AS for certain listed companies and other specified entities with effect from April 1, 2015. In subsequent phases, more companies were required to adopt Ind AS.
The convergence of Ind AS with IFRS resulted in several changes to Indian accounting practices. Some of the significant changes include the introduction of fair value accounting, new standards for revenue recognition and lease accounting, and changes to the classification of financial instruments.
The convergence process was not without challenges. The implementation of Ind AS required significant investments in technology, training, and resources by companies. The transition also posed challenges in terms of tax implications, regulatory compliance, and the impact on key financial metrics.
Despite these challenges, the convergence of Ind AS with IFRS has been viewed as a significant step towards aligning Indian accounting practices with global standards. The adoption of Ind AS has improved the comparability and transparency of financial statements, facilitated cross-border investments, and increased investor confidence. The convergence process has also positioned India as a global player in accounting and financial reporting, enabling Indian companies to compete on a level playing field with their international counterparts.
(e) What are different modes of winding up of a company? Describe the powers of the liquidator under compulsory winding up of companies. 3+7=10
Ans: Winding up refers to the process of closing down the operations of a company and distributing its assets to its creditors and shareholders. There are two modes of winding up of a company, voluntary winding up and compulsory winding up.
1. Voluntary winding up: This mode of winding up occurs when the shareholders of the company pass a resolution to wind up the company voluntarily. The company then appoints a liquidator who takes control of the company's assets, settles its liabilities, and distributes any remaining assets among the shareholders.
2. Compulsory winding up: This mode of winding up occurs when the court orders the winding up of a company, usually in response to a petition filed by creditors, shareholders, or the company itself. The court appoints a liquidator who takes over the management of the company, collects its assets, settles its liabilities, and distributes any remaining assets among the shareholders.
Powers of the liquidator under compulsory winding up of companies:
1. Power to investigate: The liquidator has the power to investigate the affairs of the company and its directors to determine the causes of the company's failure and whether any fraudulent or wrongful acts have been committed.
2. Power to sell assets: The liquidator has the power to sell the company's assets to settle its liabilities and distribute the remaining assets among the shareholders.
3. Power to sue: The liquidator has the power to sue on behalf of the company to recover any outstanding debts or assets.
4. Power to compromise: The liquidator has the power to compromise with creditors and debtors to settle the company's liabilities.
5. Power to distribute assets: The liquidator has the power to distribute any remaining assets among the shareholders after settling the company's liabilities.
In conclusion, the powers of the liquidator under compulsory winding up of companies are extensive, and the liquidator is responsible for ensuring that the winding up process is carried out in a fair and transparent manner.
(f) From the following information, prepare a Profit and Loss A/c of United Bank of India for the year ended on 31st March, 2022: 10
(g) From the following particulars, prepare a Fire Revenue A/c of FRJ Insurance Co. Ltd. for the year ended on 31st
March, 2022: 10
The company calculates its reserve for unexpired risks at 50% of the net premium each year.
(h) Consider the following information taken from the records of Das Ltd.:
(1) The company had a balance of 5% Government Bonds of Rs. 5,00,000 (Cost Rs. 4,80,000) as on 31/12/2020.
(2) Interest was receivable on April 1 and October 1 each year.
(3) The company received interest up to October 1, 2020.
(4) On July 1, 2021 the company further purchased bonds of Rs. 1,50,000 at a cost of Rs. 1,70,000.
(5) On October 15, 2021 bonds worth Rs. 1,80,000 were sold for Rs. 1,70,000.
You are required to prepare Investment A/c for the year ended on 31st December, 2021 valuing investment on
average cost basis. Ignore brokerage. 10
(i) Moon Ltd. was incorporated on July 1, 2021 to acquire a running business with effect from 1/4/2021. The accounts of the company for the year ended on 31st March, 2022 disclosed the following:
(1) There was a gross profit of Rs. 1,50,000.
(2) Sales for the year amounted to Rs. 6,00,000 of which Rs. 1,20,000 were for the first six months.
(3) Expenses debited to Profit and Loss A/c were as follows:
Prepare a statement showing the amount of profit made before and after incorporation. 10
(j) Explain mandatory and voluntary disclosures to be made in the Annual Report of a company. 10
Ans: The Annual Report of a company is a comprehensive document that provides an overview of the company's financial performance, business operations, and future prospects. It is a crucial document that helps stakeholders make informed decisions about the company's investments, governance, and management.
Mandatory Disclosures:
Mandatory disclosures are the information that companies are required by law to disclose in their annual reports. These disclosures include financial statements, such as the balance sheet, income statement, and cash flow statement. The financial statements provide an overview of the company's financial performance and position, including its revenue, expenses, assets, and liabilities.
Companies are also required to disclose information about their board of directors, executive compensation, related party transactions, and material contracts. This information is essential for stakeholders to evaluate the company's governance, management, and relationships with other entities. Additionally, companies must disclose their risks and uncertainties, including market risks, credit risks, and operational risks, to provide transparency to stakeholders.
Voluntary Disclosures:
Voluntary disclosures are additional information that companies choose to include in their annual reports beyond the mandatory requirements. These disclosures may include the company's social and environmental responsibility initiatives, research and development efforts, innovation strategies, and other information that the company believes is relevant and useful to stakeholders. Voluntary disclosures can help companies demonstrate their commitment to sustainability, transparency, and good corporate citizenship, which can enhance their reputation and stakeholder trust.
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