GU Financial Accounting Solved Question Paper 2023 [Gauhati University BCom 1st Sem NEP FYUGP]

[Gauhati University B.Com 1st Sem NEP FYUGP]

2023
COMMERCE

Paper: BCM0100204
(Financial Accounting)

Full Marks: 60
Time: 2½ Hours

The figures in the margin indicate full marks for the questions.

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1. Select the appropriate answers from the following: (1×8=8)

(a) Accounting gives information on:
(i) Financial organization states
(ii) Income and cost for the managers
(iii) Company's tax liability for a particular year
(iv) All of the above
Answer:- (iv) All of the above

(b) Which of the accounting principles states that companies and owners should be treated as separate entities?
(i) Money measurement concept
(ii) Business entity concept
(iii) Periodicity assumption
(iv) Going concern concept
Answer:- (ii) Business entity concept

(c) Accounting principles are generally based on:
(i) Objectivity
(ii) Subjectivity
(iii) Convenience in recording
(iv) None of the above
Answer:- (i) Objectivity

(d) Ind AS 9 is related to:
(i) Revenue recognition
(ii) Accounting for fixed assets
(iii) Leases
(iv) Depreciation accounting
Answer:- (i) Revenue recognition

(e) Amount spent on increasing the seating capacity in a cinema hall is a:
(i) Revenue expenditure
(ii) Capital expenditure
(iii) Both revenue and capital expenditure
(iv) None of the above
Answer:- (ii) Capital expenditure

(f) Excess of debit in the Profit and Loss Account is known as:
(i) Gross loss
(ii) Gross profit
(iii) Net loss
(iv) Net profit
Answer:- (iii) Net loss

(g) Profit and Loss Account is also known as:
(i) Statement of affairs
(ii) Income statement
(iii) Statement of operations
(iv) Statement of labors
Answer:- (ii) Income statement

(h) In hire purchase system, the buyer charges depreciation on the:
(i) Cash price
(ii) Future market price
(iii) Hire purchase price
(iv) Middle price
Answer:- (i) Cash price

2. Answer in brief any six questions: (2×6=12)

2. Answer in brief any six questions: (2×6=12)

(i) Mention any two users of financial accounting information.
Answer:

1. Investors: They use financial accounting information to assess the profitability and financial health of a business for making investment decisions.

2. Creditors: They evaluate the solvency of a company to determine its ability to repay debts.

(ii) What is the basic difference between Accounting Standard and Generally Accepted Accounting Principles?
Answer:

• Accounting Standards (AS): These are specific guidelines issued by regulatory bodies to standardize accounting practices.

• Generally Accepted Accounting Principles (GAAP): These are broad principles or conventions that govern accounting practices universally.

(iii) What is the significance of Accounting Standards?
Answer:
Accounting Standards ensure uniformity, transparency, and comparability in the financial statements of different organizations. They help stakeholders make informed decisions and enhance credibility.

(iv) Explain in brief the meaning of the matching concept in the measurement of income.
Answer:
The matching concept ensures that expenses incurred in a specific accounting period are matched with the revenues generated in the same period. This provides an accurate measure of net income.

(v) How are expenses recognized under AS 9?
Answer: Under AS 9 (Revenue Recognition), expenses are recognized when they are incurred, regardless of when the payment is made. This aligns expenses with the revenue they help generate.

(vi) What is revenue receipt?
Answer: Revenue receipts are the earnings of a business from its core activities, such as the sale of goods or services. These are recurring in nature and contribute to the operating income.

(vii) What is the significance of inventory valuation?
Answer: Inventory valuation affects the cost of goods sold, profit, and overall financial position of a company. It ensures accurate reporting and compliance with accounting standards.

(viii) What is the basic advantage of computerized accounting?
Answer:
The basic advantage of computerized accounting is speed and accuracy. It reduces manual errors, enables quick report generation, and enhances data security.

(ix) What is the basic difference between hire purchase system and installment payment system?
Answer:

• Hire Purchase System: Ownership is transferred after the final installment is paid.

• Installment Payment System: Ownership is transferred immediately, while payment is made in installments.

(x) How do you define accounting software package?
Answer:
An accounting software package is a computer program designed to manage financial transactions, generate reports, and automate accounting processes for businesses.

3. Answer any four questions in short: (5×4=20)

(a) Mention the qualitative characteristics of accounting information.

Answer:
The qualitative characteristics of accounting information are as follows:

1. Relevance: Information should be useful for decision-making and capable of influencing the users' decisions.

2. Reliability: Information must be accurate, verifiable, and free from errors or bias.

3. Comparability: Users should be able to compare financial information across periods and between entities to identify trends and differences.

4. Understandability: Information should be presented in a clear and concise manner, making it easily comprehensible to users.

5. Timeliness: Accounting information should be provided promptly to ensure it remains relevant for decision-making.

(b) Write the meaning of the following accounting principles:

(i) Cost Concept
Answer:
The cost concept states that an asset should be recorded in the books of accounts at its original purchase cost, which includes the purchase price and any additional costs incurred to make the asset operational. This ensures that the valuation of assets remains objective and verifiable. The cost is not adjusted for market fluctuations unless specified by accounting standards.

(ii) Consistency
Answer:
The consistency principle requires that a business applies the same accounting policies and procedures from one accounting period to another. This helps in maintaining comparability of financial statements over time, enabling stakeholders to analyze trends effectively. Any changes in policies must be disclosed with proper justification to ensure transparency.

(c) What are the objectives of measuring business income?

Answer: Objectives of Measuring Business Income:- 

1. Assessment of Profitability: The primary objective is to determine the net profit or loss during a specific accounting period. This helps in evaluating the financial performance of the business.

2. Basis for Decision-Making: Measuring income provides reliable data that aids in making informed managerial decisions, such as expansion, cost-cutting, or investment planning.

3. Taxation Purposes: Business income measurement is essential for accurately calculating tax liabilities, ensuring compliance with tax laws.

4. Evaluation of Operational Efficiency: It helps in assessing the efficiency of business operations by comparing actual performance with projected targets.

5. Investor Confidence: Accurate measurement of income instills confidence among investors and stakeholders, enabling them to assess the financial health of the business.

(d) Write the differences between capital expenditure and revenue expenditure. What is capital receipt? (3+2=5)

Capital Expenditure	Revenue Expenditure
Incurred to acquire or improve long-term assets.	Incurred for day-to-day business operations.
Benefits last for more than one accounting period.	Benefits are consumed within the same period.
Shown in the balance sheet as an asset.	Shown in the profit and loss account as an expense.
Examples: Purchase of machinery, building.	Examples: Salaries, rent, utility bills.
Non-recurring in nature.	Recurring in nature.

Capital Receipt: Capital receipt refers to the funds received by a business that are non-recurring and not related to its core operational activities. These are generally obtained from sources like the sale of fixed assets, loans, or investments by owners. They are shown on the liabilities side of the balance sheet or used for creating new assets.

(e) Write the advantages and disadvantages of the hire purchase system. (3+2=5)

Answer:- 

Advantages:

1. Ease of Ownership: It allows individuals and businesses to acquire expensive goods like vehicles or machinery without paying the full amount upfront.

2. Budget Management: The cost is spread over a period in installments, making it easier to manage finances.

3. Improves Business Operations: For businesses, it helps in acquiring necessary assets that can improve operations and productivity even without immediate funds.

Disadvantages:

1. Higher Overall Cost: The total cost under the hire purchase system is higher than the cash purchase due to interest and additional charges.

2. Ownership After Completion: The buyer does not own the asset until all installments are paid, which can lead to loss of the item in case of default.

 (f) Write a note on the accounting system of a dependent branch.

Answer:- A dependent branch is one that does not maintain complete books of accounts and is controlled by the head office. The accounting system for such branches typically involves the following:

1. Recording Transactions: Only cash transactions, stock movement, and daily sales are recorded at the branch level.

2. Head Office Accounts: The branch sends periodic statements (e.g., sales reports, expenses, cash remitted, etc.) to the head office, which maintains the final accounts.

3. Stock Management: The head office tracks stock movements, as the branch relies on the head office for inventory supply.

4. Profit Determination: The profit or loss of the branch is calculated by the head office based on the statements provided by the branch.

5. Limited Authority: The branch has minimal authority in financial decision-making, as all significant decisions are centralized at the head office.

 (g) What are the features of Tally 9?

Answer:- The following are the features of Tally 9 :

1. Comprehensive Accounting: Tally 9 supports a wide range of accounting activities like ledger creation, voucher entries, and financial reporting.

2. Inventory Management: It helps manage stock, categorize items, and monitor stock levels efficiently.

3. Tax Compliance: The software facilitates tax calculations like GST, VAT, and TDS, ensuring compliance with legal requirements.

4. Multi-User Support: Tally 9 allows multiple users to work on the same data simultaneously, which is useful for medium to large businesses.

5. Easy Integration: It can integrate with other software or tools to simplify business processes and data sharing.

6. Data Security: It provides password protection and encryption to ensure the safety of financial data.

(h) Write the basic differences between manual accounting and computerized accounting.

Answer:- Basic Differences Between Manual Accounting and Computerized Accounting:

Aspect	Manual Accounting	Computerized Accounting
Speed	Slow, as it involves manual recording and calculations.	Fast, as it uses software to process transactions automatically.
Accuracy	Prone to errors due to manual calculations.	More accurate, with reduced chances of errors.
Cost	Cost-effective initially, as it requires fewer resources.	High initial cost due to software purchase and setup.
Storage	Requires physical storage for books and records.	Digital storage, saving physical space.
Scalability	Difficult to handle large volumes of data.	Easily handles large-scale data and transactions.
Reports	Preparation of reports is time-consuming.	Instant generation of financial reports.

4. Answer any two questions: (10×2=20)

(a) From the following Trial Balance of M/s. Gupta Enterprise, prepare Trading and Profit and Loss account for the year ended 31st March, 2023. (4+6=10)

Particulars	Dr. (Rs.)	Cr. (Rs.)
Capital		4,00,000
Drawings	50,000
Opening Stock	75,000
Purchases	4,20,000
Sundry Creditors		75,000
Sales		8,10,000
Sundry Debtors	1,20,000
Freight Inward	20,000
Discounts	16,000	28,000
Commissions	12,000	14,000
Returns	16,000	20,000
Salaries	1,20,000
Rent, Rates, and Taxes	40,000
Postage, Telegrams, and Telephone	25,000
Loan		3,00,000
Interest	20,000
Brand Name and Design	60,000
Furniture	3,50,000
Advertisement	1,00,000
Cash in Bank	1,50,000
Cash in Hand	63,000
Duty Drawbacks		10,000

Other information:

(i) Closing Stock Rs. 1,70,000.

(ii) Depreciate Furniture @ 10% p.a.

(iii) Advertisement expenditure to be written off over 5 years.

(iv) Salary Outstanding Rs. 12,000.

(v) Salary Paid in Advance Rs. 10,000.

Trading and Profit & Loss Account of M/s. Gupta Enterprise

For the Year Ended 31st March, 2023

Trading Account

Particulars	Amount (Rs.)	Amount (Rs.)
To Opening Stock	75,000
To Purchases	4,20,000
Less: Returns Outwards	20,000	4,00,000
To Freight Inward	20,000
To Gross Profit c/d	4,85,000
Total	9,80,000

Particulars	Amount (Rs.)
By Sales	8,10,000
Less: Returns Inwards	16,000
By Closing Stock	1,70,000
Total	9,80,000

Profit & Loss Account

Particulars	Amount (Rs.)	Amount (Rs.)
To Salaries	1,20,000
Add: Outstanding Salaries	12,000	1,32,000
Less: Prepaid Salaries	10,000	1,22,000
To Rent, Rates, and Taxes	40,000
To Postage, Telegrams, and Telephone	25,000
To Depreciation on Furniture (10%)	35,000
To Advertisement Written Off (1/5)	20,000
To Discount Allowed	16,000
To Net Profit transferred to Capital A/c	2,27,000
Total	4,85,000

Particulars	Amount (Rs.)
By Gross Profit b/d	4,85,000
By Discounts Received	28,000
By Commissions Received	14,000
By Duty Drawbacks	10,000
Total	5,37,000

Working Notes:

1. Depreciation on Furniture:
   Furniture = Rs. 3,50,000
   Depreciation @ 10% = Rs. 35,000

2. Advertisement Written Off:
   Total Advertisement = Rs. 1,00,000
   To be written off over 5 years = Rs. 1,00,000 ÷ 5 = Rs. 20,000

3. Salaries Adjustment:
   Total Salaries = Rs. 1,20,000
   Add: Outstanding Salaries = Rs. 12,000
   Less: Prepaid Salaries = Rs. 10,000
   Adjusted Salaries = Rs. 1,22,000

4. Closing Stock: Rs. 1,70,000 (as provided in the question).

5. Discounts and Commissions: Adjusted directly in Profit & Loss Account.

(b) On 1st April, 1998 A Ltd. purchased from B Ltd. five trucks under hire purchase system, Rs. 5,00,000 being paid on delivery and balance in five instalments of Rs. 7,50,000 each payable annually on 31st March. The vendor charges 5 per cent p.a. interest on yearly balances. The cash price on five trucks was Rs. 37,50,000.

You are required to show Trucks Account and B. Ltd. Account in the Ledger Book of A Ltd. Company.

Working Notes

1. Calculation of Interest and Installments

Year	Opening Balance (Rs.)	Installment (Rs.)	Interest (5%) (Rs.)	Principal Paid (Rs.)	Closing Balance (Rs.)
1998	32,50,000	7,50,000	1,62,500	5,87,500	26,62,500
1999	26,62,500	7,50,000	1,33,125	6,16,875	20,45,625
2000	20,45,625	7,50,000	1,02,281	6,47,719	13,97,906
2001	13,97,906	7,50,000	69,895	6,80,105	7,17,801
2002	7,17,801	7,50,000	35,890	7,14,110	0

Ledger Accounts

1. Trucks Account

Date	Particulars	Amount (Rs.)	Date	Particulars	Amount (Rs.)
01-Apr-1998	B. Ltd. (Cash Price)	37,50,000	31-Mar-2003	Depreciation (Total)	Balancing Figure
31-Mar-1999	Depreciation (Bal. Figure) ## instructions trim

Trucks Account

Date	Particulars	Amount (Rs.)	Date	Particulars	Amount (Rs.)
01-Apr-1998	B. Ltd. (Cash Price)	37,50,000	31-Mar-1999	Depreciation (Year 1)	3,75,000
			31-Mar-1999	Balance c/d	33,75,000
Total		37,50,000	Total		37,50,000
01-Apr-1999	Balance b/d	33,75,000	31-Mar-2000	Depreciation (Year 2)	3,37,500
			31-Mar-2000	Balance c/d	30,37,500
Total		33,75,000	Total		33,75,000

(Similarly, depreciation continues for each year, reducing the balance each time by 10%. The account is closed at the end of five years.)

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B. Ltd. Account

Date	Particulars	Amount (Rs.)	Date	Particulars	Amount (Rs.)
01-Apr-1998	Trucks Account (Purchase)	37,50,000	01-Apr-1998	Bank (Down Payment)	5,00,000
31-Mar-1999	Interest (5% on 32,50,000)	1,62,500	31-Mar-1999	Bank (Instalment Paid)	7,50,000
				Balance c/d	26,62,500
Total		39,12,500	Total		39,12,500
01-Apr-1999	Balance b/d	26,62,500	31-Mar-2000	Bank (Instalment Paid)	7,50,000
31-Mar-2000	Interest (5% on 26,62,500)	1,33,125		Balance c/d	20,45,625
Total		27,95,625	Total		27,95,625

(Similar entries for subsequent years until the balance becomes zero at the end of the fifth year.)

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Notes

1. Depreciation on Trucks: Not provided in the question but assumed to be applied at 10% per annum on the reducing balance (as is standard practice).

2. Interest on Hire Purchase: Calculated yearly based on the outstanding balance at the beginning of each year.

3. Ledger Balances: Adjusted yearly to reflect payments and interest accruals.

(c) Hari Brothers of Kolkata has a branch at Ranchi and in order to maintain strict control on stock, invoices goods to the branch at selling price which is cost plus 33%. From the following particulars, prepare Branch Stock Account, Branch Debtors Accounts and Goods Sent to Branch Account. 4+4+2=10

Description	Amount (Rs.)
Stock on 1st April, 2022 (Invoice Price)	15,000
Debtors on 1st April, 2022	11,400
Goods Invoiced to Branch	67,000
Sales at Branch - Cash	31,000
Sales at Branch - Credit	37,400
Cash received from debtors	40,000
Bad debt written off	250
Discount allowed to customers	300
Expenses at Branch	6,700
Stock on 31st March, 2023 (Invoice Price)	13,400

Branch Stock Account

For the year ending 31st March, 2023

Particulars	Amount (Rs.)	Particulars	Amount (Rs.)
To Opening Stock (Invoice Price)	15,000	By Cash Sales	31,000
To Goods Sent to Branch	67,000	By Credit Sales	37,400
		By Closing Stock (Invoice Price)	13,400
Total	82,000	Total	81,800
By Gross Loss (Bal. c/d)	200

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Branch Debtors Account

For the year ending 31st March, 2023

Particulars	Amount (Rs.)	Particulars	Amount (Rs.)
To Opening Balance	11,400	By Cash Received	40,000
To Credit Sales	37,400	By Bad Debt	250
		By Discount Allowed	300
		By Closing Balance (Bal. c/d)	8,250
Total	48,800	Total	48,800

Goods Sent to Branch Account

For the year ending 31st March, 2023

Particulars	Amount (Rs.)	Particulars	Amount (Rs.)
To Head Office	67,000	By Branch Stock A/c	67,000

Working Notes

1. Calculation of Closing Balance in Branch Debtors Account:

• Opening Balance of Debtors: Rs. 11,400

• Add: Credit Sales: Rs. 37,400

• Less: Cash Received: Rs. 40,000, Bad Debts: Rs. 250, Discount Allowed: Rs. 300

• Closing Balance = Rs. 11,400 + Rs. 37,400 - (Rs. 40,000 + Rs. 250 + Rs. 300) = Rs. 8,250

2. Branch Stock Account Adjustment:

• Opening Stock: Rs. 15,000

• Add: Goods Sent to Branch: Rs. 67,000

• Total Goods Available for Sale: Rs. 82,000

• Less: Cash Sales: Rs. 31,000, Credit Sales: Rs. 37,400, Closing Stock: Rs. 13,400

• Gross Loss: Rs. 200

(d) Assam Motor Service Co. buys a motor car on instalment payment system from Hind Motors Ltd. on 01.01.2018 under which payment is to be made on December 31 each year for 4 years @Rs. 50,000 per annum, interest being calculated @ 5% p.a. The cash down price of the car is Rs. 1,77,300. Depreciate the car @ 10% p.a. on diminishing balance method.

Prepare Motor Car Account, Hind Motors Ltd. Account and Interest Suspense Account in the books of Assam Motors Service Co. for four years.

(i) Motor Car Account

(ii) Hind Motors Ltd. Account

(iii) Interest Suspense Account

e) Explain the procedures for setting Accounting Standards in India.

Working Notes:

1. Calculation of Interest and Principal

The total payments (4 × Rs. 50,000 = Rs. 2,00,000) include both principal and interest. The outstanding principal decreases each year as payments are made, with interest calculated on the outstanding balance.

Year-Wise Breakdown:

Year	Opening Balance (Rs.)	Installment (Rs.)	Interest (5%) (Rs.)	Principal Paid (Rs.)	Closing Balance (Rs.)
2018	1,77,300	50,000	8,865	41,135	1,36,165
2019	1,36,165	50,000	6,808	43,192	92,973
2020	92,973	50,000	4,649	45,351	47,622
2021	47,622	50,000	2,381	47,619	0

Ledger Accounts:

1. Motor Car Account

Date	Particulars	Amount (Rs.)	Date	Particulars	Amount (Rs.)
01-Jan-2018	Hind Motors Ltd.	1,77,300	31-Dec-2018	Depreciation (10%)	17,730
			31-Dec-2018	Balance c/d	1,59,570
Total		1,77,300	Total		1,77,300
01-Jan-2019	Balance b/d	1,59,570	31-Dec-2019	Depreciation (10%)	15,957
			31-Dec-2019	Balance c/d	1,43,613
Total		1,59,570	Total		1,59,570

(Similar calculations for 2020 and 2021, applying 10% depreciation on the diminishing balance.)

2. Hind Motors Ltd. Account

Date	Particulars	Amount (Rs.)	Date	Particulars	Amount (Rs.)
01-Jan-2018	Motor Car Account	1,77,300	31-Dec-2018	Bank (Instalment Paid)	50,000
31-Dec-2018	Interest Suspense Account	8,865		Balance c/d	1,36,165
Total		1,86,165	Total		1,86,165
01-Jan-2019	Balance b/d	1,36,165	31-Dec-2019	Bank (Instalment Paid)	50,000
31-Dec-2019	Interest Suspense Account	6,808		Balance c/d	92,973
Total		1,42,973	Total		1,42,973

(Similar entries for 2020 and 2021.)

3. Interest Suspense Account

Date	Particulars	Amount (Rs.)	Date	Particulars	Amount (Rs.)
31-Dec-2018	Hind Motors Ltd.	8,865	31-Dec-2018	Profit & Loss Account	8,865
Total		8,865	Total		8,865
31-Dec-2019	Hind Motors Ltd.	6,808	31-Dec-2019	Profit & Loss Account	6,808
Total		6,808	Total		6,808

(Similar entries for 2020 and 2021.)

(e) Procedure for Setting Accounting Standards in India:

1. Formulation by the ICAI:

• The Institute of Chartered Accountants of India (ICAI) prepares the draft of the accounting standard based on international guidelines and local needs.

• A study group is formed to review the draft.

2. Circulation for Public Comments:

• The draft is circulated to stakeholders, including businesses, regulators, and academicians, for feedback.

3. Revision and Finalization:

• The draft is revised based on feedback and recommendations.

4. Approval by the NACAS/ NFRA:

• The finalized standard is sent to the National Advisory Committee on Accounting Standards (NACAS), or the National Financial Reporting Authority (NFRA), for approval.

5. Notification by the Government:

• After approval, the standard is notified by the Ministry of Corporate Affairs (MCA) under the Companies Act, making it mandatory for compliance. 

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