[Gauhati University BCom Advanced Financial Accounting Solved Question Paper 2024, GU BCom Advanced Financial Accounting Question Paper Solution 2024, Advanced Financial Accounting Solved Paper 2024]
2024
4 (Sem–5/CBCS) COM HE2 (AFA)
Commerce (Honours Elective)
Paper : COM–HE–5026
(Advanced Financial Accounting)
Full Marks : 80, Time : Three hours
The figures in the margin indicate full marks for the questions.
1. (a) State whether each of the following statements are True or False : 1×5 = 5
(i) When short working lapses it is transferred to Profit & Loss Account.
Answer: True — When short work lapses (is irrecoverable) after the specified recoupment period has expired, the amount is transferred to the Profit and Loss Account as an expense.
(ii) Under Departmental Accounts, both Profit & Loss Account and Balance Sheet are prepared for each department.
Answer: True — In departmental accounting each department shows its results via separate P&L and Balance Sheet.
(iii) Insurance company is liable to pay the claim for loss of profit caused during the indemnity period.
Answer: True — A loss of profit insurance covers the indemnity period for interruption.
(iv) Under the maximum loss method, the maximum possible loss will be divided among the partners in capital ratio.
Answer: False — Under the maximum loss method, the maximum possible loss is divided among partners in their profit-sharing ratio, not their capital ratio.
(v) Government Accounting follows a double entry system.
Answer: True — Yes, modern government accounting systems have largely adopted the double-entry system, especially with the shift towards accrual-based double-entry accounting (ABDEAS).
(b) Fill in the blanks with appropriate words : 1×5 = 5
(i) Short working arises when minimum rent is payable.
(ii) Expenses which can’t be apportioned among the departments should be shown in the General Profit & Loss Account.
(iii) Balance of the Realisation Account is transferred to the partners’ Capital Accounts.
(iv) The difference between standard turnover and actual turnover during the indemnity period is called short sales.
(v) Expenditure under the Consolidated Fund requires authorisation after it has been incurred.
2. Answer the following questions briefly : 2×5 = 10
(i) What is minimum rent?
Answer: Minimum rent (also called dead rent or fixed rent) is the amount that the lessee must pay to the lessor irrespective of the actual royalty earned, i.e., even if output or sales are low the minimum rent is payable.
(ii) Give the meaning of inter-departmental transfer.
Answer: An inter-departmental transfer is a transaction where one department supplies goods or services to another department within the same organisation, and the cost or value of that supply is recorded by crediting the supplying department and debiting the receiving department.
(iii) What is a consolidated fund?
Answer: The Consolidated Fund is the principal government fund (for the Union or a State) into which all revenues, loans raised and loan repayments are credited and from which government expenditures are made only under law/appropriation.
(iv) What are standing charges?
Answer: Standing charges are fixed costs or expenses which a business must incur regardless of the level of production or activity — for example licence fees, insurance, rent, interest on capital.
(v) State two differences between dissolution of partnership and dissolution of a firm.
Answer:
3. Answer any four questions : 5×4 = 20
(i) Write the impact of strike and lockout in the payment of royalty.
Answer: When a strike or lockout occurs, the normal production or sales of the lessee is disrupted. Since royalty is generally payable on the basis of actual output or sales, such interruptions directly affect royalty calculation. The key impacts are:
Reduction in Royalty Payable: Because production or sales decreases during a strike or lockout, the actual royalty amount calculated on output or sales becomes lower.
Minimum Rent Becomes Applicable:b Even if production falls sharply, the lessee is still required to pay minimum rent. When royalty based on actual output is less than minimum rent, the minimum rent must be paid.
Short Working Increases: Since minimum rent is payable despite low or nil production, the difference between minimum rent and actual royalty becomes short working. Short working is higher during strike/lockout periods.
Recoupment Rights May Continue: If the agreement allows recoupment of short working, the lessee may recoup the short working caused by the strike or lockout in future years, provided production increases and royalty exceeds minimum rent.
Special Provisions in Agreement: Some royalty agreements specifically relax minimum rent during strike or lockout periods. If such a clause exists, the lessee may pay royalty only on actual output and minimum rent may not apply.
Thus, strike and lockout generally reduce royalty payable but increase short working, unless the agreement provides special concessions.
(ii) What are the special features of departmental accounting?
Answer:
The following are the special features of departmental accounting:
It determines the profit or loss of each department separately.
It enables comparison of performance among various departments.
It involves allocation and apportionment of expenses and incomes to each department on a suitable basis.
It helps management evaluate the operational efficiency of every department.
It identifies strong and weak departments for better managerial decisions.
(iii) What are different modes of discharging purchase consideration?
Answer: The following are the different modes of discharging purchase consideration:
Payment in cash.
Issue of equity shares or preference shares.
Issue of debentures.
A combination of cash, shares, and debentures.
Transfer of other assets or assumption of liabilities as agreed.
(iv) Describe the steps to be followed to lodge a claim before the insurance company for indemnification of loss of stock due to fire.
Answer: The following are the steps to be followed to lodge a claim before the insurance company for indemnification of loss of stock due to fire:
Inform the insurance company immediately about the occurrence of fire, giving details of the date, time, place, and extent of the loss.
Take necessary steps to control the fire and prevent further damage, and preserve the damaged goods for inspection.
Submit a written claim intimation to the insurer, mentioning policy number, nature of loss, and estimated amount of damage.
Co-operate with the surveyor appointed by the insurer, provide access to the premises, and furnish all relevant documents such as stock records, purchase invoices, sales records, and fire brigade report.
Prepare a detailed statement of stock lost, including opening stock, purchases, sales, and closing stock as per books, supported by necessary evidence.
Submit the claim form along with required documents such as accounts, bills, stock register, photographs, and the surveyor’s report.
Respond to any queries or additional requirements raised by the insurer for verification of the claim.
Wait for the insurer’s assessment and approval, after which the admissible claim amount is processed and paid to the insured.
(v) Briefly describe five principles of Government Accounting
Answer:
The following are the five principles of Government Accounting:
Principle of Annuality: Government revenues and expenditures are recorded and authorised for a specific financial year, and accounts are prepared accordingly.
Principle of Fund Accounting: Government transactions are classified into separate funds such as the Consolidated Fund, Contingency Fund, and Public Account to ensure proper control and transparency.
Principle of Cash Basis: Government accounts are maintained on the cash basis of accounting, meaning transactions are recorded only when cash is actually received or paid.
Principle of Budgetary Control: All expenditures require prior approval through the budget, and spending must strictly follow the authorised budget provisions.
Principle of Accountability: Government accounting ensures clear responsibility for the collection, custody, and utilisation of public money, enabling proper audit and public scrutiny.
(vi) Explain the rule laid down in Garner vs. Murray case.
Answer: The following is the rule laid down in the Garner vs. Murray case:
When a partner becomes insolvent at the time of dissolution of a firm, the deficiency in his capital account must be borne by the remaining solvent partners.
The solvent partners should bear this loss in the ratio of their last agreed capital balances, and not in the profit-sharing ratio.
The “last agreed capitals” mean the capital balances after adjustments of profit, loss, drawings, interest, and other items but before realisation results.
The insolvent partner’s private estate is applied first for payment of his private debts, and only the surplus, if any, is contributed towards firm’s deficiency.
If the insolvent partner’s private assets are insufficient, the remaining deficiency is redistributed among the solvent partners according to the above rule.
4. Answer the following questions : 10×4 = 40
(i) What are the objectives of amalgamation of firms? Give the accounting entries required to be passed in the books of the new firm born after amalgamation.
Answer:
The following are the objectives of amalgamation of a firm:
To eliminate competition among existing firms and strengthen the market position.
To achieve economies of scale through combined resources and reduced operating costs.
To increase efficiency by pooling managerial skills, technical expertise, and financial resources.
To expand business operations, customer base, and market coverage.
To improve financial stability and creditworthiness through a stronger capital structure.
To remove duplication of work and improve overall coordination.
To utilize idle resources of both firms more effectively.
To enhance profitability by integrating production, marketing, and distribution channels.
To reduce risks through diversification of products or services.
To ensure continuity and long-term sustainability of business.
The following are the accounting entries in the books of the new firm after amalgamation:
For recording business purchase:
Dr. Business Purchase A/c
Cr. Vendor (Old Firm) A/cFor recording assets taken over:
Dr. Individual Assets A/c
Cr. Business Purchase A/cFor recording liabilities taken over:
Dr. Business Purchase A/c
Cr. Individual Liabilities A/cFor payment of purchase consideration to old firms:
If paid in cash:
Dr. Vendor A/c
Cr. Cash/Bank A/cIf paid by issue of shares/debentures:
Dr. Vendor A/c
Cr. Share Capital / Debentures A/cFor recording goodwill or capital reserve:
If purchase consideration > net assets:
Dr. Goodwill A/cIf purchase consideration < net assets:
Cr. Capital Reserve A/cFor any remaining balances adjusted:
Dr./Cr. Capital A/cs of partners of the new firm as required.
These steps complete the accounting treatment in the books of the new firm formed after amalgamation.
Or
From the following Trial Balance, prepare Departmental Trading and Profit & Loss Account of M/s. Golaghat Trading Company for the year ended on 31 March, 2023 :
TRIAL BALANCE
(a) Stock on 31 March, 2023:
Dept. A – ₹2,748
Dept. B – ₹2,400
(b) Rent, Electricity, Salaries and Depreciation to be apportioned between Dept. A and Dept. B in the ratio 2 : 1.
(c) Other expenses and income to be apportioned to A and B Departments on suitable basis.
(d) Depreciate Machinery @ 10% p.a.
(e) Rent prepaid ₹370 and outstanding electricity ₹180.
Solution:
Departmental Trading Account for the year ended 31-03-2023
Departmental Profit & Loss Account for the year ended 31-03-2023
(Amts apportioned as instructed; rent, electricity, salary, depreciation in 2:1 A:B; other items apportioned on sales/purchases basis as stated.)
Final — Combined Profit & Loss of the Firm
(ii) On 15th June, 2023, the premises and stock of a firm were destroyed by fire. The accounting records were saved, and the following particulars were available:
Stock at cost on 1st January, 2022 – ₹70,500
Stock at cost on 31st December, 2022 – ₹81,900
Purchases less returns for the year 2022 – ₹3,98,00
Sales less return for the year 2022 ₹ 4,87,000
Wages for the year 2022. ₹ 3,000
Purchases less return from 1st January to 15th June, 2023. ₹ 1,60,000
Sales less return from 1st January to 15th June, 2023. ₹ 2,31,200
Wages from 1st January to 15th June, 2023. ₹ 1,200
Carriage from 1st January to 15th June, 2023. ₹ 800
Expenses for putting off fire. ₹ 1,000
The Stock salvaged was. ₹ 5,300
Show the amount of claim.
Solution:
OR
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