2023 (Feb-March)

ame of the Paper : Financial Accounting

ame of the Course: B.Com. (Hons.) Regular
emester
uration: 3 Hours Maximum Marks: 90
Attempt all questions. Allquestions are compulsory and carry equal marks.
Q. 1. (a) State with reasons (attempt any six) whether the following statements are
ue or false. (1.5 x 6)
() Accounting performs only one function, ie, maintenance of systematic accournting
records.
(1) Expense incurred to keep the machine in working condition is capital expenditure.
(ii) An expenditure intended to benefit the current period is revenue expenditure.
(iv) Accrual means recognition of revenue as it is earned and of costs as they are paid.
(o) As per the consistency principle, accounting policy once adopted for similar items
should be followed consistently from year to year and should never be changed
under any circumstance.
(vi) All the enterprises are required to apply Ind AS.
(oi) Going concern, consistency &e accrualarethe fundamental accounting assumptions.
(vii) An outstanding expense account is a nominal account.
(b) Write short notes on any two of the following: (4.5 x2)
() Prior Period Items
(ii) Money measurement concept
(ii) "Event Occurring after Balance Reporting Period" as per Ind AS 10.
Ans. (a) () False, Acounting performs not only orne function but it is the process that
consists recording, classifying, summarising and interpreting of the transactions
of the enterprise which are of financial nature.
() False, It is a Revenue expenditure because it does not increase the benefits but
only keeps the machine in working condition.
(tn) True, It is incurred to maintain the existing earning capacity of the business.
(io) False, Accrual means recognition of revenue as it is earned and of costs as they
are incurred.
(o) False, Consistency principle does not say that accounting policies cannot be
changed at all. They can be changed in certain circumstances. But this change
must be disclosed along with an explanation of change and its effects on the
-result.
(vi) False, The MCA notified the Companies Rules, 2015 which specify that Ind
AS are applicable to certain class of companies and set out the dates of their
applicability.
(vii) True, According to AS-1 issued by ICAI, Going Concern, Consistency and Accrual
are the fundamental accounting assumptions.
(vi) False, Outstanding Expense Account is a Representative Personal Account which
represents a certain person or a group of persons.
(b) () Prior Period Items.See Q. 4, Chapter 8. Page T48
(i) Money Measurement Concept. See Q. 1 (Point 2),Chapter4. Page T-26
(üi) "Event Occurring after Balance Reporting Period" as per Ind AS 10.
See Q. 10, Chapter 7.. Page T-46
Q. 2.(a) On 1 January 2015, a new plant was purchased by Mr. Afor 2,00,000 and a'
further sum of 10,000 was spent on its installation. On 1* June 2016, a new plant was
purchased for 1,30,000.
On 20th October, 2017, the first plant was, destroyed by fire and 75,000 only was
realized by selling the scrap. It was not insured.
On 7th October, 2017, a second-hand plant was purchased for 1,50,000 and a fürther
sum of 15,000 was spent on its repairs and 5,000 on its erection. It camne into use on
69
70 Shiv Das DELHI UNIVERSITY SERIES
15n November, 2017. Depreciation has been provided at the rate of 10%
original cost annually on 31st December. It was the practice to charge the p.a.
full onyearthe
depreciation on all the acquisitions made during the year and to ignore depreciation on
the item sold during the year. The accounts are closed annually on 31" December, In
December 2017, it was decided to change the method of depreciation and to follow the
rate of 15% p.a. on diminishing balance method in respect of the existing items of plant
because of the change in the statute to best reflect the consumption pattern of the asset.
Show Plant A/c, Accumulated Depreciation A/e and the Plant Disposal A/e for
3 years.,
12
(6) X Ltd. gives you the following details of the inyentory for the year 2021-22. Find
out the value of closing inventory by (a) Group method; (b) Item by item method: 6
Article
Group No. of units Cost per Realisable value per unit Realisation
unit ) ) expenses
1. 200 100 120 25/3%
2 B 400 200 200 10%
A 600 150 160 25/3%
4. B 800 250 300 10%
Sol. (a) Let P, P, and P, are first, second and third purchased plant respectively.
Dr. Plant Account Ci.
Date Particulars ) Date Particulars 3)
1.1.15 Bank Ac (P;) 2,10,000 31.12.15 Balance cld 2,10,000
(2,00,000 +10,000)
2,10,000 2,10,000

S
1.1.16 Balance b/d 2,10,000 31.12.16 Balance cld 3,40,000
1.6.16 Bank Alc (P) 1,30,000
3,40,000 3,40,000
1.1.17 Balance b/d 3.40,000 20.10.17| Plant Disposal Alc (P) .2,10,000
7.10.17 Bank AWc (P) 1,70,000 31.12.17| Båance cld 3,00,000
<(1,50,000 +15,000 +5,000)
5,10,000 5,10,000
Dr. Accumulated Depreciation Account. Cr.
Date Particulars () Date Particulars )
31.12.15 Balance cld 21,000 31.12.15| Depreciation Alc (P,)
((2,10,000 x 10 21,000
100
21,000 21,000
31.12.16 Balance cd 55,000 1.1.16 Balance b/d 21,000
31.12.16 Depreciation Alc:
P 721,000
34,000
P, (1,30,000 x10/100)
13,000
55,000 55,000
20.10.17 Plant Disposal Alc (P,) 42,000 1.1.17 Balance- b/d 55,000
31.12.17 Balance cld 56,050 31.12.17| Depreciation Alc (WDV) 43,050
98,050 98,050
15% on 1,17,000 (P,) 17,550
15% on 1,70,000 (P.) 25,500 43,050
 Financial Accounting 2023 (Feb-March) 71
Dr. Cr.
Plant Disposal Account
Date Particulars Date Particulars
20.10.17 Plant Alc (P,) 2,10,000| 20.10.17 Accumulated Dep. A/c 42,000
(21,000 + 21,000)
Bank Ac (Scrap) 5,000
P&LAWC (loss) (b/) 1,63,000
2,10,000 2,10,000
(b) (a) Group Method
Lower of Cost
Group Article Cost ) Net Realisable Value (NRV) ) or NR
(RV- Realisation Expenses)
Group A 20,000124,000 - (25/300 x 24,000) 22,000
3 90,000 96,000 -(25/300 x 96,000) 88,000
Total 1,10,000 1,10,000 1,10,000
Group B 2 80,000 80,000 -(10/100 x 80,000) 72,000
2,00,0002,40,000 - (10/100 x 2,40,000) 2,16,000| 2,88,000
Total 2,80,000 3,90,000
Closing Inventory =(1,10,00 + 2,80,000) =3,90,000
(b) Item by Item Method
Cost NRVE) Lower of cost
Article
) (RV - Realisation Exp.). or NRV
1 20,000 22,000 20,000
2 80,000 72,000 72,000
90,000 88,000 88,000
4 2,00,000 2,16,000 2,00,000
3,80,000
.:. Closing Inventory 3,80,000
Or, (a) Explain in brief the föllowing:
() Meaning of Property, Plant and Equipment
(i) Impairment Loss as per AS-26 (iii) Features of AS-2
(6) HP is a leading distributor of petrol. A detail inventory of petrol is taken when the
books are closed at the end of each month. At the end of month following information
is available: 6
Sales
General overheads cost
747,25,000
1,25,000
Inventory at the beginning 1,00,000 litres @715 per litre
Purchases:
June 1 Two lakh litres @14.25
June 30 One lakh litres @15.15
Closing inventory 1.30 lakh litres. Compute the following by the FIFO method:
() Value of inventory on June 30 (i). Amount of cost of goods sold for June
(ii) Profit/Loss for the month of June
Ans. (a)() See Q. 1(4), Chapter 10.
(ii) An impairment loss is the amount by which the carrying amount ofPage T-55
an asset
exceeds its recoverable amount. Recoverable amount is higher of an asset's net
selling value and its value in use.
Value in use is the present value of estimated future cash flows
from the continuous use of an asset and from its disposal at the expected to arise
and of its useful
life.
(ii) See Q. 6, Chapter 6. (Page T-40
72 Shiv Das DELHI UNIVERSITY SERIES

(b) () Value of Inventory (FIFO Method) =(1,00,000 ×*15.15) + (30,000 x14.25)

-{19,42,500
(ii) Calculation of Cost of Goods Sold:
Particulars
Opening Stock: (1,00,000 x15) 15,00,00
Add: Purchases: June 1 (2,00,000 x 14.25) 28,50,000
June 30 (1,00,000 x*15.15) 15,15,000 43,65,000
Less: Closing Stock (from point (Ö) (19,42,500)
Cost of Goods Sold 39,22,500
(i) Calculation of Profit/loss for the month of June:
Particulars K)
Sales
Less: Cost of Goods Sold
47,25,000
(39,22,500)
8,02,500
Less: General Overhead Cost
Profit
(125,000)
6,77,500
Q 3. (a) Chandigarh Cricket Club provides you with the following information
related to its restaurant for the year ended 315t March, 2022: 6
Particulars Particulars
Opening stock of rstaurant on 1.4.21 9,750 Closing stockof restaurant on 31.3.22 11,250
Restaurant takings 9,04,000 Restaurant purchases 5,12,000
Wages (including 1,25,000 for rèst.) 2,03,750 Fuel 44,250
China glass Cutlery on 1.4.2021 6,250 Depreciation to be charged on China
gláss Cutlery @20% p.a
Prepare Restaurant Trading A/c and show the extract of Income and Expenditure AJc
and extract of Balance Sheet for the year ended 2021-22.
(b) An NPO supplies the following information for the year ended 31t March, 2022.
Calculate the amount of Sports Material consumed and present the items in the financial
statements of the NPO for the year ended 31* March, 2022 based on the following.
information:
Particulars As at 1.4.21 () As at 1.4.22 (7)
Creditors for sports materials 5,750 14,750
Stock.of sports materials 18,750 38,000
The payment to creditors amounted to 71,000 and cash purchases of sports materials
amounted to 20,000.
(c) The following information was obtained from the Secretary of the Crazy Jay Club:
Subscriptions received in 2022-23 as per Receipts and Payments Account 789,000
Advance Subscriptions received in 2021-22 5,000
Subscriptions outstanding at the end of 2022-23 12,500
(including 1500 for 2021-22)
Advance Subscriptions received for 2023-24 3,000
Subscriptions written off during 2022-23 600
-Subscriptions receivable on 1.4.2022 K8400
Prepare:
(a) a statement/account showing the Subscriptions income. for the year ended
31.3.2023 and
(b) Show how the relevant items will appear in the Income and Expenditure Account
for the year and in the Balance Sheet as at the end of the year..
 Financial Accounting 2023 (Feb-March) 73
Sol. (a) Restaurant Trading Account
Dr. Cr.
for the year ended 31 March, 2022
Pariculars Particulars
Opening stock 9,04,000
9,750 Restaurant takings 11,250
Purchases 5,12,000 Closing stock
Wages 1,25,000
Fuel 44,250
Depreciation on Cultery (R6.250 x d 1,250
Surplus transferred to Income &
Expenditure Alc 2,23,000
9,15,250 915250
Dr. Extract of Income & Expenditure Account Cr.
Ependiture Income 2.23,000
Wages 78,750| Surplus
Extract of Balance Sheet as at 31st March, 2022
Liabilities Assets
China Glass Cutlery 6,250
Less: Depreciation (1,250) 5,000
Closing Stock 11,250
(b) Dr. Creditors for Sports Matetrial Account Cr.
Particulars Particulars
Cash Alc (Paid) 71,000 Balance b/d 5,750
Balance cd 14,750 Stock of Sports Material (Bal. Fig.) 80,000
85,750 85,750
Dr. Stock of Sports Material Account Cr.
Particulars Particulars
Balance b/d 18,750 Income &ExpenditureA/c (Bal. Fig.) 80,750
Creditors for Sports Material 80,000 Balance cld 38,000
Cash Alc (Purchases) 20,000
1,18,750 1,18,750
An extract of Income & Expenditure Account
Expenditure Income
Sports material consumed 80,750
An extract of Balance Sheet as at 31st March, 2023
Liabilities Assets
Creditors for Sports Materials 14,750 Stock of Sports Material 38,000
Subscriptions Account
(c) Dr. for the year ended 31st March 2023 Cr.
Particulars Particulars
Balance b/d 8,400 Balance b/d (Advance at the Beginning) 5,000
(Outstanding at the Beginning) Bank Alc 89,000
Income &Expenditure Alc(Bal. Fig) 95,700 Income & Expenditure Alc (Witten of) 600
Balance cld (Advance at the end) 3,000 Balance cld:.(Outstanding at the end)
2021-22 1,500
2022-23 11,000 12,500
1,07,100 1,07,100
(6) Amountof Subscription to be shown in Income and Expendifüure A/c= 95.700
Amount of Subscription Outstanding to be shown in Liabilities side of Balance Sheet
=12,500
Amount of Subscription received in Advance to be shown in Balarnce Sheet=3,000
74 Shiv Das DELHI UNIVERSITY SERIES
Or, TheTrial Balance of Mr. Gopal Das at 31t March, 2018 is given below:
Particulars Dr. ) Cr. ()
Purchases 8,12,525
Sales 12,62,000
Provision for Doubtful Debts 26,000
Sundry Debtors 2,51,000
Sundry Creditors 1,52,630
Bills Payable 20,250
Opening Stock 1,33,625
Wages 1,15,685
Salaries 27,875
Furniture 36,250
Postage 21,130
Power and fuel 6,750
General Expenses .29,155
Bad debts 2,625
Loan to Ram @10% p.a. (on 1s Dec. 17) 15,000
Cash in hand and at bank 50,000
General expenses outstanding 3,500
Drawings 22,260
Capital .50,000

ShivBas
Outstanding wages 10,000
Input CGST 5,000
Input SGST 5,000
Input IGST 8,000
Output CGST 4,000
Output SGST 4,000
Output IGST 9,500
Total 15,41,880 15,41,880
Prepare Trading and Profit and Loss Account for the year ended 31 March, 2018
and the Balance Sheet as at that date after taking into consideration the following
information: 18
() Stock on 31t March, 2018 was T62,750.
(i) Depreciation on furniture is to be charged @10%.
(iii) Sundry debtors include an item of 2,500 from a customer who.has become
insolvent.
(iv) The remaining debtors are not considered to be doubtful in recovery.
(v) Goods costing 7,500 plus IGST @12% were destroyed by fire and insurance
company admitted a claim for 78,000.
(vi) Received goods from Rahul &Company of 6,000 plus IGST@ 12% on 27h
March, 2018 but the invoice of purchase was not recorded in the Purchases book.
Sol. Trading and Profit &Loss Account of Mr. Gopal Das
Dr. for the year ended 31.03.18 Cr.
Particulars Particulars
Opening Stock 1,33,625. Sales 12,62,000
Purchases 8,12,525 Closing stock 62,750
Add: Recieved 6,000
Less: Destroyed by fire (7,500) 8,11,025
Wages 1,15,685
Power &fuel 6,750
Gross Profit cld 2,57,665
13,24,750 13,24,750
 Financial Accounting 2023 (Feb-March) .75
Salaries 27.875 Gross Profit b/d 2,57,665
Depreciation on furniture 3,625| Provision for doubtful Debts (old) 26,000
(R36,250 x10/100) Accrued interest on loan
Postage
General Expenses 21,130 (15,000 x 10/100 x 4/12) 500
29,155
Bad debts R(2,625 +2500) 5,125
Insurance cdaim (loss)
(R7,500 x112/100-8,000)
400

Net Profit transferred to Capital 1,96,855

Account 2,84,165 2,84,165
Balance Sheet
As at 31.03.18.
Liabilities Assets
Capital 50,000 Sundry Debtors 2,51,000
Add: Net Profit 1,96,855 Less: Bad debts (2,500) 2,48,500
Less: Drawings (22,260) 2,24,595 Closing stock 82,750
Sundry Creditors 1,52,630 Furniture 36,250
Add: Rahul (Creditor) Less: Depreciation (3,625) 32,625
(K6,000 x112/100) 6,720 1,59,350 Loan to Ram 15,000
Bills Payable 20,250 Add: Accrued Interest (4 months) 500 15,500
Outstanding Genieral Expenses 3,500| Insurance Claim 8,000
Outstanding Wages 10,000 Cash in hand and at Bank 50,000
Input SGsT 320,
4,17,695 4,17,695
Working Notes:
CGST ) SGST
) IGST )
4,000 4.000 9,500
Output
Input 5,000 5,000 7,320*,
1,000 1,000 1,680
Set off: (1,000) (680) (L,680)
320 (cr.)
", Input IGST =Amt. given +Input received on goods purchased - Input received on goods destroyed
= 78,000 + R6,000 x 12/100 -7,500 x 12/100
=78,000 + 720 -900 =7,820
Cross utilisation of Credit of CGST and SGST is not possible. It means, CGST Credit (i.e.,
input tax paid on CGST) cannot be utilised for the payment of SGST and SGST credit caDnot
be utilised for the payment of CGST.
Q. 4. XLtd. has two branches at Lucknow and Itawa. Goods are invoiced tó branches
at cost plus 50%. Goods are transferred. by/to another branch at its cost. Following
information is available about the transactions of the Lucknow branch for the year
ended 315t March, 2022:
Particulars )
Opening stock as its cost 4,80,600
Goods sent to branch 14,09,400
fincluding goods invoiced at 27,000-tó branch on 25h March, 2022 but not received by the
branch til 31 March, 2022)
Goods received from Itawa branch 10,800
Goods transferred to Itawa branch 91,800
Good returned by branch to H.0. 21,060
76 Shiv Das DELHI UNIVERSITY SERIES
Goods returned by credit custonmers to branch 10,280
Goods retumed by credit customers directly to H.O. 2,160
Agred allowance to custömers ofthe seling price (already considered while invoicing)
Normal loss due to wastage and deterioration of stock at cost to H.O.
1,800
1,800
Loss-in-transit
(at invoice price) 11,880 against which a sum of 7,320 was recelved from the insurance
company in fullsettlement of the claim)
Cash sales 57,600 and Credit sales 13,12,920
Branch expenses (including Insurance charges) 790,000
Bad debts 1,800and discount allowed to customers 900
The branch manager is entitled to a commission of 5% of profit of the branch after
charging such commission.
Required: Prepare Branch Stock A/c, Branch Adjustment A/c and Branch
Profit &Loss A/c assuming that the closing stock at the branch at its cost as per physical
verification amounted to R3,60,000. 18
Sol. Dr. Lucknow Branch Stock Account Cr.
Particulars Particulars
Balance b/d 4,80,600 Goods to Branch A/c 91,800
Goods Sent to Branch Alc 14,09,400 (transfer to Itawa)
Goods Sent to Branch Ac 10,800 Goods sent to Branch A/c 21,060
(transfer from Itawa) (Returns to H.0.)
Branch Debtors A/c (Sales Return) 10,260 Branch Adjustment Ac 1,800
(Allowance)
Branch Adjustrment Alc, 2,700
(nvoice price of Normal lo) (1800×150%)
S Branch Adjustment Alc *, "3,960
(load on loss) (11,880 x 1/3)
Branch P/LAlc (Cost of lost) 7,920 11,880
Cash Sales 57,600
Credit sales. .13,12,920
Branch Shortage (Balancing Figure) 24,300
Balance c/d: In transit 27,000
In Hand 3,60,000 3,87,000
19,11,060 19,11,060
Dr. Lucknow Branch Adjustment Account Cr.
Particúlars Particulars
Goods Sent to Branch Alc 30,600 Goods Sent to Branch A/c 4,69,800
(load on transfer91,800x 1/3) (load on goods transferred)
Goods Sent to Branch Alc 7,740 (t14,09,400 x 1/3)
(Returns to H.0.)-<(21,060 +2160)x1/3 Goods Sent to Branch Alc 3,600
Branch Stock Alc (Allowance). 1,800 (load on transfer) (10,800 x1/3)
Branch StockAc (normal loss) 2,700 Stock Reserve Ac (4,80,600 x 1/3) 1,60,200
Branch Stock A/c (R11,880 x 1/3] 3,960
(load on Abnormal loss)
Branch Stock Alc (24,300 x1/3) 8,100
(load on shortage)
Stock Reserve (3,87,000 x1/3) 1,29,000
Branch Profit &Loss Alc
(Balance Figure) 4,49,700
6,33,600 6,33,600
 Financial Acounting 2023 (Fetb-March) T7
Dr, Lucknow Branch Profit and Loss Account Cr.
Particulars Particulars
Branch Stock Ac (t1.380-3,960) 7.920 Branch Adjustment Alc 449,700
(Abnomai lass) (Gross Proft)
Branch Stock Alc {24,300-8,100) 16,200:Bank Ac(Insurance claim) 7,320
(Cost of Shortage)
Expenses 90,000
Bad debts 1.800
DiscountAliowed 900
Manager's Comnission (3,40,200 *,) 16,200
General P& LAC 3,24,000
4,57,020 4,57,020
Note:
1Normal Loss. Such loss is bound to occur due to inherent nature of goods, such as loss of
weight due to leakage, evaporation etc. Normal loss is treated as direct charge which affects
Gross
lost.
proft margin oniy. Hence, normal loss will not be split-into loading and cost of goods
": Abnormal Loss. Branch stock destroyed by fire, floods, theft or loss in transit is called
abnormal loss, Accounting treatmnent for abnormal loss is:
Invoice value of abnormal loss will be credited Branch Stock Account, the particular loss
account being debited with the same amount. The load on such loss will be debited to
Branch Adjustment Account and credited to Abnormal Loss Account. The Cost of Loss will
be transterred to the Branch Profit &Loss A/c.
Acounting Entry will be:
() Abnormal Loss A/c Dr.
To Branch Stock Ac XXX

() Branch Adjustment A/c Dr. (Loading)

Branch Profit &LOss A/C Dr. (Cost price of loss)
To Abnormal Loss A/C (Total)
Or, Patna branch is supplied goods from the H.O. at 20% profit on invoice price.
All expenses (except petty expenses) are paid by H.0. directly. Such petty expenses
are paid by the branches that are allowed to maintain petty cash balance of Z,000 on
imprest system. From the following balances, prepare Patna Branch A/c:
Balances as on 31 March, 2021:
Petty cash at branch 7,000
Stock at branch at cost price 3,58,400
Debtors at branch 1,21,800
Creditors at branch 735,000
Fumiture at branch
71,05,000
Prepaid rent for 3 months 78,400
Transactions for the year ended 31st March, 2022:.
Goods send to branch at invoice price 716,24,000
Cash sales at branch 13,30,000
Credit sales at branch
9,10,000
Allowances to debtors
Cash received from customers Z16,800
Bad debts written off 7,70,000
74,200
Goods returned by branch to H.0. at invoice price
*Cash purchases by the branch (on H... pemission) 14,000
Cash paid to Creditors 2,10,000
1,40,000
Payments made by the H.0.
Rent for one year (Paid on October 1, 2021) 33,600
Salaries (Paid in advance 7,000) 735,000
Insurance paid for one year (up to 30 June, 2022) 25,200
78 Shiv Das DELHI UNIVERSITY SERIES
Payments made by the branch:
Petty expenses Z16,800
Balance as on 31st March, 2022
Stock at Ccost 75,60,000
Creditors 49,000
Provide depreciation on furniture at 20% per annum. 18
Sol. Dr. Patna Branch Account Cr.
Particulars Particulars
Balance b/d: Pety Cash 7,000 Balance b/d: Creditors 35,000
Stock (IP)(3,58, 400x100
123 4,48,000 Stock Resrve 3,58,400 x2 89,600
100
Debtors 1,21,800 Goods Sent to Branch Alc (loading) 3,24,800
Furniture 1,05,000 Cash remitances" 17,50,000
Prepaid Rent 8,400 6,90,200 Goods sent to Branch Alc 14,000
Goods Sent to Branch Alc (IP) 16,24,000 (Return to H.0.)
Goods Sent to Branch Ac
2,800 Balance cld: Stock5,60,000 x12 7,00,000
(load on return)14,000 x20 100)
100
Bank Alc: Rent
Salaries
Insurance
33,600
35,000
25,200
Petty Cash
Debtors 1
7,000'2
2,40,800
80
Petty Expenses 16,800 Furniture1,05,000,-*1,05,000 x 84,000
Creditors 1,40,000. Advance Salary 7,000
General P&LAc (Balancing Figure) 6,50,300 Prepaid Insurance 25,000 x12) 6,300
Balance cld:Creditors 49,000 Prepaid Rent 8,400
32,66,900 32,66,900
Working Notes: *, Dr. Balance Debtors Account Cr.
Particulars Particulars
Balance b/d 1,21,800 Allowance 16,800
Credit Sales 9,10,000 Bank A/c (Collection from Debt.) 7,70,000
Bad debts 4,200
Balance çfd (Balancing Fig.) 2,40,800
.10,31,800 10,31,800
2 Dr. Petty Cash Account Cr.
Particulars Particulars
Balance b/d 7,000 Petty Expenses A/c 16,800
Bark A/c (Balancing Figure) 16,800 Balance cd 7,000
23,800 23,800
Since the Petty Cash Account is being maintained on Imprest System; it is assumed that the
amount of 16,800 spent by the branch must have been reimbursed by H.O. and as such the
closing balance of Petty Cash willremain as in the beginning i.e, 7,000
Dr. Branch Creditors Account Cr.
Particulars Particulars
Bank A/c (Payment) 140,000 Balance b/d 35,000
Balance cd 49,000 Stock A/c (Balancing Fig.) 1,54,000
(Credit Purchase)
1,89,000 1,89,000
*, Dr. Branch Cash Account Cr
Particulars Particulars
Sales A/c 13,30,000 Purchase A/c 2,10,000
Debtors A/c 7,70,000 Creditors A/c 1,40,000
Branch A/c 17,50,000
(Cash remittances to H.O.)
21,00,000 21,00,000
 Financial Accounting 2023 (Feb-March) 79
Q.5. M/s. AM Enterprise had two departments, Cloth and Readymade Clothes. The
Readymade Cloths were madéby the frm itself out of the cloth supplied by the cloth
Cepartment at its usual selling price. From the followingfigures, prepare Departmental
Trading and Profit & Loss Account for the year ended 31 March 22:
Particulars Cloth Depart1ment Readymade Clothes
Department ()
Opening Stock on 1April, 2021 31,50,000 5,32,000
Purchases 2,10,00,000 1,68,000
Sales 2,31,00,000 47,25,000
TransfertoReadymade Clothes Depatment 31,50,000
Manufacturing Expenses 6,30,000
Seling Expenses 2,10,000 73,500
Rent &Warehousing 8,40,000 5,60,000
Stock on 31s March, 2022 21,00,000 6,72,000
In additon to the albove, the following information is made available for necessary
consideration:
The stock in the Readymade Clothes Department may be considered as consisting of
75% cloth and 25% other expenses. The Cloth Department earned a gross profit at the rate
of 15% in 2021-22. General Expenses of the business as a whole amount to 10,85,000. 18
Sol. Departmental Trading and Profit & Loss Account
for the year ended 31.03.22
Cloth Ready Cloth Ready- Total
Dept. made
Total Particulars
Particulars ) Dept. made ()
) Clothes ) Clothes
Dept. (3) Dept. R)
Opening atock 31,50,000 5,32,000 36,82,000|Sales 2,31,00,000 47,25,000 2,78,25,000
Purchases 2,10,00,000 1,68,000| 2,11,68,000Transfer to Ready
Transfer from Cloth made Clothes Dept. 31,50,000 31,50,000
Department 31,50,000| 31,50,000|Closing Stock 21,00,000 6,72,000 27,72,000
Manufacturing exp. 6,30,000 6,30,000
Gross Profit 42,00,000 9,17,000 51,17,000
2,83,50,000 53,97,000| 3,37,47,000 2,83,50,000| 53,97;000| 3,3747,000
Seling Expenses 2,10,000 73,500 2,83,500l Gross Profit 42,00,000 9,17,000| 51,17,000
Rent & Warehousing| 8,40,000 5,60,000 14,00,000
Net Profit 31,50,000 2,83,500| 34,33,500
42,00,000 9,17,000 51,17,000 42,00,000 9,17,000| 51,17,000
General Profit and Loss Account
for the year ending 31.03.22
Particulars Particulars
Stock Reserve (Closing Stock)" 80,640 Net Profit: (R31,50,000 +2,83,500) 34,33,500
General expenses 10,85,000 Stock Reserve (Opening Stock)" 59,850
Net Profit 23,27,710
34,93,350
34,93,350
80 Shiv Das DELHI UNIVERSITY SERIES
Working Notes: ", Calculation of Stock Reserve
Opening
5,32,000
Closing
Total
6,72,000
Break up: 3,99,000 5,04,000
75% Cloth
25% Other expenses
133,000 1,68,000
Stock reserve:
59,850
@15% on opening stock 80,640
@16% on closing stock*,
Calculation of Gross Profit %
0,15
Opening (given)
(Gross Profit 42,00,000 = 16% 0.16
Closing Total Sales 2,62,50,000
terms are
Or, (a) B & P Ltd. availed a lease from N & L Ltd. The conditions of the lease
as under: 12
() Lease period is 3 years in the beginning of the year 2019, for equipment costing
10,00,000 and has an expected useful life of 5 years.
(i) the fair market value is also 10,00,000.
(iii) The property reverts back to the lessor on termination of the lease.
(iv) the unguaranteed residual value is estimated at 1,00,000 at the end of the year
2021.
(v) three equal annual payments are made at the end of each year.
Consider implicit rate of return = 10 %
The present value of 1 due at the end of third year at 10% rate of interest is 0.7513.
The present value of annuity of 1 at the end of third year at 10% IRR is 2.4868.
State whethr the lease constitutes finance lease and also calculate unearned finance
income.
(6) Distinguish between Operating lease and Finance lease. 6
Sol. (a) Computation of Annual Lease Paynent to the Lessor:
Cost of Equipment 10,00,000
Unguaranteed Residual Value (URV) 1,00,000
Present Value of (URV) =(1,00,000 x 0.7513) Z75,130
:. Present Value of lease payments (10,00,000 - 75,130) 9,24,870

Annual Lease Payment (FVof Lease

IRR
Payment 2924870
72.4868
73,71,91.70

Present Value oflease payment9,24,870 equals to 92.48 %of FV (10,00,000) This shows
that
() Present Value of MLP (Minimum Lease Payment) substantially covers the initial
Fair value of the asset.
(ii) Lease term i.e., 3 years covers the major part of life of the asset ie. 5 years.
Therefore, it is a finance lease.
Computation of Unearned Finance Income (UFI):

Total lease payment (3,71,912 x 3) 11,15,736

Add: Unguaranteed Residual Value 1,00,000
Gross Investment in lease 12,15,736
Less: PV of Gross Investment
() PV of Lease rentals 9,24,870
(i) PV of UGRV 75,130(10,00,000)
Unearned Finance Income (UFI) 2,15,736
(b) See Q. 1; Chapter 11. [Page T-65
 2023 (Feb-March)
Name of the Paper : Financial Accounting
Name of the Course: B.Com.
(Hons.) SOb
Duration:3 Hours Maximum Marks: 90
Attempt all questions. All questions are compulsory and carry eqiual marks,
l (a) A custonmer fled a suit against the company's advertisement on 10h April,
02 The claim was of 50 lakhs. Keeping in view the provision of AS 4, state whether
hs event should be adjusted in the books of account for the year ended 31" March,
2022?
(0) State the accounting principles with reasons involved in the following statements:
10
() Advance received from customer is not recorded as sales.
(1) Hard work of management is not directly disclosed on the Assets side of the
balance sheet.
(ti1) Closing stock is valued at lower of cost or net realisable value.
(io) Rent for last month was not paid. But it should be recorded as an expense for the
year ended 31 March, 2022.
() Draving account is debited for cash withdrawn from bank by the proprietor for
buying a new car.
(c) Discuss the Fundamental Accounting Assumptions as per AS 1. 4
Ans (a) As we know contingency is restricted to conditions existing at the Balance
Sheet date. Here in the given case the suit against company's advertisement was filed
by a party on 10 April 2022 i.e., 10 days after the year end, claiming damages of Z50
lakhs. Therefore,it does not fit into the definition of a contingency and hence it is a non
adjusting event.
(6) Accounting Principles with reasons:
) Revenue Recognition because revenue is considered as being earned on the date
at which it is realised i.e., on happening of the sale.
() Money measurement because only those transactions which can be measured in
terms of money are recorded in the books of accounts.
(im) Prudence because the alternative should be selected which has least favourable
immediate effect on Net Profit or Capital.
(iv) Accrual concept because liabilities are reflected in the accounts for the period in
which they occur.
() Separate Business Entity because an enterprise is treated as separate from its
OWners.

(c) FundamentalAccounting Assumptions:

As per AS1 certain fundamental accounting assumptions underlie the preparation and
presentation of financial statements. They are usually not specifically stated because their
acceptance and use are assumed. Disclosure is necessary if they are not followed.
The following have been generally accepted as fundamental accounting assunptions:
) Going Concern. The enterprise is normally viewed as a going concern, that
is, as continuing in operation for the foreseeable future. It is assumed that the
enterprise has neither the intention nor the necessity of liquidation or of curtailing
materially the scale of the operations:
() Consistency. It is assumed that accounting policies are consistent from one period
to another.
(ii) Accrual. Revenues and costs are accrued, that is, recognised as they are earned
or incurred (and not as money is received or paid) and recorded in the financial
statements of the periods to which they relate. (The considerations affecting the
process of matching costs with revenues under the accrual assumption are not
dealt with in this Standard).
Or. (a) Give any three differences between AS 5 and Ind AS 8. 3
81
82 Shiy Das DELHI UNIVERSITY SERIES
(b) Write a short note on the following: 2.5x4
() Extraordinary items (i) Contingent Liability & Contingent Asset
(iii) Money Measurement Concept
(iv) Generally Accepted Accounting Principles (GAAP)
(c) Mr. Shyam who is a registered taxpayer in Delhi, purchased goods for 5,00,000 from
Shyam in Jaipur, Rajasthan. He sold those goods for 6,00,000 to Mahesh in Delhi. He also
prchased a computer for 50,000 from Hariom in Jaipur. Assume CGST and SGST @9%
each on intra-state supply and IGST @18% on inter-state transaction. Pass journal entries5
for the above transaction, including set-off entries in the books of Shyam.
Ans. (a) Difference between AS-5 and Ind AS-8
AS-5 Ind AS-8
(Net Profit or loss for the period, priorperiod (Accounting policies, change in accounting
items & thanges in accounting policies) estimates and errors)
() Less disclosure required as compared are
Disclosure requirements given in IND AS 8
more detailed as compared to AS 5.
to IND AS-8,
() It requires the rectification of prior Itrequires the rectification of material prior
period errors with retrospective effect.
period items with prospective effect.
(i) Extraordinary items to be disclosed |IND AS 8 prohibits presentation of any
item as extraordinary item.
seperately.
(b) () Extra-ordinary items. See Q. 1(1), Chapter 8. (Page T-47
(n) Contingent Liabilities. See Q. 5, Chapter 13. Page T-75
Contingent Assets. See Q. 6, Chapter 13. [Page T-76
(iii) Money Measurement Concept. See Q.1 (Point 2), Chapter 4. Page T-26
(iv) Generally Accepted Accounting Principles (GAAP). See Q. 10, Chapter 1.
Page T-6
JOURNAL of Mr. SHYAM in Delhi
Date Particulars L.F. Dr. ) Cr. )
Purchase Alc Dr. 5,00,000
Input IGSTAlc (R5,00,000 x 18/100) Dr. 90,000
To Shyam's in Jaipur Alc 5,90,000
(Purchase made and GST recorded)
Mahesh's Alc Dr. 7,08,000
To Sales Ac 6,00,000
- To Output CGST Ac (6,00,000 x9/100 ) 54,000
To Output SGST Wc (*6,00,000 x9/100 ) 54,000
(Goods sold to Mahesh and GST recorded)
Purchase Ac Dr 50,000
Input IGSTAc (750,000 x18/100) 9,000
To Hariom's Alc 59,000
(Computer purchased from Hariom and GST recorded)
Output CGST Ac Dr. 54,000
Ouput SGST AC Dr. 45,000
To Input IGST Ac (90,000 +9,000) 99,000
(Offset of CGST &SGST liabilty, usedthe credit in (GST)
Q. 2.(a) A machine is purchased together with spare parts, The price of machinery
is 15,00,000 and a major spare part for 2,00,000 which can only be used on this
machinery, As Per AS-10(Revised), what is the cost of Machinery? State with reason.5
(b) As per AS-26, how would you deal with the following situations: 10
() During the year 2022-2023, a company spent ?50,00,000,for research and
development for its new product which was launched in the same year. But after
six months this launch was proved to be failure.
 Financial Accounting 2023 (Feb-March) 83
(") A company is showing an intangible asset of 66 1akhs as on 1-04-2016. The
asset was acquired for 90 lakhs on 01-04-2012 and samé was available for use
from that date. The company has been following the policy of amortization of
intangible assets over the period of 15 years on straight line basis.
(e) Give any three differences between AS-2 and IND AS 2.
Ans. (a) Cost of machinery is {17 lakh (15 lakh + 2 lakh) because major spare parts
and standby equipments are treated as PPE (Properly, Plant & Equipment) if they are
expected to be used for more than one accounting period.
(6) () As the launch proved to be failure, it means that there willbe no future economic
benefits. Therefore, as per AS 26 the company should show the entire amount of
50,00,000 as charge in the Statement of Profit &Loss during 2022-23.
(ii) As per AS 26 'Intangible Assets' the depreciable amount of an intangible asset
should be allocated on a systematic basis over the best estimates of its useful life.
There is a rebuttable presumption that the useful life of an intangible asset will
not exceed 10 years from the date when the asset is available for use. Amortization
should commence when the asset is available for use.
In the given case, the company has been following the policy of amortization of
the intangible asset over a period of 15 years on straight line basis. The period
of 15 years is more than the maximum period of 10 years specified 90 as per AS 26.
Carrying amount of intangible asset as on 1.4.2016 = 790 lakhs x4
10
=790 -736 =754 lakhs
The difference of 12 lakhs i.e., (T66 lakhs -54 lakhs) willbe adjusted against the
opening balance of Revenue reserve.
Carrying amount of 54, lakhs would be amortised: over remaining 6 years
@79 lakhs per year.
Journal Entry
Revenue Reserve Dr. 12,00,000
To Intangible Assets 12,00,000
(Adjustment to Reserve due to restaterment of the carrying amt. of
intangible asset)
(b) Difference between AS-2and IND AS-2
AS-2 IND AS-2
) As perAS 2, it is not necessary to use IND AS 2requires an entity to use the same
the same cost formula consistently cost formula for all inventories having
for all inventories that are of similar similar nature and use to the entity.
nature and use to the entity.
(1) Less disclosures are required. More disclosures are required.
(tin) Itdoes not contain explanation with|It provides explanation with regard to
regard to inventories of. service inventories of service providers.
providers.
Or, (a) Ram purchased a machine for 790,000 on 01/04/2017. He charges depreciation
on SLM and closes his books on December 319 every year. The machinery has a useful
Hfe of 9 years after which residual value of machinery is 79000. He purchased another
machine on 1* May 2018 for 45,000 with 5 years useful life and 5000 residual value.
TnTune 2019, the first machine was sold for 40,000. Prepare the machinery account for
ihe 3 years ending December 31st 2019. 12
(b) State with reference to AS-2 (Revised) how will you value the inventories in the
below case:
Raw material was purchased at 780 per kg. The finished goods in which the raw
Material is incorporatedis expected to be sold at below cost. 5,000kgs of raw material
sin stock at the end of the year and replacement cost is 60 per kg. 6
84 Shiv Das DELHI UNIVERSITY SERIES
Sol. Dr. Machinery Account Cr,
Date Particulars ) Date Particulars )
01.04.17 Bank Alc (M,) 90,000 31.12.17| Depreciation Alc (M,) 6,750
(Purchase) (R9,000 x 9/12)
Balance cld (M,) 83,250
90,000 90,000
01.01.18 Balånce b/d 83,250 31.12.18 Depreciation Alc;
9,000
01.05.18 To Bank Alc (M,) (Purchase) 45,000 M.
M, (R8,000 x 8/12) 5,333 14,333
Balance cld: (M,) 74,250
(M,) 39,667 1,13,917
1,28,250 1,28,250
01.01.19 Balance b/d 1,13,917 01.06.19| Depreciation A/c 3,750
(M,) (R9,000 x 5/12)
Bank A/c (sale) 40,000
P& LAc (loss) 230,500
31.12.19| Depreciation Alc (M,) 8,000
Balance cld 31,667
1,13,917 1,13,917
Working Notes: , Depreciation p.a. as per straight line method:
First Machine (M,) (on 01.04.17) Second Machine (M,) (on 01.05.18)
Cost of Machine 790,000Cost of Machine 45,000
Residual Value 9,000Residual Value 5,000
9Useful life 5
Useful life

:. Depreciation = (90,000 -9,000) =K9,000 Depreciation= (45,000-5,000)

5
=8,000

*, Calculation of Loss on M, =74,250 -3,750 -40,000 =30,500

the raw material
(b) If finished goods are expected to be sold below cost price in whichreplacement
is to be incorporated then raw material is valued at cost price or at cost
whichever is lower. Therefore, in this case raw material will be priced at replacement cost.
The value will be 5,000 kg x 60=3,00,000.
O.3. (a) From the following trialbalance and additional information, prepare Trading
and Profit and Loss Account for the year ended 31st March, 2022 and Balance Sheet as18
on the date:
TRIAL BALANCE as on 31$* March, 2022
Particulars Debit Balance ) | Credit Balance )
Opening Stock 30,000
Purchases (Adjusted) 4,65,000
Sales 9,75,000
Closing Stock 35,000
Land and Buildings 1,50,000
Machinery 4,00,000
Accumulated Depreciation:
Land and Buildings 25,000
Machinery 80,000
1,55,000
Capital
Bad Debts 5,000
Provision for Bad Debts 5,000
Salaries 40,000
Rent, Rates And Taxes 20,000
Expenses 5,750
 85
Financial Accounting 2023 (Feb-March)
Depreciation on Land and Buildings. 6,250
Depreciation on Machinery 20,000
Life Insurance Premium 5.000.
Income Tax 5,000
Drawings
Insurance
10,000
5,000
Sundry Debtors and Sundry Creditors 70,000 50,000
Output CGST 79,000and Output SGST T9,000 paid 18,000
Total 12,90,000 12,90,000
Additional infornation:
() Goods withdrawn by the proprietor 2,000.
(in) Goods amounting to 33,000 were donated by the entity.
(iin) Goods of T4,000 were distributed as free samples for advertisement.
(iv) Goods costing 5,000 were destroyed by fire and insurance company accepted a
claim for 74,000, not yet received.
() Insurance prepaid at the end 2,000.
(oi) Write off further 72,000 as bad debts and maintain a provision for bad and
doubtful debts equal to 5% of the sundry debtors.
(oin Sales include Output CGST 10,000 and Output SGST 710,000. The proprietor is
not entitled to input tax credit as he has purchased the goods from an unregistered
supplier.
Sol. Trading and Profit and Loss Account
Dr. for the year ended 31st March, 2022 Cr.
Particulars Particulars
Opening Stock 30,000 Sales 9,75,000
Purchases 4,65,000 Less: GST (10,000 + 10,000)(20,000) 9,55,000
Less: Drawings (2,000)
Less: Donation (3,000)
Less: Free samples (4,000)
Less: loss by fire (5,000) 4,51,000
Gross Profit cld (Balancing Figure) 4,74,000
9,55,000 9,55,000
Bad Debts 5,000 Gross Profit bld
Add: Bad Debts written off
4,74,000
2,000
Add: New provision
(770,000 -2,000) *°o 3,400
10,400
Less: Old Provision (5,000) -5,400
Salaries 40,000
Rent, Rates &Taxes 20,000
Trade expenses 5,750
Depreciation: L¡nd &Building 6,250
Machinery 20,000 26,250
Insurance 5,000
Less: Prepaid Insurance (2,000) 3,000
Charity and Donation 3,000
Free samples 4,000
Loss by fire 5,000
Less: Insurance claim (4,000) 1,000
Net Profit Transferred to Capital Alc 3,65,600
(Balancing Figure)
4,74,000
4,74,000
86 Shiy Das DELHI UNIVERSITY SERIES
Balance Sheet as at 31.3.22
Liabilities Assets
Capital 1,55,000 Stock 35,000
Add: Net Profit 3,65,600 Land and Building 1,50,000
Less: Drawings (10,000) Less: Accumulated Dep. (25,000) 1,25,000
Less: Life Insurance Premium (5,000) Machinery 4,00,000
Income tax (5,000) Less: Accumulated Dep. (80,000) 3,20,000
Less: Goods Withdrawal (2,000) 4,98,600 Sundry Debtors 70,000
Sundry Creditors 50,000 Less: New Bad debts (2,000)
GST Payable: Less: New provision (3,400) 64,600
Output CGST 1,000 Prepaid Insurance 2,000
Output SGST 2,000 Insurance Claim
1,000 4,000
5,50,600 5,50,600
Or, The following balances are obtained from the books of Kanpur Cricket Club as
on 31 March 2015, and 31st March, 2016: 18
Particulars 31-3-2015 <) 31-3-2016()
Building 80,000 85500
Furniture 40,000 30,600
Advance Subscription 1,500 1,000
Arrears of Subscription 3,000 5,000
Prepaid Expenses 8,00 1,000
Outstanding Expenses 3,000 1,200
Sports Equipment 24,000 21,600
Investments 12,000
Books 15,000 16,200
Cash 16,000 17,100
Consider the following information relevant to the year 2015-16:
() Depreciation provided for the year
Buildings74,500; Furniture-3,400;
Sports Equipment-5,400; Books1,800
(in) Some old furniture standing in the books for 76,000 on 1st April, 2015 was sold
for 74,000 on the same date.
(it) The club had 300 members on 31* March, 2016 as per the register of members.
No fresh members were admitted during the year but 10 members left the club
on 1$t October, 2015.
(iv) Subscription payable-15 per month.
(o) Donation received for 75,000 has been capitalisd.
(vi) Considerable expenses were paid during the year.
(vii) Capital fund as on 31-3-2015 was 1,74,300.
You are required to show the Income and Expenditure Account for the year ended
31st March, 2016 and Balance Sheet.
Sol. Receipts and Payment Account for the year ended 31st March, 2016
Receipts Payments
Balance b/d 16,000 Building 10,000
Furniture Ac(Salé) 4,000 Sports equipment 3,000
Subscription 52,400", Investment A/c 12,000
Donation Ac 5,000 Books A/c 3,000%
Expenses Ao (Balancing. Figura) 32,300
Balance c/d 17,100
77,400 77,400
 (Feb-March) 87
Financial Accounting 2023
Cr.
Dr. Income and Expenditure Account
for the year ended 31st March 2016
Expenditure Income
Depreclation: Building 4,500 Subscription:
Furniture (310 x 15 x 6) 27,900
3,400 27,000 54,900
Sports Euipment 5,400 (300 x 15 x6)
Books 1,800 15,100
Expenses 32,300
Add: Outstanding at the end 1,200
Less: Prepaid in the beginning 800
Less: O/s in the beginning (3,000)
Less: Prepaid at the end (1,000) 30,300
Loss on sale of fumiture 2,000
{6,000 - 4,000)
Excess Income over expenditure (Suplus) 7,500
(Balancing Figure) 54,900
54,900
Balance Sheet as at 31.3.2016
Liabilities Assests
1,74,300 Building 85,500
Capital Fund 30,600
Add: Capitalised Donation 5,000 Furniture
7,500 186,800 Sports Equipment 21,600
Add: Surplus 12,000
Advance Subscription 1,000 lnvestments
1,200 Books 16,200
Outstanding Expenses Arrears of Subscription 5,000
Prepaid Expenses 1,000
Cash 17,100
1,89,000 1,89,000
Building Account Cr.
Working Notes: * Dr. Particulars
Particulars
80,000 Depreciation A/c 4,500
Balance b/d
Cash A/c (Purchase Bal.Fig,) 10,000 Balance c/d 85,500
90,000 90,000
Furniture Account Cr.
Dr.
Particulars Particulars
Balance b/d 40,000 Depreciation A/c 3,400
Cash A/c (Sale Proceeds) 4,000
Income &Expenditure A/c (Los) 2,000
Balance c/d 30,600
40,000 40,000
Dr. Subscription Account Cr.
Particulars Particulars
Arrears of Subscription (Beginning) 3,000 Advance Subscription A/C(Beginning) 1,500
Income &Expenditure A/c: Cash A/c (Balancing Figure) 52,400
(310 x 15 x 6) 27,900
(r300* 15 x 6) 27,000 54,900
Advance Subscription A/c (end) 1,000| Arrears of Subscription A/C (end) 5,000
58900 58,900
Dr: Sports Equipment Account Cr.
Particulars Particulars
Balance b/d 24,000 Depreciation A/c 5,400
Cash A/c (Purchase Bal. Fig.) 3,000 Balance c/d 21,600
27,000 27,000
88 Shiv Das DELHI UNIVERSITY SERIES
Cr
* Dr. Books Account
Particulars
Particulars 1,800
Balanceb/d 15,000 | Depreciation A/c 16,200
Cash A/c (Purchase Bal. Fig.) 3,000 Balance c/d 18,000
18,000
Q4 Kanpur Head Office supplies goods to its branch at Jaipur at invoice price which
Branch for the year
1s cost plus 50%. The following are the particulars related to Jaipur
2022.
(iii) Branch
Prepare: () Branch Stock Account; (ii) Branch Debtors Account; Head Office for
Adjustment Account; (iv) Branch Profit and Loss Account in the books of 18
the year 2022.
)
Stock at Branch on 1-1-2022 60,000
Branch Debtors on 1-1-2022
12,000
Goods Received from Head Office at Invoice Price
1,86,000
Goods Returned to Head Office 3,000
Credit Sales
84,00
2,000
Allowance to Customers off seling price already adjusted while invoicing 90,000
Cash received from Debtors
Discount alowed to Debtors 2,400
Expenses paid by Head Office:
Rent 2,400
24,000

Ras.
Salaries
Petty Cash 1,000
Cash Sales 1,04,000
Stock at Branch on 31-12-2022 54,000
Branch Stock Account Cr.
Sol. (i) Dr.
Particulars Particulars
Balance b/d 60,000 Branch Cash Alc (Sales) 1,04,000
Goods Sent to Branch Ac 1,86,000 Branch Debtors Alc (Credit sales) 84,000
Branch Adjustment Alc 1,000| Goods Sent to Branch Ac 3,000
(Surplus due to sale at more than (Retums to Head Office )
invoice price) (Balancing Figure) Branch Adjustment A/c 2,000
(Allowance to customers)
Balance cld 54,000
2,47,000 2,47,000
(i1f Dr. Branch Debtors Account Cr.
Particulars Particulars
Balance bld 12,000 Branch Cash Alc 90,000
Branch Stock Alc (Credit Sales) 84,000 Branch Expenses Alc(Discount allowed) 2,400
Balance cd 3,600
96,000 96,000
(iii) Dr. Branch Adjustment Account Cr.
Particurals Paticulars
Goods Sent to Branch Alc 1,000 Stock Reserve Ac(Opening) 20,000
(load on goods T3,000 x 50/150) (T60,000 x 50/150)
Branch Stock A/c 2,000 Goods Sent to Branch Alc 62,000
(Allowance to customer) (load 31,86,000 x 50/150)
Stock Reserve Alc (54,000 x50/150) 18,000 Branch Stock Alc (Surplus) 1,000
(Closing) (Surplus due to sale at more than
Branch P &L(Gross Profit) 62,000 in voice value)
83,000 83,000
 .

(Feb-March) 89
Financial Accounting 2023
Branch Profit & Loss Account
Ct.
(iv) Dr.
Particulars Particulars 62,000
Branch Expenses A/c: Discount 2,400 Branch Adjustment Ac
Rent 2,400 (Gross Profit)
Salaries 24,000
Petty Cash Expenses 1,000 29,800
General P&LAc (Net Profit) 32,200 82,000
62,000
Delhi Branch Account in the books of
Or, From the following information, prepare
the head office for the year ending on 31 March, 2023.
Balance on 1.04.2022 Cash Sent to Branchfor Expenses 24,.000
Stock at Cost 80,000 Rent 80,200
Debtors 28,000 Salaries 8,000
Petty Cash 3,000 Petty Cash 3,200
Furmiture 24,000| Insurance (from 1.07.2022 to 30,06.2023)
Prepaid Insurance 2,300 | Goods Returned by the Branch to the 8,000
Outstanding Salaries 4,200 H:0. at Cost 15,000
Good Send to Branch at cost 6,60,000 Goods Returned by Debtors to Branch 8,700
Cash Sales 6,60,000Petty Expenses Paid by the Branch
Credit Sales 3,66,000Balances on 31.03.2023
Cash received from Debtors by the Stock
Branch 2,70,000 Debtors
2
Cash paid by Debtors direct to 44,000 Petty Cash
Head Office Furniture
2
Discount Allowed 2,200 Prepaid Insurance
) Goods are sold to customers at cost plus 50%.
(ii) Depreciation on furniture is to be provided at 10% on WDV Method. 18
Sol () Dr. Delhi Branch Account Cr.
Particulars Particulars
Balance b/d: Stock 80,000 Balance bld: Outstanding Salary 4,200
Debtors 28,000 Bank Alc: Cash Sales 6,60,000
Petty Cash 3,000 Collection from debtors 2,70,000
Fumiture 24,000 Direct payment to Head Office 44,000
Prepaid Insurance 2,300 Goods Sent to Branch A/c (Returns) 8,000
Goods Sent to Branch Alc 6,60,000
24,000
Balance c/d: Stock 58,000"
Bank Ac: Rent Debtors 62,800*
Salaries Petty Cash
Petty Cash
80,200
8,000 Furniture 24,000
2,3003
Insurance 3,200 Less: Depreciation (2,400) 21,600
Net Profit 2,19,000 Prepaid Insurance (3,200/4) 800
11,31,700 11,31,700
Working Notes:
1 Dr. Memorandum Branch Stock Account (Cost Basis) C
Particulars Particulars
Balance b/d 80,000 Cash Sales 6,60,000
Goods Sent to Branch A/c 6,60,000 Less: Load (50/150)(2,20,000) 4,40,000
Sales Return 15,000 Credit sales 3,66,000
Less: Load on Sales 5,000) 10,000 Less: Load (50/150)(1,22,000) 2,44,000
Good Sent to Branch A/c
(Returns by Branch) 8,000
Balance c/d (Balancing Fig) 58,000
7,50,000
7,50,000
90 Shiv Das DELHIUNIVERSITY SERIS
" Dr. Memorandum Branch Debtors Account
Particulars Assets
Balance b/d 28,000 Cash (2,70,000+44,000) 3,14,000
Sales (Credit) 3,66,000 Discount Allowed 2,200
Returns 15,000
Balance c/d (Balancing Fig.) 62,800
394,000 3,94,000
*a Dr. Memorandum Petty Cash Account Cr.
Pariculars
Balance b/dParticulars 3,000 Petty Expenses A/c 8,700
Remittarnce from Head Office 8,000 Balance c/d (Balancing Fig,) 2,300
11,000 11,000
Q5. From the following trial balance, prepate DepartmentalTrading and Profit &Loss
Account for the year ended on 31t March, 2019 and Balance sheet as on the Date: 18
Particulars Dr.) Cr. )
Stock on 1-4-2019: Department A 60,000
Department B 50,000
Purchases: DepartmentA 80,000
Departmeht B 70,000
Sales: DepartmentA 2,0^ 000
Department B 1,80,000
Wages: DepartmentA 15,000
Department B 5,000
Rent 10,000
Salanes 16,000
Lighting and Heating 6,000
Discount Allowed and Received 1,500 1,900
Advertising 2,700
Carriage Inwards 1,500
Furniture and Fittings 11,200
Plant and Machinery 16,000
Sundry Debtors &Sundry Creditors 44,000 10;000
Drawings 2,000
Cash in Hand 11,000
Cash at Bank 70,000
Capital 50,000
4,41900 4,41,900
The informationis also given: () Rent, Lighting and heating, Salaries and Depreciation
are to be apportioned in the ratio of 2:1 between the Departments Aand B. (t) Other
expenses and income are to be apportioned on suitable basis. (it) The following
adjustments are to be made: Rent prepaid 1,000; Lighting and Heating outstanding
1,200; Depreciation is to be charged on furniture and fittings and Plant and Machinery
@ 10% per annum. (iv) Stock at 319 March: Department A 10,000, Departnent B15,000.
Sol. Departmental Trading and Profit and Loss Account
Dr. for the year ended 31st march, 2020 Cr.

Particulars Departments Departments

A <) B) Particulars
A) B)
Opening Stock 60,000 50,000 Sales 2,00,000| 1,80,000
Purchases 80,000 70,000| Closing Stock 10,000 15,000
Wages 15,000 5,000
.Carriage Inward (8:7) 800 700
Gross profit 54,200 69,300
2,10,000 1,95,000 2,10,000 1,95,000
 Financial Accounting 2023 (Feb-March) 91
Rent (2: 1) 6,000 3,000 Gross Profit 54,200| 69,300
(R10,000-1,000 prepald) Discount Receíved (8:7) 1,013 887
Salaries(2: 1) 10,667 5,333
Lighting & Heating(2: 1) 4,800 2,400
outstanding)
(Z6.000 +1,200 i.e.,
Discount Allowed (10:9) 789 711
Advertising (10:9) 1,421 1,279
Dep. on furniture (2:1) 747 373
(11,200 x 10/100)
Dep. on Plant & Machinery (2:1)| 1,067 533
(R16,000 x 10/100)
Net Profit (Balancing Figure) 29,722 56,558
55,213 70,187 55,213| 70,187
Balance Sheet as at 31st March 2020
Liabilities Assests
Capital 50,000 Stock (10,000 + 15,000) 25,000
Add: Net Profit 86,280 Prepaid Rent 1,000
Less: Drawings (2,000) 1,34,280Cash in Hand 11,000
Sundry Creditors 10,000 Cash at Bank 70,000
Outstanding Lighting &Heating 1,200 Funiture &Fitings 11,200
Less: Depreciation (1,120) 10,080
Plant &Machínery 16,000
Less: Dépreciation (1,600) 14,400
Debtors 14,000
1,45,480 1,45,480
Working Notes: *
1. Discount Received to be apportioned on the basis of Purchase (8:7) between Department
A & B.
2. Advertising to be apportioned on the basis of Sales (10: 9) between Department A&B.
3. Carriage Inward to be apportioned on the basis of Purchases (8 :7) between Department A &
B
4. Discount Allowed to be apportioned on the basis of Sales (10 : 9) between Department A & B.
Or, (a) A && Co. Acquired machinery on lease fromB and Co. On April 1, 2018 on the
following terms:
Lease term 5 years; Fair value of machinery 45,00,000; Useful life 15 years
Annual Lease rental payable at 74,00,000, <3,00,000, 2,00,000, T60,000 and Z40,000.
Present value are 0.8696, 0.7561, 0.6575, 0.5718, and 0.4972 for the first, second, third,
forth and fifth year respectively at 15% IRR.
Depreciation : 10% p.a. on straight line basis.
() Whether the lease an Operating lease or Finance lease giving reasons?
(ii) How would this lease be accounted for in the books of the lessor and lessee?
Pass journal entries for this purpose for first year in the books of both lessor
and the lessee, assuming that accounts are closed on 31 March every year. 12
(0) Explain accounting treatment of operating lease in the books of lessor and leasee.
lease 6
Sol. (a) () The given lease is operating lease due to the following reasons:
Present Value of minimum lease payments is substantially lower than the fair value of the
asset as shown below:
Present value of MLP:
= (4,00,000 x 0.8696) + (3,00,000 x 0.7561) + (32,00,000 x 0.6575)
+ (R60,000 x0.5718) +(740,000 x 0.4972)
=(3,47,840 + 2,26,830 + 1,31,500 +34,308 +19,900) =7,60,378
Fair Value of Machinery = 45,00,000
92 Shiv Das DELHI UNIVERSITY SERIES
Para 23 of AS 19 provides from the Lessee's perspecttve as follows:
Lease payments under an Operating lease should be recognised as an expense in the
Statement of Profit and Loss on straight line basis over the lease term unless another
systematic basis is more representative of the time pattern of the User's benefit.
Para 40 of AS 19 states from the Lessor's perspective:
Lease income from Operating leases should be recognised in the Statement of Proft
and Loss on a straight line basis over the lease term, unless another systematic basis is more
representlative of the time pattern in which benefit derived from the use of the Leased
Asset Diminishes.
In the absence of such systenmaticbasis which is more representative of the time pattern
in which benefit derived from the use of the leased asset is diminished, the Lease rental is
to be accounted for on a straight line basis.
Therefore in the given question the Lease should be accounted for in the books of the
Lessor and the Lessee as follows:
Since Present Value of Annual Lease Rental Payable is substantially lower than the
Fair value of assest therefore the given lease is Operating lease.
(i) JOURNAL of B & Co,/Lessor
Date Particulars L.F. Dr. ) Cr. ()
31.03.19 Operating Lease Receivable AWc Dr. 2,00,000
To Lease Rental Inconme Alc 2.00,000
(Operating Lease Recoverable recorded (4,00,000
+3,00,000 +2,00,000 +760,000 + 740,000)/5]
Bank A/c Dr. 4,00,000
To Operating Lease Receivable Alc 4,00,000
(Receipt of Lease Rental Income as per the Lease agreement)
Depreciation on Machinery Alc Dr. 3,00,000
To Machinery Alc 3,00,000
(Charged Depreciation on Machinery)
Lease Rental Income Alc Dr 2,00,000
To Statement of Profit &loss AWc(10,00,000/5) 2,00,000
(Lease rerntal income transferred to P.& LAlc)
Statement of Profit &loss A/c Dr. 3,00,000
To Depreciation on Machinery Alc 3,00,000
(Depreciation transferred to P&LÁc)
The Credit Balance of 2,00,000 in Operating Lease Receivable Ac should be shown as Current Liability in
the Balance Sheet of B&Co. as at 31.03.2019.
(ii1) JOURNAL; of A &Co,/ Lessee
Date Particulars L.F, Dr. ) Cr. ()
31.3.19 Lease Rernt Expense Ac Dr 2,00,000
To Operating Lease Rent Payable A/c 2,00,000
(Lease rent for year Idue)
Operating Lease Rent Payable Ac Dr 4,00,000
To Bank Ac 4,00,000
(Payment of Lease Rent)
Statement of Profit &Loss Alc (R10,00,000/5) Dr. 2,00,000
To Lease Rent Expenses Ac 2,00,000
(Lease rent for the year transferto Profit &Loss Account)
The Debit Balance in Operating Lease Alc of 72,00,000 should be shown as Current Asset in the Balance
Sheet of A&Co. (Lessee)
(b) See Q.3, Chapter 11. [Page T-67,