LOYOLA-INTERNATIONAL ACADEMIC

COLLABORATION
LOYOLA COLLEGE CHENNAI – 600 034
BBA-FRANCE – END SEMESTER EXAMINATION
I SEMESTER – NOVEMBER 2017
BBA 136 – FINANCIAL ACCOUNTING I

Date: 08/11/2017 Dept. No. Max. : 100 Marks

Time: 9 A.M. – 12 P.M.

PART A
Answer ALL questions (Marks : 6 x5=30)

1. State whether the following are TRUE or FALSE:

a. When prices are rising FIFO method will show lower profit.
b. Bank account is a real account
c. Current ratio will decrease when receivable are collected.
d. Gross profit is the difference between sales and net purchases if there is no stock.
e. High stock turnover will result in more profit

2. State whether the following are Capital or Revenue expenditure:

a. Goods destroyed by fire
b. Fines paid by a transport company for overloading their vehicles
c. Training cost of employees for updating their skills
d. Stamp duty paid on registration of land
e. Cost of replacing temporary roofing by a permanent one

3. Distinguish between
a. Cash discount and Trade discount.
b. FIFO and LIFO methods of pricing issues

4. Explain the following:

a. Accrual concept
b. Prudence principle

5. Pass adjusting entries for the following assuming books are closed on 31st December 2016,
a. Rent for 6 months at Rs.2500 per month as paid in advance on December 01 and debited to Prepaid Rent
account.
b. December salary Rs.4000 is unpaid on 31st December
c. Loan of Rs.50,000 at 10% interest p.a. was taken on 1st September 2016. Entry for interest accrued has not
been passed.
d. A machine was purchased on 1st October 2016 for Rs.2,00,000 at 10% discount. It has a life of 5 years and a
salvage value of Rs.30,000.
e. Revenue Rs.40,000 was received on 1st December 2016 and credited to Unearned revenue account. During
December Rs.5000 worth of work was completed.

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 6. Fire occurred in the video shop of X on November 4th. The following information is available for the period July
1st to November 3rd.
Opening stock on July 1st 24,000
Purchases 246,000
Purchase returns 14,000
Freight 24,000
Sales 506,000
Sales returns 26,000
X sells his goods at a profit margin of 60% on selling price.
Calculate the value of the goods lost by fire.

PART B
Answer ANY FIVE questions (Marks:5x10=50)

7. Gross profit ratio 20% on sales

Gross profit Rs.40,000
Debtors collection period 25 days
Inventory turnover 40 days
Creditors payment period 45 days
Calculate sales, debtors, stock and creditors.

8. Enter the following transactions in the three columnar Cash Book of Mohan.
Jan 1 Cash balance Rs.20000; Bank balance Rs.25,000
5 Bought furniture Rs.10000 less 10% discount and paid by cheque.
6 Received Rs.4000 from Ashok in full settlement of his debt of Rs.4200.
7 Paid Gopal Rs.5200 by cheque and received a discount of Rs/200
8 Paid salaries Rs.5000 and received commission Rs.200
9 Paid into bank Rs.10000
11 Sold old furniture for Rs.2500
12 Received Rs.300 interest on bank deposit
13 Paid tution fees of Proprietor’s son Rs.2500 by cheque
14 Discounted a 3 month bill of Rs.5000 with the bank and received Rs.4800
15 Withdrew cash Rs.4000 from bank for office use

9. Journalise the following transactions:

Sept 1 Received Rs.8000 12% six months Note receivable from A a debtor in settlement of his account.
December 1 Received Rs.20,000 16% three month Note receivable from Y against a loan given.
December 15 Discounted A’s note receivable, the banker charging 18% interest per annum.
March 1 Collected the amount due on maturity of Y’s note
April 1A’s note was dishonored on maturity. The banker paying Rs.100 as protest fee.
April 15 A declared insolvent and 60 paise in the rupee was received from him.
Assume books are closed on December 31, every year.

10a. ABC Ltd has the following inventory, purchases and sales data for the month of August:
Opening balance August 1st 100 units at Rs.8 per unit
Purchases :
Aug 5th 600 units at Rs.9 per unit
th
Aug 11 300 units at Rs.10 per unit
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 Aug 23rd 400 units at Rs.11 per unit

Sales:
Aug 9th 400 units
th
Aug 18 500 units
Aug 28th 200 units
The company follows the periodic inventory method and prices issues under Weighted Average Method and
FIFO method. Calculate :
i. Value of closing stock on August 31.
ii. Cost of goods sold on August 31.
iii. Profit during August, assuming selling price per unit is Rs.15 and Operating expenses are Rs.250.

10b. A purchased a machine costing Rs.80,000 on 1/7/2014 and spent Rs.20,000 on its installation. The machine was
sold on 1/7/2016 for 10% less than the Book value. Books are closed on 31 st March every year. Depreciation is
provided at 20% p.a under WDV method. Show the machinery account.

11. Rectify the following errors:

i. Sales to Ashok Rs.20,000 was credited to Anand’s account
ii. Purchase Book total was overcast Rs.100
iii. Wages paid to workers for construction of a building was debited to Wages Account
iv. Interest on Bank OD Rs.500 was entered in the Bank Account as Rs.50
v. Sales returns Rs.1500 was entered in Purchase Return Book.
vi. Cash purchases from X Rs.800 was credited to X’s account
vii. Discount received on payment to X Rs.100 was omitted to be entered in the Discount column of the
Cash Book.
viii. Purchases from John Rs.5100 was entered in the Purchase Book as Rs.1500, but John’s account was
correctly posted.

12. Bank Balance as per Cash book stood at Rs.10000 on 31/3/2016.

On comparison with the Pass book the following were noticed:
a) Out of cheques banked during March Rs.10000 a cheque for Rs.2000 was collected in April.
b) Out of cheques issued in March Rs.14000 only cheques worth Rs.10000 was collected upto 31 st
March.
c) The following items appeared in Pass book only on 31/3:
Bank charges Rs.200
Bank interest Rs.350
House rent paid Rs.3500
Interest collected by bank Rs.750
A direct deposit of Rs.2500 by a customer into bank.
The bank had debited our account with Rs.2300 for a bill discounted which was dishonoured.
The credit side of cash book was undercast Rs.1000
Prepare the adjusted Cash book and ascertain the bank balance to be entered in the Balance
sheet on 31/3/2016.
Also prepare a Bank Reconciliation statement and ascertain the balance as per the Pass book.

13. On 31st December 2015 the books of Accounts showed Accounts receivable Rs.2,00,000
on which a provision for Bad debts is to be maintained at 5%.
During 2016 the following transactions took place:
Sales Rs.14,00,000 (including Rs.200000 cash sales
Sales returns Rs.50,000
Sales allowances Rs.10,000
Discount allowed to debtors Rs.8,000
Cash received from Account Receivable Rs.10,00,000
Wrote off Rs.20,000 due from A and Rs.15,000 due from B as uncollectable.

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 Subsequently A paid Rs.14,000.
On 31st December 2016, the books are closed and a provision of 5% was made on the doubtful
debts.
Journalise the above transactions and show the entries in the P/L account and Balance Sheet as on
31st December 2016.

PART C
COMPULSORY QUESTION (marks:1 x 20=20)

14,. The following Trial Balance is extracted from the books of Mr. Rahul on 31.12.16.
Particulars Debit Credit
Rs. Rs.
Furniture and fittings 14,300 -
Legal expenses 390 -
Capital - 12,500
Commission received - 1,100
Sundry Debtors 9,800
Sundry Creditors 2,500
Stock on 1.1.16 3,460 -
Purchases 10,000
Sales - 27,900
10% Bank loan 10,000
Cash 1220
Taxes and Insurance 1,000 -
Bad debts 250 -
Salaries 5,080 -
Interest on Bank loan 500 -
Drawings 2,000 -
Bills receivables 6,000 -
-------- ---------
54,000 54,000
Adjustments:

i) Stock on 31.12.16 was Rs.8,000 at cost and Rs,7500 at realisable value

ii) Bank loan was taken on 1/4/16
iii) Insurance was paid on 1/10/16 for a one year period,
iv) Provide 5% for doubtful debts
v) Depreciate furniture at 20% p.a.
vi) 20% of commission received is for work to be done in January 2017
Prepare Trading and Profit and Loss account for the year ending 31/12/2016 and a Balance sheet on that
date.

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