Subject: Financial Accounts

Topic: Single Entry System By: Questionscastle Academic Team Document Code: CA/IPCC/ACC/00018
Conversion Method Q 1. The following information is provided to you from which you are required to prepare a profit and loss a/c for the year ended 31st Dec 1989 and a balance sheet as on that date: Asstes and Liabilities 01-01-1989 31-12-1989 ` ` Sundry Asstes 18,000 20,000 Stock 14,000 19,000 Cash in hand 8,200 4,800 Cash at bank 2,200 8,000 Debtors ? 26,000 Creditors 12,000 9,800 Miscellaneous expenses outstanding 1,000 600 Details relating to the years transactions are: Return from debtors Sales cash and credit Return to creditors Receipts from debtors deposited in to bank Salary and wages paid out of bank Cash drawings Cash withdrawn from bank 6,000 3,00,000 3,000 2,43,000 Bad Debts Discount Allowed by creditors Payment to creditors by cheque Cash purchases 1,000 4,000 2,36,200 10,000 5,000 2,000 ?

18,000 Misc exp. paid by cash 9,400 Purchase sundry assets by cheque 21,000 Cash sales deposited in bank

Q 2. Sri Kapoor has a trading business for which the following procedure is followed: 1. All collections are deposited with bank each day. 2. All payments except petty expenses are made by cheque. 3. To meet petty expenses a cheque for `1500 is withdrawn from the bank on the first day of each month. The following figures are available from Sri Kapoors record: 01-01-1981 31-12-1981 ` ` Cash in hand 150 300 Balance in bank 30,000 21,000 Debtors 1,00,000 1,25,000 Creditors 90,000 1,00,000 Stock 15,000 25,000 Payments made to creditors during the year `1,20,000 Personal drawings of bank `6,000 Sri kapoor sales goods at a profit of 25% on sales. Prepare P&L a/c for the year ended 31-12-1981 and a Balance Sheet as on that date. Q 3. From the following information obtained from Mr. X a trader who does not maintain his accounts, prepare a P&L A/c for the year ended 31st Mar 1993 and a Balance Sheet as on that date. a) Withdrawal as per pass book; ` Rent, rates, taxes and insurance 12,000 Printing charges 1,000 Postage and telegram 1,000 Paid for purchases 50,000

Wages 8,000 Furniture purchased on 1st Apr 1992 2,000 Advertisement Expenses 1,000 X Drawings 10,000 Salaries 8,000 b) Balance at bank on 31-03-1993 `3,000 c) Stock on 01-04-1992 was `24,000 and stock on 31st Mar 1993 was `20,000. Out of stock on 0104-1992 spoiled stocks were sold for `2,000 which were not deposited in bank. d) Payment for purchase includes `4,000 for last years purchase. `1,000 of previous year purchase is still unpaid on 31-3-1993. Current years unpaid invoices not ticked off in the purchase register amounted to `5,000. e) Collections from sales is `1,00,000 which includes `12,000 for last year sale. Balance of unticked bills of last year sale still amounted to `8,000 on 31st Mar 1993. Unticked bill of current year amounted to `20,000. f) On 31st Mar 1993 Salaries of `500 and wages of `500 were outstanding. g) On 31-03-1992 Furniture was `6,000 and Machinery was `50,000. h) Prepaid insurance on 31-03-1993 was `400. i) Depreciate furniture by 10% and Machinery ny 25%. He maintained purchases and sales register and items are ticked off on collection or payments. All collections are deposited and payments are in cheque. Petty expenses of `1,000 were paid from his drawings. All purchases and sales are on credit basis. Q 4. A is importer of fancy goods, operating from rented premises which is on lease of `1,000 per month. He prepares his accounts as on 31st Dec each year. On the night of 31st Dec 1987 all his books and records were destroyed in a fire. The following was summarized financial position as on 31st Dec 1986. Assets: ` Motor Car 20,000 Stock in trade (at cost) 2,00,500 Balance at bank 27,060 Prepaid rates 500 Furniture 10,000 Debtors 24,000 Cash in hand 590 2,82,650 Current Liabilities: Creditors for purchases 1,10,200 Due for Hire Purchase Installment 2,790 Accrued Rent 2,000 1,14,990 The following further information is also available: a) A buys goods for resale only from one manufacturer in Japan, who allows a rebate of 3% of the goods purchased by him in excess of `5,00,000 in a calendar year. The rebate due for the year ended 31st Dec 1987 was `12,480. b) All goods are sold at a standard gross profit margin of 40% on selling price. Any rebate due is to be ignored for the purpose. c) Stock at cost on 31st Dec 1987 amounted to `90,200. d) Weekly cash expenses out of cash sales (before deposition of same in the bank) have been: Drawings `300 Petrol 100 Carriage Outward 500 General expenses 50 Cash in hand on 31st Dec 1987 was `1,670. e) His bank statement for the year reveal the following: Paid for purchases of `10,10,500 Car expenses `6,680 goods Rent 13,000 Salaries 1,12,460 Rates for the year ended 3,200 Travelling expenses 36,800 31st Mar 1988 Hire purchase installment 3,040 Printing and stationery 6,400

(Final payment) Advertisement Lorry Hire charges Drawings f)

12,280 Insurance (for business) 48,700 General expenses 37,000 Balance on 31st Dec 1987

3,000 36,230 2,31,800

Depreciation on motor car and furniture is to be provided @30% and 15% resp.

Prepare Trading and P&L A/c for the year ended 31st Dec 1987 and a Balance Sheet as on that date. Comparison Method Q 5. The income tax officer, assessing the income of Mr. Modi for the financial year 1997-98 and 1998-99 feels that Mr. Modi has not disclosed the full income. He gives you the following particulars of assets and liabilities of Mr. Modi on 1st Apr 1997 and 1st Apr 1999. 1st Apr 1997: Assets : Cash in hand `25,500 Stock 56,000 Sundry Debtors 41,500 Land and Building 1,99,000 Wifes Jewelery 75,000 Liabilities: Owing to Modis Brother 40,000 Sundry Creditors 35,000 1st Apr 1999: Assets: Cash in hand 16,000 Stock 91,500 Sundry Debtors 52,500 Land and Building 1,90,000 Motor Car 1,25,000 Wifes Jewellry 1,25,000 Loan to Motis Brother 20,000 Liabilities: Sundry Creditors 55,000 During the two year the domestic expenditure was `4,000 p.m. The declared income of financial years were `1,05,000 for 1997-98 and `1,23,000 for 1998-99 respectively. State whether the income tax officers contention is correct. Explain with workings. Q 6. VP keeps his books in single entry system. On 1-1-92 his position was as follows: Sundry Creditors `20,000, Cash in hand `300, Cash at bank `10,500, Sundry Debtors `40,000, Stock `10,000, Plant `20,000. On 31-12-1992 the position was as follows: Sundry Creditors `35,000, Cash in hand `500, Cash at bank `22,000, Sundry Debtors `49,000, Stock `12,000, Plant `45,000. VP Drew `500 at the end of every month. He introduced `25,000 by way of additional capital. Depreciate Plant at 10% and raise a reserve of 2.5% against sundry debtors. Required a statement of Profit and Loss and a statement of affairs for the year ending. Q 7. Ramesh carries on business as dress maker. He does not keep any accounts but want to ascertain his profit and loss for the year 1990. He gives you a idea of the assets and liabilities as on 31-12-1989 and 31-12-1990 which is as follows: 31-12-1989 31-12-1990 Cash in hand `470 `430 Bank balance as per pass 6,230 8,170 book Book Debts 3,100 2,900 Stock in trade 15,000 18,000 Investment in DCM 8,000 3,000 Debentures Equipment at cost 6,000 10,000 Owing for supplies 5,000 6,000 On enquiry you came to know about the following: a) Certain cheques for payment of taxes amounting to `2,500 issued on 28-12-1989 had not been presented, these were paid in jan 1990.

b) c) d) e) f) g) h)

Stock in trade is valued at selling price, the mark up in 1989 has 25% on selling price but during 1990 it was 25% on cost. Book debts on 31-12-1989 include `1,000 for goods sent on approval basis, the customer is still having the right to return the goods. The investments are shown at face value, the purchase having been made at 95. Half the equipment as on 31-12-1989 was purchased in 1988 and the remaining in 1989, depreciation at the rate 10% on original cost on closing balance is charged. A cheque for `500 was returned by the bank dishonoured on 30th Dec 1990 and customer has deposited `700 directly in to the bank on the same date. Ramesh did not know of these as yet. His drawings are `500 p.m. A chewue issued for `3,100 for his income tax was not presented as on 31-12-1990. You are required to ascertain the profit/loss suffered by Ramesh in 1990.

Q 8. Suresh does not maintain his books of accounts under the double entry system but keeps slips of paper from which he makes up his annual accounts. He has borrowed moneys from a bank to whom he has to render figures of profit every year. He has given the bank the following profit figures: Year ending 31st Dec Profit (`) ` 1987 20,000 1988 32,000 1989 35,000 1990 48,000 1991 55,000 The bank appoints you to audit the statement and verify whether the figures of profit reported are correct or not for this purpose the following figures are made available to you: 1. Position as on 31st Dec 1986: Sundry Debtors `20,000, Stock in trade (at 95% of cost) `47,500, cash in hand and at bank `12,600, Trade creditors `6,000, expenses due `1,600. 2. He had borrowed `5,000 from his wife on 30th Sept 1986 on which he had agreed to pay 12% p.a. simple interest. The loan was repaid along with interest on 31st Dec 88. 3. In December 1987, he had advanced `8,000 to A for purchase of vacant land. The property was registered in Mar 1989 after payment of balance consideration of `32,000. Cost of registration incurred for this purpose was `7,500. 4. Suresh purchased jewelry for his daughter for `15,000 in October 1989 marriage expenses incurred in January 1990 were `24,000. 5. A new VCR was purchased by him in march 1991 for `18,000 and presented by him to his friend in Nov 1991. 6. His annual household expenses amounted to `24,000 min. 7. The position of assets and liabilities as on 31st Dec 1991 was found to Overdraft with bank (secured against property of `12,000), Trade Creditors `10,000, Expenses payable `600, sundry debtors (including `600 due from peon declared insolvent by court) `28,800, Stock in trade (at 125% of cost to reflect market value) `60,000 and cash `250. It is found that the rate of profit has been uniform through the period and the proportion of sales during the year to sales for the period was in ratio of 3:4:4:6:8. Ascertain the annual profit and indicate differences, if any with those reported by Suresh to banker. All working should form part of your answer. Q 9. From the following information of M/s Pradip and Co. prepare a trading and profit and loss a/c for the year ended 31st Mar 1993 and a Balance sheet as on that date: Liabilities and Assets 31-03-1992 31-03-1993 Car `90,000 `90,000 Furniture 10,000 10,000 Stock 70,000 90,000 Debtors 62,000 46,000 Bank 9,000 16,000 Creditors 60,000 ? The following further information are also available: 1. M/s Pradip and co. purchased goods from manufacturer who allow discount of 3% on goods purchased in excess of `5,00,000 in a year. The discount for the year ended 31st Mar 1993 was `12,480.

2. 3.

GP Ratio is 30%. Bank statement reveals following information for the year: Creditors `9,03,520 Car Expenses `23,000 Printing and Stationery `6,400 Carriage outward `18,600 Delivery van purchases `1,70,000 Drawings `50,000 Salaries `60,000 Rent `30,000 Rates and Taxes `3,000 Travelling Expenses `14,900 Misc Expenses `9,580.

Q 10.You are provided with following: (a) Balance Sheet of A on 1st Apr 1989. Liabilities Assets ` ` Bank O/D 500 Debtors 3,900 Sundry Creditors 3,600 Cash in hand 70 Bills Payable 1,600 B/R 2,500 Capital 20,000 Stocks 7,530 Plant & Machinery 4,700 Land and Building 7,000 25,700 25,700 (b) The cash transactions for the year up to Mar 31st, 1990. To Bal b/d 70 By Bal b/d (Bank O/D) 500 To Receipts from debtors 29,000 By Salaries 4,900 To B/R 10,000 By Wages 1,580 To Cash Sales 3,700 By B/P 14,300 By Payment to creditors 14,700 By Office Exp. 800 By Drawings 4,500 By Investment at par (9% 1,000 GP. Notes on 1st Oct 1989) By Bal C/d Cash 40 Bank 490 42,770 42,770 (C) A summary of the remaining transactions for the year up to Mar 31st, 1990. Sales Credit `40,700 Purchases 30,000 Bill Payable 15,000 Stock of Goods on 31st Mar 1990 5,300 Discount to customer 200 Discount received 100 B/R Received 10,000 Provide for doubtful debts on closing debtors at 5%. Provide for depreciation on plant and machinery at 5% and on land and building at 2.5%. Prepare Trading and P&L A/c for the year ended 31st Mar 1990 and Balance Sheet as on that date. Q 11.From the following data you are required to prepare a Trading and P&L A/c for the year ended 31st Mar 1989 and a Balance Sheet as on that date. All workings should form part of your answer. Liabilities and Assets 01-04-1988 31-03-1989 Creditors `15,770 `12,400 Sundry Expenses o/s 600 330 Stock in trade 11,610 12,040 Cash in hand and at bank 6,960 8,080 Trade Debtors -17,870 Details relating to transactions during the year are: Cash and discount credited to debtors `64,000

Bad Debts Discount allowed by trade creditors Additional capital paid in to bank Cash purchases Paid by cheque for machinery purchased Cash paid in to bank Cash in hand 31-03-1989 Sales return Sales (cash and credit) Purchase return Realization from debtors paid in to bank Cash expenses Household exp. drawn from bank Cash drawn from bank Cheques issued to creditors

420 700 8,500 1,030 430 5,000 1,200 1,450 71,810 400 62,500 9,570 3,180 9,240 60,270