MAXIMUM MARKS: 59 TIMING:1 hour 45 mins

PAPER : PRINCIPLES & PRACTICE OF ACCOUNTING

Question 1:
(a) State with reasons, whether the following statements are True or False:
(i) Cash Discount is a reduction granted by a supplier from the sale price of goods
or services on business considerations for prompt payment.
(ii) M/s. XYZ & Co. runs a office. They renovated some of the old cabins. Because
of this renovation some space was made free and number of cabins was
increased from 15 to 18. The total expenditure incurred was Rs. 30,000 and
was treated as a revenue expenditure.
(iii) In case of bill of exchange, the drawer and the payee may not be the same
person but in case of a promissory note, the maker and the payee may be the
same person.
(3 x 2 = 6 Marks)

(b) Distinguish between Provision and Contingent Liability.

(c) X purchased a machinery on 1st January 2017 for Rs. 4,80,000 and spent Rs.
20,000 on its installation. On July 1, 2017 another machinery costing Rs. 2,00,000
was purchased. On 1st July, 2018 the machinery purchased on 1st January, 2017
having become scrapped and was sold for Rs. 2,90,000 and on the same date fresh
machinery was purchased for Rs. 5,00,000. Depreciation is provided annually on
31st December at the rate of 10% p .a. on written down value. Prepare Machinery
account for the years 2017 and 2018.
(4 Marks)

Question 2:
(a) On 30th September, 2018, the bank account of XYZ, according to the bank column
of the cash book, was overdrawn to the extent of Rs. 16,124. An examination of the
Cash book and Bank Statement reveals the following:
(i) A cheque for Rs. 11,14,000 deposited on 29th September, 2018 was credited
by the bank only on 3rd October, 2018.
(ii) A payment by cheque for Rs. 18,000 has been entered twice in the Cash book.
(iii) On 29th September, 2018, the bank credited an amount of Rs. 1,15,400
received from a customer of XYZ, but the advice was not received by XYZ until
1st October, 2018.
(iv) Bank charges amounting to Rs. 280 had not been entered in the cash book.
(v) On 6th September 2018, the bank credited Rs. 30,000 to XYZ in error.
(vi) A bill of exchange for Rs. 1,60,000 was discounted by XYZ with his bank. The
bill was dishonoured on 28th September, 2018 but no entry had been made in
the books of XYZ.

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 (vii) Cheques issued upto 30th September,2018 but not presented for payment
upto that date totalled Rs. 13,46,000.
(viii) A bill payable of Rs. 2,00,000 had been paid by the bank but was not entered in
the cash book and bill receivable for Rs. 60,000 had been discounted with the
bank at a cost of Rs. 1,000 which had also not been recorded in cash book.
You are required:
To show the appropriate rectifications required in the cash book of XYZ, to arrive at
the correct balance on 30th September, 2018 and to prepare a Bank Reconciliation
Statement as on that date.
(10 Marks)

(b) Correct the following errors (i) without opening a Suspense Account and (ii) with
opening a Suspense Account:
(1) The sales book has been totalled Rs. 4,200 short.
(2) Goods worth Rs. 3,600 returned by Gaurav & Co. have not been recorded
anywhere.
(3) Goods purchased Rs. 4,500 have been posted to the debit of the supplier Sen
Brothers.
(4) Furniture purchased from Mary Associates, Rs. 30,000 has been entered in the
purchase Daybook.
(5) Discount received from Black and White Rs. 2,400 has not been entered in the
books.
(6) Discount allowed to Radhe Mohan & Co. Rs. 360 has not been entered in the
Discount Column of the Cashbook. The account of Radhe Mohan & Co. has,
however, been correctly posted.
(10 Marks)
Question 3:

(a) From the following particulars prepare an account current, as sent by Mr. Amit to Mr.
Piyush as on 31" December, 2020 by means of product method charging interest @
8% p.a.
Date Particulars Rs.
01-09-2020 Balance due from Piyush 900
15-10-2020 Sold goods to Piyush 1,450
20-10-2020 Goods returned by Piyush 250
22-11-2020 Piyush paid by Cheque 1,200
15-12-2020 Received cash from Piyush 600

(5 Marks)
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(b) From the following information show the journal entries in the books of ABC Limited for
the year ended 31st March, 2020:
(1) 200 units of goods costing Rs. 500 each sent to XYZ Limited on Sales
or Return Basis @ Rs. 750 per unit. This transaction was however
treated as actual sales in the books of accounts.
(2) Out of the above 200 units, only 120 units were accepted by XYZ
Limited during the year @ Rs. 700 per unit. No information was
received about acceptability of balance units by the year end.

(5 Marks)

(c) Mahesh had the following bill receivables and bills payables against Rajesh. Calculate
the average due date, when the payment can be received or made without any loss
of interest.
Bills Tenure
Date Tenure Date Bills Payable
Receivable
12-06-20 5,000 3 months 27-05-20 3,700 3 months
10-07-20 6,200 1 month 07-06-20 4,000 3 months
15-07-20 3,500 3 months 10-07-20 5,000 1 month
12-06-20 1,500 2 months
28-06-20 2,500 2 months
15 August, 2020 was Public holiday. However, 10th September, 2020 was also
th

suddenly declared as holiday.

Question 5:
(a) M/s. ABC Enterprises were unable to agree the Trial Balance as on 31st March, 2020
and have raised a suspense account for the difference. Next year the following errors
were discovered:
(i) Repairs made during the year were wrongly debited to the building A/c -
Rs. 25,000.
(ii) The addition of the 'Freight' column in the purchase journal was short by
Rs. 3,000.
(iii) Goods to the value of Rs. 2,100 returned by a customer, Rani & Co., had been
posted to the debit of Rani & Co. and also to sales returns.
(iv) Sundry items of furniture sold for Rs. 60,000 had been entered in the sales
book, the total of which had been posted to sales account.
(v) A bill of exchange (received from Raja & Co.) for Rs. 40,000 had been
returned by the bank as. dishonoured and had been credited to the bank and
debited to bills receivable account.
You are required to pass journal entries to rectify the above mistakes.
(5 Marks)

(b) Discuss the factors taken into consideration for calculation of depreciation.
(5 Marks)

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