MGT 211: Accounting for Financial Analysis and Planning
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MGT 211: Accounting for Financial Analysis and Planning
BBS 1st Year
Model Question
Full Marks: 100
Pass Marks: 35
Candidates are required to give their answer in their own words as far as practicable. The figures in
the margin indicate full marks.
Attempt ALL Questions
Brief Questions Answer (10x2=20)
1. Write about the two differences between Equity Share Capital and Preference Share Capital.
2. Differentiate between pre -acquisition and post-acquisition dividend.
3. Define the meaning of cash from financing activities.
4. What do you mean by current purchasing power method?
5. Why is Capital Budgeting significant for an organization?
6. A company presents the following information.
Equity Share Capital of Rs 100 each = Rs.100000
8% Preference share capital of Rs 100 each = Rs.60000
6% Debentures = Rs.40000
The company is within 40% tax racket
Required: EPS at EBIT level of Rs.100000
7. You are provided the following information.
Sales = Rs.300000 Wages to workers = Rs.50000
Interest received = Rs.10000 Cost of bought in materials and services = Rs.180000
Required: Amount of value added.
8. A company whose NPAT was Rs.60000, has 10% Debenture of Rs.100000 and 8% Performance Share
Capital of Rs.100000. If tax rate is 40%, find out Interest Coverage Ratio.
9. The following information are provided
Cost of sales adjustment = Rs.30000
Depreciation adjustment = Rs.10000
Current cost adjustment = Rs.60000
Required: Monitory working capital adjustment10. A machine was purchased on 1st Baisakh, 2068 for Rs.90000 and incurred Rs.10000 each for
transportation and installation. It was estimated that the machine will have a scrap value of
Rs.10000. The total life of the machine wi ll be 10000 hours. If machine runs for 3000 hours during
2068, find out the amount of depreciation for the year 2068.
Descriptive Questions Answer (attempt any five) (5x10=50)
11. a. Ratio Analysis is used to measure financial performance of the organization, comment. (5)
b. The following information are given.
Current Ratio = 2 Current Liabilities = Rs.250000
Fixed Assets = Rs.500000 Stock = Rs.100000
Prepaid expenses = Rs.25000 Debenture = Rs.100000
Share Capital = Rs.300000 Net Profit = Rs.50000
Inventory Turnover ratio = 5 times
Required: a. Quick Ratio b. Sales (Rs.)
c. Debt to Total Capital Ratio d. Return on Total Assets (1.25x4=5)
12. A company is considering the replacement of old machine. The existing machine is 5 year old, has
current cash salvage value of Rs.30000 and remaining depreciable life of 10 years. The machine was
originally purchased for Rs.75000 and it is being depreciated at Rs.5000 per year for tax purpose.
The new machine will cost Rs.150000 and will be depreciated on straight line basis over 10 years
with no salvage value. The management of the company anticipates that with expanded operation,
there will be a need of an additional working capital of Rs.30000. T he new machine will allow the
company to expand the current operation and there by increase annual sales revenue by Rs.40000
and annual variable operating cost by Rs.10000. The company’s tax rate is 50% and its cost of capita l
is 10%.
Required: i) Net cash outlay (NCO)
ii) Incremental annual cash inflow (CFAT)
iii) Final year cash inflow.
iv) Net Present Value (NPV) of the project.
v) Decision regarding replacement of old machine. (2+2+2+2+2)
13. a. Clarify the meaning of depreciation with two main objectives. (5)
b. The following are the particulars relating to the machine account.
i) Purchase 5 machines at Rs.10000 each
ii) Date of purchase January 1, 2008
iii) Depreciation applied Straight line at 20% p.a.
iv) Salvage Value Rs.2000 each (Book value)v) Scrapped One machine realizing Rs.6000 on the last date of December, 2010
vi) Accounts closed on The last date of December every year
Required: Machinery account for 2010 (5)
14. A book store performed the following transactions during the year, 2012.
Amount (Rs.) Amount (Rs.)
Sales revenue 5000000
Less: cost of goods sold:
Beginning inventory 600000
Purchases 3000000
Ending Inventory (400000) 3200000
Gross Profit 1800000
Less: Operating Expenses:
Administration (cash) 500000
Selling and Distribution (cash) 240000
Interest 60000
Depreciation 200000 1000000
Net income before tax 800000
Less: Income Tax 200000
Net income after Tax 600000
Less: Dividend 300000
Net Profit 300000
Price Indices
1-1-2012 125
31-12-2012 200
Average Index 160
Time of fixed assets purchased 100
Required: a) Purchasing power gain or less on holding monetary items.
b) Restated purchasing power income statement (5+5=10)
15. The balance sheet of a company is as follows:
Liabilities Amount (Rs.) Assets Amount (Rs.)
3000 Equity Share Capital 225000 Land & Building 200,000
of Rs.100 each, Rs.75 called up
10% Preference Share Capital of 100000 Plant & Machinery 240,000
Rs.100 each, fully paid up
8% Debenture 200000 Inventory 190000
Account Payable 225000 Account 62000
ReceivablePreference dividend due 12000 Cash 20000
P/L account 50000
762000 762000
The Company went into voluntary liquidation. The assets except cash realized Rs.450000 including
Rs.180000 on sale of plant and machinery, which was mortgaged against 8% debenture. The liquidator
was entitled to a remuneration of 4% on value of assets realized and 2% on amount paid to equity
shareholders. The cost of liquidation was Rs.12000.
Required: Liquidator's final statement of account (10)
16. Define consolidated balance sheet. How would you ascertain the amount of minority interest and
capital reserve or goodwill? Explain with suitable example. (4+6=10)
Analytical Questions Answer (attempt any two) 2x15=30)
17. A company and B company decided to amalgamate and a new Company, C Company is formed to
take over the amalgamated companies with effect from January 1, 2013, when their balance sheet
stood as follows:
Liabilities (Rs.) A Co B Co Assets (Rs.) A Co B Co
Equity shares of Rs 100 each 1000000 500000 Goodwill 190,000 60,000
Reserve Fund 290,000 175,000 Premises 500,000 240,000
P/L A/C 110,000 75,000 Machinery 300,000 195,000
Accounts payable 95,000 47,500 Furniture 85,00
Outstanding expenses 5000 2500 Inventory 130,000 90,000
Accounts Receivables 210,000 175,000
Cash at bank 85,000 30,000
Preliminary expenses 10,000
1500,000 800,000 1500,000 800,000
C Company issued 5000 equity shares of Rs.100 each, 10000, 8% preference shares of Rs.10 each and
10% debentures Rs.200000 to the public apart from the issues made to carry out the business
combination.
Required:
i) Calculate the amount payable to each company assuming that the purchase consideration was settled
by the following in each of the companies. 40% in equity shares, 30% in preference shares, 20% in
debentures and the rest in cash.
ii) Necessary journal entries in the book of A Co.iii) Amalgamated balance sheet of New Company. (4+6+5)
18. An unadjusted trial balance of a company is given below.
Particulars Debit (Rs.) Credit (Rs.)
Cash 200000
Bank 354000
Discount Allowed 5000
Furniture 120000
Purchases 200000
Debtors 85000
Interest on loan 6000
Salary 60000
Rent 30000
Capital 500000
Creditors 50000
Discount Received 10000
Sales 400000
10% Bank Loan 100000
1060000 1060000
Adjustment:
a. Closing stock Rs.50000
b. Prepaid rent was Rs.2000
c. Out standing interest on bank loan was Rs.4000
d. Depreciation on furniture at 10% per annum
Required: i. Income Statement (4)
ii. Balance Sheet (5)
iii. Cash flow Statement (6)
19. a. Explain the meaning, features and privileges of public limited company. (2+3+3=8)
b. “Cash Flow Statement is useful internally to management and externally to investors an d
creditors”, Discuss. (7)Financial Accounting and Analysis
BBS 1st Year
Model Question
Course No.: MGT 211 Full Marks: 100
Nature of the Course: Core Pass Marks: 35
Candidates are required to give their answer in their own words as far as practicable. The
figures in the margin indicate full marks.
Brief Answer Questions (10x2=20)
1. What is business entity concept of accounting?
2. Write about the cash basis of accounting.
3. What are the importance of internal control to a business?
4. Write down the meaning of contingent liabilities.
5. What is long lived assets?
6. On January 1, Simran Company borrowed Rs. 100,000 from bank by signing a 3-month, 12%
notes payable. It paid the principal and interest at due date.
Required: Journal entries for issue and retirement of note.
7. You are provided the following information.
Sales = Rs.300,000 Wages to workers = Rs.50,000
Interest received = Rs.10,000 Income tax paid = Rs.5,000
Cost of bought in materials and services = Rs.180,000
Opening Stock = Rs.20,000 Closing Stock = Rs.30,000
Required: Amount of value added.
8. The following information are given:
Started business with cash of Rs.80,000
Paid rent Rs.13,000 including advance rent of Rs.1,000
Salary paid Rs.16,000 and outstanding salary was Rs.2,000
Required: Accounting equation
9. The following transactions of the Light Company are given below:Jestha 5 Returned by Rama Lights
20 Fans @ Rs.1,500 each
2 dozen Lamps @ Rs.900 each
Carriage charge Rs.1,000
Less: Trade discount 10%
Jestha 17 Returned 8 Heaters from KK Lights for Rs.20,000
Jestha 29 Returned 300 Led Lights to Divya Lights Rs.30,000
Required: Return inward book
10. The following information are given,
Trial Balance
Particulars Debit Credit
Sundry Debtors 220,000
Bad Debts 20,000
Provision for Doubtful Debts 30,000
Adjustment:
Additional Bad Debts to be written off Rs.10000
New Provision for Doubtful Debts @ 10% on Debtor
Required: Provision for doubtful debt account.
Short Answer Questions (attempt any five) (5x10=50)
11. The following information is provided:
Net Working Capital Rs.600,000 that represents Rs.300,000 inventory value
Current Liabilities Rs.200,000
Capital Employed Rs.1,000,000
Debentures Rs.400,000
Account Receivable Rs.200,000
Operating Profit of the year Rs.100,000 being 10% of Sales
Income Tax is 25%
Required:
a. Net profit after tax b. Liquid Ratio c. Debt Equity Ratio
d. Stock Turnover Ratio e. Average Payable Period f. Return on Shareholder’s Equity
g. Net Profit Margin (1+6x1.5=10)
12. The ABC Company sells a single product for Rs.2 per unit and uses a periodic
inventory system. The following data are available for the year.Date Transaction Number of Units Unit Cost Rs. Total Rs.
Baisakh 11 Beginning inventory 1,000 1 1,000
Jestha 16 Purchase 700 1.1 770
Shrawan 22 Sale (1,100)
Kartik 27 Sale (400)
Poush 13 Purchase 800 1.3 1,040
Falgun 15 Sale (600)
Required:
a. Cost of goods sold, ending inventory and gross profit under weighted average costing
method
b. Cost of goods sold, ending inventory and gross profit under FIFO method (5+5=10)
13 a. A firm purchased a machine costing Rs.200,000 on 1st Baishak 2075. The useful life of the
machine is 3 years with expected salvage value of Rs.40,000. The firm decided to invest
the depreciation amount to earn interest at 5% per annum. The sinking fund table shows
that Rs.0.317208 invested at 5% p.a. will give Re. 1 at the end of 3 years. At the end of 3rd
year, the investments were sold for Rs. 100,000.
Required: Depreciation Fund Investment Account
b. Explain the concept of accounting standard. Why it is needed? (2+3=5)
14 a. On 1st Baisakh 2075, MG Group Stockholder’ Equity category appeared as follows:
8% Preferred Stock of Rs.500 par value
1,000 shares issued and outstanding 500,000
Common Stock Rs.100 par value 15,000 shares
1,500,000
issued and outstanding Additional paid in
capital – Preferred Additional paid in capital – 300,000
Common 400,000
Total contributed capital 2,700,000
Retained Earnings 2,000,000
Total Shareholders’ Equity 4,700,000
The Preferred Stock is non-cumulative and non-participating. During 2075 the
following transaction occurred
a. On 1st Ashwin, declared a cash dividend of Rs.80,000 on preferred stock. Paid
the dividend on 1st Kartik.b. On 1st Mangsir, declared a 10% stock dividend on common stock. The current
market price of the common stock was Rs.180. The stock was issued on Poush
c. On 1st Magh declared a cash dividend of Rs.60 per share on the common stock; paid
the dividend on 30th Magh
d. On 1st Chaitra issued a 2-for-1 stock of common stock, when the stock was selling
for Rs.200 per share.
Required: Develop the Stockholders Equity category of the 31st Chaitra 2075 balance sheet.
Assume the net income for the year was Rs.300,000 (5)
b. Explain the concept of bonds and write down the main characteristics of bond. (5)
15. a. Differentiate between horizontal and vertical analysis. (5)
b. Differentiate between account receivable and note receivable (5)
16. Discuss in brief about the disclosures required for financial statement under Nepal Financial
Reporting Standard (NFRS). (10)
Long Answer Questions (attempt any two) (2x15=30)
17. Following are the transaction of a Computer Service Agency during the month of January.
Jan 2 Received cash Rs.300,000 to start business from the owners of the company. Jan
8 Deposited into bank Rs.100,000
Jan 10 Signed a two year promissory note at the bank and received cash of Rs.50,000.
Interest 10% along with Rs.50,000 will be repaid at the end of two years.
Jan 11 Purchase of supplies for Rs.30,000 on account. The company has 45 days to pay
for the supplies.
Jan 19 Billed a client Rs.100,000 for service rendered by expert in helping to install a
new computer system. The client is to pay 25% of the bill upon its receipt and the
remaining balance within 60 days.
Jan 21 Paid Rs.10,000 to the advertising company.
Jan 22 Received Rs.45,000 after deduction of 10% discount from the client billed on Jan
19
Jan 26 Received cash of Rs.30,000 for service provided in selecting software for its
computer.
Jan 28 Purchased a computer system for Rs.50,000 in cash.
Jan 30 Paid Rs.50,000 salaries for January and Rs.30,000 rent for February.
Required:
a. Journal entries (5)
b. T accounts (ledger) for income, account receivable and account payable (3)c. Triple column cash book (4)
d. Trial Balance (3)
18. The balance sheet of a company for two years are given below:
Liabilities Year 1 Year 2 Assets Year 1 Year 2
Equity Share capital 1,000,000 12,00,000 Fixed assets 1,000,000 1,200,000
Share premium 100,000 120,000 Inventory 200,000 350,000
10% Debentures 120,000 70,000 Accounts receivable 250,000 340,000
Provision for tax 20,000 40,000 Prepaid expenses 20,000 10,000
Provision for dividend 10,000 20,000 Cash 120,000 150,000
Accounts payable 60,000 150,000
Accumulated depreciation 250,000 280,000
Profit and loss a/c 30,000 170,000
1,590,000 2,050,000 1,590,000 2,050,000
Income Statement for the Year 2
Sales revenue Rs.
10,00,000
Less: Cost of goods sold 600,000
Gross Profit 400,000
Less: Operating expenses:
Administrative expenses 150,000
Depreciation 50,000
Provision for tax 40,000
Provision for dividend 20,000
Interest paid 12,000
Premium on redemption of debentures 5,000
Total operating expenses 277,000
Net income 123,000
Add: Gain on sale of fixed assets 17,000
Retained earning 140,000
Additional information
i. A plant costing Rs.50,000 with an accumulated depreciation of
Rs.20,000 has been sold for Rs.47,000.
ii. Dividend paid in year 2 Rs. 10,000.
Required: Cash flow statement by using direct method (6+3+3+3=15)
19. “Financial accounting is based on generally accepted accounting principles, which
is enabled
the preparation and presentation of financial statement uniformly,” discuss. (15)
Chapter 1 Basic Understanding of Financial Accounting
1. Define Financial Accounting. [2]
2. Write any two objectives of financial accounting. [2]3. Write any two limitations of financial accounting. [2]
4. Show the relationship between book keeping, accounting and
accountancy.[2]
5. List out the users of accounting information. [2]
6. Differentiate between cash and accrual basis of accounting. [2]
7. Discuss the concept, features and objectives of financial accounting. [15]
8. What do you mean by accounting information? Explain in brief the
qualitative features of accounting information. [15]
9. Describe the user of accounting information and why do they need such
information? Explain. [15]
Chapter 2 Conceptual Framework of Accounting
1. What do you understand by business entity concept? [2]
2. What is meant by going concept? [2]
3. What is realization concept? [2]
4. Write in brief about money measurement or monetary concept. [2]
5. Write short note on matching principle. [2]
6. Give the meaning of accounting period concept. [2]
7. Write any two differences between accounting concept and accounting
conventions. [2]
8. Define GAAP. Explain in brief features of GAAP [10]
9. What do you mean by accounting standard? Explain the need and
significance of accounting standard [10]
Chapter 3 Accounting Process
1. Define source of document with suitable examples. [2]
2. What is subsidiary book? Mention its types. [2]
3. Write short notes on debit note and credit note. [2]
4. Write any two differences between trade discount and cash discount. [2]
5. Mention the objectives of trial balance. [2]
6. What do you mean by sources of documents? Discuss their role in recording
process. [10]
7. Following transactions are provided:
a. Started business with cash Rs 2,00,000.
b. Purchased goods on credit for Rs 50,000.
c. Goods costing Rs 4,000 distributed as sample.
Required: Accounting Equation. [Assests Rs 248,000, Liabilities Rs
50,000: Owner;s equity Rs 198,000.
8. Following information are provided:
a. Started business with cash Rs. 1,00,000 and bank balance of Rs
1,50,000.
b. Purchased goods worth Rs 50,000.
c. Goods costing Rs 20,000 sold on credit at a profit of 10%.
d. Cash received from debtor Rs. 20,000 in full settlement of his debt.
Required: Accounting equation [Assers Rs 250,000, Liabilities Nil,
Owner;s equity Rs 250,000.
9. Following transactions are provided:
a. Opening balance of Assets Cash Rs 20,000, Goods Rs 30,000 and Fixed
Assets Rs 50,000.
b. Sold goods costing Rs 10,000 on credit at a profit of 5%c. Rs 10,000 paid as advance salary
d. Goods worth Rs 5,000 lost by fire.
Required accounting equation Assets Rs 95,500; Liabilities Nil Owner;s
equity Rs 95,500
10. Following transactions are given.
a. Started business with cash Rs 2,00,000 and stock Rs 1,00,000.
b. Goods sold for Rs 20,000 on cash and Rs 10,000 on credit.
c. Paid Rs 20,000 for wages including advance wages of Rs 2,000.
d. Purchased goods for cash and credit Rs 10,000 and Rs 6,000 respectively.
e. Sold goods costing Rs 5,000 at 5%loss.
Required : Accounting equation [Assets Rs 287,750 Liabilities Rs 6,000
Owner’s equity Rs 281,750]
11. The annual financial deals of a stationery shop are as follows:
a. Started the shop with initial investment of Rs 90,000 and contributed Rs
30,000 for furniture.
b. Stationeries costing Rs 75,000 were purchased from Quick Stationery
Suppliers on credit.
c. Sold 80% of the stationeries at a profit of Rs 30,000.
d. Paid salary Rs 20,000 and still outstanding Rs 2,000.
Accounting equation to show financial position changes after each
financial transaction. [Assets Rs 205,000 Liabilities Rs 77,000 Owner’s
equity Rs 128,000.]
12. At the beginning of the year, a company has total assets of Rs 1,050,000 and
total liabilities of Rs 500,000. During the year, total assets increased by Rs
250,000 and total liabilities decreased by Rs 100,000.
Accounting equation to find the amount of equity at the end of the year. [
Assets Rs 13,00,000, lIabilities Rs 4,00,000 Owner’s equity Rs 900,000.
13. Following are the transactions relating to purchase;
February 01 Purchased goods from A store
5 computers @Rs 55,000 each less trade discount of 10%
20 printers at rs 10,000 each
February 06 Purchased goods from B store
15 UPS for Rs 100,000
12 printers for Rs 96,000(Trade discount @10%) Required: Purchase book
[Ans Rs 623,900]
14. The purchase made by a book shop during a period were as follows:
Falgun 05 Purchased from Book Academy
100 pieces of Economics books at Rs 300 each
75 pieces of Financial Accounting books at Rs 500 each
Transportation charge Rs 1,000.
(Less: 10% trade discount on both items)
Falgun 15 Purchased from Prakash book store for cash:
100 pieces of Computer books at Rs 250 each
Falgun 20 Purchased from Kitab Prakashan
50 pieces of Mathemetics books for Rs 10,000(Less 10% trade discount)
25 pieces of Business Finance books at Rs 400 each
Falgun 25 Purchased a computer for office use costing Rs 50,000 from
mercantile.Required: Purchase book and purchase account [Rs 80,750 , Rs 105,750]
15. The purchase transactions of a furniture shop are given below:
Chaitra 8 Purchased from a furniture designer in cash @ 10% discount, 5
computer tables @Rs 5,000 each and 8 rotating chairs
@ Rs 4,000 each
Chaitra 15 Goods received from a furniture supplier as per previous order
10 dressing tables for Rs 25,000 and 8 TV racks @ Rs 8,000 each
Chaitra 28 Purchased from a furniture centre 5 dining tables set@ Rs 10,500
each @5% trade discount and 4 sofa sets @ Rs 7,000 each.
Required: Purchase book and Purchase account. [Rs 1,66,875, Rs 223,875]
16. The following transactions are given:
March 2: Purchased from Agrawal Book Shop, 6 dozen of Accounting
Books @ Rs 100 per book less 10% trade discount
March 15: Purchased from Sharina Book Shop, 100 pieces of Exercise
Books @ Rs 600 per dozen, purchased from Aryal Book Shoip, 60 copies of
Economics Books @ Rs 100 each(less trade discount 5%)
March 25: Purchased from Shrestha Book Shop, 50 copies of Economic
Books @ Rs 120 each in cash.
Required: Purchase book and purchase account {Rs 17,180 and Rs 23,180]
17. Mr Maharjan was a wholesale dealer of branded product. Last year in
December he made the following sales:
Dec 10 Cash sales of Rs 20,000
Dec 15 Sold to Mr Shah goods worth Rs 15,000.
Dec 20 Sold to Mr Chaudhari goods worth Rs 10,000
Dec 20 Sold to Mr Sharma goods Rs 10,000 for cash and Rs 15,000 on
credit.
Required Sales book and Sales account [Rs 40,000 and Rs 70,000]
18. Following transactions are given:
June 10: Sold to ABC Furniture House:
10 sets Sofa set @Rs 20,000 each
20 chairs for Rs 30,000
(Trade discount at 10%)
June 20 Sold 5 tables @Rs 10,000 each for cash
June 25 Sold to Nepal Furniture House:
10 tables @Rs 5,000 each
20 chairs @Rs 1500 each with trade discount @5%
Carriage charge Rs 500
Required Sales book Debtors account [Ans Rs 286,000 Rs 207,000 and Rs
79,000]
19. The sales made by a Stationery shop during a period are as follows:
Poush 05 Sales made to Birgunj Stationery
6 dozen of pencil @Rs 150 per dozen
5 dozen of ball pen 215 per ball pen
(Less Trade discount @5%)
Posh 16 Sales made to Pokhara stationery for cash
100 sets of Exercise book @Rs 40 each
50 bottles of ink @ Rs 30 each
Poush 24 Sales made to Illam stationery30 pieces of Registered book @50 each, less 10% trade discount
8 dozen of color pencil @Rs 15 per pencil
Sales book, Sales account [Rs 4,500 and Rs 10,000]
20. Following are the transactions relating to return
Ashadh 3 Returned to Prakash
3 cassette players @Rs 2,000 each
2 VCD players @Rs 5,000 each
Ashadh 5 Returned from Ram
1 cassete player Rs 2,500
Ashadh 7 Returned to Hari
2 CD players Rs 3,000 ecah
5 radios: Rs 500 each
Required Purchase return book Purchase return account[Rs 24,500]
21. Following purchase return transactions are given
Baishakh 3 Returned to Hari
2 tape records @Rs 1,000 each
1 radio of Rs 500
Biashakh 5 Returned to Bishnu
2 television sets @ Rs 5,000 ecah (less 10%trade discount)
Bishakh 8 Returned to Narayan
3 telephone sets @ Rs 1,000 each
4 heaters sets @Rs 2,000 each
Required Purchase return book Purchase return account [Rs 22,500]
22. You are provided the following information of Mr. Shrestha
Bhadra 15 Returned from Trilochan of Bhaisepati
10 kg Sugar @ Rs 12 per kg
20 kg dal @ Rs 18 per kg
Bhadra 25 Returned from Khanal of Jawalakhel
40 liter Sunflower oil @Rs 200 per liter
30 Liter Patanjali Oil @Rs 80 per liter
Original trade discount @5%
Required Sales return book [Rs 10,360]
23. Sita and Co. have drawn and accepted the following bills during Ashadh
2075
a. Bills drawn by Sujata and Co. on Ashadh 5, 2075 for Rs 15,000 payable
after 90 days.
b. Bills drawn by Samyak on Ashadh 8 , 2075 for Rs 25,000 payable after
60 days.
c. Bills drawn by Bijay on Ashadh 15,2075 for Rs 58,000 payable after 60
days
d. Bills drawn on Shanker on Ashadh 20, 2075 for Rs 40,000 payable after
90 days.
Required Bills receivable book[Rs 98,000] Bills payable book [Rs
40,000]
24. Following transactions are given
Baishakh 1: Cash in hand Rs 20,000 and cash at bank Rs 50,000.
Baishakh 3: Purchased goods for Rs 10,000 at 10% discount.
Baishakh 7: Received a cheque of Rs 2,500 from Birbal and allowed himdiscount of Rs 500.
Baishakh 10: Issued a cheque for telephone charge payment Rs 500.
Baishakh 13: Paid into bank Rs 10,000.
Baishakh 15: Commission received Rs 3,000.
Baishakh 20: Cash withdrawn from bank for official use Rs 10,000 and for
personal use Rs 5,000.
Required Triple Column Cash Book [ Balance: Cash Rs 14,000 Bank Rs
47,000]
25. Following cash and banking transactions are given:
Chaitra 1: Balance of cash in hand Rs 20,000 and cash at bank Rs 50,000.
Chaitra 5: Purchased goods for Rs 10,000 and paid Rs 4,000 in cash. The
balance amount is paid through cheque after receiving discount Rs 500.
Chaitra 9: Received cash Rs 2,700 from debtors after deducting 10%
discount
Chaitra 16: Cash deposited into bank Rs 2,000.
Chaitra 24: Paid salary Rs 1,000 and rent Rs 500 through cheque.
Chaitra 28: Goods sold for Rs 8,000 and received cash of Rs 5,000 only.
Required triple column cash book [ Balance cash Rs 21,700 Bank Rs
45,000]
26. You are given the following cash and banking transactions:
Chaitra 1: Cash in hand Rs 10,000 and cash at bank (credit) Rs 50,000.
Chaitra 6: Received cheque of Rs 5,700 from a customer after deducting 5
percent discount.
Chaitra 12: Paid by cash Rs 1,900 in full settlement of Rs 2,000.
Chaita 18: Cash deposited into bank Rs 1,000.
Chaitra 24: Sale of Rs 30,000 , Rs 4,000 received in cash and balance
amount is received by cheque, allowed cash discount of Rs 1,000.
Required: Cash book with cash, bank and discount columns. [Balance: Cash
Rs 11,100 , Bank Rs 18,300]
27. The following transactions are given to you.
April 1 Cash in hand Rs 25,000 and bank overdraft Rs 12,000.
April 4 Received cheque from Narayan Rs 36,000 after 10% discount
April 9 Purchased goods Rs 30,000 from Hari and payment made Rs 10,000
partially
April 12 Sold goods Rs 25,000
April 15 Cash deposited into bank Rs 15,000
April 19 Hari’s account settled with 10% discount by cheque.
April 22 Salary and wages paid Rs 5,000.
April 23 Rent paid Rs 4,000 and outstanding rent Rs 1,00.
April 29 Cash withdrawn from bank Rs 36,000 for office use and 2,000 for
domestic use.
28. The following cash and banking transactions are given:
1 Asadh Balance of cash Rs 17,500 and bank overdraft Rs 22,900.
4 Asadh Purchased goods from Naresh for Rs 9,000 and paid cash Rs 4,000
only a spart payment
10 Asadh Cash deposited into bank Rs 5,000.
12 Asadh Sold goods for Rs 20,000 and received cash Rs 12,000 and
cheque of Rs 7,800 in the settlement of account.16 Asadh Paid wages of Rs 3,000 in cash and salary of Rs 5,000 by cheque.
19 Asadh Received commission of Rs 2,500.
22 Asadh Paid to Naresh by cheque with 10% discount in full settlement
25 Asadh Cash withdrawn from bank Rs 5,000 for domestic use and Rs
2,000 for office use.
28 Asadh Received cheque from Shanker of Rs 18,000 aftre deducting 10%
discount.
Required: Triple Column cash book [Balance Cash Rs 22,000 Bank Rs
8,600]
29. Kamala quits her job and started a new company with her friend Bimala at
the partnership. The transactions of the business for January are as follows:
January 1 Received contribution of Rs 100,000 each.
January 5 Rs 50,000 is deposited into bank.
Jnuary 7 Purchased land and building for Rs 150,000.
January 15 Signed a promissory note with a bank in exchange of Rs 50,000.
January 21 Sold goods for Rs 75,000 out of which 40% is credit.
Jnauary 22 Paid office salaries Rs 15,000.
January 23 Bought goods worth Rs 7,500 on credit.
Jnauary 26 Paid Rs 7,450 in full settlement
January 29 Paid Telephone bill Rs 400.
January 30 Paid Electricity bill Rs 600
Required:
a. Journal entries for above transactions
b. Post the transactions into T-accounts
c. Cash book with necessary column[Cash Rs 71,550 Bank Rs 50,000]
d. A trial balance[Total Rs 325,050]
[Balance: Cash Rs 71,550, Bank Rs 50,000 Total Rs 325,050]
30. Consider the following transactions of Elite Computer Centre during the month of
Baishakh
Baishakh 2 Received contribution of Rs 200,000 from each of the two principal
owners of the new business in exchange for shares of stock.
Baishakh 8 Signed a one year promissory note of Laxmi Bank Ltd and received cash
of Rs 130,000.
Baishakh 10 purchased five computers sets @ Rs 25,000 each with down payment
of Rs 75,000 and signed three months, 5% note payable for the balance.
Biashakh 12 Paid one month rent for the building Rs 10,000.
Biashakh 15 Billed a customer for serices provided amounting to Rs 25,500.
Biashakh 28 Received Rs 15,000 cash from clients billed on Baishakh 15.
Biashakh 29 Paid Telephone bill of Rs 2,200
Biashakh 31Paid Rs 23,000 of salaries and wages for the month
Required Journal Entries T-accounts Trial balance(Rs 605,000)
31. Didi Bahini Restaurant was established by four sisters on 1st November 2019.
Transportations of the restaurant for the month were as follows:
November 1Each partner contributes RS 90,000 on the agreement of sharing profits
equally between them.
November 4 Purchased furniture for Rs 80,000 an a refrigerator for Rs 40,000.
Refrigerator was purchased by signing a 60 day bill.
November 7 Paid rent Rs 10,000 for the month
November 15 Purchased goods of Rs 30,000 in cash.November 22 Sold goods for Rs 40,000 and 60 percent was on credit.
November 27 Borrowed Rs 50,000 from finance company and agreed to pay
principal and interest at annual rate of 15 percent after six months.
November 31Paid salaries Rs 15,000 and other expenses of Rs 15,000
Required Journal Entries T-accounts as on November 31 Trial balance as on
November 31
32. Five members started a small firm in Kathmandu Valley. The firm will provide
consultancy service to small business. The following are the transactions during the
first month of its oeration.
Jan 1 Deposited Rs 15,000 from each of the members in a bank in the exchange of
shares @ of Rs 100 each to start the business.
Jan 5 Purchased office supplies on account for Rs 5,000.
Jan 10 Signed a promissory note and received cash Rs 10,000 from the bank. The
interest on the note is 12% payable at end.
Jan 12 Cash received from the customers for service to be provided in the future Rs
2000.
Jan 15 Billed customers for service provided for Rs 2,500. The amount of bill will be
received after a week.
Jan 18 Paid Rs 1,500 for advertisement to Kantipur Advertising Agency.
Jan 22 Received the amount billed the client on Jan 15.
Jan 26 Received cash of Rs 2,800 for services provided during the month.
Jan 29 Paid Rs 10,000 of salaries and wages for January
Jan 30 Paid Rs 1,400 for gs, electricity and water bills.
Required Journal Entries T-accounts Trial balance as on January 31 [Rs 97,300]
33. The following financial transactions are available for the company in operation for a
period
a. Started a business with cash Rs 5,00,000 in exchange for 5,000 shares of Rs
100 of the company.
b. Deposited Rs 4,00,000 in the company’s bank account.
c. Took a bank loan of Rs 1,00,000 at 10% interest
d. Bought office furniture worth Rs 1,00,000.
e. Purchased goods on credit Rs 2,00,000.
f. Paid interest on 10% bank loan, Rs 6,000.
g. Sold goods on cash Rs 1,00,000 and on credit Rs 3,00,000.
h. Paid cheque to creditor Rs 1,40,000 in full settlement of Rs 1,50,000by cheque.
i. Cheque received from customer Rs 1,90,000 in full settlement of 65% of his debt
j. Pai rent and salaries Rs 50,000 and Rs 40,000 respectively by cheque.
Additional information
Ending inventory Rs 50,000.
Prepaid Rent was Rs 2,000.
Outstanding interest on 10% bank loan was Rs 4,000.
Depreciation on office furniture at 10% per annum.
Required
a. Journal entries for the financial transactions.
b. Triple column cash book with cash, bank and discount column[Cash Rs
1,00,000 Bank Rs 454,000]
c. Purchase account, sales account , debtors account and creditors account.
d. Adjusted trial balance[Rs 10,64,000]
34. The financial transactions executed for a period by a newly established Nobel Pvt.
Ltd. Company are as follows:
a. Invested Rs 600,000 as capital for starting a business, of which Rs 450,000 were
deposited into bank.b. Purchased goods costing Rs 250,000 from Sunrise Goods Suppliers and paid
25% as down payment.
c. Purchased equipment costing Rs 120,000 and payment was made by a cheque.
d. Office expenses amounting to Rs 60,000 were paid by a cheque and Rs 80,000
rent in cash.
e. Sold goods for cash Rs 250,000 and supplied goods on credit to Star Trading
Ltd. For Rs 300,000.
f. Rs 150,000 invested in shares of Everest Ban Ltd.
g. Payment made to Sunrise goods suppliers amounting to Rs 142,500 by a cheque
after deduction of 5% discount.
h. Cheque of Rs 237,500 was received from star Trading Ltd. In full settlement of
Rs 250,000.
i. Rs 25,000 cash withdrawn from bank for office use and Rs 50,00 for private use.
j. Dividends of Rs 15,000 were received on shares of Everest Bank Ltd.
Additional Information:
Charge annual depreciation on equipment at 10% per annum.
Unpaid office expenses were Rs 25,000
Rs 8,000 remained as unexpired rent.
Unsold stock value recorded was Rs 30,000.
Required :
Journal entries for the above financial transactions.
Cash book with necessary columns[Cash Rs 147,500 and Bank Rs
290,000]
Sales account, purchase account, debtors account and creditors account
Adjusted trial balance[12,35,000]
35. The Balance Sheet of Nimesh and Salon Co. Ltd as on July 31,2019 is as follows.
Liabilities Rs Assets Rs
Accounts payable 3,290 Equipment 12,000
Share Capital 20,000 Supplies 6,310
Retained earnings 4,170 Accounts receivable 4,700
Cash 2,450
Prepaid rent 2,000
27,460 27,460
During August the company completed the following transactions
Aug 1 Paid for advertisement Rs 340
Aug 2 Paid rent for August Rs 500
Aug 7 Received cash from customer billed earlier Rs 2,900
Aug 14 Billed customer for service provided Rs 4,190
Aug 15 Purchased equipment on credit Rs 3,500
Aug 28 Paid salary for August Rs 2,400
Aug 29 Received advance payment from customer Rs 680
Aug 30 Paid electricity bill for August Rs 450
Aug 30 Declared and paid dividend Rs 500
Required:
Journal Entries for August transaction
Necessary ledger accounts in continuous format
Trial Balance[Rs 35,830]
36. A business firm’s opening balance sheet and financial transactions of a year in a
summarized form are as follows:
Liabilities Amount(Rs) Assets Amount (Rs)
Share capital 900,000 MachinesRetained earnings 60,000 Stock 640,000
Accounts payable 80,000 Accounts receivable 165,000
Cash at bank 145,000
Total 10,40,000 Total 10,40,000
The promoters of the firm deposited Rs 400,000 in the bank account as a
token of additional capital
Withdrawn Rs 50,000 from bank for use in the business.
Purchased goods costing Rs 3,00,000 from Sodesh Grosery shop on credit.
Purchased a computer costing Rs 24,000 for use in the business firm from
New computer supply center and the payment was made after 15 days in
cash by receiving 5% discount.
Sold its goods to Rastriya Trading Shop at a price of Rs 240,000 in cash and
another sales were made on credit at a price of Rs 560,000.
Wages amounting to Rs 130,000 were paid by cheque and salaries
amounting to Rs 125,000 were paid in cash.
Paid Rs 237,500 to Sodesh Grocery Shop after adjusting 5% discount
provided by the shop.
Issued a receipt slip for Rs 336,000 to Rastriya Trading Shop after adjusting
4% discount.
Additional Adjustments
Wages of Rs 12,500 remained unpaid.
Annual depreciation of Rs 80,000 needed to be charged on machines for th
current year.
The value of stock on losing date was Rs 50,000.
Required:
Journal
Receivables and payables accounts in continuous format
Triple column cash book[Cash Rs 340,00 Bank Rs 365,000]
Adjusted trial balance[RS 24,16,200]
Unit 4 Accrual Basis of Accounting
1. The financial position of Kalika and Bros on Baishakh 01, 2076 is as below:
Cash in hand Rs 20,000 Cash at bank Rs 36,000
Furniture Rs 50,000 Accounts payable 34,000
Accounts receivable 74,000 Stock of goods 26,000
Outstanding expenses 4,000 Prepaid expenses 8,000
Required: Opening entry [Capital Rs 176,000]
2. The following information is provided to you:
Cash in hand Rs 10,000 Sundry Debtors Rs 20,000
Inentory 10,000 Plant 30,000
Land and Building 50,000 Sundry Creditors 40,000
Bank Overdraft 10,000
Required: Opening entry[Capital Rs 70,000]
3. In the beginning of the year a trader has following assets and liabilities.
Assets Rs Liabilities Rs
Cash in hand 1,500 Bank overdraft 13,000
Cash at bank 30,000 Long term loan 35,000
Debtors 18,000 Notes payable 27,000
Machinery 65,000 Creditors 11,000
Stock 23,000
Required: Opening entry[Capital Rs 51,500]4. Consider the following ledger balance of platinum corporation at the end of Dec
31,2019
Rent expenses Rs 30,000 Utility expenses Rs 1,000
Commission earned Rs 2,50,000 Services revenue Rs 5,50,000
Wages and salary expenses Rs Advertising expenses Rs 20,000
1,00,000
Required Closing entries [Income summary a/c Rs 639,000]
5. Consider the following ledger balance of Platinum Corporation at the end of Dec 31
2019
Dividend paid Rs 100,000 Rent expenses Rs 30,000
Utility expenses Rs 1,000 Comission earned Rs 250,000
Services revenue Rs 550,000 Wages and salary expenses Rs
Advertising expenses Rs 20,000 100,000
Required: Closing entries[Income summary Rs 649,000]
6. Consider the following accounts appeared on Bijaya’s income statement
Sales revenue Rs 100,000
Cost of goods sold Rs 75,000
General and administrative expenses Rs 8,000
Depreciation expenses Rs 3,000
Commission earned Rs 2,000
Interest expense Rs 3,000
Income tax expenses Rs 5,000
Dividend paid Rs 2,500
Required closing entries [Income summary Rs 8,000]
7. Consider the following transactions
Outstanding salaries Rs 5,000 Prepaid rent 2,000
Depreciation on plant @5% on Commission earned but not
40,000 received Rs 3,000
Bad debt @1 % of sundry debtors
amounting to 50,00
Required: Adjustment entries
8. Consider the following transactions
Stock of supplies on hand Rs 50,000
Accrued expenses Rs 3,000
Prepaid wages Rs 4,500
Accrued income Rs 300
Depreciated plant and machinery by @10% p.m. on the book value of Rs 100,000.
Write off bad debt Rs 5,000.
Required: Adjustment entries
9. A trial balance on 30th Asadh 2076 before recording any adjusting entries are as
follows:
Unadjusted Trial balance as on 30th Ashadh 2076
Account titles Debit (Rs) Credit(Rs)
CAPITAL - 250000
Sales - 400000
Cost of goods sold 295000 -
Rent expenses 75000 -
Stationery 15000 -
Salaries 20000 -
Equipment 20000 -Furniture 100000 -
Accounts payable - 55000
Accounts receivable 30000 -
Prepaid insurance 15000 -
Retained earnings - 55000
Drawing 10000 -
Total 760000 760000
Adjustments
Depreciate Fixed assets by 20%
Rent payable Rs 15,000
Prepaid insurance expired of Rs 2000
Declared dividend @ 15% on common stock
Required:
Adjusting entries
Adjusted trial balance [Rs 812500]
10. A leading service firm providing variety of services in western region provides you a
trial balance on 30th Ashad 2076, before recording any adjusting entries
Unadjusted Trial Balance 30th Asadh 2076
Account Titles Debit (Rs) Credit(Rs)
Fixed assets 80,000 -
Stock 20,000 -
Purchase 70,000 -
Sales 90,000
Office expenses 10,000 -
Salaries 15,000 -
Rent 8,000 -
Bills receivable 12,000 -
Provision for bad debts - 1,000
Accumulated depreciation - 9,000
Bills payable - 20,000
Supplies 5,000 -
Share Capital - 100,000
Total 220,000 220,000
Adjustments:
Depreciate fixed assets by 10% Provision for bad debts 5%
Outstanding office expenses Rs 2000 Supplies in hand Rs 2,000
Prepaid salaries Rs 3,000
Required Necessary adjusting entries and adjusted trial balance[Rs 2,30,000]
11. The following unadjusted trial balance is extracted from Teja Consultancy as on 31st
December, 2019.
Accounts Heads Debit (Rs) Credit (Rs)
Service revenue 345000
Office supplies 120000
Cash at bank 10500
Office furniture 50000
Rent expenses 31200
Wage and salary expenses 200000
Capital stock 120000
Utility bill expenses 2400
Prepaid insurance 15000Accumulated depreciation 9000
Unearned commission 30500
Notes payable 12200
Advertisement expenses 12600
Accounts receivable 80000
Dividend received 5000
Total 521700 521700
Additional Information
80% of office supplies was consumed during the year.
Wage and salary payable Rs 20,000 per month
Office furniture depreciated at the rate of 12% per annum
Prepaid insurance expenses expired to the extent Rs 5000
Provision for doubtful debt @5% on accounts receivable
Required Adjusted trial balance for the year ended 31st December, 2019[Rs 567,700]
Necessary closing entries at 31st December, 2019[Rs 32,200]
12. Mahalaxmi Company’s Dec 31,2019-unadjusted trial balance appears below:
Unadjusted Trial Balance As on 31st Dec 2019
Particulars Amount Particulars Amount
Cash 24,800 Accounts payable 13,100
Accounts receivable 2,250 Unearned ervice 450
revenue
Supplies 700 Common stock 20,000
Prepaid rent 3,000 Retained earnings 11,250
Furniture 16,500 Service revenue 7,000
Salary expenses 950
Dividends 3,200
Utility expenses 400
51,800
Adjustments
Prepaid rent is expired Rs 1,000
Supplies used during the period Rs 300
Depreciation on furniture of Rs 275
Accrued service revenues Rs 250
Amount of unearned service revenue that has been earned Rs 150
Outstanding salary of Rs 950
Accrued income tax expenses Rs 540
Required: Adjusted trial balance[Rs 53,815]
Adjusting entries
Closing entries[Income summary Rs 2,985]
Opening entry
UNIT 5 Accounting for Inventories and Cost of Goods Sold
1. What is inventory?
2. What is cost of goods sold?
3. Define perpetual inventory system?
4. Write any two differences between perpetual and periodic inventory system/
5. What is inventory error?
6. Write short notes on FIFO and LIFO methods.
7. You are given the following information:
Net sales revenue Rs 5,00,000 Total Purchases Rs 3,80,000Purchase return Rs 15,000 Closing stock Rs 50,000
Opening stock Rs 35,000
Required: Cost of goods sold[Rs 350,000
8. The following amounts are taken from a Wholesaler’s records
Inventory, January 1 14,200
Inventory, December 31 10,300
Purchases 87,50
Purchase return and allowances 1,800
Transportation 4,500
Required: Cost of goods sold [Rs 94,100]
9. You are given the following information:
Net sales revenue=Rs 500,000
Net purchases=Rs 365,000
Opening stock=Rs 35,000
Closing stock=Rs 50,000
Required: Gross profit ration [30%]
10. A Co. Ltd began the year with Rs 130,000 in merchandise inventory and ended the
year with Rs 190,00 Sales and cost of goods sold for the year were Rs 900,000 and
Rs 640,000 respectively.
Required: Inventory turnover ratio and length of inventory cycle. [4 times 91 days]
11. A company has annual sales of Rs 300,000 and it has 30% gross profit margin. If it
has Rs 400,000 total assets and Rs 60,000 inventory.
Required: Inventory turnover ratio [3.5 times]
12. On July 1st 2019 an explosion destroyed a store of raw material. The insurance
company has agreed to pay store Rs 10,000 as a settlement for the inventory
destroyed. But an estimate of the amount of inventory lost in needed for insurance
purposes. The following information is available:
Beginning inventory RS 24,000
Sales January-June Rs 44,000
Gross profit margin 20%
Purchase January-June 53,000
Inventory not destroyed 2,000
Required: Inventory loss[Rs 29,800]
Journal entries on the store book to recognize lost as well as the insurance
reimbursement.
13. Omega Suppliers has the following inventory, purchase and sales data for the
following month:
Inventory- Jan 1st 200 units @ Rs 4.0 Rs 800
Purchases
Jan 10 500 units @ Rs 4.50 Rs 2,250
Jan 20 400 units @ Rs 4.75 Rs 1,900
Jan 30 300 units @ Rs 5.00 RS 1,500
Sales
Jan 15 500 units
Jan 25 400 units
The physical inventory count on Jan 31 shows 500 units on hand.
Required: Cost of inventory on hand at Jan 31 under periodic system and cost of
goods sold for Jan under:
a. FIFO method [ Rs 2450, Rs 4000]
b. LIFO method[ RS 2150, Rs 4300]
c. Weighted average cost method.[Rs 2305, Rs 4149]
14. The following information is available concerning the inventory of Hira LaxmiCompany:
Units Unit Cost (Rs)
Beginning Inventory 2,000 100
Purchase:
March 2 3,000 110
June 10 4,000 120
August 15 2,500 130
December 22 1,500 150
During the year, Hira LAXMI Company sold 10,000 units. It uses a periodic inventory
system.
Required:
Ending inventory and cost of goods sold for each of the following three methods.
Weighted Average[Rs 360,000 Rs 120,000 FIFO [Rs 40,000, Rs 11,40,000
LIFO[Rs 310,000, Rs 12,50,000]
Assume an estimated tax rate of 30%. How much more or less will Hira laxmi
Company pay in taxes by using FIFO instead of LIFO? [Less tax using FIFO]
15. The following information was found in the books of Azad Trading Concern for the
month of Asoj, 2076.
There were 500 units of inventory at Rs 20 per unit
Purchases
Ashoj 5 1,00 units@ Rs 21 per unit
Ashoj 10 1,200 units @ Rs 20 per unit
Ashoj 16 1,500 units @ Rs 22 per unit
Ashoj 25 2,000 units @Rs 25 per unit
Sales
Asoj 8 800 units @Rs 50 per unit
Asoj 15 1,500 units @ Rs 50 per unit
Asoj 30 1,700 units @Rs 50 per unit
Concern followed periodic inventory recording system. During the month, concern
incurred operating expenses of Rs 35,000. The expected tax rate of the concern is
20%
Required
a. Determine the value of ending inventory and costs of goods sold under FIFO and
weighted average cash flow at the end of Asoj 2076[Rs 54,400, Rs 83,600, Rs
48,967.6, Rs 89032
b. Income statement under each of the two methods and determine net income after
tax.[Rs 65,120 FIFO Rs 60,774.4 LIFO]
c. If prices are expected to decreases constantly over the periods, what inventory
costing system FIFO or weighted average will generate higher income for the
concern?
16. The gyan book store reported the following information for the year 2019
Date Units Rate (Rs) Total Cost (Rs)
Inventory @ January 1,2019 500 10 Rs 5,000
Purchase:
January 23 800 11 8800
March 14 600 12 7200
July 5 500 13 6500
August 10 1100 15 16500
December 15 1200 17 20400
Total goods available for sale 4700 64400
At the end of the year a physical count is taken and there are 600 units of books left.Operating expenses Rs 5,000 excluding depreciation of Rs 1,000. Selling price per
unit of ball is Rs 25 and tax rate is 30%.
Required
a. Use the periodic inventory system and determine the ending inventory and cost
of goods sold using: FIFO and weighted average[Rs 10,00, Rs 54,200 and Rs
8,220, Rs 56,170]
b. Income statement under the two approaches. [Rs 29,610, Rs 28,231]
c. Which method pay low tax and by how much?[WAC Rs 591]
d. If price is decreasing order which method pays more tax?[WAC]
17. Yummy Noodles Copany records for the month of Magh reveal the following:
Inventory, Magh1 150 units @ Rs 27
Magh 4, Purchase 188 units @ RS 25
Magh 7, sale 225 Units @ Rs 63
Magh 13, Purchase 165 units @Rs 26
Magh 19, Purchase 113 units @ Rs 26
Magh 23, sale 285 units @ Rs 64
Magh 26, Purchase 150 units @ Rs 25
Magh 28, Sale 82 units @ Rs 65
Selling and administrative expenses for the month were Rs 8,100. Depreciation
expense was Rs 3,000. Yummy Noodles Company,s tax rate is 30%
Required:
a. Cost of goods sold and ending inventory under each of the following three
methods. i. FIFO ii. LIFO iii. Weighted Average Cost
[Rs 15,354, Rs4,374, Rs 15,078, Rs4,650 Rs 15,244, Rs 4,480]
b. Gross margin and net income under each costing assumption
[Rs 7,904, Rs 8,097, Rs7,981]
c. Which costing method will be beneficial for Yummy Noodles Company? Justify
your answer.[LIFO]
d. Under which costing method will Yummy Noodles Company pay the least amount
of taxes? Explain your answer.[FIFO]
18. Star Trading Company sells a special product for Rs 2 per unit and uses periodic
inventory system. The following data are available for the year.
Date Transactions Units Rate (Rs) Total Cost (Rs)
Jan 1 Beginning inventory 500 Rs 1 500
Feb 5 Purchases 350 1.10 385
Apr 12 Sales 550
July 17 Sales 00
Sept 23 Purchases 400 1.30 520
Dec 5 Sales 300
Required:
a. Compute the amount of cost of goods sold and ending inventory using the FIFO,
LIFO and weighted average method. [Rs 1,145, Rs 260, Rs 1205, Rs 200, Rs
1180, Rs 225
b. Compute gross margin, under the FIFO and LIFO costing assumption[Rs 955, Rs
895]
c. Assume an estimated tax rate of 20%. Compute the amount of taxes saved if
company uses the LIFO method rather than FIFO method.[Rs 12]
d. In which situation does FIFO method provides more tax saving over LIFO
method? [FIFO]
19. Following is an inventory acquisition schedule for Gaurav Company for 2019
Units Unit Cost (Rs)Beginning inventory 2,000 2
Jan 5 Purchased 3,000 3
March 8 sold 2,000 -
June 15 purchased 4,000 4
July 20 Sold 3,000 -
Oct 25 Purchased 1,000 5
Dec 28 Sold 2,000 -
During the YEAR, Gaurav company paid operating expenses except cost of goods
sold and depreciation was Rs 5000 and depreciation during the year was Rs 2000.
Regular selling price per unit is Rs 15 and tax rate is 40%.
Required:
a. Cost of goods sold and ending inventory under each of the following three
methods: i. FIFO ii. LIFO assuming the company updates its inventory after every
transaction.[Rs 21,000; RS 13,000; Rs 27,000; Rs 7,000]
b. Income statements under each of the two methods.[Rs 46,200; Rs 42600]
c. Which method do you recommend so that Gaurav Company pays the least
amount of taxes during 2019? Explain your answer. [LIFO]
20. Inventory records of Pancha Buddha Company for the month of Baishakh is given
below.
Date Units Rate/ Unit Purchase Units Rate/unit Sales unit Rate/unit
st
1 Baisakh 500 45 - - - -
4th Baisakh - - 600 42 - -
th
7 Baisakh - - - - 750 60
13th Baisakh - - 800 44 - -
22th Baisakh - - - - 600 70
24th Baisakh - - 300 50 - -
th
30 Baisakh - - - - 35 75
50 units were damaged because of fire. Selling and administrative expenses was Rs
25,000 and depreciation on plant and machinery was Rs 15,000 for the month. The
tax rate is 30%
Required:
a. Calculate the cost of goods sold and value of closing inventory under the
following method assuming perpetual inventory system. i. FIFO Method ii. LIFO
method[ Rs 76,300; Rs 21,600; Rs 77,750; Rs 20,150]
b. Calculate the gross profit and net income under each costing assumptions. [Rs
2,135; Rs 3150]
c. Under which costing system do the Pancha Buddha Company pay least tax?
Give your opinion.[LIFO]
d. Tabulate the results of each inventory method and explain which inventory
method should the Pancha Buddha Company adopt, why?
21. XYZ Company has the following inventory purchase and sales during the month of
April
Inventory April 1 100 units @ Rs 5
Purchase April 5 200 units @ Rs 6
Purchase April 11 300 units @ Rs 8
Purchase April 23 400 units @ Rs 9
Sales
April 18 400 units @ Rs 20
April 28 200 units @ Rs 10
Company uses the perpetual inventory system. It has selling and administrative
expenses Rs 1200 and tax rate 30%.Required:
a. Amount of ending inventory under FIFO and LIFO methods.[Rs 3,600; Rs 2,900]
b. Gross profit under FIFO and LIFO methods[Rs 5,900; Rs 5,200]
c. Income statement for both the methods.[Rs 3290; Rs 2800]
Unit 6 Accounting for Cash and Internal Control
1. Write about Not Sufficient Fund (NSF) cheque.
2. Write about Electronic Fund Transfer (EFT)
3. What do you mean by deposit in transit or outstanding deposit?
4. Write short notes on petty cash funds.
5. The following information is available for Samjhana company on Chaitra 31st 2076.
a. Balance as per company records Rs 8,000
b. Un-deposited Chaitra 31st cheque Rs 3000
c. Bank services charge for Chaitra Rs 100
d. Outstanding cheque Rs 3,900 for Chaitra
e. Bills receivable collected by bank but not recorded on the books Rs 1,000
f. Interest on the preceding bill is recorded by bank Rs 200
g. Bank statement balance Rs 10,000
Required:
a. Bank reconciliation statement as on Chaitra 31st
b. Bank balance to be reported on Company’s Chaitra 31st balance sheet
c. Journal entries.[Rs 9,100]
6. The following information is available for Pravash Company on Jan 31st 2020. [Ans
17500]
a. Balance of bank statement Rs 20,500.
b. Cheques deposited in the bank Rs 5,000.
c. Outstanding cheques Rs 8,000.
d. A customer’s cheques for Rs 1,000 was returned with the bank statement marked
‘NSF’.
e. Bank service charged Rs 200.
f. Bill receivables collected by bank but not recorded in cash book Rs 2000.
g. Interest on the preceding bill recorded by bank Rs 200.
Required: Bank reconciliation statement of Pravash Company as on Jan 31st
2020.
7. Bank statement of A Company Ltd. Disclosed a balance of Rs 16,000 on June 30,
2019. On the same day the cash account in the company’s ledger disclosed Rs
14,800. Your review reveals:
a. Cheques under collection Rs 1,900
b. Outstanding cheques Rs 1000
c. The cash deposit of Rs 7,450 recorded by the bank as Rs 7,350.
d. A bills receivable of Rs 4,000 and interest of Rs 200 were collected by bank but
have not been recorded in company’s account.
e. A cheque for Rs 1,500 receive from a customer was returned by the bank owing
to lack of funds with the bank.
f. Bank service charges Rs 300
g. A cheque for Rs 7,800 Paid by the bank was recorded as Rs 7,600 by the
compay
Required:
a. Bank reconciliation statement
b. Correct cash balance that A company would report on the jUne 30 balance
sheet.[Rs 17,000]
8. The following particulars are extracted from the records of a Trader.
a. Balance as per bank statement on 31st Ashwin is Rs 1,00,000.b. Cheques issued of Rs 18,000 before 31st Ashwin but not cleared till 4th Kartik.
c. Cheques of Rs 56,000 deposited in the bank on 25th Ashwin but collected and
credited in Kartik.
d. Debit side of cash book was overcast by Rs 5,000
e. A bill receivable for Rs 12,000 due on 31st Ashwin was sent to the bank for
collection and the proceeds were credited on 1st Kartik in the bank statement.
f. Rs 13,000 as insurance premium paid by the bank as per standing instruction on
30 Ashwin had not been entered in the cash book.
Required: Bank reconciliation statement showing the balance a sper cash book
on 31st Ashwin. [Rs 150,000]
9. Bank statement of a company showed a balance of Rs 28,862 on May 31; whle the
cash account showed a Rs 27,250 balance on the same date.
a. A bank services charge of Rs 25 appeared on bank statement; this charge was
not been recorded in the cash book.
b. Cheques written by the company but not cleared by the bank Rs 1,220.
c. A deposit of Rs 887 appeared in the bank statement. The company did not record
such a deposit in the book.
d. A deposit for Rs 645 was not recorded by bank.
e. A customer’s cheque for Rs 140 was returned with the bank statement marked
‘NSF’
f. The bank collected Rs 315 of a customer’s note including Rs 15 as interest
Required:
. Bank reconciliation statement of a company as on May 31.
How much cash balance should be reported on company’s May 31, balance
sheet?
Journal entries to adjust the accounts on May 31.[Ans 28,287]
10. On December 31,2019 bank statement for a company showed a balance of Rs
6,875. On the same date, the cash account of the company’s ledger showed Rs
2,995.
Your review reveals
a. Cheques under collection on December 31st Rs 300.
b. Outstanding cheques Rs 1,720
c. A cheque for Rs 2,195 issued to a supplier was recorded by the bank as Rs
2,915.
d. A bill receivable of Rs 5,000 and interest of Rs 300 collected by the bank but not
recorded in company’s account.
e. A cheque for Rs 730 received from customer was returned by the bank owing to
lack of funds with the bank.
f. Service charges Rs 90 debited by bank.
g. Bank paid insurance premium of Rs 1,300 for company’s vehicles as per
standing instruction. The amount is not recorded in cash book.
Required:
a. Bank reconciliation statement
b. Adjusting entries[Rs 6,175]
11. The bank statement for Kripa Co. Ltd. Shows a balance of Rs 120,000 on May 31,
2019. On this date the balance of cash as per books is Rs 98,000. The following
reconciling items are determined:
a. Deposit in transit: Rs 24,000
b. Outstanding cheques: No. 645301 Rs 25,000 No. 645702 Rs 20,000
c. Errors: Cheque number 645305 was correctly issued by the company for Rs
122,600 and was correctly paid by the bank. However, the company in its books
recorded as Rs 126,200.
d. Bank memoranda:Debit- NSF cheque from Sita Rs 8,000
Debit- Bank charge Rs 3,000
Credit- Collection of notes receivable Rs 8,000 and interest Rs 500.
Required:
a. Bank reconciliation statement as on May 31,2019
b. Necessary adjustment entries [Rs 99,000]
12. Following informations is available for A company on December 31, 2019.
a. Bank overdraft as per cash book Rs 12,900.
b. A cheque issued by the firm on December 20th in favour of Anupama Electricals
for Rs 4,200 was not presented for payment.
c. Cheque for Rs 3,250 deposited on December 21st but not yet collected and
credited by the bankers.
d. Interest on investment collected by the banker and credited in the pass book of
Rs 2,700 but not recorded in cash book.
e. Three cheques totaling Rs 6,800 were sent for the deposit on December 25th out
of which a cheque of Rs 2,300 has been found, dishonoured but no record is
made in the cash book.
f. There was a debit of Rs 80 for bank charge in the pass book.
g. Cheque for Rs 1,350 issued but omitted to be recorded in cash book.
Required: Bank reconciliation statement [ Rs 13,930]
Chapter 7: Accounting for Receivables
1. Define receivables.
2. Write any two differences between notes receivables and account receivables.
3. What does credit term 3/10, net 30 mean?
4. Briefly explain the methods of estimating bad debts.
5. Write short notes on interest bearing notes and non-interest bearing notes.
6. Find the amount of bad debt expenses if the company has a policy of maintaining 5%
of credit sales. Total sales for the year was Rs 1,00,000 out of which 20% was on
cash. [Rs 4,000]
7. A company issued a note payable for Rs 120,000 for six months on October 1st at an
annual interest rate of 10%.
Required: Amount of interest xpenses at year end.[Rs 3,000]
8. A company has beginning accounts receivable was Rs 50,000. Total credit
salesduring the year was Rs 400,000 and closing accounts receivable was Rs
30,000. Days in a year is 360.
Required: Days sales in receivable for the period . [36 days]
9. On Novemebr 1, 2019, Global Compay received a Rs 50,000, 6%, 90- day
promissory note.
Required: Necessary journal entry on December 31, 2019[Rs 50]
10. Following information are provided:
Provision for bad debts Rs 5,000
Bad debts Rs 2,000
Sundry debtors Rs 50,000
Maintain provision for bad debts at 5% of on sundry debtors.
Required: Provision for bad debts account. [P/L a/c Rs 500]
11. Following information is given to you:
Provision for doubtful debts Rs 1,300
Bad debts written off during the year Rs 1,000
Debtors at the end of the year Rs 40,000
The provision for bad and doubtful debts has been maintained at 5%
Required: Provision for doubtful debts account [P/L/ a/c/ Rs 1,700]
12. Following information is given to you,You can also read
