Accounting for managers

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Accounting for managers

Answer any five of the questions below.
1. For the following transactions in ABC Ltd, prepare Accounting Equation.
a. Started Business with Cash Rs 36,000
b. Purchased goods for cash Rs 18,000 and credit Rs 12,000
c. Paid Rent in advance Rs 300
d. Paid Salary Rs.300 and Salary outstanding is Rs 60.
e. Bought motorcycle for personal use Rs.3,000

2 . Prepare a Trial Balance of Mohan& Co. as on March 31 2003
Capital 9,20,000
Sundry creditors 1,88,520
Bills payable 69,300
Sales 12,18,500
Provision for doubtful debts 13,200
Interest (cr.) 3,400
Building 7,00,000
Machinery 1,20,000
Sundry debtors 1,56,000
Cash in hand 9,880
Cash at bank 1,45,340
Bills receivable 58,440
Purchases 8,55,220
Carriage outwards 12,910
Bad debts 6130
Discount (dr.) 6200
Sales return 2850

3 .(a) Explain the nature ,uses and limitations of Financial Statements
(b) Prepare a Trading Account of Mr. Anil for the year ending 31st March, 2009
Purchases 3, 00,000
Sales 5, 00,000
Stock (April 1, 2008) 40,000
Wages 30,000
Return Outwards 3.000
Return inward 2,500
Freight and clearing charges 5.000
Additional information:-
Stock on 31st March, 2009 42,000

4 .Explain what is Bank Reconciliation statement? Draw a Proforma of a Bank Reconciliation statement with favorable balance as per cash book. Illustrate with the help of an example.

5 .Write Short notes on any three of the following.
a. Dual Aspect Concept
b. Cash book is Journal as well as Ledger. Explain
c. Accrued Income and Outstanding Expenses
d. Convention of Conservatism
e. Accounting Cycle

6 .B and C enter a joint venture to prepare a film for the Government. The Government agrees to pay Rs.1, 00,000.B contributes Rs.10, 000 and C contributes Rs. 15,000.These amounts are paid into a Joint Bank Account. Payments made out of the joint account were:
Purchase of equipment Rs.6000
Hire of equipment Rs.5, 000
Wages Rs.45, 000
Materials Rs.10, 000
Other expenses Rs.5, 000

B paid Rs.2, 000 as licensing fees. On completion, the film was found defective and Government made a deduction of Rs.10, 000.The equipment was taken over by C at a valuation of Rs.2, 000. Prepare P&L account in respect of the company.

7. Shakti International invited applications for 100,000 shares of Rs 10 each issued at a discount of 10% payable as follows:
Application Rs 4 per share
Allotment Rs 3
First call Re 1
Final call Balance amount

The company received applications for 140,000 shares and pro rata allotment was made for applications for 120,000 shares who had applied for 600 shares failed to pay amount due on allotment and his shares were forfeited after the first call. Subsequently after the final call, half of his shares were re-issued to K for Rs 11 per share. Journalize and prepare balance sheet in the books of Shakti International.

8. Anil sent on 1st July, 2006 to Rahul goods costing Rs.50,000 and spent Rs.1,000 on packing etc. On 3rd July 2006, Rahul received the goods and sent his acceptance to Anil for Rs.30,000 payable at 3 months. Rahul spent Rs.2,000 on freight and cartage,Rs 500 on godown rent and Rs.300 on insurance. On 31st December, 2006 he sent his Account Sales (along with the amount due to)Showing that 4/5 of the goods had been sold for Rs.55,000.Rahul is entitled to a commission of 10%.One of the customers turned insolvent and could not pay Rs.600 due from him. Show the necessary ledger accounts.

Section – B
Case study

X, Y and Z were partners in a firm sharing profits in the proportions of 1/2, 1/3 and 1/6 respectively. The Balance Sheet of the firm on 31st March 2001 was as follows:
Liabilities Amount Assets Amount
Trade creditors 15,000 Cash at bank 5,000
Employees provident fund 6,000 Debtors 40000
Reserve fund 18,000 Less: provision 2000 38,000
Capitals Stock 30,000
X 65,000 Investments 15,000
Y 30,000 Patents 10,000
Z 20,000 115000 Plant and machinery 50,000
Goodwill 6,000
1,54000 1,54,000

Z retired on the above date on the following terms:
a) Goodwill of the firm was valued at Rs. 30,000
b) Value of patents was to be reduced by 20% and that of plant & machinery to 90%.
c) Provision for doubtful debts was to be raised to 6 %.
d) Z took over the investments at a value of Rs.17,600.
e) Liability for workmen’s compensation to the extent of Rs. 375 is to be created.
f) Trade creditors to the extent of 2.5 % are not likely to claim their dues.
g) Amount due to Z is to be settled on the following basis:

50 % on retirement, 50 % of the balance to be paid in 2 equal half yearly installments carrying interest at 5 % p.a. and the balance by a Bill of Exchange (without interest) at 3 months.

The entire capital of the firm as newly constituted is fixed at Rs.100, 000 and the partners’ capital accounts are to be adjusted in the profit sharing ratio. Any excess is to be transferred to current account and any deficit is to be brought in cash

Prepare Revaluation account, Partners’ Capital accounts and Balance Sheet of X & Y after Z’s retirement. Also prepare Z’s Loan account till it is fully paid.

Section – C

1. Which of the following would not be included on a balance sheet?
2. Remington provided the following information about its balance sheet:

Cash $ 100
Accounts receivable 500
Stockholders’ equity 700
Accounts payable 200
Bank loans 1,000
Based on the information provided, how much are Remington’s liabilities?
3. Which of the following statements best describes the purpose of financial accounting in a limited liability company?
4. Which of these items would be accounted for as an expense?
5. A company sells goods on credit valued at £25 000 to a customer. At what point in the sales cycle should this sale be recognized in the accounts?
6. Exe Ltd sells goods on credit to Wy Ltd for £3000. Which of the following accounting entries correctly records this transaction?
7. Which of the following equations properly represents a derivation of the fundamental accounting equation?
8. A business has the following transactions recorded in its sales ledger for 2001: £000 Debtors at 1 January 2001 25 Sales in 2001 345 Receipts from debtors 318 Credit notes raised in 2001 23 Which is the correct figure for debtors at 31 December 2001?
9. The financial position of the business on a given date is reported on the
10. The net profit or loss for a particular period of time is reported on the
11. Which of the following statements is correct?
12. Which of the following statements is correct in relation to a trial balance?
13. The investment of cash into the business results in a/an
14. A business has the following items extracted from its trial balance:
Opening stock 10
Purchases 25
Sales 40
Expenses 10
In addition, its closing stock is valued at £15 000.
What is the correct figure for the business gross profit?
15. The purchase of supplies for cash will result in a/an
16. Which of the following accounting concepts are being followed when a company operates a provision
17. The double entry required to write off a specific bad debt is:
18. Services rendered for cash will result in a/an
19. Cash is received from a client for office rental space.
20. Keeping the records of the business separate from the personal records of the owner of the business is said to be adherence to which accounting principle or concept?
21. Which of the following is a formal written promise to pay a definite sum of money on demand or at a fixed or determinable future date?
22. Using lower of cost or net realisable value for the purpose of inventory valuation is the implementatation of which of the following concepts?
23. The concept of separate entity is applicable to which of the following businesses?
24. The revenue recognition principle dictates that all types pf revenue should be recognised or recorded when
25. which of the following is the time span into which the total life of a business is divided for the purpose of preparing financial statements?
26. The allocation of owner’s private expenses to his/her business violates which of the following?
27. Showing purchased office equipments in financial equipments is applicability of ?
28. Peter Atli decided to pay himself a salary of $3,000 per month for the work he performs for his business, a single proprietorship. Each time a cheque is recorded for $3,000, which account should be increased?
29. Tally package is developed by
30. We can change the Company Information from
31. The shortcut key to quit from Tally is
32. The shortcut used to activate calculator is
33. What should be credited, if salary is paid to Sohail?
34. The personal telephone bill of Junior Sample was paid by issuing a cheque from the business chequing account. No business calls had been made from Junior’s personal phone. What account must be charged for this transaction?
35. Which of the following is/are the example/s of Intangible Asset?
36. Which of the following is a FIRST product of accounting cycle?
37. What will be debited, if Mohsin commenced business with cash?
38. Assets are divided in which of the following categories in balance sheet.
39. What will be debited, if business purchased Vehicle on cash?
40. Franchise rights, goodwill and patents are the examples of:


1. Which of the following is the activity which finance people are involved?
Investing decisions
Operation decisions
Promotion decisions
Marketing decisions
2. Refers to part of current assets that fluctuates directly with changes in sales level.
Permanent assets
Temporary assets

3. Profit and Loss Account is–
Real Account
Nominal Account
Personal Account
None of the above

4. According to the accounting profession, which of the following would be considered a cash-flow item from a “financing” activity?
A cash outflow to the government for taxes.
A cash outflow to repurchase the firm’s own common stock.
A cash outflow to lenders as interest.
A cash outflow to purchase bonds issued by another company

5. Which of these items would be accounted for as an expense?
Repayment of a bank loan.
Dividends to stockholders
The purchase of land.
Payment of the current period’s rent.

6. Which of the following would not be included on a balance sheet?
Accounts receivable.
Accounts payable

7. The requirement that only transaction data capable of being expressed in terms of money be included in the accounting records relates to the —
Cost principle
Monetary unit assumption
Economic entity assumption
Both a & b

8. Revenue is generally recognized at the point of sales .Which principle is applied herein–
Consistency principle
Matching principle
Revenue recognition principle
Cost principle

9. Petty cash fund is–
Used to pay relatively small amounts
Reimbursed when the amount of money in the fund is reduced to a predetermined minimum amount
Established by estimating the amount of cash needed for disbursement of relatively small amounts during a specified period
All of the above

10. Which of the following errors will be disclosed in the preparation of a trial balance?
Recording transactions in the wrong account.
Duplication of a transaction in the accounting records
Posting only the debit portion of a particular journal entry
Recording the wrong amount for a transaction to both the account debited and the account credited.
11. Book Value is–
The amount that is due at the maturity or due date of a note.
The process of transferring the cost of natural resources to an expense account.
The cost of a fixed asset minus accumulated depreciation on the asset
The estimated value of a fixed asset at the end of its useful life.

12. An examination of the sources and uses of funds is part of–
a forecasting technique
A funds flow analysis
a ratio analysis
calculations for preparing the balance sheet

13. Which of the following is not a cash outflow for the firm?
Interest payments

14. What must be known or estimated in order to calculate depreciation?
The estimated useful life of the asset to the company
The acquisition cost of the asset.
The estimated residual value of the asset.
All of the above

15. Information that goes into ________ can be used to help prepare ________.
a forecast balance sheet; a forecast income statement
forecast financial statements; a cash budget
a cash budget; forecast financial statements
a forecast income statement; a cash budget

16. Which of the following terms best relates to natural resources?

17. A debit may signify–
An increase in an asset account
A decrease in an asset account
An increase in a liability account
An increase in the owner’s capital Account

18. When a partnership firm is to be dissolved, the following account is opened in the ledger–
Revaluation Account
Profit and Loss Adjustment Account
Realisation Account
Profit and Loss Appropriation Account

19. Settlement of accounts on the dissolution of a partnership firm is governed by the following section of the Indian Partnership Act ,1932

20. A new partner brings in cash as his share of goodwill, this amount will be distributed among the old partners–
In the old profit sharing ratio
In the ratio of their capital
In the ratio of sacrifice of profit by them

21. In the absence of an agreement to the contrary, on drawings–

No interest is to be charged
Interest @5% per annum is to be charged
Interest @6% per annum is to be charged
Interest @12% per annum is to be charged

22. For a charitable institution, subscriptions by its member constitute its—.


23. The most suitable method for providing depreciation on mines, oil wells and quarries–

Straight line method
Depletion method
Annuity method
Machine hour rate method

24. In income and expenditure account, the excess of income over expenditure is called–

Gross Profit
Net Profit

25. In consignment the risk of loss is borne by–

The consignor only
The consignee only
The consignor as well as the consignee
Neither the consignor nor the consignee

26. Carriage Outward Account will appear on the–

Debit side of the Trading Account
Debit side of the Profit and Loss Account
Credit side of the Trading Account
Credit side of the Profit and Loss Account

27. At the end of an accounting year, trade debtors total Rs.50, 000. Provisions for bad debts and discount on debtors are made @5% and @% respectively. Provisions on discount on debtors will be made for–


28. The primary record of a credit purchase of a fixed asset is made in–

Cash Book
Sales Book
Purchases Book
Journal Proper

29. Which one of the following assets could be described as a current asset?

Machinery to manufacture goods for resale
Stock of goods for resale
Buildings to house the machinery
Land on which the buildings stand

30. Which of the following equations properly represents a derivation of the fundamental accounting equation?

Assets + Liabilities = Capital
Assets + Capital = Liabilities
Assets = Liabilities + Capital
Assets = Capital – Liabilities

31. If we take goods for own use we should —

Debit Drawings Account: Credit Stock Account
Debit Purchases Account: Credit Drawings Account
Debit Sales Account: Credit Stock Account
Debit Drawings Account: Credit Purchases Account

32.Forfeited Shares Account is finally closed by the transfer of its balance to–

Securities Premium Account
General Reserve Account
Debenture Sinking Fund Account
Capital Reserve Account

33. Capital Expenditure is–

The costs of running the business on a day-to-day
Money spent on selling fixed assets
The extra capital paid in by the proprietor
Money spent on buying fixed assets or adding value to them

33. If it is required to maintain fixed capitals then the partners’ shares of profits must be–

Credited to capital accounts
Debited to partners’ current accounts
Debited to capital accounts
Credited to partners’ current accounts

34. According to the money measurement concept, the following will be recorded in the books of accounts of the business–

Health of the managing director of the company
Quality of the company’ goods
Value of plant and machinery
Dedicated and trusted employees

Sales made to Mahesh for cash should be debited to–

Cash account
Mahesh account
Sales account
Purchase account

A bank reconciliation is prepared so that the difference in the under-mentioned balance is reconciled

The difference in the balance of the bank and cash balances
The difference in the balance in the Pass Book in the beginning and at the end
The difference in the Pass Book and Cash Book balance
None of the above

In the absence of any provisions in the partnership agreement, profits and losses are shared by the partners–

In the ratio of their capitals
In the ratio of loans given by them to the partnership firm
None of the above

Under the Written down value method, the amount of depreciation goes on _______ from year to year

None of the above

How will the purchase of an asset on credit affect the accounting equation?

It will decrease the assets and decrease the capital
It will decrease the assets and decrease the liabilities
It will increase the assets and decrease another asset
It will increase the assets and increase the liabilities
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Call: +91 82907-72200 (Call/WhatsApp) or +91 88003-52777 (WhatsApp Only)

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