BBA 203

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BBA 203

Winter 2016

1. X, Y & Z were partners sharing profits and losses as 3:2:1. Their Balance Sheet as on 31.03.2016 were as under :

Liabilities	Rs.	Assets	Rs.
Capital: A 1,00,000 B 70,000 C 40,000	1,80,000	Freehold Premises Building Machinery	1,00,000 60,000 90,000
Reserves	90,000	Investments	20,000
Cash credit	30,000	Inventories	30,000
Creditors	20,000	Receivables	30,000
Bills Payable	20,000	Cash	10,000
	3,40,000		3,40,000

C expired on 1st April 2016. So, the assets are revalued and liabilities re-assessed as follows :

i) Create a provision for doubtful debt Rs. 1,000.

ii) Building is to be depreciated by 5 %.

iii) Machinery is to be depreciated by 10 %.

iv) Goodwill of the firm is to be valued at Rs. 30,000.

The balance due to C will be transferred to his executor’s loan account which will carry an interest of 10 % p.a. Prepare Revaluation Account, Capital Accounts and the Balance Sheet of new firm after adjustments.

Answer: Revaluation Account

Particulars	Amount	Particulars	Amount
To provision for doubtful debt	1000
To Machinery	9000

2. Explain Bill of exchange and the procedure for recording bills in the books of drawer and accepter when the bill is : Accepted and discharged.

i) Explain bill of exchange

ii) Journal entries in the books of drawer

iii) Journal entries in the books of acceptor

Answer: A bill of exchange is documentary evidence in writing containing an unconditional order signed by the maker, directing a certain person to pay a certain sum of money only to, or the order of, a certain person or to the bearer of the instrument.

In the Boo

3. What do you understand by goodwill? Explain the accounting treatment of goodwill at the time of admission. Give journal entry for the below problem:

T and S are partners in a firm sharing profit in the ratio 5:3. They admitted G as a new partner for 1/4th share in the profit.

G brings Rs.45,000 for her share of goodwill and Rs.1,20,000 for capital. They have withdrawn the goodwill from the firm. Make journal entries in the books of the firm after the admission of G.

The new profit sharing ratio will be 2:1:1.

Meaning of goodwill with the formula

Accounting treatment of goodwill at the time of admission

Journal entry in the books of T,S and G (Unit 10)

Answer: Goodwill generally means the reputation of the firm. When a business is doing its operations over a number of years, it may develop a good name and reputation among the customers or society. In accounting parlance, it can be called as “Goodwill”. The goodwill of a firm may earn

4. Accounting refers to a systematic knowledge of accounting. It explains ‘why to do’ and ‘how to do’ of various aspects of accounting. Explain the objectives of accounting and explain the categories of users.

Explanation of accounting objectives

Explanation of categories of users (Unit 1)

Answer: Accounting objectives

Ø  Systematic recording of all business events or transactions and subsequent posting to ledger, to finally prepare financial statements - profit and loss account and balance sheet.

Ø  Reporting the results to management, shareholders, creditors, bankers, investors, stock brokers, stock exchanges, employees, government etc.

Ø  Satisfying the statutory requirements, especially Registrar of Companies (ROC), Securities

5. Prepare Trading, Profit and Loss Account and Balance Sheet from the following particulars as on 31st March 2016.

Trial Balance

Particulars	Dr. (Rs)	Cr. (Rs)
Capital / Drawings	1400	10000
Cash in hand	1500	-
Bank overdraft @ 5%	-	2000
Purchase and Sales	12000	15000
Returns	1000	2000
Establishments charges	2500	-
Taxes and Insurance	500	-
Provision for Doubtful Debts	-	1000
Bad Debts	500	-
Sundry Debtors and Creditors	5000	1850
Commission	-	500
Investments	4000	-
Stock on 1 April 2010	3000	-
Furniture	600	-
Bills Receivable & Bills payable	3000	2500
Collected Sales Tax	-	150
Total	35000	35000

Further, you are required to take into consideration the following information:

a) Salary Rs.100 and taxes Rs.400 are outstanding but insurance Rs.50 prepaid

b) Commission amounting to Rs.100 has been received in advance for work to be done next year.

c) Interest accrued on investments Rs.210

d) Provision for doubtful Debts is to be maintained at 20%

e) Depreciation on furniture is to be charged at 10% p.a.

f) Stock on 31st March 2016 was valued at Rs.4,500

g) A fire occurred on 25th March 2016 in the godown and stock of the value of Rs.1,000 was destroyed. It was fully insured and the insurance company admitted the claim in full.

[Calculation of Trading and P/L a/c-5

Preparation of balance sheet-5]

Answer: Trading and Profit and loss Account for the period ended 31st March 2016

Particulars	Rs	Rs	Particulars	Rs	Rs
To Opening Stock		3000	By Sales	15000
To Purchase	12000		Less: Sales Returns	1000	14000

6 From the ledger balances as on 31st March 2016 show treatments in Profit and Loss Account and in Balance Sheet.

Debtors: 50,000; Bad Debts: 3,000; Discount Allowed : 2,000;

Creditors: 30,000; Provision for Discount on Creditors : 400; Discount Received 300.

Adjustments:

i) Create a provision for Bad Debts @ 10 % on Debtors

ii) Create a provision for Discount on Debtors @ 5 %

iii) Additional discount given to Debtors Rs. 1,000

iv) Create a provision for discount on Creditors @ 2 %.

From the ledger balances and adjustments as above, show treatments in :

Profit and Loss Account and Balance Sheet.

Answer: Profit and loss account for the year ended 31st March, 2016

Particulars

Amount (Rs)

Particulars

Amount (Rs)

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