Finance for bankers

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Finance for bankers

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Finance for bankers

  1. 1. Accounting & Finance for Bankers
  2. 2. TOPICS <ul><li>BANK RECONCILIATION </li></ul><ul><li>TRIAL BALANCE </li></ul><ul><li>CAPITAL & REVENUE EXPENDITURE </li></ul><ul><li>INVENTORY VALUATION </li></ul><ul><li>BILLS OF EXCHANGE </li></ul><ul><li>CONSIGNMENT ACCOUNT </li></ul><ul><li>JOINT VENTURE </li></ul><ul><li>LEASING & HIRE PURCHASE </li></ul><ul><li>NON-TRADING ORGANISATIONS </li></ul><ul><li>DEPRECIATION </li></ul><ul><li>MODEL QUESTIONS </li></ul>
  3. 3. Bank Reconciliation statement <ul><li>Meaning </li></ul><ul><li>Causes of differences </li></ul><ul><ul><ul><ul><ul><li>Cheque issued but not presented for payment </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Cheque deposited but not yet realized </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Bank charges </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Interest on saving bank </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Int. on overdraft </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Amount directly collected by bank </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Amount directly paid by bank on Std. Instructions </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Dishonor of a Cheque </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Direct payment into bank by customer </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>errors </li></ul></ul></ul></ul></ul>
  4. 4. BANK RECONCILIATION STATEMENT <ul><li>BANK RECONCILIATION( B. R. ) IS BASED ON THE PRINCIPLE OF DOUBLE ENTRY. </li></ul><ul><li>DEBIT THE RECEIVER AND CREDIT THE GIVER </li></ul><ul><li>B. R. SHOWS CAUSES OF DIFFERENCES BETWEEN CASH BOOK AND PASS BOOK BALANCE </li></ul><ul><li>DEBIT BALANCE AS PER CASH BOOK IS CREDIT BALANCE AS PER PASS BOOK = POSITIVE BALANCE </li></ul><ul><li>CREDIT BALANCE IN CASH BOOK IS DEBIT BALANCE IN PASS BOOK = NEGATIVE BALANCE/OVERDRAFT </li></ul>
  5. 5. EXAMPLES <ul><li>M/s Shekhar Enterprises .was maintaining account with KRB Bank Ltd. On 31st December,2006, Bank column of cash book of company showed a debit balance of Rs. 26000. </li></ul><ul><li>Cheques deposited into the bank but not credited before 31st December,2006 amounted to Rs.4000 </li></ul><ul><li>Bank charges of Rs. 500 were debited by the bank but no entry was made by the accountant of the company. </li></ul><ul><li>From the above particulars, find out the balance as per KRB Bank’s books. </li></ul><ul><li>Rs.30500 </li></ul><ul><li>Rs.25500 </li></ul><ul><li>Rs .21500 </li></ul><ul><li>Rs.22500 </li></ul>
  6. 6. EXAMPLES <ul><li>When overdraft as per cash book and a Cheque of Rs.1000 directly deposited in the bank, but not recorded in cash book---- </li></ul><ul><ul><ul><ul><li>a) Add Rs.1000 in CB </li></ul></ul></ul></ul><ul><ul><ul><ul><li>b) deduct Rs.1000 in CB </li></ul></ul></ul></ul><ul><ul><ul><ul><li>c) Add Rs.2000 in cash book </li></ul></ul></ul></ul><ul><ul><ul><ul><li>d) Deduct Rs.2000 in CB </li></ul></ul></ul></ul><ul><ul><li>Cheque issued to Rohan for Rs.4000 was recorded twice in cash book </li></ul></ul><ul><ul><ul><ul><li>Deduct Rs.4000 in Cash book </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Add Rs. 4000 in cash book </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Add Rs.8000 in Cash Book </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Deduct Rs.8000 in cashbook </li></ul></ul></ul></ul>
  7. 7. EXAMPLES <ul><li>Sujit is having account with two banks viz. PNB and Canara bank. He made a deposit of Rs. 3000 in Canara Bank , but wrongly entered in column of PNB.For preparing BRS of Canara Bank , sujit will---- </li></ul><ul><ul><ul><ul><li>a) Add Rs.3000 in Cash Book of Canara BK column </li></ul></ul></ul></ul><ul><ul><ul><ul><li>b) deduct Rs.3000 in Cash book of Canara BK column </li></ul></ul></ul></ul><ul><ul><ul><ul><li>c) Add Rs.6000 in cash book of Canara BK column </li></ul></ul></ul></ul><ul><ul><ul><ul><li>d) Deduct Rs.6000 in CB of Canara BK column </li></ul></ul></ul></ul><ul><li>Payment side of cash book of LKJ ltd. Is overcast by Rs.9000. </li></ul><ul><ul><ul><li>Deduct Rs.9000 in Cash book </li></ul></ul></ul><ul><ul><ul><li>Add Rs. 9000 in cash book </li></ul></ul></ul><ul><ul><ul><li>Add Rs.18000 in Cash Book </li></ul></ul></ul><ul><ul><ul><li>Deduct Rs.18000 in cashbook </li></ul></ul></ul>
  8. 8. Trial Balance(TB)- Rectification entries <ul><li>Trial balance – meaning </li></ul><ul><li>Types- gross TB, Net TB </li></ul><ul><li>Disagreement of TB </li></ul><ul><li>Classification of errors </li></ul><ul><ul><ul><li>Clerical errors </li></ul></ul></ul><ul><ul><ul><ul><li>Errors of omission </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Errors of commission </li></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Posting of correct amount at wrong side </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Posting wrong amount at wrong side </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Totaling error in subsidiary book </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Mistake while balancing of ledger </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><li>Compensating errors </li></ul></ul></ul></ul><ul><ul><ul><li>Errors of principles </li></ul></ul></ul>
  9. 9. Suspense account- <ul><li>Suspense account- After preparation of T/B </li></ul><ul><li>Rectification when books are closed- Diff. in nominal A/c adj. through P & L Adj. A/c- then effect on Capital A/c </li></ul>
  10. 10. Rectification of Errors-Examples <ul><li>(1) Rs. 7000 paid as wages for installing the machinery should be debited to----- </li></ul><ul><ul><ul><li>Wages A/c </li></ul></ul></ul><ul><ul><ul><li>Machinery a/c </li></ul></ul></ul><ul><ul><ul><li>Capital A/c </li></ul></ul></ul><ul><ul><ul><li>None of the above </li></ul></ul></ul><ul><li>(2) Sales to Navin of Rs.1000 is debited to Ravin A/c. this will be rectified by----- </li></ul><ul><li>Debiting Navin a/c and Crediting Ravin A/c </li></ul><ul><li>Debiting both Accounts </li></ul><ul><li>Debiting Ravin a/c and Crediting Navin A/c </li></ul><ul><li>Debiting Navin A/c and crediting Sales A/C </li></ul>
  11. 11. Trial Balance-Examples <ul><li>Credit sale of Rs.5000 to Suresh is posted to his credit, then rectification is </li></ul><ul><ul><ul><li>Credit Suresh to the extent of Rs.10,000 </li></ul></ul></ul><ul><ul><ul><li>Credit Suresh to the extent of Rs.5,000 </li></ul></ul></ul><ul><ul><ul><li>Debit Suresh to the extent of Rs.10,000 </li></ul></ul></ul><ul><ul><ul><li>Debit Suresh to the extent of Rs.5000 </li></ul></ul></ul><ul><li>Freight expenses for carrying New Machinery is carried to Traveling Exp. a/c. Choose the correct rectification entry </li></ul><ul><ul><li>Debit machinery a/c and credit Traveling Exp a/c. </li></ul></ul><ul><ul><li>Credit machinery a/c and debit Freight Exp a/c </li></ul></ul><ul><ul><li>Credit profit and loss account and debit Freight Exp a/c. </li></ul></ul><ul><ul><li>Debit profit and loss a/c( P&L a/c) and credit Traveling Exp a/c. </li></ul></ul>
  12. 12. Rectification of Errors-Examples <ul><li>One of the pair given below is mismatch, identify the same </li></ul><ul><ul><ul><li>Trial balance <> Statement of balances of ledger accounts </li></ul></ul></ul><ul><ul><ul><li>Real Account<> Always shows debit balance </li></ul></ul></ul><ul><ul><ul><li>Suspense Account<> difference in trail balance </li></ul></ul></ul><ul><ul><ul><li>Outstanding Expenses<> Nominal Account </li></ul></ul></ul><ul><li>One of the statement is incorrect. Select the incorrect statement. </li></ul><ul><ul><li>If the trial balance shows short debit, the suspense a/c will have credit balance. </li></ul></ul><ul><ul><li>Errors which cancel out the effect of one another are called compensating errors. </li></ul></ul><ul><ul><li>One sided errors are rectified without passing journal entries </li></ul></ul><ul><ul><li>Two sided errors originate in the primary books </li></ul></ul>
  13. 13. Capital & Revenue Expenditure CAPITAL REVENUE Large amount Relatively small Improve or enhance earning capacity Maintain asset Long duration benefit Short duration Non- recurring recurring Balance sheet item Trading /P & L A/c item
  14. 14. Deferred Revenue expenditure <ul><li>Expenditure incurred in one year , but benefit of which is accruing not in one year but following two or more years , then such expenditure is called as Deferred Revenue expenditure </li></ul><ul><li>Examples </li></ul><ul><ul><li>Heavy advertisement exp. </li></ul></ul><ul><ul><li>Issue of capital expenses </li></ul></ul><ul><ul><li>Preliminary expenses </li></ul></ul>
  15. 15. Cap. & Rev. Expenditure-Examples <ul><li>( 1) Cost of replacement of defective parts of the machinery is ----- </li></ul><ul><ul><ul><li>Capital expenditure </li></ul></ul></ul><ul><ul><ul><li>R evenue expenditure </li></ul></ul></ul><ul><ul><ul><li>Deferred revenue expenditure </li></ul></ul></ul><ul><ul><ul><li>None of the above </li></ul></ul></ul><ul><li>(2) Loss of goods due to fire Rs.8000 is a revenue expenditure because---- </li></ul><ul><ul><ul><li>It is recurring </li></ul></ul></ul><ul><ul><ul><li>Amount involved is small </li></ul></ul></ul><ul><ul><ul><li>L oss is arising out of business operations </li></ul></ul></ul><ul><ul><ul><li>None of the above </li></ul></ul></ul>
  16. 16. Cap. & Rev. Expenditure-Examples <ul><li>(3) Expenditure incurred in acquiring the patents rights for the business is an example of ---- </li></ul><ul><li>C apital expenditure </li></ul><ul><li>Deferred revenue expenditure </li></ul><ul><li>Revenue expenditure </li></ul><ul><li>( 4) Professional fees paid in connection with acquisition of leasehold premises is---- </li></ul><ul><li>C apital expenditure </li></ul><ul><li>Deferred revenue expenditure </li></ul><ul><li>Revenue expenditure </li></ul>
  17. 17. Examples <ul><li>(5)Preliminary expenses , discount allowed on issue of shares are the examples of </li></ul><ul><li>Capital expenditure </li></ul><ul><li>D eferred revenue expenditure </li></ul><ul><li>Revenue expenditure </li></ul><ul><li>(6) Machinery costing Rs.10,000, whose current book value is Rs.7000 is sold for Rs.12000 what is the amount of capital & revenue receipt </li></ul><ul><li>Capital receipt of Rs. 2000 & Rev. Receipt of Rs.10000 </li></ul><ul><li>C apital receipt of Rs. 9000 & Rev. Receipt of Rs.3000 </li></ul><ul><li>Capital receipt of Rs. 12000 & Rev. Receipt of Rs.Nil </li></ul>
  18. 18. Methods of valuation of inventory FIFO LIFO AVERAGECOST <ul><li>Goods issued valued at earliest price </li></ul><ul><li>Stock valuation at latest price </li></ul><ul><li>Goods issued valued at latest price </li></ul><ul><li>Stock valuation at earliest price </li></ul>Found out by dividing total price paid by quantity received
  19. 19. Examples <ul><li>Select the incorrect statement from the following--- </li></ul><ul><ul><ul><li>Inventory valuation is subjective because it depends upon the accounting policies adopted by the organisation </li></ul></ul></ul><ul><ul><ul><li>The basis of inventory valuation adopted should not be changed frequently because it violates accounting principle of ‘consistency’ </li></ul></ul></ul><ul><ul><ul><li>Accounting standard recommends FIFO or weighted average method </li></ul></ul></ul><ul><ul><ul><li>The ascertainment of value of stock from accounting record is known as P erpetual inventory </li></ul></ul></ul>
  20. 20. Examples-conted.. <ul><li>Q:During the rising prices the ______ method will reflect ( F IFO/LIFO/weighted Average) </li></ul><ul><li>lowest cost of material supplied and results in under pricing the products </li></ul><ul><li>Inventory is shown at the higher priced material. </li></ul><ul><li>Lock up of large amount of working capital. </li></ul><ul><li>Profits are inflated </li></ul><ul><li>More liability for payment of taxes </li></ul>
  21. 21. Bill of Exchange Bill of Exchange Promissory Note Unconditional order Unconditional promise Made by creditor Made by debtor Acceptance by debtor must No acceptance as such Three parties to a bill Two parties to a bill Noting is not necessary On dishonor, noting is necessary by notary public
  22. 22. Bill of Exchange <ul><li>Honoring on due date </li></ul><ul><li>Retirement </li></ul><ul><li>Discounting of bill </li></ul><ul><li>Sent for collection to bank </li></ul><ul><li>Endorsed to creditor </li></ul><ul><li>Renewal of the bill </li></ul><ul><li>Accommodation bill </li></ul>
  23. 23. Examples <ul><li>Q1. ___________ draws a bill on __________ </li></ul><ul><li>Q2. A bill of exchange is a negotiable instrument </li></ul><ul><li>True </li></ul><ul><li>False </li></ul><ul><li>Q3. Negotiable instruments can be ________from one person to another </li></ul><ul><li>Q4. A bill of exchange must be in writing </li></ul><ul><li>True </li></ul><ul><li>False </li></ul><ul><li>Q5: A bill of exchange is not to be dated </li></ul><ul><li>True </li></ul><ul><li>F alse </li></ul>
  24. 24. Examples-conted <ul><li>Q6.: The date on which the bill is payable is called its _________ </li></ul><ul><li>Q7. The due date is calculated after adding __________ to the actual period of the bill. </li></ul><ul><li>Q8. If the due date falls on a public holiday, then it becomes due on the ------- </li></ul><ul><li>Q9.A bill was drawn on 23rd Dec. 2005 for one month maturity. What will be its due date. </li></ul><ul><li>Q10. When a Bill of exchange or promissory note has been dishonoured for non acceptance or non payment, the holder may, within a reasonable period, cause such dishonour to be noted and certified by a notary public, such a certificate is called ________ </li></ul><ul><li>Ans.: due date, Three days of grace, Previous working day, 25th January,protest </li></ul>
  25. 25. CONSIGNMENT ACCOUNT <ul><li>A consignment is the dispatch of goods by its owner to his agent for the purpose of selling. </li></ul><ul><li>Consignor, consignee, Proforma Invoice, Account Sale </li></ul><ul><li>Books of Account in the books of consignor- </li></ul><ul><ul><ul><li>Consignment A/c </li></ul></ul></ul><ul><ul><ul><li>Consignee A/c </li></ul></ul></ul><ul><ul><ul><li>Goods sent on Consignment </li></ul></ul></ul><ul><li>Valuation of closing stock </li></ul><ul><li>Consigning goods at higher price </li></ul>
  26. 26. CONSIGNMENT ACCOUNT <ul><li>A TYPICAL CONSIGNMENT ACCOUNT WILL APPEAR AS FOLLOWS: </li></ul><ul><li>DR. CR </li></ul><ul><li>To goods sent on By consignee </li></ul><ul><li>consignment (goods sold by </li></ul><ul><li>(invoice value) consignee) </li></ul><ul><li>To bank By closing stock </li></ul><ul><li>(all expenses incurred by </li></ul><ul><li>Consignor in transporting) </li></ul><ul><li>To consignee </li></ul><ul><li>(all expenses incurred by </li></ul><ul><li>Consignee in selling) </li></ul><ul><li>To profit & loss a/c </li></ul>
  27. 27. Examples <ul><li>Q1. The possession of the goods remains with the _________, but the property in or the ownership of the goods remain with the _________ </li></ul><ul><li>Q2 : Usually the consignee recovers all ___________ by him on the consignment. </li></ul><ul><li>Q3.:Consignment account is of the nature of </li></ul><ul><ul><li>Personal account </li></ul></ul><ul><ul><li>Nominal account </li></ul></ul><ul><ul><li>Real account </li></ul></ul><ul><li>Q4.When the goods are sent by the consignor to the consignee, they are accompanied by </li></ul><ul><ul><li>Proforma invoice* </li></ul></ul><ul><ul><li>Commercial invoice </li></ul></ul><ul><ul><li>Account sales </li></ul></ul><ul><ul><li>Bank draft </li></ul></ul><ul><li>Consignee, Consignor, expenses incurred, nominal </li></ul>
  28. 28. Examples <ul><li>Q5. Where del-credere commission is paid : </li></ul><ul><ul><li>the normal commission is not payable to the consignee </li></ul></ul><ul><ul><li>the bad debts, if occur, are borne by the consignor </li></ul></ul><ul><ul><li>the bad debts, if occur, are borne by the consignee </li></ul></ul><ul><ul><li>the bad debts, if occur, are shared by the consignor and consignee equally </li></ul></ul><ul><li>Q6: The principle followed in valuations of closing stock on consignment is </li></ul><ul><ul><li>to include the expenses by the consignor only </li></ul></ul><ul><ul><li>cost to the consignor plus proportionate expenses incurred till the goods reach to the premises of the consignee plus direct expenses of consignee </li></ul></ul><ul><ul><li>Cost plus proportionate non-recurring expenses incurred by the consignor </li></ul></ul><ul><ul><li>Cost plus proportionate non-recurring expenses incurred by the consignee </li></ul></ul>
  29. 29. JOINT VENTURE <ul><li>Meaning </li></ul><ul><li>Temporary partnership </li></ul><ul><li>Accounting -when separate books </li></ul><ul><ul><ul><ul><li>Joint Bank Account </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Co-venturer’s Account </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Joint Venture Account </li></ul></ul></ul></ul><ul><li>Accounting - when no separate books are maintained </li></ul><ul><ul><ul><ul><li>Joint Venture </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Co-Venturer </li></ul></ul></ul></ul>
  30. 30. Examples <ul><li>Q1.When separate set of books are kept for keeping the accounts of Joint Venture, then </li></ul><ul><ul><li>Memorandum Joint Venture Account is prepared </li></ul></ul><ul><ul><li>Transactions take the form of ordinary accounting system </li></ul></ul><ul><ul><li>Only Joint Venture and Personal accounts of the co-venturers are maintained. </li></ul></ul><ul><ul><li>Joint Venture, Co-venturers and Joint Bank accounts are opened </li></ul></ul><ul><li>Q2.A debit balance in Joint Venture A/c indicates </li></ul><ul><ul><li>a. Profit on Joint Venture </li></ul></ul><ul><ul><li>b. Loss on Joint venture </li></ul></ul><ul><ul><li>c. Amount receivable </li></ul></ul><ul><ul><li>d. Amount payable </li></ul></ul>
  31. 31. LEASING <ul><li>Contract between two parties </li></ul><ul><li>Owner of an asset transfers his right of use to other party on payment of a fixed rent periodically </li></ul><ul><li>Types >> Finance or Capital Lease </li></ul><ul><ul><ul><ul><ul><li>Operating Lease </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Service Lease </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Leveraged Lease </li></ul></ul></ul></ul></ul>
  32. 32. Leasing Examples <ul><li>A lease which does not secure for the lessor, the recovery of his capital outlay (original cost of the asset leased) plus a return on the funds invested during the lease term is called----- </li></ul><ul><li>(a) Capital Lease </li></ul><ul><li>(b) O perational Lease </li></ul>
  33. 33. Leasing Examples <ul><li>(2) There are three parties in----- </li></ul><ul><li>Capital Lease </li></ul><ul><li>Operational Lease </li></ul><ul><li>Service Lease </li></ul><ul><li>L everaged Lease </li></ul><ul><li>(3) Allocating total finance income of Rs. 30000 over the leased period of 4 years by the sum of the digit method results in----- </li></ul><ul><li>FY Rs.7500,SY Rs.7500 TY Rs.7500, FY Rs.7500 </li></ul><ul><li>FY Rs.12000,SY Rs.9000 TY Rs.6000 FOURTH Y Rs.3000 </li></ul><ul><li>FY Rs.3000,SY Rs.6000 TY Rs.9000 FY Rs.12000 </li></ul><ul><li>FY Rs.NIL,SY Rs.10000 TY Rs.10000 FOURTH Y Rs.10000 </li></ul>
  34. 34. Leasing Examples <ul><li>(4) If Lease charges of the year exceed the depreciation charge of the year then----- </li></ul><ul><li>Lease Equalization account is debited (with the difference) </li></ul><ul><li>Lease Equalization account is credited (with the difference) </li></ul><ul><li>Lease Terminal Adjustment account is debited (with the difference) </li></ul><ul><li>None of the above </li></ul><ul><li>(5) In case operational Lease , if the total lease rent is receivable in various installments then in the first year of lease , the journal entry for total lease rent receivable, in the books of lessor is------ </li></ul><ul><li>Debit Lessee account and Credit Rent Suspense a/c* </li></ul><ul><li>Debit Advance Lease Rent account and Credit Lease Rent a/c </li></ul><ul><li>Debit Bank Account and Credit Lease Rent Account </li></ul><ul><li>Debit Bank Account and Credit Advance Lease Rent Account </li></ul>
  35. 35. HIRE PURCHASE & INSTALMENT SALE <ul><li>A buyer purchases goods but pays the price in various installments. </li></ul><ul><li>In hire purchase ownership passes to the buyer on the payment of last installment while in installment selling it passes immediately. </li></ul><ul><li>The hire purchase price consists of two elements a) cash price and b) interest for delayed payments </li></ul>
  36. 36. Accounting of non-trading organizations <ul><li>Meaning </li></ul><ul><li>Need for maintenance of accounts </li></ul><ul><li>Accounts </li></ul><ul><ul><ul><ul><ul><li>Receipt & Payment account </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Income & Expenditure Account </li></ul></ul></ul></ul></ul><ul><ul><ul><ul><ul><li>Balance sheet </li></ul></ul></ul></ul></ul>
  37. 37. Distinction Receipt & Payment A/c Income& ExpenditureA/c Real Account Nominal Account All receipts & payment in a year Only income and expenses in a year Capital/ revenue items Only revenue items Starts with Opening cash & end with closing cash No op. balance but end with surplus/ deficit current,previous and next year Current year only
  38. 38. Treatment of some items <ul><li>Donations- purpose to be seen </li></ul><ul><li>Entrance fees- cap. receipt </li></ul><ul><li>Life membership fees-cap receipt </li></ul><ul><li>Government grants-for maintenance revenue-for specific purpose cap.receipt </li></ul><ul><li>Special fund- exps& income of that fundbooked to that fund </li></ul><ul><li>Op. & closing. Stock of stationary- consumed during year to be taken as exps. </li></ul><ul><li>Sale of fixed assets/investments- above BV below BV </li></ul><ul><li>Sports material-asset and dep is charged </li></ul><ul><li>Opening/closing Balance sheet </li></ul><ul><li>Capital fund </li></ul>
  39. 39. adjustments <ul><li>Outstanding income </li></ul><ul><li>Outstanding expenses </li></ul><ul><li>Income received in advance </li></ul><ul><li>Prepaid expenses </li></ul><ul><li>Depreciation on assets </li></ul>
  40. 40. EXAMPLES <ul><li>SOLID PVT LIMITED HAS FOLLOWING TRANSACTIONS (Purchase of inventory I-Q100 @10 on 1.1.06),II(Q150@12 on 2.1.06) </li></ul><ul><li>(Issue of inventory I-Q100 on 3.1.06 II-Q50on 4.1.06) q=quantity </li></ul><ul><li>What is value of closing stock ,if co. follows FIFO method </li></ul><ul><ul><ul><li>Rs.1200 </li></ul></ul></ul><ul><ul><ul><li>Rs.1000 </li></ul></ul></ul><ul><ul><ul><li>Rs.1800 </li></ul></ul></ul><ul><ul><ul><li>None of the above </li></ul></ul></ul><ul><li>What is the value of closing stock, if co. follows LIFO method </li></ul><ul><ul><ul><li>Rs.1800 </li></ul></ul></ul><ul><ul><ul><li>Rs.1200 </li></ul></ul></ul><ul><ul><ul><li>Rs.1000 </li></ul></ul></ul><ul><ul><ul><li>None of the above </li></ul></ul></ul><ul><li>What is the value of closing stock, if co. follows weighted average cost method </li></ul><ul><ul><ul><li>Rs.1120 </li></ul></ul></ul><ul><ul><ul><li>Rs.1200 </li></ul></ul></ul><ul><ul><ul><li>Rs.1800 </li></ul></ul></ul><ul><ul><ul><li>None of the above </li></ul></ul></ul>
  41. 41. EXAMPLES <ul><li>Identify the wrong pair </li></ul><ul><ul><ul><li>Maker of the bill ^^drawer </li></ul></ul></ul><ul><ul><ul><li>Dishonour of bill ^^ rebate </li></ul></ul></ul><ul><ul><ul><li>Person in whose favour bill is endorsed^^endorsee </li></ul></ul></ul><ul><ul><ul><li>Bill of exchange ^^ negotiable instrument </li></ul></ul></ul><ul><li>One of the following pair is mismatch.Identify the wrong pair </li></ul><ul><ul><ul><li>Diminishing balance method^^ depreciated value of asset never become zero </li></ul></ul></ul><ul><ul><ul><li>Current asset^^ asset on which depreciation is not provided </li></ul></ul></ul><ul><ul><ul><li>Depreciation^^ decreases the value of the asset </li></ul></ul></ul><ul><ul><ul><li>Rate of depreciation^^ depends upon profit of the firm </li></ul></ul></ul><ul><li>Select the true statement </li></ul><ul><ul><ul><li>Goodwill is a current asset </li></ul></ul></ul><ul><ul><ul><li>The expenditure incurred on installation of machinery is revenue expenditure </li></ul></ul></ul><ul><ul><ul><li>Reducing balance method is also known as SLM </li></ul></ul></ul><ul><ul><ul><li>Even if an asset is not used ,mere passage of time will cause a fall in its value unless it happens to be land </li></ul></ul></ul>
  42. 42. EXAMPLES <ul><li>Sudhir Draws following bills </li></ul><ul><ul><ul><li>On Ruchira for Rs.1000 </li></ul></ul></ul><ul><ul><ul><li>On Madhur for Rs.2000 </li></ul></ul></ul><ul><ul><ul><li>On Trichur for Rs.3000 </li></ul></ul></ul><ul><ul><ul><li>On Nupur for Rs.4000 </li></ul></ul></ul><ul><li>All the bills are accepted by all.Solve the examples as per following </li></ul><ul><li>Ruchira’s acceptance is retained till due date, but it was dishonoured. Identify the correct entry in sudhir’s books </li></ul><ul><ul><ul><li>Debit bill a/c and credit BR a/c </li></ul></ul></ul><ul><ul><ul><li>Debit Ruchira A/c and credit BR a/c </li></ul></ul></ul><ul><ul><ul><li>Debit BR a/c and credit Ruchira a/c </li></ul></ul></ul><ul><ul><ul><li>Debit Dishonour Bill a/c credit BR a/c </li></ul></ul></ul><ul><li>Madhur’s acceptance is discounted with the bank, but it was dishonoured. Identify the correct entry in sudhir’s books </li></ul><ul><ul><ul><li>Debit Madhur credit bank a/c </li></ul></ul></ul><ul><ul><ul><li>Debit BR a/c credit Madhur a/c </li></ul></ul></ul><ul><ul><ul><li>Debit Madhur a/c credit BR a/c </li></ul></ul></ul><ul><ul><ul><li>No entry as bill is discounted with the bank </li></ul></ul></ul>
  43. 43. EXAMPLES <ul><li>Trichur’s acceptance is endorsed to Tayyab and noting charges of Rs.50 were paid, but bill was dishonoured. Identify the correct entry in sudhir’s books </li></ul><ul><ul><ul><li>Debit Trichur a/c by Rs.3050 and credit Tayyab a/c by Rs.3050 </li></ul></ul></ul><ul><ul><ul><li>Debit BR A/c, Debit Noting charges Rs.50 and credit Tayyab a/c Rs.3050 </li></ul></ul></ul><ul><ul><ul><li>Debit Tayyab a/c Rs.3050 and credit Bank a/c Rs.3050 </li></ul></ul></ul><ul><ul><ul><li>No entry as bill is endorsed to Tayyab </li></ul></ul></ul><ul><li>Nupur’s acceptance was sent to bank for collection, but it was dishonoured. Identify the correct entry in sudhir’s books </li></ul><ul><ul><ul><li>Debit Nupur credit BR a/c </li></ul></ul></ul><ul><ul><ul><li>Debit Nupur a/c credit Bill sent to Bank for collection a/c </li></ul></ul></ul><ul><ul><ul><li>Debit Bill sent to bank for collection a/c credit Bank a/c </li></ul></ul></ul><ul><ul><ul><li>No entry as bill is sent to bank for collection </li></ul></ul></ul>
  44. 44. EXAMPLES <ul><li>Choose the wrong pair </li></ul><ul><ul><ul><li>There is no difference in appearance between trade bill and accommodation bill </li></ul></ul></ul><ul><ul><ul><li>Both the parties must accept the accommodation bill </li></ul></ul></ul><ul><ul><ul><li>Accommodation bill is drawn and accepted without any consideration </li></ul></ul></ul><ul><ul><ul><li>The purpose of any accommodation bill is to provide temporary finance </li></ul></ul></ul>
  45. 45. EXAMPLES <ul><li>A trainee in a/c dept. has put up following four entries for accounting for closing stock of joint venture . One of the entries is correct. Select the same </li></ul><ul><ul><ul><ul><li>Debit bank a/c –credit joint venture a/c </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Debit stock credit joint venture a/c </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Debit co-venturer a/c credit joint venture </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Debit joint venture credit stock </li></ul></ul></ul></ul>
  46. 46. EXAMPLES <ul><li>Select the wrong statement in respect of joint </li></ul><ul><ul><ul><ul><li>It is temporary partnership </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Nature of co-venturer’s liability is limited </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Balancing figure of Joint venture a/c is either profit or loss on joint venture </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Joint bank account is the account in which banking transactions are transacted by co-venturers </li></ul></ul></ul></ul>
  47. 47. EXAMPLES <ul><li>Select the wrong pair in respect of joint </li></ul><ul><ul><ul><ul><li>Joint venture ^^ real account </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Joint bank account ^^ personal a/c </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Unsold stock taken over by coventurer ^^ credit joint venture a/c </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Credit balance in Joint venture a/c ^^ profit on joint venture a/c </li></ul></ul></ul></ul>
  48. 48. EXAMPLES <ul><li>Select the false statement </li></ul><ul><ul><ul><ul><li>Amount spent on uniform of workers is a revenue expenditure </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Expenses of whitewashing of a factory building is a revenue expenditure </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Cost of stores consumed in manufacturing machinery for installation in owned factory is a revenue expenditure </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Wages paid for construction of the extension of the factory building is a capital expenditure </li></ul></ul></ul></ul>
  49. 49. . <ul><li>The following financial statement is not prepared by a non-trading concerns </li></ul><ul><ul><ul><li>Receipt and Payment account </li></ul></ul></ul><ul><ul><ul><li>Income & Expenditure Account </li></ul></ul></ul><ul><ul><ul><li>P rofit & Loss Account </li></ul></ul></ul><ul><ul><ul><li>Balance Sheet </li></ul></ul></ul><ul><li>Receipts and Payments account is </li></ul><ul><ul><li>R eal account </li></ul></ul><ul><ul><li>Personal account </li></ul></ul><ul><ul><li>Nominal account </li></ul></ul>
  50. 50. EXAMPLES <ul><li>Incurring of expenditure of Rs.100000 on dismantling, removing and reinstalling plant & machinery is a ----- </li></ul><ul><ul><ul><ul><li>Capital expenditure </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Revenue expenses </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Deferred revenue expenditure </li></ul></ul></ul></ul><ul><ul><ul><ul><li>None of the above </li></ul></ul></ul></ul>
  51. 51. EXAMPLES <ul><li>RVY sport club has given following information regarding subscription income. Ascertain income for Current year </li></ul><ul><ul><li>Subscription received in cash Rs.5000 during Apr04 to Mar.05 </li></ul></ul><ul><ul><li>Subscription outstanding on 31.3.05 Rs.100 </li></ul></ul><ul><ul><li>Subscription outstanding on 31.3.04 Rs.200 </li></ul></ul><ul><ul><li>Subscription received in advance during 04-05 Rs.300 </li></ul></ul><ul><ul><li>Subscription received in advance during 03-04 Rs.400 </li></ul></ul><ul><ul><li>Indicate from the following the exact amount of subscription to be credited to Income & Expenditure Account </li></ul></ul><ul><ul><ul><li>Rs.5800 </li></ul></ul></ul><ul><ul><ul><li>Rs.6000 </li></ul></ul></ul><ul><ul><ul><li>Rs.5200 </li></ul></ul></ul><ul><ul><ul><li>Rs.5600 </li></ul></ul></ul>
  52. 52. Examples <ul><li>If </li></ul><ul><li>A= Income accrued during CY (figure from I & E a/c) </li></ul><ul><li>B= outstanding for CY </li></ul><ul><li>C= outstanding for PY </li></ul><ul><li>D=advance for CY </li></ul><ul><li>E= advance for PY </li></ul><ul><li>Find the income received in cash during cy to be shown in receipt & payment a/c </li></ul><ul><ul><li>A + B + C + D – E </li></ul></ul><ul><ul><li>A – B + C + D – E </li></ul></ul><ul><ul><li>A + B –C - D + E </li></ul></ul><ul><ul><li>A – B + C – D + E </li></ul></ul>
  53. 53. EXAMPLES <ul><li>Select the wrong statement in respect of lease accounting </li></ul><ul><ul><ul><li>Lease Terminal Adjustment a/c is carried forward from year to year </li></ul></ul></ul><ul><ul><ul><li>If Lease Terminal Adjustment a/c shows credit balance it is shown at liability side </li></ul></ul></ul><ul><ul><ul><li>If Lease Terminal Adjustment a/c shows debit balance it is debited to Profit and Loss account </li></ul></ul></ul><ul><ul><ul><li>Lease Terminal Adjustment a/c balance is not carried forward to next year but written off to Profit and Loss account </li></ul></ul></ul>
  54. 54. EXAMPLES <ul><li>Select the wrong statement in respect of lease accounting </li></ul><ul><ul><ul><li>If lease charges are Rs.31439 and annual depreciation is Rs. 24000, the correct entry would be- Debit Lease equalisation a/c by Rs.7439 and credit Lease Terminal a/c by Rs.7439 </li></ul></ul></ul><ul><ul><ul><li>If lease charges are Rs.14228 and annual depreciation is Rs. 14400, the correct entry would be- Debit Lease equalisation a/c by Rs.152 and credit Lease Terminal a/c by Rs.152 </li></ul></ul></ul><ul><ul><ul><li>If lease charges are Rs.7152 and annual depreciation is Rs. 8640, the correct entry would be- Debit Lease Terminal a/c by Rs.1488 and credit Lease Equalisation a/c by Rs.1488 </li></ul></ul></ul><ul><ul><ul><li>If Desai is a lessor and he purchases an asset for Rs.100000 for the purpose of giving the same on lease . The correct entry will be Debit Asset Rs.100000 and credit Bank Rs.100000 </li></ul></ul></ul>

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