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BCOC-131: Financial Accounting

BCOC-131: Financial Accounting

IGNOU Solved Assignment Solution for 2021-22

If you are looking for BCOC-131 IGNOU Solved Assignment solution for the subject Financial Accounting, you have come to the right place. BCOC-131 solution on this page applies to 2021-22 session students studying in BCOMG, BAVMSME courses of IGNOU.

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Assignment Solution

Assignment Code: BCOC-131/TMA/2021-22

Course Code: BCOC-131

Assignment Name: Financial Accounting

Year: 2021-2022

Verification Status: Verified by Professor

 

Maximum Marks: 100

Note: Attempt all the Sections.

 


SECTION-A

 


Attempt all the questions. Each question carries 10 marks. (5x10=50)

 

Q1. Journalize the following transactions, Post them into ledger and prepare a Trial balance.

 

a) Business started with a capital of Rs 5,00,000

b) Furniture purchased from Jai sons on credit Rs. 2,00,000

c) Payment made to Silky brothers Rs. 10,000

d) Commission Received from Haryana Automobiles Rs. 8,000

e) Goods purchased from Ramlal and Sons Rs. 6,00,000

f) Interest paid to Ghanshyam and Sons Rs. 6,000

 

Ans)

Journal Entries

In the Books of _____



Q2. On 1st April 2016, Chaudhary Harpal Singh purchased a Tractor of the cash price of Rs. 2,20,000 on hire-purchase system from Escorts Ltd. Rs. 20,000 were paid immediately and the balance in 4 annual instalments of Rs. 50,000 each with interest at 8% per annum. The depreciation is to be charged at 10% p.a. on written down value method. Harpal Singh paid 2 instalments and failed to pay the third instalment. Escorts Ltd. took away the tractor by paying him Rs. 90,000 in cash. Make necessary ledger accounts in the books of Harpal Singh. Books are closed on 31st March every year.

Ans)

Ledger Accounts

In the Books of Harpal Singh (Vendee)


Q3. Oswal Mills Barnala consigned 5000 kg of vanaspati ghee to Rajendra Dealers of Panipat. Each kg. Ghee costs Rs. 8. Oswal Mills paid Rs. 50 for carriage, Rs. 250 for freight and Rs. 200 for insurance in transit. During transit 500 kg. Ghee was accidentally destroyed for which insurance company paid directly to the consignor Rs. 2500 in full settlement of the claim. After 3 month from the date of consignment of goods to Panipat, Rajendra Dealers reported that 1500 kg. Ghee was sold at Rs. 9.5 per kg. The expenses were: On Godown Rent Rs. 500, On Salesman Salary Rs. 700. Rajendra dealers are entitled to a commission of 5% on sales. Due to leakage, Rajendra Dealers also reported a loss of 20 kg. Ghee. Prepare consignment account and abnormal loss account in the books of the Consignor.

Ans)


Working Notes:

 

Consignor’s expenses on 5000 kgs ghee amounts to Rs. 500. It comes to 0.10 per kgs. The cost of ghee lost in transit will be computed at Rs. 8.10 per kg.

 

Value of Closing Stock

Closing Stock in hand = 5,000 - 500 - 1,550 - 20

                                   = 2,980 kgs.

Cost per kg of Stock = 4,500 x 8 + 0.10 x 4,500 / 4,500 - 20

                                 = 36,450 / 4,480

                                 = 8.136

 

Value of Stock = 2,980 x 8.136

                        = 24245.75

 

Q4. An Accountant finds the difference in the Trial Balance amounting to Rs. 210 and put it in the Suspense Account. Later on he detects the following errors. Rectify the errors and prepare the suspense Account.

 

a) Goods purchased from Ram Rs. 700 were passed through sales book.

b) Returned Goods to Shyam Rs. 1500 was passed through returns inward book.

c) An item of Rs. 450 relating to prepaid rent account was omitted to brought forward.

d) An item of Rs. 120 in respect of purchase returns, instead of being recorded in Returns Outward book has been wrongly entered in the purchase book and posted therefrom to the debit of personal account.

e) Amount payable to Subhash for repairs done to Radio Rs. 180 and a new Radio supplied for Rs. 1920 were entered in the Purchase book as Rs. 2000.

Ans)

Journal Entries

 

Q5. Define Computerized Accounting and distinguish between manual and computerized accounting system.

Ans) A computerised accounting system is an accounting information system that processes financial transactions and events in accordance with Generally Accepted Accounting Principles (GAAP) in order to provide reports that meet the needs of the users. There are two aspects to every accounting system, whether manual or computerised. To begin, it must adhere to a set of well-defined notions known as accounting principles. Another advantage is that there is a user-defined structure for maintaining data and producing reports.

 

Difference between Manual Accounting System and Computerized Accounting

 

Data Recording: In a manual accounting system, financial transactions are recorded in books of original entries, whereas in a computerised accounting system, the data content of such transactions is saved in a well-designed accounting database.

 

Data Classification and Processing: Transactions recorded in the books of initial entry are further categorised in a manual accounting system by posting into ledger accounting. As a result, transaction data is duplicated. In a computerised accounting system, there is no such data duplication to generate transaction categorisation.

 

Data Summarization and Updating: In a manual accounting system, the transactions are summarised to provide a trial balance by determining the balances of various accounts. In a computerised accounting system, the formation of ledger accounts is not a need for establishing a trial balance because it is done automatically.

 

Adjusting Entries: In a manual accounting system, entries are made according to the cost-to-revenue concept. These entries are used to match the accounting period's expenses with the revenues generated. However, journal vouchers are generated and maintained in computerised accounting to follow the concept of cost matching revenue, but there is nothing like passing adjusting entries for errors and correction, save for correcting a principle error by sending the wrong voucher.

 

Cost of Reporting: The cost of creating reports other than the basic financial statements is considerable with a manual approach. The cost of creating specific management reports in computerised systems, on the other hand, is usually fairly low.

 

Financial Statements: In a manual accounting system, financial statement preparation presupposes the presence of a trial balance. However, there is no such requirement with computerised accounting. The preparation of financial statements is not dependent on the preparation of the trial balance because financial statements can be created directly from previously saved transaction data.

 

 

SECTION-B

 


Attempt all the questions. Each question carries 5 marks. (6x5=30)

 

Q6. State the essentials features of a joint Venture.

Ans) A joint venture is when two or more people work together on a single project. It's a type of cooperation that's limited to a single project. It's the same as a partnership, with the distinction that it's for a business that's about to close. A firm name is not usually utilised because the business will be terminated after the effort is completed. As a result, the joint venture resembles a loose partnership with no fixed name.

 

Essential Features of a Joint Venture

  1. It's a unique collaboration.

  2. Because termination is certain, it does not imply a continued partnership.

  3. After the venture is ended, the company is dissolved.

  4. Many accounting concepts, such as the going concern concept, are not relevant.

  5. It's quite easy to figure out how much money you have.

  6. A firm name is not usually utilised because the business will be terminated after the effort is completed.

 

Q7. What are the main causes of disagreement of a Trial Balance? Briefly explain.

Ans) A trial balance is a statement prepared on a certain date to verify the arithmetical accuracy of a set of books of accounts. Both sides of the trial balance agree, indicating that the books of accounts are arithmetically correct. However, there are situations when both sides of the trial balance do not agree. There are a variety of reasons for trial balance dispute. The following are a few of them:

 

Errors of Omission

An omission error occurs when a transaction is not fully or partially documented in the books. It could be due to a failure to enter a transaction in the original entry books or a failure to post a transaction from the original entry books to the relevant account in the ledger. When an omission occurs in the journal, it has no effect on the trial balance, but when an omission occurs in one of the ledger accounts, the trial balance is thrown off.

 

Errors of Commission

These errors occur when transactions are recorded in the journal, ledger, and/or subsidiary books. These inaccuracies may or may not affect the trial balance agreement. Some mistakes of commission have an impact on both sides of the trial balance, while others have no impact.

 

Trial Balance Errors

  1. During the process of preparing the trial balance, errors may arise. These may be:

  2. The ledger balance was not recorded in the trial balance.

  3. In trial balance, a debit balance is written in the credit column, and vice versa.

  4. The amount of a ledger balance is incorrectly recorded in the trial balance, for example, the salary account balance of Rs. 625 is recorded in the trial balance as Rs. 652.

  5. Two columns of the trial balance were totalled incorrectly.

 

Q8. State the factors affecting the amount of depreciation.

Ans) The factors affecting the amount of depreciation are:

  1. Cost of Asset: The original cost of an asset, including any expenses incurred at the time of purchase, is the basis for calculating depreciation.

  2. Working Life of the Assets is Estimated to Be: When estimating the amount of depreciation, any asset's useful life must be taken into account. The amount of depreciation is determined using the SLM technique by dividing the cost of assets less scrap value by the expected working life of the assets.

  3. Estimated Salvage/Residual/Scarp Value: The amount of depreciation is calculated by subtracting the estimated salvage/residual/scarp value from the asset's cost.

  4. Provision for Repairs: When calculating the amount of depreciation, the amount of provision for repairs and renewals required to keep the asset in good working order is also taken into account.

  5. Addition and Subtraction: Any addition to the asset or sale of a portion of the asset during the asset's life is taken into account for computing depreciation.

  6. Changes in Technology can create a significant depreciation in the value of an asset in today's technological world. As a result, obsolescence is a significant component in determining the amount of depreciation.

 

Q9. Explain the uses of post-dated vouchers.

Ans) The document generated for the purpose of recording business transactions in the books of accounts is referred to as a voucher. Normally, vouchers are created after transactions have occurred. However, many transactions, such as loan EMIs and rent, are regular in nature and paid monthly. Tally ERP 9 has a feature called post-dated vouchers that can be used for such transactions. Post-dated vouchers are ones that are entered into tally today but will be updated in the ledger at a later date. If I make a transaction on 1-4-2020 and the voucher date is 15-4-2020, for example, the voucher will be updated in the ledger on 15-4-2020. This function is particularly beneficial for documenting set monthly payment transactions, and it also helps to prevent omission errors to some extent.

 

Q10. What are the different types of branches? Explain the need for branch accounting.

Ans) Types of Branch: Branches may be classified into three broad categories:

  1. Dependent Branch or Branch that does not keep a complete accounting system.

  2. Branch that is self-contained or that maintains a complete accounting system.

  3. Branches in other countries.

 

Need of Branch Accounting


Branch accounting system is necessary because of the following reasons:

  1. Each branch's profit or loss can be determined.

  2. They aid in the management of branches.

  3. On the basis of head office and branch accounting periods, the actual financial status of the business can be determined.

  4. The commodities and financial requirements of the branch can be estimated.

  5. On the basis of branch accounts, suggestions for improving the branch's efficiency can be sent.

  6. Because of the Account to Companies Act of 2013, they assist in meeting legal requirements.


 

Q11. Briefly explain the benefits of Accounting Standards.

Ans) Accounting standards are intended to outline accounting concepts, valuation methodologies, and procedures for applying accounting principles in the creation and presentation of financial statements in order to provide an accurate and fair picture. The accountant gains the following advantages by establishing accounting standards:

  1. Accounting treatments used to construct financial statements are reduced to a reasonable level or eliminated entirely by standards.

  2. There are few instances where vital information does not have to be shared by law. Standards may need more information than is necessary by legislation.

  3. Accounting standards would, to a limited extent, simplify comparison of financial statements of companies located in different parts of the world, as well as between companies located inside the same country. It should be emphasised, however, that variances in institutions, cultures, and legal systems between countries result in differences in accounting standards implemented in different countries.

 

 

SECTION-C

 


Attempt all the questions. Each question carries 10 marks. (2x10=20)

 

Q12. Distinguish between the following:

 

a) Cost of Goods Sold and Cost of Goods Produced

Ans) Difference between cost of goods sold and cost of goods produced:

 

a) The cost of goods sold, also known as cost of sales, is the amount spent on things that the company actually sells during the period. The following two formulas are used to calculate it:

Cost of goods sold = Net sales - Gross profit or

Cost of goods sold = Opening stock + Net purchases + Direct expenses - Closing stock

In some circumstances, indirect expenses known as overheads are included in the cost of goods sold calculation. Only finished products stocks are taken into account when computing cost of goods sold.

 

b) The cost of items produced, on the other hand, is the amount spent on goods that the company actually produced during the period. It's calculated as follows:

Opening stock of raw materials + Net Purchase of raw materials + All manufacturing expenses - closing stock of raw materials.

Only the stock of raw materials is taken into account when determining the cost of things produced.

 

b) Profit and Loss Account and Balance Sheet

Ans) Difference between Profit & loss account and Balance Sheet

 

Q13. Write short notes on the following:

 

a) Systems of Book-keeping

Ans) Bookkeeping is the process of keeping track of financial data linked to a company's operations in a systematic and ordered manner. In our country, there are essentially two bookkeeping methods that are used:

 

Single Entry: It's an insufficient system for keeping track of commercial transactions. Only the cash book and personal accounts of debtors and creditors are kept by the company. As a result, complete transaction recording and trail balance preparation are not possible. Small businesses are the most common users of this system. This technology is simple to use and less expensive to maintain.

 

Double Entry: The impacts of transactions and other events are recorded in at least two accounts with equal debits and credits in a double entry accounting system. This system keeps track of all accounts, including personal, real, and nominal accounts. It's a comprehensive method for keeping track of company transactions. Large organisations, such as corporations, use this structure. The double entry system begins with the recording of company transactions and finishes with the preparation of final accounts and financial statement reporting to users.

 

b) International Financial Reporting Standards (IFRS)

Ans) The International Financial Reporting Rules (IFRS) are a set of international accounting standards that specify how specific types of transactions and other events should be recorded in financial statements. The International Financial Reporting Standards (IFRS) are usually principles-based standards that aim to avoid a rule-book mentality. The preparer and auditor must use their judgement when applying accounting rules based on the economic substance of transactions when using IFRS. The International Accounting Standards Board (IASB) publishes the International Financial Reporting Standards (IFRS) (IASB).

Only thirteen (13) IFRS were issued by the IASB, and they are as follows:

  1. IFRS 1 - First-time adoption of International Financial Reporting Standards

  2. IFRS 2 - Share-based payment

  3. IFRS 3 - Business combinations

  4. IFRS 4 - Insurance contracts

  5. IFRS 5 - Non-current assets held for sale and discontinued operations

  6. IFRS 6 - Exploration for and evaluation of mineral resources

  7. IFRS 7 - Financial instruments: disclosures

  8. IFRS 8 - Operating segments

  9. IFRS 9 - Financial instruments

  10. IFRS 10 - Consolidated financial statements

  11. IFRS 11- Joint arrangements

  12. IFRS 12- Disclosure of interests in other entities

  13. IFRS 13- Fair Value measurement

 

The purpose of the International Financial Reporting Standards (IFRS) is to create a global framework for how public firms prepare and present financial accounts. Rather than establishing regulations for industry-specific reporting, IFRS provides generic advice for the compilation of financial statements.

 

For major corporations with subsidiaries in several countries, having a worldwide standard is very vital. Adopting a single set of global standards will make accounting procedures easier by allowing a corporation to adopt a single reporting language across the board. A single standard will also give investors and auditors a complete picture of the financial situation.

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