Financial Accounting

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NMIMS Global Access

School for Continuing Education (NGA-SCE)

Course: Financial Accounting

Internal Assignment Applicable for December 2015 Examination

Assignment Marks: 30

Q1” Trial Balance are prepared to check the arithmetical accuracy of the posting in ledger. “Do you agree? Explain its necessary features & any 5 important steps to be considered while making Trial Balance.

Answer:Trial balance may be defined as an informal accounting schedule or statement that lists the ledger account balances at a point in time compares the total of debit balance with the total of credit balance.

The fundamental principle of double entry system is that at any stage, the total of debits must be equal to the total of credits. If entries are recorded and posted correctly, the ledger will reflect equal debits and credits, and the total credit balance will then

Q2] From below Trial Balance of Ameya Auto Parts Pvt. Ltd. for 31-12-2007

Particulars		Debit (Rs)				Credit (Rs)
Ameya Industry Capital				60,000
Cash in Hand				1500
Purchases				80,000
Sales				101,000
Return Inward				1000
Bank OD			5000
Office Salaries			6000
Insurance			500
Sundry Debtors			40,000
Sundry Creditors			50,000
Commission			1000
Furniture			8000
Building			60,000
Stock (1.1.2007)			10,000
Drawings			3,000
Bills Receivable			8,000
Bills Payable			4,000
Carriage Inward			800
Advertisement			1200
Repairs			1000
TOTAL AMOUNT	221,000				221,000

Adjustments :

# Closing Stock Rs. 25000/- at 31/12/2007.

# O/S Salary 1000/-

# Depreciation Furniture & Building @5%

# Insurance Prepaid – Rs. 100/-

# Create RDD at 5%

Answer:

To open stock                    10,000

To purchase                       80,000

(-) Seller                               80,000

To carriage                          800

To Gross profit                  34000

                                                ----------------

                                                125000

                                                ----------------

Q3) How are the expenditure related to fixed assets treated i.e., as Capital Expenditure or Revenue Expenditure as per “AS-10 – Accounting for Fixed Assets”?

Answer:Many times, we see that many companies which are in startup stage i.e. during construction period and before it is ready for commencing commercial operations do not prepare Profit and Loss Account for the year / period and the total expenditure incurred during such year / period is kept under the head "Pre-Operative Expenditure, pending allocation" - Whether this treatment is correct as per Companies Act, 1956 and whether it complies with the Accounting Standards and Guidance notes issued by the ICAI?

Let us have a glance on the various relevant statutory provisions relating to the same.

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