1- Define the following: 5x4

i) GOING CONCERN CONCEPT.

ii) RENEWAL OF BILL OF EXCHANGE.
iii) DEPRECIATION.
iv) CONTINGENT ASSETS.
v) DEFERRED REVENUE EXPENDITURE.

2- Raza Ltd. maintains a current account with the Muslim Commercial Bank. On 31st March, 2010, the bank column of its
cash book showed a debit balance of Rs. 1,54,300. However, the bank statement showed a different balance as on that
date. The following were the reasons for the difference: 20
Rs
i) Cheques deposited, but not yet credited by the bank. 75,450
ii) Cheques issued, but not yet presented for payment. 80,760
iii) Bank charges not yet recorded in the cash book. 1,135
iv) Cheques received by the bank directly from trade debtors. 1,35,200
v) Insurance premium paid by the bank as per standing instructions,
but not yet recorded in the cash book. 15,400
vi) Dividend collected by the bank, but not yet recorded in the cash book. 1,000
Required: Find out the balance as per the bank statement as on 31st March, 2010.

3- The following is the summary of the cash transactions of a literary society for the year ended 31st March, 2010: 20
Rs. Rs.
Cash balances on 1st April, 2009 31,900 Rent and rates 16,800
Entrance fees 25,500 Wages 24,500
Subscriptions 160,000 Lighting 7,200
Donations 16,500 Lecture fees 43,500
Life membership subscription 25,000 Books 21,300
Interest on fixed deposit 1,200 Office expenses 45,000
st
Profit from entertainment 4,400 Fixed deposit @6% p.a on 1 Oct, 2009 80,000
Cash at Bank on 31st March, 2010 24,200
Cash in hand on 31st March, 2010 2,000
2,65,500 2,64,500
At the beginning of the year, the society possessed books worth Rs. 2,00,000 and furniture valued at Rs. 85,000. Ordinary
subscriptions in arrear at the beginning of the year amounted to Rs. 3,500 and at the end of year Rs. 4,500. Six months rent,
Rs. 6,000 was due both at the beginning and at the end of the year. Provide Rs. 5,000 as depreciation on furniture and Rs.
11,300 as depreciation on books. Prepare the society’s income and expenditure account for the year ended 31st March, 2010
and its balance sheet as on that date.

4- Define capital expenditure and explain the rules on the basis of which capital expenditures are identified and
distinguished from revenue expenditure? 20

5- Pass journal entries to rectify the following errors: 20

i) The total of returns inwards book has been cast Rs. 4,000 short.
ii) The purchase of an office table costing Rs. 12,000 has been passed through the purchases day book.
iii) A sum of Rs. 15,000 paid to workman for wages for making showcases has been charged to wages account.
iv) A purchase of Rs. 2,680 has been posted to the creditor’s account as Rs. 600.
v) A cheque of Rs. 8,000 received from Y has been dishonored; it has been posted to the debit of allowances
account.

(Continued Overleaf)
6- From the following information prepare Profit and Loss Account for the year ended 30th September, 2010 and Balance
Sheet as on that date of Nadir Sons, Gujrat. 20
Balance Rs. Liabilities and Equities Rs.
Capital 1,20,000 Audit fee 2,000
Creditors 15,200 Office expense 2,000
Bills Payable 1,000 Interest Paid 1,700
Unexpired Commission 2,300 Bad Debts 1,400
Sales 6,24,000 Salaries 13,000
Discount received 2,100 Repairs and Renewals 1,800
Stock 1,01,000 Printing and stationary 1,400
Purchases 5,18,000 Plant and Machinery 53,000
Carriage inwards 8,900 Building 35,000
Discount Allowed 750 Tools 8,650
Book Debts 16,000

Adjustments:
i) Closing stock Rs. 1,20,000;
ii) Plant and Machinery to be depreciated at 10%, Building at 5% and Tools at 15%;
iii) Reserve against Bad Debts is to be created at 5% of the Book Debts.

7- On 1st November, 2012, Mr. A sold goods to Mr. B for Rs. 2,000 on credit basis. A then draws and B accepted a bill at
two months. A sent the bill to his banker for collection. On the due date the bill was duly presented to the acceptor but
he could not meet his acceptance. The bank paid Rs. 50 noting charges on behalf of A. The bank also charges Rs. 25 as
collection charges.
Pass Journal entries in the books of A and prepare B’s account in the books of A to find the balance payable
by B to A. 20

8- Consider with reasons whether the following items are Capital or Revenue nature: 20
a. Cost of air conditioning the office;
b. Purchase of stationary;
c. Extension of existing seating arrangement which can enhance seating capacity;
d. Repair to Building;
e. Repair to car second hand purchased;
f. Cost of acquiring a Goodwill;
g. Loan given by an financial institution resulted in default;
h. Annual repair expenses of premises paid.

9- Following is the Balance Sheet of A, B and C who were equal partners on 31st Dec, 2012.
Assets Rs. Liabilities & Equities Rs.
Cash 3,000 Creditors 46,500
Debtors 54,000 Capital:
Stock 57,000 A 84,000
Furniture 12,000 B 63,000
Building 97,500 C 30,000
They agree to take D as partner with one forth share in profit on the terms that:
i) He will bring Rs. 45,000 as Goodwill and Rs. 75,000 as Capital;
ii) Stock and Furniture is to be depreciated at 10%;
iii) The value of building to be appreciated to Rs. 135,000;
iv) A provision of 5% is to be created for provision for bad and doubtful debts.
You are required to pass Journal Entries at the time of admission of D and prepare Balance Sheet of new firm. 20

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