F-2,Block, Amity CampusSec-125, Nodia (UP)

India 201303

ASSIGNMENTSPROGRAM:SEMESTER-ISubject Name : FINANCIAL ACCOUNTINGStudy COUNTRY : TANZANIAPermanent Enrollment Number (PEN) :Roll Number : MFC001392014Student Name : YAHYA KIYABO

INSTRUCTIONSa) Students are required to submit all three assignment sets.

ASSIGNMENT DETAILS MARKSAssignment A Five Subjective Questions 10Assignment B Three Subjective Questions + Case

Study10

Assignment C 45 Objective Questions 10

b) Total weightage given to these assignments is 30%. OR 30 Marks

c) All assignments are to be completed as typed in word/pdf.d) All questions are required to be attempted.e) All the three assignments are to be completed by due dates

(specified from time to time) and need to be submitted for evaluation by Amity University.

f) The evaluated assignment marks will be made available withinsix weeks. Thereafter, these will be destroyed at the end ofeach semester.

g) The students have to attached a scan signature in the form.

Signature : _________________________________Date : 15th January 2015

( √ ) Tick mark in front of the assignments submittedAssignment

‘A’√ Assignment

‘B’√ Assignment

‘C’√

Financial Accounting

ASSIGNMENT ‘A’

Q 1. Define Accounting. How does it differ from book-keeping?

Accounting involves recording, classifying and summarizingof past events and transactions of financial nature, with aview to enabling the user of accounts to interpret theresulting summary.The American Institute of Certified Public Accountantsdefines accounting as “the art of recording, classifyingand summarizing in a significant manner and in terms ofmoney transactions and events which are, in part at least,of a financial character, and interpreting the resultsthereof”.This definition brings out the following as attributes ofaccounting:-

1. Events and transactions of a financial nature arerecorded while the events of a non-financial naturecannot be recorded.

2. The record should reflect the importance of thetransactions so recorded both individually andcollectively, which includes summarization, therebymaking it amenable to analysis.

3. The users of the financial statements should be ableto obtain the message encompassed in such financialstatements.

Book-keeping: is the part of accounting & is concernedwith record keeping or maintaining of books of accountingwhich is often routine & clerical in nature.Accounting is broader in scope than bookkeeping, whichinvolves analysis and judgment at different stages such asrecording of transactions, classification, summarizationand interpretation.

Accounting differs from Book-keeping in the following ways:-

Basis ofDistinction

Book-keeping Accounting

1 Scope It involvesidentification,measurement,recording &classification oftransaction

In addition itinvolves summarizingclassifiedtransactions.Analyzing,interpreting &communicating thesame.

2 Stage It’s a primarystage

It’s a secondarystage, starts wherebook-keeping ends

3 Basic Objective To maintainsystematicrecords

To ascertain netresults of operations& financial positionof the co

4 Who Performs Performed byjunior staff

By senior staff

5 Knowledge level Not required a It needs a high level

high level ofknowledge

of knowledge

6 AnalyticalSkill

Not required Required

7 Nature of Job Routine &clerical

Analytical

8 Supervision &Checking

Supervised by anaccountant

Whereas its work isnot supervised by abook-keeper

Q 2 What is basic accounting equation?

Accounting Equation:Under the duality concept the sources of funds must alwaysequal to uses of funds and from this equality was derived.The fundamental accounting equation can be termed as:-

Assets = Capital + LiabilitiesWhere assets refer to resources which are owned bybusiness enterprises, liabilities are debts payable toparties external to business and capital means the amountpayable to owner of the business enterprise.

Q 3 What is Journalizing? Give a format of Journal & brieflyexplain its content.

A journalizing is a process of recording transactions in a chronological order in the book of accounts.

The journal contains of date, particulars, ledger folio, debit amount and credit amount, the format of journal can beexplained as follow:-

Date Particulars L.F. Debit Rs.

Credit Rs.

The date on which transactions have taken place is enteredin the date column. Two aspects of the transaction arerecorded in the particulars column. A brief description ofthe transaction is also given in the particulars column.The Ledger Folio (L.F.) column is meant for writing thenumber of the page in the ledger in which the particulartransaction is entered. The amount to be debited isentered in the debit column and the amount to be creditedis entered in the credit column.

Q 4 what are the advantages of special Journal & list them.

Special journal refer to journals meant for specific transactions of similar nature. Special journals are also known as subsidiary books or day books.

The special journal consists of cash journal, goods journal,bills journal and proper journal.

The following are the advantages of special journals:- Facilitates division of work Permits the installation of internal check system Permits the use of specialized skills and Time & labour saving in journalizing & posting

Q 5 State the reasons for the difference between the cash book balance & pass book balance.

The following are the reasons for difference between book balance and passbook:-

Cheques issued by the business to its suppliers or other parties may not have been presented for payment.

Cheques received from customers and deposited may not have been collected by the banker.

Deposits may have been directly made by the customers into the bank account of the enterprise.

Collection charges, service charges and interest onoverdraft are charged by the banker. The business can ascertain the exact amount of charges and record them in the Cashbook only after the receipt of the bank statement.

Interest credited by bank for the balance maintained with it and any other income such as interest on securities, dividend, etc. collected bythe bank on behalf of the business can be ascertained only from the bank statement.

Wrong entries made by the business in the Cashbook or errors committed by the bank in its ledger.

Omission of entries in the two sets of books. Dishonor of customer’s cheques deposited in the

bank account

ASSIGNMENT ‘B’

Q1 Define depreciation. Differentiate, with suitable example, between Diminishing Balance Method & Straight Line Method of charging depreciation.

Depreciation is the acquisition cost of an asset (less theexpected salvage value) spread over the economic life ofthat asset. The purpose of charging depreciation over theeconomic life of the asset is to match the cost of theasset over the period for which revenue is earned by usingthe asset.

The following are the difference between diminishingbalance method and straight Line method of chargingdepreciation:-

Diminishing Balance Method Under this method the depreciation charged in the variousyears will not be equal over the useful life of the asset.This is because the depreciation charge every year iscalculated as a percentage of the outstanding balance of theasset as at the beginning of that particular year and not onthe original cost of the asset.While preparing final accounts, if depreciation is shown asan item under adjustments, calculate the amount ofdepreciation and charge it off to profit and loss account bydebiting P & L account and crediting depreciation; showdepreciation as a deduction from the asset value on theassets side of Balance Sheet.If depreciation is shown in the trial balance, then, theamount of depreciation should be charged to only P & Laccount. The percentage of depreciation to be charged under thedeclining balance method can be determined as under r = 1– (or) 1 – (s/c)1/n

where,

r = rate of depreciation under the written down valuemethod n = estimated useful life of the asset in years s = residual value or scrap value of the asset c = original cost of the asset.

Please note that if the residual or scrap value of an assetis zero, the rate of depreciation cannot be determined usingthe above formula.For example,Original Cost of the Machine- Rs.1,00,000 Estimated Scrap Value - Rs.30,000 Useful Life - 6 years The calculation of depreciation for each of the years wouldbe as follows:

r = 1 – (30,000/1,00,000)1/6 = 18%

At the end of the 1st year, the depreciation is calculatedby applying the rate to the original cost. Then the writtendown value is arrived at by deducting the depreciation soarrived at from the original cost. At the end of the 2ndyear, the depreciation rate is applied to the written downvalue at the end of the 1st year. This depreciation amountis again deducted to arrive at the written down value at theend of the 2nd year. In the above mentioned asset the depreciation calculations will be asfollows:-

Year Calculation ofdepn.

Depreciation Written downvalue

1 1,00,000 x 18% 18,000 82,0002 82,000 x 18% 14,760 67,2403 67,240 x 18% 12,103 55,1374 55,137 x 18% 9,925 45,2125 45,212 x 18% 8,138 37,0746 37,074 x 18% 6,673 30,401(The small difference between the estimated scrap value andthe written down value at the end of the sixth year is dueto approximation of the depreciation rate)

Straight Line Method Under the straight-line method, the net acquisition costor construction cost is charged off in equal proportion

during the useful economic life and the quantum of thedepreciation is arrived at by dividing the net acquisitionor construction cost by the number of years of usefuleconomic life. The net acquisition or construction cost iscalculated by deducting salvage value from the acquisitionor construction cost.

Depreciation =

For example, if the cost of an asset is Rs.1,00,000, theexpected salvage value is Rs.20,000 and the estimateduseful life is 8 years, the annual depreciation would be= Rs.10,000 or 10% per annum.This method has the following advantages:

1. the amount of depreciation and the rate does notchange over the useful economic life of the asset;

2. the calculation is relatively simple; and 3. it realistically matches cost and revenue.

Q2 Define Bills of Exchange and explain the parties involvedin it.

The Negotiable Instruments Act defines a bill of exchange as“an instrument in writing, containing an unconditionalorder, signed by the maker, directing a certain person topay a certain sum of money only to, or to the order of, acertain person or to the bearer of the instrument”.

There are three parties involved in the bill of exchange,namely drawer, drawee and payee.

The person who draws the bill is called the Drawer. Theperson who accepts the order is known as drawee and theperson to whom the amount has to be paid is known as thepayee.

Q3 Distinguish between capital expenditure & revenue expenditure.

Capital expenditure refers to expenditure that the benefitof which is not fully derived in one year but spread overseveral periods. Examples for capital expenditure are –acquisition of assets for the purpose of earning,additions to fixed assets to improve its capacity,expenditure resulting in long-term benefit to the business.Expenses like Preliminary expenses, Research and Developmentexpenditure, Interest paid during Construction period aretaken to assets side of Balance Sheet and shown under‘Miscellaneous Expenditure’.Revenue expenditure, It is an expenditure incurred and thebenefit of which is derived in the year in which the expenditure was incurred. Examples are – raw materials, repairs, depreciation, rent, wages, etc. Such expenses aredebited to Profit and Loss account. Any incomes and gains are credited to Profit and Loss account. Examples Commission received, Dividend received, Interest received etc. Net Profit is transferred to capital account in the balance sheet.

Q 4 Case Study:-

Gupta Company

Trading Account for the year ending 30.06.2001Particulars                    

                   Rs.

Particulars                    

                   Rs.

To Opening Inventory

Add: Purchases      

40,675        

Less: Returns        5,00

Goods available for sale

To Gross Profit c/d                           

 

5,760

40,175

45,935

58,965

104,900

Sales Less: Return Inward

Net sales

Closing Inventory 

98,780680

98,100

6,800

104,900

Profit and Loss Account for the year ending 30.06.2001

Wages                        8,480 Fuel & Power               4,730 Carriage on sales         3,200               Carriage on purchase 2,040                        Salaries (15,000 +1,500) 16,500 General expense 3,000Insurance (600 – 170) 430Depreciation:-Machine (20,000 * 10%) 2,000Patents (7,500 * 20%) 1,500Bad debt 725            

To Net Profit c/d              26,360

By Gross Profit b/d      58,965Rent received(other income)          

10,000 

   

   68,965

68,965

ASSIGNMENT ‘C’ OBJECTIVE QUESTIONS

Q1 b Q11 d Q21 e Q31 dQ2 a Q12 c Q22 a Q32 aQ3 c Q13 a Q23 b Q33 dQ4 c Q14 b Q24 e Q34 bQ5 c Q15 a Q25 c Q35 bQ6 a Q16 d Q26 e Q36 cQ7 d Q17 e Q27 d Q37 bQ8 e Q18 d Q28 c Q38 cQ9 d Q19 d Q29 d Q39 bQ10 d Q20 e Q30 b Q40 e