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BBA 203
Winter 2016

1. X, Y & Z were partners sharing profits and losses as 3:2:1. Their

Balance Sheet as on 31.03.2016 were as under :
Liabilities Rs. Assets Rs.
Capital: 1,80,00 Freehold 1,00,00
A 1,00,000 0 Premises 0
B 70,000 Building 60,000
C 40,000 Machinery 90,000

Reserves 90,000 Investments 20,000

Cash credit 30,000 Inventories 30,000
Creditors 20,000 Receivables 30,000
Bills 20,000 Cash 10,000
Payable
3,40,00 3,40,00
0 0
C expired on 1st April 2016. So, the assets are revalued and liabilities
re-assessed as follows :
i) Create a provision for doubtful debt Rs. 1,000.
ii) Building is to be depreciated by 5 %.
iii) Machinery is to be depreciated by 10 %.
iv) Goodwill of the firm is to be valued at Rs. 30,000.
The balance due to C will be transferred to his executors loan account
which will carry an interest of 10 % p.a. Prepare Revaluation Account,
Capital Accounts and the Balance Sheet of new firm after adjustments.

Answer: Revaluation Account

Particulars Amoun Particular Amoun
t s t
To provision for doubtful 1000
debt
To Machinery 9000

2. Explain Bill of exchange and the procedure for recording bills in the
books of drawer and accepter when the bill is : Accepted and
discharged.
i) Explain bill of exchange
ii) Journal entries in the books of drawer
iii) Journal entries in the books of acceptor
Answer: A bill of exchange is documentary evidence in writing containing an
unconditional order signed by the maker, directing a certain person to pay a
certain sum of money only to, or the order of, a certain person or to the bearer of
the instrument.

In the Boo

3. What do you understand by goodwill? Explain the accounting

treatment of goodwill at the time of admission. Give journal entry for
the below problem:
T and S are partners in a firm sharing profit in the ratio 5:3. They
admitted G as a new partner for 1/4th share in the profit.
G brings Rs.45,000 for her share of goodwill and Rs.1,20,000 for capital.
They have withdrawn the goodwill from the firm. Make journal entries
in the books of the firm after the admission of G.
The new profit sharing ratio will be 2:1:1.
Meaning of goodwill with the formula
Accounting treatment of goodwill at the time of admission
Journal entry in the books of T,S and G (Unit 10)

Answer: Goodwill generally means the reputation of the firm. When a business
is doing its operations over a number of years, it may develop a good name and
reputation among the customers or society. In accounting parlance, it can be
called as Goodwill. The goodwill of a firm may earn

4. Accounting refers to a systematic knowledge of accounting. It

explains why to do and how to do of various aspects of accounting.
Explain the objectives of accounting and explain the categories of
users.
Explanation of accounting objectives
Explanation of categories of users (Unit 1)

Answer: Accounting objectives

Systematic recording of all business events or transactions and
subsequent posting to ledger, to finally prepare financial statements -
profit and loss account and balance sheet.
Reporting the results to management, shareholders, creditors, bankers,
investors, stock brokers, stock exchanges, employees, government etc.
Satisfying the statutory requirements, especially Registrar of Companies
(ROC), Securities

5. Prepare Trading, Profit and Loss Account and Balance Sheet from the
following particulars as on 31st March 2016.
Trial Balance
Particulars Dr. Cr.
(Rs) (Rs)
Capital / Drawings 1400 10000
Cash in hand 1500 -
 Bank overdraft @ 5% - 2000
Purchase and Sales 12000 15000
Returns 1000 2000
Establishments charges 2500 -
Taxes and Insurance 500 -
Provision for Doubtful - 1000
Debts
Bad Debts 500 -
Sundry Debtors and 5000 1850
Creditors
Commission - 500
Investments 4000 -
Stock on 1 April 2010 3000 -
Furniture 600 -
Bills Receivable & Bills 3000 2500
payable
Collected Sales Tax - 150
Total 35000 35000
Further, you are required to take into consideration the following
information:
a) Salary Rs.100 and taxes Rs.400 are outstanding but insurance Rs.50
prepaid
b) Commission amounting to Rs.100 has been received in advance for
work to be done next year.
c) Interest accrued on investments Rs.210
d) Provision for doubtful Debts is to be maintained at 20%
e) Depreciation on furniture is to be charged at 10% p.a.
f) Stock on 31st March 2016 was valued at Rs.4,500
g) A fire occurred on 25th March 2016 in the godown and stock of the
value of Rs.1,000 was destroyed. It was fully insured and the insurance
company admitted the claim in full.
[Calculation of Trading and P/L a/c-5
Preparation of balance sheet-5]

Answer: Trading and Profit and loss Account for the period ended 31st
March 2016
Particulars Rs Rs Particulars Rs Rs
To Opening Stock 3000 By Sales 15000
To Purchase 12000 Less: Sales Returns 1000 14000

6 From the ledger balances as on 31st March 2016 show treatments in

Profit and Loss Account and in Balance Sheet.
Debtors: 50,000; Bad Debts: 3,000; Discount Allowed : 2,000;
Creditors: 30,000; Provision for Discount on Creditors : 400; Discount
Received 300.
Adjustments:
i) Create a provision for Bad Debts @ 10 % on Debtors
ii) Create a provision for Discount on Debtors @ 5 %
iii) Additional discount given to Debtors Rs. 1,000
iv) Create a provision for discount on Creditors @ 2 %.
From the ledger balances and adjustments as above, show treatments in :
Profit and Loss Account and Balance Sheet.
Answer: Profit and loss account for the year ended 31st March, 2016
Particulars Amount Particular Amount
(Rs) s (Rs)

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