Financial Accounting (Major) — DU B.A.(Prog.) with Commerce (Entrepreneurship and Small Business) Previous Year Question Papers

a) State with reasons, whether the following statements are true or false. (1) Heavy advertising expenditure to introduce a new product is a revenue expenditure (ii) Accounting is a service activity. (iii) received in advance. Accrual basis of accounting does not recognise accrued income and income (v) The business entity concept can only be applied to a company. Any increase in owner's equity is called an expense. (vi) According to the acerual concept, revenues are recognised only when cash 1s (vili) A business entity can keep its accounts on accrual basis of accounting (ix). Prudence is a concept to recognise unrealised profits and not losses. Revenue should be recognised only when cash is received OR -b) Write short notes oh any three of the following: Convention of Consistency (ii) Accounting Estimate (iii) Account Policies c) Distinguish between capital expenditure and revenue expenditure. a) Compare and contrast LIFO and FIFO methods of inventory valuation. b) X purchased a second-hand machinery on 1-12-2022 for 280,000; and 212,000 - for its overhauling and 28,000 for its installation which was completed by 31- 3-2022. The entity provides depreciation on its machinery at 20% p.a. on diminishing balance method from the date it was put to use and closes its books on 31 December every year. On 1-10-2023, a repair work was carried out on the machine and 25,000 were paid for the same. The machine was sold on 31-10- 2024 for a' sum of 221,000 and an amount of 72,000 was paid as dismantling charges. Prepare Machinery Account and Provision for Depreciation on Machinery Account from 2022 to 2024. OR e) Define depreciation, depletion, amortization and obsolescence (6 marks) d) A company started its business on Ist January, 2025 It purchased and used raw materials during the year 2025 as stated below. January 10 Purchased 800 kgs. (4) 262 per kg February 28 Purchased 1,200 kgs. (@ 2 57 per kg May 20 Purchased 900 kgs. (@) 3 65 per kg June 28 Retum of 600 kgs to the supplier Calculate the value of closing stock of raw materials on June 30 according 10. (D) First in first out basis, and (ii) Weighted average basis, using perpetual system. a) From the following particulars prepare the Trading and Profit and Loss Account for the year 2024 and Balance Sheet as on 31.12.2024 of' a trader Loans (since 1-1-2024) 30,000 Debtors/Creditors 50,000 40,000 Opening Stock 12,000 Purchases/Returns 2,50,000 10,000 Sales/Retums 12,000 3,22,000 Establishment (i.e. Salaries) 16,000 RECEIPTS AND PAYMENT ACCOUNT for the year ending 31-3-2025 Payments Receipts By Purchase of Bill 65,000 To Balance b/d By Tourament Fees 10,000 Cash in Hand 1-4-2024 10,200 2,000 Cash at Bank as per Pass 30,000 By Affiliation fees for 5 years To Subscriptions 2,45,000 By Rent of Playground By Expenses on Variety 15,000 To Interest on Investment- 1,800 To Sales of Tickets for Variety 20,000 By Refreshment Expenses 20,000 Programme By Furniture bought on 1-10-2024 5,000