Financial Accounting I 4th Edition Mohamed Hanif, Amitabha Mukherjee - Solutions

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Mitra & Co. has taken out a policy against consequential loss, the amount of the policy being ~ 60,000 for 2015-16 and the indemnity period being 18 months. A fire occurred on 1st September, 2015 in the premises of Mitra & Co., which interrupted business for a period of 12 months. The Profit and
Calculate the amount of claim for consequential loss from the following information :(i) The policy is for ~ 4,90,000 with a six months period of indemnity.(ii) On 1st July, 2016 fire broke out and sales of 3 months were affected.(iii) Sales for 12 months ended 30th June, 2016 amounted to ~
From the following details, determine the amount of claim under a loss of profit policy :Indemnity period 4 months Date of fire 1.4.2016 Dislocation continued upto 1.8.2016~Sum insured 60,000 Sales for the last accounting year 2,40,000 Net profit for the last accounting year 34,000 Standing charges
From the following information, compute a consequential loss claim:Financial year ends on 31st December : Turnover ~ 2,00,000; Indemnity period ---- 6 months.Period of interruption ---- 1st July to 31st October.Net profit ---- ~ 18,000. Standing charges ---- ~ 42,000 out of which ~ 10,000 have not
On 1st November 2016, a severe fire broke out in the premises of Good Luck Co. Ltd. The indemnity period lasted for 4 months during which the sales of the Company were reduced to ~ 2,00,000 only. The company closes its accounts on 30th June each year. The Profit and Loss Account for the year ended
A fire occurred on 1st July 2016 in the premises of Arolite Ltd., and business was disorganised up to 30th November 2016.From the books of account, the following information was extracted (all figures in ~) :Actual turnover from 1st July 2016 to 30th Nov. 2016 60,000 Turnover for the last financial
There was a serious fire in the premises of M/s. Fortunate on 1st September, 2016. Their business activities were interrupted till 31st December, 2016 when normal trading conditions were re- established. M/s Fortunate are insured under the loss of profit policy for ~ 42,000, the period of indemnity
On 31st December 2016, a fire damaged the premises of Shanker Ltd. and the business of the company got disorganised till 31st March, 2017. The company was insured under a loss of profit for ~ 1,95,000 with a six month’s period indemnity. The company’s account for the year ended 31st October,
A fire occurred in the premises of Malcom Marshall & Co on 15.5.2014 causing destruction of a large part of the stock. The firm had taken a fire insurance policy for ~ 5,47,200 to cover the loss of stock by fire. From the records saved, the following particulars were ascertained :
A fire occured in the godown of M/s. Krishna Traders on 31st March 2017. The stock as on 31st December 2016 was valued at ~ 5,88,000. From the following particulars relating to the period from 1st January 2017 to 31st March 2017, you are required to ascertain the amount of claim to be lodged with
The premises of a company was destroyed by fire on 15th June, 2017. The records were, however, saved which from the following particulars were available (all figures in ~):Stock at cost as on 1st January 2016 30,000 Sales less returns for the year ended Dec. 31, 2016 2,50,000 Stock at cost as on
On 1st April, 2017 the godown of Stone Ltd. was destroyed by fire. The records of the company revealed the following particulars:
A fire on October 1, 2017 destroyed the stocks of a firm. The business records were saved and from them the following particulars were ascertained:In valuing the stock on April 30, 2017 ~ 800 were written-off a particular line of goods which originally cost ~ 1,800 and which were sold in June 2017
A fire occured on 15th September 2017 in the premises of X Co. Ltd. From the following figures, calculate the amount of claim to be lodged with the insurance company for loss of stock
The premises of Eagle Pen Company caught fire on 22nd October 2016 and the stock was damaged. The firm made up accounts to 31st December each year, and on 31st December 2015 the stock at cost was ~ 13,272 as against~ 9,614 on 31st December 2014.Purchases from 1st January 2016 to the date of fire
The premises of Bombay Sports House caught fire on 1st April, 2017 and its stock was damaged. The firm made up accounts to 31st May each year. The following information is available: (all figures in ~)
M owns a retail stationery shop which is partly destroyed by fire on 27th June 2017. The stock is insured for ~ 10,500 and is subject to average clause. The opening Balance Sheet drawn on January 1, 2017 includes, inter alia, the following items:Stock ---- ~ 12,500; Trade creditors ---- ~ 3,500.On
There was a fire in godown of Spark Ltd. on 1.7.2017. Stock worth ~ 30,000 was saved. The goods were insured and fully covered.(i) An average gross profit of 20% on sales is maintained by the company.(ii) The stock is valued at 10% above cost.The purchases and sales for first 6 months of the year
A fire occured on 15th April, 2017 and destroyed the business premises of Johnson & Co. The books of account and stock amounting to ~ 18,000 were saved and the following information was available from the books The stock on 31st December, 2016 was valued at ~ 97,000. The purchases, sales and
Why is it necessary to insure the assets of the business while taking up a policy on loss of profit?
Explain the different steps for ascertaining the amount of claim for loss of profit.
Write short notes on:(a) Average clause; (b) Indemnity period; (c) Annual sales; (d) Short sales; and (e) Increased cost of working.
How is the gross profit computed for the purpose of insurance on loss of profit?
Explain the various steps for ascertaining the loss of stock by fire.
The terms of loss of profit policies are usually framed to meet the requirements of the A insurer B insured C none of these
Fire insurance policies may contain an "average clause" to A discourage under-insurance B encourage under-insurance C none of these
Gross profit is calculated on sales, based on usual gross profit percentage of the A last few years B last year C none of these
A business takes a fire insurance policy to cover the loss of asets including A liabilities B stock C none of these
When a fire takes place, the business naturally incurs heavy A expenditure B losses C none of these
Which of the errors will require an adjustment to the list of balances ?A neither (i) nor (ii)B (i) only C (ii) only D both (i) and (ii)
Which of the errors will require an adjustment to the creditors ledger control account in the general ledger?A neither (i) nor (ii)B (i) only C (ii) only D both (i) and (ii)
On checking the list of balances on the creditors ledger accounts, it was found that the total is ~ 2,250 more than the balance on the creditors control account in the general ledger.Which of the following erros could, by itself, account for this difference ?A The total of contra entries against
Praveen prepared the following creditors ledger reconciliation statement. ~Balance on general ledger control account 46,865 (Credit)Payment entered twice in general ledger control account
While preparing the creditors ledger reconciliation for a client, you noted the following errors :(i) An invoice for ~ 215 from a supplier was not entered in the accounting records.(ii) An invoice for ~ 465 was recorded as ~ 456 in the purchase day book.Which of the errors will cause a difference
Consider the following statements about control accounts.(i) Control accounts can help to speed up the preparation of draft accounts by providing the balance sheet value for trade debtors and trade creditors.(ii) Control accounts are used in double entry book-keeping only.(i) (ii)A True False B
Sriram has prepared the following reconciliation of the balance on the debtors ledger control account in his general ledger to the total of the list of balances on customer’s personal accounts : ~Balance on debtors ledger control account
Kabir’s book keeper has prepared the following trade creditors ledger reconciliation : ~Balance on general ledger control account 78,553 Less: Discount not recorded in general ledger
Which of the following statements is / are correct ?(i) the debtors ledger control account balance must be correct if it agrees with the total of the list of balances from the receivable ledger;(ii) if there is a different between the balance on the debtors ledger control account and the total of
When carrying out the reconciliation of the balance on the Debtors’ Ledger Control Account with the list of balance from debtors ledger, X found the following :(i) total of the sales day book was overcast by ~ 900;(ii) a sales invoice for Ram was posted to Raman’s Account;(iii) an invoice to a
(a) What is Self Balancing System ?(b) Why transactions like ‘Cash Sales’ and ‘Provision for Doubtful Debts’ are not recorded under Self Balancing Ledger System ?
What is Self-Balancing Ledger ? How is it different from Sectional Balancing Ledger ? What are the advantages of Self Balancing Ledger ?
It is said that "In a business of any magnitude it is desirable to raise total accounts in respect of Debtors and Creditors Ledgers". What are these total accounts and why is it desirable to raise them ?
On account of the very large number of his transactions, a merchant keeps a separate Bought Ledger and a separate Sold Ledger as also a General Ledger. What matters would you expect to find in each of the above ledgers ? How would you make each of the above ledgers Self-Balancing ?
What is Sectional Balancing System ? State the advantages of Sectional Balancing.
State the advantages of Self-Balancing System.
(a) What is ‘Self-Balancing Ledger’ ? (b) Why adjustments are necessary in the Self-Balancing System?
State the purposes of using Control Accounts.
A Mehta who keeps a special set of books for this type of business sends out goods on sale or return as follows :
Messrs. Sound of Music supplied goods on Sale or Return basis, the particulars of which are as under:
A merchant sells goods to his customers on "sale or return" basis treating all such transactions as actual sale at the time of despatch. On 10.12.2017, just before the end of accounting year on 31.12.2017, the merchant sent some goods costing ~ 6,000 at 20% profit on sale, and was passed through
In preparing the final accounts of a company it is found that Sundry Debtors of ~ 42,000 includes ~ 4,000 representing price of goods sent out on approval for which the date of return has not yet expired.Give the adjustment entries assuming that the goods were invoiced at a price of 25% above cost.
X Ltd. sends out its gas stoves to dealers on Sale or Return. All such transactions are, however, treated like actual sales and are passed through the Day Book. Just before the end of the financial year, 100 stoves, which cost them ~ 150 each, are sent to a dealer on Sale or Return and are debited
A Gas Company sends out its gas stoves to dealers on Sale or Return. All such transactions are, however, treated like actual sales and are passed through the Day Book. Just before the end of the financial year, 100 stoves which cost them ~ 150 each, are sent to a dealer on sale or return and are
When the transaction are few, the seller, while sending the goods on sale or return basis treats them as A ordinary sale B no sale C profit
Under sale or return agreement, revenue is recognised A at the time of delivery of goods B when the buyer signifies his approval but sale price has not be fixed C when the buyer signifies his approval and the sale price has been fixed
Goods sent on sale or return basis are beneficial to the A seller only B buyer only C seller and the buyer
Under a sale or return basis, the property in the goods passes to the buyer A when he gives his approval subject to certain conditions B when he gives his approval unconditionally C when a bill receivable is accepted
Under a sale or return basis, when goods are transferred from wholeseller to retailer, it implies a change A in the possession of the goods only B in the ownership of the goods C in the possession and the ownership of goods
What are the benefits of selling goods on sale or approval basis ?
Under a sale or return agreement, when revenue is recognised ?
If the goods are sent on sale or approval basis, when will the sale take place or the property in the goods passes to the buyer ?
Roy Brothers of Calcutta sent goods costing ~ 60,000 to Patel Brothers of Bombay on 10th September, 2015, on consignment basis. The invoice price was made by adding 25% of the cost. Roy Brothers of Calcutta paid the following expenses in connection with the despatch of goods : Packing ~ 350,
On 1st September, 2016 goods which cost to X ~ 33,000 were consigned by him to his agent Y at a proforma invoice price which was 20% over cost. X paid insurance and freight charges amounting to ~ 1,250. Y was allowed 3,000 per annum towards establishment cost, 5% commission on gross sales and 3%
Rama consigned goods to Ravindran, his agent at New Delhi at cost price of ~ 40,000. Rama’s accountant, at the end of the year, drew up the agent’s account as under: Ravindran sold the goods for ~ 45,000, which exceeded by ~ 9,000 their invoice value. He collected ~ 38,000 after allowing
On 1st December, 2016, 100 radio sets were sent on consignment by Kolay & Co of Bombay to Paul & Co of Calcutta at a Proforma Invoice price of ~ 1,800 each (including a profit of 20% on cost). Kolay & Co paid freight, insurance and other charges amounting to ~ 8,000. 2 radio sets were totally
X of Delhi purchased 10,000 meters of cloth for ~ 2,00,000 of which 5,000 meters were sent on consignment to Y of Agra at the selling price of ~ 30 per meter. X paid ~ 5,000 for freight and ~ 500 for packing etc.Y sold 4,000 meters at ~ 40 per meter and incurred ~ 2,000 as selling expenses. Y is
Mr Achut of Bombay consigned 100 units of a commodity to Mr. Rao of Delhi. The goods were invoiced at ~ 150 so as to yield a profit of 50 per cent on cost. Mr.Achut incurred ~ 1,000 on freight and insurance. Mr. Rao incurred ~ 500 on freight and ~ 800 on rent. Before December 31, 2016, he sold 50
A of Bombay sent goods on consignment basis, to B of Calcutta at an invoice price of 25% on cost which was to be sold for general commission of 10% on gross sales plus a special commission of 25% on excess of sale proceeds less all commission over the invoice price. A sent 100 boxes of tea at an
Reema consigns goods to Sunita to be sold at above invoice price, Sunita is to get commission of 5% on sales at invoice price, plus 25% of any surplus price realised. Reema received from Sunita on advance of 75% of the invoice price; the accounts being settled by Bank Drafts immediately on
On 1.4.2017, X of Delhi consigned 550 tins of oil to Y of Calcutta. Each tin contains 1.5 Kg of oil. The cost is~ 21 per kg. This is to be sold at 331/3% above cost. Y is to be paid 3% ordinary and 2% del credere commission on sales on the basis of the price specified above.Any deficiency in the
B of Bombay consigned 400 packages of coffee to K of Kanpur. The cost of each package was ~ 300. A sum of ~2,000 was paid towards freight and insurance by B. In the transit, 60 packages were damaged. However, the consignor received ~ 400 for the damaged packages from the insurance company.The
Mr Krishna Murty requests you to prepare a Consignment Account for the year ended 30.6.2017 and for this purpose gives you the following information to ascertain the profit earned on consignment.(i) Agent’s commission @ 5% on gross sales ~ 20,000.(ii) Cost of goods fully damaged in transit
X consigned goods costing ~ 1,60,000 to A. The terms of the consignment were:(a) Consignee to get commission of 5% on cash sales and 4% on credit sales.(b) Any goods taken by consignee himself or goods lost through consignee’s negligence, shall be valued at original cost plus 121/2% and no
Rahim of Calcutta consigned 100 cases of medicine. Costing ~ 1,000 per case to Karim of Kanpur on 1.1.2017. The goods were to be sold at 25% above cost. Any deficiency in the selling price was to be borne by Karim. Karim was, however, entitled to a special commission @ 25% of any surplus price
Oil India Ltd of Bombay consigned 1,000 barrels of Lubricant oil costing ~ 800 per barrel to Central Oil Company, Calcutta, on 1st Jan 2017. Oil India Ltd paid ~ 50,000 as freight and insurance. 25 barrels were destroyed on 7.1.2017 in transit. The insurance claim was settled at ~ 15,000 and was
M/s Abubacker and Sons, Madras, sent to their agents, M/s Chinnadurai and Bros in Ceylon on February 12, 2017 a consignment of hides and skins costing ~ 24,000. They incurred ~ 1,200 on freight and packing and ~ 300 towards insurance. They drew a bill on the agent for ~ 20,000 at three months’
On July 1, 2016 A had consigned to B goods costing ~ 50,000, on which A paid freight and insurance amounting to ~ 2,500. On September 30, 2016, B’s first Account Sales was received, showing that he had effected sales for~ 32,000 of which ~ 30,000 had been received in cash. His expenses to date
Ramesh Oil Mills, Bombay, consigned 40,000 kg of castor oil in 10 kg tins to B N Chatterjee, Calcutta, on 1st April, 2017. The cost of oil was ~ 2 per kg. The consignors paid ~ 10,000 as freight and insurance. During transit 50 tins were totally destroyed for which the insurance company paid
Naresh consigns 1,000 bats costing ~ 500 each to Swaroop for sales and incurs ~ 4,000 towards freight and~ 1,000 for insurance. Swaroop was able to take delivery of 900 bats only and 100 bats were destroyed in transit.The insurance company admitted the claim and paid the same. Swaroop will be
Raja of Calcutta consigned on 1st April, 2016 to Praja of Burdwan 50 TV sets at ~ 6,000 per set. Raja incurred the following expenses on the consignment : Freight ~ 1,000; Insurance and other charges ~ 500. The consignee paid~ 980 as non-recurring and ~ 1,000 as recurring expenses. On the way a set
On 1st July, 2016, Sengupta of Calcutta sent 150 cases of goods at a cost of ~ 750 per case to Kapoor of Bombay on consignment basis and paid ~ 1,900 for insurance premium, ~ 3,500 for freight and ~ 2,600 for dock charges. On arrival of the goods, Kapoor sent a bank draft for ~ 10,000 to Sengupta
Karnath sold goods on behalf of Vijay Sales Corporation on consignment basis. On January 1, 2016, he had with him a stock of ~ 20,000 on consignment.Karnath had instructions to sell the goods at cost plus 25% and was entitled to a commission of 4% on sales, in addition to 1% del credere commission
On 1.1.2017, Amar Mills of Calcutta consigned 5,000 Kg of oil to Vijay Stores of Madras. Each Kg of oil costs~ 8. Amar Mills paid ~ 50 as carriage, ~ 250 as freight and ~ 200 as insurance. During transit, 500 Kg were accidentally destroyed for which the Insurance company paid directly to consignor
On 1st January, 2017, C of Calcutta sends 1,000 boxes of clothing to M of Madras on consignment basis. The goods in each box cost ~ 200. C pays railway freight and insurance ~ 500 and draws upon M a bill for ~ 10,000 which is duly accepted.On 2nd April, 2017, M forwards an Account Sales to C
On 1st January, 2016 Sadhan Sen of Sodepur sent 1,000 units of silk goods to Biren Bose of Berhampur .The goods cost ~ 75,000 to Sadhan and these were sent on consignment basis. Sadhan had to incur an expenditure of ~ 1,500 on the goods. On the due date, the goods reached the destination and Biren
C of Calcutta sent 100 bicycles to B of Mumbai to be sold on consignment basis on 1.1.2016. The cost of each bicycle was ~ 800, C incurred ~ 500 for freight, ~ 750 for cooli charges and ~ 850 for insurance premium.On 31.12.2016, C received on Account Sales from B, which showed that he sold 80
Who pays del credere commission ? Why is commission paid ?
(a) When consignor sends goods to the consignee, why no entry is passed in the books of consignee ?(b) Why recurring expenses are not considered for valuing unsold stock on consignment ?[C.U.B.Com. (Hons.) ---- 2013]
How is abnormal loss treated in Consignment Account ? [C.U.B.Com. (General) ---- 2012]
State the procedure of valuation of closing stock on consignment.
What is a Proforma Invoice? Prepare a Proforma Invoice with assumed figures.
What are non-recurring expenses? Give some examples.
What is del credere commission? Why is it given to the consignee?
What is an Account Sales? Prepare an Account Sales with assumed data.
What is a Consignment Account? Distinguish between sale and consignment.
Consignee account is in the nature of A personal account B real account C nominal account.
Del credere commission is calculated on A total sales B cash sales C credit sales.
Del credere commission that is given to the consignee is to cover A normal loss B abnormal loss C loss of bad debts.
No journal entry is required to be passed when there is A normal loss B abnormal loss in transit C abnormal loss in consignee’s godown.
Del credere commission is given when the consignee A sells all the goods on credit B gets no ordinary commission C bears the loss of bad debts.

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Financial Accounting I 4th Edition Mohamed Hanif, Amitabha Mukherjee - Solutions

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