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financial accounting

Financial Accounting For Management 4th Edition Neelakantan Ramachandran, Ram Kumar Kakani - Solutions

The following is the Balance Sheet of a partnership firm as on 31.12.2017:A and B has been sharing profits in the ratio of 3 : 2. On 1.1.2018, they decide to take C as a partner on the following terms and conditions:(i) The new profit-sharing ratio will be 2:1:1;(ii) C is to bring in ₹75,000 as
A and B are in partnership sharing profits and losses as 2 :1. As from 1.10.2016, they take C as a partner who will have 1/6th share. As between A and B, they decide to share equally, C brings in ₹ 50,000 as capital and ₹ 4,000 as premium for Goodwill. Following is the Balance Sheet as on
A and B are partners in a firm sharing profits and losses in 7:3. The balance sheet as at 31.3.2018 is as follows:On 1.4.2018 C joins the firm as a 3rd partner for 1/4th share of the future profits of the firm on the following terms:(a) Goodwill is valued at ₹40,000 and C is to bring the
State the treatment of Goodwill on admission of a new partner.
D, H, F were equal partners of the firm ‘Enterprise’ and the following Balance Sheet as at 1.7.2018 was produced by them:On 1.7.2018 they agreed to take R as an equal partner on the following terms:(a) R should bring ₹1,60,000 as his capital and goodwill, his share of goodwill was evaluated
A and B are in partnership sharing profits and losses in the ratio 4:3 and for the last four years they have been entitled to annual salaries of ₹90,000 and ₹1,50,000 respectively, but not to interest on capitals. The annual accounts have shown the following net profits before charging
A, B and C are partners in a firm of accountants who maintain accounts on a cash basis sharing profits and losses in the ratio of 2:3:1. Their Balance Sheet as on March 31, 2018 on which date D is admitted as a partner, is as follows:D is given 1/4 share of the profits and losses in the firm and
K and L are two partners sharing profits and losses in the ratio of 5:3. Their Balance Sheet as at 30th. June, 2018 is as followsOn 1st July, they take M into partnership. M brings ₹25,000 as his capital. The new profit sharing ratio of K, L and M is 2:4:1. Patent is written-off from the books
Quick and Slow are partners in a firm sharing profits and losses in the ratio of 3 : 2. The Balance Sheet of the firm as on 31st March, 2018 was as under:Smooth was admitted as a new partner with effect from 1st April, 2018 and it was agreed that he would bring some private furniture worth
A and B are partners sharing profits and losses in the ratio of 3 : 1. Their capitals were : A —₹60,000; B ₹20,000. They decided to change the profit-sharing ratio to 5 : 3 with effect from 1.1.2018. The goodwill of the firms is to be valued at 2 years’ purchase of 3 years’ average
The following is the Balance Sheet of A, B and C who share profits equally as on 1.1.2018.On the above date, the partners changed their profit-sharing ratio to 2 : 2 : 1. Following are agreed upon :(i) The value of land is ₹30,000(ii) Reserve is to be maintained at ₹30,000(iii) The total
A, B and C were partners sharing profits and losses in the ratio of 3 : 2 : 1. The Balance Sheet of the firm as on 1.1.2017 was as under:On the above date, the partners decided to change their profit sharing ratio to 1 : 2 : 3. Goodwill was valued at ₹18,000. No entries were, however, passed to
The following is the Balance Sheet of A, B and C who share profits in the ratio of 3 : 2 : 1 as on 1.1.2018From the above date, the partners decided to share profits equally. The following are agreed upon:(i) The value of the land will be ₹21,000.(ii) Joint life policy will not be shown.(iii)
The following is the Balance Sheet of A, B and C as on 1.1.2018:The partners share profits in the ratio of 2 : 2 : 1, but, on the above date, they have decided to change that to 2 : 1 : 1.The following adjustments are required :(a) The value of the land is ₹15,000.(b) The value of machinery and
The firm of A, B and C has existed for some years, profit being shared as 2/5, 2/5 and 1/5 respectively. C, however, feels that this arrangement has not been satisfactory to him and requires to be placed on some basis as regards profits as A and B. He further wants that this arrangement shall apply
A, B and C are partners in a firm sharing profits and losses as 8 : 5 : 3. Their Balance Sheet as at 31st December, 2017, was as follows :From 1st January 2018 they agreed to alter their profit-sharing ratio as 5: 6: 5. It is also decided that:(a) The fixed assets should be valued at
A, B and C were partners. On 1.4.2017, they admitted, their manager, D as a partner. Profits and losses in the new partnership were to be shared in the ratio of 4 : 3 : 2 : 1 respectively. In addition, C is to get a salary of ₹600 p.m. D had previously been paid a salary of ₹1,000
A and B had been in partnership for many years as architects, sharing profits equally. It had been their custom to ignore fees, etc., earned on uncompleted matters when preparing annual accounts. On 1.1.2017, they entered into a new partnership agreement under which the profits earned in any year
The partnership accounts of A and B, sharing profits in the ratio of 3 : 2, were maintained on cash basis right from its formation. Now, the partners decided for change into mercantile basis with retrospective effect. Following details are given in this respect (all in ₹). Pass the required
A, B and C are partners in a firm with Head Office in Kolkata and Branches in Mumbai and Chennai. They share profits and losses in the ratio of ₹5:3:2. B and C (respectively managing Mumbai and Chennai Branches) are also entitled to a fixed salary of ₹5,000 p.a. and to a commission
A, B and C are partners in a firm. Following are their summarised capital accounts :On 1.1.2018, it is agreed that the following would be effective retrospectively from 1.1.2017:(1) A shall be entitled to a salary of ₹750 p.m.(2) Interest shall be allowed on partners’ capital at 5% on the
What is an accounting policy choice?
In what areas do organisations often make policy choices?
Software Ltd is a software technology company that began operations at the beginning of 2017. It plans to list on the Australian Stock Exchange in 2019. The company believes that it can start selling its software program from 2018 (sales forecasts are in the income statement below). The
Why is the location of an item in the financial statements an accounting policy choice?
ABC is considering issuing new shares to finance expansion. The management prepared the following income statement for the period ending 31 December 2019, to be submitted to the board of directors for its approval: The CFO suggests that the $450 million spent on marketing costs on 1 January
Why do organisations have a choice on what accounting policies to use?
Are there any limits on the choices that companies have?
You work for a large local company as the inventory manager. The company uses FIFO in accounting for inventory. In June, the company began to stock a new product, Painto. The June inventory record for Painto was: 1. Calculate, using FIFO: a. The cost of the 30 June inventory of
As you have seen, there is a general conflict between two financial reporting objectives. The first objective is to fit the accounting to each company’s circumstances so that the resulting reports are relevant for understanding or evaluating that company. The second is to make accounting
Should management have the responsibility and the authority to choose companies’ accounting policies, or should that role be someone else’s (such as the government’s, the auditor’s or an independent board’s)? If you think it should be management’s role, explain why. If you think it
A commentator on the accounting scene remarked: ‘Management makes its accounting choices to serve its own interests, and there’s no way the poor lonely auditor can hold the fort of fairness when you consider how vague and judgemental accrual accounting’s criteria for accounting policy choices
Consider the following note disclosure from the financial results of WW Ltd, a large retailer: Settlement discounts, rebates and other purchase allowances totalling $600.9 million currently recognised in other operating revenue, will be reclassified as a reduction in cost of sales of $418.3
Earlwood Ltd has been operating for several years now. So far the profit for the current year is $75 000, before income tax. Management is considering a few changes and has asked your advice. The possible changes are: a. Change the revenue recognition policy to recognise revenue earlier in the
A shareholder in a large public company threatens to sue management, the auditors and the AASB for ‘approving conservative accounting policies that have resulted in poor apparent performance and low stock prices that have reduced my investment value’. What do you think of the shareholder’s
A new CEO is appointed to an organisation. Why might he or she have incentives to write off particular capitalised assets, write down some investments and write off a lot of bad debts?
Select a company you are familiar with, such as Woolworths, Qantas or any of the big four banks (ANZ, National Australia Bank, Commonwealth Bank, Westpac) and peruse its sustainability report.
Based on your accounting knowledge to date, do you think traditional financial reporting provides all the information stakeholders require? Consider your answer based on the various different stakeholder requirements.
Outline the costs and benefits of preparing a sustainability report.
Are the stakeholders for sustainability reporting different from the stakeholders for traditional financial reporting? If you think they are, identify the different groups and explain their interests/requirements in the reports.
What skills do accountants have that are important in the development of sustainability reports?
Explain why sustainability reporting is necessary. Consider both the benefits of sustainability reporting and the drivers for sustainability reporting in your answer.
Identify three types of KPIs used in sustainability reports.
What are the six key categories used by the GRI in sustainability reports? Provide two examples for each category.
Explain some of the key arguments on whether sustainability reporting should be voluntary or mandatory. Provide at least two points for each side of the argument.
Considering the various professions involved in the assurance of sustainability reports, what are some of the key tensions surrounding this issue?
What skills do the accountants and non-accounting professionals provide in the assurance of sustainability reports?
What is integrated reporting? How is integrated reporting different from other forms of reporting?
Identify the drivers of integrated reporting.
What are the key tensions in the field concerning integrated reporting?
Outline your thoughts on whether integrated reporting is achievable.
What are some of the challenges integrated reporting must overcome?
Who will read an integrated report? Will all stakeholders have the same level of skills or competency to understand the integrated report?
M/s Gagan Cycle Ltd. …(a) The accounts of M/s. Gagan Cycle Ltd. show a profit of ₹88,000 for the year. This includes an amount of ₹25,000 relating to an order just received. Based on this information, what will be the profit?(b) The corrected profit would be ₹________ because we should
A profit making business operation as a separate legal entity and in which ownership is divided in the proportion of investment is known as a:(a) Limited Liability Partnership(b) Partnership(c) Limited Liability Company(d) All of the above
___________ concept applies when Abdul Agro Limited bought a grinding machine and recorded the purchase at the amount of cash paid to purchase it.
Look at the chapter opener wherein Chanakya’s views on accounting are shared. Times have changed! Would you like to still agree with his views on accounting? Discuss.
Match the following: Users and their Need for Organizations ‘Accounting Numbers’ 1. State Government 2. Central Government, Ministry of Finance 3. SEBI, RBI and such Regulatory Bodies 4. Top management 5. Employees union 6. Public 7. Long-term lenders 8. Banker-cum-working provider 9.
Financial Accounting information is:(a) A summary of historical events, both financial and non financial(b) The result obtained from appropriate measures(c) Enhanced by management’s explanation(d) All of the above
Using the same method of accounting over a considerable period is referred to as the _____________ principle.
What is Conservatism? Can you think and give illustrations of this concept being misused?
Arijit Singh recently purchased a Bolbo car and fell in love with it – to the extent that he renamed ahimself as Bolbo Arijit Singh. Yet, he stuck to his business plan of releasing albums. He estimated the yearly cost in producing his next album to be INR 1 crore. Sales were estimated to be INR 2
According to which concept, tangible fixed assets are depreciated on the basis of expected life rather than on the basis of market value.(a) Conservatism concept(b) Money measurement concept(c) Going concern concept(d) Consistency concept
If an accountant overstates a business entities resources (or material assets) then we can state that he is violating the ______________ principle of accounting.
On a scale of 1 to 10, wherein 1 stands for just one page summary information and 10 stands for detailed information on each and every accounting transaction:(a) As a retail investor, what level of financial detail of information would you like to have in the periodical financial reports? Give
Amar, Akbar, Anthony and Amarpreet were four school time friends. After passing from school, the four met with each other and were discussing about their future plans. All four were sure that they would take up to doing business after finishing their graduation.Amar was very ambitious and always
Although accounting information is widely used by a variety of external parties, financial reporting is primarily directed toward the information needs of:(a) Customers(b) Employees(c) Equity Analysts, and Credit Rating Agencies(d) Investors and creditors
Chirag Shah desires to open a sole proprietorship to do the business of managing “spiritual road shows” to be attractive. He decides to start his own business at Timbaktu [with a plan to expand it down south till Tirupur].a) What are the merits and demerits of opening a sole proprietorship?b)
Lehman Brothers Holdings Inc. was a global financial services giant which, until declaring bankruptcy in 2008, participated in investment banking business and related areas. It was a primary dealer in the U.S. Treasury securities market. Its subsidiaries included Lehman Brothers Inc., Aurora Loan
Which of the following you do not agree to:(a) The auditor is the chief information officer of a firm.(b) Book keeping involves measuring and recording business transactions.(c) Gains or a loss in a series of transaction(s) is an event.(d) SEBI is the capital market regulatory authority prescribing
M/s Manish Boutique Ltd. … During the year, Manish Malhotra had taken home some clothing fabric from his boutique, to present his wife a new suit for her birthday. He has included the cost of this stock (₹12,000) as a business expense while calculating the profits, which came to ₹62,000.
Under what type of situations might a firm disguise itself as a “going concern” in its accounting reports [even if its business model does not convey the same]? How can the users of accounting information make out such discrepancies?
Koya was driving the Pajero Sports Vehicle of Sayed Abdul Rehman Alsagoff of Arab Merchant Llc. He returned to Kozhikode and decided to operate cabs.He bought a Tata Safari costing ₹7,85,000 on road. This included ₹30,000 annual insurance, ₹60,000 on 15-years road tax, and ₹3,000 on
State whether the following statement are True or FalseWithdrawals of retained surplus by the owners of the business can be called Dividends.
State whether the following statement are True or FalseThe Manufacturing Account indicates the amount of gross profit earned by the business, by matching the cost of the sales with the revenues generated by the business during the period.
State whether the following statement are True or FalseIdeally, firms would like to ‘special identification method’ of inventory valuation.
State whether the following statement are True or FalseOperating Profit computations should ideally exclude other income.
State whether the following statement are True or FalseCost of goods sold normally includes all those costs of making the inventory available for sale, and are directly traceable to the inventory to be sold.
State whether the following statement are True or FalseDepletion charge is an apt method of expiring natural resources.
State whether the following statement are True or FalseSale on credit can result in a future possible expense.
Mr. Silkwallah established the Fashion Clothing Company (FCC) to market designer clothes. The business was to get designer clothes produced by tailors, exclusively for FCC. FCC provides the following information for the year ended as at March 31, 2015:On 1 April 2015, FCC engaged Ms Kaptawallah as
State whether the following statement are True or FalseFor the purpose of matching, there are revenues that are going to occur for a business and can be traced to each particular unit of expenses.
All costs involved in the goods or services transferred to the customer are recognized as ______________.
What would be the major differences in the profit and loss account of a manufacturing firm and a trading firm?
State whether the following statement are True or FalseAll assets, irrespective of their life, compulsorily expire as expenses sooner or later.
Imagine a firm wherein, all costs were incurred in the first half of the year and all revenue earned in the second half? You would see a semi-annual income statement for the first half of the year reflecting a loss. The second half of the year would reflect a profit. In such a case one can say
On Television Eighteen India Limited, which runs the popular private television channel ‘CNBC India’. We reproduce the profit and loss account of Television Eighteen India Limited for two consecutive years (financial years 2009 and 2010) with specific learning agenda. Based on the same comment,
State whether the following statement are True or FalseThe point of reference for the recognition of expenses also becomes the recognition of revenues.
State whether the following statement are True or False:Assets = Owners’ Equity is also a possible scenario.
(a) Classify the following items into current assets, fixed assets, proprietary funds and current liabilities and prepare a balance sheet for Dilli Durbar Company as at March 31, 20X7:Additional Information:(b) Provide for depreciation on plant and machinery at the rate of 10% per annum.(c) Sundry
ITC is one of India’s foremost multi-business enterprise with businesses encompassing Fast Moving Consumer Goods (FMCG), Hotels, Paperboards & Specialty Papers, Packaging, Agri-Business, and Information Technology – and having a market capitalization of over US $40 billion. ITC is rated
Contingent liabilities are disclosed as ______ to the balance sheet.
Gutthi Sharma provided the following information about her firms balance sheet:From the information provided above, what are the firm’s external liabilities?(a) ₹2,000(b) ₹9,000(c) ₹12,000(d) ₹17,000 Cash Accounts receivable Shareholders' equity Accounts payable Project
Classify the following either as – (i) Current assets; (ii) Fixed tangible assets; (iii) Current liabilities; (iv) Non-Current liabilities; or (v) Fixed intangible assets:1. Building2. Patent rights3. Office furniture4. Accrued interest5. Mortgage loan6. Supplier7. Bank
In a travel company, painting a car would be treated as a ___________ expenditure; and music player bought to fit in a car would be a __________ expenditure.(a) Capital; Capital(b) Capital; Revenue(c) Revenue; Revenue(d) Revenue; Capital
Asset losses expected due to non-collection of receivables are called ______.
Discuss the various ways of presenting a balance sheet. Which form of presentation is prescribed by the latest Companies Act in India?
Shiraz Daneshyar was working for the TV Today Network, one of India’s leading news television networks along with Network 18 and NDTV. Its news channels included Aaj Tak (Hindi), Headlines Today (English), Tez (Hindi), and Business Today (English). Please help Shiraz in completing the balance
The modern day Jhola-wala laptop carrying and tobacco-chewing Wharton-returned Professor Rajat Jain was teaching financial accounting course in one of the IIMs. The class was hazaar (means, thousand times) impressed with his smart looks and pony tail-especially the Dance India Dance members
State whether the following statement are True or False:Outsiders’ claim against the business is a residual claim.

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