Financial Accounting -II (C1BC230211T)

1st year, B.Com (Evening) Date:03.03.2025

Semester 2 Time:1 hr.30mins
Full Marks: 40
Section A (Answer any 4 out of 6 questions) (5 marks each)
Q1. Q1) Give Journal Entries in the books of Branch A to rectify or adjust the following:
[4X1]
(i) Head Office expenses ₹4,500 allocated to the Branch, but not recorded in the
Branch Books.
(ii) Depreciation of branch assets, whose accounts are kept by the Head Office, not
provided earlier for ₹1,000.
(iii) Branch paid ₹3,000 as salary to a H.O. Inspector, but the amount paid has been
debited by the Branch to Salaries account.
(iv) H.O. collected ₹12,000 directly from a customer on behalf of the Branch, but no
intimation to this effect has been received by the Branch.

1. Journal Entries

Dr. Amount Cr. Amount

Particulars
(₹) (₹)
(i) Expenses Account Dr. 4,500
To Head Office Account 4,500
(Being the allocated expenditure by the head office recorded in
branch books)
(ii) Depreciation Account Dr. 1,000
To Head Office Account 1,000
(Being the depreciation provided)
(iii) Head Office Account Dr. 3,000
To Salaries Account 3,000
(Being the rectification of salary paid on behalf of H.O.)
(iv) Head Office Account Dr. 12,000
To Debtors Account 12,000
(Being the adjustment of collection from branch debtors)

2 Given below is the financial information for the Jammu branch of Hindustan Industries –
Delhi Head Office for the year ending 31st March 2024. (2+2)
1. Goods are sent to the branch at a wholesale price at cost plus 20%.
2. The sale price is cost plus 50%.
 3. Other information:

Particulars Amount (₹)

Stock as on 01.04.2023 (invoice price) 2,20,000

Goods sent during the year (invoice price) 11,00,000

Sales during the year 12,00,000

Expenses incurred at the branch 45,000

Ascertain in books of Hindustan Industries- Delhi Head office :

(i) The Gross profit from Branch stock Account (Wholesale price)
(ii) The Net profit from Branch Profit and Loss Account;
Ans 2)
i)
In the books of Best New Delhi
Branch stock Account (Wholesale price)

Amount Amount
Particulars Particulars
(₹) (₹)

To Opening Stock 2,20,000 By Sales 12,00,000

By Closing Stock (Refer

To Goods sent to branch 11,00,000 3,60,000
W.N.)

To gross Profit (Bal.

2,40,000
fig.) (2)

Total 15,60,000 Total 15,60,000

Branch Profit and Loss Account

Particulars Amount (₹) Particulars Amount (₹)

To Expenses 45,000 By To gross Profit 2,40,000

To Net Profit (2) 1,95,000

Total 2,40,000 Total 2,40,000

Working Note:
Particulars ₹

Cost Price 100

Invoice Price 120

Sale Price 150

Calculation of closing stock at invoice price

Particulars ₹

Opening stock at invoice price 2,20,000

Goods received during the year at invoice price 11,00,000

Total 13,20,000

Less: Cost of goods sold at invoice price (9,60,000)

(Calculation: ₹12,00,000 × (120/150))

Closing Stock 3,60,000

Q3) a) Following notes pertain to the Balance Sheet of Mars Company Limited as at 31st
March 2022: (2 marks)

Particulars ₹

Authorised capital:

50,000 12% Preference shares of ₹10 each 5,00,000

5,00,000 Equity shares of ₹10 each 50,00,000

Total Authorised Capital 55,00,000

Issued and Subscribed capital:

50,000 12% Preference shares of ₹10 each fully paid 5,00,000

4,00,000 Equity shares of ₹10 each, ₹8 paid up 32,00,000

Reserves and Surplus:

General Reserve 1,60,000

Capital Redemption Reserve 2,40,000

Particulars ₹

Securities Premium (collected in cash) 2,75,000

Revaluation Reserve 1,00,000

Profit and Loss Account 16,00,000

On 1st April 2022, the company made the final call of ₹2 each on 4,00,000 equity shares. The
call money was received by 25th April 2022. Thereafter, on 1st May 2022, the company
decided to capitalize its reserves by issuing bonus shares at the rate of one share for every
four shares held, ensuring minimum reduction in free reserves.
Show necessary journal entries in the books of the company for bonus issue.

Ans 3a) Journal Entries in the books of Mars Ltd.

2022 Particulars Dr. ₹ Cr. ₹

April
Equity Share Final Call A/c Dr. 8,00,000
1

To Equity Share Capital A/c 8,00,000

(Final call of ₹2 per share on 4,00,000 equity shares made due)

(0.5 marks)

April
Bank A/c Dr. 8,00,000
25

To Equity Share Final Call A/c 8,00,000

(Final call money on equity shares received) (0.5 marks)

May 1 Capital Redemption Reserve A/c Dr. 2,40,000

Securities Premium A/c Dr. 2,75,000

General Reserve A/c Dr. 1,60,000

Profit and Loss A/c (b.f.) Dr. 3,25,000

To Bonus to Shareholders A/c 10,00,000

(Bonus issue of one share for every four shares held, by utilising
various reserves as per Board’s resolution dated ……….) (1
mark)
2022 Particulars Dr. ₹ Cr. ₹

Bonus to Shareholders A/c Dr. 10,00,000

To Equity Share Capital A/c 10,00,000

(Capitalisation of profit)

Q3 b) The following is the abstract of the Balance Sheet of Tata Ltd. as on 31.03.2024: (2
marks)
Issued and Paid-up Capital:
 20,000 Equity Shares of ₹20 each fully paid-up - ₹4,00,000
Reserves and Surplus:
 Securities Premium - ₹30,000
 General Reserve - ₹1,00,000
 Profit and Loss Account - ₹80,000
At the annual general meeting of the company, the following resolutions were passed:
- To give existing shareholders the option to purchase three Rights shares at ₹28 per
share for every five shares held
All the shareholders took up the option of Rights shares.
Show appropriate journal entries to record the above transactions in the books of Tata Ltd.
Ans 3b)

2024 Particulars Dr. ₹ Cr. ₹

April
Bank A/c Dr. 3,36,000
1

To Equity Share application A/c 3,36,000

(Being application money received for 12,000 rights equity share

@ Rs 28) (1 mark)

April Equity Share application A/c Dr. 3,36,000

To Equity Share capital A/c 2,40,000

To Securities premium A/c 96,000

2024 Particulars Dr. ₹ Cr. ₹

(Being issue of 12,000 equity shares of Rs 10 at a premium of Rs

4 per share) (1 mark)

Q4) State four points of difference between Departmental and Branch accounting (4)
Ans 4) Theory

Basis of distinction Branch Accounts Departmental Accounts

1. Maintenance of Branch accounts may be maintained Departmental accounts are

accounts either at branch or at head office. maintained at one place only.

Common expenses are

2. Apportionment As expenses in respect of each branch distributed among the
of common can be identified, so the apportionment departments concerned on some
expenses problem never arises. equitable basis considered
suitable in the case.

Reconciliation of head office and

branch accounts is necessary in case of
3. Reconciliation branches maintaining independent Such problem never arises.
accounting records at the end of the
accounting year.

4. Conversion of At the time of finalization of accounts,

foreign currency conversion of figures of foreign branch Such problem never arise
figures is necessary.

Q5) A Bombay head office passes one entry at the end of each month to adjust the position
arising out of inter-branch transactions during the month. From the following inter-branch
transactions in April, 2024, make the entry in the books of Bombay head office. (4)
(a) Gurgaon branch:
(i) Received goods from Pune branch ₹ 4,500 and Rajkot branch ₹ 3,000.
(ii) Sent goods to Rajkot branch ₹ 7,500 and Pune branch ₹ 6,000.
(iii) Received bills receivable from Rajkot branch ₹ 4,500.
(iv) Sent acceptances to Pune branch ₹ 3,000 and Rajkot branch ₹ 1,500.
(b) Meerut branch (apart from (a) above):
(i) Received goods from Pune branch ₹ 7,500 and Gurgaon branch ₹ 3,000.
(ii) Cash sent to Pune branch ₹ 1,500 and Gurgaon branch ₹ 3,000.
(c) Pune branch (apart from (a) and (b) above):
(i) Sent goods to Rajkot branch ₹ 4,500.
(ii) Received bills receivable from Rajkot branch ₹ 4,500.
(iii) Received cash from Rajkot branch ₹ 2,500.
Ans 5) In the books of the Head Office
Journal

Date Particulars L.F. Dr. ₹ Cr. ₹

2015 April 30 Meerut Branch A/c Dr. 6,000

Pune Branch A/c Dr. 1,000

To Gurgaon Branch A/c 6,000

To Rajkot Branch A/c 1,000

(Being the adjustment for branch transactions)

[ 2 marks for correct Journal & 2 marks for finding balance of 4 city branch)

Workings
Statement Showing Inter-Branch Transactions

Gurgaon Gurgaon Meerut Meerut Pune Pune Rajkot Rajkot

Branches
Dr. ₹ Cr. ₹ Dr. ₹ Cr. ₹ Dr. ₹ Cr. ₹ Dr. ₹ Cr. ₹

Gurgaon

Goods received 7,500 4,500 3000

Goods sent 13,500 6,000 7,500

Bills
Receivable 4,500 4,500
received

Bills Payable
4,500 3,000 1500
accepted

Meerut

Goods received 3,000 10,500 7,500

Cash sent 3,000 4,500 1,500

Pune
 Gurgaon Gurgaon Meerut Meerut Pune Pune Rajkot Rajkot
Branches
Dr. ₹ Cr. ₹ Dr. ₹ Cr. ₹ Dr. ₹ Cr. ₹ Dr. ₹ Cr. ₹

Goods sent 4,500 4,500

Bills
Receivable 4500 4500
received

Cash received 2500 2500

TOTAL 15,000 21,000 10,500 4,500 17,500 16,500 13,500 14,500

Balance 6,000 - - 6,000 - 1,000 1,000 -

21,000 21,000 10,500 10,500 17,500 17,500 14,500 14,500

Q6) On 1st January, 2022, Banerjee & Co. purchased a motor car from Automobile Co. on
the hire purchase system. At the time of agreement, a sum of ₹ 12,000 was paid out of the
cash down price of the car and the balance was payable in 3 equal annual instalments together
with interest @ 5% p.a. The amount of each instalment including interest was ₹16,800. You
are required to calculate the total cash price of the truck and the interest paid with each
instalment. (4)
Ratio of interest and amount due =
5/ 105 = 1/21
(2) Calculation of Interest and Cash Price

No. of Amount due at the time of

Interest Cash price
instalments instalment

₹ 16,000 (1
3rd 16,800 1/21 of ₹ 16,800 = ₹ 800
mark)

1/21 of ₹ 32,800 = ₹ ₹ 31,238 (1

2nd ₹ 32,800
1,562 mark)

1/21 of ₹ 48,038 = ***₹ ₹ 45,750 (1

1st ₹ 48,038
2288 mark)

Total Cash Price = ₹ 45,750+ ₹ 12,000 = ₹ 57,750. (1 mark)

₹ 16,000 + ₹ 16,800 = ₹ 32,800;
₹ 31,238 + ₹ 16,800 = ₹ 48,038.

Q7) On 1st January 2023, Hari Om purchased a machine on hire purchase from Fan Motor
Co. Ltd. for ₹ 5,60,000. Down payment of ₹ 1,50,000 is made. First instalment of ₹ 1,50,000
made at the end of the year on 31.12.2023. Rate of interest is charged at 5% p.a. Hari Om
depreciates the machine at 10% p.a. on written-down value method. Due to financial
difficulties Hari Om after having paid the down payment and 1st instalment at the end of the
first year could not pay the 2nd instalment at the end of second year. Fan Motor Co. Ltd. took
possession of the machine on 31.12.2024 and sold it for ₹ 3,01,100 on the same date. You are
required to prepare: (a) Hari Om Account & (b) Goods Repossessed Account in the books of
the Fan Motor Co. Ltd. (3+1)
Ans 7 In the books of Fan Motor Co. Ltd.
Hari om Account
Date Par culars Amount (₹) Date Par culars Amount (₹)

01.01.2023 To H.P. Sales 5,60,000 01.01.2023 By Bank A/c 1,50,000

A/c

31.12.2023 To Interest 20,500 31.12.2023 By Bank A/c 1,50,000

A/c

31.12.2023 By Balance 2,80,500

c/d (1
marks)
Total 5,80,500 Total 5,80,500

01.01.2024 To Balance 2,80,500 31.12.2024 By Goods 2,94,525

b/d Repossessed
A/c (1
marks)
31.12.2024 To Interest 14,025
A/c (1
marks)
Total 2,94,525 Total 2,94,525

Goods Repossessed Account

Date Par culars Amount (₹) Date Par culars Amount (₹)

31.12.2024 To Hari Om 2,94,525 31.12.2024 By Bank A/c 3,01,100

A/c (Sale of
repossessed
bus)

31.12.2024 To Profit & 6,575

Loss A/c (1
marks)
 Total 3,01,100 Total 3,01,100

Q8) State the basis of allocation of Departmental expenses (4X1)

 Rents, rates and taxes – Floor area occupied by each department
 Provident Fund contribution- Wages and salaries of each department
 Carriage inward- purchases of each department
 Labour Welfare expenses- No. of employees in each department

Section B (Answer any 2 out of 3 questions) (10 marks each)

Q9 ) From the following balance extracted from the books of B.N. Pai, prepare Departmental
Trading Account and General Profit and Loss Account for the year ended 31st October, 2024:

Particulars Dr. ₹ Cr. ₹

1. Capital 6,00,000

2. Land and Building 2,50,000

3. Furniture 50,000

4. Opening Stock:

Dept A 60,000

Dept B 80,000

5. Purchases:

Dept A 20,00,000

Dept B 30,00,000

6. Sales:

Dept A 40,00,000

Dept B 64,00,000

7. General Expenses 28,00,000

8. Sundry Debtors 4,00,000

9. Sundry Creditors 2,00,000

10. Drawings 5,60,000

11. Cash and Bank 20,00,000

Particulars Dr. ₹ Cr. ₹

Total 1,12,00,000 1,12,00,000

Additional Information:
i) The closing stock of Department A is ₹2,60,000, which includes goods transferred
from Department B valued at ₹80,000. Similarly, the closing stock of Department B is
₹5,20,000, including goods transferred from Department A valued at ₹1,80,000. Both
departments have valued their closing stock at cost, except for the portion arising
from interdepartmental transfers.
ii) Sales of Dept A include transfer of goods to Dept B of value ₹4,00,000 and sales of
Dept B include transfer of goods to Dept A of value ₹6,00,000 both at market price to
transferor Dept.
iii) The opening stock of Department A includes goods valued at ₹20,000 transferred
from Department B, while the opening stock of Department B includes goods valued
at ₹30,000 transferred from Department A, both recorded at the cost to the transferor
department.
iv) Depreciate land and building by 5% and furniture by 10% p.a. Unallocated expenses
are not transferred to individual departments.

Ans 9) B.N. Pai

DEPARTMENTAL TRADING ACCOUNT

for the year ended 31.10.2025

Particulars Dept A ₹ Dept B ₹ Total ₹ Particulars Dept A ₹ Dept B ₹ Total ₹

To Opening
60,000 80,000 1,40,000 By Sales* 36,00,000 58,00,000 94,00,000
Stock
By
Transfers-
To
14,00,000 26,00,000 40,00,000 goods 6,00,000 —
Purchases*
transferred to
Dept A
To By
Transfers- Transfers-
Goods 6,00,000 goods 4,00,000
from Dept transferred to
B Dept A
To
Transfers-
By Closing
Goods 4,00,000 — 2,60,000 5,20,000 7,80,000
Stock
from Dept
A
To Gross
22,00,000 38,40,000 60,40,000
Profit c/d
 Particulars Dept A ₹ Dept B ₹ Total ₹ Particulars Dept A ₹ Dept B ₹ Total ₹
42,60,000 69,20,000 101,80,000 Total 42,60,000 69,20,000 101,80,000

GENERAL PROFIT AND LOSS ACCOUNT

for the year ended 31.10.2025

Total Total
Particulars Total ₹ Particulars Total ₹
₹ ₹
By Gross profit
b/d 22,00,000
To General Expenses 28,00,000
Dept A 38,40,000

Dept B
To Depreciation
12500
Land (5% of 2,50,000)-
5000
Building (10% of 50,000)
To Reserve on closing stock
99,000
Transfer from Dept A
48,000
Transfer from Dept B
To Net profit transferred to capital
30,75,500
A/c
60,40,000 60,40,000

The unrealised profit on interdepartmental transfers is determined as under:

Transfers included in [closing stock X Gross profit/ (sales +transfer)]

Dept A= [80,000* 38,40,000/ (58lac+6lac)]= Rs 48,000

Dept B= [1,80,000 * 22,00,000/(36 lac+ 4lac)]= Rs 99,000

[2 marks per adjustment ; Gross profit – 1 mark; Net profit – 1 mark]

Q10) Varun Transport Agency purchased 2 motor vans costing ₹ 40,000 each from Deva Auto
Company on 1st January 2022, on the hire purchase system. The terms of payment were as
follows:
Payment of ₹ 10,000 each for motor van on delivery. Remainder in three equal instalments
together with interest 10% p.a. to be paid at the end of each year.
Varun Transport Agency write-off 20% depreciation each year on the diminishing balance
method. The hire purchaser paid two instalments due on 31st December 2022 and 2023 but
could not pay the final instalment.
Deva Auto Company re-possessed one motor van adjusting its value against the amount due.
The re-possession was done on the basis of 25% depreciation on the Fixed Instalment
Method.
Write-up the Motor Van Account and Deva Auto Company Account in the books of Varun
Transport Agency.
Ans 10) In the books of Varun Agency

Motor Van Account

Date Particulars ₹ Date Particulars ₹

To Deva Auto
1.1.2022 80,000 31.12.2022 By Depreciation A/c (1 marks) 16,000
Co. A/c

31.12.2022 By Balance c/d 64,000

1,60,000 1,60,000

1.1.2023 To Balance b/d 64,000 31.12.2023 By Depreciation A/c (1 marks) 12,800

31.12.2023 By Balance c/d 51,200

64,000 64,000

1.1.2024 To Balance b/d 51,200 31.12.2024 By Depreciation A/c 10,240

By Deva Auto Co A/c (Agreed value

10,000
of van returned)

By Profit & Loss A/c (Note 2) (2

10,480
marks)

By Balance c/d (W.D.V. of one

Motor Van still in possession) (2 20,480
marks)

51,200 51,200

Deva Auto Company Account

Date Particulars ₹ Date Particulars ₹

1.1.2022 To Bank A/c (Down payment) 20,000 1.1.2022 By Motor Van A/c 80,000

To Bank A/c (₹ 20,000 + 6,000)

31.12.2022 26,000 31.12.2022 By Interest A/c 6,000
(1 marks)

31.12.2022 To Balance c/d 40,000

86,000 86,000

To Bank A/c (₹ 20,000 + 4,000)

31.12.2023 24,000 1.1.2023 By Balance b/d 40,000
(1 marks)

31.12.2023 To Balance c/d 20,000 31.12.2023 By Interest A/c 4,000

44,000 44,000

31.12.2024 To Motor Van A/c 10,000 1.1.2024 By Balance b/d 20,000

31.12.2024 To Balance c/d (2 marks) 12,000 31.12.2024 By Interest A/c 2,000

22,000 22,000

Working Notes:
(1) Book Value of Motor Van repossessed

Description ₹

Cost of the Van on 1.1.2022 40,000

Less: Depreciation of 2022 @ 20% 8,000

W.D.V. on 1.1.2023 32,000

Less: Depreciation of 2023 @ 20% 6,400

W.D.V. on 1.1.2024 25,600

Less: Depreciation of 2024 @ 20% 5,120

Book value on 31.12.2024 20,480

(2) Loss on Repossession of one Van

Description ₹

Cost of the Van on 1.1.2022 40,000

Description ₹

Less: Depreciation for 2022, 2023 & 2024 @ 25% on the fixed instalment method 30,000

Agreed value 10,000

Book value 20,480

Less: Agreed value (as above) 10,000

Loss on repossession 10,480

Q11) A Company with its head office at Calicut has a branch at Nagercoil. Goods are
invoiced to the branch at cost plus 33 1/3%. The following information is given in respect of
the branch for the year ended 31st March, 2024:

Details ₹ Details ₹

Goods Sent to
branch (Invoice 2,40,000 Discount allowed 500
value)

Stock at branch
(1.4.2023) at 12,000 Bad debts 750
invoice price

Stock at branch
Cash sales 90,000 (31.3.2024) at invoice 24,000
price

Returns from Branch Debtors’

3,000 18,250
Debtors balance (31.3.2024)

Branch expenses Collections from

26,750 1,35,000
paid for cash Debtors

Branch Debtors’
Branch Debtors’
15,000 cheques returned 2500
balance (1.4.2023)
dishonoured

You are required to prepare the Branch Stock Account, Branch Debtors’ Account and
the Branch Adjustment Account to reveal the profit of the branch for the year 2023-
24.

Ans 11) In the books of Head Office, Calicut

Nagercoil Branch Stock Account

Dr. Cr.
Date Particulars ₹ Date Particulars ₹
 Dr. Cr.
1.4.2014 To Balance b/d 12,000 31.3.2015 By Bank A/c (cash sales) 90,000
To Goods Sent to By Nagercoil Branch
31.3.2015 2,40,000 1,40,000
Branch A/c Debtors A/c (Note 1)
To Nagercoil Br.
By Shortage-in-stock A/c
Debtors A/c (Returns) 3,000 1,000
(Balancing figure) (2 marks)
(1 marks)
By Balance c/d 24,000
2,55,000 2,55,000

Dr. Nagercoil Branch Debtors Account Cr.

Date Particulars ₹ Date Particulars ₹

By Bank A/c
1.4.2014 To Balance b/d 15,000 31.3.2015 1,35,000
(Collection)
To Bank A/c (Dishonour of By Nagercoil Branch
31.3.2015 2,500 3,000
cheques) (1 mark) Stock A/c
To Nagercoil Branch Stock By Nagercoil Branch
1,40,000
A/c (Note 1) (2 marks) Debtors A/c
Bad debt 750
Discount allowed 500
By Balance c/d 18,250
1,57,500 1,57,500

Dr. Nagercoil Branch Adjustment Account Cr.

Date Particulars ₹ Date Particulars ₹

To Branch Expenses A/c By Stock Reserve A/c
31.3.2015 28,000 1.4.2014 3,000
(Note 3) (Note 2) (1 marks)
To Shortage-in-stock A/c By Goods Sent to Branch
1,000 60,000
(Note 4) A/c (Note 2) (1 marks)
To Stock Reserve A/c (Note
6,000
2) (1 marks)
To Net Profit (Trans. to
General P & L A/c) (1 28,000
marks)
63,000 63,000

Working Notes:

1. Credit sales have not been given; hence, the balancing figure of the Branch Debtors
Account is taken as credit sales.
2. Loading is 33 1/3% on cost (or 1/4 on invoice value). Therefore:
o Loading on opening stock: ₹12,000/4 = ₹3,000
o Loading on goods sent: ₹2,40,000/4 = ₹60,000
o Loading on closing stock: ₹24,000/4 = ₹6,000
3. Total branch expenses = Cash expenses ₹26,750 + Bad Debts ₹750 + Discount ₹500 =
₹28,000
4. When no separate Branch Profit and Loss Account is prepared, the shortage or surplus
in stock is transferred to the Branch Adjustment Account.
o If separate accounts are prepared, loading is transferred to the Branch
Adjustment Account and cost to the Branch Profit and Loss Account.