Course: Financial Accounting and Analysis

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NMIMS Global Access

School for Continuing Education (NGA-SCE)

Course: Financial Accounting and Analysis

Internal Assignment Applicable for June 2017 Examination

Assignment Marks: 30

Instructions:

·       All Questions carry equal marks.

·       All Questions are compulsory

·       All answers to be explained in not more than 1000 words for question 1 and 2 and for question 3 in not more than 500 words for each subsection. Use relevant examples, illustrations as far as possible.

·       All answers to be written individually. Discussion and group work is not advisable.

·       Students are free to refer to any books/reference material/website/internet for attempting their assignments, but are not allowed to copy the matter as it is from the source of reference.

·       Students should write the assignment in their own words. Copying of assignments from other students is not allowed.

Question 1.  Income statement for the year ended 31st March 17, is as under           (Rs in lacs)                                                                                                       (10 Marks) 

Continued on next page

Answer1.

Question2. The matching concept of accounting suggests that in order to calculate accurate amount of profit or loss for the period the expenses or revenues should be recognized correctly. Thus, it is important to differentiate between the capital and revenue items. Mr. Ramchandani purchased Shaper Jet 3D printer at Rs90000, extra printer cartridges and ink for Rs10000 for his business. Discuss how the expenditure will be treated while preparing the financial statements.  Provided the rate of depreciation on printer and related assets is 10 % p.a.                                                                        (10 Marks)

Answer2.

As per the matching concept of accounting it is important to differentiate between capital and revenue expenditure in order to correctly calculate profit or loss for a period. A capital expenditure is not completely taken in profit and loss calculation for a particular period but is spread over a number of years.

Question3a. TCD Ltd provided Rs50 lacs for inventory obsolescence in 2013-14. In the subsequent year, it was determined that 25 % of such stocks are usable. The accounts manager of the company wants to adjust the same through prior period adjustment account, as the provision was made in the earlier years. Give your opinion whether the contention of the accounts manager is correct or not.                                                                            (5 Marks)

Answer3a.

TCD Ltd provided Rs50 lacs for inventory obsolescence in 2013-14. In the subsequent year, it was determined that 25 % of such stocks are usable.

The contention of the accounts manager is incorrect. As per the accounting standard for Net profit or Loss for the period, prior period items are income or expenses which arise in the current period as a result of errors or omissions in the preparation of the financial statements of one or more prior periods.

Question3b. Rectify the following errors by passing Journal entry.    (5 Marks)                         

·      Paid Rs15000 for advertisement debited to electricity expenses

·      Received Rs250000  on account of cash sales to Jannaak omitted to recorded in the books 

Answer3b.

Paid Rs15000 for advertisement debited to electricity expenses

Original entry-

Electricity Expenses A/c Dr. 15000

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