6 Marks Question

Question 16 Marks

Following balance appear in the books of $M / s$ Anandi as on $1^{\text {st }}$ April 2022:

	₹
Machinery Account	60,000
Provision for depreciation A/c	36,000

On $1^{\text {st }}$ April 2022 , they decided to dispose off machinery for ₹ 8,400 , which was purchased on $1^{\text {st }}$ April 2018 for ₹ $16,000$.
You are required to prepare Machinery Account, Provision for Depreciation Account and Machinery Disposal A/c for the 2022-23. Depreciation was charged at $10 \%$ p.a. on original cost method.

Answer

MACHINERY ACCOUNT
Dr.				Cr.
Date	Particulars	J.F	Amount (₹)	Date	Particulars	J.F.	Amount (₹)
01.04.2022	To Balance b/d		60,000	01.04.2022	By Machinery Disposal A/c		16,000
				31.03.2023	By Balance c/d		44,000
			60,000				60,000

MACHINERY DISPOSAL ACCOUNT
Dr.				Cr.
Date	Particulars	J.F.	Amount (₹)	Date	Particulars	J.F.	Amount (₹)
01.04.2022	To Machinery A/c		16,000	01.04.2022	By Cash A/c – Sale		8,400
				01.04.2022	By Provision For Depreciation A/c		6,400
				01.04.2022	By Profit & Loss A/c - Loss		1,200
			16,000				16,000

PROVISION FOR DEPRECIATION ACCOUNT
Dr.				Cr.
Date	Particulars	J.F.	Amount (₹)	Date	Particulars	J.F.	Amount (₹)
01.04.2022	To Machinery Disposal A/c		6,400	01.04.2022	By Balance b/d		36,000
31.03.2023	To Balance c/d		34,000	31.03.2023	By Depreciation		4,400
			40,400				40,400
				01.04.2023	By Balance b/d		34,000

Working Note:

	₹
Cost	16,000
Less: Depreciation for 2018-19 @ 10%	-1,600
W.D.V.	14,400
Less: Depreciation for 2019-20 @ 10%	-1,600
W.D.V.	12,800
Less: Depreciation for 2021-22 @ 10%	-1,600
W.D.V.	11,200
Less: Depreciation for 2022-2023 @ 10%	-1,600
W.D.V.	9,600
Less: Sale Value	(8,400)
Loss on sale	1,200

In fixed instalment method or straight line method of depreciation amount of depreciation remain the same year after year and always depreciation is calculated on the cost of the asset during the useful life of the asset. The value of asset tends to zero after the useful life of the asset i.e. asset completely written off in its life.

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Question 26 Marks

The following balances appear in the books of Y Ltd.:

	₹
Machinery A/c as on 1-4-2022	8,00,000
Provision for Depreciation A/c as on 1-4-2022	3,10,000

On 1-7-2022, a machinery which was purchased on 1-4-2019 for ₹ $1,20,000$ was sold for ₹ 50,000 and on the same date, another machinery was purchased for ₹ 3,20,000.
The firm has been charging depreciation at $15 \%$ p.a. on Original Cost Method and closes its books on $31^{\text {st }}$ March every year. Prepare the Machinery A/c and Provision for Depreciation $A / c$ for the year ending $31^{\text {st }}$ March 2023.

Answer

MACHINERY ACCOUNT
Dr.			Cr.
Date	Particulars	Amount (₹)	Date	Particulars	Amount (₹)
2022			2022
Apr.01	Balance b/d (6,80,000 + 1,20,000 )	8,00,000	Jul-01	Provision for Depreciation A/c	58,500
July 01	Bank A/c	3,20,000	Jul-01	Bank A/c (Sale)	50,000
			Jul-01	Profit and Loss A/c (Loss on Sale)	11,500
			2023
			Mar.31	Balance c/d	10,00,000
		11,20,000			11,20,000

PROVISION FOR DEPRECIATION ACCOUNT

Date	Particulars	Amount (₹)	Date	Particulars	Amount (₹)
2022			2022
July 01	To Machinery		April 1	By Balance b/d	3,10,000
	(54,000+4,500)	58,500	2022
			July 01	By Depreciation A/c $\left(1,20,000 \times \frac{15}{100} \times \frac{3}{12}\right)$	4,500
			2023
			Mar. 31	By Depreciation A/c I. $\left(6,80,000 \times \frac{15}{100}\right)$	1,02,000
				II. $\left(3,20,000 \times \frac{15}{100} \times \frac{9}{12}\right)$	36,000
2023
March 31	To Balance b/d	3,94,000
		4,52,500			4,52,500

Working Note:-
Value of Machinery =₹ 6,80,000+₹ 1,20,000=₹ 8,00,000
Calculation of Profit and Loss on Sale of machinery:

Particulars	Amount
Value of Machinery on Apr. 01, 2019	1,20,000
Less: Depreciation for 3 years 3 months	58,500
Value of Machinery July 01, 2022	61,500
Less: Sale Value	50,000
Loss on Sale	11,500

Calculation of Depreciation:-
₹ 6,80,000 $\times 15 \%=$ 1,02,000
₹ 1,20,000$\times 15 \% \times \frac{3}{12}$ = ₹ 4,500
₹1,20,000$\times 15 \% \times 3$ years = ₹ 54,000
₹ 3,20,000 $\times \frac{15}{100} \times \frac{9}{12}$ = ₹ 36,000

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Question 36 Marks

An accountant, while balancing his books found that there was a difference of ₹ 270 in the trial balance. Being required to prepare the final accounts he placed the difference to a newly opened Suspense Account, which was carried forward to the next year when the following errors were discovered:
i. Salary for the month of March was posted twice, ₹ 155
ii. Interest on investments collected by the bankers, were posted directly in concerned accounts through the pass book, but no entry was made in the bank column of the cash book ₹ 75
iii. Goods worth ₹ 700 were distributed as free samples but this fact has not been taken into Books.
iv. Rent of ₹ 350 received from Abhi credited both to Rent Account and Abhi Account.
v. A purchase of a chair from Wallmart Furniture Mart for ₹ 65 has been entered in purchases book as ₹ 56
vi. Old Machinery sold to the proprietor Keshav for ₹ 400 was entered in Sales Book as sale to Krishna.
vii. Cash Purchases from Ajit ₹ 189 were recorded in Cash Book as well as in Purchases Book and posted from both.
viii. Closing Stock has been undervalued by ₹ 300
Give necessary rectifying entries and prepare the Suspense Account.

Answer

RECTIFYING JOURNAL ENTRIES
S. No.	Particulars		L.F	Dr. (₹)	Cr. (₹)
(i)	Suspense A/c	Dr.		155
	To Salary A/c				155
	(Salary posted twice in the books now rectified)
(ii)	Bank A/c	Dr.		75
	To Suspense A/c				75
	(Interest collected by the bank not entered in Cash Book now rectified)
(iii)	Advertisement or Free Samples A/c	Dr.		700
	To Purchases A/c				700
	(Goods distributed as free samples not recorded in the books now rectified)
(iv)	Abhi A/c	Dr.		350
	To Suspense A/c				350
	(Rent received wrongly credited to Abhi Account now rectified)
(v)	Furniture A/c	Dr.		65
	To Purchases A/c				56
	To Wallmart Furniture Mart A/c				9
	(Furniture purchased wrongly entered in the purchase book with the wrong amount now rectified)
(vi) (a)	Drawings A/c	Dr.		400
	To Machine A/c				400
	(Old Machinery sold to Proprietor recorded)
(vi) (b)	Sales A/c	Dr.		400
	To Krishna A/c				400
	(Sale of machinery wrongly debited to Krishna's Account reversed)
(vii)	No rectification entry to be passed since correct entry is entered
(viii)	Closing Stock A/c	Dr.		300
	To Trading A/c				300
	(Under-valuation of stock corrected)

SUSPENSE ACCOUNT
Dr.	Cr.
Particulars	J.F	₹	Particulars	J.F	₹
To Difference in Trial Balance (Balancing Figure)		270	By Bank A/c		75
To Salary A/c		155	By Abhi		350
		425			425

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Question 46 Marks

Correct the following errors: (1) without Suspense Account and (2) with Suspense Account:
i. Sales Book has been totalled ₹ 8,000 short.
ii. Goods of ₹ 1,500 returned by Shivam & Co., have not been recorded.
iii. Goods purchased of ₹ 2,500 was posted to debit of the supplier, Ram.
iv. Furniture purchased from Pink & Co., of ₹ 10,000 has been entered in Purchases Book.
v. Cash received from Aniket ₹ 3,500 has not been posted in his account. Also prepare Suspense Account.

Answer

I. Without Suspense Account:
i. Since Sales Book has been casted (totalled) short by ₹ 8,000 , Sales Account has been credited short by ₹ 8,000 . The correcting entry is to credit the Sales Account by ₹ 8,000 as "By wrong totalling of the Sales Book ... ₹ 8,000 "
ii. To rectify the omission, Returns Inward Account has to be debited and the account of Shivam \& Co. credited. The entry:

Returns Inward A/c	..Dr.	₹ 1500
To Shivam & Co.			₹ 1500
(goods returned by the firm, previously omitted from the Returns Inward Book)

iii. Ram has been debited ₹ 2,500 instead of being credited. His account should now be credited by ₹ 5,000 to remove the wrong debit and to give the correct credit. The entry will be on the credit side "By error in posting ... ₹ 5,000 ".
iv. By this error, Purchases Account has been debited by ₹ 10,000 whereas the debit should have been to the Furniture Account. The rectifying entry will be:

Furniture A/c	Dr.	₹ 10,000
To Purchases A/c			₹ 10,000
(correction of the mistake by which Purchases Account was debited instead of the Furniture Account)

v. Cash received from Aniket of ₹ 3,500 has not been credited to his account. For the rectification of this error, Aniket's Account should be credited as follows:

Aniket's ACCOUNT
Dr.							Cr.
Date	Particulars	J.F.	₹	Date	Particulars	J.F.	₹
					By Omission of Posting		3,500

II. With Suspense Account:

Date	Particulars		L.F	Dr. (₹)	Cr. (₹)
(i)	Suspense A/c	...Dr.		8,000
	To Sales A/c (correction arising from undercasting of Sales Book)				8,000
(ii)	Returns Inward A/c	...Dr.		1,500
	To Shivam & Co. (recording of goods returned by Shivam & Co., a customer)				1,500
(iii)	Suspense A/c	...Dr.		5,000
	To Ram (correction of the error by which Ram were debited instead of being credited by ₹2,500)				5,000
(iv)	Furniture A/c	...Dr.		10,000
	To Purchases A/c (correction of recording purchase of furniture as ordinary purchases)				10,000
(v)	Suspense A/c	...Dr.		3,500
	To Aniket (cash received from Aniket, now posted to his account)				3,500

(ii)

SUSPENSE ACCOUNT
Dr.							Cr.
Date	Particulars	J.F.	₹	Date	Particulars	J.F.	₹
	To Sales A/c		8,000		By Difference in		16,500
	To Ram		5,000		Trial Balance
	To Aniket		3,500		(Balancing Figure)
			16,500				16,500

Notes:
i. One should note that the opening balance in the Suspense Account will be equal to the difference in the Trial Balance.
ii. If the question is silent as to whether a Suspense Account has been opened or not, the student should make his assumption, state it and then proceed.

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Question 56 Marks

Record necessary Journal entries assuming CGST @ $5 \%$ and SGST @ $5 \%$ and all transactions are occurred within Delhi)
i. Shobit bought goods $₹ 1,00,000$ on credit
ii. He sold them for $₹ 1,35,000$ in the same state on credit
iii. He paid for Railway transport ₹ 8,000
iv. He bought computer printer for $₹ 10,000$
v. Paid postal charges ₹ 2000

Answer

Journal
Date	Particulars		L.F	Dr. (₹)	Cr. (₹)
(i)	Purchases A/c	Dr.		1,00,000
	Input CGST A/c	Dr.		5,000
	Input SGST A/c	Dr.		5,000
	To Creditors A/c				1,10,000
	(Goods bought on credit)
(ii)	Debtors A/c	Dr.		1,48,500
	To Sales A/c				1,35,000
	To Output CGST A/c				6,750
	To Output SGST A/e				6,750
	(Goods sold on credit)
(iii)	Transport Charges A/c	Dr.		8000
	Input CGST A/c	Dr.		400
	Input SGST A/c	Dr.		400
	To Bank A/c				8,800
	(transport charges paid)
(iv)	Computer printer A/c	Dr.		10,000
	Input CGST A/c	Dr.		500
	Input SGST A/c	Dr.		500
	To Bank A/c				11,000
	(Computer-Printer bought)
(v)	Postal charges A/c	Dr.		2000
	Input CGST A/c	Dr.		100
	Input SGST A/c	Dr		100
	To Bank A/c				2200
	(Paid for Portage)
(vi)	Output CGST A/c	Dr.		6,7503
	Output SGST A/c	Dr.		6750⁴
	To Input CGST A/c				6000¹
	To Input SGST A/c				6000²
	To Electronic Cash Ledger A/c				1500
	(GST set off and balance paid)

Working Notes :-
Total Input CGST =₹ 5,000+₹ 400+₹ 500+₹ 100=₹ $6,000^1$
Total Input SGST =₹ 5,000+₹ 400+₹ 500+₹ 100=₹ $6,000^2$
Total Output CGST =₹ $6,750^3$
Total Output SGST =₹ $ 6,750^4$
Net CGST Payable =₹ 6,750-₹ 6,000=₹ 750
Net SGST Payable =₹ 6,750-₹ 6,000=₹ 750

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Question 66 Marks

What is a journal? Give a specimen of journal showing at least five entries.

Answer

A journal is a book of original entries that records transactions as they take place, such an entry into the journal must contain a source document. Maintaining a journal ensures all transactions are recorded and in one place and debit and credit for each transaction are linked properly. A journal consists of the following sections:
Business started with cash ₹ 10,000
Goods purchased from Ramesh for ₹ 2,000
Stationary purchased for cash for ₹ 200
Opened a bank account for ₹ 3,000
Goods sold to Sakshi for ₹ 1,000
Received a cheque of ₹ 1,000 from Suresh

Journal Entry
Date	Particulars		L.F	Debit (%)	Credit (%)
	Cash A/c	Dr.		10,000
	To Capital A/c				10,000
	(Business started with cash)
	Purchases A/c	Dr.		2,000
	To Ramesh A/c				2,000
	(Goods purchased on credit)
	Stationary A/c	Dr.		2,00
	To Cash A/c				2,00
	(Purchase of Stationary for cash)
	Bank A/c	Dr.		3,000
	To Cash A/c				3,000
	(Opened a bank account)
	Sakshi A/c	Dr.		1,000
	To Sales A/c				1,000
	(Goods sold to Suresh on credit)
	Bank A/c	Dr.		1,000
	To Suresh A/c				1,000
	(Cheque received from Suresh)
	Total c/f			17,200	17,200

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Account 6 Marks Question

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