I. Given here are a few situations:

    a.       Personal and business transactions are separately maintained.

    b.      Inventory is recorded at its purchase price.

    c.       The death of the chief executive officer of the company is not recorded in accounts.

    d.      In case of doubt, it is considered better to understate rather than overstate income.

    e.       Assets are not stated at their liquidation value.

    f.       Financial Statements are prepared on an annual basis.

    g.      Expenses are recognized in the same period as the related revenues.

    h.      Revenue is recognized when it is earned and expense is recognized when it is incurred.

    i.     The accounting records only events that affect the financial position of the entity and at the same time can be reasonably determined in monetary terms.

    j.        Same treatment is given to comparable transactions from period to period.

 

   REQUIRED

   State the accounting assumption or principle that describes each of the given situations.

 

  II. The manager of a company who did not have proper accounting knowledge prepared the following balance sheet. He has wrongly classified the items under assets, liabilities and ownersâ equity.

 

 Ownerâs Equity and Liabilities

Rs

     Assets

Rs

Share Capital

10,00,000

Retained Earnings

5,00,000

Equipment

9,00,000

Land and Buildings

7,00,000

Cash

2,00,000

Long â term loan

4,00,000

 

 

Accounts Payable

2,00,000

 

 

Accounts Receivables

3,00,000

 

21,00,000

 

21,00,000

 

 REQUIED:

 Prepare the correct Balance sheet.

    III.      Using Accounting Equation, Answer the following independent Questions.

 a)      New Companyâs assets are Rs 250 lakh and its external liabilities are of Rs 100 lakh, determine the amount of ownerâs Equity.

   b)  Royal Industries has total assets of Rs 100 lakh and ownersâ Equity of Rs 70 lakh, Compute the amount of external liabilities.

    c)      Small Enterprise has following amounts appearing in Balance Sheet as at 31^st December, 2015:

   Capital Rs 50 lakh, Reserves and undistributed profits Rs 15 lakh, and total external liabilities Rs 35 lakh, Determine the amount of total assets.

 

    IV.      Journalize the following transactions, Post them into ledger account and Prepare a Trial Balance

   2015

   March â 1 Commenced business with cash Rs.1,00,000

   March â 2 Purchased goods for cash Rs. 25,000

   March â 3 Purchased furniture for cash Rs. 6,000

   March â 5 Purchased goods from Suresh on credit Rs. 5,000

   March â 7 Sold goods for cash Rs. 30,000

   March â 10 Sold goods to Mahesh on credit Rs. 25,000

   March â 12 Returned goods to Suresh Rs. 500

   March â 13 Mahesh returned us goods worth Rs. 500

   March -15 Paid Rs. 4,450 to Suresh by cheque in full settlement of his account

   March â 20 Received a cheque of Rs. 24,450 from Mahesh and gave a discount of Rs. 50

   March â 25 Withdrew cash for personal use Rs. 2,500

   March â 28 Paid rent of Rs. 5,000 and Salary Rs. 6,000 by cheque