Subject Code: IMT-57

Subject Name : Financial Accounting

Objective: This course intends to: 1. Develop understating of financial statements including consolidated financial statements; 2. Capture techniques of financial statement analysis; 3. Enables to understand accounting standards; 4. Develop knowledge of using electronic data base containing financial information. Contents : MEANING AND SCOPE OF ACCOUNTING Need for Accounting, Development of Accounting, Definition and Functions of Accounting, Book-Keeping and Accounting, Is Accounting a Science or an Art?, End-Users of Accounting Information, Accounting and Other Disciplines, Role of the Accountant, Branches of Accounting, Difference Between Management Accounting and Financial Accounting, Importance of Accounting ACCOUNTING PRINCIPLES AND STANDARDS Meaning of Accounting Principles, Accounting Concepts, Accounting Conventions, Indian Accounting Standards, Systems of Book-Keeping, Systems of Accounting JOURNALISING TRANSACTIONS Journal, Rules of Debit and Credit, Compound Journal Entry, Opening Entry LEDGER POSTING AND TRIAL BALANCE Ledger, Posting, Relationship Between Journal and Ledger, Rules Regarding Posting, , Trial Balance, Voucher System BANK RECONCILIATION STATEMENT Need for Bank Reconciliation Statement, Meaning and Objective of Bank Reconciliation Statement, Importance of Bank Reconciliation, Technique of Preparing Bank Reconciliation Statement FINAL ACCOUNTS Trading and Profit & Loss Account, Manufacturing Account, Balance Sheet, Adjustment Entries, Worksheet COMPANY FINANCIAL STATEMENTS Meaning and Types of Financial Statements, Nature of Financial Statements, Limitations of Financial Statements, Preparation of Company Financial Statements, Profit and Loss Account, Balance Sheet FINANCIAL REPORTING Meaning of Financial Reporting, Illustrative Example FINANCIAL STATEMENTS: ANALYSIS AND INTERPRETATION Relationship between Analysis and Interpretation, Steps Involved in the Financial, Statements Analysis, Ratio Analysis, Classification of Ratios, Profitability Ratios, Turnover Ratios, Financial Ratios, Advantages of Ratio Analysis, Limitations of Accounting Ratios, Computation of Ratios CASH FLOW STATEMENT Meaning of Cash Flow Statement, Preparation of Cash Flow Statement, Sources of Cash, Difference Between Cash Flow Analysis and Funds Flow Analysis, Utility of Cash Flow Analysis, Limitations of Cash Flow Analysis, AS 3 (Revised): Cash Flow Statements

Notes:
a. b. c. d. Write answers in your own words as far as possible and refrain from copying from the text books/handouts. Answers of Ist Set (Part-A), IInd Set (Part-B), IIIrd Set (Part C) and Set-IV (Case Study) must be sent together. Mail the answer sheets alongwith the copy of assignments for evaluation & return. Only hand written assignments shall be accepted.

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A. First Set of Assignments: B. Second Set of Assignments: C. Third Set of Assignments: D. Forth Set of Assignments:

5 Questions, each question carries 1 marks. 5 Questions, each question carries 1 marks. 5 Questions, each question carries 1 marks. Confine your answers to 150 to 200 Words. Two Case Studies : 5 Marks. Each case study carries 2.5 marks.

ASSIGNMENTS
FIRST SET OF ASSIGNMENTS Marks Assignment-I = 5

PART A
1. What is a Contingent Liability? Where is it shown in the Balance Sheet? Give three examples of Contingent Liabilities? 2. State which of the errors will affect the agreement of the Trial Balance and which will not.Give rectifying journal entries(with full narration) assuming the difference in trial balance has been placed to suspense account a. Purchase of second hand Motor Car for Rs 10000/- has been debited to car maintenance account. b. A sale of Rs 7500/- to Mr A has been wrongly entered in sales day book as Rs 750/c. An entry in the Purchase return book of Rs 3000/- has been omitted to be posted in the account of Mr B the supplier.

d. An amount of Rs 12000 received from Mr X has been posted to the credit of Mrs X a/c as Rs 1200/e. The total of sales Day Book for the month of December Rs 750000/- has been omitted to be posted f. Wages for installation of machinery has been debited to wages account Rs 10000/-

3.

a) Describe operating, financing and investing activities as per AS 3. b) Discuss the provisions of AS 6 regarding the change in the method of Depreciation.

4. Write short notes on the following: a. Money Measurement Concept b. Going Concern Concept 5. Differentiate between a. Capital Expenditure and Revenue Expenditure b. Cash System of accounting and Mercantile System of accounting SECOND SET OF ASSIGNMENTS Assignment-II = 5 Marks

PART B
1. If debits equal credits in the Trial Balance you can be assured that there are no errors in the Trial Balance Comment. 2. Show the effect of the following transactions on the assets, liabilities & capital of Mr Abhay Kumar through the accounting equation: a. He started business with cash of Rs 20000 b. He purchased goods for cash Rs 10000 Financial Accounting. .............................................. Page 2 of 5 ............................................................................... IMT-57

c.

Purchased goods on credit from Mr Mohal Lal for Rs 8000

d. Sold goods for cash costing Rs 8000 for Rs 10000 e. Withdrew Rs1000 from business in cash to pay for his private expenses f. Electricity bill paid for Rs100

g. Rent outstanding Rs400 h. He borrowed Rs 5000 from Mr Lalit i. Purchased goods for cash Rs 2000.

3. The following is the extracts of financial information relate to Curious Ltd. Balance Sheet Particulars Share Capital Reserve and Surplus Loan Fund 2011 10 30 60 100 Fixed Assets(Net) (a) Current Assets: Stocks Debtors Cash & Bank Balances Other Current Assets 30 30 10 30 100 Less: Current Liabilities Net Working Capital(b) Total assets(a+b) Sales (Rs in lakhs) 30 70 100 270 20 30 20 10 80 20 60 90 300 30 2010 10 10 70 90 30

(a) Calculate, for the two years Debt Equity Ratio, Quick Ratio and Working Capital Turnover Ratio; and (b) Find the sales volume that should have been generated in 2011 if the company were to have maintained its Working Capital Turnover Ratio. 4 5 What is a trial balance? Explain its objectives. What do you understand by the expression Corporate Governance and discuss contents of the Report on Corporate Governance. Assignment-III = 5 Marks

THIRD SET OF ASSIGNMENTS

PART C
1. a) Can depreciation be charged on capital work in progress ? Give reasons. b). Discuss the triple column cash book. What are the contra entries Financial Accounting. .............................................. Page 3 of 5 ............................................................................... IMT-57

2. Analysis and interpretation of financial data is the real challenge the financial managers face today. Discuss 3. Define the following a. Price Earnings Ratio b. Debt Equity Ratio 4. Explain the different categories in which the accounting transactions can be classified. Also state the rule of debit and credit in this connection. 5. Prepare the bank reconciliation statement from the following details: a. Balance as per pass book Rs.25000/- (Dr.) b. Cheque deposited but not credited Rs.7000/c. Cheques issued but not presented for payment Rs.5000/-

d. Bank charges and interest levied by bank Rs 250/e. Dividend received credited by bank directly Rs 450/f. Insurance premium paid by bank as per the standing instruction but not accounted for Rs 500/-

g. Amount deposited directly by the customer Rs 2000/h. A bill payable paid by bank on due date Rs 3000/i. A bill receivable which was earlier purchased by bank,dishonoured on due date Rs 5000/Assignment-IV = 2.5 Each Case Study

FOURTH SET OF ASSIGNMENTS

CASE STUDY - I
From the following balance sheets of Alfa Ltd. make out Cash Flow Statement as per AS-3(revised) as on 31st March 2011. LIABILITIES Equity Share Capital Profit & Loss a/c Bank Loan Creditors Outstanding Expenses Provision for Taxation Unclaimed dividend TOTAL 2010 200000 50000 10000 15000 5000 20000 300000 2011 200000 90000 20000 1000 25000 4000 340000 TOTAL 300000 34000 0 Cash Bank Debtors Stock Fixed Assets ASSETS 2010 8000 22000 10000 25000 235000 2011 10000 20000 20000 15000 27500 0

Net Profit for the year after providing Rs 20000 for depreciation was Rs 60000. During the year, company declared equity dividend @ 10%, and paid Rs 15000 as income tax.

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CASE STUDY-II
The following is the Trial Balance of AL Manufacturers Ltd. Prepare (i) Trading Account, (ii) Profit & Loss Account and (iii) Balance Sheet in the form prescribed under the Companies Act, 1956. Trial Balance of M/S ABC Ltd: Dr.(Rs) Authorised Capital 50,000 shares of Rs. 10 each Subscribed Capital 10,000 shares of Rs. 10 each Calls in arrear Land Buildings Plant and machinery Furniture & Fixtures Carriage Inwards Wages Salaries Bad Debt Provision, 1-4-2010 Sales Sales Returns Bank Charges Coal, Gas & water Rates & Taxes Purchases Purchase Returns Bills Receivable General Expenses Sundry Debtors Sundry Creditors Stock, 1-4-2010 Fire Insurance Cash at Bank Cash in hand Securities premium General Reserve 6,400 10,000 25,000 15,000 3,200 2,300 21,400 4,600 1,400 80,000 1,700 100 700 800 50,000 3,400 1,200 1,900 42,800 13,200 25,000 400 13,000 2,500 6,000 24,000 228,000 Cr.(Rs) 500,000

100,000

228,000 You are also to make provisions in respect of the following: (i) Depreciation: @ 5% on Building @ 15% on Plant & Machinery @10% on Furniture & Fixtures (ii) Make a provision of 5% on Sundry Debtors for bad debts. (iii) Carry forward Rs. 120/- for unexpired insurance expenses (iv) Provide for the following outstanding liabilities: (i) Wages: Rs. 3,200/(ii) Salaries: Rs. 500/(iii) Rates & Taxes: 200/(v) The value of closing stock as on 31-3-2011 is Rs. 30,000.

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