Explain why these two principles are contradicting each other. Your answer should be substantiated with relevant examples. (10 Marks)
2. Explain any two types of errors that are disclosed by trial balance with examples and rectification entry.
Note - Avoid giving examples given in the self learning material. (10 marks)
Nov 2010
3. Let us assume you have been recently appointed as Management Accountant of a small but upcoming firm. Your immediate supervisor has asked you to prepare certain financial ratios from the balance sheet of one of their clients M/s Vinod Enterprise.
Liabilities Amount Assets Amount
Equity Share Capital 50000 Fixed assets 87500
8% Pref Share Capital 10000 Investments 25000
Reserve Fund 40000 Stock 30000
6% Debentures 20000 Sundry Debtors 13500
Sundry Creditors 30000 Bank Balance 7000
P & L account
Year 2000 - 1000
2001 - 20000
21000
Preliminary expenses 8000
Total 171000 Total 171000
The director intent to transfer a sum of Rs.5000 out of the current year’s profit to provision for tax. The financial ratios needed are:
a. Return on capital employed
b. Current ratio
c. Fixed assets to networth
d. Debt - Equity ratio
e. Return on owner’s capital. (10 Marks)
4. A friend of you has approached to help him out in setting his books of accounts in order.
Unfortunately he is struck with difference in trial balance. Help him in redrafting the trial balance. (5 Marks)
Sl.no Particulars Dr Cr
1 Stock on 31st Dec,2008 1,92,100
2 Capital 13,450
3 Cash in hand 1,400
4 Bank Overdraft 9,320
5 Sales 2,36,400
6 Purchases 106,400
7 Returns inward 13,400
8 Returns outward 2,960
9 Carriage outward 2,360
10 Carriage inward 14,260
11 Salaries 9,600
12 Wages 3,660
13 Sundry debtors 16,300
14 Sundry creditors 37,360
15 Stock on