Institute of Chartered Financial Analysts of India (ICFAI) University 2007 Certification Finance Financial Accounting – I (111) : - Question Paper

Rs.44,500
(c)
Rs.53,500
(d)
Rs.54,000
(e)
Rs.52,500.
(2 marks)
< ans >
74.
Consider the subsequent particulars pertaining to the sole proprietor business of Mr. Agarwal:
Particulars
As on April 01, 2005 (Rs.)
As on March 31, 2006 (Rs.)
Capital
3,50,000
?
Loan from bank
1,75,000
1,25,000
Sundry creditors
25,000
35,000
Fixed assets
2,75,000
2,55,000
Inventory
1,50,000
1,75,000
Sundry debtors
70,000
90,000
Cash and bank
55,000
85,000
The profit for the year 2005-2006 was
(a)
Rs.4,45,000
(b)
Rs. 55,000
(c)
Rs. 30,000
(d)
Rs. 95,000
(e)
Rs. 75,000.
(2 marks)
< ans >
Suggested Answers Financial Accounting – I (111) : January 2007
1.
ans : (c)
cause : Intangible assets are amortized like tangible fixed assets. If costs benefit more than 1 accounting period, they should be systematically and rationally allocated to all accounting periods. Matching concept involves recognizing costs as expenses on the basis of direct association with assets. Thus amortization of intangible assets is in systematic allocation of costs over several periods in recognition of matching concept (c). The other concepts do not recognize allocation of costs of fixed assets. Conservatism concept is not meant to introduce a bias into financial reporting. It is a prudent reaction to uncertainty to try to ensure that inherent risks in business are adequately considered. Going concern concept (b) assumes that the business entity is presumed to be a going concern in the absence of evidence to the contrary. Time Period concept (d) requires accounting info to be reported at regular intervals to foster comparability. Business entity concept explains that in accounting business is to be considered as a separate entity from the owner.
< TOP >
2.
ans : (a)
cause : When Office equipment is purchased for cash, there is no change in the assets, liabilities and owners’ equity. Thus, the option (a) is the accurate ans. The cash on hand is used for purchase of furniture and it is only a change in the composition of the assets. The other options (b), (c), (d) and (e), which indicate a change either an increase or a reduce in assets/liabilities/owners equity are (b) There is a reduce in assets, increase in liabilities and no change in owners' equity (c)There is a reduce in assets, no change in liabilities and a reduce in owners' equity (d)There is an increase in assets, reduce in liabilities and no change in owners’ equity (e)There is an increase in assets, no change in liabilities and an increase in owners’ equity are not the accurate answers. Hence (a) is the accurate ans.

Earning:   Approval pending.