ECO-02 Solve Assignment Free 2024-2025 || Learnignou.in

Bachelor of Computer Application (BCA) 2024-2025

Course Code: ECO-02
Course Title: Accountancy-1
Maximum Marks: 100
Weightage: 25%
Last Dates for Submission: 30th April,2025 (For January Session)

There are five in this assignment ehich carried 100 marks. Answer all the question. Please go the guidelines regarding assignemnts given i the program Guide for the format of Presentation.

Attempt all the questions:

Q1: From the following prepare Trading and Profit and the Loss Account of Lakshmi & Co. for the year ended December 31,2023.

The Stock on December 31,2023 was valued at Rs. 26,000

Answer: . Trading Account

This account is used to calculate the gross profit by comparing the net sales and cost of goods sold.

Trading Account for the year ended December 31, 2023

Particulars	Amount (Rs.)	Particulars	Amount (Rs.)
To Opening Stock	40,000	By Sales	1,62,100
To Purchases	98,000	Less: Returns Inwards	(2,400)
Less: Returns Outwards	(3,000)		1,59,700
	95,000	By Closing Stock	26,000
To Carriage on Purchases	2,000
To Gross Profit c/d (Balancing Figure)	48,700
Total	1,85,700	Total	1,85,700

Gross Profit: Rs. 48,700

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2. Profit & Loss Account

This account is used to calculate the net profit by adjusting operating expenses and incomes against the gross profit.

Profit & Loss Account for the year ended December 31, 2023

Particulars	Amount (Rs.)	Particulars	Amount (Rs.)
To Salaries & Wages	12,000	By Gross Profit b/d	48,700
To Rates and Taxes	8,600	By Commission Received	650
To Sundry Expenses	2,500	By Discount Received	750
To Bank Charges	50	By Income from Investments	500
To Discount Allowed	530
To Carriage on Sales	1,700
To Lighting and Heating	2,200
To Postage	300
To Commission Paid	1,000
To Interest Paid on Bank	550
To Net Profit c/d (Balancing Figure)	21,670
Total	50,100	Total	50,100

Net Profit: Rs. 21,670

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Summary:

Net Profit: Rs. 21,670

Gross Profit: Rs. 48,700

Q2: Distinguish Between:

a) Non-recurring and Recurring Expenses

Answer: (a) Non-recurring Expenses vs. Recurring Expenses

Basis	Non-recurring Expenses	Recurring Expenses
Nature	One-time, infrequent expenses	Regular, continuous expenses
Occurrence	Incurred occasionally	Incurred repeatedly over time
Examples	Purchase of machinery, renovation costs, legal fees for company registration	Rent, salaries, utility bills, maintenance expenses
Purpose	Usually associated with acquiring long-term assets or making significant changes	Related to the day-to-day operations of the business
Impact on Financial Statements	Generally capitalized and shown as assets (may be depreciated over time)	Charged as expenses in the profit & loss account

b) Ordinary Commission and Del Credere Commission

Answer: Ordinary Commission vs. Del Credere Commission

Basis	Ordinary Commission	Del Credere Commission
Definition	Commission earned for selling goods on behalf of the principal	Additional commission given for taking responsibility for customer credit risk
Risk	No risk is borne by the agent regarding payment default by customers	Agent assumes the risk of bad debts (non-payment by customers)
Remuneration	Lower commission rate	Higher commission rate due to the risk involved
Liability	Agent is not liable if the customer defaults on payment	Agent is liable for any losses due to customer non-payment
Example	Commission for selling products as an intermediary	A commission agent also guaranteeing customer payments takes del credere commission

C) Account Sales and invoice

Answer:Account Sales vs. Invoice

Basis	Account Sales	Invoice
Definition	A statement sent by an agent to the principal, detailing sales made on behalf of the principal, expenses incurred, and commission earned	A document issued by a seller to the buyer indicating the products sold, their quantity, price, and total amount payable
Issued By	Agent to the principal	Seller to the buyer
Purpose	To inform the principal about the sales and expenses	To request payment from the buyer for goods/services sold
Content	Sales details, deductions (expenses and commission), net amount payable to the principal	Description of goods, price, quantity, terms of payment
Frequency	Issued periodically	Issued every time a transaction takes place

d) Normal Loss and Abnormal Loss

Answer: Normal Loss vs. Abnormal Loss

Basis	Normal Loss	Abnormal Loss
Definition	The unavoidable loss that occurs naturally during a process or operation (e.g., evaporation, spoilage)	Losses that occur due to unexpected or unusual events (e.g., accidents, theft, fire)
Expected/Unexpected	Expected and accounted for in advance	Unexpected and not anticipated in normal business operations
Nature	Part of the normal business process	Unusual and non-recurring in nature
Accounting Treatment	Included in the cost of production and distributed over remaining goods	Recorded separately as an abnormal loss in the profit & loss account
Examples	Evaporation of liquids during storage, spoilage of perishable goods	Damage due to fire, theft, or accidents

Q3: Explain the accounting concepts which guide the accountant at the recording stage.

Answer: At the recording stage, accountants follow several accounting concepts that provide a foundation for accurate, consistent, and meaningful financial reporting. These concepts guide the process of recording financial transactions in the books of accounts. The main accounting concepts are:

1. Business Entity Concept

This concept states that the business is treated as a separate entity from its owner(s). The business’s transactions are recorded separately from the personal transactions of the owner(s). This distinction helps in assessing the true financial position of the business.

• Example: If the owner invests money into the business, it is recorded as capital in the business’s books, not as the owner’s personal income.

2. Money Measurement Concept

Only those transactions that can be expressed in monetary terms are recorded in the books of accounts. Non-monetary transactions, such as employee satisfaction or the reputation of the business, are not recorded.

• Example: Purchase of goods worth Rs. 10,000 is recorded, but an increase in employee morale is not because it cannot be measured in monetary terms.

3. Going Concern Concept

This concept assumes that a business will continue to operate indefinitely and not be forced to close or liquidate in the near future. This affects the valuation of assets and liabilities in financial statements.

• Example: A company does not record its fixed assets at liquidation value, assuming they will continue to be used for business purposes.

4. Accounting Period Concept

A business’s life is divided into specific time periods (usually a year) for financial reporting purposes. This allows stakeholders to assess the performance of the business over a regular interval.

• Example: A company prepares its financial statements annually to assess profit or loss for each year.

5. Cost Concept

Assets and liabilities are recorded at their original cost or purchase price rather than at current market value. This ensures consistency in the valuation of assets.

• Example: If a machine is purchased for Rs. 50,000, it will be recorded at this amount even if its market value changes over time.

6. Dual Aspect Concept (or Duality Concept)

Every transaction has two aspects: a debit and a credit of equal value. This concept is the basis of the double-entry system of accounting, ensuring that the accounting equation (Assets = Liabilities + Equity) is always balanced.

• Example: If a business purchases goods worth Rs. 10,000 on credit, there will be an increase in both inventory (asset) and accounts payable (liability).

7. Realization Concept

Revenue is recognized when it is earned, regardless of when the cash is actually received. This ensures that income is recorded when goods are sold or services are provided, not when cash is collected.

• Example: If a business sells goods on credit, the revenue is recorded at the time of sale, even though the payment will be received later.

8. Accrual Concept

Transactions are recorded in the period they occur, not when cash is received or paid. This concept ensures that expenses and revenues are matched to the period in which they are incurred or earned.

• Example: If salaries for December are paid in January, they will still be recorded in December’s accounts as an expense.

9. Matching Concept

Expenses should be matched with the revenues they help to generate. In other words, costs associated with earning revenue in a specific period must be recorded in that same period.

• Example: If a company makes sales in March but incurs the cost of goods sold in February, the expenses from February will be matched with the revenue in March.

10. Conservatism (Prudence) Concept

This concept dictates that accountants should anticipate and record all probable losses but not record gains until they are realized. This helps ensure that the financial statements present a cautious and realistic picture of the financial position.

• Example: If a company expects a potential loss from a lawsuit, it will record the expected loss, but if it expects to win a lawsuit, it will not record the gain until it is confirmed.

11. Consistency Concept

The accounting policies and methods used by a business should be consistent from one period to another. This allows for meaningful comparisons of financial data over time. If any changes are made in accounting policies, they must be disclosed.

• Example: If a company uses the straight-line method of depreciation, it should continue using it in the following years unless a valid reason for change is provided.

12. Materiality Concept

This concept states that only significant items that can influence the decision-making of users of financial statements should be recorded and reported. Insignificant amounts may be ignored or merged with other items.

Example: Small expenses like the cost of pens and papers may not be itemized in the financial statements as they are immaterial to the overall financial health of the company.

Q4: a: What is a Single-Entry System? State its features and limitations.

Answer: a) What is a Single-Entry System?

The Single-Entry System is a simple method of accounting that primarily records only one aspect of each transaction, typically focusing on cash receipts and payments. It does not adhere to the double-entry principles of recording both debit and credit for each transaction. This system is mainly used by small businesses, sole proprietors, or individuals with minimal transactions who do not require a full set of accounting records.

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Features of Single-Entry System:

1. Incomplete Record Keeping:
   • Only partial records of financial transactions are maintained, typically focusing on cash transactions.
2. Records Cash and Personal Accounts:
   • Only cash and personal accounts of debtors and creditors are generally maintained, while real and nominal accounts (like assets, expenses, income) are rarely recorded.
3. No Uniformity in Recording:
   • There are no standardized rules for recording transactions, and the method may vary based on the individual or business.
4. Unsuitable for Complex Businesses:
   • It is more suitable for small businesses or sole proprietors where the volume of transactions is limited.
5. No Trial Balance:
   • Since the double-entry system is not followed, it is not possible to prepare a trial balance to check the accuracy of the records.
6. No Systematic Ledger Accounts:
   • The Single-Entry System does not maintain systematic ledgers, making it difficult to derive financial statements with complete accuracy.

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Limitations of Single-Entry System:

Auditors cannot rely on single-entry records due to the lack of complete financial data, making the audit process difficult.

Inaccuracy:

Due to incomplete records and the lack of adherence to the double-entry system, the accuracy of accounts is questionable, and errors may go undetected.

No Check on Arithmetical Accuracy:

Since a trial balance is not prepared, the arithmetic accuracy of the books cannot be tested, leading to a higher chance of errors.

Difficult to Ascertain Profit or Loss:

It is difficult to determine the exact profit or loss of the business as complete records of income and expenses are not maintained.

Incomplete Information:

The system does not provide detailed information about assets, liabilities, or the financial position of the business.

Difficulty in Fraud Detection:

Since records are incomplete, it becomes challenging to detect fraud or manipulation in the accounts.

Not Suitable for Auditing:

b) Distinguish Single-Entry System from Double-Entry System.

Answer:Distinguish between Single-Entry System and Double-Entry System

Basis	Single-Entry System	Double-Entry System
Definition	A system of accounting in which only one aspect of a transaction (usually cash) is recorded	A system of accounting in which both debit and credit aspects of every transaction are recorded
Nature of Record	Incomplete recording of transactions	Complete and systematic recording of all transactions
Accounts Maintained	Only cash and personal accounts (debtors/creditors) are usually maintained	All types of accounts (personal, real, nominal) are maintained
Trial Balance	Trial balance cannot be prepared due to incomplete records	Trial balance can be prepared, ensuring arithmetical accuracy
Accuracy	Accuracy is doubtful due to the lack of a double-checking mechanism	Ensures accuracy by following the double-entry principle of balancing debits and credits
Financial Position	Cannot provide a full picture of the financial position of the business	Provides a clear and complete view of the financial position
Suitability	Suitable for small businesses or individuals with fewer transactions	Suitable for businesses of all sizes, especially complex and large-scale operations
Ascertainment of Profit/Loss	Difficult to ascertain actual profit or loss as records are incomplete	Can easily determine profit or loss by preparing financial statements
Fraud Detection	Difficult to detect fraud or errors due to incomplete records	Easier to detect fraud or errors due to the complete and systematic recording of transactions
Auditing	Auditing is difficult due to incomplete records	Auditing is easy and reliable with full records available
Double Entry Concept	Does not follow the principle of duality (debit and credit)	Follows the principle of duality, where every transaction has two sides: debit and credit

Q5: Define Depreciation. Explain the need and significance of depreciation. What factors should be considered for determining the amount of depreciation?

Answer: Definition of Depreciation

Depreciation is the systematic allocation of the cost of a tangible fixed asset over its useful life. It represents the gradual reduction in the value of an asset due to wear and tear, usage, obsolescence, or the passage of time. Depreciation is treated as an expense in the accounting records and helps in matching the cost of an asset with the revenue it generates over time.

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Need and Significance of Depreciation

1. Accurate Profit Calculation:
   • Depreciation is recorded as an expense in the profit and loss account, ensuring that the true cost of using an asset is matched with the revenue it generates. This helps in accurately calculating the net profit or loss.
2. Asset Valuation:
   • Over time, fixed assets like machinery, vehicles, or equipment lose value. By accounting for depreciation, the true value of these assets is reflected in the financial statements, giving stakeholders a realistic view of the company’s assets.
3. Capital Recovery:
   • Depreciation allows for the recovery of the cost of an asset over its useful life. This means that the business can accumulate funds over time to replace the asset when it becomes obsolete or fully depreciated.
4. Compliance with Accounting Standards:
   • Depreciation is a requirement under accounting standards and principles (such as the matching concept) to ensure that expenses related to assets are recognized in the periods in which the revenue is earned.
5. Tax Deduction:
   • Depreciation is a non-cash expense that reduces taxable income. Businesses can claim depreciation as a tax deduction, thereby reducing their overall tax liability.
6. Decision Making:
   • Understanding the depreciation of assets helps management in making decisions regarding the replacement or upgrading of assets. It also assists in budgeting for future capital expenditures.

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Factors to Consider in Determining the Amount of Depreciation

The potential fluctuation in the salvage value at the end of the asset’s life, due to market conditions or demand, can influence the depreciation calculation.

Cost of the Asset:

The original purchase price of the asset, including any related costs such as transportation, installation, and setup, is the base value for calculating depreciation.

Useful Life of the Asset:

The estimated number of years the asset is expected to be used by the business before it becomes obsolete or unfit for use. Depreciation is spread over this useful life.

Salvage (Residual) Value:

The estimated amount that can be recovered by selling or disposing of the asset at the end of its useful life. Depreciation is calculated on the cost minus the salvage value.

Depreciation Method:

The method used to allocate depreciation, which affects the depreciation expense each year. Common methods include:

Straight-Line Method: An equal amount of depreciation is charged each year.

Declining Balance Method: A higher depreciation expense is charged in the earlier years of the asset’s life.

Units of Production Method: Depreciation is based on the asset’s usage or output during a period.

Legal or Regulatory Requirements:

Laws and accounting standards may prescribe specific rates of depreciation for certain types of assets, which businesses must follow.

Obsolescence:

Technological advancements or changes in market conditions may render an asset obsolete before its useful life is fully over. Depreciation should consider the possibility of early obsolescence.

Maintenance and Repairs:

The condition of the asset, along with how well it is maintained, impacts its useful life and thus the amount of depreciation. Well-maintained assets may have a longer useful life.

Scrap Value Fluctuations: