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The following are the financial statements of a company: Liabilities Last Year Current year Assets Last Year…

The following are the financial statements of a company:

Liabilities Last Year Current year Assets Last Year Current year
Share capital150,000300,000Fixed assets250,000360,000
Pref. share capital60,00090,000Investment60,00075,000
10% bank loan75,00030,000Sundry debtors45,00060,000
Accounts payable40,00030,000Inventories30,00075,000
Retained earnings30,00075,000Cash at bank15,00030,000
Prov. for dividend15,00030,000
Prov. for tax30,00045,000
Total400,000600,000Total400,000600,000

Income Statement for the current year

Particulars Rs. Rs.
Sales300,000
Less: Cost of goods sold120,000
Gross profit180,000
Less: Operating expenses (including depreciation Rs. 30,000 and interest Rs. 12,000)87,000
Provision for tax45,000
Provision for dividend30,000162,000
18,000
Add: Gain on sale of plant (cost Rs. 30,000, accumulated depreciation Rs. 15,000)12,000
Interest on investment15,000
Net income45,000

Required: Cash flow statement by using direct method.

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  1. 1.

    Describe the users of accounting information. Why do they need such information? Explain.

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  2. 2.

    Following are the transaction of a company.

    a. Started business with cash Rs. 100,000 and bank balance Rs. 40,000.

    b. Purchased office equipment for Rs. 100,000 and paid 25% cash and balance through cheque.

    c. Purchased merchandise goods for Rs. 50,000 on account.

    d. Sold merchandise goods on account for Rs. 170,000.

    e. Received a cheque from customer Rs. 145,000 in full settlement of Rs. 150,000.

    f. Paid Rs. 45,000 to supplier by issuing a cheque after deducting 10% discount.

    g. Rs. 12,000 was paid for insurance premium.

    h. Paid electricity bill Rs. 15,000.

    i. Paid office salary Rs. 20,000.

    j. Rent paid in advance Rs. 15,000 through cheque.

    Additional Information

    a) Ending inventory Rs. 20,000.

    b) Office salary due Rs. 4,000

    c) Depreciation on office equipment @25%

    Required:

    a. Journal entries.

    b. Triple column cash book.

    c. Accounts receivable and payable account.

    d. Adjusted trial balance.

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  5. 5.

    (a) On Chaitra 2081, Bank Statement disclosed a balance of Rs.10,000 and Cash Book showed the balance of Rs.8,900.

    i) Undeposited cheque Rs. 3,000

    ii) Outstanding cheque Rs. 4,000.

    iii) Notes receivable and interest collected by the bank Rs. 1,000 and Rs. 200 respectively.

    iv) A customer's cheque for Rs. 1,000 was returned by the bank due to insufficient fund.

    v) Bank charge Rs. 100 for the service provided by the bank.

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    b. Bank balance to be reported on company's balance sheet as on 31st Chaitra.

    (b) Differentiate between accounting and accountancy.

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  6. 6.

    (a) A company purchased a machine on January 1, 2023 for Rs. 90,000 and spent Rs. 10,000 on its installation. The company writes off depreciation @ 10% p.a. on straight line method. At the end of June 2025, the company sold the machine at Rs. 90,000. The books are closed on 31st December every year.

    Required: Machinery account for the first three years.

    (b) Differentiate between capital and revenue expenditures.

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