Model paper

Dean's Office Official Model Question Paper

ACS 206 · Accounting for Business

Programme
BBM
Academic year
Semester 5
Paper type
Official Model Question
Sitting
Dean's Office Blueprint
Full marks
60
Duration
180 minutes

Tribhuvan University

Faculty of Management

Office of the Dean

Official Model Question Paper / Dean's Office Blueprint

Course: ACS 206 · Accounting for Business

Level: Bachelor of Business Management (BBM) · Semester 5

Full Marks: 60

Time: 3 hrs.

Candidates are required to give their answers in their own words as far as practicable. Figures in the margin indicate full marks.

Group A

Brief Answer Questions. Attempt ALL questions. (5 × 2 = 10)

[5*2=10]

  1. State the Fundamental Accounting Equation and explain its underlying rationale.

    [2]
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    Fundamental Accounting Equation

    Assets=Liabilities+Owner’s Equity\text{Assets} = \text{Liabilities} + \text{Owner's Equity}

    It reflects the dual-aspect convention: every economic resource (Asset) possessed by a business is financed either by external third-party lenders (Liabilities) or by enterprise owners (Equity).

  2. Distinguish between the cash basis and accrual basis of accounting.

    [2]
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    Cash Basis vs. Accrual Basis

    • Cash Basis: Revenues are recorded only when cash is received, and expenses are recognized only when cash is paid out.
    • Accrual Basis (Mandatory under GAAP/NAS): Revenues are recognized when earned and expenses are recognized when incurred, regardless of cash timing.

  3. Define Depreciation and mention two common methods used to compute it.

    [2]
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    Meaning and Methods of Depreciation

    Depreciation is the systematic allocation of the depreciable cost of a tangible non-current asset over its estimated useful economic life.

    Two Common Methods:

    1. Straight-Line Method (SLM).
    2. Diminishing Balance / Reducing Balance Method (DBM).

  4. What is the primary purpose of preparing a Bank Reconciliation Statement (BRS)?

    [2]
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    Purpose of Bank Reconciliation Statement (BRS)

    A BRS is prepared to identify, explain, and reconcile discrepancies between the cash book balance (bank column) maintained by the business and the bank balance shown in the bank passbook/statement, identifying unpresented checks, uncredited lodgments, and bank charges.

  5. Differentiate between Capital Expenditure and Revenue Expenditure with examples.

    [2]
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    Capital vs. Revenue Expenditure

    • Capital Expenditure: Spending incurred to acquire, improve, or extend the productive life of non-current assets, generating economic benefits across multiple accounting periods (e.g., purchasing factory machinery).
    • Revenue Expenditure: Routine operating spending incurred in day-to-day business operations whose benefits expire within the current accounting year (e.g., factory electricity, staff salaries).

Group B

Short Answer Questions. Attempt any THREE questions. (3 × 10 = 30)

[3*10=30]

  1. Pass journal entries for the following business transactions in the books of Apex Trading Enterprises:

    1. Started business with cash Rs 500,000 and bank balance Rs 800,000.
    2. Purchased merchandise for Rs 200,000, paying 50% by cheque and balance on credit from Nepal Suppliers.
    3. Sold goods costing Rs 120,000 for Rs 160,000 to Himalayan Mart on credit.
    4. Received cheque from Himalayan Mart in full settlement of Rs 155,000, allowing Rs 5,000 cash discount.
    5. Paid office rent Rs 25,000 and outstanding salaries Rs 40,000 via bank transfer.
    [10]
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    Journal Entries in the Books of Apex Trading Enterprises

    Date / S.N. Particulars L.F. Debit (Rs) Credit (Rs)
    1 Cash A/c ... Dr.<br>Bank A/c ... Dr.<br> To Capital A/c<br>(Being business commenced with cash and bank) 500,000<br>800,000 <br><br>1,300,000
    2 Purchases A/c ... Dr.<br> To Bank A/c<br> To Nepal Suppliers A/c<br>(Being merchandise purchased partly by cheque and on credit) 200,000 <br>100,000<br>100,000
    3 Himalayan Mart A/c ... Dr.<br> To Sales A/c<br>(Being goods sold on credit) 160,000 <br>160,000
    4 Bank A/c ... Dr.<br>Discount Allowed A/c ... Dr.<br> To Himalayan Mart A/c<br>(Being cheque received in full settlement with discount allowed) 155,000<br>5,000 <br><br>160,000
    5 Rent Expense A/c ... Dr.<br>Salary Payable (Outstanding Salary) A/c ... Dr.<br> To Bank A/c<br>(Being rent and outstanding salary paid via bank) 25,000<br>40,000 <br><br>65,000
    Total 1,885,000 1,885,000

  2. From the following information, prepare a Bank Reconciliation Statement for Everest Commercial Traders as of 31 Ashadh 2080:

    1. Bank balance as per Cash Book: Rs 145,000 (Debit).
    2. Cheques issued to suppliers totaling Rs 42,000 were not presented for payment until 31 Ashadh.
    3. Cheques deposited into bank for Rs 35,000 were not credited by bank.
    4. Direct bank interest credited by bank Rs 3,500 was not recorded in Cash Book.
    5. Bank debit for account service charges Rs 800 was not entered in Cash Book.
    6. A customer directly deposited Rs 18,000 into the firm’s bank account without notification.
    [10]
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    Bank Reconciliation Statement of Everest Commercial Traders

    As of 31 Ashadh 2080

    Particulars Amount (Rs) Amount (Rs)
    Balance as per Cash Book (Debit / Favorable) 145,000
    Add:
    1. Cheques issued but not yet presented for payment 42,000
    2. Direct bank interest credited by bank not entered in cash book 3,500
    3. Direct deposit by customer into bank account 18,000 63,500
    Subtotal 208,500
    Less:
    1. Cheques deposited into bank but not yet collected/credited 35,000
    2. Bank service charges debited by bank not in cash book 800 (35,800)
    Balance as per Bank Pass Book / Statement (Credit / Favorable) 172,700

  3. Explain the major steps in the Accounting Cycle from transaction identification to post-closing trial balance.

    [10]
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    The Accounting Cycle Steps

    The accounting cycle is the sequential sequence of accounting procedures performed during an accounting period:

    [1. Transaction Analysis & Source Documents]
                   |
                   v
[2. Journalizing in Books of Original Entry]
                   |
                   v
[3. Posting to General Ledger Accounts]
                   |
                   v
[4. Unadjusted Trial Balance Preparation]
                   |
                   v
[5. End-of-Period Adjusting Journal Entries]
                   |
                   v
[6. Adjusted Trial Balance & Financial Statements]
                   |
                   v
[7. Closing Temporary Accounts & Post-Closing Trial Balance]
    1. Identification of Transactions: Verifying source documents (invoices, receipts, vouchers).
    2. Journalizing: Recording transactions chronologically in the General Journal with debits and credits.
    3. Posting to Ledger: Transferring journal debits/credits to respective T-accounts in the General Ledger.
    4. Unadjusted Trial Balance: Verifying arithmetic equality of total debits and credits.
    5. Adjusting Entries: Accruing revenues/expenses, deferrals, and depreciation.
    6. Financial Statements: Preparing Statement of Profit or Loss, Balance Sheet, and Cash Flow Statement.
    7. Closing Entries & Post-Closing Trial Balance: Closing temporary revenue/expense accounts to retained earnings to reset balances for the next cycle.

  4. Discuss the significance of the Nepal Financial Reporting Standards (NFRS) and compare NFRS with traditional Nepal Accounting Standards (NAS).

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    Nepal Financial Reporting Standards (NFRS) vs. Traditional NAS

    The Institute of Chartered Accountants of Nepal (ICAN) formulated NFRS converged with International Financial Reporting Standards (IFRS).

    1. Key Differences

    • Fair Value Focus: NFRS places significant emphasis on fair-value measurement for financial assets, biological assets, and investment properties, whereas old NAS relied predominantly on historical cost.
    • Substance Over Form: NFRS mandates economic substance over legal form (e.g., right-of-use asset recognition for long-term operating leases under NFRS 16).
    • Comprehensive Disclosures: NFRS mandates extensive quantitative risk disclosures (liquidity risk, credit risk, market sensitivity).

    2. Significance for Business

    • Enhances global comparability and transparency for foreign investors and multilateral lenders.
    • Standardizes financial reporting for commercial banks, insurance companies, and listed public enterprises.

Group C

Comprehensive Answer / Case Analysis Question. (1 × 20 = 20)

[1*20=20]

  1. The following Trial Balance was extracted from the books of Surya Trading Company Ltd. on 31 Ashadh 2080:

    Heads of Account Debit (Rs) Credit (Rs)
    Opening Stock 120,000 -
    Purchases & Sales 900,000 1,600,000
    Returns Inward & Outward 30,000 20,000
    Wages and Salaries 180,000 -
    Carriage Inward (Freight) 25,000 -
    Office Administrative Expenses 85,000 -
    Selling and Distribution Expenses 60,000 -
    Plant and Machinery 500,000 -
    Land and Buildings 1,200,000 -
    Accounts Receivable and Payable 240,000 160,000
    Cash and Bank Balances 140,000 -
    Share Capital (Equity shares of Rs 100) - 1,500,000
    10% Bank Loan - 300,000
    Retained Earnings (Opening) - 100,000
    Total 3,480,000 3,480,000

    Additional Adjustments on 31 Ashadh 2080:

    1. Closing stock valued at Rs 150,000.
    2. Outstanding wages amounted to Rs 20,000.
    3. Provide depreciation at 10% on Plant & Machinery and 5% on Land & Buildings.
    4. Full year interest on the 10% Bank Loan is due and unpaid.
    5. Create a provision for doubtful debts at 5% on Accounts Receivable.
    6. Provide for corporate income tax at 25%.

    Required: a. Prepare the Statement of Profit or Loss for the year ended 31 Ashadh 2080. b. Prepare the Statement of Financial Position (Balance Sheet) as of 31 Ashadh 2080.

    [20]
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    Financial Statements of Surya Trading Company Ltd.

    a. Statement of Profit or Loss for the Year Ended 31 Ashadh 2080

    Particulars Amount (Rs) Amount (Rs)
    Gross Revenue from Sales (1,600,000−30,0001{,}600{,}000 - 30{,}000 returns) 1,570,000
    Less: Cost of Goods Sold (COGS):
    Opening Stock 120,000
    Net Purchases (900,000−20,000900{,}000 - 20{,}000) 880,000
    Carriage Inward 25,000
    Wages (180,000+20,000180{,}000 + 20{,}000) 200,000
    Cost of Goods Available for Sale 1,225,000
    Less: Closing Stock (150,000) (1,075,000)
    Gross Profit 495,000
    Operating Expenses:
    Office Administrative Expenses 85,000
    Selling and Distribution Expenses 60,000
    Provision for Doubtful Debts (5%×240,0005\% \times 240{,}000) 12,000
    Depreciation on Plant & Machinery (10%×500,00010\% \times 500{,}000) 50,000
    Depreciation on Buildings (5%×1,200,0005\% \times 1{,}200{,}000) 60,000 (267,000)
    Operating Profit before Finance Cost 228,000
    Finance Cost (Bank Loan Interest: 10%×300,00010\% \times 300{,}000) (30,000)
    Net Profit Before Tax (NPBT) 198,000
    Provision for Corporate Income Tax (25%×198,00025\% \times 198{,}000) (49,500)
    Net Profit After Tax (NPAT) for the Year 148,500

    b. Statement of Financial Position (Balance Sheet) as of 31 Ashadh 2080

    Assets Amount (Rs) Liabilities and Equity Amount (Rs)
    Non-Current Assets: Shareholders’ Equity:
    Land & Buildings (1,200,000−60,0001{,}200{,}000 - 60{,}000) 1,140,000 Share Capital 1,500,000
    Plant & Machinery (500,000−50,000500{,}000 - 50{,}000) 450,000 Retained Earnings (100,000+148,500100{,}000 + 148{,}500) 248,500
    Total Non-Current Assets 1,590,000 Total Equity 1,748,500
    Current Assets: Non-Current Liabilities:
    Closing Stock 150,000 10% Bank Loan 300,000
    Accounts Receivable (240,000−12,000240{,}000 - 12{,}000) 228,000 Current Liabilities:
    Cash and Bank Balances 140,000 Accounts Payable 160,000
    Outstanding Wages 20,000
    Outstanding Bank Interest 30,000
    Provision for Income Tax 49,500
    Total Current Assets 518,000 Total Current Liabilities 259,500
    Total Assets 2,108,000 Total Liabilities & Equity 2,108,000