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ACC 251

Accounting for Business

TU BBS · Fourth Year · Four-year BBS curriculum

Requirement
elective
Full marks
100
Practice sets
5 sets

Practice sets and model questions

5 complete syllabus-aligned practice examinations with model-style questions and step-by-step solutions. Independently prepared by Paper Khoj, not issued by TU.

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Practice Set 1

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PAPER KHOJ

Practice Examination — Set 1

For BBS · Fourth Year

Based on the prescribed TU Faculty of Management syllabus and examination structure

Independently prepared by Paper Khoj. This is not an official Tribhuvan University or Dean's Office question paper.

Course: ACC 251 · Accounting for Business

Level: Bachelor of Business Studies (BBS) · Fourth Year

Full Marks: 100

Time: 3 hrs.

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

Group 'A'

Brief Answer Questions. Attempt ALL questions.

[10 × 2 = 20]
  1. [2]

    What is a Partnership Deed? State two rules in its absence.

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    Partnership Deed: A written legal agreement among partners stating terms and conditions. Rules in absence of deed: (1) Profits/losses shared equally, (2) No interest allowed on capital or charged on drawings, (3) Interest on partner’s loan allowed at 6% p.a.

  2. [2]

    State the formula for Sacrificing Ratio on admission of a partner.

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    Sacrificing Ratio=Old Share−New Share\text{Sacrificing Ratio} = \text{Old Share} - \text{New Share}

    Used to divide the goodwill brought in by the incoming partner among old partners.

  3. [2]

    What is a Revaluation Account?

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    Concept: A nominal account prepared at the time of admission, retirement, or death of a partner to record gains and losses arising from the revaluation of assets and reassessment of liabilities.

  4. [2]

    What is the Garner vs. Murray rule in partnership dissolution?

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    Rule: The capital deficiency of an insolvent partner is treated as a capital loss and borne by the solvent partners in the ratio of their capitals standing immediately before dissolution (not profit-sharing ratio).

  5. [2]

    Differentiate between Hire Purchase and Installment Sale.

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    Distinction: In Hire Purchase, ownership passes only upon payment of the final installment; in an Installment Sale, ownership transfers immediately upon signing the contract.

  6. [2]

    What is ‘Shortworkings’ in royalty accounting?

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    Shortworkings=Minimum Rent−Actual Royalty\text{Shortworkings} = \text{Minimum Rent} - \text{Actual Royalty}

    It arises when actual production royalties fall short of the guaranteed minimum rent payable to the landlord.

  7. [2]

    Define ‘Del Credere Commission’ in consignment.

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    Concept: An extra commission paid by the consignor to the consignee in exchange for the consignee bearing the risk of bad debts on credit sales.

  8. [2]

    What is an ‘Account Sales’?

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    Concept: A periodic statement rendered by the consignee to the consignor detailing gross sales proceeds, expenses incurred, commission charged, and net balance remitted.

  9. [2]

    Differentiate between Consignment and Sale.

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    Distinction: In a sale, ownership passes to buyer immediately. In consignment, ownership remains with consignor; consignee acts merely as an agent.

  10. [2]

    What is an ‘Average Clause’ in fire insurance claims?

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    Concept: A policy clause penalizing under-insurance:

    Claim=Loss of Stock×Policy Sum InsuredTotal Stock on Fire Date\text{Claim} = \text{Loss of Stock} \times \frac{\text{Policy Sum Insured}}{\text{Total Stock on Fire Date}}
    .

Group 'B'

Short Answer / Descriptive Questions. Attempt any FIVE questions.

[5 × 10 = 50]
  1. [10]

    A and B are partners sharing profits in the ratio 3:2. They admit C for 1/5th share. Calculate the new profit sharing ratio and sacrificing ratio.

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    Calculation:

    1. Let total share = 1. C’s share = 1/5.
    2. Remaining share = 1−1/5=4/51 - 1/5 = 4/5.
    3. A’s new share = 4/5×3/5=12/254/5 \times 3/5 = 12/25.
    4. B’s new share = 4/5×2/5=8/254/5 \times 2/5 = 8/25.
    5. C’s share = 1/5=5/251/5 = 5/25.
    • New Ratio = 12:8:512 : 8 : 5.
    • Sacrificing Ratio = Old Ratio = 3:23 : 2.
  2. [10]

    Explain the preparation of Realization Account on the dissolution of a partnership firm.

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    Realization Account Procedure:

    1. Transfer Assets: Dr. Realization A/c with book values of all assets (except cash/bank and partner loans).
    2. Transfer Liabilities: Cr. Realization A/c with book values of third-party liabilities.
    3. Realization of Assets: Cr. Realization with actual cash realized from sale.
    4. Settlement of Liabilities: Dr. Realization with actual cash paid to creditors.
    5. Balance: Transfer profit/loss on realization to partners’ capital accounts in profit sharing ratio.
  3. [10]

    Explain the Debtors Method and Stock & Debtors Method in Branch Accounting.

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    1. Debtors Method: Branch Account is treated like a personal customer account. Debited with opening balances and goods sent; credited with cash remittances and closing balances. Balance is branch net profit. 2. Stock & Debtors Method: Analytical system maintaining Branch Stock, Branch Debtors, Branch Expense, and Branch Adjustment Accounts to track inventory shortages and unrealized loading profit.

  4. [10]

    Discuss the valuation of unsold stock in consignment accounts, explaining treatment of normal and abnormal losses.

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    Valuation Formula:

    Value of Unsold Stock=Cost Price+Proportionate Non-recurring Expenses of Consignor & Consignee\text{Value of Unsold Stock} = \text{Cost Price} + \text{Proportionate Non-recurring Expenses of Consignor \& Consignee}

    • Normal Loss: Unavoidable (evaporation/breakage); inflated over remaining units.
    • Abnormal Loss: Accidental (fire/theft); credited to Consignment Account at full cost plus proportionate expenses and transferred to P&L.
  5. [10]

    Explain the accounting treatment of Royalties in the books of the Lessee when minimum rent exceeds actual royalties with right of recoupment.

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    Journal Entries in Lessee’s Books:

    1. When Royalties < Minimum Rent:
      • Royalties A/c Dr. (Actual royalty)
      • Shortworkings A/c Dr. (Deficiency)
      • To Landlord A/c (Minimum rent)
    2. Payment: Landlord A/c Dr., To Bank A/c.
    3. Recoupment in Later Year:
      • Royalties A/c Dr. (Total earned)
      • To Landlord A/c (Net cash payable)
      • To Shortworkings A/c (Amount recouped)
  6. [10]

    How is the claim for Loss of Stock calculated under a Fire Insurance Policy using a Memorandum Trading Account?

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    Procedure:

    1. Ascertain historical Gross Profit percentage from previous year’s Trading Account.
    2. Prepare Memorandum Trading Account from beginning of current financial year up to fire date.
    3. Estimated Stock on Fire Date = (Opening Stock + Purchases + Direct Expenses) - (Sales - Estimated Gross Profit).
    4. Net Claim = Estimated Stock on Fire Date - Salvaged Stock.

Group 'C'

Comprehensive / Analytical Questions. Attempt any TWO questions.

[2 × 15 = 30]
  1. [15]

    A machinery was purchased on Hire Purchase on 1st Baishakh 2078. Cash price: Rs. 100,000. Down payment: Rs. 25,000. Balance payable in 3 equal annual installments of Rs. 30,000 each payable at year end. Interest charged at 10% p.a. Depreciation charged at 10% p.a. on written down value (WDV). Prepare Machinery Account and Hire Vendor Account in the books of the buyer for 3 years.

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    1. Analysis of Installments:

    • Cash price = Rs. 100,000. Less Down payment = Rs. 25,000. Opening balance = Rs. 75,000.
    • Year 1: Interest = 75,000×10%=Rs. 7,50075,000 \times 10\% = \text{Rs. } 7,500. Installment = Rs. 30,000. Principal = 30,000−7,500=Rs. 22,50030,000 - 7,500 = \text{Rs. } 22,500. Balance = 75,000−22,500=Rs. 52,50075,000 - 22,500 = \text{Rs. } 52,500.
    • Year 2: Interest = 52,500×10%=Rs. 5,25052,500 \times 10\% = \text{Rs. } 5,250. Installment = Rs. 30,000. Principal = 30,000−5,250=Rs. 24,75030,000 - 5,250 = \text{Rs. } 24,750. Balance = 52,500−24,750=Rs. 27,75052,500 - 24,750 = \text{Rs. } 27,750.
    • Year 3: Installment = Rs. 30,000. Principal = Rs. 27,750. Interest = 30,000−27,750=Rs. 2,25030,000 - 27,750 = \text{Rs. } 2,250. Balance = Nil.

    2. Depreciation Calculation (10% WDV):

    • Year 1: 100,000×10%=Rs. 10,000100,000 \times 10\% = \text{Rs. } 10,000. WDV = Rs. 90,000.
    • Year 2: 90,000×10%=Rs. 9,00090,000 \times 10\% = \text{Rs. } 9,000. WDV = Rs. 81,000.
    • Year 3: 81,000×10%=Rs. 8,10081,000 \times 10\% = \text{Rs. } 8,100. WDV = Rs. 72,900.

    3. Ledger Balances Summary:

    • Machinery A/c: Shows closing WDV of Rs. 72,900 at end of Year 3.
    • Hire Vendor A/c: Fully settled with total payment of Rs. 115,000 (Rs. 100,000 principal + Rs. 15,000 total interest).
  2. [15]

    On 31st Ashad 2080, a fire occurred in the premises of Nepal Traders. Prepare statement of insurance claim given: Stock on 1st Shrawan 2079: Rs. 120,000; Purchases up to fire: Rs. 450,000; Sales up to fire: Rs. 600,000; Wages: Rs. 30,000; Salvaged stock: Rs. 20,000; Sum insured: Rs. 90,000. Average Gross profit on sales historically is 25%. Apply average clause.

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    Step 1: Memorandum Trading Account (up to fire date):

    • Debit: Opening Stock (Rs. 120,000) + Purchases (Rs. 450,000) + Wages (Rs. 30,000) = Rs. 600,000.
    • Gross Profit = 25%×600,000=Rs. 150,00025\% \times 600,000 = \text{Rs. } 150,000.
    • Total Debit = 600,000+150,000=Rs. 750,000600,000 + 150,000 = \text{Rs. } 750,000.
    • Credit: Sales = Rs. 600,000.
    • Estimated Stock on Fire Date = 750,000−600,000=Rs. 150,000750,000 - 600,000 = \textbf{Rs. 150,000}.

    Step 2: Actual Loss of Stock:

    Loss of Stock=Stock on Date of Fire−Salvaged Stock=150,000−20,000=Rs. 130,000\text{Loss of Stock} = \text{Stock on Date of Fire} - \text{Salvaged Stock} = 150,000 - 20,000 = \textbf{Rs. 130,000}

    Step 3: Application of Average Clause:

    Admissible Claim=Loss of Stock×Sum InsuredStock on Date of Fire=130,000×90,000150,000=Rs. 78,000\text{Admissible Claim} = \text{Loss of Stock} \times \frac{\text{Sum Insured}}{\text{Stock on Date of Fire}} = 130,000 \times \frac{90,000}{150,000} = \textbf{Rs. 78,000}

    Conclusion: The insurance company will settle the claim for Rs. 78,000 due to under-insurance.

  3. [15]

    P, Q, and R were partners sharing profits in the ratio 2:2:1. They decided to dissolve the firm on 31st Chaitra 2080. Their balance sheet showed: Creditors Rs. 80,000; P Capital Rs. 100,000; Q Capital Rs. 80,000; R Capital Rs. 40,000; Assets Rs. 300,000. Assets realized Rs. 210,000. Realization expenses paid were Rs. 10,000. Prepare Realization Account, Partners’ Capital Accounts, and Bank Account.

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    1. Realization Account:

    • Total Debits: Assets transferred (Rs. 300,000) + Realization expenses (Rs. 10,000) + Creditors paid (Rs. 80,000) = Rs. 390,000.
    • Total Credits: Creditors transferred (Rs. 80,000) + Cash realized (Rs. 210,000) = Rs. 290,000.
    • Realization Loss = 390,000−290,000=Rs. 100,000390,000 - 290,000 = \textbf{Rs. 100,000}.
    • Shared in 2:2:1 ratio: P = Rs. 40,000; Q = Rs. 40,000; R = Rs. 20,000.

    2. Partners’ Capital Accounts:

    • P: Opening Rs. 100,000 - Loss Rs. 40,000 = Final Payment Rs. 60,000.
    • Q: Opening Rs. 80,000 - Loss Rs. 40,000 = Final Payment Rs. 40,000.
    • R: Opening Rs. 40,000 - Loss Rs. 20,000 = Final Payment Rs. 20,000.

    3. Bank Account:

    • Receipts: Opening Cash (Nil) + Assets realized (Rs. 210,000) = Rs. 210,000.
    • Payments: Realization expenses (Rs. 10,000) + Creditors (Rs. 80,000) + P (Rs. 60,000) + Q (Rs. 40,000) + R (Rs. 20,000) = Rs. 210,000 (Fully Balanced).