2023-24

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ECO-02
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Solved Assignment
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 ECO-02 Solved Assignment 2023-2024 (July-January)

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Course Code ECO-02

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Course Title Accountancy-1

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Assignment Number BCA (II)/02/Assignment/2023-24

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Maximum Marks 100

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Weightage 25%

31st October, 2023 (For July Session)

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Last Date of Submission
30 th April, 2024 (For January Session)

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Note: There are six questions in this assignment which carried 100 marks. Answer all the questions. Please go through the guidelines regarding

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assignments given in the Program Guide for the format of presentation.

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Attempt all the questions:
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Q1. Define accounting and explain its scope, objectives advantages and limitations. (20)

Q2. Write about the Bank Reconciliation Statement, what are the main causes of difference. (20)
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Q3. Write notes on the following concepts: (4 × 5 = 20)

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a) Going Concern Concept

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b) Conservatism

c) Consistency
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d) Materiality
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Q4. Sohan drew on Mohan a bill for Rs. 1,500 for 3 months on June 1, 2023. The bill was endorsed to Rohan. On July 15, Mohan approaches Sohan to
renew the bill for a period of three months and charges Rs. as interest. Sohan aggress to renew the bill. Mohan pays the amount of interest in cash and

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accepts a new bill for Rs. 1,500. The bill is honoured on the due date. Record these transactions in the books of various party. (20)

Q5. From the following figures prepare Trading and Profit and Loss Account of Lakshmi & Co. for the year ended December 31, 1987. (20)

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Stock on January 1, 1987 Rs. 40,000

Purchases Rs. 98,000

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Commission Received Rs. 650

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Rent, Rates and Taxes Rs. 8,600

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Salaries & Wages Rs. 12,000

Sales Rs. 1,62,100

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Returns Inwards Rs. 2,400

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Returns Outwards Rs. 3,000

Sunday Expenses

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Bank Charges Rs. 50
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Discount Received Rs. 750

Carriage on Purchases Rs. 2,000

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Discount Allowed Rs. 530

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Carriage on Sales Rs. 1,700

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Lighting and Heating Rs. 2,200

Postage Rs. 300

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Income from Investments Rs. 500

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Commission Paid Rs. 1,000

Interest paid on a bank loan Rs. 550

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The stock on December 31, 1987 was valued at Rs. 26,000.

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-: Solution :-

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Q1. Define accounting and explain its scope, objectives advantages and limitations.

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Solution:

Accounting is the process of recording, classifying, summarizing, and interpreting financial transactions and events of a business or an organization. It

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involves the identification, measurement, and communication of financial information to various stakeholders, such as shareholders, creditors,
investors, and management. The primary objective of accounting is to provide relevant and reliable information about the financial performance and

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position of an entity, which is used for decision-making purposes by various stakeholders.

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Scope of Accounting:
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The scope of accounting is wide and encompasses various aspects of financial transactions and events. It includes the following:

 Recording and classifying financial transactions and events

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 Preparing financial statements, such as the balance sheet, income statement, and cash flow statement
 Analyzing financial data and interpreting the results
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 Managing financial resources and planning budgets

 Providing financial advice and consultancy services
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 Auditing and ensuring compliance with accounting standards and regulations

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Objectives of Accounting:

The main objectives of accounting are as follows:

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 To provide relevant and reliable financial information to stakeholders for decision-making purposes

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  To measure and report the financial performance and position of an entity
 To ensure compliance with accounting standards and regulations

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 To facilitate effective management of financial resources
 To provide a basis for taxation and other legal requirements

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Advantages of Accounting:

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The advantages of accounting are as follows:

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 Helps in effective management of financial resources
 Provides timely and accurate financial information for decision-making purposes


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Facilitates budgeting and financial planning
 Helps in tracking the financial performance and position of an entity

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 Provides a basis for taxation and other legal requirements
 Facilitates comparison of financial data over time and across entities

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Limitations of Accounting:

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The limitations of accounting are as follows:
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 Accounting information is based on historical data, which may not reflect the current position of an entity
 Accounting data is subject to estimates and assumptions, which may not be accurate in all cases
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 Accounting standards and regulations may vary across jurisdictions, leading to inconsistencies in financial reporting
 Accounting data may not account for non-financial factors, such as environmental and social impacts of business operations
 Accounting data may not reflect the true economic value of an entity, as it is based on accounting conventions and principles.
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Q2. Write about the Bank Reconciliation Statement, what are the main causes of difference.
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Solution:
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A bank reconciliation statement is a document that compares the bank statement and the company's cash book to identify any discrepancies between
the two. The main purpose of the bank reconciliation statement is to ensure that the company's records match the bank's records, and to identify any

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errors or omissions that may have occurred during the recording of financial transactions.

The process of preparing a bank reconciliation statement involves comparing the transactions recorded in the cash book with those recorded in the bank

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statement for a specific period. Any differences between the two records are identified and explained. The bank reconciliation statement includes
details of the following:

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 The balance as per the company's cash book
 The balance as per the bank statement

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 The reasons for any differences between the two balances

The main causes of differences between the cash book and bank statement balances are as follows:

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1) Timing differences: Timing differences occur when a transaction is recorded in the cash book but has not yet been processed by the bank. This

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may include checks that have not yet been cleared, deposits that have not yet been credited, or bank charges that have not yet been debited.
2) Errors and omissions: Errors and omissions in recording transactions can also cause differences between the cash book and bank statement
balances. This may include errors in recording the amount of a transaction, or omitting a transaction altogether.

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3) Bank charges and interest: Bank charges and interest may be deducted or added by the bank, which may not be recorded in the company's cash

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book.
4) Fraudulent transactions: Fraudulent transactions, such as unauthorized withdrawals or deposits, can also cause differences between the cash
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book and bank statement balances.

By preparing a bank reconciliation statement, the company can identify any discrepancies between its records and the bank's records, and take
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corrective action to rectify any errors or omissions. This ensures that the company's financial records are accurate and reliable, and helps to prevent
fraud or other financial irregularities.
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Q3. Write notes on the following concepts:

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a) Going Concern Concept

b) Conservatism
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c) Consistency

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 d) Materiality

Solution:

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a) Going Concern Concept:

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The Going Concern Concept is a fundamental accounting principle that assumes that a business will continue to operate indefinitely, without the need to
liquidate its assets or cease operations. This concept assumes that the business will be able to generate sufficient cash flows to meet its obligations and
continue operating in the foreseeable future. This concept is important because it allows businesses to prepare financial statements on the basis of the

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assumption that they will continue to operate, rather than on the basis of liquidation value.

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b) Conservatism:

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Conservatism is an accounting principle that requires businesses to exercise caution when reporting financial information. This principle requires

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businesses to recognize losses, expenses, and liabilities as soon as they are probable, but to recognize gains and revenues only when they are certain.
This principle is important because it helps to ensure that financial statements are not overstated, which could mislead investors and other stakeholders.

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c) Consistency:

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Consistency is an accounting principle that requires businesses to use the same accounting methods and procedures from one accounting period to the
next. This principle ensures that financial statements are comparable over time, and that investors and other stakeholders can make informed decisions
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based on consistent financial information. Consistency is important because it helps to ensure that financial statements are reliable and can be trusted
by stakeholders.
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d) Materiality:
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Materiality is an accounting principle that requires businesses to report financial information that is material or relevant to the decision-making process
of investors and other stakeholders. This principle allows businesses to focus on reporting information that is important, rather than reporting every
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minor detail. Materiality is important because it allows businesses to focus on reporting financial information that is relevant and useful to stakeholders,
while avoiding the reporting of irrelevant or insignificant information.
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Q4. Sohan drew on Mohan a bill for Rs. 1,500 for 3 months on June 1, 2023. The bill was endorsed to Rohan. On July 15, Mohan approaches Sohan to
renew the bill for a period of three months and charges Rs. as interest. Sohan aggress to renew the bill. Mohan pays the amount of interest in cash and

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accepts a new bill for Rs. 1,500. The bill is honoured on the due date. Record these transactions in the books of various parties.

Solution:

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In the given scenario, there are three parties involved: Sohan, Mohan, and Rohan.

Let's record these transactions in the books of each party:

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Books of Sohan:

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Books of Mohan:

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Books of Rohan:

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Note that the interest charged by Sohan on Mohan's bill is Rs. 50, and the renewed bill for Rs. 1,500 is due on September 1, 2023.

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Q5. From the following figures prepare Trading and Profit and Loss Account of Lakshmi & Co. for the year ended December 31, 1987.
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Stock on January 1, 1987 Rs. 40,000

Purchases Rs. 98,000

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Commission Received Rs. 650

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Rent, Rates and Taxes Rs. 8,600

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Salaries & Wages Rs. 12,000

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Sales Rs. 1,62,100 9

Returns Inwards Rs. 2,400

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Returns Outwards Rs. 3,000

Sunday Expenses Rs. 2,500

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Bank Charges Rs. 50

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Discount Received Rs. 750

Carriage on Purchases Rs. 2,000

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Discount Allowed Rs. 530

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Carriage on Sales Rs. 1,700

Lighting and Heating Rs. 2,200

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Postage Rs. 300

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Income from Investments Rs. 500

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Commission Paid Rs. 1,000

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Interest paid on a bank loan rn Rs. 550

The stock on December 31, 1987 was valued at Rs. 26,000.

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Solution:
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