IGNOU| FINANCIAL ACCOUNTING (BCOC - 131)| SOLVED PAPER – (DEC - 2023)| (BCOC)| ENGLISH MEDIUM
BACHELOR OF COMMERCE
(GENERAL) (CBCS)
(BCOMG)
Term-End Examination
December - 2023
BCOC-131
FINANCIAL ACCOUNTING
Time: 3 Hours
Maximum Marks: 100
Note: Attempt any five questions. Each question carries 20 marks.
हिंदी माध्यम: यहां क्लिक करें
1. (a) State the objectives and significance of setting Accounting Standards. 10
Ans:- The
main objectives and importance of setting accounting standards are:-
(i) To
enhance transparency and disclosure in financial reporting through
requiring companies to provide detailed information about their financial
position, performance and cash flows, enabling stakeholders to make
well-informed decisions.
(ii) To
ensure consistency and comparability in financial reporting by
establishing uniform principles and guidelines, allowing investors and analysts
to compare the financial performance of different companies in the same
industry or across different sectors.
(iii) To facilitate
accountability and governance within organisations by mandating the
preparation of accurate and reliable financial statements, helping to prevent
fraud, mismanagement and unethical practices.
(iv) To
promote economic stability and growth by providing investors confidence in
financial markets and reducing the risk of financial crises.
(v) To
protect the interests of investors by making timely, relevant and
accurate financial information available to investors to make informed
decisions about buying, holding or selling securities.
(vi) To
comply with regulatory requirements set by bodies such as IFRS issued by SEC
or IASB in the U.S. (vii) Facilitate decision making by providing relevant and
reliable financial information to stakeholders such as investors, creditors and
managers.
(viii)
Support investment analysis by standardising the presentation of
financial information, making it easier for investors to analyse and compare
investment opportunities.
(ix)
Facilitate cross-border transactions by ensuring consistency and
comparability in financial reporting across different countries and
jurisdictions.
(x)
Promote public trust and confidence in financial markets by ensuring that
financial information is accurate, reliable and transparent.
In short, accounting
standards play a vital role in ensuring transparency, consistency and
reliability in financial reporting, fostering trust, facilitating informed
decision making and promoting economic stability and growth.
(b)
Explain the steps involved in the Accounting process. 10
Ans:- The
accounting process involves several steps to record, classify, summarize, and
analyze financial transactions. These steps are crucial to preparing financial
statements that provide stakeholders with a comprehensive overview of the
company's financial position and performance.
The steps
involved in the accounting process are:-
(i)
Identify transactions: Identify all financial and monetary
transactions that occur during the accounting period. This includes both cash
and non-cash transactions, such as sales, purchases, expenses, and revenues.
(ii) Record
transactions in the journal: Create journal entries for each identified
transaction. This step involves recording transactions in the journal, which is
a book of original entry. The journal entry includes the date, description, and
amount of each transaction.
(iii) Post
transactions to the ledger: Post journal entries to the ledger, which is
a book of final entry. Ledgers are organized by account type, such as assets,
liabilities, equity, revenue, and expenses. Each transaction is recorded in the
corresponding ledger account, ensuring that accounting records are accurate and
up-to-date.
(iv)
Prepare the unadjusted trial balance: Prepare an unadjusted trial balance
by listing all ledger accounts and their corresponding debit or credit
balances. This step ensures that the sum of all debit balances is equal to the
sum of all credit balances, which indicates that the accounting records are
accurate.
(v) Adjust
for accruals and prepayments: Adjust the trial balance for accruals and
prepayments. Accruals are expenses or revenues that have been incurred but not
yet paid or received, while prepayments are advance payments for goods or
services. These adjustments ensure that the financial statements accurately
reflect the company's financial position and performance.
(vi)
Prepare the adjusted trial balance: Prepare an adjusted trial balance by
incorporating accruals and prepayment adjustments. This step ensures that the
financial statements accurately reflect the company's financial position and
performance.
(vii)
Prepare financial statements: Prepare financial statements, including the
balance sheet, income statement, and cash flow statement. These statements
provide stakeholders with a comprehensive overview of the company's financial
position and performance.
(viii)
Close the ledgers: Close the ledgers by transferring temporary
account balances to permanent accounts. This step ensures that the financial
statements accurately reflect the company's financial position and performance,
and that the accounting records are ready for the next accounting period.
(ix)
Communicate with users: Communicate financial statements to
stakeholders, including investors, creditors, and management. This step ensures
that financial statements are effectively used by stakeholders to make informed
decisions.
(x) Review
and update: Regularly review and update accounting records to ensure that
they accurately reflect the company's financial position and performance. This
step ensures that financial statements remain accurate and reliable over time.
2. What are the different categories in which accounting
transactions can be classified? Also explain the ‘debit and credit rules’ in
this regard. 14+6
Ans:- Accounting transactions can be classified
into several categories based on various criteria.
Here are
some of the main categories:-
(i)
Purpose-Based Categories:
(a)
Business Transactions: These are transactions directly related to
business operations, such as sales, purchases, rent, utilities, and
advertising.
(b)
Non-Business Transactions: These are transactions that are not related
to business operations, such as charitable donations, scholarships, and
sponsorships.
(c)
Personal Transactions: These are transactions that are related to
the business but are not business expenses, such as employee birthdays or
anniversary parties.
(ii)
Relationship-Based Categories:
(a)
Internal Transactions: These are transactions that involve the
movement of money within the company, such as the payment of salaries or the
depreciation of assets.
(b)
External Transactions: These are transactions that involve
interactions with entities outside the organization, such as buying supplies or
making sales.
(iii)
Exchange-based Categories:
(a) Cash
Transactions: These are transactions that involve a direct exchange of cash,
such as cash purchases or cash sales.
(b)
Non-cash Transactions: These are transactions that do not involve
cash, such as returns or credit transactions.
(c) Credit
Transactions: These are transactions that involve a promise to pay at a later
date, such as credit purchases or credit sales.
(iv)
Transaction Categories in Accounting:
(a)
Income: Money received, such as sales or dividends.
(b)
Expenses: Costs, such as rent or utilities.
(c)
Transfers: Movement of money between accounts.
(d)
Investments: Purchase or sale of assets or stocks.
(e) Loans:
Money borrowed or repaid.
These
categories help organize and analyze financial transactions, making it easier
to track cash flows, identify trends, and make informed financial decisions.
The 'debit
and credit rules' in accounting classification are based on the double-entry
bookkeeping method. In this system, each transaction is recorded with both a
debit and a credit entry. A debit entry increases an asset or expense account,
while a credit entry increases a liability or equity account. This ensures that
the accounting equation (assets = liabilities + equity) remains balanced.
For
example, when a business purchases office supplies for $100, the transaction
would be recorded as follows:-
(a) Debit:
Office supplies (asset) = $100
(b)
Credit: Cash (asset) = $100
This way,
the transaction is classified correctly and the accounting equation remains
balanced.
3. You are required to pass the necessary journal entries to
rectify the following errors: 20
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