Name and explain different types of reserves in detail.
Types of Reserves are as follows:-
1) Revenue Reserves:- These reserves come into existence out of profits which have been earned in the course of day-to-day business operations. Therefore, the revenue reserves represent undistributed profits and as such are available for the distribution of dividends.
Revenue reserves may be of the following two types:-
(A) General Reserve:- Usually, the businessmen do not withdraw the entire profits from the business but retain a part of it in the business to meet unforeseen future uncertainties.
(B) Specific Reserve:- Such a reserve is created for a specific purpose and can be utilised only for that purpose.
2) Capital Reserves:- In addition to the normal profits, capital profits are also earned in the business from many sources. The reserves created out of such capital profits are known as Capital Reserves. Such reserves generally, are not available for distribution as cash dividend among the shareholders of a Company. Profits received from the following sources are termed as Capital profits:-
(A) Profits on the sale of fixed assets.
(B) Profits on the revaluation of fixed assets and liabilities.
(C) Premiums received on issues of Shares or Debentures.
(D) Profit on redemption of Debentures.
(E) Profit from the reissue of forfeited shares.
(F) Profit prior to the incorporation of a Company.
(G) Profit on the purchase of a running business.
State whether the following statements are true or false:
State briefly the need for providing depreciation.
Give four examples each of ‘revenue reserve’ and ‘capital reserves’.
Explain the concept of depreciation. What is the need for charging depreciation and what are the causes of depreciation?
Give four examples each of ‘provision’ and ‘reserves’.
What are the effects of depreciation on profit and loss account and balance sheet?
State with reasons whether the following statements are True or False ;
(i) Making excessive provision for doubtful debits builds up the secret reserve in the business.
(ii) Capital reserves are normally created out of free or distributable profits.
(iii) Dividend equalisation reserve is an example of general reserve.
(iv) General reserve can be used only for some specific purposes.
(v) ‘Provision’ is a charge against profit.
(vi) Reserves are created to meet future expenses or losses the amount of which is not certain.
(vii) Creation of reserve reduces taxable profits of the business.
Discuss in detail the straight line method and written down value method of depreciation. Distinguish between the two and also give situations where they are useful.
Basaria Confectioner bought a cold storage plant on July 01, 2014 for ₹ 1,00,000. Compare the amount of depreciation charged for first three years using:
Distinguish between ‘general reserve’ and ‘specific reserve’.
Name any two types of commonly used negotiable instruments.
Why is it necessary to record the adjusting entries in the preparation of final accounts?
State the meaning of incomplete records?
Briefly state how the cash book is both journal and a ledger.
State the meaning of a trial balance?
State the four basic requirements of a database applications.
Define accounting.
State the different elements of a computer system.
Why is it necessary for accountants to assume that business entity will remain a going concern?
State the need for the preparation of bank reconciliation statement?
Fill in the blanks :
(i) Passbook is a copy of.............as it appears in the ledger of the bank.
(ii) When money is with drawn from the bank, the bank ............. the account of the customer.
(iii) Normally, the cash book shows a debit balance, passbook shows .............balance.
(iv) Favourable balance as per the cash book means .............balance in the bank column of the cash book.
(v) If the cash book balance is taken as starting point the items which make the cash book balance smaller than the passbook must be .............for the purpose of reconciliation.
(vi) If the passbook shows a favourable balance and if it is taken as the starting point for the purpose of bank reconciliation statement then cheques issued but not presented for payment should be .............to find out cash balance.
(vii) When the cheques are not presented for payment, favourable balance as per the cash book is .............than that of the passbook.
(viii) When a banker collects the bills and credits the account passbook overdraft shows .............balance.
(ix) If the overdraft as per the passbook is taken as the starting point, the cheques issued but not presented are to be .............in the bank reconciliation statement.
(x) When the passbook balance is taken as the starting point items which makes the passbook balance .............than the balance in the cash book must be deducted for the purpose of reconciliation.
Give two examples each of the organisations where ‘ready-to-use’, ‘customised’, and ‘tailored’ accounting packages respectively suitable to perform the accounting activity.
List the distinctive advantages of a computer system over a manual system.
Distinguish between statement of affairs and balance sheet.
Fill in the blanks:
1. Issued a cheque for ₹8,000 to pay rent. The account to be debited is ............
2. Collected ₹35,000 from debtors. The account to be credited is ............
3. Purchased office stationary for ₹18,000. The account to be credited is ...........
4. Purchased new machine for ₹1,70,000 and issued cheque for the same.
The account to be debited is ............
5. Issued cheque for ₹70,000 to pay off on of the creditors. The account to be debited is ............
6. Returned damaged office stationary and received ₹50,000. The account to be credited is ............
7. Provided services for ₹65,000 on credit. The account to be debited is ...........
Who are the external users of information?
Which of the following is correct?
(i) Liabilities = Assets + Capital
(ii) Assets = Liabilities – Capital
(iii) Capital = Assets – Liabilities
(iv) Capital = Assets + Liabilities.
State the causes of difference occurred due to time lag.
Opening capital is ascertained by preparing :
(a) Total debtors account (b) Total creditors account
(c) Cash account (d) Opening statement of affairs
Discuss the advantages of computerised accounting system over the manual accounting system.