Governmental Accounting Continuing Problem Solutions Chapter 2

Preparation Of Investment Account In The Books Of The Company :

GOVERNMENT ACCOUNTING introduction

On 1.1.1995, X. Ltd. had 10,000 Equity shares of Rs. 10 each in Alpha Ltd. purchased for Rs. 1,25,000. The company, unlike Investment Companies, does not make any apportionment of dividends in between capital and revenue.

On 15.5.1995, the Alpha Ltd. made a bonus issue of 1 fully paid share for 2 held on 15.5.1995. In addition, on the same day, Right shares were issued at 3 for 5 held on that date at a premium of Rs. 3, Rs. 7 to be paid on application and the balance in one call after a month. These shares are not to rank for dividend for the year ending 30th June 1995. 2,000 Right shares were taken up by X Ltd., balance Right being sold at Rs. 2 each on 25.5.1995.

On 15.10.1995, the company declared a dividend of 20% for the year ending 30th June 1995.

Make out the Investment Account in the books of X. Ltd. Ignore Income-tax.

Full Accounting Questions And Answers

Here is a list of full accounting questions and answers that can be found on this site, along with a brief description of each one. Please note that these are generally intermediate to advanced exercises.

I would definitely recommend to time yourself when you practice each of these exercises. This will help ensure you're not taking too long to complete each question and will help you get used to doing exercises under exam settings.

For your convenience, difficulty levels and time limits are stated for each of these exercises at the top of each page.

  • A beginner-level quiz taken directly from the Accounting Basics books. 9 multiple choice questions which test the 1st theory chapter here on Basic Accounting Concepts.
  • Covers the accounting equation, assets, liabilities, equity, financial position.
  • 12 minutes
  • For practice on the basic accounting equation and its 3 elements – assets, liabilities and owner's equity.
  • Basic understanding of income and profit is preferable.
  • 10 minutes
  • Simple journal entries – starting a business , asset purchases, paying creditors, cash income and expenses, drawings.
  • Service business – no inventory but supplies on hand and used.
  • 12 minutes
  • Basic journal entries: capital investment, sales, debtors, simple cash expenses, drawings
  • Inventory business – simple purchases and sales journal entries
  • Practice with drawing up T-Accounts.
  • 20 minutes

8) Debtors and Creditors Control Accounts Exercise

9) Debtors and Creditors Ledger Question

Preparation Of Investment Account In The Books Of The Investor:

Mr. Investor furnishes the following details relating to his holding in 6% Government Bonds:

Opening balance Face Value Rs. 60,000 Cost Rs. 59,000.

1.3.1996 100 units purchased ex-interest at Rs. 98.

1.7.1996 Sold 200 ex-interest out of the original holding at Rs. 100.

1.10.1996 Purchased 50 units at Rs. 98 cum-interest.

1.11.1996 Sold 200 units ex-interest at Rs. 99 out of the original holding.

Interest dates are 30th September and 31st March. Mr. Investor closes his books every 31st December. Show the Investment Account as it would appear in his books.

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Chapter : What Is Gaap

Question 1: Who is required to follow GAAP?

Question 2: Who creates the rules for GAAP?

Question 3: What is the purpose of Generally Accepted Accounting Principles ?

Answer to Question 1: Publicly-traded companies.

Answer to Question 2: The Financial Accounting Standards Board

Answer to Question 3: To purpose of GAAP is to ensure that companies financial statements are prepared using a similar set of rules and assumptions. This helps to enable meaningful comparisons between the financial statements of multiple companies.

Chapter 1: Amortization Of Intangible Assets

Governmental and Nonprofit Accounting 10th Edition Freeman ...

Questions 1-2: Prepare journal entries to record each of the following events.

Question 1: Trent runs a business as an engineering consultant. He invents a new system for preparing bridges to deal with extreme weather conditions. He spends $28,000 securing a 14-year patent for his invention. He expects the system to be used for the next few decades at least.

Question 2: Tina runs a business creating medical supplies for surgeries. Her team develops a new tool for assisting in heart surgery. She spends $42,000 on getting it patented. She receives a 14-year patent, but she only expects the technology to be used for about 7 years before a newer technology comes along to replace it.

Answer to Question 1:

To record receiving the patent:

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Preparation Of Investment Account Showing The Profits And Losses On The Transactions Using Fifo Method:

Sohini Finance Ltd. has done the following transactions in 12% State Govt. Stock between 1st September 1992 an 30th June 1994 and all these transactions are cum-interest excepting those marked Ex- interest. Interest is payable on 30th June and 31st December.

The accounting periods ends on 30th June every year:

1.11.92 Sold Rs. 15,000 Rs. 104.50, brokerage Rs. 1.50.

Write-up Investment Account in the books of Sohini Finance Ltd., showing the profits and losses on the transactions using FIFO method.

Preparation Of Final Accounts Of A Company When Additional Information Is Given:

Given below is the trial balance and additional information relating to Bharat Implements Ltd., as at the end of their financial year 1999-2000. Prepare the final accounts in proper form.

Sundry Debtors include Rs. 121 thousand due for more than six months out of which provision has been made for doubtful debts at Rs. 45 thousand during the year.

Included in other expenses are:

Fees to auditors Rs. 65 thousand, out of which Rs. 15 thousand are in other capacities and

Interest on fixed loans Rs. 620 thousand, and other interest Rs. 1,000 thousand.

Rs. 340 thousand are to be re-transferred from development rebate reserve account.

Provisions are to be made for managing directors remuneration at 5% of net profits as provided under law, subject to a maximum of Rs. 120 thousand per annum.

Balance of profit is to be transferred to general reserve after providing for dividend at 25% on capital.

The authorised capital of the company is 20 lakhs Equity Shares of Rs. 10 each.

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How To Solve A Basic Accounting Equation

Here is an example using the formula Assets = Liabilities + Equity or Capital

Problem:

Find out how accounting equation is calculated after taking into consideration each of the following transactions in the books of Mr. A

  • Started business with capital $100,000

    Solution

    Capital + Liabilities = Assets

  • Bought furniture $25, 000

    Capital + Liabilities = Assets

  • Bought goods for cash $20, 000

    Solution

    Capital + Liabilities = Assets

  • Brought goods from Mr. Nelson on credit $5,000

    Solution

    Capital + Liabilities = Assets

  • Sold goods for cash for $15, 000

    Capital + Liabilities = Assets

  • Sold goods to Mr. William on credit $8,000

    Solution,

    Capital + Liabilities = Assets

  • Paid cash to Nelson $4,000

    Solution,

    Capital + Liabilities = Assets

  • Received cash from William $5,000

    Solution

    Capital + Liabilities = Assets

    Depreciation Of An Asset: Problem And Solution # 1

    AI Answers: impairment accounting issues in real estate

    On 1st December, 2011 the company acquired and put into operation a new machine at a total cost of Rs 7,60,000. Depreciation was provided on the new machine on the same basis as had been used in the case of the earlier machine. The company closes its books of account every year on 31st March.

    Prepare Machinery Account and Depreciation Account for four accounting years ended 31st March. 2012:

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    Variety Of Accounting Regimes

    In Finland, financial accounting has traditionally been tied to tax accounting, while bank financing has dominated the majority of enterprise financing . These traits show a link to the so-called continental European accounting system, which differs from the Anglo-American accounting system which emphasises equity financing from capital markets. Figure 2 contextualises the current Finnish accounting model in relation to impacting factors using Nobes general framework of analysis. This framework was developed to explain differences in financial reporting systems and the main distinction between the Anglo-Saxon and continental European financial accounting regimes. Belonging to one of these groups of accounting systems may affect a countrys position on the kind of standards that are deemed to be suitable for financial accounting in both the private and public sectors.

    Depreciation Of An Asset: Problem And Solution # 4

    X Co. Ltd. purchased a machine on 1st April, 2008 for Rs 1,60,000. On October 1, 2009 another machine was purchased for Rs 1,40,000. On October 1, 2010 the first machine was sold for Rs 1,20,000. On the same date, another machine was purchased for Rs 1,00,000. On October 1, 2011 the second machine was sold for Rs 92,000.

    Rate of depreciation was 10% on original cost annually on 31st March. On 31st March, 2011 the method of charging depreciation was changed to diminishing balance method, the rate being 15%.

    Prepare Machine Account for the years ending 31st March, 2009, 2010, 2011, and 2012.

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    Preparation Of Bonds Account:

    On 1.1.1999, X Ltd. bought 100, 12% Govt. Bonds of Rs. 1,000 each at Rs. 940 each. On 1.8.1999, X Ltd. sold 50, 12% Debentures at Rs. 980 each.

    Interest is paid half-yearly i.e. on 30th June and 31st December, every year. Prepare 12% Govt. Bonds Account assuming that the market price for the same is Rs. 990 per bond.

    Using Available Information To Manage And To Achieve Growth

    Government and Not for Profit Accounting 5th Edition ...

    The process of implementing a system for accounting to the federal government, designing special procedures, and implementing regulatory compliance policies naturally generates a wealth of useful information available to the new contractor. However, this cache of information has little value if the contractor does not recognize the benefits of leveraging the information acquired into understanding of governmental purposes, needs, and larger processes, and then use that knowledge to best manage and methodically grow the company.

    For just one example, compliance with government requirements necessitates correct calculation of an overhead rate. However, if the contractor's management does not recognize the importance of learning why the rate is significant, and does not control spending to manage rate variance, then there is not much use for the company in its mere awareness of the overhead rate and of the fact that conformance relies upon its correct calculation.

    Today's technological innovations afford contractors a much better capacity for compliance with government requirements, permitting employment of systems for management and growth, while adapting to keep in step with ever-incoming changes in requirements.

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    Preparation Of Investment Account And Profit & Loss Account:

    On 1.4.96, Sundar had 25,000 equity shares of X Ltd at a book value of Rs. 15 per share . On 20.6.96, he purchased another 5,000 shares of the company at Rs. 16 per share. The directors of X Ltd. announced a bonus and rights issue. No dividend was payable on these issues.

    The terms of the issue are as follows:

    Bonus basis 1: 6 .

    Rights basis 3: 7 Price Rs. 15 per share

    Due Date for payment 30.9.96.

    Dividends:

    Dividends for the year ended 31.3.96 at the rate of 20% were declared by X Ltd. and received by Sundar on 31.10.96. Dividends for shares acquired by him on 20.6.96 are to be adjusted against the cost of purchase.

    On 15.11.96, Sundar sold 25,000 equity shares at a premium of Rs. 5 per share.

    You are required to prepare in the books of Sundar:

    Investment Account

    Profit & Loss account.

    For your exercise, assume that the books are closed on 31.12.96 and shares are valued at average cost.

    Top 5 Problems On Final Accounts Of The Companies

    Are you looking for problems and solutions of final accounts of the companies? You are at the right place! In this article we have compiled top five accounting problems on final accounts of the companies with its relevant solutions.

    Contents:

  • Preparation of Profit and Loss Account, Profit and Loss Appropriation Account and Balance Sheet of a Company
  • Preparation of Balance Sheet, Profit and Loss Account in Accordance with the Requirements of Companies Act, 1956
  • Preparation of Final Accounts of a Company Ignoring Previous Years Figure
  • Preparation of Final Accounts of a Company According to Requirements of Schedule VI of the Companies Act, 1956
  • Preparation of Final Accounts of a Company When Additional Information is Given

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    Preparation Of Profit And Loss Account Profit And Loss Appropriation Account And Balance Sheet Of A Company:

    The Trial Balance of T.V. Limited at 31st December 1996 was as under:

    Further information:

    Of the shares allotted 2,000 shares worth Rs. 2,00,000 were allotted as fully paid to vender from where a running business was acquired.

    Of the Debtors Rs. 10,000 were outstanding but are considered good except a debt of Rs 5,000 doubtful to be provided.

    A provision of Rs. 25,000 is to be made for Income Tax.

    The market value of Government securities on the date of the Balance Sheet was Rs. 93,000 and that of equity shares was 1,60,000.

    Auditors fee Rs. 3,000 should be provided for. Included in General Expenses is six months insurance Rs. 1,500 paid for the year to end on 30th June 1997.

    Interest on Debentures issued and on Investment in Government Securities should be taken into account.

    Provide for a dividend of 5% on shares.

    Prepare Profit and Loss Account, Profit and Loss Appropriation Account and the Balance Sheet as on 31.12.1996.

    Chapter 1: Other Gaap Concepts And Assumptions

    Advanced Accounting- Government Part 1 and 2 Overview

    Question 1: Andy runs a real estate development firm. Five years ago, he purchased a piece of land for $250,000. This year, an appraiser tells Andy that the land is worth $300,000. At what value should Andy report the land on his balance sheet? Why?

    Question 2: Andy is the sole owner of his firm. In June, he moves $30,000 from his business checking account to his personal checking account. If Andy wants his financial records to be in accordance with GAAP, should he record the transaction or not? Why?

    Answer to Question 1: Andy should report the land at its original cost: $250,000. Under GAAPs Historical Cost assumption, assets are reported at their historical cost rather than at their current market value. This is done in order to remove subjective asset valuations from the reporting process.

    Answer to Question 2: Yes, in order to be in compliance with GAAP, Andy must record the transaction. GAAPs Entity Assumption considers businesses to be separate entities from their owners. As such, transactions between a business and its owners must be recorded as if they were between the business and an entirely separate party.

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    When Erps Fall Short

    Most public sector enterprise resource planning solutions, especially those of the early 2000s, lack highly specialized functionality and controls, such as reporting tools necessary to inform management and guide key decisions. ERPs create a continuous need to manually pull data into Excel to prepare reports and answer common questions. Switching ERPs will not solve this problem. At the local level, agencies have one ERP, which is limited in usability and functionality. Generally, the budget is written in Excel, uploaded back to the ERP reporting is done outside the ERP, and non-financial information is housed in various other systems so running performance data is a manual data aggregation process. Historically, local agencies sought out a better ERP that claims to do more or is slightly more usable for operations beyond finance, but this technique still falls short. The current approach taken by local agencies is to use an ERP for core accounting functions and add a performance and collaborative budgeting software like OpenGov for those features and to ensure others can leverage the data.

    A Better Wayimprove Gasbs Financial Reporting Model

    Historically, governmental GAAP has included accrual-based concepts underlying the Statement of Activities. But it has also seen fit to apply a cash-like modified accrual basis to underlying governmental funds accounts. And many state and local governments crafted their budgets in terms of the funds accounts , thereby allowing them to claim balanced budgets while showing accrual-based deficits in the results reported in their consolidated financial statements.

    That, in a nutshell, is how the game has been played.

    Back in 1997, several Illinois senators led an effort resulting in the passage of a law titled the Truth in Budgeting Act. It passed the Illinois General Assembly overwhelmingly. But the intent of the law was circumvented in its implementation. In response to criticism, the Illinois State Comptrollers Office stated that GAAP was indeed being used as required because the law called for GAAP for governments, which was interpreted to refer to governmental fund accounting, not the consolidated governmental-wide reported results.

    This helped Illinois exclude the full pension expense while balancing its budgets, but with disastrous longer-term consequenceseven under the Truth in Budgeting Act. This interpretation also helped lay the foundation for related deceptions, as local governments have claimed surpluses in their funds accounts while running up massive overall debt at the same time.

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    A Valuable Opportunity To Improve Government Accountingand Accountability

    Why have so many state and local governments accumulated massive debts, even as they claimed to balance their budgets every year? Political math.

    Wait, how can math be political? In accounting, we use math. But we also use words to describe numbers. We quantify concepts with numbers, and then describe those numbers with names and definitions. Financial reporting adds a layer of rhetoric on top of accounting results. But accounting results are themselves infused with rhetoricwords produced by political forces.

    Consider the word budget and what most people think if they are told their government balanced the budget. The first definition for budget on Dictionary.com states it is an estimate, often itemized, of expected income and expense for a given period in the future. This is a reasonable version of what most people think a budget is. But it is important to note we are talking about expected income and expense, for a period in the future.

    Consider another definition. The first definition for budget in the American Heritage Dictionary reads an itemized summary of estimated or intended expenditures for a given period, along with proposals for financing them.

    In Illinois, the slippery slope of expenses versus expenditures played a critical role in enabling politicians to claim they were balancing their budgetsnot only in principle, but as required by lawwhile running up debt.

  • heinrichcarbandoin.blogspot.com

    Source: https://www.knowyourgovernment.net/government-accounting-problems-and-solutions/

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