CUSTOMER_CODE
SMUDE
DIVISION_CODE
SMUDE
EVENT_CODE
SMUAPR15
ASSESSMENT_CODE BB0017_SMUAPR15
QUESTION_TYPE DESCRIPTIVE_QUESTION
QUESTION_ID
73966
QUESTION_TEXT
What are the disclosure requirement expenses in trading account as
per part II of schedule VI of the companies act of 1956
SCHEME OF
EVALUATION
Stock
Opening and closing balances of stocks should be included in
the Trading and Profit & Loss account on the debit side and
credit side respectively. The closing stock should be shown in the
assets side of the balance sheet also.
Purchases
Purchases and purchases return balances need not be shown
separately in the lading and profit & loss account. Instead
purchase returns should be deducted from purchases and only
the net amount should be shown in the debit side of the trading
account
Carriage and Carriage Inward
These are transportation expenses incurred on purchases of
goods and are debited to trading and profit & loss account.
Carriage outward, however, should be included in the profit and
loss account.
Freight
Freight paid on the purchase of goods is a direct expense and
therefore should be included in the trading account. Freight paid
on any asset like furniture, plant and machinery must be debited
to the relevant asset account itself.
Dock Dues and clearing Charges
These are paid on goods imported from foreign countries.
These expenses are direct expenses and should be debited to
trading and profit & loss account. Duties paid on export and
forwarding charges should be included in the profit and loss
account.
Packing Material and charges
Generally the amounts spent on them constitute indirect
expenses to be debited profit and loss account. But when special
packing is required to make the goods ready for sale especially in
the case of branded goods, the item should be transferred to
trading account. Unused stock of packing material is an asset.
Work-In-Progress
This item represents partly finished goods. Its opening balance
should be debited to trading and profit & loss account and the
balance at year end is first credited trading account and then
shown on the assets side of the balance sheet.
Royalties
These are payments for acquiring the right to use patents in
the production process. Royalties on the production basis should
be debited to trading account if there is no separate
manufacturing account e.g. production of coal or medicines;
otherwise they are debited to profit and loss account e.g. royalties
on the sale of books.
Withdrawals, Samples, Etc.
When the goods are withdrawn for personal use or for
distribution as samples, they can not be treated as part of the
sales. Instead the purchases must be adjusted for such items by
giving a proper credit of the same.
Raw Material Consumed
Clause 3 (ii) (a) (i) of part Il of Schedule Vito the Companies Act
1956 require that in the case of manufacturing Companies the
following information has to a given either by way of separate
statement or as part of the profit and b account:
(1) ltemwise breakup of raw material consumed quantity as
well as value thereof.
(2) The basic raw material consumed shall be separately stated
itemwise.
(3) Intermediate and components procured from the other
manufacturer may suitably grouped if their list is too large the
quantities may not be mentioned.
(4) To reduce the list to a sizeable one; the items which in
values individual account for 10% or more of the total value of
the raw materials consumed shall be shown separately as a
distinct item with the respective quantities.
(1X10=10)
QUESTION_TYPE DESCRIPTIVE_QUESTION
QUESTION_ID
73967
What is contingent liability? What are the disclosure requirements of
QUESTION_TEXT contingent liabilities in balance sheet as per part I of schedule VI of
companies Act, 1956.
SCHEME OF
EVALUATION
Meaning of Contingent Liability
The term “Contingent Liability’ has not been defined in the
Companies Act, 1956. However, the Institute of Chartered
Accountants of India in its ‘Guidance Note on Terms used in
Financial Statements’ defines Contingent Liability as “an
obligation relating to an existing condition or situation which
may arise in future depending ion the occurrence or non
occurrence of one or more uncertain future events”.
( 2 marks)
Disclosure requirements of Schedule VI
According to Part I of Schedule VI of Companies Act, 1956,
the following items
including those of contingent liabilities should be separately
disclosed by way of I note to the Balance Sheet
a) Claims against the company not acknowledged as debts.
b) The uncalled liability on shares partly paid.
c) Arrears of fixed cumulative dividends.
d) Estimated amount of contracts remaining to be executed on
capital account and not provided for.
e) Other money for which company is contingently liable.
In respect of arrears of fixed cumulative dividends the following
details should be:
( 3 marks )
1. The period from which the dividends are in arrears showing
separately such arrears on each class of shares;
2. The amount should be stated before deduction of income tax,
but in case of tax-free dividends, the amount should be shown
free of income tax and the fact that it is so shown should be
stated.
Under sub-head (e) above the amount of guarantees given by
the company on behalf of directors or other officers of the
company should be stated where practicable, the general nature
of each such contingent liability, if material, should be specified.
( 3 marks)
Instances of contingent liabilities
The study of annual accounts revealed the following items
separately disclosed as a contingent liability not provided for in
accounts (by way of note to accounts)
1.) Claims against company not acknowledged as debts.
2.) Bills discounted.
3.) Excise duty matters in dispute or under appeal.
4.) Custom duty matters in dispute or under appeal.
5) Uncalled liability on partly paid up shares.
6) Income tax and sales tax matters under appeal.
7) Guarantees given to banks in respect of third parties.
However, ICAI has clarified that it is not contingent liabilities
and need not be disclosed as such.
8) Letters of credit outstanding.
9) Industrial relations matters such as bonus in appeals.
10) Liability in respect of suits pending in the court.
11) Dispute in regard to bonus etc.
12) Matter referred to arbitration.
( 2 marks )
QUESTION_TYPE
DESCRIPTIVE_QUESTION
QUESTION_ID
118107
QUESTION_TEXT
Explain any five principles for capitalization of assets.
Following are the principles for capitalization of assets (any
five)
SCHEME OF
EVALUATION
1.
Land
2.
Plants / units
3.
Buildings, roads, bridges etc…
4.
Railway lines and sidings
5.
Rights and patents
6.
Temporary and enabling works
2 * 5 = 10
QUESTION_TYPE
DESCRIPTIVE_QUESTION
QUESTION_ID
118108
QUESTION_TEXT
Explain the different types of discount and capital and revenue
receipts
Types of discount
Trade discount, Cash discount
SCHEME OF
EVALUATION
Capital receipts: Owner’s contribution as capital amount received
by way of loan, sale proceeds of fixed assets etc are regarded as
capital receipts.
Revenue receipts: income earned in the course of business is
treated as revenue receipt.