CBSE Class 10 Elements of Book Keeping and Accountancy Sample Paper 2026 27 with Solutions PDF Download

1A. Identify, which of the following is not a Capital Expenditure for a firm? [1 Mark]
(A) Purchase of machinery
(B) Purchase of a Building
(C) Loan taken from Bank
(D) Rent Received

Answer: (D) Rent Received

Teacher's Note:
a) Capital expenditure creates a long-term asset or benefit for the business, such as machinery or a building.
b) Rent received is a revenue receipt, not an expenditure at all, so it cannot be capital expenditure.

OR

1B. Identify, which of the following is not a Capital Receipt for a firm? [1 Mark]
(A) Capital introduced by the owner
(B) Loan taken from bank
(C) Sale of old Machinery
(D) Cash sales

Answer: (D) Cash sales

Teacher's Note:
a) Capital receipts either increase a liability or reduce an asset, and are not from normal business operations.
b) Cash sales is a revenue receipt because it arises from the regular trading activity of the firm.

2A. A firm purchased Machinery of Rs. 14,00,000 on 1st April, 2025. Depreciation was to be charged @7½% p.a by written down value method. What will be the value of depreciation charged during the year? [1 Mark]
(A) Rs. 1,50,000
(B) Rs. 1,30,000
(C) Rs. 1,40,000
(D) Rs. 1,05,000

Answer: (D) Rs. 1,05,000

Teacher's Note:
a) Depreciation under WDV is calculated as \( 14,00,000 \times \frac{7.5}{100} = 1,05,000 \) for the first year.
b) In the first year, book value equals the original cost, so WDV depreciation is same as SLM depreciation.

OR

2B. ABC Limited purchased Building of Rs. 60,00,000 on 1st April, 2024. Depreciation was to be charged @10% p.a by Straight Line method. What will be the book value of the building at the end of the accounting year? [1 Mark]
(A) Rs. 6,00,000
(B) Rs. 54,00,000
(C) Rs. 3,20,000
(D) Rs. 1,60,000

Answer: (B) Rs. 54,00,000

Teacher's Note:
a) Under SLM, depreciation is \( 60,00,000 \times \frac{10}{100} = 6,00,000 \).
b) Book value = Cost minus depreciation = Rs. 60,00,000 - Rs. 6,00,000 = Rs. 54,00,000.

3. A multinational company established its set up in India, under the Make-in-India scheme of the government. It spent Rs. 3,60,00,000 on an advertisement campaign for the launch of a new product. The benefit of this advertisement is expected to continue for several years.
The amount of expenditure indicated in the above text can be categorised under the book of accounts as________. (Choose the correct option to fill up the blank) [1 Mark]
(A) Capital Expenditure
(B) Deferred Revenue Expenditure
(C) Capital Gain
(D) Revenue Expenditure

Answer: (B) Deferred Revenue Expenditure

Teacher's Note:
a) Deferred revenue expenditure is a heavy revenue expense whose benefit spreads over several years.
b) Advertisement is revenue in nature but its large amount and long-term benefit make it deferred, not capital, expenditure.

4. On 1st April, 2025 Chopra Ltd. purchased Equipment and Machinery worth Rs. 1,00,00,000. Depreciation was to be charged @ 10% p.a by fixed instalment system. On the same day, Khan and Peter Ltd purchased Machinery worth the same amount and charged depreciation @ 10% p.a by reducing instalment system. On 31st March, 2026 which of the following statement holds true? [1 Mark]
(A) Total Depreciation charged by the two companies will be same.
(B) Total Depreciation charged by Chopra Ltd. will be more than that charged by Khan and Peter Ltd.
(C) Total Depreciation charged by Chopra Ltd. will be lesser than that charged by Khan and Peter Ltd.
(D) Book value of the assets mentioned, will be same at the year ending March 31, 2025.

Answer: (A) Total Depreciation charged by the two companies will be same.

Teacher's Note:
a) In the very first year, the written down value equals the original cost, so WDV and SLM give the same depreciation amount.
b) Differences between the two methods appear only from the second year onwards.

5. Bank Reconciliation statement is prepared by the __________. (Choose the correct option to fill up the blank) [1 Mark]
(A) Owner of the business
(B) Banks
(C) Tax Authorities
(D) Creditors

Answer: (A) Owner of the business

Teacher's Note:
a) BRS is an internal accounting tool, prepared by the business itself, not by the bank.
b) It helps the owner locate errors and timing differences between the Cash Book and Pass Book.

6. Read the following statements carefully:
Statement 1: Bank Reconciliation Statement is prepared to find out the reasons for the difference between Cash Book balance and Pass Book balance.
Statement 2: Timing differences such as cheques issued but not presented may cause the difference.
In light of the given statements, choose the correct option from the following: [1 Mark]
(A) Statement 1 is true and Statement 2 is false.
(B) Statement 1 is false and Statement 2 is true.
(C) Both Statements 1 and 2 are true.
(D) Both Statements 1 and 2 are false.

Answer: (C) Both Statements 1 and 2 are true.

Teacher's Note:
a) BRS explains why Cash Book and Pass Book balances differ.
b) Cheques issued but not presented is a classic timing difference that causes the mismatch.

7. Debit balance as per Cash book is Rs. 1,40,000. Cheques issued but not presented were Rs. 18,000 and cheques deposited but not cleared were Rs.1,20,000. What will be resulting balance after preparing Bank Reconciliation Statement? [1 Mark]
(A) Credit Balance as per Pass Book Rs. 38,000
(B) Credit Balance as per Pass Book Rs. 58,000
(C) Debit Balance as per Pass Book Rs. 38,000
(D) Debit Balance as per Pass Book Rs. 22,000

Answer: (A) Credit Balance as per Pass Book Rs. 38,000

Teacher's Note:
a) Starting from Cash Book debit balance: Rs. 1,40,000 + Rs. 18,000 (cheques issued not presented) - Rs. 1,20,000 (cheques deposited not cleared) = Rs. 38,000.
b) A favourable Cash Book (debit) balance corresponds to a credit balance in the Pass Book, since the bank shows the customer as a creditor.

8A. A limited liability partnership firm, purchased machinery, land and office furniture for its business. At the end of the year, the accountant calculated depreciation only on assets whose value decreases with usage.
Identify, on which of the following assets, depreciation will not be charged? [1 Mark]
(A) Building
(B) Machinery
(C) Land
(D) Office furniture

Answer: (C) Land

Teacher's Note:
a) Land does not wear out with use and normally has an unlimited useful life, so no depreciation is charged on it.
b) Machinery, building and furniture all wear out over time and hence are depreciated.

OR

8B. Rohit purchased a machine for Rs. 5,00,000. The accountant estimated its useful life as 10 years and scrap value Rs. 50,000.
Identify, which of the following information is not required for calculating depreciation using the Straight Line Method? [1 Mark]
(A) Cost of the asset
(B) Market demand
(C) Scrap Value
(D) Estimated Life

Answer: (B) Market demand

Teacher's Note:
a) SLM depreciation formula only needs cost, scrap value and estimated life.
b) Market demand for the product affects sales, not the depreciation calculation.

9. Read the following Assertion (A) and Reason (R). Choose the correct options from those given below:
Assertion (A): If Bank Reconciliation Statement is prepared with Pass Book balance in the beginning of the period, the difference of Rs.10,000 (Rs.21,000 deposited but Rs.11,000 recorded in Cash Book) will be added.
Reason (R): The bank has recorded Rs.21,000 while the Cash Book shows only Rs.11,000, therefore the Pass Book balance is higher by Rs.10,000. [1 Mark]
(A) Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (A).
(B) Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A).
(C) Assertion (A) is true, but Reason (R) is false.
(D) Assertion (A) is false, but Reason (R) is true.

Answer: (D) Assertion (A) is false, but Reason (R) is true.

Teacher's Note:
a) Since the Pass Book already shows the higher amount, the Rs.10,000 difference must be subtracted, not added, to arrive at the Cash Book balance.
b) The Reason correctly explains why the Pass Book balance is higher, so Reason alone is true.

10. Read the following Assertion (A) and Reason (R). Choose the correct options from those given below:
Assertion (A): A bill of exchange must be issued by the drawer and accepted by the drawee.
Reason (R): A bill of exchange is a written document which is unconditional by definition. [1 Mark]
(A) Both Assertion (A) and Reason (R) are true, and Reason (R) is the correct explanation of Assertion (A).
(B) Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A).
(C) Assertion (A) is true, but Reason (R) is false.
(D) Assertion (A) is false, but Reason (R) is true.

Answer: (B) Both Assertion (A) and Reason (R) are true, but Reason (R) is not the correct explanation of Assertion (A).

Teacher's Note:
a) Both statements describe true features of a bill of exchange.
b) Being unconditional is a separate feature and does not explain why the drawer must issue and the drawee must accept the bill.

11. Read the following statements carefully:
Statement 1: A bill of exchange accepted by Dilawar in favour of Bhuwan represents a liability for Dilawar.
Statement 2: The same bill of exchange which is accepted by Dilawar in favour of Bhuwan represents as an asset for Bhuwan.
In light of the given statements, choose the correct option from the following: [1 Mark]
(A) Statement 1 is true and Statement 2 is false.
(B) Statement 1 is false and Statement 2 is true.
(C) Both Statements 1 and 2 are true.
(D) Both Statements 1 and 2 are false.

Answer: (C) Both Statements 1 and 2 are true.

Teacher's Note:
a) For the acceptor (Dilawar), the bill is Bills Payable, a liability.
b) For the holder (Bhuwan), the same bill is Bills Receivable, an asset.

12A. On 1st May 2024, Rajesh issued a bill of exchange Rs. 1,00,000 on Roshan for a period of 3 months. The maturity date of bill will be __________. (Choose the correct option to fill up the blank) [1 Mark]
(A) 4th August 2024
(B) 3rd August 2024
(C) 1st August 2024
(D) 5th August 2024

Answer: (A) 4th August 2024

Teacher's Note:
a) 3 months from 1st May 2024 gives 1st August 2024.
b) Adding 3 days of grace period gives the maturity date of 4th August 2024.

OR

12B. On 15 October 2024, Bharat issued a bill on Laxman of Rs. 1,05,000. Laxman accepted the bill. Ram transferred the bill to Shatrughan and Shatrughan further transferred back the bill to Ram.
In the light of the above text, _________will receive the amount on due date of the bill. (Choose the correct option to fill up the blank) [1 Mark]
(A) Ram
(B) Laxman
(C) Bharat
(D) Shatrughan

Answer: (A) Ram

Teacher's Note:
a) The holder of the bill on the maturity date is entitled to receive payment.
b) Since the bill was transferred back to Ram, he is the final holder and receives the amount.

13. Read the following statements carefully:
Statement 1: Statement of Profit and Loss is prepared to determine Profit or Loss in case of Accounts from Incomplete Records.
Statement 2: Balance Sheet can be prepared with Accounts from Incomplete Records.
In light of the given statements, choose the correct option from the following: [1 Mark]
(A) Statement 1 is true and Statement 2 is false.
(B) Statement 1 is false and Statement 2 is true.
(C) Both Statements 1 and 2 are true.
(D) Both Statements 1 and 2 are false.

Answer: (A) Statement 1 is true and Statement 2 is false.

Teacher's Note:
a) Statement of Profit and Loss is used to compute profit under the single-entry system.
b) With incomplete records, only a Statement of Affairs, not a formal Balance Sheet, can be prepared.

14A. Net Profit of Nimit Kumar and Sons was Rs. 24,50,000. There were indirect Incomes of Rs. 5,40,000 and indirect expenses of Rs. 9,70,000.
Calculate and choose the value of the amount of Gross Profit. [1 Mark]
(A) Rs.29,90,000
(B) Rs.28,80,000
(C) Rs.14,80,000
(D) Rs.34,20,000

Answer: (B) Rs.28,80,000

Teacher's Note:
a) Gross Profit = Net Profit - Indirect Incomes + Indirect Expenses.
b) Rs.24,50,000 - Rs.5,40,000 + Rs.9,70,000 = Rs.28,80,000.

OR

14B. Gross Loss of the firm run by Mr Crust stands at Rs. 11,50,000. There were indirect Incomes of Rs. 5,40,000 and indirect expenses of Rs. 9,70,000.
Calculate and choose the value of the amount of Net Loss. [1 Mark]
(A) Rs.15,80,000
(B) Rs.16,80,000
(C) Rs.15,40,000
(D) Rs.17,80,000

Answer: (A) Rs.15,80,000

Teacher's Note:
a) Net Loss = Gross Loss + Indirect Expenses - Indirect Incomes.
b) Rs.11,50,000 + Rs.9,70,000 - Rs.5,40,000 = Rs.15,80,000.

15. Bank Reconciliation Statement is prepared to reconcile _________ and ________ balances. (Choose the correct option to fill up the blank) [1 Mark]
(A) Ledger Accounts and Cash Book
(B) Trial Balance and Pass Book
(C) Cash Book and Pass Book
(D) Vouchers and Pass Book

Answer: (C) Cash Book and Pass Book

Teacher's Note:
a) BRS matches the balance shown by the firm's own Cash Book with the balance shown by the bank's Pass Book.
b) It is not concerned with vouchers, ledgers or the trial balance directly.

16. A bill of exchange enables the buyer to buy the goods on credit and pay after the period of credit. However, the seller of goods even after extension of credit can get payment immediately by __________. (Choose the correct option to fill up the blank) [1 Mark]
(A) retaining the bill till maturity.
(B) discount the Bills on Exchange
(C) sending Bills for collection
(D) endorsing the bill to a third party

Answer: (B) discount the Bills on Exchange

Teacher's Note:
a) Discounting means the seller gets immediate cash from the bank, less a small discount charge.
b) Retaining or sending for collection means waiting till the due date, not immediate payment.

17A. Statement of financial position produced from incomplete accounting record is commonly known as _______. (Choose the correct option to fill up the blank) [1 Mark]
(A) Balance Sheet
(B) Profit and Loss account
(C) Statement of Affairs
(D) Statement of financial position

Answer: (C) Statement of Affairs

Teacher's Note:
a) Since incomplete records lack full ledger support, the position statement is called a Statement of Affairs, not a Balance Sheet.
b) It lists estimated assets and liabilities to find capital.

OR

17B. Amount of Capital in case of Accounts from Incomplete Records is calculated by preparing _________. (Choose the correct option to fill up the blank) [1 Mark]
(A) Balance Sheet
(B) Statement of Profit and Loss
(C) Statement of Affairs
(D) Profit and Loss Account

Answer: (C) Statement of Affairs

Teacher's Note:
a) Capital is the balancing figure between total assets and total liabilities in the Statement of Affairs.
b) This is the starting point (opening capital) and ending point (closing capital) used in the Statement of Profit and Loss.

18. While preparing Statement of Affairs, total of assets side was Rs. 28,50,000 and Creditors amounted to Rs. 12,00,000. The balancing figure of Rs. 16,50,000 will be known as ________ (Choose the correct option to fill up the blank) [1 Mark]
(A) Profit or Loss
(B) Capital
(C) Net Assets
(D) Deficiency

Answer: (B) Capital

Teacher's Note:
a) In a Statement of Affairs, Assets minus Liabilities gives the owner's Capital.
b) Rs.28,50,000 - Rs.12,00,000 = Rs.16,50,000, which is Capital, not profit directly.

19. Kamakhya started business with the following assets:
i. Cash Rs. 10,50,000 and Bank Balance Rs. 12,50,000.
ii. She purchased Furniture of Rs. 4,80,000 and Equipment of Rs. 4,20,000.
iii. She spent Rs. 1,30,000 for advertisement and paid rent of Rs. 2,40,000.
On the basis of above information, calculate the following values:
(I) Capital invested in business by Kamakhya [1 Mark]
(II) Total Capital Expenditure [1 Mark]
(III) Total Revenue Expenditure [1 Mark]

Answer:
1. Capital invested = Cash + Bank Balance = Rs.10,50,000 + Rs.12,50,000 = Rs.23,00,000.
2. Total Capital Expenditure = Furniture + Equipment = Rs.4,80,000 + Rs.4,20,000 = Rs.9,00,000.
3. Total Revenue Expenditure = Advertisement + Rent = Rs.1,30,000 + Rs.2,40,000 = Rs.3,70,000.

Teacher's Note:
a) Cash and bank introduced by the owner form the opening capital.
b) Assets that give long-term benefit (furniture, equipment) are capital expenditure; expenses consumed during the year are revenue expenditure.

20. Pratyaksh owns a manufacturing business. During the year he made the following payments:
Purchased a new machine to increase production capacity.
Paid salaries to office staff.
Spent money on repairing the existing machinery.
Based on the above information, answer the following:
(I) Identify one Capital Expenditure and one Revenue Expenditure from the case. [1 Mark]
(II) How does each type of expenditure affect the earning capacity of the business? [1 Mark]
(III) Where will these expenditures be shown in the financial statements? [1 Mark]

Answer:
1. Capital Expenditure - purchase of new machine; Revenue Expenditure - salaries paid to office staff (or repairs to existing machinery).
2. Capital expenditure increases earning capacity by adding a new productive asset, while revenue expenditure only maintains the existing earning capacity through routine expenses.
3. Capital expenditure is shown in the Balance Sheet under Fixed Assets and depreciated over time; revenue expenditure is shown in the Profit and Loss Account, reducing profit.

Teacher's Note:
a) Ask "does it create a new asset or benefit for years" to decide capital nature.
b) Repairs that merely restore an asset to working condition are revenue expenditure, not capital.

21. Xperia ltd. has been using such a method of charging depreciation where more amount is charged in the initial years as compared to later years?
(I) Name the method used by the company. [1 Mark]
(II) State any two merits of this method. [2 Marks]

Answer:
1. The method is the Written Down Value (WDV) Method.
2. Merits: (a) It matches cost with revenue better, since more depreciation is charged when the asset is new and repair costs are low. (b) It recognises actual wear and tear more realistically as the asset ages and its efficiency falls.

Teacher's Note:
a) In WDV, depreciation is always calculated on the reducing book value, not original cost.
b) Remember WDV gives a declining depreciation charge year after year.

22. Donald sold goods worth Rs. 41,30,000 to Vladimir and issued a bill for four months. The bill was duly accepted.
Pass necessary journal entries in the books of acceptor of the bill if the bill is retained till maturity. [3 Marks]

Answer:

Teacher's Note:
a) The acceptor (buyer, Vladimir) records the purchase, then the acceptance as Bills Payable, and finally payment on maturity.
b) Bills Payable is always a liability account for the acceptor of the bill.

OR

On March 15, 2024 Balwan sold goods for Rs. 13,25,000 to Sumit on credit. Sumit accepted a bill for three months drawn on him by Balwan. Ten days later, Balwan endorsed the bill to his creditor Arpita Sood in settlement of his dues of Rs. 14,25,000. The bill was duly met on due date.
Record the necessary journal entries in the books of Balwan. [3 Marks]

Answer:

Teacher's Note:
a) Once a bill is endorsed to a creditor, the drawer's liability for that debt is settled and no further entry is needed on the due date.
b) The difference between the debt settled (Rs.14,25,000) and the bill value (Rs.13,25,000) is Discount Received.

23A. On 31 October, 2025 Cash Book of M/s Raghuwar Dayal and Sons showed positive balance of Rs. 4,50,000. On comparing it with the Pass book, the following points came into consideration.
(a) Cheques issued but not yet presented for payment amounted to Rs. 1,60,000.
(b) Cheques deposited in bank and cleared but omitted to be entered in Cash Book amounted to Rs. 1,20,000.
(c) Interest allowed by Bank amounted to Rs. 15,000.
Prepare Bank Reconciliation Statement. [4 Marks]

Answer:

Teacher's Note:
a) Items increasing the bank's recorded balance relative to the Cash Book are added when starting from the Cash Book balance.
b) Cross-check the final Pass Book figure by adding all pluses to the opening Cash Book balance.

OR

23B. Fill in the blanks with appropriate terms:
(I) Cheques deposited into the bank are recorded on the __________ side of the bank column in the Cash Book. [1 Mark]
(II) A Bank Reconciliation Statement is prepared to __________ the bank balances shown in the Cash Book and the Pass Book. [1 Mark]
(III) Cheques issued to parties are entered on the __________ side of the bank column of the Cash Book. [1 Mark]
(IV) The credit side of the Pass Book should match the __________ column of the Cash Book, while the debit side of the Pass Book should match the __________ column of the Cash Book when there are no differences. [1 Mark]

Answer:
1. Debit side.
2. Reconcile.
3. Credit side.
4. Debit column, Credit column.

Teacher's Note:
a) Cheques deposited are receipts, so they go on the debit side of the Cash Book's bank column.
b) The Pass Book is prepared from the bank's viewpoint, so its credit and debit sides are opposite to the firm's Cash Book.

24. On 25 November, 2024, Tomas issued a bill on a for Rs. 1,30,000 and on the same date drew a bill for 4 months. The bill was accepted by Narender. Thomas discounted the bill from his bank @ 18% p.a. The bill was duly met on due date. Give necessary journal entries in the books of Drawer and Drawee. [4 Marks]

Answer:

Working Note: Discount = \( 1,30,000 \times \frac{18}{100} \times \frac{4}{12} = Rs.7,800 \). Amount received from bank = Rs.1,30,000 - Rs.7,800 = Rs.1,22,200.

Teacher's Note:
a) Once a bill is discounted, the drawer records no further entry on maturity if the bill is met, because the bank collects the amount from the drawee.
b) Discount is calculated on the face value for the unexpired period at the given rate per annum.

25. (I) Elaborate the difference between income statement and position statement. [3 Marks]
(II) State the formula for 'Cost of Goods Sold'. [1 Mark]

Answer:
1. The Income Statement measures the financial performance of a business over a period of time by matching revenues against expenses to find profit or loss; the Position Statement (Balance Sheet) is a snapshot of assets, liabilities and capital at one specific point in time, usually the last day of the accounting year.
2. Cost of Goods Sold = Opening Stock + Purchases + Direct Expenses - Closing Stock.

Teacher's Note:
a) Remember "period" for Income Statement and "point in time" for Position Statement.
b) COGS formula must include direct expenses like wages and carriage inwards, not indirect expenses.

26. Jamshed Ji started business on 31st October, 2024 with Capital of Rs. 41,50,000. During the year he undertook the following transactions:
i. Introduced additional capital on 31st December, 2024 of Rs. 4,40,000.
ii. He withdrew Rs. 2,10,000 per month for his household expenses.
iii. He spent Rs. 1,30,000 from the business to buy mobile phone for his wife.
If his Capital as on March 31st 2025, stands at Rs. 44,70,000 as on March 31, 2025. You are required to calculate profit or loss made by him for the year ended March 31, 2025 by preparing Statement of Profit and Loss. [4 Marks]

Answer:

Teacher's Note:
a) Business started only on 31 October 2024, so drawings and time period run for only 5 months up to March 2025.
b) Mobile phone bought for personal use from business funds is treated as drawings in kind.

27. CLOSE AI Ltd. purchased a computer and other peripherals worth Rs. 39,50,000 on 1st July 2023 and spent Rs. 2,20,000 on installation and Rs. 1,30,000 on transportation. The same is to be depreciated @10%p.a. on written down value.
If the books are closed on 31st march every year:
(I) Pass necessary journal entries on the date of purchase and depreciation charged for the year ended March 31, 2024 and March 31, 2025.
(II) Also determine the books value of Machinery to be shown in the Balance Sheet as at March 31, 2025. [6 Marks]

Answer:

Total Cost = Rs.39,50,000 + Rs.2,20,000 + Rs.1,30,000 = Rs.43,00,000.
Depreciation for 9 months (1 July 2023 to 31 March 2024) = \( 43,00,000 \times \frac{10}{100} \times \frac{9}{12} = Rs.3,22,500 \). Book Value on 31.03.2024 = Rs.43,00,000 - Rs.3,22,500 = Rs.39,77,500.
Depreciation for full year 2024-25 = \( 39,77,500 \times \frac{10}{100} = Rs.3,97,750 \). Book Value on 31.03.2025 = Rs.39,77,500 - Rs.3,97,750 = Rs.35,79,750.

Book Value of Machinery to be shown in the Balance Sheet as on 31 March 2025 = Rs.35,79,750.

Teacher's Note:
a) The first year's depreciation must be pro-rated for only the months the asset was actually used (9 months here).
b) From the second year onward, depreciation under WDV is charged on the reduced book value, not the original cost.

28. Rohit runs a small bookstore and maintains a bank account with MDFC Bank, Jaipur Branch. While checking his records on 31 March 2025, he noticed that the balance shown in his Cash Book did not match the balance shown in the Pass Book.
To resolve the issue, Rohit consulted his friend Ankit, a Chartered Accountant. After examining the records, Ankit identified the following reasons for the difference and decided to prepare a statement to reconcile the balances:
a) A customer directly deposited Rs.12,000 into the bank account, but Rohit had not yet recorded it in the Cash Book.
b) The bank charged Rs.1,500 as bank charges during the month, which was not recorded in the Cash Book.
c) During the month, cheques amounting to Rs.25,000 were issued, out of which cheques worth Rs.15,000 were presented for payment.
d) Interest of Rs.3,000 was credited by the bank but was not entered in the Cash Book.
e) Cheques amounting to Rs.40,000 were deposited in the bank, out of which only Rs.32,000 were cleared by the bank.
Based on the above case, answer the following questions:
Name the statement that Ankit should prepare to reconcile the difference between the Cash Book and Pass Book balances.
(I) If the Pass Book balance is taken as the starting point, how will item (a) be treated?
(II) If the Cash Book balance is taken as the starting point, how will item (b) be treated?
(III) If the Pass Book balance is taken as the starting point, how will item (c) be treated?
(IV) If the Cash Book balance is taken as the starting point, how will item (d) be treated?
(V) If the Pass Book balance is taken as the starting point, how will item (e) be treated? [6 Marks]

Answer:
Ankit should prepare a Bank Reconciliation Statement.
1. Item (a): Subtract Rs.12,000 from the Pass Book balance, since the Cash Book has not yet recorded this deposit.
2. Item (b): Subtract Rs.1,500 from the Cash Book balance, as bank charges reduce the balance but are not yet recorded there.
3. Item (c): Subtract Rs.10,000 (unpresented cheques, Rs.25,000 - Rs.15,000) from the Pass Book balance.
4. Item (d): Add Rs.3,000 to the Cash Book balance, since interest credited by the bank is not yet recorded in the Cash Book.
5. Item (e): Add Rs.8,000 (uncleared cheques, Rs.40,000 - Rs.32,000) to the Pass Book balance.

Teacher's Note:
a) Always identify whether an item increases or decreases the balance, and in which book it is missing, before deciding to add or subtract.
b) Unpresented and uncleared cheques are the two most common timing differences tested in BRS problems.

29. The following statement of financial position relates to Mr. Arvind, who maintains his books under the incomplete records system, as on 31 March 2024 and 31 March 2025.
Particulars | 31 March 2024 (Amount in Rs.) | 31 March 2025 (Amount in Rs.)
Cash | 25,000 | 40,000
Bank | 12,000 | 18,000
Debtors | 45,000 | 32,000
Creditors | 18,000 | 24,000
Furniture | 70,000 | 90,000
Bills Receivable | 8,000 | 10,000
Bills Payable | 6,000 | 5,000
During the year 2024-25, he introduced additional capital of Rs.60,000 into the business and withdrew Rs.6,000 per month for personal expenses.
Required:
Calculate the profit or loss made by him for the year ending 31 March 2025. [6 Marks]

Answer:

Calculation of Profit:
Closing Capital = Opening Capital + Capital Introduced - Drawings + Profit
Rs.1,61,000 = Rs.1,36,000 + Rs.60,000 - Rs.72,000 + Profit
Rs.1,61,000 = Rs.1,24,000 + Profit
Profit = Rs.37,000

Teacher's Note:
a) Capital in a Statement of Affairs is always the balancing figure between total assets and total liabilities.
b) Drawings of Rs.6,000 per month for 12 months work out to Rs.72,000 for the full year.

OR

(I) Explain the meaning of Accounts from Incomplete Records. [3 Marks]
(II) Distinguish between a Balance Sheet and a Statement of Affairs. [3 Marks]

Answer:
1. Accounts from Incomplete Records, also called the Single-Entry System, is a method of bookkeeping where a business does not maintain accounts according to the double entry system. Only partial records are kept, usually of personal accounts such as debtors, creditors, cash and bank, while many real and nominal accounts are missing.
2. It is generally adopted by small traders because it is simple and inexpensive, but since the dual aspect of transactions is not recorded, it is considered unscientific and unreliable, and true profit or position can only be found by reconstructing accounts such as a Statement of Affairs.
3. A Balance Sheet is a formal statement prepared under the double entry system from ledger accounts and the trial balance, showing accurate assets, liabilities and capital on a given date. A Statement of Affairs is prepared under the single entry system to estimate assets, liabilities and capital, and often relies on estimates and approximations rather than complete ledger figures.

Teacher's Note:
a) Remember Single Entry System is another name for Accounts from Incomplete Records.
b) A Statement of Affairs gives only an estimated capital, unlike the accurate capital shown by a Balance Sheet.

30. The following is the Trial Balance of Mr. Karan Mehta, a businessman based in Mumbai, for the year ending 31 March 2025.
Name of Account | Debit Balance (Amount in Rs.) | Credit Balance (Amount in Rs.)
Furniture and Equipment | 4,00,000 |
Plant and Machinery | 3,00,000 |
Goodwill | 65,000 |
Opening Stock (1 April 2024) | 60,000 |
Debtors / Creditors | 85,000 | 55,000
Purchases / Sales | 2,50,000 | 4,50,000
Returns | 25,000 | 15,000
Rent | 70,000 |
Commission Received | | 60,000
Wages | 40,000 |
Discount | 12,000 | 25,000
Capital | | 8,52,000
Cash in Hand | 90,000 |
Bank Balance | 1,00,000 |
Bank Loan | | 80,000
Drawings | 40,000 |
Total | 15,37,000 | 15,37,000
The closing stock on 31 March 2025 was valued at Rs.75,000.
Required:
Prepare the following accounts:
(I) Trading Account
(II) Profit and Loss Account for the year ended 31 March 2025
(III) Balance Sheet as on that date. [6 Marks]

Answer:

Teacher's Note:
a) Always net off purchase and sales returns against purchases and sales before computing gross profit.
b) Capital in the Balance Sheet is adjusted for net profit added and drawings deducted.