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Mr. Sumit has...

Question

Mr. Sumit has been hired to be the accountant for his favorite band. Let's assume that the group has a concert coming up in New York on April 15, 2017. However, there are a lot of expenses like airline tickets, hotel deposits, security, buses, stage hands, equipment technicians, and advertising which have been paid in March 2017 i.e. the prior accounting period. Sumit, as the accountant, posted all of the expenses for airline tickets, hotel deposits, security, buses, stage hands, equipment technicians, and advertising in March 2017. Is this correct? If not, in which period shall all these expenses be recorded.

Yes, he is correct

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No, expenses should be recorded in April 2017

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Expenses should not be recorded

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None of the above

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Solution

The correct option is B No, expenses should be recorded in April 2017
Neither the revenue nor the related expenses will be recorded in March 2017, but both will be matched in the period the concert takes place: the first month of Financial Year 2017-18. These expenses shall be recorded as prepaid expenses which will be shown as asset in March 2017. In this way, the revenue earned is linked to the related expenses.

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Similar questions

Q. A , B and C are partners sharing profits and losses in the ratio of 3 : 2 : 1 respectively. Their Balance Sheet as at 31st March , 2108 is as follows:


Liabilities		₹	Assets	₹
Capital A/cs:			Land and Building	50,000
A	60,000		Plant and Machinery	40,000
B	60,000		Furniture	30,000
C	40,000	1,60,000	Stock	20,000
Creditors		30,000	Debtors	30,000
Bills Payable		10,000	Bills Receivable	20,000
			Bank	10,000

		2,00,000		2,00,000

D is admitted as a new partner on 1st April, 2018 for an equal share and is to pay ₹ 50,000 as capital .
Following are the adjustments required on D's admission :
(a) Out of the Creditors , a sum of ₹ 10,000 is due to D which will be transferred to his capital Account.
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(c) Expenses debited in the Profit and Loss Account includes a sum of ₹ 2,000 paid for B's personal expenses.
(d) A Bill of Exchange of ₹ 4,000, which was previously discounted with the banker, was dishonoured on 31st March, 2018 but no entry has been passed for that .
(e) A Provision for Doubtful Debts @ 5% is to be created against Debtors .
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Prepare necessary Ledger Accounts and Balance Sheet after D's admission.

Q. Which resolution has been adopted by the UN Security Council for the protection of cultural heritage in March,

2017

A, B

and

C

are partners sharing profits and losses in the ratio of

3 : 2 : 1

respectively. Their Balance Sheet as at

31^{s t}

March,2018 is as follows:

Liabilities	(Rs.)	Assets	(Rs.)
Capital A/cs: A 60,000 B 60,000 C 40,000 Creditors Bills Payable	1,60,000 30,000 10,000	Land and Building Plant and Machinery Furniture Stock Debtors Bills Receivable Bank	50,000 40,000 30,000 20,000 30,000 20,000 10,000
	2,00,000		2,00,000

D

is admitted as a new partners on

1^{s t}

April,2018 for an equal share and is to pay

R s . 50, 000

as capital. Following are the adjustment required on

D^{'} s

admission:
(a) Out of the Creditors, a sum of

R s . 10, 000

is due to

D

which will be transferred to his capital Account.
(b) Advertisement Expenses of

R s . 1, 200

are to be carried forward to next accounting period as Prepaid Expenses.
(c) Expenses debited in the Profit and Loss Account includes a sum of

R s . 2, 000

paid for

B^{'} s

personal expenses.
(d) A Bill of Exchange of

R s . 4, 000

which was previously discounted with the banker, was dishonoured on

31^{s t}

March,2018 but no entry has been passed for that.
(e) A Provision for Doubtful Debts @

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Q. Calculate amount to be posted to the Income and Expenditure Account for the year ended 31st March, 2018:
(i) Amount paid for stationery during the year ended 31st March , 2018

—

₹5,400; Stock of Stationery in Hand on 31st March, 2018

—

₹250.
(ii) Stock of Stationery in Hand on 1st April, 2017

—

₹ 1,500; Payment made for Stationery during the year ended 31st March, 2018

—

₹5,400; Stock of Stationery in Hand on 31st March, 2018

—

₹250.
₹
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Stock of Stationery on 31st March, 2018 250

Following Receipt and Payment Account was prepared from the cash book of Delhi Charitable Trust for the year ending December 31, 2017

Receipt and Payment Account for the year ending December 31, 2017
Receipts	Amount Rs	Payments	Amount Rs
Balance b/d		Charity	11,500
Cash in hand	11,500	Rent and taxes	3,200
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Subscription	42,800	Postage	300
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Interest on investment	4,500	Insurances	2,000
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		Investment	23,000
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		Cash at bank	16,000
	98,600		98,600

Prepare Income and expenditure account for the year ended December 31, 2017, and a balance sheet as on that date after the following adjustments:

(a)	It was decided to treat one-third of the amount received on account of donation as income.
(b)	Insurance premium was paid in advance for three months.
(c)	Interest on investment Rs1,100 accrued was not received.
(d)	Rent Rs600: salary Rs900 and advertisement expenses Rs1,000 outstanding as on December 31, 2017.

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