PCO 01 Solved Assignment 2022 – 23 (IGNOU)

PCO 01 Solved Assignment 2022 – 23

IGNOU B.Com Free Solved Assignment 2022 – 23

COURSE CODE: PCO – 01

COURSE TITLE: PREPARATORY COURSE IN COMMERCE

ASSIGNMENT CODE: PCO – 01/TMA/2022-23

COVERAGE: ALL BLOCKS

Maximum Marks: 100

In this post, you will get PCO 01 Solved Assignment 2022 – 23. For Free B.Com IGNOU Solved Assignments 2022 – 23, you can visit our website regularly or you can download our mobile application. We will try to provide IGNOU Solved Assignments 2022 – 23 for BA, MA, MCOM, BBA and MBA also.

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Q. 1. Discuss the forms of business organisation. (10)

Ans: Various Forms of Business Organisations are:

1. Sole Trade Business: Sole proprietorship is the form of business, which is owned, managed and controlled by an individual. It is the simplest form of business, established with the limited resources, ability and capital of the individual known as sole trader or entrepreneur.

Features:

a) Easy to form and close

b) Unlimited Liability

c) One bearer of profit and loss

d) One-man Control

e) No separate entity

f) Lack of business continuity.

2. Hindu Undivided Family (HUF): A Joint Hindu Family Business may be defined as a form of business organization in which all the male members of a Hindu Undivided Family Carry on business under the management and control of the head of the family called “Karta”. The members of the family are known as ‘Co-parceners’.

3. Partnership Business: According to section 4 of the Company’s act 1932,” Partnership is a relation between two or more persons who have agreed to share the profits of a business carried on by all or any one of them acting for all.”

Partnership in this way is an agreement, between two or more persons to carry on legal business with profit motive, which is carried on by all or any one of them acting for all.

4. Co-operative Society: A co-operative society is a voluntary association started with the aim of service of its members. It is a form of business where individuals belonging to the same class join their hands for the promotion of their common goals. A Co-operative Society is established by group ten or more persons who voluntary come together for mutual benefit. It is based on the principles of collective effort, mutual self-help, equality and freedom.

Salient features of cooperative societies

a) Voluntary organization.

b) Suited for relatively economical weaker sections.

c) Objective is mutual help and service motive.

d) Common interest of members.

5. Company: A Joint Stock Company is an association of many persons who contribute money or money’s worth to a common stock and employs it for a common purpose. The common stock so contributed is denoted in money and is capital of the company. The persons who contribute it or to whom it belongs are members. The proportion of capital to which each member is entitled is his share.

Features of a Company

a) Artificial Person: A company is an artificial person, which exists only in the eyes of law.

b) Created by law: A company can be formed only with registration.

c) Perpetual succession: A company has a continuous existence.

d) Limited Liability: The liability of every member is limited to the face value of shares, held by him.

6. Limited Liability Partnership (LLP): LLP is simply a combination of Partnership and Company form of business organisation. It is a corporate business vehicle that enables profession expertise and entrepreneurial initiative to combine and operate in flexible, innovative and efficient manner. It provides an alternative to the traditional partnership firm with unlimited liability. Section 2(1) (n) defines the expression ‘limited liability partnership’ as a partnership formed and registered under LLP Act.

Features of LLP:

a) An LLP is a body corporate formed and incorporated under this Act and is legal entity separate from its partners.

b) It is an alternative corporate business from that gives the benefit of limited liability of a company and the flexibility of the partnership;

c) An LLP shall have perpetual succession.

d) Minimum number of members for a LLP is 2 and no limit for maximum numbers.

Q. 2. Define Accounting. Discuss the need of accounting. (10)

Ans: Accounting is the analysis and interpretation of book-keeping records. It includes not only maintains of accounting records but also the preparation of financial statements which helps in analysis and interpretation of business transactions and events.

According to the American institute of certified public accounts” The arts of recordings, classifying and summarizing in a significant manner and in terms of money transaction and events which in parts, at least of a financial charter and interpreting the result there of”.

In the words of R.N. Anthony, “Accounting is a means of collecting, summarizing, analyzing and reporting in monetary terms the information of business.”

Features of Accounting:

a) It is an art of recording of transactions.

b) Accounting’s main feature is also classifying all business transactions.

c) Summarising of business transactions by preparing trial balance.

d) It helps in interpretation of financial results.

Need of Accounting: Need of accounting can be understood under the two head – objectives of accounting and advantages of accounting.

The mean objectives of accounting are as follow:

a) To keep systematic and authentic records of all the financial transaction of a business.

b) To ascertain the net profit or loss suffered on account of carrying the business by preparing profit and loss account.

c) To ascertain the financial position of business on a particular date by preparing balance sheet.

d) To determine the tax liability of the business.

e) To assist the management in taking various important managerial decisions.

The main advantages of accounting are mentioned below:

a) Accounting helps in keeping a systematic and permanent record of business transactions and events.

b) Accounting information is used by the management in taking various managerial decisions.

c) It shows the financial position of business on a particular data.

d) Accounting data are accepted by the tax authorities as authentic and reliable. Hence they can be used as the basis for discharging tax liabilities.

e) Accounting supplies financial data which are accepted by the insurance company as reliable figure for settlement of insurance claim.

Q. 3. Mr. Mukesh Rana carries on readymade garments business. A few transactions are given below. Identify the transactions to be recorded in the books of his business. (10)

(a) Purchased a typewriter for Rs. 6,000 for office use.

(b) Sold old domestic furniture for Rs. 500.

(c) Purchased cloth for garments for Rs. 10,000.

(d) A shirt worth Rs. 250 is taken home for his son.

(e) Appointed Satish as an assistant in the shop.

Ans: (a) Purchased a typewriter for Rs. 6,000 for office use.

Ans: This transaction is to be recorded in the books of his business because it affects his business. Journal entry for this transaction is Typewriter account debited and Cash account credited.

(b) Sold old domestic furniture for Rs. 500.

Ans: This transaction is not to be recorded in the books of account because it is a personal transaction.

Ans: This transaction is to be recorded in the books of account because it is business transaction. Journal entry to record this transaction is purchase account debit and cash account credit.

(d) A shirt worth Rs. 250 is taken home for his son.

Ans: This transaction is not recorded in the books of account because it is a person transaction. This transaction can be recorded only when shirt is bought out of business cash.

(e) Appointed Satish as an assistant in the shop.

Ans: This is not a transaction at all because it does not involve any monetary items.

Q. 4. Differentiate between double entry system and single entry system. (10)

Ans: Single Entry: It is incomplete system of recording business transactions. The business organization maintains only cash book and personal accounts of debtors and creditors. So the complete recording of transactions cannot be made and trail balance cannot be prepared.

Double Entry: Double Entry is an accounting system that records the effects of transactions and other events in at least two accounts with equal debits and credits. Under this system all accounts i.e., Personal, real and nominal accounts are maintained. It is a complete system of recording business transactions.

Difference between Double Entry System and Single Entry System

S.N.	Double Entry System	Single Entry System
1.	Under this system, both aspect of each transaction are record.	Under this system, both aspect of each transaction are not recorded.
2.	In this system, Personal, Real and Nominal accounts are kept fully.	In this system, only Personal Accounts are kept and Real and Nominal Accounts are ignored.
3.	In this system, Cash book, General ledger, Debtors’ Ledger and Creditors’ Ledger are maintained.	In this system, only Debtors’ Ledger and creditors’ Ledger are kept. Cash book is also kept but personal transaction gets mixed up with business transaction.
4.	Under this system, arithmetical accuracy can be checked by preparing Trial Balance at any moment of time.	Under this system, arithmetical accuracy cannot be checked because to Trial Balance can be prepared.
5.	In this system, Trading, Profit and Loss Accounts and balance sheet can be prepared.	In this system, Trading, Profit And Loss Accounts and Balance sheet cannot be prepared.
6.	This system is scientific and follows certain rules.	This system is unscientific and does not follow any concrete rules.

Q. 5. Discuss the classification of accounts with example. (10)

Ans: All business transactions broadly be classified into three categories:

(i) those relating to persons,

(ii) those relating to property (assets), and

(iii) those relating to incomes and expenses. Hence, it becomes necessary to keep an account for each person, each asset, and each item of income and expense. Thus, three classes of accounts are maintained for recording all business transactions.

They are:

(i) Personal Accounts,

(ii) Real Accounts, and

(iii) Nominal Accounts. Real and Nominal Accounts taken together are called Impersonal Accounts.

(i) Personal accounts: It includes the account of person with whom the business deals. These accounts are classified in to three categories.

a) Natural personal accounts: The term natural persons mean persons who are creation of god. For e.g.; Raja’s accounts, Gupta’s accounts etc.

b) Artificial personal accounts: These accounts include accounts of corporate bodies or institutions

c) Representative personal account-these are accounts which represents certain person or group of persons. For example, salary due, rent outstanding etc.

(ii) Real Accounts:Accounts relating to properties or assets are known as ‘Real Accounts’. Every business needs assets such as Machinery, Furniture, etc., for running its activities. In. book-keeping, a separate account is maintained for each asset owned by the business. Dealings relating to purchase or sale of the asset are recorded through this account. Furniture Account, Machinery Account, Building Account, etc., are some examples of real accounts. Cash Account which shows receipts and payments of cash is also a real account. They are known as real accounts because they represent things of value owned by the business.

(ii) Nominal Accounts: Accounts relating to expenses, losses, incomes and gains are known as ‘Nominal Accounts’. Every business unit incurs certain expenses such as payment of salaries to employees, payment of wages to workers, etc., while carrying out its activities. It may also suffer losses such as loss by fire, loss by theft, etc. It may also earn certain incomes and gains such as receipt of commission, receipt of-interest, profit on sale of an asset, etc. A separate account is maintained for recording each item of expense, loss, income or gain. Thus, Wages Account, Salaries Account, Commission Received Account, and Interest Received Account are all nominal accounts.

Q. 6. Journalise the following transactions, post them into ledger and balance the accounts: (15)

1st April 2022	Ashok commenced business with cash Rs. 1,20,000
3rd April 2022	Purchased furniture for cash Rs. 24,000
4th April 2022	Purchased goods from Vijay Rs. 36,000
5th April 2022	Sold goods Rs. 4,800
7th April 2022	Paid rent Rs. 3,000

Ans:

Journal Entries

In the Books of Ashok

Date	Particulars	L.F.	Amount (Dr.)	Amount (Cr.)
1-4-22	Cash Account Dr To Capital Account (For business started with cash by Ashok)		1,20,000	1,20,000
3-4-22	Furniture Account Dr To Cash Account (For Furniture purchased for cash)		24,000	24,000
4-4-22	Purchases Account Dr To Vijay (For goods purchased from Vijay)		36,000	36,000
5-4-22	Cash Account Dr To Sales Account (For goods sold for cash)		4,800	4,800
7-4-22	Rent Account Dr To Cash Account (For rent paid in cash)		3,000	3,000

Cash Account

Date	Particulars	L.F.	Amount	Date	Particulars	L.F.	Amount
1-4-22 5-4-22	To Capital A/c To Sales A/c		1,20,000 4,800	3-4-22 7-4-22 7-4-22	By Furniture A/c By Rent A/c By Balance C/d		24,000 3,000 97,800
			1,24,800				1,24,800
8-4-22	To Balance b/d		97,800

Capital Account

7-4-22	By Balance C/d	1,20,000	1-4-22	By Cash A/c	1,20,000
		1,20,000			1,20,000
			8-4-22	By Balance b/d	1,20,000

Furniture Account

3-4-22	To Cash A/c	24,000	7-4-22	By Balance C/d	24,000
		24,000			24,000
8-4-22	To Balance b/d	24,000

Purchases Account

4-4-22	To Vijay	36,000	7-4-22	By Balance c/d	36,000
		36,000			36,000
8-4-22	To Balance b/d	36,000

Vijay

7-4-22	To balance C/d	36,000	4-4-22	By Purchases A/c	36,000
		36,000			36,000
			8-4-22	By Balance b/d	36,000

Sales Account

7-4-22	To Balance c/d	4,800	5-4-22	By Cash A/c	4,800
		4,800			4,800
			8-4-22	By Balance b/d	4,800

Rent Account

7-4-22	To Cash Account	3,000	7-4-22	By Balance C/d	3,000
		3,000			3,000
8-4-22	To Balance b/d	3,000

Trial Balance

AS on 7-4-22

Particulars

Amount

Particulars

Amount

Cash

Furniture

Purchases

Rent

97,800

24,000

36,000

3,000

Capital

Sales

Vijay

1,20,000

4,800

36,000

1,60,800

Q. 7. What is a Bank Reconciliation Statement? Discuss the various causes of disagreement between the balances shown by the cash book and the pass book. (15)

Ans: Bank Reconciliation Statement: The statement which is prepared for verifying and reconciling the bank balances, shown by the cash book and pass book on a certain date and incorporates the reasons of disagreement between them is called a bank reconciliation statement. This statement is prepared on a particular date by the customer verify the balances of cash book and pass boo. The bank reconciliation statement is needed and also important because of the following:

a) The bank reconciliation will bring out only errors that may have been committed either in the cash book or in the pass book.

b) Any undue delay in the clearance of cheques will be shown up by the reconciliation.

c) A regular reconciliation discourages the staff of the customer or even that of the bank form embezzlement. There have been many cases when the cashiers merely made entries in the cash in the bank they were able to get away with it only because of lack of reconciliation.

d) Reconciliation helps the management check the accuracy of entries made in the cash book and keeps track of cheques.

Causes of difference between balance as par cash book and pass book

a) Cheques issued but not presented for payment: – when cheques are issued, the entry in the cash book is made immediately. But if the cheques issued are not presented to bank for payment till the date of preparing reconciliation statement, it will be a causes of disagreement between AB and CB balances.

b) Cheques paid into the bank but not yet cleared: – As soon as the cheques are deposited in to the bank, the entry is passed on the debit side of the bank column in the cash book. But cheques deposited may not be collected and credited by bank till date.

c) Interest allowed by the bank: – Bank might have credited the account of the customer with the interest and have made entry in the pass book. But such entry may not be recorded in the cash book.

d) Interest and bank charges debited by bank: – The bank debits the customer’s account with the interest due on bank overdraft. It also debits the account of the customers for the incidental and collection charges. The bank debits the customer’s account, but their entries are not made in cash book till date of preparation of B.R.S

e) Interest, dividend etc. collected by bank: – Sometime interest on government securities or dividend on share is collected by the bank and is credited to the customer’s account. If these items are not recorded in the cash book till the date of preparation of the reconciliation statement, the balance will differ

f) Direct payment by a customer into bank: Sometime a customer directly deposited the amount due into the dealers account. If this item is not recorded in the cash book till the date of preparation of the reconciliation statement, the balance will differ.

Q. 8. (a) Distinguish between the following: (10)

(1) capital receipts and revenue receipts,

Ans: Capital receipts: are defined as “non-recurring receipts’ from the owner of the business or lender of money creating a liability to either of them”. Itincludes proceeds out of sale of assets, Introduction of capital, raising of bank loan, issue of shares and debentures etc. Such receipts are non-recurring in nature.

Revenue receipts: Revenue receipts are defined as “a recurring receipt against sale of goods in the normal course of business. It may be both trading income or a non-trading income of regular or recurring nature. Such receipts are recurring in nature.

(2) capital profits and revenue profits, and

Ans: Capital Profits: When a profit arises out of a casual and non-recurring transaction such as sale of assets, it is termed as Capital Profit. It is non-recurring in nature and is calculated by deducting purchase price of the assets from the sale price.

Revenue Profits: If profit arises out of an ordinary nature such as sale of goods, it is termed as ‘Revenue Profit’. It is recurring in natures and is calculated by deducting total cost of goods from the total revenue.

(3) capital losses and revenue losses.

Ans: Capital Losses: When a loss incurred in a casual and non-recurring transaction such as sale of assets, it is termed as Capital loss. It is non-recurring in nature. It is occurred when sale price of asset is less than the cost of purchase of asset.

Revenue losses: If losses arise out of an ordinary nature such as sale of goods, it is termed as ‘Revenue loss’. It is recurring in natures. It is occurred when total cost of goods sold is more than the sale price.

(b) What is suspense account? When it is opened? (10)

Ans: Suspense Account: If the trial balance does not tally due to the existence of one sided errors accountant has to carry forward his accounting process prepare financial statements. The accountant tallies his trial balance by putting the difference on the shorter side as “suspense account”. It is an imaginary account. Its nature is not certain. The suspense account is a temporary account in which the difference in trial balance is placed and is wiped off when the errors are located and corrected. The suspense account balance will be placed on that side of the trial balance which is found to be shorter in order to make the trial balance agree.

Utility of Suspense Account

After making the trial balance agree, the next step is to prepare the final accounts. Suspense account facilitates the preparation of financial statements even when the trial balance has not tailed. It also helps in the rectification of errors in the same accounting period as well as subsequent period as well as subsequent period. It is important to note that only the errors affecting the agreement of the trial balance are rectified through the medium of suspense account.

Suspense account may be opened in the following circumstances:

1) To balance a disagreed trial balance: As stated above that suspense account is opened when a trial balance does not agree. It is recorded on the shorter side of trial balance. The debt balance of suspense account is written on the assets side of balance sheet while credit balance is written on the liabilities side of balance sheet. It is to be noted that the existence of suspense account in the books is a clear proof of some deficiency in accounting. So, it is the duty of the accountant to locate errors and rectify them so that the suspense account may be closed and the books may be set right.

2) To post doubtful items. Sometimes, an item cannot be posted to the correct account, owing to insufficient information. Suppose, a merchant receives a bank draft of Rs. 3,000 from his customer, but the name of the sender is not known to him.

Closing of suspense account

1. Rectification of Errors in Two Accounts with same Amount (Two sided error): When two accounts, with equal amount are involved in error, the simple way is to pass a rectifying journal entry. The account which is to be corrected is shown on the regular side and account which is to be cancelled is shown on the opposite side. Suspense account does not open in case of two sided errors because it does not affect trial balance.

2. Rectification or Error in Two Accounts with Different Amounts (One sided error): In this case, rectifying journal entry is passed with the help of suspense account. First, the accounts which are wrong are corrected by giving debit and/or credit as the case may be, and then the difference in debit and credit amount is shown against the suspense account. At the end of accounting year, suspense account is closed by debiting or crediting suspense account as the case may be.

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