1

ANSWERS TO

COMMERCE PAPER – II

MAY – 2005
PART – A

I. Answer TWO questions from the following, not exceeding

40 lines each.

1. What are the major functions of Marketing? Explain.

Ans:
Marketing functions have been classified by different marketing experts in
different ways. But the most acceptable and meaningful classification is given by Clark
and Clark and shown in the following chart.
1. Functions of Exchange
2. Functions of physical supply
3. Facilitating functions

I. Functions of Exchange :

1. Buying : It is the first step in the process of marketing. It requires planing of

purchases search for sellers, selection of goods to be brought, assembling of
goods in right quantity, quality at right price time and the right place. Goods may
be purchased in any ways as : (a) By Inspection (b) By grading (c) By Sample or
(d) By description.
2. Selling : The main objective of any concern is to earn profits by selling. Selling
is the process of disposing off or transferring goods by sale. Selling creates
demand for product. Selling function involves product planning and
 2

development, finding out or locating to buyers, negotiation of terms of sale such

as price, quantity, quality, date of delivery etc.
3. Pricing : Pricing is closely related to selling. Pricing policy directly affects the
sales and profitability of the concern. The pricing policy may be cost based,
demand based or competition based and it varies from one company to the
other.
4. Advertising : Advertising is nothing but a paid form of non-personal
presentation of ideas, goods or services by an identified sponsor. Advertising
aims at introducing a new product, creating demand, facing competition and
creating goodwill. The different media used for advertising are television, radio,
cinema, press, posters etc.
5. Sales Promotion : It refers to those marketing activities other than advertising,
personal selling and publicity that stimulate consumer purchasing and dealer
effectiveness. Sales promotion techniques are indirect and non-personal.
Samples, demonstrations, coupons, contests, discounts, prizes, gifts etc., are
examples for sales promotion.

II. Functions of Physical Supply :

1. Transportation : Transportation is the carrying of goods from point of

production to the place of consumption. It creates place utility. Different modes
of transportation like bullock cart, truck, train, aeroplane and ship can be used
for the movement of goods.

2. Storage : Storage involves the holding of goods from the time they are
produced ntil they are needed for consumption without deterioration in quality.
Storage creates time and place utilities. It enables goods to be made available
to consumers whereever and whenever they are needed. It matches supply with
demand and stabilises prices.

III.Facilitating functions :

1. Financing : For exchange of goods and services and for any other marketing
activities finance is an important aspect. The finance of marketing can be
 3

obtained from various sources such as banks, Financial institutions, individuals

etc.
2. Risk taking : Risk is the chance of loss. In anymarketing activity uncertainty is
bound to exist. The unpredictable nature of consumers changing fashions,
increasing competition etc., have to led to the concept of Risk- bearing. Some of
the risks may be avoided by taking insurance coverage.
3. Marketing Research : This is scientific device of knowing the potential market
for a particular product. This tells the producers as to (1) who are potential
buyers (2) What are their requirements (3) What are the defects of the product
(4) How should it be placed and all other relevant information.
4. Standardisation and Grading : Standardisation refers to establish standards
for different grades of products. Standard is a list of specification based on size,
colour, appearance, shape, taste etc. Grading refers to sorting of products into
different lots, each of which has substantially some characteristics with respect
of quality.
5. Packing : Packing is also an important function of marketing. It protect the
goods from damages. It also serves as a means of identifying a manufacturer’s
products. Packing means placing products in appropriate packages.
6. Branding : A brand is defined as a name, term, symbol or a design or
combination of them which is intended to identify the goods. The object of
branding is to introduce product differentiation in the market. Brand differentiates
the goods of one seller from those of his competitors in the market.

2. What is Consumerism? What are the reasons for the slow

development of consumer movement in India?
Ans:
Consumerism :
Consumerism is a social force designed to protect consumer interests in the
market place by organising consumer pressures on business. These pressures are
brought about by the consumers, organising themselves as consumer organsiations, to
fight against unfair trade practices that are indulged in by the sellers.

Philip Kotler : ``Consumerism as social movement seeking to augment the rights

and p owers of buyers in relation to sellers’’.
 4

Their consumerism is a growing social force which makes consumers to be aware

of their rights. These rights are protected by :
(I) educating the consumers and mobilising them to fight for their rights
(II) exerting pressure on the government to protect the consumer interests by
guaranteeing their legitimate rights, and
(III) making the business more honest and responsible. This process will be
successful only when all the consumers represented by different voluntary
non-government consumers organisations, the government, the regulatory
authorities in the country, the consumer courts, organisations representing
trade, industry and service providers, the law makers and those who are
responsible for the implementation of laws and rules act together.

Reasons for backwardness of Consumer Movement :

The consumer movement in India is slowly developed due to the following
reasons.
1. Poverty : Majority of people are living in India below the poverty line. Therefore
they are unable to exercise their rights as consumers.
2. Malnutrition : Hunger does not differentiate between adulterated and
unadulterated food. The poor have no time to examine the things before they
consume them.
3. Lack of Education : Indians are decile persons. They believe in Karma and
accept things as they are. This is so because of lack of education and
unawareness of the consumers as to their rights given by the laws.
4. Poor Organisation of Consumers : A few number of people are participating in
consumer activities. Lack of leadership of consumer organisations is the main
cause of low level consumer movement in India.
5. Poor Implementation of laws : Many laws have been enacted to protect the
consumers from various malpractices played by the businessmen. However,
their implementation is very poor. This is due to the loopholes in law and lack of
co-ordination at different levels of machinery and also their illiteracy.
 5

1. Describe the functions of Stock Exchange.

Ans:
Stock Exchange :
The following are the definitions given by various experts and institution an stock
exchange.
Garg K. L.: An association of persons engaged in the buying and selling of
stocks, bonds and shares for the public on commission and guided by certain
rules and usages.
Securities contracts (Regulation) Act 1956: Any body of individuals whether
incorporated or not, constituted for the purpose of assisting, regulating, or
controlling the business of buying, selling or dealing in securities.
Functions of Stock Exchange:
Stock exchange, being a part of capital market, performs two functions viz.,
primary functions and subsidiary functions.
A. Primary Functions:
The following are the basis functions of a stock exchange.
1. Provision of ready market for securities: The stock exchange provides a
ready market for securities. The investors can easily buy and sell securities
on the floor of the stock exchange. The prices at which the securities have
been traded are regularly given in the electronic and print media for the
benefit of investors.
2. Determination of security prices: The stock exchange helps in determining
the prices of various listed securities. The buying of securities regularly leads
to the determination of prices of securities. The exchange helps in the
provision of prices of securities through print and electronic media.
3. Mobilisation Surplus Savings: Stock exchange is a channel for mobilising
capital. It helps in the mobilisation of small savings from various parts of the
country. By directing the flow of capital into worthwhile projects, it helps faster
economic development of the country. It provides mobility capital and
facilitate sound investment.
4. Provision of Liquidity for securities: In a stock exchange buying and
selling securities takes place regularly and systematically. Hence, an investor
can encash his securities at any time.
 6

5. Protection of investors: A stock exchange functions strictly according to

rules and regulations. These rules and regulations provide a check on over
trading in securities. They prevent the manipulation of prices. Thus, a stock
exchange serves as a caretaker of investor ‘s money.
6. Encourages speculative dealings: Most of dealings are in the form of
forward contracts. In stock exchanges all facilities for a future contract are
provided. The terms of contract, payment and other conditions will be certified
by the exchange. This encourages speculation.
7. Barometer of economy: A stock exchange serves as a reliable barometer of
a country’s economic situation. It reflects the changes taking place in the
economy. It is a symbol of the development of an economy.

Subsidiary Functions:
In addition to the above primary function, stock exchange performs the
following subsidiary functions.

1. Safety of Investment: Securities in the stock exchanges are

listed after complete security. It prevents the trading of false and duplicate
securities. It also facilitates in the immediate and easy transfer of securities.

2. Provision of information about listed companies: The

organised stock exchange collects information about the companies listed
with it and publish the information in the form of “Official Year Book”. This
proves very useful to the investors in making investment decisions.

3. Publication of statistics: Stock exchanges publish regularly

correct reports regarding securities trade. They provide free information from
such reports to investors.
 7

II. Answer any FOUR of the following questions, not exceeding

20 lines each.

1. What are the advantages of Insurance?

Ans:
Insurance – Definition:
According to Justice Tindal, “Insurance is a contract in which a sum of money is
paid by the assured in consideration of insurers incurring the risk of paying a large
sum upon a given contingency.”
According to Schultz and Bradwill, “Insurance in its technical sense is a social
device which employs the use of pooling technique to eliminate uncertainly.
Thus, Insurance is a device by which loss due to some uncertain even is spread over
a large number of people who voluntarily join against such an event.

Advantages of Insurance:
The advantages of insurance to a businessman can be understood from the
following points.
1. Security and Safety: It gives a sense of security and safety to the trader. It
enables him to receive compensation against actual loss.
2. Distribution of risk: A trader can transfer the risk of loss to the insurance
company.
3. Normal expected profit: An insured trader can enjoy normal margin of profit all
the time.
4. Easy to get loan: A trader can get bank loan easily if his stock or property is
insured.
5. Advantages of specialisation: Businessman can concentrate on his business
activities without spending more time on safeguarding his property. The
insurance companies, on the other hand, can provide specialised insurance
services.
6. Development of social sectors: Insurance funds are available for economic
development particularly for the development of social sectors.
7. Social co-operation: The burden of loss is shouldered by so many persons.
Thus, insurance provides a firm of social co-operation.
 8

1. What are the advantages and disadvantages of Television Advertising?

Ans:
Television Advertising :
It is said that today television advertising is the best selling media ever invented. It
has a potential advertising impact unmatched by an other media. It is a means of
bringing actual demonstration in the homes of the prospects and is therefore more
effective media when compared with radio. That is why the position of radio advertising
has now being gradually taken by television advertising.
The coverage of television is increasing at a rapid pace in India. This media is
particularly advantageous for those advertisers whose products require demonstration.
Sponsored programmes have also been started on television in India.

Advantages :
1. On television the products can be demonstrated and their use can be explained.
No other medium can compete with T.V. as far as effective presentation is
concerned.
2. This medium reaches the people almost like personal or face to face contract.
3. Advertisements can be clubbed with entertainment programmes to avoid
monotony arising on account of continuous viewing of advertisements.
4. This medium facilitates the advertisers to use computer graphics, music, spoken
words, written words and illustrations while transmitting the message.
5. The message can be sent conveniently depending on the geographical region to
cover and accordingly the channel can be chosen.
6. This medium allows the advertiser to repeat the message as frequently as
possible to draw the attention of the target audience.

Disadvantages :
1. It is a costly medium when compared to print medium and only the big firms can
afford to use it because its production costs are very high.
2. The message given in TV must be seen and understood immediately. Otherwise,
its utility is lost. Therefore, complicated messages cannot be sent through T.V.
 9

3. Often too much content is compressed in T.V. advertisements which is to last for a
few seconds, Because of this, people fail to understand the main theme of the
advertisement.
4. With the help of remote control, viewers may skip the commercials.

2. Advantages of Foreign trade.

Ans:
Foreign Trade :
Foreign trade or international trade refers to the trade between two or more
nations. It involves the exchange of goods and services between the citizens of two
nations.
Advantages of Foreign Trade:
The following are the advantages of foreign trade.
1. Goods made available: It enables a country to obtain such articles which
cannot be produced at home or which can be produced at high cost.
2. Sale of surplus production: It enables a country to dispose of those goods
which are in surplus and to purchase such goods which are in short supply.
3. Cheap goods to customers: It tends to equalise prices of goods though out the
world (allowing for transport and other costs). Thus customers can buy cheap
and best goods.
4. Specialisation: It enables each country to produce only those goods which it
can produce cheaply. Thus it leads to specialisation.
5. Full Utilisation of resources: It provides an opportunity to every country to
utilise its natural resources in a better way. Thus wastage of resources is
avoided.
6. Helpful in difficult times: In difficult times (famine, earthquake, flood, war)
foreign trade is very useful. Articles of short supply can be imported from other
countries.
7. Variety of goods: It enables a country to enjoy large variety of goods of various
countries.
8. Wide market: Markets can be widened and better prices can be secured for the
goods.
9. Cultural exchange: It leads to connections in several non – business directions
as well. Exchange of ideas promote international peace.
 10

10. More Profits: Foreign trade is more profit – earning then home trade.

3 Role of Leadership
Ans:
Leadership :

4..Differences between Speculation and Gambling.

Ans:
Speculation :
Speculation is defined as intelligent and rational forecasting of future trend of prices
on the basis of concrete information and knowledge It involves any business activity
relatig to the forecasting of price movements and expenditure of capital with a view to
making profit prompted by expectation of rise or fall in prices in the near future.

Gambling :
Gambling is unethical, illegal and wihtout foresight and knowledge. Gambling is
based on blind chance and not on knowledge.
Differences between Speculating and Gambling

1. Speculation is based on knowledge and foresight. On the other hand Gambling is

based on blind chance and not on knowledge.
2. Speculation is a rational activity based on region or logic. Whereas gambling is
irratiional forecasting. It is recognised as reclus or blind speculation.
3. Speculation is recognised as lawful activity. On the other hand the contract of
gambling is void and unenforceable by law.

1. Advantages of using Computers.

Ans:
Computer :
A computer can be defined as an electronic data processing machine which not
only process numeric and non –numeric data. It also stores and retrieves a lot of
information whenever needed.
 11

Computer can do mathematical calculations like additions, subtractions,

multiplication’s, divisions etc., millions of times faster than a human brain.
Advantages of Computers:
Computers are widely used in almost every aspect of present day society. They
have become an indispensable tool of the modern competitive world. In business
field computers are widely used for inventory control, preparation of salary sheets,
maintenance of records. Preparation of financial statements etc. The following are
advantages of computers.
1. A computer provides more information than is otherwise possible.
2. It provides information at a great speed.
3. It reduces the monotony of the office staff.
4. It makes complicated calculations at a great speed.
5. It saves office labour costs.
6. It ensures greater accuracy in data processing
7. It provides indirect financial saving through various types of application e. g.,
inventory control.
8. It ensures better centralised control.
9. It provides flexibility of operations as any number of programmes can be
prepared for different business operations.
10. It improves customer service and company prestige.

III. Answer any FIVE of the following questions, not exceeding

5 lines each.
1. Packaging
Ans:
It is a sub-division of packing function of marketing. Packaging means placing of
goods in small packages for sale to the consumers. It is concerned with packing articles
in convenient size. It facilitates easy handling of goods by the buyers. Packaging
requires certain good qualities like attractiveness, protective strength, consumer’s
conveience, economy etc.

1. District Forum
 12

Ans:
District Forum:
A consumer Disputes Redressal Forum to be known as the District Forum, is the
forum established by the State Government in each District by notification. The State
Government may establish, if it deems fit, more than one District Forum in a district.
The District Forum is vested with necessary powers to redress consumers’
grievances with respect to unfair trade practices, defective goods and services, where
the value of which and the compensation, if any, claimed does not exceed Rs.20 lakhs

2. Voyage Policy
Ans:
The policy is issued to cover a particular voyage from one port to another and
from one place to another. The policy mentions the port of departure and the port of
destination, between which the risks are generally underwritten. However, this policy
may include time factor also as from Bombay to London for one year.

3. Outdoor Media
Ans:
Outdoor or mural advertising is the oldest form of advertising and remains the
most common media even today. It is also called `wall advertising’. Outdoor advertising
consists of a display of advertisements out of door which may be in the form of posters,
painted signs, field signs, neon light signs, hoardigns and posters carried by
sandwitchmen. This is also referred to as mural advertising as posters consisting of a
picture, are often placed on walls particularly a large one, printed directly on a wall or
large photograph attached directly to a wall.
Small playcards or posters placed outside or inside carriages such as trams, delivery
–vans, buses, railway carriages etc., are come under this category. The new form of
advertising by using balloons, kites and smoke-writing in the sky is also a part of outdoor
advertising.
4. Letter of Credit
Ans:
 13

A letter of credit is a document issued by a bank in the importer’s country in

favour of a foreign dealer. It contains an undertaking by the bank that the bill of
exchange drawn by the foreign dealer on the importer will be honoured on
presentation to the extent of the amount specified in it. A letter of credit is generally
issued by the bank on the basis of a deposit by the importer. It is a proof of the
importer’s credit worthiness.

5. Personality development
Ans:
Personality development means development of communication skills required
by a person to handle different situations with different people. It deals with the inducing
of communications skills, inter personal skills, leadership qualities, motivation factors
and other skills required to survive in the case of unforeseen circumstances in the vast
world especially in the business world. Basically, the personality development deals with
changing the behaviour of the individual.

6. Bull
Ans:
A speculator, who anticipates rise in the price of securities. He buys securities
with a view to sell them in future at a higher prices and thereby make a profit. In
India, a bull is also known as a tejiwala.

7. Key board
Ans:
Key Board : It is a primary input device to the computer. The key board has ordinary
keys of standard manual or electronic typewriter. Besides, the computer key
board has some special keys to perform some special function. Each key bears a
character or characters both of numbers, alphabet and other symbols. Alphabet
keys have both upper case and lower case. Upper case indicates capital letters
and lower case indicates small letters. It is placed in front of the monitor. The
keys act as switches when pressed, a key sends electronic signal to the central
processing unit. The typical computer keyboard many have four arrow keys used
to control the movement of the cursor. The four keys are meant for four directions
 14

in which the cursor moves. Right arrow when pressed moves the cursor to the
right direction. When key having left arrow label is pressed the cursor is moved in
the left direction. Similarly up and down arrow keys.

PART – B
Solution IV:
LEDGER ACCOUNTS:

Dr. Revaluation Account Cr.

Particulars Amount Particulars Amount
To Stock a/c 22,500 By Building a/c 75,000
To Furniture a/c 2,200 By Investments a/c 21,500
To Reserve for bad debts a/c
2,750
To Contingent Liability a/c 6,000
To Govind Capital a/c 37,830
To Gopal Capital a/c 25,220
96,500 96,500

Dr. Govind Capital Account Cr.

Dat Particulars LF Amount Date Particulars LF Amount
e
To Balance 4,29,330 By Balance b/d 3,40,500
c/d
By Revaluation 37,830
a/c
By Goodwill a/c 51,000
4,29,330 4,29,330
By Balance b/d 4,29,330

Dr. Gopal Capital Account Cr.

Dat Particulars LF Amount Date Particulars LF Amount
e
To Balance 3,99,720 By Balance b/d 3,40,500
c/d
By Revaluation 25,220
a/c
By Goodwill a/c 34,000
3,99,720 3,99,720
 15

By Balance b/d 3,99,720

Dr. Goverdhan Capital Account Cr.

Dat Particulars LF Amount Date Particulars LF Amount
e
To Balance 3,00,000 By Cash b/d 3,00,000
c/d
3,00,000 3,00,000
By Balance b/d 3,00,000

Dr. Cash Account Cr.

Dat Particulars LF Amount Date Particulars LF Amount
e
To Balance 7,100 By Balance c/d 3,92,100
b/d
To Govardhan 3,00,000
Capital a/c
To Goodwill 85,000
a/c
3,92,100 3,92,100
To Balance 3,92,100
b/d

Dr. Goodwill Account Cr.

Dat Particulars LF Amoun Date Particulars LF Amoun
e t t
To Govardhan 51,000 By Cash 85,000
Capital a/c
To Gopal 34,000
Capital a/c
85,000 85,000

Balance Sheet of Govind and Gopal and Govardhan as on 01-04-04

Liabilities Amount Assets Amount
Rs. Rs.
Creditors 1,24,350 Cash 3,92,100
Contingent 6,000 Bank 1,19,250
Liability
Capitals: Investments 21,500
Govind 4,29,330 Debtors 55,000
Gopal 3,99,720 Less: RDD 2,750 52,250
 16

Govardhan 3,00,000 Furniture 44,000

Less: 2,200 41,800
Depreciation
Stock 1,80,000
Less: 22,500 1,57,500
Depreciation
Buildings 4,00,000
Add: Appreciation 75,000 4,75,000
12,59,400 12,59,400

Solution V (a):

Consignment a/c

Dr. Cr.
Dat Particulars LF Amoun Date Particulars LF Amoun
e t t
To Goods By Krishna a/c 34,000
sent on 24,000
Consignment
a/c (60 X 400)
To Cash a/c 2,000
To Krishna a/c 1,500
To Krishna a/c 5,100
To Profit &
Loss a/c 1,400
34,000 34,000

Dr. Krishna Account Cr.

Dat Particulars LF Amoun Date Particulars LF Amoun
e t t
To Consignment 34,000 By Consignment 1,500
a/c a/c
By Consignment 5,100
a/c
By Cash 10,000
By Balance c/d 17,400
34,000 34,000

Dr. Goods sent on Consignment Account Cr.

Dat Particulars LF Amoun Date Particulars LF Amoun
e t t
To Trading a/c 24,000 By Consignment 24,000
a/c
24,000 24,000
 17

Solution V (b):

Income and Expenditure Account of Hyderabad Friends Club

Dr. For the year ended 31-3-04
Cr
Expenditure Amount Income Amount
Rs. Rs.
To Salaries 900 By Subscriptions 1,600
Add: O/s 85 985 Less: Sub. Of 2004 50
To Cricket 300 1,550
To Tennis 270 Add: Sub.
Outstanding 150 1,700
To Insurance 180 By Lockers Rent 50
Less: Prepaid 135 45 By Interest 50
To Printing 100 By Cricket 200
To Telephone 200 By Tennis 200
To Surplus 400 By Billiards 100
2,300 2,300

Answer - VI (a):

Grace Days :

The period of the bill of exchange starts from the date written on top right
hand corner. Thus, it helps in calculating due date of the bill. Generally the due
date of the bill is calculated by adding to the date of the bill, the period of the bill
and also three days of grace.

Answer - VI (b):

Causes for Depreciation :

The causes for providing of depreciation may be divided into Internal Causes and
External Causes.
1. Internal Causes :
The following are the internal causes for depreciation of fixed assets.
1. Wear and Tear
2. Depletion .
3. Accidents
4. Maintenance
 18

2. External Clauses
The following are the external causes.
1. Obsolescence
2. Laps of Time .
3. Permanent fall in price

Answer – VI (c)

Account Current :

An Account Current is a statement, in account form of transactions between two

parties with additional columns provided for the purpose of calculating interest due or
receivable the net balance of which is to be entered in the statement itself.
J.R Botliboi defines Account Current as a ``Statement in a debit and credit form
recording the transactions between two parties during a particular period, interest usually
being calculated one such item at agreed rate and includes in the account.

Answer - VI (d):
Average Due Date :

``Average due Date’’ is arithmetic average of several due dates of various

payments. J.R. Batiliboi defines the Average Due Date as ``Average Due date means an
equated date on which a payment may be made in one single amount in place of several
amounts due for payment on different dates.’’

Answer - VI (e):

Suspense Account :

When the Trial Balance does not agree, an effort is made to locate errors and
rectify them. But if the errors cannot be located easily and quickly and, at the same time,
if the final accounts are to be prepared urgently, the difference in the Trial Balance is
 19

rectified by writing it to the lesser side of the Trial Balance under the name of Suspense
Account. Such a temporarily opened suspense account is to be closed later on when
the errors are located and rectified.

Answer - VI (f):

Account Sales

A Statement submitted by the consignee to the consignor giving account of the

sale proceeds, details of various expenses incurred and the commission due to him.

Solution VI (h):

New Profit sharing ratio : 7:3

3
Charan' s Share 
7
3 4
Re maining share  1 - 
7 7
4 7 28
Arun' s new share   
7 10 70
4 3 12
Kiran' s New share   
7 10 70
3 30
Charan' s share  
7 70

= 28:12 : 30

Answer - VII (a):

 20

Kinds of Errors :
Errors may be broadly classifed into two categories. They are :
1. Errors of Principle : Errors involving violation of accounting principle are
termed as errors of principle.
2. Clerical Errors : The errors made by the clerical staff while recording
transactions are known as Clerical Errors. These are of the following three
types.
(1) Errors of Omission
(2) Errors of Commission and
(3) Compensating Errors

Solution VII (b):

Journal Entries in the books of Madhu

Date Particulars L.F. Debit Credit
Rs. Rs.
2004 Vasu a/c Dr. 10,000
Jan.1 To Sales a/c 10,000
(Being goods sold to Vasu)
Bills receivable a/c Dr. 10,000
To Vasu a/c 10,000
(Being the bill drawn for 3 months)
Bank a/c Dr. 9,775
Discount a/c 225
To Bills receivable a/c 10,000
(Being the bill discounted with the
bank)
Ap.4 Vasu a/c Dr. 10,000
To Bank a/c 10,000
(Being the bill dishonoured)

Solution VII (c):

Machinery a/c

Dr. Cr.
Date Particualrs Rs. Date Particulars Rs.
2002 2002
Jan.1 To Cash a/c 20,000 Dec.31 By Depreciation 2,500
 21

To Installation 5,000 By Balance c/d 22,500

expenses
25,000 25,000
2003 2003
Jan.1 To Balance b/d 22,500 Dec.31 By Depreciation 2,500
By Balance c/d 20,000
22,500 22,500
2004 2004
Jan.1 To Balance b/d 20,000 Dec.31 By Depreciation 2,500
By Cash 12,000
By Profit & Loss a/c 5,500
20,000 20,000

Solution VII (d):

Calculation of Average Due Date

Starting Date : March 10, 2004

Due Date Amount Rs. No.of days from Products
starting date to
Due date
10-3-2004 400 0 0
19-4-2004 300 40 12,000
9-5-2004 500 60 30,000
18-6-2004 200 100 20,000
1,400 62,000

Average Due Date = Starting Date + Total products

Total Amount

= March 10 + 62,000
1,400

= March 10 + 44 days = April 23rd

Average Due Date = April 23, 2004