Slides for paper F A MBA Health Care-II.pptx

MBA Health

1. Question No.1 Numerical Question No.1 On BRS ABC Corp, has a balance of $2000 as per passbook as on 31st M arch 2023. However, the balance as per cash book as on 31st march 2023 is  $2210. Other Data are given as under: A check of $500 was deposited, but it is not yet processed by the bank. Bank charges of $60 were recorded in the passbook, but not in the cash book. Checks worth $300 were issued, but not presented. Bank interest of $50 was recorded in the passbook, but not in the cash book . Keeping in view the Data, You are required to Prepare the Bank Reconciliation Statement.

2. Question No.1 Cont.. . Solution #1: Bank Reconciliation Statement(BRS) ABC Corporation Limited Bank Reconciliation Statement March 31, 2023 Balance as per passbook (Cr. Balance) $ 2000 Add: Deposits in Transit $ 500 Add: Bank Charges 60 560 $2560 Less: Outstanding Checks $300 Less Bank Interest 50 350 Balance as per Cashbook (Dr . Balance ) $2210

3. Question No.1 Cont... Solution #1: Bank Reconciliation Statement(BRS ) on another method ABC Corporation Limited Bank Reconciliation Statement March 31, 2023 Balance as per Cash book (Dr. Balance) $ 2210 Less: Deposits in Transit $ 500 Less: Bank Charges 60 560 $1650 Add: Outstanding Checks $300 Add Bank Interest 50 350 Balance as per pass book (Dr . Balance ) $2000

4. Question No. 2 Numerical Question No.3 on Double Declining Balance method of Depreciation Suppose a business has bought a machine for $ 100,000. They have estimated the machine’s useful life to be eight years, with a salvage value of $ 11,000 . Required: Prepare a schedule of Depreciation for the Machine using Double Declining Balance method of Depreciation. Solution: Working: Now, as per the straight-line method of depreciation: Cost of the asset = $ 100,000 Salvage Value = $ 11,000 The useful life of the asset = 8 years Depreciation rate = 1/useful life *100 = (1/8) * 100 = 12.5% Double-declining balance formula =  2 X Depreciation rate. Here, it will be 2 x 12.5% = 25%

5. Question No. 2 Cont... Solution of Numerical Question No.3 on Double Declining Balance method of Depreciation Continued Year 1 Depreciation = $100000 X 25% = $25,000 Year 2 Depreciation = $75,000 x 25% = $18,750 Depreciation schedule of the Machine will look like below over the 8 years of it’s useful life : Year Book Value (Beginning Year) Depreciation Book Value (End Year) 1 $1,00,000 $25,000 $75,000 2 $75,000 $18,750 $56,250 3 $56,250 $14,063 $42,188 4 $42,188 $10,547 $31,461 5 $31,461 $7,910 $23,730 6 $23,730 $5,933 $17,798 7 $17,798 $4,449 $13,348 8 $13,348 $2,348 $11,000

6. Question No. 3 The Concept of Non-Trading Organizations The organizations whose main objectives are not to earn profit but to provide valuable services to its member and to the society are known as non-trading organizations. These organizations are involved in promoting welfare of society. Their charters prohibit the payment or provision of dividend. The example of such organizations are sports clubs, social clubs, educational institutions, libraries, hospital, religious trust, temples, churches, mosques and gurudwaras etc.

7. Q uestion No. 3 Cont... Characteristics of Non-Trading Organizations The main objective of such concern is not to earn profit but providing services to its members and society . The main sources of revenues are Subscriptions money and Donation donations from member and societies. A non-profit organisation is governed and managed by elected member in the same way a business corporation is managed by a board of director. A non-profit organization employs the same accrual basis of accounting used by business enterprises. Non Profit Organizations prepare receipts and payments account, income and expenditures account and balance sheet.

8. Question No. 3 Cont... Accounting Procedures of Non-trading Organisation Non-trading organizations can keep and maintain their accounting records under single entry system or double entry system. The small sizes of organizations follow single entry whereas the large size of organizations follow double entry system. A Non Trading organisation prepares at the year end, the following three financial statements: Receipt and payment account Income and expenditure account Balance sheet

9. Question .4 Receipt and Payment Account It is a summary of cash receipts and cash payments. It is prepared at the end of the accounting period. All the cash receipts are recorded on the debit side and all the payments are recorded on the credit side of the receipts and payments account. Cash book consists of entries of receipt and payment in a chronological order, while the receipts and payment is a summary of total cash receipts and payments . Receipt and payment account starts with opening balance of cash and bank and ends with closing balance of cash and bank. It does not take into account outstanding amount in receipts and payments account.

10. Question .4 Cont... Characteristics of Receipts and P ayment Account The main characteristics or attributes are as follows: It is a summary of cash transactions. Like a cash book records cash receipts on debit side and payments on the credit side. It includes cash and banking transactions whether these are related with previous or current or subsequent year. It records all receipts and payments whether related to capital or revenue nature. It starts with opening balance of cash in hand and cash at bank. It ends with closing balance of cash in hand cash at bank. It does not include non-cash transactions like Depreciation or outstanding expenses or revenue. It is not based on accrual basis of accounting

11. Question .4 Cont... Format of Receipts and Payment Account

12. Question. 5 Preparation of Receipts and Payment Account from given information Numerical Example No. 1. From the following information of Red Cross Society, prepare Receipts and Payments Account for the year ended Dec. 31, 2019. Cash in hand on Jan. 1, 2019 $ 35,000 and Cash at Bank on Jan. 1, 2019 , $ 50,000 . Donation Received during the year $ 25,000 & Subscription received is $ 20,000 . Utilities Charges Paid $ 5,000 ; Salary Paid $ 45,000 and Outstanding Salary is $ 5,000 Honorarium paid to trainer $ 15,000 and Rent Paid $ 7,500 . Life membership Fees received $15,000 and Interest Received on Govt. Bond $1,000 Purchase of computer by check $ 30,000 and Purchase of Furniture for Cash $ 4,000 Entrance Fees Received $10,000 . Purchase of Supplies Material for Cash $ 6,000 and Purchase of Government Bond $20,000 . Payment to Petty Cashier $ 500 . Cash in Hand Dec. 31, 2019 $ 18,000 and Cash in Bank Dec. 31, 2019 $ 20,000 .

13. Question. 5 cont... Solution of Numerical Example No. 1. Red Cross Society Receipts and Payment Account For the year ended Dec. 31, 2019 Receipts Amount $ Payment Amount $ To Balance b/d :   By Utilities 5,000 Cash 35,000   By Salaries 45,000 Bank 50,000 85,000 By Computer 30,000 To Donation 25,000 By Petty Cash 500 To Subscription 20,000 By Furniture 4,000 To Life Membership fees 15,000 By Supply 6,000 To Interest on Bond 1,000 By Bonds 20,000 To Entrance Fees 10,000 By Rent 7,500     By Balance c/d:       Cash - 18,000       Bank - 20,000 38,000   1,56,000   1,56,000

14. Question .6 Income and Expenditure A ccount Income and expenditure account is just like a profit and loss account. It is prepared to find out the amount of surplus or deficit made during the accounting period. It records all the expenses and losses on the debit side and all the revenue and gains on the credit side. It accounts for only revenue nature of expenditure and income. It shows only current year incomes and expenditure whether they are received or not. It excluded previous year and next year income and expenditures. In other words, incomes and expenditures have to be adjusted for both outstanding and prepaid items on matching principles of accounting. According to F.G. Williams, “An income and expenditure account is prepared to show all the revenue income for the period whether actually received or accrued and all the revenue expenditures for the period whether actually paid or accrued that is not yet paid.

15. Question .6 cont... Characteristics of Income & Expenditure Account It records only revenue nature of expenses and incomes. It records incomes, expenses and losses and gains which related to current accounting year. It records all the expenses and losses on the debit side and all the incomes and gains on the credit side. Both cash and non-cash items such as salaries paid and depreciation incurred are taken into account. It is prepared on the basis of accrual concept.

16. Question .6 cont... Format of Income and Expenditure Account XYZ ……… Income and Expenditure Account For the Year ended ……, 20XX Expenditure Amount Incomes Amount To Salaries & wages expense ………   By Subscription received ……….   Add: O/S Salaries at end .…….   Add: Subs. Due at End ……….   Less: Preaid salary at end ………. …………. Add: Adv. Subs. at Beg. ……….   To Rent and Taxes …………. Less: Adv. Sub. at End. ……….   To Postages & Stationaries …………. Less: Sub. Due at Beg. ………. . ………… To Stock/Refreshment consumed …………. By Entance & admission fees ………… To Travelling & fare expense …………. By Loker Rent ………… To Repairs & maintenance expense …………. By Life Membership Fees ………… To Newspaper & Magzines …………. By Donation ………… To Upkeep of ground expense …………. By Grant from Govt (revenue) ………… To Interest & bank charges …………. By Match or tournament fees ………… To Honorarium expenses …………. By Refreshment receipts ………… To Entertainment expense …………. By Profit on sale of assets ………… To Match/tournament expennse …………. By Sale of newspaers & magzines ………… To Annual Expense …………. By sales of sport materials ………… To Loss on sale of assets …………. By Interest received ..……..   To Charity & releif expense …………. Add: Accrued interest ………. ………… To Utilities expense …………. By Other Inomces ………… To Other expense …………. By Deficit   To Surplus (Excess of income over Exp.) …………. (Excess of exp. Over income) …………   ………….   ………….

17. Question . 7 Solution of Example No.5 The Red Cross Society Income and Expenditure Account For the year ended Dec. 31, 2019 Expenditure Amount Income Amount To Utilities Expense $ 5,000 By Subscription* $ 20,000 To Salaries Expense 45,000   By Donation 25,000 Add: O/S salary 5,000 50,000 By interest received 1,000   To Honorarium 15,000 Add: Accrued Interest 200 1,200 To Rent Expense 7,500 By Deficit (Excess of   To Supply Expense 6,000 Expense over Income) 54,850 To Depreciation Expense       Other F Assets 15,000       Furniture 300       Computer 2,250 17,550       $1,01,050   $1,01,050

18. Question . 7 Cont... Solution of Example No.5 Continued Working Notes. Computation of Subscription: Subscription received in 2019: Less: advance subscription received for 2020 Less: Arrears of subscription received for 2018. Add: Subscription received in advance in 2018 Add: Outstanding subscription at end for 2019 Subscription to be shown for the year 2019 $ 20,000 - (3,000) - ( 2,000) + 1,000 + 4,000 $ 20,000 Computation of Depreciation Depreciation on other Fixed Assets = $ 150,000 ×10 %× 1= $ 15,000 Depreciation on Furniture = $ 4,000 × 10% × 9/12 = $ 300 Depreciation on Computer = $ 30,000 × 15% × 6/12 = $2,250 Total Depreciation = $ 15,000 + 300 + 2,250 = $ 17,550

19. Question . 8 Consignment Account CONSIGNMENT: Consignment accounting is a type of business arrangement in which one person send goods to another person for sale on his behalf and the person who sends goods is called consignor and another person who receives the goods is called consignee, where consignee sells the goods on behalf of consignor on consideration of certain percentage on sale. Features: 1. Two Parties: Consignment accounting mainly involves two party’s consignor and consignee. 2. Transfer of Possession: Possession of goods transferred from consignor to consignee. 3. Agreement: There is a pre-agreement between the consignor and consignee for terms and conditions of the consignment. 4. No Transfer of Ownership: The ownership of goods remains in the hands of the consignor until the consignee sells it. The only possession of goods is transferred to a consignee.

20. Question . 8 Cont... Consignment Account Features: Re-Conciliation : At the end of the year or periodic intervals consignor sends Proforma invoice while consignee sends account sale details and both reconcile their accounts Separate Accounting: There is independent accounting done of consignment account in the books of consignor and consignee. Both prepare consignment account and record the journal entries of goods send/Received through consignment account only. Terms used in consignment Accounts: Consignor : It is the person that sends goods. Consignee : The person who receives the goods is called the consignee . Consignment: Consignment is a business arrangement through which the consignor sends goods to the consignee for sale. Consignment Agreement: It is legally written communication between the consignor and consignee, which defines the terms and conditions of the consignment.

21. Question . 8 Cont... Consignment Account Pro-Forma Invoice: When the consignor sends goods to the consignee, he also forwards statements showing details of goods such as quantity, price, etc. and that statement is called the Pro-forma invoice. Recurring Expenses: The consignee incurs these expenses after the goods reached his place. These expenses are of maintenance of goods etc . Non- Recurring Expenses: Expenses that are incurred by the consignor to dispatch the goods from his place to place of the consignee are called non-recurring expenses. These expenses are added to the cost of goods Commission: Commission is the reward/ consideration for the sale of goods on behalf of the consignor. It is as per the consignment agreement. Account Sale: It is the statement forwarded by the consignee to consignor showing details of goods sold, amounts received, expenses incurred, a commission charged, advance payment and balance due and stock in hand, etc.

22. Question . 8 Cont... Consignment Account Commission In Consignment Arrangement: There are three types of commission payable to consignee on sale of the goods. Simple Commission: This is usually a fixed percentage on the total sale, calculated as per mutually agreed terms. Over-riding Commission: In case of an extra-ordinary sale of the goods, some specific amount is payable to consignee in the form of an incentive is called overriding commission. Over-riding commission is also calculated on the total sales. Del-credere Commission − “An agreement by which the Consignee, in consideration of an additional premium or commission (called a del credere commission), engages, when he sells goods on credit, to insure, warrant, or guarantee to his principal the solvency of the purchaser, the engagement of the factor being to pay the debt himself if it is not punctually discharged by the buyer when it becomes due.”