KSLU Solved Question Papers
Financial Accounting
Previous Year Question Paper with Solution
B.Com. LL.B. (Five Years) · Sem 1
2019 Jun Examination
munotes.in
Mumbai
B.Com. LL.B. (Five Years) Sem 1 Financial Accounting 2019 Jun Question Paper with Solutions
First published on munotes.in on 21 October 2026.
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The question paper reproduced here is the paper as set by Karnataka State Law University at the 2019 Jun examination.
Contents
The questions below are the paper as Karnataka State Law University set it at the 2019 Jun examination, in the order it was set.
MarksPage
MarksPage
The Paper as Set
The questions in this volume are the questions asked at the 2019 Jun examination, reproduced as Karnataka State Law University set them, in the order it set them. Long reading passages are shortened to their first and last lines and our summary; the original paper prints them in full. Only the answers are ours. See the original question paper.
Duration 3 hours · Total marks 80 · 20 questions answered
Instructions printed on the paper
- N.B. (1) Answer all five units. (2) One essay type question and short note/problems is compulsory from each Unit. (3) Figures to the right indicate marks. (4) Answers should be written in English completely. (5) Use simple calculator only.
How to use this volume
Solve the paper first, under exam conditions and against the clock. Then read the answers here and mark your own. Reading a solution before attempting the question feels productive and teaches very little, because recognising an answer is not the same as being able to write one.
Q1
Unit I
(a)What is double entry system ? Explain.[10]
Answer
For full marks, cover: the meaning of the double entry system and its origin; its principle (every transaction has two equal and opposite aspects); the accounting equation it rests on; its rules of debit and credit; its features; the stages of the system; a worked set of transactions showing both aspects and the agreement of totals; and its advantages and limits.
Meaning
The double entry system is the method of recording every business transaction in two accounts. One account is debited and the other credited with the same amount. It rests on the fact that every transaction has two aspects, a receiving and a giving. When a business buys furniture for cash, furniture comes in and cash goes out. Both changes are recorded. The system was described in print by the Italian mathematician Luca Pacioli in 1494, and it is the basis of modern accounting.
The principle and the accounting equation
Because each transaction is recorded twice in equal amounts, the total of all debits always equals the total of all credits. This also keeps the accounting equation true at every moment:
Assets = Capital + Liabilities.
A business starting with cash of ₹ 1,00,000 from its owner has assets of 1,00,000 and capital of 1,00,000. If it then borrows ₹ 40,000 from a bank, assets become 1,00,000 + 40,000 = 1,40,000 and capital plus liabilities become 1,00,000 + 40,000 = 1,40,000. The two sides move together.
Rules of debit and credit
Under the traditional approach, accounts are personal, real or nominal:
- Personal accounts: debit the receiver, credit the giver.
- Real accounts: debit what comes in, credit what goes out.
- Nominal accounts: debit all expenses and losses, credit all incomes and gains.
Under the modern approach, an increase in an asset or an expense is a debit. An increase in a liability, capital or income is a credit. Both approaches give the same entries.
Features of the double entry system
- Two aspects. Every transaction affects at least two accounts.
- Equal amounts. The debit and the credit of each transaction are equal.
- Complete record. Personal, real and nominal accounts are all kept, so the record of the business is complete.
- Self-checking. Because debits equal credits, the trial balance agrees if the work is arithmetically correct.
- Basis of final accounts. The ledger balances lead to the trading and profit and loss account and the balance sheet.
Stages of the system
- Journalising: recording each transaction in the journal or a subsidiary book, showing the debit and the credit.
- Posting: transferring each entry to the two ledger accounts concerned.
- Balancing: finding the balance of each ledger account.
- Trial balance: listing the balances to check that debits equal credits.
- Final accounts: preparing the profit and loss account and the balance sheet.
A worked illustration
| Transaction | Account debited | Account credited | Dr. (₹) | Cr. (₹) |
|---|---|---|---|---|
| Started business with cash ₹ 50,000 | Cash | Capital | 50,000 | 50,000 |
| Bought goods on credit from Hari ₹ 12,000 | Purchases | Hari | 12,000 | 12,000 |
| Sold goods for cash ₹ 9,000 | Cash | Sales | 9,000 | 9,000 |
| Paid rent ₹ 2,000 | Rent | Cash | 2,000 | 2,000 |
| Total | 73,000 | 73,000 |
Each line has an equal debit and credit, so the totals agree: 50,000 + 12,000 + 9,000 + 2,000 = 73,000 on each side. Cash in hand is 50,000 + 9,000 - 2,000 = 57,000, and Hari is owed 12,000.
Advantages
- Complete and systematic record of every transaction, both its aspects.
- Arithmetical accuracy can be checked by a trial balance.
- Profit or loss can be found through the profit and loss account.
- Financial position is shown by the balance sheet.
- Amounts due from debtors and to creditors are known from the personal accounts.
- Fraud and errors are harder to hide, because both sides must agree.
- Comparison and decisions. The figures of different years can be compared.
- Acceptance. The system is universally accepted, and for companies it is required by law: section 128 of the Companies Act, 2013 requires books "on accrual basis and according to the double entry system of accounting".
Limits
- Agreement of the trial balance does not prove that there are no errors. Errors of omission, principle, commission and compensating errors are not revealed.
- It records only transactions measured in money.
- It needs trained staff and is costlier than single entry for a very small trader.
- Some figures in it, such as depreciation and provisions, are estimates, so the profit it shows is partly a matter of judgment.
Conclusion. The double entry system records every transaction in two accounts, debit and credit, of equal amounts, because every transaction has two aspects. It keeps the accounting equation true, allows a trial balance to check arithmetical accuracy and leads to the final accounts. Its advantages are a complete record, the profit, the financial position and control. Companies must use it by law, though a trial balance cannot reveal every error.
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