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The formula for calculation of profit/loss is

PROFIT / LOSS = CLOSING CAPITAL + DRAWINGS - OPENING CAPITAL

As per question 

Closing capital = Rs. 21,500

Drawings = Rs. 4,300

Opening capital = Rs. 19,400

So, the profit will be 21,500 + 4300 - 19400 = 6,400

Therefore, option no. 4 is correct.

The incorrect statement is Bank pass book represents a copy of the ledger account of the bank in the books of the customer.

• The bank passbook represents all the transactions related to amount withdrawn from or deposited to the bank account within a specified period of time. It is provided by the bank to its customers and is updated via bank. 
• Bank passbook does not represent the copy of the ledger account of the bank in the books of the customer but the debit or credit transactions of the bank account and balance or overdraft in the bank account as per bank.

The incorrect answer is Under the self-balancing ledger system, only two ledger accounts are prepared (Debtors Ledger and Nominal Ledger).

Self-Balancing Ledger: All the ledger accounts are prepared from the balances extracted from the trial balance. Under a double-entry system of accounting, each ledger is self-balancing. 

• Under self-balancing ledgers, as all the ledgers are prepared using the double-entry system, so a trial balance can be prepared with the Debtor's or Creditor's ledger balances. So, Option 2 is also contextually correct.
• Under self-balancing ledgers, Debtors Ledger is also known as Sold Ledger or Sales Ledger, which records all the transactions related to customers to whom goods have been sold on credit. Therefore, Option 3 is also contextually correct.
• Under the self-balancing ledger system, each ledger is prepared under the double-entry system. For each transaction, there shall be a debit entry and simultaneous credit entry. Therefore, Option 4 is also contextually correct.
• Under self-balancing ledger system, three ledger accounts are prepared namely Debtors Ledger, Creditor's Ledger and Nominal Ledger. So, option 1 contains an INCORRECT statement.

The correct answer is an Error of principle

Purchase of a computer: It is regarded as the purchase of an asset. It is a capital expenditure of a company. It will be posted to the debit of Computer A/c. 

Office Expenses: These expenses are incurred by the company in process of carrying out the business activity. These are of routine nature and hence are treated as revenue expenditure. For e.g., Electricity bill, Rent, etc. It will be posted to the debit of Profit & Loss A/c.

Treating Capital Expenditure as Revenue Expenditure is an error of principle.

Errors in Accounting:

The Correct Answer is 09.05.2017

Bill of exchange: A bill of exchange is an agreement between two parties in which one party is bound to pay a certain amount of money to the other party on a specified date or on order. It is a type of Negotiable Instrument which allows the buyer and seller to carry out credit operations. It is an "unconditional order" and has to be signed by both parties.

• In the case of Bill after sight, the calculation of maturity date of bill of exchange will start from the date when the bill is accepted.
• 3 days of grace are added extra to the maturity date of the bill for the drawee to make the payment.

Calculation of maturity Date

• Date of acceptance = 06.03.2017 
• Validity of the bill = 2 months
• Maturity date = 06.03.2017 + 2 months + 3 days of grace = 09.05.2017

Fraud is the intentional activity to gain personal benefit directly or indirectly illegally, against organization or entity policy.

Error is unintentional mistakes in the preparation or. presentation of financial information.

•  What is the difference between fraud and error?
  • The distinguishing factor between fraud and error is whether the underlying action that results in the misstatement in the financial statements is intentional or unintentional.
  • Unlike error, fraud is intentional and usually involves deliberate concealment of the facts.
  • The error refers to an unintentional misstatement in the financial statements, including the omission of an amount or disclosure.
  • So, we can say that the words fraud and error have different meanings.

Therefore option no. 3 is correct.

The correct answer is There are 3 types of differences between the cash and pass book, namely timing, transactions and errors.

Bank reconciliation statement: A bank reconciliation statement is a report or statement prepared by a company to reconcile bank transactions recorded in its books of accounts with bank statements. The bank reconciliation statement ensures the accuracy of bank balances by helping in the verification of entries recorded in the books of accounts.

• BRS is the process of reconciling Bank column of the cash book and bank balance as per bank's passbook. So, option 1 is incorrect.
• Overcasting refers to increase in amount. Overcasting the debit side of cashbook means increasing the total of debit side of cash book. It is an error in totalling. So, option 3 is incorrect.
• Debit balance in the cash book is NOT same as overdraft as per the pass book because overdraft is a type of loan taken from the bank and debit balance of cashbook shows the favourable balance as per cashbook. So, option 4 is incorrect.
• Variation in Passbook and Cashbook arise due to several reasons like, difference in the dates of transaction and debit/credit made by the bank, Omission of any transaction to be recorded, etc. So, option 2 is correct.

• Debit as per cash book is favourable that denotes deposit of amount, but debit as per Passbook is unfavourable that denotes withdrawal from bank account.
• Credit as per cash book is unfavourable that denotes amount withdrawn, but credit as per Passbook is favourable that denotes deposit of amount in bank account.
• Overdraft is a type of loan, so it will increase when the amount is withdrawn from and will decrease when the amount is deposited to the bank account.

The correct answer is debit. 

Rules for debit and credit : 

The correct answer is Equal debit and credit entries are made for each transaction.

• The double Entry System of accounting is based on the dual aspect of accounting.
• The dual aspect of accounting says that every transaction will have two effects in the books of account.
• For every debit, there will be a credit of the same amount and vice versa.

• Debit: It has been derived from the Italian word 'Debito', written on the left side of any account.
• Credit: It has been derived from the Italian word 'Credito', written on the right side of any account.
• Business Transaction: Any transaction recorded from the information provided on source documents and has an effect on the assets and liabilities of a business.

Meaning of Bill of ​Exchange

According to the Negotiable Instruments Act 1881, a bill of exchange is defined as “an instrument in writing containing an unconditional order, signed by the maker, directing a certain person to pay a certain sum of money only to, or to the order of a certain person or to the bearer of the instrument”.

Some of the characteristics of the Bill of Exchange:

• It is important to have a bill of exchange in writing.
• It must contain a confirmed and unconditional order to make a payment and not just the request.
• The order should not have any condition.
• The bill of exchange amount should be definite.
• Fixed date for the amount to be paid.
• The bill must be signed by both the drawee and the drawer.
• The amount stated on the bill should be paid on-demand or on the expiry of a fixed time.
• The amount is paid to the beneficiary of the bill, specific person, or against a definite order.

Therefore, in the above question option no. 3 i.e. The promise to pay must always be conditional, is incorrect.

Meaning of Bill of Exchange

According to the Negotiable Instruments Act 1881, a bill of exchange is defined as “an instrument in writing containing an unconditional order, signed by the maker, directing a certain person to pay a certain sum of money only to, or to the order of a certain person or to the bearer of the instrument”.

Parties Of Bill of Exchange

(1) Drawer:

• The drawer is the maker of a bill of exchange.
• The bill is signed by Drawer.
• A creditor who is entitled to receive payment from the debtor can draw a bill of exchange.

(2) Drawee:

• Drawee is the person upon whom the bill of exchange is drawn.
• Drawee is the debtor who has to pay the money to the drawer.
• He is also known as ‘Acceptor’.

(3) Payee:

• The payee is the person to whom payment has to be made.
• The payee may be the drawer himself or a third party.

Therefore, now it is clear that the bill of exchange is drawn by the creditor and not a debtor.

Hence, the false statement is Option 4 i.e. Bill of exchange is drawn by the debtor.

The correct answer is Rs. 85600

Solution

Calculation of Subscription for the year 2019-20

•  Outstanding subscriptions for the current year are added to subscriptions received during the year because they are related to the current year. They will be subtracted from the subscription received next year when received.
•  Subscription received in advance for the year is accrued income. Hence, it is subtracted from the subscription received.
• Outstanding subscription received for the previous year is subtracted, as the accounting for the same has already been done in the previous year.
• The resultant amount is the amount to be credited to the Income and Expenditure account in respect of subscription.

The term 'Provision' means to write off or retain any amount by depreciation, renewal, or diminution in asset value, or by making available for any known liability an amount that has not been determined with sufficient accuracy can be done.

Provisions in accounting refer to the amount that is generally put aside from the profit in order to meet a probable future expense or a reduction in the asset value although the exact amount is unknown.

To qualify as a provision in accounting, the funds must be for a specific purpose, such as to offset the decrease in an asset’s value.

• A provision stands for liability of uncertain time and amount.
• Provisions include warranties, income tax liabilities, future litigation fees, etc.
• They appear on a company’s balance sheet

In financial accounting for the purpose of calculation and accounting, we take into consideration, financial/fiscal year and not the calendar year.

The fiscal/ Financial year starts from the 1st of April and ends on the 31st of March.

Therefore, as per the above question salary of MR. X for PY 2019-2020 will be calculated as follows.

He joins the job on 1-July-2019 and the year ends on 31st March 2020 so total months in PY for which salary is payable to MR. X comes to 9 months.

Therefore Salary of MR. X will be Rs. 30,000 x 9 months = Rs. 2,70,000.

The correct answer is When a transaction is not recorded at all

Error of Omission: This type of error arises when an accountant completely or partially excludes or omits to record an entry in the books of accounts. Complete omission of entry does not affect the Trial Balance while partial omission affects the Trial Balance.

For example: Payment of Electricity bill omitted to be recorded

 Other types of Errors in Accounting: