Question 3 OR (d)
Sports materials consumed: supplier balances, advances and cash purchases
6 marks
- Time to write
- About 12 minutes
- Notes
- Crux notes
Question
Question 3 OR (d) · 6 marksHow will you deal the following items when drawing up the Income and Expenditure Account for the year that ends on March 31,2024, and the Balance sheet on that date?
| Particulars | As at 01.4.2023 (Rs.) | As at 31.3.2024 (Rs.) |
|---|---|---|
| Amount due to suppliers of Sports Materials | 36,000 | 21,600 |
| Advances to Suppliers of Sports Materials | 12,000 | 7,200 |
| Stock of Sports Materials | 36,000 | 4,800 |
During 2023-2024, the payment made to the supplier of Sports Material was Rs. 1,05,600 and Cash Purchase amounted to 20% of Total Purchases.
Reworded from the university paper: names and figures differ, the task is the same. The original paper belongs to the University of Delhi. See DU's question bank.
Before you write
Read off the question and its marks
Read from the question
- HowHow it works or is done, step by step.
What the paper leaves open
The payment made to the suppliers during the year (₹1,05,600 in our version) is read as covering both the amounts owed to them and any advances paid, so credit purchases are found from one suppliers' account that carries the opening and closing amounts due and the opening and closing advances. The misprint "deal the following" is kept as printed.
Write it in this order
- Read the data; note exactly what is asked 1 min
- 1 Suppliers' account with dues and advances: credit purchases 2 marks 3 min
- 2 Total and cash purchases from the 20% condition 1 mark 2 min
- 3 Sports materials consumed to the Income and Expenditure Account 2 marks 3 min
- 4 Balance Sheet: stock, advances and amount due 1 mark 2 min
- Check: arithmetic, units (₹, %), final answer underlined 1 min
Try it first. About 12 minutes for 6 marks. Write it out, then open the solution.
Solution
Hover or tap a marked figure, like 72,000, to see how it is made and where else it appears.
The Income and Expenditure Account is charged with the sports materials consumed in the year, not the amount paid.
- Only expenses of the current year are debited to the Income and Expenditure Account; an expense incurred but not yet paid is added to the year's expense and also shown as a liability.
- The year's purchases are found from the payments, adjusted for the amounts owed to suppliers at the start and at the end of the year, as in the DU text's worked example for stationery.
- The material used is the stock in hand at the start plus the purchases, less the stock still unused at the end.
- Assets at the year end (here the closing stock and the advances) go on the assets side of the Balance Sheet, and amounts still to be paid (here the amount due to suppliers) on the liabilities side.
WN1: Suppliers of Sports Materials Account (credit purchases as the balancing figure)
| Dr | ₹ | Cr | ₹ |
|---|---|---|---|
| To Balance b/d (advances, 01.4.2023) | 12,000 | By Balance b/d (amount due, 01.4.2023) | 36,000 |
| To Cash (payment during the year) | 1,05,600 | By Credit purchases (balancing figure) | 96,000 |
| To Balance c/d (amount due, 31.3.2024) | 21,600 | By Balance c/d (advances, 31.3.2024) | 7,200 |
| 1,39,200 | 1,39,200 |
| Dr | ₹ |
|---|---|
| To Balance b/d (advances, 01.4.2023) | 12,000 |
| To Cash (payment during the year) | 1,05,600 |
| To Balance c/d (amount due, 31.3.2024) | 21,600 |
| 1,39,200 | |
| Cr | ₹ |
| By Balance b/d (amount due, 01.4.2023) | 36,000 |
| By Credit purchases (balancing figure) | 96,000 |
| By Balance c/d (advances, 31.3.2024) | 7,200 |
| 1,39,200 |
WN2: Total purchases. Cash purchases are 20% of total purchases, so credit purchases are the other 80%.
| Particulars | ₹ |
|---|---|
| Credit purchases (80% of total) | 96,000 |
| Cash purchases (20% of total: 96,000 ÷ 80% × 20%) | 24,000 |
| Total purchases (96,000 ÷ 80%) | 1,20,000 |
WN3: Sports materials consumed
| Particulars | ₹ |
|---|---|
| Opening stock of sports materials | 36,000 |
| Add: total purchases (WN2) | 1,20,000 |
| 1,56,000 | |
| Less: closing stock of sports materials | (4,800) |
| Sports materials consumed | 1,51,200 |
Treatment in the final accounts
- Income and Expenditure Account for the year ended March 31, 2024: expenditure side, Sports materials consumed ₹1,51,200.
- Balance Sheet as on March 31, 2024: assets side, Stock of sports materials ₹4,800 and Advances to suppliers of sports materials ₹7,200; liabilities side, Amount due to suppliers of sports materials ₹21,600.
The other reading. If the ₹1,05,600 also covered the cash purchases, credit-supplier payments would be ₹1,05,600 less 20% of total purchases. Total purchases would then be ₹96,000 (cash ₹19,200, credit ₹76,800) and consumption ₹1,27,200. The paper speaks of the payment "to the supplier", so it is read as the credit suppliers' payment.
Where the 6 marks sit
| # | Component | Marks |
|---|---|---|
| 1 | Suppliers' account with dues and advances: credit purchases | 2 |
| 2 | Total and cash purchases from the 20% condition | 1 |
| 3 | Sports materials consumed to the Income and Expenditure Account | 2 |
| 4 | Balance Sheet: stock, advances and amount due | 1 |
| Total | 6 |
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