Solved Assignment 2 Code 444 Spring 2016 ADVANCE ACCOUNTING CODE 444
Solved Assignment 2 Code 444 Spring 2016 advance accounting for the semester spring 2016 is available for the Open University students of B.Com. This is complete 2nd aiou solved assignment advance accounting code 444 solved by accounting professional.
Q 1:- What do you know about the Hire Purchase system?
Ans. Hire Purchase system: The price under hire purchase system is paid in installments. The goods are delivered in the possession of the purchaser at the time of commencement of the agreement. Hire vendor continuous to be the owner of the goods till the payment of last installment.
Difference between hire purchase and Installment sales:
1. The distinction between the hire purchase system and the installment payment system should now be noted.
2. Under the hire purchase system, the property in the goods sold does not pass to the buyer but remains with the seller until the last installment has been paid.
3. If default is made in payment, the seller can retake possession of the goods.
4. Under the installment payment system, the property in the goods sold passes at once to the buyer, although payment for them is to be spread over a period of years or months.
5. If default is made in payment, the seller cannot retake possession of the foods, he can only sue for the balance of the debt.
6. Goods purchased on the hire system will, therefore, need different treatments in accounts to the one necessary to record a purchase under an installment agreement.
Solved Assignment 2 Code 444 Spring 2016
Q 2: Define the term lease and describe the criterion to identify the finance lease.
Ans. Lease: A contract by which one party conveys land, property, services etc, to another for a specified time, usually in return for a periodic payment.
Criterion to identify the finance lease:
Criteria for the Lessee:
At the date of lease agreement, if a lessee meats any one of the following criteria, it is classified as capital lease. If none of the criteria below is met, the lease is classified as operating lease:-
1. The lease agreement transfers ownership of the property to the lessee by the end of the lease term.
2. The lease contains a bargain purchase option.
3. The lease term is equal to 75 percent or more of the estimated economic life of the leased property. 4. The present value of these minimum lease payments at the inception of the lease is equal or at least 90% of the market value of the leased asset at that time.
Criteria for the Lessor:-
From the lessor’s point of view a lease is classified as a direct financing or sales type capital lease if all of the following criteria are met, failing which the lease will be classified as operating lease.
1. The lease agreement transfers ownership of the property to the lessee by the end of these term.
2. The lease contains a bargain purchase option.
3. The lease term is equal to 75% or more of the estimated economic life of the leased property.
4. The present value of the minimum lease payments at the inception of the lease is equal to at least 90% of the market value of the leased asset at that time.
5. Collectibles of the lease payments is reasonably assured.
6. There are no significant uncertainties related to amount of un-reimbursable cost, yet to be incurred by the lessor under the lease. You might have noticed that the first four conditions are exactly the same for lessee as well as lessor accept if any one of the four constitutions is true it is qualified for capital lease from lessee’s point of view. But all six conditions (including four mentioned for lessee) must he fulfilled to qualify for direct financing or sales-type capital for lessor; otherwise lease is classified as an operating lease.
Solved Assignment 2 Code 444 Spring 2016
Course: Advanced Accounting Code: 444 Assignment No: 02 Level: B.Com Spring 2016
Q 3: The following data is available front the financial of Shahbaz Corporation
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AIOU Solved Assignment 1 Code 444 Spring 2017 B.COM
Q 1: What is the difference between shares and debentures? Also, explain in detail the various types of shares and debentures, which may be issued by a Joint Stock Company.
Answer. Definition:Justice Farewellas defined share in the following word,
“A share is the interest of the shareholder in the company; it is measured by the sum of money for the purpose of liability in the first place and of interest (dividend) in this condolencea company’s capital is divided into a number of equal parts called as a share”.
Nature of Share:
- The share of a company shall be movable property. It is transferable in the manner provided by the article of the company.
- The share capital no n refund able except in the case of winding up and reduction of capital.
- c. Each share in a company shall have distinctive numb
Class of Share:
Beforepassingofthecompanyordinance1948, accompany use to issue three types of shares.
- Ordinary Share.
- Preference Share.
- Deferred Share.
AIOU Solved Assignment 1 Code 444 Spring 2017 B A
The company’s ordinance no wallows the company to issue only one type of shares normally ordinary shares.
- Ordinary Share: Are also called Equity Sh The holders of ordinary or Equity Shares are the real owners of the company .The ordinary shareholders have voting rights in the meetings of the company, they are entitled and receive dividend and are declared by the board of directors.The Equity Share capital cannot be redeemed during the life of the company.
- Preference Share: As the name suggest have certain preference on other types of shares. The preferences are as under.
- The first preference is for payment of dividend first paid to preference shareholder.
- In case of winding up the company, the preference shareholders have prior right in regard to repayment of capital.
- c. A fix rate of dividend is paid on preference share capital.
- Deferred Share: Is also called Founder’s Share we refuse to be issued to the promoters of the claims of all other shareholders had been not the deferred shareholders.
Definition:The Company’s Ordinance explains debentures in the following words; “Debentures includes Debenture Stock, bonds, terms, Finance Certificate(T.F.C)and any other security other then the share of a company with constituting a charge on the assets on the company or not.
A company may raise part of its capital by obtaining loans in the form of debentures. Debenture means too we a debt, “debenture is a security issues or allotted to the interest under the seal of the company who become creditors of the company”. A debenture may therefore be defined as a document issued by the company as an evidence of its debts .It contains a contract of the repayment of the principle sum of the interest at a specified date to the debenture holder.
Kinds of Debentures:
The debentures can be classified of their issue by the company.
- Ordinary or Naked Debentures: The debentures, which are issued without any security for re payment, are known as Ordinary or Naked Debentures.
- Mortgage Debentures: Mortgage Debenture is one, which is secured by a mortgage
On the real property of thecompany.
- Redeemable Debentures: The debentures, which are re payable at the state time ,arecalled Redeemable Debentures.
- Irredeemable Debenture: A debenture, which is not payable during the life time of the issuing company, is called Irredeemable Debenture.
- Registered Debentures: A Registered Debenture id issued in the name of owner of
- Bearer Debentures: The Bearer Debentures, which does not show the name of owner the Bond.
- Equipment Trust Debenture: The debentures, which are issued of raise funds for
The purchase of new equipment of a business is called Equipment trust Debenture.
- Convertible Debentures: In certain cases, the company allows the debentures holders to count their debentures for the share of the company.
|1. Share Capital: The company’s ordinance defines shares as a share incapital of the company.||A debenture is a certificate in datedness|
Issued under the scale of the company.
|2. Rights: The shareholder receives dividends when the company earns theprofit. They suffer financially when itsuffers losses.||The right of debenture is to receive money at a fixed rate of interest. They can earn whit the profit or loss of company.|
|3. Voting: A shareholder is entitled to vote at the company’s general meeting.||The debenture holder has no rights of voting at any meeting of the company.|
|4. Owner of the Company: The share holders except the Preference Shareholders are the owner of the company.||The debentures are the creditors of the company and as such they have no claim on the ownership of the company.|
|5. Return of the Capital: The shareholders are allowed to sale the share a will to other person but they are not paid back capital.||The company gives an undertaking to pay back the capital along with the interest a stated time to the debenture.|
|6. Management: The shareholder manages the offers of the company through the created representatives called Board of Directors.||The debenture holders are not entitled tointerfere in the management and the administration of the company as they are not the owner of the company.|
|7. Payment at the Winding up: In case the company is wind up the shareholder has a secondary claim of the return of money on the purchased shares.||On winding up of the company, the first propriety is to pay back the money to the debentureholder.|
|8. Islamic Sprits: The dividend paid to the shareholders depends upon the profit of the company. There are no fix errata of return on the shares of the company. Asmuch theyare Islamic in character.||The company has to pay fix errata of interest to the bondholders whether the company makesany, which is basically against the Islam.|
Redemption of Debentures means to discharge the liability on account of debenture. Debentures may be redeemed out of profit, out of capital or out of provision made for redemption. A company can redeemed its debenture by any of the following method.
Answer (a): Debenture-Definition:
Debenture is a type of debt instrument that is not secured by physical assets or collateral. Debentures are backed only by the general creditworthiness and reputation of the issuer. Both corporations and governments frequently issue this type of bond in order to secure capital. Like other types of bonds, debentures are documented in an indenture.
ABOUT AIOU Solved Assignment 1 Code 444 Spring 2017 FINE MORE
|The holder of shares is known as shareholder||the holder of debentures is known as debenture holder|
|Debenture is the debt of the company||Share is the capital of the company|
|, debentures represent indebtedness of the company||The shares represent ownership of the shareholders in the company|
|the income earned on debentures is interest.||The income earned on shares is dividend|
|debentures are convertible||Shares cannot be converted|
|Conversely, security charge is created for the payment of debentures.||There is no security charge created for payment of shares|
|security charge is created for the payment of debentures||Trust deed is not executed in case of shares|
|Debentures can be issued at discount without any legal compliance.||Shares are issued at discount subject to some legal compliance|
Types of shares
A company may have many different of shares that come with different conditions and rights.
AIOU Solved Assignment 1 Code 444 Spring 2017 Types of Shares
There are four main types of shares
- Ordinary shares are standard shares with no special rights or restrictions. They have the potential to give the highest financial gains, but also have the highest risk. Ordinary shareholders are the last to be paid if the company is wound up.
- Preference shares typically carry a right that gives the holder preferential treatment when annual dividends are distributed to shareholders. Shares in this category receive a fixed dividend, which means that a shareholder would not benefit from an increase in the business’ profits. However, usually they have rights to their dividend ahead of ordinary shareholders if the business is in trouble. Also, where a business is wound up, they are likely to be repaid the par or nominal value of shares ahead of ordinary shareholders.
- Cumulative preference shares give holders the right that, if a dividend cannot be paid one year, it will be carried forward to successive years. Dividends on cumulative preference shares must be paid, despite the earning levels of the business, provided the company has distributable profits.
- Redeemable shares come with an agreement that the company can buy them back at a future date – this can be at a fixed date or at the choice of the business. A company cannot issue only redeemable shares.
- Types Of Debentures
- The major types of debentures are as follows:Types Of Debentures On The Basis Of Record Point Of Viewa. Registered Debentures
These are the debentures that are registered with the company. The amount of such debentures is payable only to those debenture holders whose name appears in the register of the company.b. Bearer Debentures
These are the debentures which are not recorded in a register of the company. Such debentures are transferable merely by delivery. Holder of bearer debentures is entitled to get the interest.
2. Types Of Debentures On The Basis Of Security
a. Secured Or Mortgage Debentures
These are the debentures that are secured by a charge on the assets of the company. These are also called mortgage debentures. The holders of secured debentures have the right to recover their principal amount with the unpaid amount of interest on such debentures out of the assets mortgaged by the company.
b. Unsecured Debentures
Debentures which do not carry any security with regard to the principal amount or unpaid interest are unsecured debentures. These are also called simple debentures.
AIOU Solved Assignment 1 Code 444 Spring 2017 Debentures Type
- 3. Types Of Debentures On The Basis Of Redemption
a. Redeemable Debentures
These are the debentures which are issued for a fixed period. The principal amount of such debentures is paid off to the holders on the expiry of such period. These debentures can be redeemed by annual drawings or by purchasing from the open market.
b. Non-redeemable Debentures
These are the debentures which are not redeemed in the life time of the company. Such debentures are paid back only when the company goes to liquidation.
- 4. Types Of Debentures On The Basis Of Convertibility
a. Convertible Debentures
These are the debentures that can be converted into shares of the company on the expiry of pre-decided period. The terms and conditions of conversion are generally announced at the time of issue of debentures.
b. Non-convertible Debentures
The holders of such debentures can not convert their debentures into the shares of the company.
5. Types Of Debentures On The Basis Of Priority
a. First Debentures
These debentures are redeemed before other debentures.
b. Second Debentures
These debentures are redeemed after the redemption of first debentures.
AIOU Solved Assignment 1 Code 444 Spring 2017 continue
Q #2 Ayala Corporation opens a branch at Multan on IST January, 2016Book of ayala corporation Multan branch a/c for the year ended 31st 2016
|Goods sent to Multan branch (invoice price) 30937||Cash sales|
|Less: goods returned||Stocks 57750|
|By the branch (invoice prince) 10500||298875||Petty cash 625||58375|
|Cash sent to branch for exp||41250||Debtors||27500|
|Stock reverse (57750 *1/5)||Goods sent to branch|
|General profit and less account||2975||298875*1/5||59775|
Branch debtors Account
Q#3 tanvir and zaheer entered into a joint venture to construct a building for a contract price of rs. 4000000. They agreed to share profits………….
Joint venture account
|Joint book account||Rs||Rs|
|Zaheer (taken over of various items)||16800|
|Wages||25400||Joint bank account||4000000|
|Building pass fit||8700|
AIOU Solved Assignment 1 Code 444 Spring 2017Join Bank Account
Joint bank account
(payment of cost)
|Joint venture||131400||Tanvir on (ventures completion)||1498240|
(recipt of contact
|4000000||Zaheer (on venture completion)||702360|
|Building passed fit||8700|
(on venture completion)
|702360||Joint venture( profit )||599160|
FIND ALSO:- AIOU SOLVED ASSIGNMENT 2 CODE 444 SPRING 2017
|Supervisor (paid)||19800||Cash (contribution)||120000|
(on venture completion)
|1498140||Joint venture( profit )||1398040|
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