CBSE Class 10 Elements of Book Keeping & Accountancy Question Paper 2024 with Answer Key and Solution PDF

Capital expenditure refers to funds used by a company to acquire, upgrade, or maintain physical assets like buildings, machinery, or equipment. It is typically incurred with the aim of generating future economic benefits over a long period of time. Capital expenditures are considered investments, not expenses, and are capitalized as assets on the balance sheet.

In contrast to operating expenses, which reduce profits in the period they are incurred, capital expenditures do not directly reduce the profit of the concern in the year they are incurred. Instead, they are depreciated over time, which spreads the expense across multiple periods. Therefore, option (d) is incorrect as capital expenditure does not reduce profits immediately but contributes to the creation of long-term value. Quick Tip: Capital expenditure creates future benefits and is recorded as an asset rather than an expense.

In accounting, expenditures are classified based on their nature and the long-term benefit they provide to the company. Capital expenditures (CapEx) are typically associated with acquiring or improving long-term assets that will benefit the company for many years, such as purchasing machinery or building a new office.

In contrast, revenue expenditures (RevEx) are short-term costs that are necessary to maintain the normal functioning of an existing asset but do not increase its value or extend its useful life significantly.

The expenditure of Rs. 20,000 on painting the building falls under the category of revenue expenditure because it does not improve the building's value or extend its life. It is considered a maintenance cost aimed at keeping the building in a usable condition rather than enhancing it. Since the painting is intended to maintain the current state of the building, it is recorded as a revenue expenditure and directly charged to the income statement in the period it is incurred.

The key characteristic of revenue expenditures is that they are recurring costs that are essential to keep the business running but do not result in an increase in asset value. Therefore, option (a) is correct because it appropriately classifies the painting expense as a revenue expenditure. Quick Tip: Revenue expenditures are generally for maintenance purposes, keeping assets in their current state of operation, and are accounted for as expenses in the income statement.

The maintenance cost of a shop is considered a routine expense incurred to keep the shop's operations running smoothly. These costs do not add any long-term value to the asset or extend its useful life. Maintenance costs are typically treated as Revenue Expenditure, as they are recurring in nature and are necessary for the business to continue functioning on a day-to-day basis.

Unlike capital expenditures (CapEx), which are aimed at enhancing or improving an asset to create future economic benefits, revenue expenditures (RevEx) are short-term costs that are charged to the income statement in the period they are incurred. Since the maintenance does not create future benefits or improve the asset's value, it is treated as an expense and not as a capital expenditure.

Thus, option (d) is correct because the maintenance of the shop is a necessary operational cost, and it is classified as a revenue expenditure. Quick Tip: Routine costs like maintenance, repairs, or upkeep of assets are considered Revenue Expenditure because they ensure the asset continues to function but do not increase its value.

Depreciation is a method of allocating the cost of a tangible fixed asset over its useful life. It is charged to reflect the wear and tear, deterioration, or obsolescence that occurs as the asset is used in business operations over time. Fixed assets, which include long-term assets like machinery, buildings, vehicles, and equipment, are subject to depreciation because they are expected to provide benefits over several years, but their value declines gradually as they are used.

Capital, current assets, and liquid assets, on the other hand, are not depreciated. Capital refers to the funds invested in the business, while current and liquid assets are assets that are expected to be consumed or converted into cash within one year. These assets do not experience depreciation because they are not subject to the same wear and tear as fixed assets. Therefore, depreciation is only applicable to fixed assets, making option (a) the correct choice. Quick Tip: Depreciation is a non-cash expense that applies only to tangible fixed assets that have a limited useful life, such as buildings, machinery, or vehicles.

The Book Value of a fixed asset is the value recorded on the company’s balance sheet after deducting accumulated depreciation from the asset's original or historical cost. Over time, as depreciation is charged, the book value of an asset decreases. The book value represents the remaining value of the asset that has not yet been depreciated.

It is important to note that the book value does not necessarily reflect the current market value or fair value of the asset. The historical cost is used as the basis for calculating the book value, and depreciation is deducted to account for the wear and tear or obsolescence of the asset.

Thus, option (b) is correct because the value after deducting depreciation from the historical cost is known as the book value. Quick Tip: Book value is a historical measure that reflects the asset's value in the books after accounting for depreciation. It differs from market value or fair value, which are influenced by current market conditions.

The depreciation under the Written Down Value (WDV) method is calculated based on the book value of the asset at the start of the year. The formula for depreciation is:
\[ Depreciation = Cost \times Rate of Depreciation \]

Given:
- Cost of the truck = Rs. 16,00,000
- Rate of depreciation = 12%

To calculate the depreciation for the first year, we use the formula:
\[ Depreciation = 16,00,000 \times \frac{12}{100} = Rs. 1,92,000 \]

Next, we calculate the book value at the end of the first year by subtracting the depreciation from the original cost:
\[ Book Value = Cost - Depreciation \] \[ Book Value = 16,00,000 - 1,92,000 = Rs. 14,08,000 \]

Thus, the book value of the truck on 31^st March 2023 is Rs. 14,08,000. Quick Tip: In the Written Down Value method, depreciation is charged on the remaining book value each year, which causes the depreciation amount to decrease over time as the asset's value reduces.

Under the Straight-Line Method (SLM), depreciation is calculated as:
\[ Depreciation = Cost \times Rate \times Time \]

Given:

Cost = Rs. 8,00,000

Rate = 15%

Time = 7 months (from September to March)


Now, calculating depreciation:
\[ Depreciation = 8,00,000 \times \frac{15}{100} \times \frac{7}{12} \] \[ Depreciation = 8,00,000 \times 0.0875 = Rs. 70,000 \]

Hence, the depreciation for the year ending on March 31, 2023, is Rs. 70,000.
Quick Tip: In the Straight-Line Method, depreciation is calculated on the original cost of the asset, irrespective of its age. This method results in equal depreciation expense every year.

Depreciation is a method of allocating the cost of an asset over its useful life. In the case of the **Straight Line Method (S.L.M.)**, depreciation is charged equally over the asset's estimated useful life. This method is applied to Fixed Assets, which are long-term assets such as buildings, machinery, and equipment.

Fixed assets are subject to depreciation because they have a limited useful life, and their value decreases over time due to usage, wear and tear, or obsolescence. In contrast, current assets (e.g., inventory, cash), liquid assets (e.g., cash equivalents), and fictitious assets (e.g., goodwill, deferred charges) do not undergo depreciation since they are either short-term in nature or not subject to the same physical deterioration.

Thus, depreciation is only applicable to fixed assets, and the correct answer is (c) Fixed Assets. Quick Tip: Depreciation spreads the cost of fixed assets over their useful life, ensuring that the asset's cost is matched with the revenue it helps generate over time.

The Scrap Value of an asset is its estimated residual value at the end of its useful life. It represents the expected selling price of the asset after it becomes obsolete or unfit for further use. This value is important in determining how much of the asset's cost is expected to be recovered after its service life has ended.

In accounting, the scrap value is considered when calculating depreciation, particularly in methods like the Straight-Line Method. It is subtracted from the original cost of the asset to determine the total amount of depreciation to be charged over its useful life.
Quick Tip: Scrap value is essential for calculating depreciation using methods like the Straight-Line Method, as it helps in determining the depreciable amount of an asset.

- Statement-I is correct: A Bank Reconciliation Statement (BRS) is prepared to reconcile the balance as per the Cash Book and the balance as per the Bank Statement. It helps identify discrepancies between the two records, ensuring accurate financial reporting. Typically, it is prepared more frequently than annually, often monthly, but the general idea remains the same: to reconcile the two balances.


- Statement-II is incorrect: The Bank Reconciliation Statement is prepared by the account holder, not the bank. While the bank provides the bank statement, the responsibility for preparing the BRS lies with the account holder or the accounting department to identify any discrepancies and adjustments that need to be made.
Quick Tip: A Bank Reconciliation Statement (BRS) helps identify errors, omissions, or timing differences between the Cash Book and Bank Statement, ensuring that the financial records are accurate.

If a cheque issued is omitted to be recorded in the Cash Book, the balance as per the Cash Book will be lower. While preparing the Bank Reconciliation Statement, this amount must be added back to reconcile the balances. This adjustment ensures that the cash book reflects all transactions, providing an accurate representation of the company's financial position. Adding this amount helps to reconcile the discrepancy between the bank balance and the book balance.
Quick Tip: Ensure all issued cheques are recorded in the Cash Book to avoid discrepancies in the Bank Reconciliation Statement. Regularly updating the Cash Book helps maintain accurate financial records.

The maturity date of a bill is calculated by adding the specified number of months to the bill's issue date and then considering any grace period. Here, the bill is payable three months after the date.

1. Add 3 months from the bill date (1^st February 2023):

- February \(\rightarrow\) March \(\rightarrow\) April.

This brings the due date to 1^st May 2023.

2. A grace period of 3 days is added as per the standard practice for bills of exchange.

- 1^st May + 3 days = 11^th April, 2023.

Thus, the maturity date of the bill is 11^th April, 2023. Quick Tip: While calculating the maturity date for bills of exchange, add the given months and include a standard 3-day grace period to determine the exact due date.

The Bill Receivable Account represents an amount owed to the business, which is an Asset. It is recorded on the asset side of the Balance Sheet under current assets, as it represents amounts the business expects to receive in the near future. Bills Receivable arise when the business accepts a bill from a debtor, and it is a claim for payment that is expected to be realized soon.
Quick Tip: Bills receivable are treated as current assets because they are expected to be realized within a year. These are shown under the current assets section of the Balance Sheet.

The formula to reconcile the Bank Statement is:
\[ Balance as per Cash Book + Cheques issued but not presented - Cheques deposited but not credited \]

Given:

Balance as per Cash Book = Rs. 30,000

Cheque deposited but not credited = Rs. 5,000 (deduct)

Cheque issued but not presented = Rs. 7,000 (add)
\[ Resulting Balance = 30,000 + 7,000 - 5,000 = Rs. 28,000 \] Quick Tip: To reconcile balances, always add cheques issued but not presented and subtract cheques deposited but not yet credited.

A Bank Reconciliation Statement (BRS) is prepared by the account holder (customer) to reconcile the balance as per the Cash Book and the Bank Pass Book. It identifies any discrepancies caused by timing differences, such as outstanding cheques or deposits in transit, or errors in recording by either the bank or the business. The objective is to ensure that both the Cash Book and the Bank Pass Book reflect the same balance after the reconciliation process.
Quick Tip: The BRS ensures accurate records by reconciling differences between the Bank Pass Book and Cash Book. It is a useful tool for detecting errors and understanding the true financial position.

A Pass Book is a mirror copy of the customer’s account as maintained in the bank’s ledger. It records all the transactions associated with the customer's account, including deposits, withdrawals, interest, and bank charges. Essentially, it represents the bank’s view of the customer’s account, showing the bank’s records of the transactions.

This is why the correct answer is (a), as the Pass Book reflects the bank’s ledger entries regarding the customer’s account. It does not directly reflect the cash book or the firm’s receipts, which are related to other aspects of accounting. Quick Tip: The Pass Book reflects the bank's perspective on a customer’s account and is useful for reconciling any discrepancies between the bank’s and the customer’s records.

The formula for Net Profit is:
\[ Net Profit = Gross Profit - Expenses + Other Income \]

Given:

Gross Profit = Rs. 1,20,000

Expenses (Salary) = Rs. 50,000

Interest Received = Rs. 40,000

Now, calculating the Net Profit:
\[ Net Profit = 1,20,000 - 50,000 + 40,000 = Rs. 1,30,000 \]

Thus, the Net Profit is Rs. 1,30,000.
Quick Tip: Net Profit accounts for all incomes and expenses after calculating the Gross Profit. It gives a clear picture of a company's profitability after all costs and revenues have been accounted for.

The formula for Net Profit is: \[ Net Profit = Gross Profit - Expenses + Other Income \]

Given:

Gross Profit = Rs. 5,00,000
Expenses include: Advertisement, Rent, Repairs (which reduce Net Profit)
Other Income includes: Commission received (which increases Net Profit)

\[ If Commission Received = X then Net Profit = Gross Profit - Total Expenses + X \]

Where \(X\) is the additional income from commission. Quick Tip: Net Profit increases with additional income streams and decreases with additional expenses post-calculating Gross Profit.

A Credit Balance in the Pass Book indicates a favorable balance (amount deposited). The corresponding balance in the Cash Book would be a Debit Balance, as the two records are mirror images of each other. This is because the Bank Reconciliation Statement helps reconcile any discrepancies between the balances in both books, and it shows the actual available balance in the Cash Book.
Quick Tip: A credit balance in the Pass Book always corresponds to a debit balance in the Cash Book, as both reflect the same transaction but from different perspectives.

A bill of exchange is a financial instrument that contains an order to pay a specific sum of money by one party (the drawee) to another party (the payee) at a specified time. It is different from a promissory note, which contains a promise to pay rather than an order. The drawee is typically a bank or another financial institution, and the bill serves as a method of transferring payment obligations. Quick Tip: A bill of exchange is different from a promissory note as it is an order to pay, not a promise.

Incomplete records (also called single-entry accounting) are generally maintained by small traders or individuals who do not follow double-entry accounting due to simplicity and cost constraints. These traders usually record only cash transactions and do not keep a full set of books, making it easier for them to manage limited transactions without the need for complex accounting systems.
Quick Tip: Incomplete records are commonly used by small businesses with limited transactions. It's an easy method but may not provide a complete picture of the financial health of the business.

The formula to calculate capital at the beginning of the year is:
\[ Capital at Beginning = Capital at End - Additional Capital + Drawings + Loss \]

Given:

Capital at End = Rs. 40,000

Additional Capital = Rs. 30,000

Drawings = Rs. 20,000

Loss = Rs. 60,000
\[ Capital at Beginning = 40,000 - 30,000 + 20,000 + 60,000 = Rs. 70,000 \] Quick Tip: Capital at the beginning can be derived by adjusting additional capital, drawings, and profit/loss to the closing capital.

A Balance Sheet is a financial statement that shows the financial position of a business at a specific date. It reports the assets, liabilities, and equity of the business, helping stakeholders understand the company's financial health. The Balance Sheet provides a snapshot of what the business owns (assets) and owes (liabilities), as well as the net worth (equity) of the company at a particular point in time.
Quick Tip: The Balance Sheet reflects the company's financial health, including what it owns and owes. It does not show profit or loss, which is reported separately in the Profit and Loss statement.

If the debit side of the Profit and Loss Account exceeds the credit side, it indicates a Net Loss. This happens when total expenses exceed total revenues, meaning the business has spent more than it has earned during the accounting period. Quick Tip: Net loss occurs when a business's expenses are greater than its revenue in a given accounting period.

Closing Stock is shown on the Credit side of the Trading Account. It represents the unsold goods at the end of an accounting period. The closing stock is added to the trading account to calculate the cost of goods sold. Additionally, it is shown as a current asset in the Balance Sheet, as it reflects the value of inventory still held by the business.
Quick Tip: Closing Stock appears on the credit side of the Trading Account to match against the cost of goods sold. This helps in determining the gross profit or loss for the period.

Rent from Tenant is an income for the business and is shown on the Credit side of the Profit and Loss Account. This helps in determining the net profit or loss of the business. Although the question suggests the Debit side, rent is actually shown on the Credit side as income, not as an expense. Quick Tip: Incomes like rent received are recorded on the credit side of the Profit and Loss Account.

The Single Entry System records only cash receipts and cash payments. It does not record credit transactions or maintain a complete double-entry system. This makes it simpler but less accurate, as it misses vital financial details such as credit sales or purchases. Quick Tip: The single entry system is simple and economical but lacks accuracy and completeness as it omits credit transactions.

Capital Expenditure refers to spending incurred to acquire or improve fixed assets, which provide long-term benefits to the business. These expenditures are not recorded as expenses in the Profit and Loss account but are capitalized and appear as assets on the Balance Sheet. Capital expenditures typically result in increased productive capacity or extended asset life, and they contribute to the overall growth of the business. Examples of capital expenditure include the purchase of land, installation of machinery, or repairs that enhance the life of existing assets.
Quick Tip: Capital expenditures are non-recurring and appear as assets on the Balance Sheet, not in the Profit \& Loss Account. This distinguishes them from revenue expenditures, which are short-term costs.

1. Installation of a new machine: This is Capital Expenditure as it creates a new fixed asset providing long-term benefits. It will be capitalized and reflected on the Balance Sheet as an asset.

2. Repairs due to negligence: This is Revenue Expenditure as it is recurring and does not create a new asset. It is considered an operational cost and is charged to the Profit and Loss Account.

3. Air-conditioning for the office: This is Capital Expenditure as it improves the value and functionality of the office, providing long-term benefits. The cost will be capitalized as an asset.
Quick Tip: Capital expenditures create or improve fixed assets, while revenue expenditures maintain the existing assets without increasing their value.

The Written Down Value (WDV) Method charges depreciation on the book value of the asset, which decreases over time. As a result, higher depreciation is charged in the initial years, and the amount decreases in later years.

Merits of the WDV Method:
1. It matches depreciation expense with the asset's usage, which is typically higher in the initial years.

2. It reduces the tax burden in the early years, as higher depreciation leads to lower taxable profits. Quick Tip: The WDV method is suitable for assets that lose value rapidly in their initial years, such as machinery and vehicles.

The following journal entries will be recorded in the books of X:
 

The following journal entries will be recorded in the books of Z:
 

The following journal entries will be recorded in the books of X and Y:

In the books of X:
 

The formula to calculate profit/loss is:
\[ Profit/Loss = Closing Capital - Opening Capital - Additional Capital + Drawings \]

Given:

- Opening Capital = Rs. 4,00,000

- Additional Capital = Rs. 75,000

- Withdrawals = Rs. 8,000 per month for 7 months (June to December):

\[ Drawings = 8,000 \times 7 = Rs. 56,000 \]
- Closing Capital = Rs. 4,50,000

Calculation:
\[ Profit/Loss = 4,50,000 - 4,00,000 - 75,000 + 56,000 \] \[ Profit/Loss = Rs. 31,000 \, (Profit). \] Quick Tip: To determine profit or loss using the capital approach, adjust for additional capital introduced and drawings made during the period.

The Trading Account is prepared to determine the Gross Profit or Gross Loss of a business during an accounting period. It records direct incomes and direct expenses related to the core business operations.

Two items transferred to the credit of Trading Account:
1. Sales (Net Sales).
2. Closing Stock. Quick Tip: The Trading Account focuses on direct transactions, like purchases and sales, to ascertain Gross Profit or Loss.

Direct Expenses are costs directly attributable to the production of goods or rendering of services. These expenses are incurred during the manufacturing or trading activities and are essential for generating revenue.

Two examples of Direct Expenses:
1. Wages paid for production.
2. Carriage Inwards.
Quick Tip: Direct expenses are directly related to the production process and are debited to the Trading Account. They are essential for calculating the cost of goods sold.

To calculate the profit, we use the formula:
Profit = Closing Capital - Opening Capital - Fresh Capital Introduced + Drawings

Step 1: Calculate Capital at the beginning and end of the year.

Opening Capital (as on 31^st March, 2022):
Assets - Liabilities = (16,000 + 4,000 + 14,000 + 8,000 + 400) - 10,000 = 32,400

Closing Capital (as on 31^st March, 2023):
Assets - Liabilities = (16,000 + 4,000 + 10,000 + 9,000 + 3,600) - 7,000 = 35,600

Step 2: Apply the formula.
Profit = Closing Capital - Opening Capital - Fresh Capital Introduced + Drawings
Profit = 35,600 - 32,400 - 600 + 4,100 = Rs. 6,700

Conclusion: The profit for the year ending 31^st March, 2023 is Rs. 6,700. Quick Tip: When using the incomplete records system, always calculate capital as Assets minus Liabilities to determine profit or loss.

Bank Reconciliation Statement of Shyam Limited as on 31^st March: