Trade discounts are generally ignored for accounting purposes in that they are omitted from accounting records. Therefore, sales, along with any receivables in the case of a credit sale, are recorded net of any trade discounts offered.
Here the cost of goods sold = 600
Invoice price will be = 600 + 10% of 600 = 660
Trade discount = 5% of 660 = Rs. 33
Thus sales to be recorded = invoice price –trade discount = 660 – 33 = Rs. 627

The amount of an asset or resource that exceeds the portion that is utilized. A surplus is used to describe many excess assets including income, profits, capital and goods. A surplus often occurs in a budget, when

A bill of exchange is said to be dishonoured when the drawee refuses to accept or make payment on the bill. A bill may be dishonoured by non-acceptance or non-payment.

If the drawee refuses to accept the bill when it is presented before him for acceptance, it is called dishonour by non-acceptance. When a bill is dishonoured by non-acceptance, an immediate right of recourse against the drawer and endorser accrues to the holder. In this case, presentment for payment is not necessary.

If the drawer has accepted the bill, but on the due date, he refuses to make payment of the bill, it is called dishonour by non-payment. In this case the holder has immediate right of recourse against each party to the bill.

Here the bill returned dishonored as Y became insolvent and 40 paise per rupee is recovered from his estate.

So the amount recovered is:
Total amount of the bill = 1,00,000
Amount recoverd per rupee = 40 p
So the amount of the bill recovered = 1,00,000 × 40/100 = Rs. 40,000

A joint venture (JV) is a business agreement in which the parties agree to develop, for a finite time, a new entity and new assets by contributing equity. They exercise control over the enterprise and consequently share revenues, expenses and assets.
Profit on venture can be ascertained with the help of the joint venture account.

Goods bought on joint venture as well as expenses incurred in connection with the business are debited to the joint venture account and credited to the coventurer’s account or the joint bank account. When the goods are sold, the amount thereof is debited to the coventurer’s account or the joint bank account and credited to the joint venture account. If the parties have taken over plant or materials etc., the value will be debited to the account of the party concerned and credited to the joint venture account. The joint venture account will now show profit or loss which will be transferred to the personal accounts of the
respective parties in their profit sharing ratio.

Cheques deposited but not credited: When cheques received from customer are deposited into the bank for collection, an entry is made on the debit side of the cash book in the bank column and thereby the bank balance as per Cash Book increases the amount whereas the bank credits the customer’s account only after collecting the proceeds of the cheques. After the credit entry is made by the bank the balance as per Pass book will also increase and thus both the balances will agree. The process of collection of
cheque requires time and due to this gap, some cheques deposited into the bank may remain uncredited by the bank. Hence the balances of both the books disagree.

Here out of the cheques amounting to Rs. 5,000 deposited, cheques aggregating Rs. 1,500 were credited in March and cheques aggregating Rs. 2,000 credited in April and the rest have not been collected. The cheques credited by bank till 31st march will be shown in the bank statement. Thus cheques amounting to 5,000 – 1,500 = 3,500 has not been credited in the bank statement and so this amount is to be subtracted from the balance of the cash book.

Gross profit is a company’s revenue minus its cost of goods sold. Gross profit is a company’s residual profit after selling a product or service and deducting the cost associated with its production and sale.
Cost of goods sold is the direct costs attributable to the production or purchase of the goods sold by a company. It excludes indirect expenses such as distribution costs and sales force cost.
Cost of goods sold in the above case = 3,10,000
Gross profit = sales-cost of goods sold = 4,00,000 – 3,10,000 = Rs. 90,000

Realization concept in accounting, also known as revenue recognition principle, refers to the application of accruals concept towards the recognition of revenue (income). Under this principle, revenue is recognized by the seller when it is earned irrespective of whether cash from the transaction has been received or not. The accrual journal entry to record the sale involves a debit to the accounts receivable account and a credit to sales revenue; if the sale is for cash, debit cash instead. The revenue earned will be reported as part of sales revenue in the income statement for the current accounting period.
Here Mr. Mohan sold merchandise for Rs. 60,000. Customers paid him Rs. 50,000 cash and assured him to pay Rs. 10,000 shortly.
The amount of revenue earned by him is Rs 60,000.

When owner withdraws money from a business for personal expenses it is known as drawings. Drawings accounting is used when an owner of a business wants to withdraw cash for private use. The bookkeeping entries are recorded on the drawings account.
This drawings account is deducted from the capital account.

Here Mr. X spends Rs. 5,000 to meet his family expenses thus cash resources of the busi ness is going down by Rs. 5,000 and since drawings is deducted from the capital account the balance of the capital account goes down by Rs 5,000.

The balance of capital and cash accounts will be Rs. 6,95,000 and Rs. 1,95,000.

Objection of auditor is justified due to reasons mentioned in option (C)

Conservatism concept being followed in the given case.