G.C.E.(A.L.) Support Seminar

Transcription

1 G.C.E.(A.L.) Support Seminar 2014 Accounting Paper I Answer Guide Questoion No. Answer Questoion No. Answer (1) 3 (21) 2 (2) 4 (22) 4 (3) 1 (23) 4 (4) 5 (24) 3 (5) 5 (25) 2 (6) 3 (26) 4 (7) 5 (27) 3 (8) 5 (28) 2 (9) 4 (29) 4 (10) 2 (30) 5 (11) 3 (12) 2 (13) 5 (14) 4 (15) 4 (16) 2 (17) 2 (18) 3 (19) 5 (20) 5 [ see page 2

2 2 Accounting Paper I 31' A False B False C True D False 32' Prime entry book Source document ^1& Purchase Journal Purchase Invoice ^2& General Journal Journal Voucher 33' 1. Increase 2. Decrease 3. Decrease 4. Decrease 34' ^a& Trade Creditors Dr Purchase account Cr ^b& Profit will decrease by Rs ' Financial Accounting Management Accounting (1) Users of Information External Internal (2) Legal requirements Apply Not Apply (3) Time Annually (in general) On Demand (4) Nature of the information Historical oriented Historical, provided Present and Future oriented 36' Rs ' (i) Rs (ii) Rs ' (i) Rs (ii) Rs ' Rs ' ^ & A, B ^ & A, B, D ^ & C 41' (i) Rs (ii) Rs ' 1' There must be a present obligation as a result of a past event. 2. It is probable that an outflow of resources embodying economic benefits will be required to settle the obligation. 3. A reliable estimate can be made of the amount of the obligation.

3 3 43' Net cash flows generated from operational activities Rs Option: Draft profit for the period Add: Provision for income tax Depreciation of assets Deduct: Profit on sale of motor vehicles Income tax paid Increase in inventories Net cash flows generated from operational activities (Rs. '000) (520) ' A Transfer of Rs to the general reserve. B Issue of shares of Rs by capitalising the reserves. C Issue of Ordinary shares for Rs D Transfer of Rs to revaluation reserve, and Rs to retained earnings, out of the total comprehensive income of Rs ' Only C. 46' Rs ' ^ & Purchasing department should be informed by the stores department on the required quantity of goods to be purchased. ^ & Obtain quotations from the approved suppliers. (Purchasing department will send to suppliers) ^ & Recording the receipts, issues and balances of the stocks and keeping them at the racks will enable to check the balances of stocks at the stores at any given time ^ & Register maintained to record the material receipts, issues and balances including the value. 48' ^ & Economic Order Quantity units ^ & Optimum number of orders to place 125 orders 49' ^ & Accumulated Fund Rs Accumulated Fund Rs Surplus Rs ^ & Accumulated Fund Rs ' 1. Prime cost 2. Prime cost 3. Production overhead cost 4. Production overhead cost

4 Question No. 01 ^1& ^2& 4 Accounting Paper II Net Profit Adjustment Statement Drafted Profit Add: Building revaluation Provision for doubtful debts Interest Income Deductions: Depreciation Building Depreciation Machinery Lease interest Bad debts Write off of inventories Long term loan interest Expenses of issue of shares Provision for income taxes Kanishaka (Pvt) Ltd. Statement of Financial Position as at NonCurrent Assets Property Plant and Equipment Fixed Deposit 15% Current Assets Inventories Trade debtors 260 Provision for doubtful debts (13) Interest receivable Cash & cash equivalents Stated Capital Ordinary Shares Non redeemable preference shares Reserves Revaluation reserve General reserve Retained earnings Longterm liabilities Long term Lease creditors Current liabilities Trade creditors Loan interest payable Lease creditors Income tax payables Dividends payables Bank overdraft (Rs. '000) (440) 372 (Rs. '000)

5 ^3& Balance Capitalization of reserves General reserve Total comprehensive income Right issue of shares Dividends: Preference shares Ordinary shares Balance Kanishaka (Pvt) Ltd. Changes in equity statement for the year ended Ordinary shares Preference shares Revaluation reserve (600) General reserve 800 (200) Retained earnings 450 (200) 372 (180) (100) 342 (Rs. '000) Total (180) (100) ^4& Disclosures (1) The inventories has been valued at Rs which is the lower of cost of the inventories and its net realizable value. (2) Rs worth of inventories has been pledged to the bank as a security for the bank overdraft obtained. Workings : Asset Land Buildings Office Equipment Machinery Depreciation Buildings Office Equipment Machinery Balance Balance Additions/ Revaluations Additions Disposals/ Transfers Deductions Balance Balance (Rs. '000) ^1 420& Building Account Bal b/f Accumulated 280 Revaluation 680 Depreciation Reserve Bal c/d Revaluation Reserve Bal b/f 200 Land 400 ^Equity& Buildings Bal c/d

6 Question No ' ^a& ^1& Profit and Loss Appropriation Account (Rs.'000) Net profit 740 Interest on capital: Disa Gaya Sachi Salaries : Sachi Profit Shares : Disa Gaya Sachi ^235& ^175& ^330& Drawings Drawings Balance c/d Current Accounts (Rs.'000) Dissa Gaya Sachi Dissa Gaya Sachi Balance b/f Salaries Interest on capital Profit share Interest for loan Goodwill Balance c/d Capital Accounts (Rs.' 000) Dissa Gaya Sachi Dissa Gaya Sachi Balance b/f Salaries Goodwill Ú Goodwill also can be treated by debiting Sachi Rs.50 and crediting Gaya Rs.50.

7 ^a& Extracts of statement of Financial Position as at (Rs.'000) Equity and Liabilities Capital Accounts : Dissa Gaya Sachi Current Accounts : Dissa Gaya Sachi Non Current Liabilities : Loan from Sachi Current Liabilities : Loan from Sachi Workings: Calculation of Adjusted profit Rs. 000 Profit before adjustments ( ) 660 Add Drawings ( ) 85 Deductions Loan interest 400 5/100 ¼ (5) 740 Total Goodwill 50 6 = 300 ^b& ^1& Suranji Manufacturing Enterprise Manufacturing account for the quarter ended /1 Inventory Raw material purchases 3/31 Inventory Cost of materials consumed Production salaries Prime Cost Production overhead cost Overhead expenses Depreciation on machinery Total production cost (8 800) (Rs. '000) ^2& Revenue generated from sales of flower pots = Rs

8 8 Workings: Number of flower pots produced 1/1 Timber stock ( Sq.fts) 50 Purchases 300 3/31 Closing stock (8 800 / 220) (40) 310 No. of flower pots = Production salaries = Rs Number of Flower pots sold Opening No. of flower pots 200 Production during the quarter Closing stock (100) Question No. 03 ^3& ^a& ^1& Bal B/f ^ & ^ & ^ & ^ & ^ & ^ & ^ & ^ & Motor Vehicles Furniture & fittings Assets Stocks Trade Debtors Bank Liabilities (Rs. '000) Equity ^2& All numbers are in rupees thousand Net profit/ loss = Closing net assets Opening net assets + Drawings Additional capital introduced Net Loss = Rs. 45 =

9 ^b& ^1& (1) Promotional Expenses Dr. Suspense Account (Correcting the error of non recording of the promotional expenses) (2)... Suspense Account (Correcting for the error of insurance expenses of Rs not been taken to the trial balance) (3) Motor vehicle repair account Dr. Motor vehicle account (Correcting the error of recording of motor vehicle repair expenses of Rs in to the motor vehicle account) (4) Purchase returns account Dr. Trade creditors (Correcting the error of duplicating the recording of purchase returns of Rs in the purchase returns journal) (5) Suspense account Dr. Commission received account Commission paid account (Correcting the error of recording commission received as commission paid) (6) Sales account Dr. Suspense account (Correcting the totaling error in the sales journal which increased the total sales in sales journal by Rs.9 000) 9 General Journal ^2& Suspense Account Balance b/f Insurance expenses Commission received Sales Commission paid Promotional expenses Question No ' ^a& ^1& Creditors Control Account Sales returns Balance B/f Discount Purchases Cash Cash Balance C/d

10 ^2& Rs Balance as per creditor account Add: Unrecorded Purchases Purchases being recorded at a lower amount Less: Sales Balance in the creditor account (20 000) Option: Creditors Control Account Sales Balance B/f Purchases (recorded at a lesser value) Balance C/d Purchases ^3& Creditor Reconciliation Statement Balance as per creditors control Add: Discount Asith Unrecorded discount Deductions: Unrecorded purchases Total of trade creditor ledger (12 000) ^b& ^1& Bank Reconciliation Statement as at Bank overdraft as per bank statement ^8 000& Add : Unrealized cheques Less : Cheques issued but not presented Balance as per bank account ^18 000& ^1 000&

11 11 Bank Account Returned cheque Balance B/f (Rent) Bank charges 500 Cheque book charges 350 Balance C/d Insurance expenses Question No ' ^a& ^1& ^2& Bank account balance (over draft) before the adjustments are made is Rs General Ledger (1) Machinery transfer account Dr. Machinery account (Transferring the cost of the machine to the machinery transfer account) (2) Accumulated depreciation for machinery Machinery transfer account (Transferring the accumulated depreciation of the transferring machinery to the Machinery transfer account ) (3) Machinery account Machinery transfer account Cash account (Completing the transaction by transferring the old machine and settling the balance by cash) (4) Machinery transfer account Profit & Loss/ Income statement (Recognizing the profit of machinery transfer) ^2& Decrease in profit if not for machinery transfer (Machinery depreciation) = Rs Decrease in profit as a result of transfer (Depreciation ) = Rs Increase in profit due to the profit obtained in machine transfer = Rs Rs Increase in profit = Rs

12 Workings: 12 Accumulated profit up to the date of transfer } Year ended = Year ended = Year ended 2 = } = } Depreciation up to = Depreciation for the = to 1/1 to 3/31 = year ended = ' ^b& Statement of Affairs Capital Noncurrent assets Cash Trade debtors Trade creditors Stocks Cash account Bal b/f Salaries Receipts from Operational expenses trade debtors } Drawings Cash sales Trade creditors Bal c/d Creditors Control Account Cash Bal b/f Discount Purchases received } Bal c/d Debtors Control Account Bal b/f Cash Sales Discount given Bal c/d

13 13 Sales Less: Cost of sales Stock Purchases Less: Closing stock Gross Profit Add: Other income Discount received Noncurrent asset depreciation Discount allowed Salaries Operational expenses Provision for doubtful debt Net Loss Income statement (48 000) ( ) (69 500) (1 750) Statement of Financial position Non Current Assets Property Plant and Equipment Depreciation Current Assets Cash Inventories Trade debtors Provision for doubtful debt (2 500) (15 000) (Rs.'000) Capital Less : Accumulated loss Less : Drawings Current liabilities Accrued salaries Trade creditors (1 750) (5 000)

14 Question No ^6& ^a& ^1& Statement of Affairs as at (Rs. ' 000) Accumulated Fund 550 Noncurrent assets Noncurrent Liabilities Sports complex 500 Life membership fund 500 Gym equipment 800 Gym Equipment fund Current Liabilities Current Assets Subscription received 125 Subscription receivable 50 in advance } Bank balance 125 Advance received Cash Income and Expenditure Account for the year ended ^Rs. ' 000& Salaries 120 Subscription fees 550 Other Expenses 250 Daily fees 520 Promotional expenses 80 Rental income 120 Maintenance 75 Depreciation Sports complex 25 Depreciation Gym equipment 160 Surplus Statement of Financial Position as at (Rs. ' 000) Accumulated Fund 550 Noncurrent assets Add : Surplus 480 Sports complex 475 Noncurrent Liabilities Gym equipment Life time membership fund 450 Gym Equipment fund Current Liabilities Subscription received 100 Current Assets in advance } Subscription receivable 100 Advance received 70 Bank balance 745 Rent received in advance Cash

15 15 Workings: Subscription Account (Rs. ' 000) Balance B/f 50 Balance B/f 125 Income expenditure 550 Cash 425 Balance c/d 100 Life member fees 50 Balance c/d Cash Account (Rs. ' 000) Balance B/f 40 Salaries 120 Subscription 425 Other expenses 250 Income from daily charges 550 Promotional expenses 80 Rental income 180 Maintenance 75 Bank 620 Balance c/d ^b& Total variable cost = Rs. 300 Contribution = = 500 Total Fixed Cost Vehicle expenses = Other = Salaries = (1) Number of items to be sold = / 500 = 325 (2) In order to obtain a profit of Rs = ( )/500 = 625

16 Question No ^7& ^a& ^1& Average Profit A Average Profit B (32 000) = = Accounting Rate of Return (ARR) Average Investment Average Profit 100 } Cost+ Scrap value Average Investment 2 Average Investment = % 32% ^2& Payback Period A Time Profit Depreciation Scrap value Cash flow 0 ^ & ^32 000& Payback period = 2 years and 01 month Accumulated cash flows ^ & ^ & ^15 000&

17 17 Payback Period B Time Profit Depreciation Scrap value Cash flow 0 ^ & Accumulated cash flows ^ & ^ & ^40 000& Payback period 2 years and 04 months ^3& A Discounting factor at 15% Cash Flows Present Value 1 ^ & ^ & ' ' ' ' Net Present Value B Discounting 15% Cash Flows Present Value 1 ^ & ^ & ' ' ' ' Net Present Value ^4& As per Accounting Rate of Return (ARR) A B Option to select 29.67% 32% B As per Payback Period A B Option to select 2 years and 01 month 2 years and 04 months A (5) Machine A As per Net Present Value A B Option to select A

18 ^7& 18 ^b& (1) Average Consumption = = = / 3 = (2) Re order level = Maximum consumption Maximum lead time = = units (3) Re order quantity = units ^4& Unit price Balance Purchases Issues (10 000) ( ) Sales returns Purchases Purchase returns (2 000) (30 000) Balance Value of stock as at is Rs