XI ACCOUNTING REGULAR / PRIVATE. S.Hussain

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1 The workings under the heading of Additional Working are not required according to the requirement of the examiner. These are only for understanding the solutions. For more help, visit XI ACCOUNTING REGULAR / PRIVATE Compiled and Solved by: S.Hussain

2 ACCOUNTING 2009 REGULAR / PRIVATE Time: 20 Minutes Max. Marks: 20 SECTION A (MULTIPLE CHOICE QUESTIONS) Note: (i) Attempt all the questions from this section in the answer script. (ii) M.C.Qs. paper is to be returned to the invigilator after 20 minutes. (iii) Do not copy down the part question in your answer book. Write only the answer in full against the proper number of the question and its part. (iv) The code of your question paper must be mentioned in bold letters in the beginning. Q.No.1 Choose the correct answer for each from the given options: (i) If commission received during the year amounts to Rs.20,000 and commission accrued at year end is Rs.5,000, what is the amount of commission for the year? (a) Rs.20,000. (b) Rs.5,000. (c) Rs.15,000. (d) Rs.25,000. (ii) Which of the following is shown in income statement? (a) Prepaid salaries. (b) Accrued salaries. (c) Salaries expense. (d) Salaries paid. (iii) The purpose of a trial balance is to: (a) Determine arithmetic accuracy of double entry. (b) Show financial position at a particular date. (c) Show performance of a business. (d) None of these. (iv) The purpose of Control account is to: (a) Calculate the sales and purchases. (b) Find errors quickly. (c) Make the trial balance. (d) Prevent errors. (v) Which of the following is correct? (a) Assets = Liabilities + Owner s Equity. (b) Liabilities = Assets + Owner s Equity. (c) Owner s Equity = Assets + Liabilities. (d) Assets = Liabilities Owner s Equity. (vi) It is called liabilities: (a) Machinery. (b) Loan. (c) Owner s capital. (d) Notes receivable. X I A c c o u n t i n g ( R e g u l a r / P r i v a t e ) Page 2

3 (vii) Purchases are best described by: (a) Purchase of furniture for use in business. (b) Purchase of stationary for use in business office. (c) Purchase of merchandise for resale. (d) Purchase of computer for owner s personal use. (viii) It is not an asset: (a) Cash. (b) Unexpired insurance. (c) A/c. receivable. (d) Unearned commission. (ix) Cash book is used for recording: (a) All cash transactions. (b) All cash and credit transactions. (c) Cash receipts only. (d) Cash payments only. (x) Sales journal is used for recording: (a) Sale of merchandise for cash. (b) Sale of merchandise on credit. (c) Sale of merchandise both for cash and on credit. (d) Sale of furniture on credit. (xi) If salaries paid during the year amounts to Rs.9,000 and salaries accrued at the year end are Rs.3,000. The amount of salaries expense for the year will be: (a) Rs.9,000. (b) Rs.3,000. (c) Rs.6,000. (d) Rs.12,000 (xii) Which account should be debited for recording advance payment of rent? (a) Rent expense account. (b) Rent payable account. (c) Prepaid rent account. (d) Unearned rent a/c. (xiii) Which of the following is correct statement? (a) Profit does not change owner s equity. (b) Profit increases owner s equity. (c) Profit decreases owner s equity. (d) Profit decreases liabilities. (xiv) Gross profit is equal to: (a) Purchases Sales. (b) Sales Cost of goods sold. (c) Sales Operating expenses. (d) Purchases Ending merchandise inventory. X I A c c o u n t i n g ( R e g u l a r / P r i v a t e ) Page 3

4 (xv) Posting means: (a) Making an entry in general journal. (b) Making an entry in special journal. (c) Transferring an entry from a journal to ledger account. (d) Determining balance of an account. (xvi) Which of the following accounts normally has credit balance? (a) Cash. (b) Purchases. (c) Insurance expense. (d) Purchase discount. (xvii) Beginning inventory + Purchases Ending inventory = : (a) Cost of goods sold. (b) Gross profit. (c) Net profit. (d) Net sales. (xviii) Purchases journal is used to record: (a) Purchase of fixed assets. (b) Purchase of merchandise for cash. (c) Purchase of merchandise on credit. (d) Purchase of merchandise both for cash & on credit. (xix) Allowance for bad debts account is: (a) An asset account. (b) A contra asset account. (c) A liability account. (d) An expense account. (xx) Closing entries are recorded: (a) At start of an accounting period. (b) At end of an accounting period. (c) When a new accountant joins the firm. (d) None of these. X I A c c o u n t i n g ( R e g u l a r / P r i v a t e ) Page 4

5 ACCOUNTING 2009 REGULAR / PRIVATE Time: 2 Hours 40 Minutes Max. Marks: 80 Note: Q.No.2 SECTION B (SHORT ANSWER QUESTIONS) (50) Attempt any Four questions. All questions carry equal marks. The use of calculator is allowed. GENERAL JOURNAL GIVEN The following are transactions relating to the business of Mr. Babar for the month of January January: 5. Mr. Babar invested cash in the business Rs.200, Purchased merchandise on account Rs.20, Returned defective merchandise to the supplier Rs.2, Sold merchandise on account Rs.15, Granted an allowance of Rs.1,000 to the customer due to supply of defective merchandise. 25. Paid rent for January, Rs.5,000. REQUIRED Record the above transactions in the standard form of General Journal. SOLUTION 2 MR. BABAR GENERAL JOURNAL FOR THE MONTH OF JANUARY 2009 Date Particulars P/R Debit Credit 5.Jan Cash 200,000 Capital 200,000 (To record the investment by owner in the business) 10.Jan Purchases 20,000 Accounts payable 20,000 (To record the purchase of merchandise on account) 12.Jan Accounts payable 2,000 Purchase return and allowances 2,000 (To record the defective goods returned to supplier) 18.Jan Accounts receivable 15,000 Sales 15,000 (To record the goods sold on account) 20.Jan Sales returns and allowances 1,000 Accounts receivable 1,000 (To record the sales return) 25.Jan Rent expense 5,000 Cash 5,000 (To record the rent paid for the month) X I A c c o u n t i n g ( R e g u l a r / P r i v a t e ) Page 5

6 Q.No.3 LEDGER AND TRIAL BALANCE: GIVEN The following transactions were completed by Khurram & Co. during February February: 2. Khurram started business with a cash investment of Rs.100, Purchased furniture for use in business on credit for Rs.25, Returned defective furniture worth Rs.1,000 to the supplier. 15. Paid salaries expense Rs.5, Received commission income Rs.12, Received utilities bills of Rs.3,000 to be paid by Mar.10. REQUIRED a) Enter the above transactions in the ledger accounts in skeleton T form. b) Foot and balance the accounts in pencil. c) Prepare a trial balance on February 28. SOLUTION 3 (i & ii) GENERAL LEDGER Cash 2.Feb Capital 100, Feb Salaries expense 5, Feb Commission income 12, Feb c/d balance 107, , ,000 1.Mar b/d balance 107,000 Furniture 9.Feb Accounts payable 25, Feb Accounts payable 1, Feb c/d balance 24,000 25,000 25,000 1.Mar b/d balance 24,000 Accounts Payable 10.Feb Furniture 1,000 9.Feb Furniture 25, Feb c/d balance 24,000 25,000 25,000 1.Mar b/d balance 24,000 Utilities Payable 28.Feb Utilities expense 3, Feb c/d balance 3,000 3,000 3,000 1.Mar b/d balance 3,000 Capital 2.Feb Cash 100, Feb c/d balance 100, , ,000 1.Mar b/d balance 100,000 X I A c c o u n t i n g ( R e g u l a r / P r i v a t e ) Page 6

7 Commission Income 28.Feb Cash 12, Feb c/d balance 12,000 12,000 12,000 1.Mar b/d balance 12,000 Salaries Expense 15.Feb Cash 5, Feb c/d balance 5,000 5,000 5,000 1.Mar b/d balance 5,000 Utilities Expense 28.Feb Utilities payable 3, Feb c/d balance 3,000 3,000 3,000 1.Mar b/d balance 3,000 SOLUTION 3 (iii) KHURRAM & CO. TRIAL BALANCE FOR THE MONTH OF FEBRUARY 2009 NO. PARTICULARS P/R DEBIT CREDIT 1 Cash 107,000 2 Furniture 24,000 3 Accounts payable 24,000 4 Utilities payable 3,000 5 Capital 100,000 6 Commission income 12,000 7 Salaries expense 5,000 8 Utilities expense 3,000 Total 139, ,000 Additional Working: KHURRAM & CO. GENERAL JOURNAL FOR THE MONTH OF FEBRUARY 2009 Date Particulars P/R Debit Credit 2.Feb Cash 100,000 Capital 100,000 (To record the investment by owner in the business) 9.Feb Furniture 25,000 Accounts payable 25,000 (To record the purchase of furniture on account) 10.Feb Accounts payable 1,000 Furniture 1,000 (To record the defective furniture returned to supplier) X I A c c o u n t i n g ( R e g u l a r / P r i v a t e ) Page 7

8 Date Particulars P/R Debit Credit 15.Feb Salaries expense 5,000 Cash 5,000 (To record the salaries paid) 28.Feb Cash 12,000 Commission income 12,000 (To record the commission received) 28.Feb Utilities expense 3,000 Utilities payable 3,000 (To record the unpaid utilities expense) Q.No.4 SPECIAL JOURNAL AND SUBSIDIARY LEDGER GIVEN The following are selected transactions completed by Farrukh Traders during March 2009: March: 7. Purchased merchandise on account from Nasir Sons for Rs.8, Purchased merchandise on account from Ahsan Brothers for Rs.13, Purchased merchandise on account from Yasir Trading Company for Rs.7, Purchased merchandise on account from Nasir Sons for Rs.6,000. REQUIRED a) Record the above transactions in Purchase Journal (Page 9). b) Make posting to the accounts payable subsidiary ledger. Use three-column ledger accounts. c) Prepare schedule of accounts payable on March 31. SOLUTION 4 (a) FARRUKH TRADERS PURCHASE JOURNAL FOR THE MONTH OF MARCH 2009 (PAGE # 9) Date Invoice No. Name of Suppliers P/R Amount 7.March Nasir Sons 8, March Ahsan Brothers 13, March Yasir Trading Company 7, March Nasir Sons 6, March Purchases Dr. 34,000 Accounts payable Cr. SOLUTION 4 (b) FARRUKH TRADERS SUBSIDIARY LEDGER FOR THE MONTH OF MARCH 2009 Nasir Sons Date Invoice No. Particulars P/R Debit Credit Balance 7.March.2009 PJ-9 8,000 8, March.2009 PJ-9 6,000 14,000 X I A c c o u n t i n g ( R e g u l a r / P r i v a t e ) Page 8

9 Ahsan Brothers Date Invoice No. Particulars P/R Debit Credit Balance 11.March.2009 PJ-9 13,000 13,000 Yasir Trading Company Date Invoice No. Particulars P/R Debit Credit Balance 17.March.2009 PJ-9 7,000 7,000 SOLUTION 4 (c) FARRUKH TRADERS SCHEDULE OF ACCOUNTS PAYABLE FOR THE MONTH ENDED 31 MARCH 2009 Name of Suppliers Amount Nasir Sons 14,000 Ahsan Brothers 13,000 Yasir Trading Company 7,000 Total 34,000 Q.No.5 CASH BOOK GIVEN The following are cash transactions relating to the business of Kamran Enterprises for April 2009: April: 5. Mr. Kamran invested cash Rs.50,000 in the business. 11. Received cheque for Rs.19,500 from a customer and allowed discount of Rs Deposited customer s cheque in the bank. 20. Issued a cheque for Rs.9,800 to a supplier in full settlement of the accounts payable of Rs.10, Withdrew cash Rs.5,000 from bank for office use. 30. Paid salaries for the month Rs.6,000 in cash. REQUIRED a) Record the above transactions in a three column Cash Book. b) Balance the Cash Book on April 30 and bring down the balances on May 1. SOLUTION 5 X I A c c o u n t i n g ( R e g u l a r / P r i v a t e ) Page 9

10 KAMRAN ENTERPRISES THREE COLUMN CASH BOOK FOR THE MONTH OF APRIL 2009 Date 5.April 11.April 16.april 25.April 1.May Particulars Capital Accounts receivable Cash (Deposited) Bank (Withdrew) B/D Balance P/R (C) (C) S.Disc Cash 50,000 19,500 5,000 74,500 49,000 Bank 19,500 19,500 4,700 Date 16.April 20.April 25.April 30.April 30.April Particulars Bank (Deposited) Accounts payable Cash (Withdrew) Salaries expense C/D Balance P/R (C) (C) P.Disc Cash 19,500 6,000 25,500 49,000 74,500 Bank 9,800 5,000 14,800 4,700 19,500 X I A c c o u n t i n g ( R e g u l a r / P r i v a t e ) Page 10

11 Q.No.6 BANK RECONCILIATION STATEMENT GIVEN A comparison of the Cash Book of Rizwan Corporation and the bank statement for January 2009 revealed the following: (i) Balance per Cash Book Rs.24,000. (ii) Balance per bank statement Rs.9,000. (iii) Late deposit not shown in bank statement Rs.8,000. (iv) Outstanding cheque Rs.2,200. (v) Direct deposit by a customer not recorded on Cash Book Rs.3,000. (vi) Dishonoured cheque Rs.14,000. (vii) Profit credited by bank, not debited in Cash Book Rs.2,000. (viii) Withholding tax debited by the bank, not credited in Cash Book Rs.200. REQUIRED Prepare a Bank Reconciliation Statement on January 31. SOLUTION 6 RIZWAN CORPORATION BANK RECONCILIATION STATEMENT FOR THE MONTH OF JANUARY 2009 Particulars Cash Book Pass Book Balance on 31 January ,000 9,000 Add: Late deposit cheque (iii) 8,000 17,000 Less: Outstanding cheque (iv) (2,200) 14,800 Add: Direct deposit by customer (A/R) (v) 3,000 27,000 Less: Dishonoured cheque (vi) (14,000) 13,000 Add: Profit given by bank (vii) 2,000 15,000 Less: Withholding tax deducted by bank (viii) (200) Reconcile Balance 14,800 14,800 Additional Working: RIZWAN CORPORATION GENERAL JOURNAL FOR THE MONTH OF JANUARY 2009 Date Particulars P/R Debit Credit 1 Bank 3,000 Accounts receivable 3,000 (To record the direct deposit by a customer) 2 Accounts receivable 14,000 Bank 14,000 (To record the dishonoured cheque) 3 Bank 2,000 Profit 2,000 (To record the profit given by bank) 4 Withholding tax 200 Bank 200 (To record the withholding tax deducted by bank) X I A c c o u n t i n g ( R e g u l a r / P r i v a t e ) Page 11

12 Q.No.7 CORRECTION OF ERRORS GIVEN The following errors were discovered before closing the books of accounts of Ehsan Company: (i) Purchase of furniture for Rs.9,000 was debited to purchase account. (ii) Return of defective goods worth Rs.2,000 to the supplier was credited to purchase account. (iii) Ordinary repair costing Rs.1,000 to office equipment was debited to office equipment account. (iv) Depreciation was overcharged by Rs.3,000 through the allowance for depreciation account. (v) Purchase of office supplies on credit for Rs.9,000 was recorded as Rs.6,000. (vi) Payment of rent expense Rs.5,000 was recorded as receipt of rent income. REQUIRED Prepare correcting entries in general journal. SOLUTION 7 EHSAN COMPANY CORRECTING ENTRIES Date Particulars P/R Debit Credit 1 Furniture 9,000 Purchases 9,000 (To correct the purchase of furniture) 2 Purchases 2,000 Purchase return and allowances 2,000 (To correct the purchase return) 3 Repair expense 1,000 Office equipment 1,000 (To correct the repair of equipment) 4 Allowance for depreciation 3,000 Profit and loss account 3,000 (To correct the overcharge of depreciation) 5 Office supplies 3,000 Accounts payable 3,000 (To correct the purchase of office supplies) 6 Rent expense 5,000 Rent income 5,000 Cash 10,000 (To correct the rent income account) Note: Q.No.8 SECTION C (DETAILED ANSWER QUESTIONS) (30) Attempt the following questions: FINANCIAL STATEMENTS AND CLOSING PROCESS GIVEN Ledger balances and adjustment data for Rajput Company at the end of annual accounting period, December 31, 2008 are as follows: Debit Balances: Cash Rs.4,000; Accounts receivable Rs.8,000; Merchandise inventory January 1 Rs.5,000; Unexpired insurance Rs.3,000; Furniture Rs.10,000; Drawings Rajput Rs.6,000; Purchases Rs.40,000; Salaries expenses Rs.15,000; Rent expenses Rs.2,000. X I A c c o u n t i n g ( R e g u l a r / P r i v a t e ) Page 12

13 Credit Balances: Accounts payable Rs.7,000; Unearned commission Rs.3,000; Allowance for depreciation Rs.3,000; Capital Rajput Rs.30,000; Sales Rs.50,000. Adjustment Data: (i) Merchandise inventory at December 31, Rs.6,000. (ii) Insurance expired by Rs.2,000. (iii) Bad debts 2% of sales. (iv) Depreciation 10% of the cost of furniture. (v) Accrued salaries Rs.1,000. (vi) Unearned commission Rs.1,000. REQUIRED a) Prepare a multi-step Income Statement and a classified Balance Sheet for December 31, b) Prepare closing entries in General Journal. OR Prepare adjusted trial balance. SOLUTION 8 (a) RAJPUT COMPANY INCOME STATEMENT FOR THE PERIOD ENDED 31 DECEMBER 2008 Sales 50,000 Less: Cost of Goods Sold: Merchandise inventory (beg) 5,000 Add: Purchases 40,000 Merchandise available for sale 45,000 Less: Merchandise inventory (end) (6,000) Cost of goods sold (39,000) Gross profit 11,000 Less: Operating Expenses: Salaries expense (15, ,000) 16,000 Rent expense 2,000 Insurance expense 2,000 Bad debts expense (50,000 x 2%) 1,000 Depreciation expense (10,000 x 10%) 1,000 Total operating expenses (22,000) Loss from operation (11,000) Add: Other Income: Commission income 2,000 Net Loss (9,000) X I A c c o u n t i n g ( R e g u l a r / P r i v a t e ) Page 13

14 RAJPUT COMPANY BALANCE SHEET AS ON 31 DECEMBER 2008 ASSETS EQUITIES Current Assets: Current Liabilities: Cash 4,000 Accounts payable 7,000 Accounts receivable 8,000 Salaries payable 1,000 Les: All for bad debts (1,000) 7,000 Unearned commission 1,000 Merchandise inventory 6,000 Total liabilities 9,000 Unexpired insurance 1,000 Total current assets 18,000 Owner s Equity: Fixed Assets: Capital 30,000 Furniture 10,000 Less: Net loss (9,000) Less: All for depreciation (4,000) 21,000 Total fixed assets 6,000 Less: Drawings (6,000) Total owner s equity 15,000 Total assets 24,000 Total equities 24,000 SOLUTION 8 (b) RAJPUT COMPANY CLOSING ENTRIES FOR THE PERIOD ENDED 31 DECEMBER 2008 Date Particulars P/R Debit Credit 1 Expense and revenue summary 67,000 Merchandise inventory 5,000 Purchases 40,000 Insurance expense 2,000 Rent expense 2,000 Bad debts expense 1,000 Depreciation expense 1,000 Salaries expense 16,000 (To close the various expenses accounts) 2 Sales 50,000 Merchandise inventory 6,000 Commission income 2,000 Expense and revenue summary 58,000 (To close the various income accounts) 3 Capital 9,000 Expense and revenue summary 9,000 (To transfer the net loss to the capital account) 4 Capital 6,000 Drawings 6,000 (To close the drawings account) Additional Working: X I A c c o u n t i n g ( R e g u l a r / P r i v a t e ) Page 14

15 RAJPUT COMPANY ADJUSTING ENTRIES FOR THE PERIOD ENDED 31 DECEMBER 2008 Date Particulars P/R Debit Credit 1 Merchandise inventory 6,000 Expense and revenue summary 6,000 (To adjust the merchandise inventory) 2 Insurance expense 2,000 Unexpired insurance 2,000 (To adjust the insurance expense) 3 Bad debts expense 1,000 Allowance for bad debts 1,000 (To adjust the bad debts expense) 4 Depreciation expense 1,000 Allowance for depreciation Furniture 1,000 (To adjust the depreciation expense) 5 Salaries expense 1,000 Salaries payable 1,000 (To adjust the unpaid salaries) 6 Unearned commission 2,000 Commission income 2,000 (To adjust the unearned commission) OR RAJPUT COMPANY ADJUSTED TRIAL BALANCE FOR THE PERIOD ENDED 31 DECEMBER 2008 NO. PARTICULARS P/R DEBIT CREDIT 1 Cash 4,000 2 Accounts receivable 8,000 3 Allowance for bad debts 1,000 4 Merchandise inventory 5,000 5 Unexpired insurance 1,000 6 Furniture 10,000 7 Allowance for depreciation 4,000 8 Accounts payable 7,000 9 Unearned commission 1, Salaries payable 1, Rajput Capital 30, Rajput Drawings 6, Sales 50, Commission income 2, Purchases 40, Salaries expense 16, Rent expense 2, Bad debts expense 1, Depreciation expense 1, Insurance expense 2,000 Total 96,000 96,000 X I A c c o u n t i n g ( R e g u l a r / P r i v a t e ) Page 15