XI - ACCOUNTING REGULAR / PRIVATE

Transcription

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 1992 REGULAR / PRIVATE Time: 3 Hours Max. Marks: 100 Q.No.1 ACCOUNTING EQUATION-RULES OF DEBIT AND CREDIT a. State the rules of debit and credit in terms of increase and decrease in the value of the five financial elements. b. Six selected transactions of Fair Traders are given in the balance sheet equation below. The effect of each transaction upon the equation is shown. You are to write a sentence explaining each transaction (i) through (vi). Assets = Liabilities + Owner s Equity Cash + Supplies + Equipment = Accounts payable + Salim Capital i. 50,000 = + 50,000 ii. 1, ,000 iii. + 15,000 = + 15,000 iv. -5,000 = -5,000 v. -1,000 = -1,000 vi SOLUTION 1 (a) Rules of Debit & Credit: Head of Accounts Increases Decreases Assets Recorded as Debit Recorded as Credit Liabilities Recorded as Credit Recorded as Debit Owner s Equity Recorded as Credit Recorded as Debit Revenue and Income Recorded as Credit Recorded as Debit Expenses Recorded as Debit Recorded as Credit SOLUTION 1 (b) i. Cash invested in the business by the owner Rs.50,000. ii. Purchased supplies for cash Rs.1,000. iii. Purchased equipment on account Rs.15,000. iv. Paid cash to creditor Rs.5,000. v. Returned equipment to the supplier Rs.1,000. vi. Withdrew cash by owner for personal use Rs.400. Q.No.2 CASH BOOK GIVEN Mr. Karim, a sole trader, uses a three column CASH BOOK. On May 1, 1992 the business had cash on hand Rs. 30,000 and cash in bank Rs. 20,000. During the month the following transactions were completed by Mr. Karim. May 1: Sold merchandise for cash Rs.15,000 of which Rs.10,000 were deposited into bank the same day. May 3: Received a cheque for Rs.2,000 from Agha which was deposited into bank. May 5: Received rent in advance for six months in cash Rs.6,000 for a portion of the business building layout. May 10: Agha s cheque was returned by bank, having been dishonoured by his bank. May 12: Paid Fine Company invoice, Rs.5,000 less 2% discount, by cheque, in full settlement of account. X I A c c o u n t i ng ( R e g u l a r / P r i v a t e ) Page 2

3 May 15: Received a cheque in full settlement of Baber Company invoice, Rs.8,000 less 2% discount. May 17: Deposited Baber Company s cheque into bank. May 20: Mr. Karim withdrew cash Rs.5,000 from bank for payment of his residential house rent. May 25: Withdrew cash from bank Rs.3,000 for business use. May 29: Purchased merchandise for cash Rs.6,500. May 30: Paid salaries to staff Rs.10,000 in cash. May 31: Cash was found short by Rs.10. a) Enter the balance on May 1 in the Cash Book and record the above transactions therein. b) Balance and rule off the cash book on May 31, and bring down the balances on June 1, c) Set up T- accounts for Sales Discount account and Purchase Discount account and make postings to them, giving posting reference. SOLUTION 2 GENERAL LEDGER Sales Discount 31.May.1992 CB Rs.160 Purchase Discount 31.May.1992 CB Rs.100 X I A c c o u n t i ng ( R e g u l a r / P r i v a t e ) Page 3

4 Date 1.May 1.May 3.May 5.May 15.May 17.May 25.May 1.June Particulars Balances Sales A/R (Agha) Unearned rent A/R (Baber Company) Cash (Deposited) Bank (Withdrew) B/D Balance P/R (C) (C) S.Disc Cash 30,000 5,000 6,000 7,840 3,000 51,840 27,490 Bank 20,000 10,000 2,000 7,840 39,840 24,940 Date 10. May 12.May 17.May 20.May 25.May 29.May 30.May 31.May 31.May Particulars A/R (Agha) A/P (Fine Co) Bank (Deposited) Drawings Cash (Withdrew) Purchases Salaries expense Cash short & over C/D Balance P/R (C) (C) P.Disc Cash 7,840 6,500 10, ,350 27,490 51,840 Bank 2,000 4,900 5,000 3,000 14,900 24,940 39,840 MR. KARIM THREE COLUMN CASH BOOK FOR THE MONTH OF MAY 1992 X I A c c o u n t i ng ( R e g u l a r / P r i v a t e ) Page 4

5 Q.No.3 GENERAL JOURNAL GIVEN Take the transactions given in Question No.2 of this paper. Record all the transactions in the standard form of General Journal giving explanation below each entry. SOLUTION 3 MR. KARIM GENERAL JOURNAL FOR THE MONTH OF MAY May Cash 5,000 Bank 10,000 Sales 15,000 (To record the goods sold for cash and deposited into bank) 3.May Bank 2,000 Accounts receivable (Agha) 2,000 (To record the cheque received from Agha and deposited into bank) 5.May Cash 6,000 Unearned rent 6,000 (To record the rent received in advance) 10.May Accounts receivable (Agha) 2,000 Bank 2,000 (To record the cheque retuned by bank) 12.May Accounts payable (Fine Company) 5,000 Purchase discount 100 Bank 4,900 (To record the cheque issued after availing the discount) 15.May Cash 7,840 Sales discount 160 Accounts receivable (Baber Company) 8,000 (To record the cheque received after allowing discount) 17.May Bank 7,840 Cash 7,840 (To record the cheque deposited into bank) 20.May Drawings 5,000 Bank 5,000 (To record the withdrew from bank for personal use) 25.May Cash 3,000 Bank 3,000 (To record the cash withdrew from bank for office use) 29.May Purchases 6,500 Cash 6,500 (To record the purchased merchandise for cash) X I A c c o u n t i ng ( R e g u l a r / P r i v a t e ) Page 5

6 30.May Salaries expense 10,000 Cash 10,000 (To record the salaries paid for cash) 31.May Cash short & over 10 Cash 10 (To record the cash was found short) Q.No.4 BILLS TRANSACTIONS GIVEN On March 15, 1992 Mr. Sayed sold merchandise on account for Rs.8,000 to Mr. Nazir, and withdrew a bill for this amount on Mr. Nazir payable 2 months after date. Mr. Nazir accepted it and returned it to Mr. Sayed. On April 15, 1992 Mr. Sayed got the bill discounted for Rs.7,800. At maturity, the bill was paid by the drawee. Give dated General Journal entries separately in the books of Sayed and Nazir. Write explanation below each. SOLUTION 4 MR. SAYED GENERAL JOURNAL 15.Mar Accounts receivable (Mr. Nazir) 8,000 Sales 8,000 (To record the goods sold on account to Nazir) 15.Mar Bill receivable 8,000 Accounts receivable (Mr. Nazir) 8,000 (To record the acceptance received) 15.Apr Cash 7,800 Interest expense 200 Bill receivable 8,000 (To record the bill discounted by Mr. Sayed) MR. NAZIR GENERAL JOURNAL 15.Mar Purchases 8,000 Accounts payable (Mr. Sayed) 8,000 (To record the goods purchased from Sayed on account) 15.Mar Accounts payable (Mr. Sayed) 8,000 Bill payable 8,000 (To record the acceptance given) 15.May Bill payable 8,000 Cash 8,000 (To record the payment of bill on maturity date) X I A c c o u n t i ng ( R e g u l a r / P r i v a t e ) Page 6

7 Q.No.5 SPECIAL JOURNALS GIVEN The following is an extract from the subsidiary ledger of accounts payable of Highsons Co. for the month of April Huma Stores Date Explanation Reference Debit Credit Balance 1.April.1992 PJ5 Rs.6,500 Rs.6, April.1992 PJ5 Rs.8,500 Rs.15,000 Fast Company Date Explanation Reference Debit Credit Balance 20.April.1992 PJ5 Rs.10,000 Rs.10,000 Hatim & Sons Date Explanation Reference Debit Credit Balance 12.April.1992 PJ5 Rs.4,800 Rs.4, April.1992 PJ5 Rs.8,200 Rs.13,000 Take the data contained in the Subsidiary Ledger of Accounts Payable of Highsons Co. as given above. a) Prepare the Purchase Journal of Highsons Co. with necessary columns-headings giving dated entries in sequence. Total the Purchase Journal and give the journal entry on April 30, 1992 to post it and write the post reference. b) Set up the Accounts Payable controlling account and the Purchase account in the General Ledger in the standard form of T-account, and make postings to these accounts giving date and reference. (Accounts payable controlling account bears No.21 and Purchase account No.50). SOLUTION 5 (a) HIGHSONS CO. PURCHASE JOURNAL FOR THE MONTH OF APRIL 1992 (Page#5) Date Invoice No. Name of Suppliers P/R Amount 1.April.1992 Huma Stores 6, April.1992 Huma Stores 8, April.1992 Hatim & Sons 4, April.1992 Fast Company 10, April.1992 Hatim & Sons 8, April.1992 Purchases Dr ,000 Accounts payable Cr. 21 SOLUTION 5 (b) GENERAL LEDGER Purchases (50) Date Particulars P/R Amount Date Particulars P/R Amount 30.April A/P PJ-5 38,000 Accounts Payable (21) Date Particulars P/R Amount Date Particulars P/R Amount 30.April Purchases PJ-5 38,000 X I A c c o u n t i ng ( R e g u l a r / P r i v a t e ) Page 7

8 Q.No.6 ADJUSTING AND REVERSING ENTRIES GIVEN The following is the Pre-Closing Trial Balance (partial) of Ahmad Company on December 31, 1991, end of accounting year: Account Title Debit Balances Credit Balances Accounts receivable Rs.15,000 Allowance for doubtful accounts Rs.500 Prepaid rent 8,000 Office equipment Cost 30,000 Allowance for depreciation Office equipment 6,000 Unearned commission 9,000 Consulting fees income 16,000 Salaries expense 17,500 Office supplies expense 5,500 Data for adjustments on December 31, 1991 (i) Increase the allowance for doubtful accounts to 10% of the accounts receivable. (ii) Prepaid rent is rent for 8 months paid on July 1, (iii) 10% of the cost of office equipment is depreciated annually. (iv) Commission still unearned amounted to Rs.2,500. (v) Of the consulting fess income, Rs.2,000 is still unearned. (vi) Salaries expense includes salaries paid for January 1992 Rs.1,500. (vii) Office supplies unused amounted to Rs.500. a) Give adjusting entries in General Journal with explanation below each. b) Give reversing entries with explanation. (Note: Show all your computations. They carry marks). SOLUTION 6 (a) AHMAD COMPANY ADJUSTING ENTRIES 1 Bad debts expense 1,000 Allowance for doubtful accounts 1,000 (To adjust the bad debts expense) 2 Rent expense 6,000 Prepaid rent 6,000 (To adjust the prepaid rent) 3 Depreciation expense 3,000 Allowance for depreciation Office equipment 3,000 (To adjust the depreciation expense) 4 Unearned commission 6,500 Commission income 6,500 (To adjust the unearned commission) 5 Consulting fees income 2,000 Unearned consulting fees 2,000 (To adjust the consulting fees income) 6 Prepaid salaries 1,500 Salaries expense 1,500 (To adjust the salaries expense) X I A c c o u n t i ng ( R e g u l a r / P r i v a t e ) Page 8

9 7 Office supplies 500 Office supplies expense 500 (To adjust the unused office supplies) SOLUTION 6 (b) AHMAD & COMPANY REVERSING ENTRIES FOR THE PERIOD 1 JANUARY Unearned consulting fees 2,000 Consulting fees income 2,000 (To reverse the unearned consulting fees) 2 Salaries expense 1,500 Prepaid salaries 1,500 (To reverse the salaries expense) 3 Office supplies expense 500 Office supplies 500 (To reverse the office supplies expense) Computation for Bad Debts Expense: Accounts receivable 15,000 Rate of bad debts 10% Allowance for doubtful accounts (Closing balance) 1,500 Less: Allowance for doubtful accounts (credit balance) (500) Bad debts expense 1,000 Computation for Depreciation Expense: Office equipment cost 30,000 Rate of depreciation 10% Depreciation expense 3,000 Q.No.7 FINANCIAL STATEMENT GIVEN Balance taken from the ledger of Haji Tabba, a sole trader, on June 30, 1992 before adjustments were as follows: Debit Balances: Cash Rs.1,800; Accounts receivable Rs.2,850; Merchandise inventory (1.7.91) Rs.1,200; Office equipment Rs.900; Purchases Rs.3,000; Prepaid shop rent Rs.1,200; Carriage in Rs.225; Salaries expense Rs.2,100; Insurance expense Rs.450; Sales discount Rs.75. Credit Balances: Accounts payable Rs.2,250; Haji Tabba capital Rs.4,725; sales revenue Rs.6,000; Purchase discount Rs.105; Commission income Rs.600; Allowance for bad debts Rs.120. Supplementary data for adjustments on June 30, 1992 (i) Salaries payable Rs.285. (ii) Taxes payable Rs.39. (iii) Shop rent prepaid Rs.375. (iv) Insurance unexpired Rs.90. X I A c c o u n t i ng ( R e g u l a r / P r i v a t e ) Page 9

10 (v) Commission receivable Rs.66. (vi) Merchandise inventory was valued at Rs.1,950 on June 30, (vii) Allowance for bad debts was estimated at Rs.270. (viii) Allowance for depreciation on office equipment was estimated at Rs.90. a) Prepare Income Statement for the year ended June 30, (Group the expense and revenue data properly and give complete title to the statement). b) Prepare Balance Sheet as of June 30, 1992 in classified form, giving complete title. (Note: You may prepare the two financial statements either in account form or report form). SOLUTION 7 (a) HAJI TABBA INCOME STATEMENT FOR THE PERIOD ENDED 30 JUNE 1992 Sales 6,000 Less: Sales discount (75) Net sales 5,925 Less: Cost of Goods Sold: Merchandise inventory (beg) 1,200 Add: Net Purchases: Purchases 3,000 Add: Carriage in 225 Delivered purchases 3,225 Less: Purchase discount (105) Net purchases 3,120 Merchandise available for sale 4,320 Less: Merchandise inventory (end) (1,950) Cost of goods sold (2,370) Gross profit 3,555 Less: Operating Expenses: Salaries expense (2, ) 2,385 Insurance expense (450 90) 360 Taxes expense 39 Shop rent expense (1, ) 825 Bad debts expense 150 Depreciation expense 90 Total operating expenses (3,849) Loss from operation (294) Add: Other Income: Commission income ( ) 666 Net profit 372 X I A c c o u n t i ng ( R e g u l a r / P r i v a t e ) Page 10

11 SOLUTION 7 (b) HAJI TABBA BALANCE SHEET AS ON 30 JUNE 1992 ASSETS EQUITIES Current Assets: Current Liabilities: Cash 1,800 Accounts payable 2,250 Accounts receivable 2,850 Salaries payable 285 Less: All for bad debts (270) 2,580 Taxes payable 39 Merchandise inventory 1,950 Total liabilities 2,574 Prepaid shop rent 375 Prepaid insurance 90 Owner s Equity: Commission receivable 66 Capital 4,725 Total current assets 6,861 Add: Net profit 372 Fixed Assets: Total owner s equity 5,097 Office equipment 900 Less: All for depreciation (90) Total fixed assets 810 Total assets 7,671 Total equities 7,671 Additional Working: HAJI TABBA ADJUSTING ENTRIES 1 Salaries expense 285 Salaries payable 285 (To adjust the unpaid salaries) 2 Taxes expense 39 Taxes payable 39 (To adjust the accrued taxes) 3 Shop rent expense 825 Prepaid shop rent 825 (To adjust the prepaid shop rent) 4 Prepaid insurance 90 Insurance expense 90 (To adjust the insurance expense) 5 Commission receivable 66 Commission income 66 (To adjust the accrued commission income) 6 Merchandise inventory 1,950 Expense and revenue summary 1,950 (To adjust the merchandise inventory) 7 Bad debts expense 150 Allowance for bad debts 150 (To adjust the bad debts expense) 8 Depreciation expense 90 Allowance for depreciation Office equipment 90 (To adjust the depreciation expense) X I A c c o u n t i ng ( R e g u l a r / P r i v a t e ) Page 11

12 Q.No.8 CLOSING PROCESS GIVEN Pick out Expense and Revenue data from the balances given in question No.7 in this paper, and also take into account the supplementary data for adjustment as given therein. a) Prepare Closing Entries in General Journal. b) Set up the Expense and Revenue Summary and complete the postings to it from the General Journal as in (a) above. c) Close the Expense And Revenue Summary as in (b) above. SOLUTION 8 (a) HAJI TABBA CLOSING ENTRIES FOR THE PERIOD ENDED 30 JUNE Expense and revenue summary 8,349 Merchandise inventory 1,200 Purchases 3,000 Carriage in 225 Salaries expense 2,385 Insurance expense 360 Taxes expense 39 Shop rent expense 825 Bad debts expense 150 Depreciation expense 90 Sales discount 75 (To close the various expenses accounts) 2 Sales revenue 6,000 Merchandise inventory 1,950 Purchase discount 105 Commission income 666 Expense and revenue summary 8,721 (To close the various income accounts) 3 Expense and revenue summary 372 Capital 372 (To transfer the profit to the capital account) SOLUTION 8 (b & c) Expense and Revenue Summary 1 8, , ,721 8,721 X I A c c o u n t i ng ( R e g u l a r / P r i v a t e ) Page 12