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1997

Compiled and Solved by:

S.Hussain

XI - ACCOUNTING

REGULAR /

PRIVATE

http://www.a4accounting.net/

Compiled & Solved by: S.Hussain [email protected]

X I – A c c o u n t i n g – 1 9 9 7 ( R e g u l a r / P r i v a t e )

ACCOUNTING – 1997

REGULAR / PRIVATE Time: 3 Hours Max. Marks: 100 Q.No.1 ACCOUNTING EQUATION AND TERMS

a) State the fundamental accounting equation. b) Distinguish between the following:-

(i) Accounting and Book-keeping. (ii) Assets and Equities. (iii) Accounts receivable and Accounts payable. (iv) Purchase return and Purchase discount.

SOLUTION 1 (a) Accounting equation = Assets = Liabilities + Owner’s equity. SOLUTION 1 (b) Distinguish Between:

(i) Accounting and Book-Keeping: Bookkeeping is part of accounting. It is the recording of the day to day transactions of a business. Therefore, bookkeeping can play an important role in the efficient running of a business: A business needs to pay its bills and it must therefore keep a record of those bills so that the correct amounts can be paid at the correct times and also so that bills are not paid twice by mistake. Similarly, a business needs to keep track of cash and cheques received from customers. Generally, all these things are the concern of bookkeeping. Accounting builds on the bookkeeping information, interpreting it, compiling reports, year-end accounts, and tax returns, budgeting and carrying out financial analysis and so on.

(ii) Assets and Equities: Assets: In common terms any object, tangible or intangible, that is of value to its possessor is called asset. In most cases it either is cash or can be turned into cash; exceptions include prepayments, which may represent payments made for rent, rates, or motor licenses, in cases in which the time paid for has not yet expired. Most accounting bodies throughout the world would now define an asset as a source of future economic benefits obtained or controlled as a result of past transactions or events. Tangible assets include land and building, plant and machinery, inventory, debtors and cash; intangible assets include goodwill, patents, copyrights, and trade marks.

Equities: A beneficial interest in an asset in known as equity. The net assets of a company after all creditors (including the holders of preference shares) have been paid off.

(iii) Accounts Receivable and Accounts Payable: Accounts Receivable: The amounts owing to a business from customer for invoiced amounts. Accounts receivable are classed as current assets on the balance sheet, but distinguished from prepayments and other non-trade debtors.



Accounts Payable: The amounts owed by a business to suppliers (e.g. for raw materials). Accounts payable are classed as current liabilities on the balance sheet but distinguished from accruals and other non-trade creditors.

(iv) Purchase Returns and Purchase Discount: Purchase Returns: Goods purchased from a supplier but returned to the supplier because they are faulty, are not exactly what was ordered, etc. Purchase Discount: A discount granted to a supplier, for example for a bulk purchase or prompt payment. It is shown as a credit in the profit and loss account.

Q.No.2 CASH BOOK GIVEN Karim & Co. uses a three column Cash Book in their business. On April 1, 1996 the balances of cash on hand and cash at bank were Rs.5,000 and Rs.8,000 respectively. The following are the cash transactions for the month of April 1996:- April 1: Cash sales Rs.3,000. April 4: Cash deposited into bank Rs.4,000. April 7: Received a cheque for Rs.975 from Saleem in full settlement of his account of Rs.1,000. April 12: Issued a cheque for Rs.980 to Jamil & Co. in full settlement of their account of Rs.1,000. April 14: Purchased sales supplies for cash Rs.200. April 17: Deposited into bank the cheque received on April 7 from Saleem. April 18: Advice received from the bank that one customer Naeem had made direct deposit in the bank

Rs.4,000. April 19: Purchased merchandise and paid by cheque Rs.3,000. April 23: Withdrew from bank Rs.400 for private use and Rs.600 for office use. April 25: Sold merchandise for cash Rs.3,000. April 27: Paid for rent expense cash Rs.400. April 29: Paid salaries expense by cheque Rs.1,500. April 30: Cash was found over by Rs.30. REQUIRED

a) Enter the opening balances and record the above transactions in the Cash Book. b) Balance the Cash Book on April 31, 1996 bringing down the cash and bank balances on May 1,

1996. c) Set up T-accounts for Sales Discount and Purchase Discount in the ledger and post the totals of

the discount columns of the Cash Book, Sales Discount account No. is 3001 and Purchase Discount account Number is 2001).

SOLUTION 2

GENERAL LEDGER Sales Discount (3001)

31.April.1996 CB Rs.25

Purchase Discount (2001)

31.April.1996 CB Rs.20



KARIM & CO. THREE COLUMN CASH BOOK

FOR THE MONTH OF APRIL 1996

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Q.No.3 GENERAL JOURNAL GIVEN The following transactions were completed by Aslam Brothers during February 1997:- February 1: Proprietor made investment of Rs.8,000 in the business. February 2: Deposited cash into bank Rs.5,000. February 7: Purchased merchandise for cash Rs.16,000. February 15: Sold merchandise for cash Rs.27,000. February 20: Sold old furniture on account for Rs.12,000. February 24: Received a cheque Rs.9,800in full settlement of Rs.10,000. February 26: Withdrew cash from bank for business use Rs.15,000. February 28: Salaries paid in cash Rs.9,000. February 28: Proprietor withdrew cash Rs.8,000 and merchandise worth Rs.2,000. REQUIRED Record the transactions given above in the standard form of General Journal. Give explanation below each entry. SOLUTION 3

ASLAM BROTHERS GENERAL JOURNAL

FOR THE MONTH OF FEBRUARY 1997

Date Particulars P/R Debit Credit

1.Feb Cash 8,000 Capital 8,000 (To record the investment by owner)

2.Feb Bank 5,000 Cash 5,000 (To record the cash deposited into bank)

7.Feb Purchases 16,000 Cash 16,000 (To record the purchased merchandise for cash)

15.Feb Cash 27,000 Sales 27,000 (To record the merchandise sold for cash)

20.Feb Accounts receivable 12,000 Furniture 12,000 (To record the sale of old furniture on credit)

24.Feb Cash 9,800 Sales discount 200 Accounts receivable 10,000 (To record the cheque received after allowing discount)

26.Feb Cash 15,000 Bank 15,000 (To record the cash withdrew from bank for office use)

28.Feb Salaries expense 9,000 Cash 9,000 (To record the salaries paid for cash)




28.Feb Drawings 10,000 Cash 8,000 Purchases 2,000 (To record the cash and merchandise withdrew by owner

for personal use)

Q.No.4 BANK RECONCILIATION STATEMENT GIVEN A comparison of Cash Book and Bank Statement of Aleem Sons for the month of March, on March 31, 1997 revealed the following:-

(i) Balance per cash book Rs.42,5000 (ii) Balance per bank statement Rs.37,758. (iii) Cheque deposited on 31st March 1997 not shown in bank statement for Rs.6,244. (iv) Interest credited by bank Rs.167 not recorded in cash book. (v) Bank service charges shown in the bank statement Rs.14. (vi) Cheque dishonoured by the bank not recorded in cash book Rs.700. (vii) Outstanding cheques # 0432 – Rs.964, #0435 – Rs.1,085.

REQUIRED a) Prepare Bank Reconciliation Statement as on March 31, 1997. b) Prepare necessary adjusting entries in General Journal of Aleem Sons.

SOLUTION 4 (a)

ALEEM SONS BANK RECONCILIATION STATEMENT FOR THE MONTH OF MARCH 1997

Particulars Cash Book Pass Book

Balance 31 March 1997 42,500 37,758 Add: Un-cleared cheque (iii) 6,244

44,002 Add: Interest income (iv) 167

42,667 Less: Bank service charges (v) (14)

42,653 Less: Dishonoured cheque (vi) (700)

41,953 Less: Outstanding cheques: (vii) Cheque # 0432 Rs.964 Cheque # 0435 Rs.1,085 (2,049)

Reconcile Balance 41,953 41,953



SOLUTION 4 (b) ALEEM SONS

GENERAL JOURNAL FOR THE MONTH OF MARCH 1997


1 Bank 167 Interest income 167 (to record the interest given by bank)

2 Service charges 14 Bank 14 (To record the service charges)

3 Accounts receivable 700 Bank 700 (To record the dishonoured cheque)

Q.No.5 SPECIAL JOURNALS GIVEN Below are selected transactions of Khalid & Co. April 1: Sold merchandise on account to Mr. Ahmed Rs.4,000. April 4: Sold merchandise on account to Mr. Basit Rs.5,000. April 8: Merchandise returned from Ahmed Rs.1,000. April 10: Sold the old typewriter for cash Rs.500. April 12: Sold merchandise on account to M/S. Mubeen and Khan Rs.2,000. April 16: Merchandise returned from Basit Rs.800. April 19: Sold merchandise for cash Rs.3,000. April 23: Sold merchandise to Mr. Ahmed on account for Rs.6,000. April 30: Returned merchandise from M/S. Mubeen and Khan Rs.700. REQUIRED

a) Record the above transactions as the case may be in: (i) Sales Journal. (ii) Sales Return & Allowance Journal.

Ignore the irrelevant transactions. b) Give the Journal entry to post each total and posting reference. Accounts Receivable control

account bears No.2001 Sales account No.3011 and Sales Return and Allowance No.3012. c) Set up Accounts Receivable Control account, Sales Account and sales Return and Allowance

account in the Genera Ledger and an account for each customer in the Accounts Receivable Subsidiary Ledger in self-balancing form. Make postings to the ledger accounts affected giving posting reference.

SOLUTION 5 (a & b)

KHALID & CO. SALES JOURNAL

FOR THE MONTH OF APRIL

Date Invoice No. Name of Customers P/R Amount

1.April Mr. Ahmed 4,000 4.April Mr. Basit 5,000 12.April M/s. Mubeen and Khan 2,000 23.April Mr. Ahmed 6,000

30.April Accounts receivable Dr. 2011 17,000 Sales Cr. 3011



KHALID & CO. SALES RETURN AND ALLOWANCE JOURNAL

FOR THE MONTH OF APRIL

Date Invoice No. Name of Customers P/R Amount

8.April Mr. Ahmed 1,000 16.April Mr. Basit 800 30.April M/s. Mubeen and Khan 700

30.April Sales return and allowance Dr. 3012 2,500 Accounts receivable Cr. 2011

SOLUTION 5 (c)

GENERAL LEDGER Accounts Receivable (2001)

30.Apr Sales 17,000 30.Apr Sales returns 2,500 30.Apr c/d balance 14,500

17,000 17,000

1.May b/d balance 14,500

Sales

31.Aug Accounts receivable 17,000

Sales Return & Allowances

30.Apr Accounts receivable 2,500

KHALID & CO.

SUBSIDIARY LEDGER FOR THE MONTH OF APRIL

Mr. Ahmed

Date Invoice No. Particulars P/R Debit Credit Balance

1.April SJ 4,000 4,000 8.April SRJ 1,000 3,000 23.April SJ 6,000 9,000

Mr. Basit


4.April SJ 5,000 5,000 16.April SRJ 800 4,200

M/S. Mubeen and Khan


12.April SJ 2,000 2,000

30.April SRJ 700 1,300



Q.No.6 BILL OF EXCHANGE GIVEN Aslam sells merchandise to Bashir on account for Rs.5,000. Aslam drew a bill on Bashir for this amount, payable after three months. Bashir accepts it and returned it to Aslam. Aslam keeps the bill with himself and presents the same for payment on due date. The bill is dishonoured on due date and Aslam pays Rs.50 as noting charges. REQUIRED Give Journal Entries in the books of Aslam and Bashir for the above transactions. SOLUTION 6

ASLAM GENERAL JOURNAL


1 Accounts receivable (Bashir) 5,000 Sales 5,000 (To record the goods sold on account to Bashir)

2 Bill receivable 5,000 Accounts receivable (Bashir) 5,000 (To record the acceptance received)

3 Accounts receivable (Bashir) 5,050 Cash 50 Bill receivable 5,000 (To record the bill dishonoured on maturity date)

BASHIR

GENERAL JOURNAL


1 Purchases 5,000 Accounts payable (Aslam) 5,000 (To record the goods purchased from Aslam on account)

2 Accounts payable (Aslam) 5,000 Bill payable 5,000 (To record the acceptance given)

3 Bill payable 5,000 Noting charges 50 Accounts payable (Aslam) 5,050 (To record the dishonoured of bill of exchange)

Q.No.7 CORRECTION OF ERRORS GIVEN Pass Journal Entries with full narration to rectify any Eight of the following errors before closing the accounts:-

(i) Purchase of an office table amounting to Rs.1,600 has been entered as office equipment. (ii) Sales return of Rs.550 from a customer has been debited to sales discount account. (iii) Withdrawal by the proprietor of Rs.500 has been debited to General expense account. (iv) Payment to technicians for installation of computer Rs.1,500 has been debited to repairs

Expense account. (v) Receipt of Rs.600 from Rana and Company, a customer, has been recorded in the account of

Rani and Company. (vi) Old office furniture sold for Rs.750 has been recorded as Rs.720 in furniture account wrongly.



(vii) Machinery repairs payment Rs.200 has been debited to Machinery account. (viii) Construction as addition of office building for Rs.50,000 was wrongly debited to building

repairs account. (ix) Purchase of stationary for Rs.1,200 has been recorded as purchases. (x) Wages paid to carpenter for making office furniture has been recorded as wages expense

account. SOLUTION 7

GENERAL JOURNAL


1 Office furniture 1,600 Office equipment 1,600 (To correct the office equipment account)

2 Sales return and allowances 550 Sales discount 550 (To correct the sales discount account)

3 Drawings 500 General expense 500 (To correct the general expense account)

4 Equipment 1,500 Repairs expense 1,500 (To correct the repairs expense account)

5 Accounts receivable (Rani and Company) 600 Accounts receivable (Rana and Company) 600 (To correct the customer receivable account)

6 Suspense account 30 Office furniture 30 (To correct the office furniture account)

7 Repairs expense 200 Machinery 200 (To correct the machinery account)

8 Building 50,000 Repairs expense 50,000 (To correct the repairs expense account)

9 Supplies 1,200 Purchases 1,200 (To correct the purchases account)

10 Office furniture Wages expense (To correct the wages expense for furniture)



Q.No.8 FINANCIAL STATEMENTS a) Income Statement:

GIVEN The following balances have been taken from the ledger of Zahid and Co. on December 31, 1996, the close of their financial year:- Merchandise inventory January 1, 1996 Rs.6,000; Purchases Rs.39,000; Freight Rs.2,000; Merchandise inventory December 31, 1996 Rs.10,000; Office supplies expense Rs.1,400; Rent expense Rs.200; Salaries expense Rs.1,600; General expense Rs.1,500; Sales Rs.70,000.

REQUIRED Prepare classified Income Statement for the year ended December 31, 1996.

b) Balance Sheet: GIVEN On December 31, 1996, the ledger accounts of Waseem Traders showed the following balances:-

Cash Rs.3,700 Merchandise inventory Rs.7,500 Accounts receivable 4,000 Shop furniture 7,000 Prepaid rent 4,600 Office equipment 3,500 Building 44,000 Bank loan 10,000 Office furniture 4,000 Capital ? Accounts payable 5,500 Drawings 4,500 Bank 8,500 Net income 35,700 Note receivable 5,000 REQUIRED Prepare classified report form balance Sheet. SOLUTION 8 (a)

ZAHID AND CO. INCOME STATEMENT

FOR THE PERIOD ENDED 31 DECEMBER 1996 Sales 70,000 Less: Cost of Goods Sold: Merchandise inventory (beg) 6,000 Add: Net Purchases: Purchases 39,000 Add: Freight 2,000

Net purchases 41,000

Merchandise available for sale 47,000 Less: Merchandise inventory (end) (10,000)

Cost of goods sold (37,000)

Gross profit 33,000 Less: Operating Expenses: Salaries expense 1,600 Rent expense 200 Office supplies expense 1,400 General expense 1,500

Total operating expenses (4,700)

Net profit 28,300



SOLUTION 8 (b) ZAHID AND CO. BALANCE SHEET

AS ON 31 DECEMBER 1996 ASSETS

Current Assets: Cash 3,700 Bank 8,500 Accounts receivable 4,000 Merchandise inventory 7,500 Prepaid rent 4,600 Note receivable 5,000

Total current assets 33,300 Fixed Assets: Building 44,000 Office furniture 4,000 Shop furniture 7,000 Office equipment 3,500

Total fixed assets 58,500

Total assets 91,800

EQUITIES

Liabilities: Current Liabilities: Accounts payable 5,500 Bank loan 10,000

Total liabilities 15,500 Owner’s Equity: Capital 45,100 Add: Net profit 35,700

80,800 Less: Drawings (4,500)

Total owner’s equity 76,300

Total equities 91,800



Computation of Capital: Cash 3,700 Accounts receivable 4,000 Merchandise inventory 7,500 Prepaid rent 4,600 Note receivable 5,000 Bank 8,500 Building 44,000 Office furniture 4,000 Shop furniture 7,000 Office equipment 3,500 Drawings 4,500

Total debit 96,300 Less: Total Credit: Accounts payable 5,500 Bank loan 10,000 Net profit 35,700

Total credit (51,200)

Capital 45,100

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