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2002

Compiled and Solved by:

S.Hussain

XI – ACCOUNTING

REGULAR

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ACCOUNTING – 2002

REGULAR Time: Three Hours Max. Marks: 100 Note: Attempt any Four questions. All questions carry equal marks. Show computations, where necessary. Q.No.1 ACCOUNTING EQUATION

a) On July 1, Basit began operating a business. After each of the five transactions, the accounting equation for the business showed the following balances. Analyze the equation and describe each of the five transactions with their amounts.

BALANCE AFTER: Transaction + Cash +Accounts

receivable + Office supplies

+ Office furniture

= Accounts payable

+ Basit’s capital

(i) Rs.30,000 0 0 0 = 0 30,000 (ii) Rs.29,200 0 2,000 0 = 1,200 30,000 (iii) Rs.11,200 0 2,000 18,000 = 1,200 30,000 (iv) Rs.11,200 2,400 2,000 18,000 = 1,200 32,400 (v) Rs.8,200 2,400 3,400 19,600 = 1,200 32,400 b) During the month of September, AB Company had cash receipts of Rs.36,000 and cash payments

of Rs.40,500. The September 30 cash balance was Rs.8,000; calculate the August 31 cash balance.

c) Aqeel, the owner of a business had a capital account balance of Rs.230,000 on May 31 and Rs.296,000 on June 30. His net income for the month June was Rs.72,000; calculate withdrawals during June from the business.

d) The ending balance of an owner’s equity is Rs.42,000. During the year the owner contributed Rs.12,000 and withdrew Rs.8,000. If the firm had Rs.16,000 net incomes for the year, what was the owner’s equity at the beginning of the following?: (i) Rs.38,000. (ii) Rs.22,000. (iii) Rs.42,000. (iv) Rs.46,000.

SOLUTION 1 (a)

(i) Mr. Basit invested cash in the business Rs.30,000. (ii) Purchased office supplies for Rs.800 on cash and for Rs.1,200 on account. (iii) Purchased office furniture for cash Rs.18,000. (iv) Services provided to the customers on account Rs.2,400. (v) Purchased office supplies for cash Rs.1,400 and office furniture for cash Rs.1,600.

SOLUTION 1 (b) Cash at end 8,000 Add: Cash payments during the period 40,500

Total cash available 48,500 Less: Cash receipts during the period (36,000)

Cash at 31 August 12,500

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SOLUTION 1 (c) Capital at 31 May 230,000 Add: Net profit 72,000

302,000 Less: Capital at 30 June (296,000)

Drawings 6,000

SOLUTION 1 (d) Capital at end 42,000 Add: Drawings 8,000

50,000 Less: Additional investment (12,000)

38,000 Less: Net profit (16,000)

Drawings 22,000

Q.No.2 GENERAL JOURNAL

a) Explain the terms “Journalizing” and “Posting”. b) During the month of March of the current year Mr. Zia, a sole business consultant completed

the following transactions: March 1. Zia started his business with the cash investment of Rs.25,000. March 2. Bought Rs.6,000 supplies for his office. March 3. Paid Rs.5,000 rent for the month of March for the office. March 5. Purchased office equipment for Rs.12,000. This amount was to be paid in three equal

installments at the end of March, April and May. March 16. Receipt from consultation service was Rs.8,250. March 30. Payment of salary to the assistant was Rs.3,600. March 31. Paid the first installments on equipment. March 31. Receipt from the service rendered during the last two weeks ended March 31,

amounted to Rs.9,300. March 31. Zia withdrew Rs.8,000 cash for his personal use.

REQUIRED Prepare General Journal entries to record the above transactions, giving explanation below each entry. SOLUTION 2 (a) Journalizing: Entering of financial data (taken usually from a journal voucher), pertaining to a specific transaction, in a journal under a double entry bookkeeping system. It involves recording of five aspects of a transaction: (1) its date, (2) ledger account to be debited and amount, (3) ledger account to be credited and amount, (4) brief description of the transaction, and its (5) cross-reference to the general ledger. Posting: Process of transferring debit and credit amounts from journals to the ledger(s) is called posting.

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SOLUTION 2 (b) MR. ZIA

GENERAL JOURNAL FOR THE MONTH OF MACRH

Date Particulars P/R Debit Credit

1.Mar Cash 25,000 Capital 25,000 (To record the investment by owner in the business)

2.Mar Office supplies 6,000 Cash 6,000 (To record the purchase of office supplies for cash)

3.Mar Prepaid office rent 5,000 Cash 5,000 (To record the rent paid for the month of March)

5.Mar Equipments 12,000 Accounts payable 12,000 (To record the purchase of equipment on installment)

16.Mar Cash 8,250 Consultation fees income 8,250 (To record the consultation income received)

30.Mar Salaries expense 3,600 Cash 3,00 (To record the cash paid to office assistant)

31.Mar Accounts payable 4,000 Cash 4,000 (To record the first installment paid for equipment)

31.Mar Cash 9,300 Consultation fees income 9,300 (To record the cash received against consultation)

31.Mar Drawings 8,000 Cash 8,000 (To record the cash withdrew by owner for personal

use)

Q.No.3 LEDGER POSTING GIVEN Take the transaction in question numbered 2 above. REQUIRED

(i) Set up T-accounts involved therein. (ii) Post the transactions direct into the ledger accounts affected, completing double entry in each

case. (iii) Balance the accounts. (iv) Prepare a Trial Balance dated March 31.

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SOLUTION 3 (i, ii & iii) GENERAL LEDGER

Cash

1.Mar Capital 25,000 2.Mar Supplies 6,000 16.Mar Service income 8,250 3.Mar Prepaid rent 5,000 31.Mar Service income 9,300 30.Mar Salaries expense 3,600 31.Mar Accounts payable 4,000 31.Mar Drawings 8,000

26,600 31.Mar c/d balance 15,950

42,550 42,550

1.Apr b/d balance 15,950

Supplies

2.Mar Cash 6,000 31.Mar c/d balance 6,000

6,000 6,000

1.Apr b/d balance 6,000

Prepaid Rent

3.Mar Cash 5,000 31.Mar c/d balance 5,000

5,000 5,000

1.Apr b/d balance 5,000

Equipment

5.Mar Cash 12,000 31.Mar c/d balance 12,000

12,000 12,000

1.Apr b/d balance 12,000

Accounts Payable

31.Mar Cash 4,000 5.Mar Office equipments 12,000 31.Mar c/d balance 8,000

12,000 12,000

1.Apr b/d balance 8,000

Capital

1.Mar Cash 25,000 31.Mar c/d balance 25,000

25,000 25,000

1.Apr b/d balance 25,000

Drawings

31.Mar Cash 8,000 31.Mar c/d balance 8,000

8,000 8,000

1.Apr b/d balance 8,000

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Service Income

16.Mar Cash 8,250 31.Mar Cash 9,300 31.Mar c/d balance 17,550

17,550 17,550

1.Apr b/d balance 17,550

Salaries Expense

30.Mar Cash 3,600 31.Mar c/d balance 3,600

3,600 3,600

1.Apr b/d balance 3,600

SOLUTION 3 (iv) MR. JAMIL

TRIAL BALANCE FOR THE MONTH OF MARCH 2001

NO. PARTICULARS P/R DEBIT CREDIT

1 Cash 15,950 2 Supplies 6,000 3 Prepaid rent 5,000 4 Equipments 12,000 5 Accounts payable 8,000 6 Capital 25,000 7 Drawings 8,000 8 Service income 17,550 9 Salaries expense 3,600

Total 50,550 50,550

Q.No.4 ADJUSTMENTS AND CLOSING PROCESS GIVEN The unadjusted Trial Balance of Masoom Associates, Karachi as of December 31, 2001, the end of accounting year is as follows:

Debit (Rs.) Credit (Rs.) Cash 9,000 Un-expired insurance 3,000 Supplies 4,800 Equipment 36,000 Allowance for depreciation 2,400 Masoom Capital 37,600 Masoom Drawings 10,000 Revenue from service 96,000 Salaries expense 51,600 Rent expense 21,600

136,000 136,000

REQUIRED Prepare adjusting and closing journal entries using the information given below:

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a) Insurance expired Rs.1,800. b) Supplies on hand Rs.1,400. c) Estimated depreciation of office equipment Rs.5,000. d) Unpaid salaries Rs.1,600.

SOLUTION 4

MASOOM ASSOCIATES, KARACHI ADJUSTING ENTRIES

FOR THE PERID ENDED 31 DECEMBER 2001

Date Particulars P/R Debit Credit

a) Insurance expense 1,800 Un-expired insurance 1,800 (To adjust the insurance expired)

b) Supplies expense 3,400 Supplies 3,400 (To adjust the supplies used during the period)

c) Depreciation expense 5,000 Allowance for depreciation (Equipment) 5,000 (To adjust the depreciation expense on equipment)

d) Salaries expense 1,600 Salaries payable 1,600 (To adjust the unpaid salaries)

MASOOM ASSOCIATES, KARACHI

CLOSING ENTRIES FOR THE PERID ENDED 31 DECEMBER 2001

Date Particulars P/R Debit Credit

1 Expense and revenue summary 85,000 Insurance expense 1,800 Supplies expense 3,400 Salaries expense 53,200 Depreciation expense 5,000 Rent expense 21,600 (To close the various expenses accounts)

2 Revenue from service 96,000 Expense and revenue summary 96,000 (To close the various income accounts)

3 Expense and revenue summary 11,000 Capital 11,000 (To transfer the profit to the capital account)

4 Capital 10,000 Drawings 10,000 (To close the drawings account)

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Q.No.5 FINANCIAL STATEMENTS a) BALANCE SHEET GIVEN The following is the post closing Trial Balance of Alam Automobile Service.

ALAM AUTOMOBILE SERVICES TRIAL BALANCE DECEMBER 31, 2001

Debit Credit Cash 6,500 Accounts receivable 4,000 Un-expired insurance 600 Office supplies 600 Testing equipment 7,200 Allowance for depreciation 100 Unearned service fees 3,000 Accounts payable 2,400 Alam Capital 10,400 Salaries payable 3,000

18,900 18,900

REQUIRED Prepare Balance Sheet as on December 31, 2001.

b) INCOME STATEMENT GIVEN The following closing entries were made by Raja Cloth House at the end of the current year December 31.

Date Particulars P/R Debit Credit

1 Merchandise inventory Rs.55,000 Sales Rs.300,000 Purchase returns and allowances Rs.2,400 Purchase discount Rs.3,600 Income summary Rs.361,000

2 Income summary Rs.316,800 Merchandise inventory Rs.42,000 Sales return and allowances Rs.2,400 Sales discount Rs.3,600 Purchases Rs.180,000 Transport-in Rs.4,800 Selling expense Rs.48,000 General and administrative expenses Rs.36,000

REQUIRED Use the information in the above closing entries and prepare an income statement for Raja

Cloth House.

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SOLUTION 5 (a) ALAM AUTOMOBILE SERVICES

BALANCE SHEET AS ON 31 DECEMBER 2001

ASSETS EQUITIES Current Assets: Current Liabilities: Cash 6,500 Accounts payable 2,400 Accounts receivable 4,000 Salaries payable 3,000 Un-expired insurance 600 Unearned service fees 3,000

Office supplies 600 Total liabilities 8,400

Total current assets 11,700 Owner’s Equity: Fixed Assets: Capital 10,400

Testing equipment 7,200 Total owner’s equity 10,400

Less: All for depreciation (100)

Total fixed assets 7,100

Total assets 18,800 Total equities 18,800

SOLUTION 5 (b)

RAJA CLOTH HOUSE INCOME STATEMENT

FOR THE PERIOD ENDED 31 DECEMBER Sales 300,000 Less: Sales return and allowances 2,400 Less: Sales discount 3,600 (6,000)

Net sales 294,000 Less: Cost of Goods Sold: Merchandise inventory (beg) 42,000 Add: Net Purchases: Purchases 180,000 Add: Transportation in 4,800

Delivered purchases 184,800 Less: Purchase returns and allowances (2,400) Less: Purchase discount (3,600)

Net purchases 178,800

Merchandise available for sale 220,800 Less: Merchandise inventory (end) (55,000)

Cost of goods sold (165,800)

Gross profit 128,200 Less: Operating Expenses: Selling expense 48,000 General and administrative expense 36,000

Total operating expenses (84,000)

Net profit 44,200

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Q.No.6 SPECIAL JOURNALS GIVEN The following are Purchase Journal and Purchase Returns and Allowances Journal of Muzammil and Company for the month of June of the current year.

PURCHASE JOURNAL

Date Invoice No. Suppliers P/R Amount Rs.

June 01 435 Qazi Brothers 12,000 June 04 641 Mehran Traders 16,500 June 14 512 Qazi Brothers 9,400 June 24 672 Mehran Traders 11,600 June 24 215 Dilawar and Sons 7,300

June 30 Purchases Dr. 502 56,800 Accounts payable Cr. 201

PURCHASE RETURN AND ALLOWANCE JOURNAL

Date Invoice No. Name of Suppliers P/R Amount Rs.

June 09 112 Qazi Brothers 550 June 09 213 Mehran Traders 950 June 20 145 Qazi Brothers 400 June 26 248 Mehran Traders 600 June 27 215 Dilawar and Sons 800

June 30 Accounts payable Dr. 201 3,300 Purchase returns and allowance Cr. 503

REQUIRED Prepare General Journal and Subsidiary Ledger of Accounts Payable and their schedule on June 30. SOLUTION 6

GENERAL LEDGER Purchases (502)

30.June Accounts payable 56,800 30.June c/d balance 56,800

56,800 56,800

1.July b/d balance 56,800

Accounts Payable (201)

30.June Purchase returns 3,300 30.June Purchases 56,800 30.June c/d balance 53,500

56,800 56,800

1.July b/d balance 53,500

Purchase Returns and Allowances (503)

30.June Accounts payable 56,800 30.June c/d balance 56,800

56,800 56,800

1.July b/d balance 56,800

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MUZAMMIL AND COMPANY SUBSIDIARY LEDGER

FOR THE MONTH OF JUNE Qazi Brothers

Date Invoice No. Description P/R Debit Credit Balance

1.June 435 PJ 12,000 12,000 9.June 112 PRJ 550 11,450 14.June 512 PJ 9,400 20,850 20.June 145 PRJ 400 20,450

Mehran Traders

Date Invoice No. Description P/R Debit Credit Balance

4.June 641 PJ 16,500 16,500 9.June 213 PRJ 950 15,550 24.June 672 PJ 11,600 27,150 26.June 248 PRJ 600 26,550

Dilawar and Sons

Date Invoice No. Description P/R Debit Credit Balance

24.June 215 PJ 7,300 7,300 27.June 215 PRJ 800 6,500

MUZAMMIL AND COMPANY

SCHEDULE OF ACCOUNTS PAYABLE FOR THE MONTH ENDED 30 JUNE

Name of Suppliers Amount

Qazi Brothers 20,450 Mehran Traders 26,550 Dilawar and Sons 6,500

Total 53,500

Q.No.7 PETTY CASH BOOK GIVEN A firm completed the following petty cash transactions during December of the current year: December 01. Drew a Rs.1,500 cheque, cashed it, and gave it to the petty cashier. December 03. Purchased computer paper for Rs.288. December 06. Paid Rs.56 delivery expenses and Rs.30 wages on merchandise purchased. December 09. Paid Rs.75 parcel post charges. December 10. Paid Rs.200 to the son of the proprietor from petty cash for personal use. December 18. Paid Rs.95 delivery charges on merchandise purchased. December 22. Paid a service station for servicing the personal car of the proprietor Rs.75. December 25. Paid delivery expenses Rs.155. December 30. Paid Rs.445 for the repair of computer. December 31. Paid for entertainment Rs.55. REQUIRED

(i) Prepare Petty Cash Book having five categories of accounts: Office supplies, Delivery expenses, Postage, Withdrawals, and Miscellaneous expenses.

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(ii) Prepare journal entries to record: a) Establishment of Petty Cash Fund. b) Disbursement of Petty Cash Fund. c) Replenishment of Petty Cash Fund.

SOLUTION 7

M/S. ________ GENERAL JOURNAL

FOR THE MONTH OF DECEMBER

Date Particulars P/R Debit Credit

1.Dec Petty cash fund 1,500 Bank 1,500 (To record the establishment of petty cash fund)

31.Dec Office supplies 288 Delivery expenses 306 Postage 75 Withdrawals 275 Miscellaneous expense 530 Petty cash fund 1,474 (to record the expenses paid)

1.Sep Petty cash fund 1,474 Bank 1,474 (To record the replenishment of petty cash fund)

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M/S. _______ PETTY CASH BOOK

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