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2005

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 – 2 0 0 5 ( R e g u l a r / P r i v a t e )

Page 2

ACCOUNTING – 2005

REGULAR / PRIVATE Time: 3 Hours Max. Marks: 100 Note: Attempt any four questions. Q.No.1 ACCOUNTING EQUATION

a) Define Accounting Equation. b) Describe the rules of Debit and Credit in term of increase and decrease for Assets, Liabilities,

Expenses, Revenue and Capital. c) Write the steps of accounting cycle in proper sequence.

SOLUTION 1 (a) Accounting equation: An increase or decrease in the total assets of a concern must be accompanied by an equal increase or decrease in the liabilities and capital in order to ensure that a balance sheet will always balance. Assets = Liabilities + Owner’s Equity SOLUTION 1 (b) 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 & Income Recorded as Credit Recorded as Debit

Expenses Recorded as Debit Recorded as Credit

SOLUTION 1 (c) Steps of Accounting Cycle:

Journal Entries: The transaction is recorded in journal as a debit and credit.

Post to Ledger: The journal entries are transferred to the appropriate T-accounts in the general ledger.

Trial Balance: A trial balance is calculated to verify that the sum of debits is equal to the sum of credits.

Adjusting Entries: Adjusting entries are made for accrued and differed items. The entries are journalized and posted to the T-accounts in the general ledger.

Adjusted Trial Balance: A new trial balance is calculated after making the adjusting entries.

Financial Statement: Income statement, balance sheet and cash flow statements are prepared.

Closing Entries: Transfer the balances of temporary accounts to owner’s equity account.

After-Closing Trial Balance: A final trial balance is calculated after the closing entries made.

Reversing Entries: Reverse the necessary adjusting entries (optional).



Page 3

Q.No.1 GENERAL JOURNAL GIVEN M/s. Nadia Traders started business on March 1, 2005 with cash investment of Rs.500,000. She completed the following transactions during the month. Mar 02, 05 Paid shop rent in advance for ten months Rs.60,000. Mar 04, 05 Purchased computer for the business worth Rs.25,600 in cash. Mar 05, 05 Purchased goods on account for Rs.110,000. Mar 06, 05 Paid for advertising Rs.17,000. Mar 10, 05 Purchased merchandise for cash Rs.25,000. Mar 19, 05 Purchased office supplies for Rs.50,000 on account. Mar 20, 05 Sold merchandise on credit for Rs.10,000. Mar 22, 05 Proprietor purchased gold ring from business cash worth Rs.5,000. Mar 25, 05 Sold goods for cash Rs.100,000. Mar 29, 05 Paid salary to the salesman Rs.7,000. Mar 31, 05 Opened a bank account with Rs.50,000. REQUIRED Record the above transactions in skeleton form I the books of M/s Nadia Traders. SOLUTION 2

M/S NADIA TRADERS GENERAL JOURNAL

FOR THE MONTH OF MARCH 2005

Date Particulars P/R Debit Credit

1.Mar Cash 500,000 Capital 500,000 (To record the investment by owner in the business)

2.Mar Prepaid shop rent 60,000 Cash 60,000 (To record the rent paid in advance for shop)

4.Mar Equipment 25,600 Cash 25,600 (To record the computer purchased for cash)

5.Mar Purchases 110,000 Accounts payable 110,000 (To record the merchandise purchased on account)

6.Mar Advertising expense 17,000 Cash 17,000 (to record the advertising expense paid)

10.Mar Purchases 25,000 Cash 25,000 (To record the goods purchased for cash)

19.Mar Office supplies 50,000 Accounts payable 50,000 (To record the office supplies purchased on account)

20.Mar Accounts receivable 10,000 Sales 10,000 (To record the goods sold on account)

22.Mar Drawings 5,000 Cash 5,000 (To record the withdrew by owner for personal use)



Page 4


25.Mar Cash 100,000 Sales 100,000 (To record the goods sold for cash)

29.Mar Salaries expense 7,000 Cash 7,000 (To record the salaries paid to the salesman)

31.Mar Bank 50,000 Cash 50,000 (To record the opened a bank account)

Additional Working:

GENERAL LEDGER Cash

1.Mar Capital 500,000 2.Mar Prepaid shop rent 60,000 25.Mar Sales 100,000 4.Mar Equipment 25,600 6.Mar Advertising expense 17,000 10.Mar Purchases 25,000 22.Mar Drawings 5,000 29.Mar Salaries expense 7,000 31.Mar Bank 50,000

189,600 31.Mar c/d balance 410,400

600,000 600,000

1.Apr b/d balance 410,400

Bank

31.Mar Cash 50,000 31.Mar c/d balance 50,000

50,000 50,000


Accounts Receivable

20.Mar Sales 10,000 31.Mar c/d balance 10,000

10,000 10,000


Prepaid Shop Rent


60,000 60,000




Page 5

Office Supplies

19.Mar Accounts payable 50,000 31.Mar c/d balance 50,000

50,000 50,000


Equipment


25,600 25,600


Accounts Payable

5.Mar Purchases 110,000 31.Mar c/d balance 160,000 19.Mar Office supplies 50,000

160,000 160,000


Capital


500,000 500,000


Drawings


5,000 5,000


Sales

20.Mar Accounts receivable 10,000 31.Mar c/d balance 110,000 25.Mar Cash 100,000

110,000 110,000


Purchases

5.Mar Accounts payable 110,000 10.Mar Cash 25,000 31.Mar c/d balance 135,000

135,000 135,000


Salaries Expense


7,000 7,000




Page 6

Advertising Expense


17,000 17,000


M/S NADIA TRADERS TRIAL BALANCE

FOR THE MONTH OF MARCH 2005

NO. PARTICULARS P/R DEBIT CREDIT

1 Cash 410,400 Bank 50,000 Accounts receivable 30,000 Prepaid shop rent 36,000 Shop furniture 64,000 Accounts payable 50,000 Capital 500,000 Drawings 22,000 Purchases 343,000 Sales 350,000 Salaries expense 10,000

Total 900,000 900,000

Q.No.3 CASH BOOK GIVEN Mr. Taloot a sole trader uses a three column cash book for his business. On February 01, 2005, he has cash on hand Rs.25,000 and cash in bank (HBL) Rs.35,000. During the month he completed the following transactions: Feb.04, 05: Received a cheque of Rs.9,900 from Tanzeel in full settlement of his account Rs.9,990. Feb.11, 05: Deposited Tanzeel’s cheque into the bank. Feb.15, 05: Issued a cheque for Rs.5,500 to Burhan in full settlement of his account Rs.5,550. Feb.21, 05: Deposited cash into bank Rs.1,000. Feb.26, 05: Withdrew cash Rs.3,000 from bank for personal use and Rs.5,000 for office use. Feb.28, 05: Paid salaries Rs.5,000 in cash. REQUIRED

a) Enter the opening balances and record the above transactions in a three column Cash Book. b) Balance the Cash Book on Feb.25,05 bringing down the cash & bank balances on March 01, 05. c) Set up T-accounts for sales discount and purchase discount and post the discount amounts.

SOLUTION 3

GENERAL LEDGER Sales Discount

28.Feb.2005 CB Rs.90

Purchase Discount

28.Feb.2005 CB Rs.50



Page 7

MR. TALOOT THREE COLUMN CASH BOOK

FOR THE MONTH OF FEBRUARY 2005

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Page 8

Q.No.4 BANK RECONCILIATION STATEMENT GIVEN On January 31, 2005, the Cash Book of Jawad Baluch provides the following information:

(i) Debit balance (bank column) Rs.12,500. (ii) Balance as per bank statement on Jan. 31, 2005 Rs.13,426. (iii) Bank debited his charges Rs.115 the item was not recorded in the Cash Book. (iv) Un-cleared cheques Rs.1,000. (v) Unpaid cheque Rs.2,000. (vi) Dividend on PPL shares credited by bank Rs.50 not recorded in the Cash Book. (vii) A cheque # 1009 issued to Ahmad Husain Rs.266 was wrongly recorded in the Cash Book as

Rs.257. REQUIRED

a) Prepare a Bank Reconciliation Statement on January 31. b) Prepare adjusting journal entries in General Journal.

SOLUTION 4 (a)

JAWAD BALUCH BANK RECONCILIATION STATEMENT FOR THE MONTH OF JANUARY 2005

Particulars Cash Book Pass Book

Balance on 31 January 2005 12,500 13,426 Les: Bank charges (iii) (115)

12,385 Add: Un-cleared cheques (iv) 1,000

14,426 Less: Unpaid cheques (v) (2,000)

12,426 Add: Dividend collected by bank (vi) 50

12,435 Less: Accounts payable (Error) (vii) (9)

Reconcile Balance 12,426 12,426

SOLUTION 4 (b)

JAWAD BALUCH GENERAL JOURNAL

FOR THE MONTH OF JANUARY 2005


1 Bank charges 115 Bank 115 (To record the bank charges deducted by bank)

2 Bank 50 Dividend income 50 (To record the dividend income received by bank)

3 Accounts payable (Ahmad Husain) 9 Bank 9 (To record the error in payment to supplier)



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Q.No.5 BILL OF EXCHANGE a) Define a bill of exchange. Name the parties to a bill of exchange. b) GIVEN On April 05, 2005 Ali sold merchandise to Sameer worth Rs.25,000 on credit, and drew

upon him a 3 month bill for the amount. Sameer accepted the bill and returned it to Ali. Ali discounted the bill with his bankers and paid Rs.1,200 as discount charges. On the due date Sameer paid the bill.

REQUIRED Record the above transactions in the books of the Seller, Purchaser and Bank. SOLUTION 5 (a) Bill of Exchange: An unconditional order in writing, addressed by one person (the drawer) to another (the drawee) and signed by the person giving it, requiring the drawee to pay on demand or at a fixed or determinable future time a specified sum of money to or to the order of a specified person (the payee) or to the bearer. There are three parties to bill of exchange:

(i) Drawer: A person who signs a bill of exchange ordering the drawee to pay the specified sum at the specified time.

(ii) Drawee: The person on whom a bill of exchange is drawn. The drawee will accept it and pay it on maturity.

(iii) Payee: A person who receives the payment through bill of exchange. SOLUTION 5 (b)

ALI GENERAL JOURNAL


5.Apr Accounts receivable (Mr. Sameer) 25,000 Sales 25,000 (To record the goods sold on account to Sameer)

5.Apr Bill receivable 25,000 Accounts receivable (Mr. Sameer) 25,000 (To record the acceptance received)

5.Apr Cash 23,800 Discount charges 1,200 Bill receivable 25,000 (To record the bill discounted by Mr. Ali)

MR. SAMEER

GENERAL JOURNAL


5.Apr Purchases 25,000 Accounts payable (Mr. Ali) 25,000 (To record the goods purchased from Ali on a/c)

5.Apr Accounts payable (Mr. Ali) 25,000 Bill payable 25,000 (To record the acceptance given)

5.July Bill payable 25,000 Cash 25,000 (To record the payment of bill on maturity date)



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BANK GENERAL JOURNAL


5.Apr Bill receivable 25,000 Cash 23,800 Interest income 1,200 (To record the bill discounted)

5.July Cash 25,000 Bill receivable 25,000 (To record the payment received against bill of

exchange)

Q.No.6 SPECIAL JOURNAL GIVEN The following are the selected transaction of Seema Stores: Jan. 01, 05: Sold goods to Mr. Bilal Rs.19,000 on account. Jan. 05, 05: Sold merchandise on account to Mr. Babar Rs.15,000. Jan. 08, 05: Sold old furniture to Mr. Taha for Rs.5,000 on account. Jan. 11, 05: Merchandise was returned by Mr. Bilal worth Rs.1,000. Jan. 15, 05: Sold merchandise to Rasheeda Stores Rs.18,000 on a/c. Jan. 18, 05: Sold merchandise to Mr. Babar Rs.5,000 on account. Jan. 22, 05: Goods returned by Mr. Babar worth Rs.500. Jan. 27, 05: Sold goods on account to Rasheeda Stores Rs.21,000. Jan. 29, 05: Sold an old computer to Madoona Stores for Rs.5,000. REQUIRED

(i) Record the above transactions in (a) Sales Journal Page No.56 (b) Sales Return and Allowance Journal Page No.29.

(ii) Total both the special journals on January 31, 2005 and pass the entry on January 31, 2005. (iii) Set up Accounts receivable Control Account, Sales Account and Sales Return and Allowances

Account in the General Ledger. (iv) Set up account for each customer in the Accounts Receivable Subsidiary Ledger in self-balancing

form. SOLUTION 6 (i & ii)

SEEMA STORES PURCHASE JOURNAL

FOR THE MONTH OF JANUARY 2005 (PAGE # 56)

Date Invoice No. Name of Customers P/R Amount

1.January Mr. Bilal 19,000 5.January Mr. Babar 15,000 15.January Rasheeda Stores 18,000 18.January Mr. Babar 5,000 27.January Rasheeda Stores 21,000

31.January Accounts receivable Dr. 78,000 Sales Cr.



Page 11

SEEMA STORES SALES RETURN AND ALLOWANCE JOURNAL

FOR THE MONTH OF JANUARY 2005 (PAGE # 29)

Date Invoice No. Name of Customers P/R Amount

11.January Mr. Bilal 1,000 22.January Mr. Babar 500

31.January Sales return and allowance Dr. 1,500 Accounts receivable Cr.

SOLUTION 6 (iii)

GENERAL LEDGER

Accounts Receivable

31.Jan Sales 78,000 31.Jan Sales return 1,500 31.Jan c/d balance 76,500

78,000 78,000

1.Feb b/d balance 76,500

Sales

31.Jan c/d balance 78,000 31.Jan Accounts receivable 78,000

78,000 78,000

1.Feb b/d balance 78,000

Sales Return and Allowances

31.Jan Accounts receivable 1,500 31.Jan c/d balance 1,500

1,500 1,500

1.Feb b/d balance 1,500 SOLUTION 6 (iv)

SEEMA STORES SUBSIDIARY LEDGER


Mr. Bilal

Date Invoice No. Particulars P/R Debit Credit Balance

1.January.2005 SJ-56 19,000 19,000 11.January.2005 SRJ-29 1,000 18,000

Mr. Babar


5.January.2005 SJ-56 15,000 15,000 18.January.2005 SJ-56 5,000 20,000 22.January.2005 SRJ-29 500 19,500

Rasheeda Stores


15.January.2005 SJ-56 18,000 18,000 27.January.2005 SRJ-29 21,000 39,000



Page 12

Additional Working: RASHEEDA STORES GENERAL JOURNAL



8.Jan Accounts receivable (Mr. Taha) 5,000 Furniture 5,000 (to record the sale of old furniture on account)

29.Jan Accounts receivable (Madoona Stores) 5,000 Equipment 5,000 (To record the sale of old equipment on account)

Q.No.7 FINANCIAL STATEMENT GIVEN The following balances were taken from the pre-closing Trial Balance of Fatima & Co. prepared on Dec. 31, 2004. Debit Balances: Cash Rs.6,400; Accounts receivable Rs.40,000; Merchandise inventory (Jan.01) Rs.32,000; Sales equipment Rs.30,000; Prepaid insurance Rs.800; Sales supplies Rs.1,200; Purchases Rs.100,000; Sales salaries expenses Rs.9,600; Office salary expense Rs.4,000; Advertising expense Rs.4,000 (Total Rs.228,000). Credit Balances: Sales Rs.156,000; Accounts payable Rs.24,000; Fatima capital Rs.48,000 (Total Rs.228,000). Data for adjustments on December 31:

(i) Merchandise inventory was valued at Rs.30,000. (ii) Sales supplies were Rs.200. (iii) Insurance expired Rs.400. (iv) Unpaid sales salaries were Rs.500. (v) Depreciation on fixed assets was estimated Rs.5,000. (vi) Bad debts on accounts receivable Rs.3,000.

REQUIRED (i) Prepare Income Statement for the year ended Dec. 31, 2004. (ii) Prepare Report form balance Sheet as of Dec. 31, 2004.

SOLUTION 7 (i)

FATIMA & CO. INCOME STATEMENT

FOR THE PERIOD ENDED 31 DECEMBER 2004 Sales 156,000 Less: Cost of Goods Sold: Merchandise inventory (beg) 32,000 Add: Purchases 100,000

Merchandise available for sale 132,000 Less: Merchandise inventory (end) (30,000)

Cost of goods sold (102,000)

Gross profit 54,000 Less: Operating Expenses: Office salary expense 4,000 Sales salaries expenses (9,600 + 500) 10,100



Page 13

Bad debts expense 3,000 Sales supplies expense 1,000 Insurance expense 400 Advertising expense 4,000 Depreciation expense 5,000

Total operating expenses (27,500)

Net profit 26,500

SOLUTION 7 (ii)

FATIMA & CO. BALANCE SHEET

AS ON 31 DECEMBER 2004 ASSETS

Current Assets: Cash 6,400 Accounts receivable 40,000 Less: Allowance for bad debts (3,000) 37,000

Merchandise inventory 30,000 Prepaid insurance 400 Sales supplies 200

Total current assets 74,000 Fixed Assets: Sales equipment 30,000 Less: Allowance for depreciation (5,000)

Total fixed assets 25,000

Total assets 99,000

EQUITIES

Liabilities: Current Liabilities: Accounts payable 24,000 Sales salaries payable 500

Total liabilities 24,500 Owner’s Equity: Capital 48,000 Add: Net profit 26,500

Total owner’s equity 74,500

Total equities 99,000



Page 14

Additional Working: FATIMA & CO.

ADJUSTING ENTRIES FOR THE PERIOD ENDED 31 DECEMBER 2004


1 Merchandise inventory 30,000 Expense and revenue summary 30,000 (To adjust the merchandise inventory)

2 Sales supplies expense 1,000 Sales supplies 1,000 (To adjust the sales supplies expense)

3 Insurance expenses 400 Prepaid insurance 400 (To adjust the prepaid insurance)

4 Sales salaries expenses 500 Sales salaries payable 500 (To adjust the accrued salaries)

5 Depreciation expense 5,000 Allowance for depreciation – Sales equipment 5,000 (To adjust the depreciation expense)

6 Bad debts expense 3,000 Allowance for bad debts 3,000 (To adjust the bad debts expense)

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