SECTION “A” (MULTIPLE CHOICE QUESTIONS)
1. Choose the correct answer for each from the given options:
(i) In single entry system, statement of assets, liabilities and capital is called:
* Income Statement
* Retained Earning Statement
* Statement of profit/loss
* Statement of affairs
(ii) Receipts and payments account is a summary of:
* cash book
* purchase book
* Sales book
* none of these
(iii) The shares of a public limited company are:
* Non transferable
* Non refundable
* None of these
(iv) In appearance, the statement of affairs is similar to a:
* Balance sheet
* Profit and loss account
* Trading account
* Statement of retained earning
(v) Persons, who have entered into a partnership, are collectively called:
(vi) This is shown as a liability:
* Advance from customers
* Loan to employee’s
* Accrued rent income
* Unexpired insurance
(vii) Fixed assets are usually used for:
* a no. of years
* five years
* one year
* six months
(viii) Depreciation is a process of:
* Cost allocation
* Cash accumulation
(ix) The amount collected from the members by a non profit organization on annual bases is called:
(x) Salvage value is not deducted from the cost of the fixed asset while calculating depreciation under:
* Straight line method
* Units of production method
* Hours of work method
* Diminishing bal. method
(xi) The share capital through which a company is registered, is called:
* Issued Capital
* Paid up Capital
* Authorized Capital
* Called up Capital
(xii) Profit I Loss of a company is transferred to its:
* Retained earning a/c.
* Share Capital account
* Profit-and loss account
* Bank account
(xiii) Non-profit organizations are established for:
* Earning profits
* Trading purpose
* Manufacturing goods
* Welfare purposes
(xiv) The profit paid’ by a company to its shareholders is known as:
(xv) A public limited company is managed by its:
* Bond holders
* Board of Directors
(xvi) A written partnership agreement is called:
* Partnership Act
* Partnership Registration
* Partnership Certificate
* Partnership Deed
(xvii) Under the straight line method, the annual depreciation charge:
* Remain Constant
(xviii) The new partner is credited by his entire amount of investment under:
* Goodwill method
* Bonus method
* Revaluation method
* Purchase of interest
(xix) Cash dividend is paid by the issuance of:
* Pay order
* Bank draft
* Bonus shares
* Dividend Warrant
(xx) Example of non-profit making organization is:
* Fan factory
* Sugar mill
* Private college
* none of these
SECTION ‘B’ (SHORT-ANSWER QUESTIONS)
Note: Attempt any five questions from this section.
2. PARTNERSHIP-DIVISION OF PROFIT & LOSS
Bilal and Haris are partners having capitals of Rs.120,000 and Rs.80,000 respectively. Their profit and loss sharing ratio is 2:1. They agree to admit Saad as a partner for 1/3 interest in the firm.
REQUIRED: Give entries in the General Journal to record the admission of Saad under each of the following separate cases.(Show necessary computations)
Case i, Saad invest sufficient cash to take 1/3 interest in the firm.
Case ii. Saad invest Rs.136,000 cash for 1/3 interest (The total capital of the firm is to be increased by the amount of Saad’s investment only)
4. x, y and z were partners sharing profit and loss in the ration of 3:2:1 respectively. They decided to dissolve the firm on December 31, 2012. Just before liquidation, the balance sheet was as follows:
Other assets were sold for Rs.460,000 Cash, liabilities were paid in full. The remaining cash was distributed among — the partners.
REQUIRED: Prepare necessary entries for liquidation of firm in General Journal.
5. ISSUANCE OF SHARES & DEBENTURES:
Sana & Co. was registered with an authorized capital of Rs.50,00,000 divided into 500,000 ordinary shares of Rs.10 each. The company offered 20,000 shares to the public payable in full on application. The bank of the company informed that applications for 25,000 shares were received.
The company allotted the offered shares and refunded the amount received in excess, During the year, the company completed the following transactions:
(i) Issued 6,000 ordinary shares at Rs.15 each for cash.
(ii) Issued 3,000 shares to’ the promoters at par in consideration of their services of the company.
(iii) Issued 5,000 12% debentures of Rs.100 each at Rs.95 cash.
REQUIRED: Give entries in the G. Journal of Sana & Co.
6. COMPANY – RETAINED EARNINGS:
The following data is extracted from the balance sheet of Taha & Co. Ltd. as on December 31, 2012.
500,000 Ordinary shares of Rs.10 each 50,00,000
Issued and paid up capital:
200,000 Ordinary shares of Rs.10 each 20,00,000.
Retained Earning 2,50,000
On December 31, 2012 the income summary of the
company showed a net income of Rs.750,000.The company decided as under:
(i) To declared cash dividend @ 15%.
(ii) To appropriate Rs.2,00,000 for plant expansion.
(iii) To appropriate Rs.1,20,000 for contingencies.
(iv) To appropriate Rs.1,80,000 for sinking fund.
REQUIRED: Prepare necessary entries in the General Journal of Taha & Co. Ltd.
7. SINGLE ENTRY:
Mr. Imran started his business on March 1, 2012 with a cash investment of Rs.50,000. He kept his records on single entry basis. On December 31, 2012 the following information was available:
Cash Rs.15,000 Account Receivable Rs.30,000 Merchandise Inventory Rs.25,000 office Equipment Rs.40,000 Account Payable Rs,20,000.
(i) He withdrew Rs.1,000 cash per month from the business for his personal use.
(ii) He made an additional investment of Rs.10,000 in his business.
(iii) Accrued salaries amounted to Rs.2,500.
(iv) Office equipment is to be depreciated @ 12% per annum
(v) Prepaid rent is Rs.1,500.
REQUIRED: Prepare statement of profit and loss for the year ended December 31,2012.
8. NON-PROFIT CONCERN:
Following are the receipts and payments account of pioneer sports club for the year 2012.
Additional Informations on December 31, 2012:
(i) Depreciation on fixed assets @ 10%.
(ii) Accrued interest on Bank loan @ 12% per annum.
(iii) Accrued subscription Rs.6,000.
(iv) Unearned Rent Rs.4,000.
(v) Prepaid utilities Rs.3,000.
REQUIRED: Prepare income and expenditure account for the year ended on December 31, 2012.
SECTION C (DETAILED-ANSWER QUESTION)
Note: Attempt any Two part questions.
9. DEPRECIATION ACCOUNTING:
(a) Identify the following as ‘Capital Expenditure’ or ‘Revenue Expenditure’.
(i) Purchased new battery for an older motor vehicle.
(ii) Replaced hand dise of office computer which doubled its storage capacity.
(iii) Transfer charges of a newly owned building.
(iv) Paid annual motor vehicle tax.
(v) Annual maintenance of plant and equipments.
(i) Revenue Expenditure.
(ii) Capital Expenditure.
(iii) Capital Expenditure.
(iv) Revenue Expenditure.
(v) Revenue Expenditure.
9.(b) Khalid & Co. purchased a machine on January 1, 2010, having a list price of Rs.900,000. It was subject to a Trade discount of 10%. The credit terms are 2/10, n/30 (The payment was made within the credit period) The company also paid Sales Tax Rs.80,000, transportation charges Rs.12,000, labour charges Rs.5,000, foundation cost Rs.6,000, installation charges Rs.3,500, test run charges Rs.2,500, paid Rs 4,000 as premium for a 3 years fire insurance policy and Rs.1,200 as driving license fee.
(i) Calculate the cost of machine.
(ii) Give entries in the General Journal to record the above transactions.
COMPUTATION OF COST OF MACHINE
List Price 9,00,000
Less: 10% Trade Discount 90,000
Invoice Price 8,10,000
Less: 2% Cash Discount 16,200
Net Cash Price 7,93,800
Add: Other Expenses
Sales Tax 80,000
Transportation in 12,000
Labour charges 5,000
Foundation cost 6,000
Installation cost 3,000
Test run charges 2,500
Total Other Expenses 1,08,500
Total Cost of Machine 9,02,300
9.(c) Usman & Co. purchased a machine costing Rs.5,25,000 on March 31, 2012. It was estimated to have a salvage value of Rs.1,25,000 and useful life of 10 years.
(i) Calculate depreciation charge for the year ended on December 31,2012 under straight line method.
(ii) Prepare adjusting entry to record depreciation as on December 31,2012 under diminishing balance method.
COMPUTATION OF DEPRECIATION,
BY HOURS METHOD.
Per year depreciation = cost – Salvage value
Per year depreciation = 5,25,000 – 1,25,000
Per year depreciation = 400,000
Depreciation 31.12.2012 (40,000 x 9/12) 30,000.