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PRINCIPLES OF ACCOUNTING – b.Com part – I

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Instructions: Attempt any five questions.

Q.No.1 ACCOUNTING PRINCIPLES AND CONCEPTS

Explain the following accounting principles and concepts, and illustrate effects of their
violation:
(i) Concept of going concern.
(ii) Concept of business entity.
(iii) Principle of consistency.
(iv) Principle of conservatism.
(v) Principle of adequate disclosure.

Q.No.2 WORK SHEET

GIVEN The following balances were taken from the General Ledger of Mr. Saleem, a sole
proprietor on September 30, 995
Cash 12,250
Notes receivable 3,000
Accounts receivable 5,300
Allowance for bad debts (Cr.) 100
Merchandise inventory 20,180
Store supplies 540
Building 50,000
Accumulated depreciation – Building 20,000
Accounts payable 8,720
Notes payable 5,000
Saleem, Capital 40,000
Sales revenue 95,000
Interest revenue 200
Cost of goods sold 57,900
Salaries expense 7,500
General expense 10,900
Interest expense 700
Property tax expense 750
The data for adjustments to be made at year ended September 31, 1995 are:
(i) Store supplies on hand Rs.310.
(ii) Property tax paid in advance Rs.145.
(iii) Accrued interest on notes receivable Rs.212.
(iv) Accrued interest on notes payable Rs.150
(v) Adjust the allowance for bad debts account to 5% of accounts receivable.
(vi) The building has an estimated life of 50 years with no salvage value (Straight Line Method of
depreciation).
REQUIRED
Prepare Ten-Column Work Sheet.

Q.No.3 ADJUSTING, CLOSING AND REVERSING ENTRIES

GIVEN The following information related to the accounts of the Global Equipment Company
is available at the year-end on December 31, 1995:

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(i) Store supplies account shows a debit balance of Rs.1,850. A count of store supplies on
December 31 amounts to Rs.370.
(ii) On November 1, 1995, company received Rs.5,400 for repair service to be provided during
next 9 months. The amount appears in the unearned repair revenue account.
(iii) December 31, 1995 falls on Monday. Employees of the company are paid Rs.14,224 on every
Thursday, for six working days.
(iv) Insurance expense has debit balance of Rs.7,660. Details of that amount are as follows:
Policy No. Date of the Purchase of Policy Period of Policy Amount
101 January 1, 1995 3 years Rs.4,800
102 July 1, 1995 2 years 1,900
103 September 1995 1 year 960
(v) Sale commissions are paid at 2% of net sales. Payment is made monthly, on 10th of the
following month. Net sales for the month of December were Rs.108,600.
REQUIRED
Prepare in the General Journal:
(i) Adjusting entries.
(ii) Reversing entries.

Q.No.4 BANK RECONCILIATION STATEMENT

GIVEN The accountant of Majid Company has extracted the following data from its cash
book (bank column) and its bank statement on September 30, 1995:
(i) Balance as per bank statement Rs.10,162.
(ii) Balance as per cash book Rs.12,525.
(iii) A cheque for Rs.1,500 was issued by the company for the purchase of furniture. The same
was paid by bank but was not entered in company books.
(iv) A cheque for Rs.750 of Mr. Khalil deposited into bank but was erroneously recorded as
Rs.570 in company books.
(v) Bank deposit of September 30, for Rs.1,750 not shown in bank statement.
(vi) Dividends collections were credited by the bank but not recorded in company books,
Rs.1,250.
(vii) Bank returned a cheque of Rs.630 marked NSF, which was received from Hamid.
(viii) The company issued a cheque of Rs.1,250 for repairs whilst the same was erroneously
recorded by the bank as Rs.1,520.
(ix) Cheques outstanding as of September 30, were as follows:
No. 860 for Rs.151.93
No. 867 for Rs.82.46 and
No. 869 for Rs.122.61.
REQUIRED
(a) Prepare a Bank Reconciliation Statement of September 30, 1995.
(b) Prepare the necessary adjusting entries in General Journal form.

Q.No.5 (a) SPECIAL JOURNAL

GIVEN Following payments were made by Mr. Aslam for the month of July 1995, credit
terms are 3/10, n/30;
July 8 Paid Asghar Company invoice due for Rs.1,500 dated July 2, issued cheque no. 234.
July 12 Paid freight charges on merchandise purchased Rs.120, issued cheque no. 235.
July 15 Paid Feroze Company invoice of Rs.4,500 dates July 8 less returns of Rs.500. Issued cheque
no. 236.

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July 22 Purchased merchandise for cash Rs.2,000 and issued cheque no. 237.
July 23 Mr. Aslam withdrew Rs.500 from business. Issued cheque no. 238.
REQUIRED
(i) Record the transactions for July using cash payments journal.
(ii) Foot and rule the journal.

Q.No.5 (b) VOUCHER SYSTEM

GIVEN Enter the following transactions in General Journal form. Assume the use of voucher
register and a cheque register:
(i) Issued voucher no. 722 to establish a petty cash fund Rs.1,000.
(ii) Prepare a cheque no. 932 in payment of voucher no. 722.
(iii) Petty cash receipts indicate the following expenditures:
Store supplies Rs. 11.44
Office supplies expenses 16.20
Miscellaneous expenses 48.30
Issued voucher no. 832 reimburse the petty cash fund.

Q.No.6 ACCOUNTS RECEIVABLE

(a) GIVEN Following is the aging schedule of Fazal Company as of December 31, 1995:
Balance Not Yet Due Days Past Due
1 – 30 31 – 60 61 – 90 More than 90
40,000 20,000 10,000 5,000 3,000 2,000
Rates of estimated uncollected accounts:
Time Past Due Estimated Percentage
Not yet due 2%
1 – 30 days 4%
31 – 60 days 20%
61 – 90 days 30%
Over 90 days 50%
Allowance for bad debts account has a credit balance of Rs.1,200.
REQUIRED
(i) Compute the amount of estimated uncollectible accounts and compute the bad debts
expense.
(ii) Record the adjusting entry for bad debts expense.
(iii) Prepare partial balance sheet.

(b) GIVEN Following are the transactions of Ambar Company:

(i) Collected 5% of Rs.1,400 owed by Hi-light Company, bankrupt. Wrote off the remainder as
worthless.
(ii) Received Rs.228 from Mr. Irfan, whose account has been written off two years earlier.
(iii) Following accounts were written off as uncollectible:
Mr. Fahim Rs. 384
Star Co. 272
Sunlight Co. 566
(iv) Estimated bad debts at 1% of credit sales of Rs.52,400. Allowance for bad debts before
adjustment was Rs.150 (Debit).
REQUIRED
Record the above entries in the General Journal.

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Q.No.7 INVENTORY VALUATION

(a) What are the effects of overstatement and understatement of beginning and ending
inventory on gross profit?
(b) GIVEN Imam Company have the following items in inventory on September 30, 1995:
Inventory Cost Market Price
Category A Rs. Rs.
Item 1 1,000 700
Item 2 1,200 1,300
Category B
Item 3 2,000 2,400
Item 4 2,500 2,200
REQUIRED
Compute the value of ending inventory using “Lower of Cost or Market” rule item by item,
category wise, and inventory as a whole.

(c) GIVEN The inventory record of Imam Company showed the following transactions for the
month ended September 30, 1995:
Units Unit Cost
September 1 Inventory 700 Rs. 6.20
September 5 Purchases 400 6.40
September 18 Sales @ Rs.12 300 ---
September 25 Sales @ Rs.12.5 600 ---
September 28 Purchases 600 6.70
REQUIRED
Compute the ending inventory under:
(i) LIFO – Perpetual System (ii) LIFO – Periodic System
Explain the causes of difference in the final inventory valuations under the above two systems.

Q.No.8 DEPRECIATION
GIVEN During 1995 Agro Spray Company engages in the following transactions:
January 1: The Company traded in its old computer system as a part of a new system. The old
computer had cost Rs.40,000 and accumulated depreciation of Rs.14,000. The new
computer had a list price of Rs.64,000. The company was granted Rs.24,000 trade in
allowance for the old computer system.
April. 2: The Company sold a building for Rs.255,000. The building cost Rs.335,000 and had
an accumulated depreciation of Rs.135,000 (January 1, 1995). The company uses
Straight Line Method of depreciation. The building was estimated to have a useful
life of 20 years and salvage value of Rs.35,000.
June. 30: The company retired a machine: Cost of machine was Rs.10,000 and on this date
allowance for depreciation was Rs.8,500. Salvage value was estimated at Rs.400.
REQUIRED
Record each of the transactions listed above (Show all computations).

Q.No.9 ACCOUNTING FOR COMPANIES

GIVEN Waheed Company Limited issued ordinary shares of Rs.10 each during 1995:
(i) 10,000 shares for purchase of machine (market price of shares was Rs.12).
(ii) 4,000 shares at par to promoters for services rendered.

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(iii) Offered 90,000 shares to the public at a premium of Rs.2. application money received for
120,000 shares. The company allotted the shares and refunded the excess money.
(iv) Issued 5,000 shares at par for the redemption of 20% debentures payable.
(v) The company acquired the following assets from a firm:
Merchandise Rs.20,000; Equipment Rs.120,000 and Furniture Rs.60,000.
Purchase consideration was paid by issuing 25,000 shares of Rs.10 each as fully paid up.
REQUIRED
Record the above transactions in the G. Journal of the Co.

Instructions:
(1) Attempt any five questions.
(2) All question carry equal marks.

Q.No.1 WORK SHEET

GIVEN The following balances were taken from the General Ledger of Mr. Tanveer Adil on
December 31, 1995:
Cash 5,000
10% Investment in bonds 10,000
Merchandise inventory (1-1-95) 4,000
Purchases 20,000
Accounts receivable 10,000
Allowance for bad debts (Dr.) 200
Office supplies expense 800
Office equipment 15,000
Allowance for depreciation – Office equipment 6,000
Interest income – Investment in bonds 500
Unearned rent 5,500
Sales 35,000
Salaries expense 4,000
Advertisement expense 1,000
Capital – Mr. Tanveer Adil 23,000
The data for adjustments for the year ended December 31, 1995:
(i) Merchandise inventory Rs.10,000 on 31-12-1995.
(ii) Interest on investment on bonds is receivable semi-annually on June 30, and December 31.
(iii) Provision for estimated bad debts for the year at 5%.
(iv) Office supplies used Rs.500.
(v) 20% Depreciation for the year on written down value of office equipments.
(vi) Rent is not earned Rs.2,000 only.
(vii) Salaries expense for the year Rs.3,000.
(viii) Prepaid advertisement Rs.200.
REQUIRED
Prepare Ten-Column Work Sheet.

Q.No.2 ADJUSTING AND CLOSING ENTRIES

GIVEN The following balances have been taken from the books of JunaidShibli& Company
on December 31, 1995:

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Salaries expense 10,000

Rent income 18,000
Advertisement expense 5,000
Commission income 2,000
Accounts receivable 20,000
Sales 50,000
Allowance for bad debts (Cr.) 500
Prepaid insurance 3,000
Purchases 35,000
10% debentures payable 20,000
Interest expense – Debentures payable 1,000
Supplementary Data for Adjustments:
(i) Salaries amounting to Rs.3,000 were payable on December 31, 1995. Salaries were also paid
in advance Rs.1,500 which have already been charged to salaries expense.
(ii) Unearned rent Rs.2,000.
(iii) Advertisement expense for the year Rs.1,000.
(iv) Commission income for the year Rs.1,500.
(v) Estimated bad debts 1/2 of 4% on sales.
(vi) Premium paid for insurance covering the period from July 1, 1995 to June 30, 1998.
(vii) Interest is paid June, 30 and December 31, on debentures payable were issued on April 1,
1995.
(viii) Rebate in original selling price was granted to a customer on defective goods, amounting to
Rs.500. This amount had already been charged to sales.
REQUIRED
Adjusting and closing entries in General Journal.

Q.No.3 ACCOUNTING FOR COMPANIES

(a) GIVEN Siddique Company Ltd. is registered with an authorized capital of Rs.1,000,000
divided into 100,000 ordinary shares of Rs.10 each. The company issued its shares as under:
(i) The company offered to the public 50,000 shares at par. Applications for 40,000 shares were
received. As per agreement the underwriters subscribed for the balance of their shares. The
directors finalized the allotment of 40,000 shares to the public and 10,000 shares to the
underwriters. The company paid 2% underwriting commission on shares subscribed to them.
(ii) The company purchased a machine costing Rs.72,000 and issued sufficient shares. The
shares had a market value of Rs.8/= each.
(iii) The company allotted necessary shares in consideration of stock dividend Rs.50,000. The
shares had a market value of Rs.12.50.
(iv) The company issued 1,000 shares in exchange for services rendered to the company. The
stock holders agreed that these services were worth Rs.15,000.
REQUIRED
Record the above transactions in the General Journal of the company.

(b) (i) Aamir Company issued 10,000 – 15% debentures payable of Rs.10 each at market
price of Rs.9/= each, redeemable after 5 years at Rs.12/= each.
(ii) The company created reserve for plant extension for Rs.20,000.
REQUIRED
Record entries in the General Journal of the Company.

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Q.No.4 ACCOUNTS RECEIVABLE

(a) GIVEN The following balances have been taken from the books of Mr. Shaheryar on
December 31, 1995:
Accounts receivable (1-1-1995) Rs. 40,000
Allowance for bad debts (1-1-1995) 1,000
Total sales on credit during the year 400,000
Sales returns on credit 80,000
An amount was granted as sales discount 20,000
Cash collection during the year from customers whom credit sales were made 100,000
REQUIRED
(i) Uncollectable account expense is estimated 0.25 of 10% of net sales on credit.
(ii) Prepare partial balance sheet as on December 31, 1995.

(b) GIVEN Atif& Company presented the following selected information for the year ended
December 31, 1995:
Balance accounts receivable (31-12-94) Rs. 200,000
Balance allowance for bad debts (31-12-94) Rs. 5,000
A customer account is written off 6,000
A previously written off account of Rs.7,000 was subsequently recovered to the extent of 5,000
On December 31, 1995, the A/R (control) showed a debit balance of Rs.86,000. Analysis of
accounts receivable subsidiary ledger revealed a credit balance of Rs.4,000 in customer account.
On this date the company estimates bad debts at 10% of accounts receivable.
REQUIRED
(a) Record entries including adjusting.
(b) Prepare partial balance sheet as on December 31, 1995.

Q.No.5 INVENTORY VALUATION

GIVEN During the year 1995 Shamim Company sold 12,000 units of X commodity for
Rs.240,000. The company had on hand 1,500 units each Rs.13/= on January 1, 1995. Purchases
during 1995 were as follows:
Month Date Quantity in Units Unit Cost Total Cost
January 20 2,000 Rs.12.00 Rs. 24,000
March 30 1,000 Rs.13.00 Rs. 13,000
May 24 3,000 Rs.13.00 Rs. 39,000
July 12 4,000 Rs.15.00 Rs. 60,000
September 15 1,000 Rs.16.00 Rs. 16,000
November 20 1,000 Rs.17.00 Rs. 17,000
December 8 600 Rs.18.00 Rs. 10,800
Total 12,600 Rs. 179,800
REQUIRED
On December 31, 1995, compute the gross profit/loss on sales, assuming the use of the
following cost of closing inventory of each method:
(a) FIFO (b) LIFO (c) Weighted Average

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Q.No.6 DEPRECIATION
(a) GIVEN The following information are available from the book of Amjad& Company:
On January 10, 1995, the company paid Rs.9,000 for replacing the plaster of walls of building. It is
estimated that the new plaster will extent life of building from original life of 30 years to a total life
of 36 years. Following are dome details of subsidiary ledgers:
(i) Cost of building Rs.100,000.
(ii) Allowance for depreciation unto December 31, 1994 Rs.45,000.
(iii) Age of building 20 years.
REQUIRED
(a) Record extra ordinary repair in General Journal.
(b) Determine depreciation on building for the year in which plaster was replaced, using Straight
Line Method and assuming no scrap value.
(c) Prepare partial balance sheet on 31-12-1995.

(b) GIVEN Hanif Company Ltd. purchased a truck on January 1, 1993 at a cost of Rs.275,000
having estimated life 25 years and salvage value Rs.25,000. The company uses Straight Line
Method and accounting year ends on December 31, each year.
On January 10, 1995 the company decided that estimated total life of truck should be 22 years
instead of 25 years and salvage value should be Rs.35,000 instead of Rs.25,000.
On July 1, 1196, the truck was traded in with a new truck having a listed price Rs.300,000. The
trade-in-allowance of old truck was agreed at Rs.138,500 and balance is paid in cash.
REQUIRED
Computation and only entry to trade-in in the General Journal.
The loss or gain on exchange is unrecognized.

Q.No.7 BANK RECONCILIATION STATEMENT

GIVEN On Comparison of cash book entries with those of the bank statement of Maqsood
Company on June 30, 1996, the following differences were found:
(i) Cash book balance (Dr.) Rs.15,000.
(ii) Bank statement balance (Dr.) Rs.20,000.
(iii) A cheque for Rs.14,500 deposited into bank was wrongly entered into bank statement for
Rs.5,100.
(iv) Marked-up charged by bank Rs.600.
(v) Cheque of Baber & Co. for Rs.3,500 has marked NSF (Dishonoured) and returned by bank.
(vi) A cheque drawn for purchases of equipment Rs.4,000 but was recorded by Company
Rs.2,500.
(vii) A customer cheque for Rs.8,600 deposited directly in bank was, by mistake entered into cash
column of cash book.
(viii) Total uncleared cheques amounted Rs.30,000.
(ix) Cheques issued Rs.10,000 but presented for cash Rs.5,800 into bank.
(x) The bank paid a non-interest bearing note for Maqsood Company’s account Rs.3,000 was
not recorded in cash book.
(xi) A cheque Rs.2,000 drawn by Maqbool Company, was wrongly debited by bank to Maqsood
Co. account.
(xii) Dividend collected by bank but was not recorded in cash book Rs.2,200.
REQUIRED
(i) Prepare a Bank Reconciliation Statement showing adjusted balance.
(ii) Prepare necessary adjusting entries in the General Journal of Maqsood Company.

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Q.No.8 (a) VOUCHER SYSTEM

GIVEN Record the following transactions of Aslam in General Journal form. Assume the use
of voucher register and cheque register:
(i) Purchase raw material from ZahidRs.20,000 voucher No. 550 and paid transportation
expense thereon Rs.300 voucher No. 551 vide cheque No. B-25.
(ii) Paid advertisement expense voucher No. 552 Rs.2,000.
(iii) Purchased equipments Rs.6,000 making down payment of Rs.2,000 and agreeing to pay the
balance in 15 days.
(iv) Advance by cheque Rs.4,000 for travel expenses to an officer making a business trip.
(v) Reimbursed the officer by cheque with Rs.1,000 for expenses incurred by him in excess of
travel expenses.

Q.No.8 (b) CASH CONTROL

GIVEN Arif Company completed the following transactions:
(i) Sold for Rs.200,000 half portion of building bearing cost Rs.130,000. Received according to
terms of sales Rs.150,000 in cash and a 10% six months note for balance.
(ii) Sold merchandise to Mushtaq Brothers Rs.50,000 on list price subject 10% trade discount on
credit terms 5/15, 2/20 and n/30 on June 1, 1996.
(iii) On June 5, 1996 Mushtaq Brothers returned merchandise Rs.10,000 and paid balance in
cash on June 19, 1996.
(iv) Merchandise worth Rs.50,000 and cash Rs.30,000 were burnt by fire.
REQUIRED
Record the above transactions in General Journal of Arif Company.

Q.No.9 MODARABA AND MUSHARIKA

GIVEN Write a detailed note on Modaraba and Musharika.

Instructions:
(1) Attempt any five questions.
(2) All questions carry equal marks.

Q.No.1 WORK SHEET

GIVEN Presented below is the unadjusted trial balance of Hasan& Co. as at the end of year
December 31, 1996.
Debit Credit
Cash 1,000
Accounts receivable 3,000
Merchandise inventory (1.1.96) 30,000
Office supplies 2,500
Automobile 200,000
Accumulated depreciation: Automobile 7,500
Accounts payable 2,500
Hasan – Capital 200,000
Hasan – Drawings 1,600
Sales 190,400
Purchases 144,000

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Freight – in 500
Salaries expenses 5,800
Rent expense 6,000
Automobile expenses 4,200
Utility expenses 1,800
400,400 400,400
Data for year – end adjustments:
(i) The inventory was counted at end, values Rs.26,000.
(ii) Out of automobile expenses, Rs.400 represents those of owner’s private use.
(iii) Office supplies has a physical balance at end valued Rs.200.
(iv) Salaries included Rs.1,500 not earned by the employees.
(v) The automobile has run ten thousand kilometers during the period; the rate of depreciation
is one rupee per kilometer.
REQUIRED
Prepare a 10-Column Work Sheet.

Q.No.2 CLOSING AND OPENING ENTRIES

GIVEN Take the data given in question No. 1 above.
REQUIRED
(1) Record the appropriate entries in General Journal to close the accounts.
(2) And the opening entries in General Journal for the next accounting year.

Q.No.3 ADJUSTING AND REVERSING ENTRIES

(a) GIVEN The following selected balances are taken from the pre-closing trail balance of M/s.
Zeeshan Traders for the year ended June 30, 1995:-
Salaries expense Rs. 20,000
Commission earned 10,000
Sales return & allowance 1,000
Advertising unexpired 5,000
Selling expense 8,000
General expense 6,000
Allowance for bad debts (Cr.) 400
Additional data for adjustments:
(a) Salaries accrued amount to Rs.5,000.
(b) Commission unearned amount to Rs.900.
(c) Sales return & allowance increases to Rs.150.
(d) Advertising expired amount to Rs.1,000.
(e) Allowance for bad debts to be raised to Rs.1,000.
REQUIRED
Prepare adjusting journal entries in proper form.

(b) GIVEN Assume that an adjusting entry made on December 31, 1996 was as follows:-
Salaries expense 4,000
Salaries payable 4,000
(Four days salaries for December, accrued)
Show how a January 3, 1997, payment of Rs.6,000 (6 days) salaries would be recorded, assuming
that:-
(i) No reversing entry used and

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(ii) A reversing entry used, on January 1, 1997.

Q.No.4 CASH CONTROL – BANK RECONCILIATION

(a) GIVEN During the process of completing the bank reconciliation of Millat Supply Co. for 28,
February 1997, the following facts were discovered:
Balance as per cash book Rs. 437,850
Balance as per bank statement Rs. 460,750
(i) A cheque for Rs.2,050 was wrongly deducted in the cash book as Rs.20,500.
(ii) Company deposited three cheques during the month, but one cheque of Rs.24,000 remain
uncleared.
(iii) Cheque book charges by bank Rs.50.
(iv) Bank charges of Rs.1,500 was deducted by the bank.
(v) Cheque amounting to Rs.67,450 found outstanding.
(vi) A cheque amounting to Rs.36,550 returned by bank marked.
(vii) A cheque for Rs.36,500 was issued but entered in the company’s record as Rs.35,600.
REQUIRED
Prepare a Bank reconciliation Statement at Feb. 28, 1997, giving adjusted balance of cash
book and the bank.

(b) GIVEN Baluch Corporation uses voucher system. The following transaction occurred during
the May 1997:
(i) Voucher No. 100 prepared to purchase office equipment at cost of Rs.4,000 from Hub
Furniture Co.
(ii) Cheque No. 114 issued in payment of voucher No. 100.
(iii) Voucher No. 101 prepared to establish a petty cash fund of Rs.150.
(iv) Cheque No. 115 issued in payment of voucher No. 101.
(v) Voucher No. 102 prepared to replenish the petty cash fund which contained Rs.40 cash and
receipts for postage Rs.38, miscellaneous expense Rs.54, and delivery service Rs.18.
(vi) Cheque No. 116 issued in payment of voucher No. 102.
REQUIRED
Record the above transactions in voucher register and cheque register in the General journal form.

Q.No.5 ACCOUNTING FOR RECEIVABLES

(a) GIVEN An analysis of the accounts receivable at end year produced the following groups:-
Not yet due Rs. 150,000
1 – 30 days past due 75,000
31 – 60 days past due 45,000
61 – 90 days past due 15,000
Over 90 days past due 10,000
Percentage considered uncollectable:-
Group Percentage
1 2%
2 3%
3 15%
4 30%
5 50%

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REQUIRED
(i) Compute the estimated amount of uncollectable amount based on the above estimates.
(ii) Give the adjusting entry to record the bad debts expense assuming that allowance for
doubtful account showed a credit balance of Rs.400.

(b) GIVEN The following balances available for Zubair Company as at 1.1.1996.
Accounts receivable Rs. 300,000
Allowance for doubtful accounts 16,000
During the year ended December 31, 1996 the following transactions were completed:-
(a) Sales on account Rs.950,000 and for cash Rs.50,000.
(b) Cash collection from customer’s Rs.550,000.
(c) Customer’s account written off amount to Rs.10,000.
(d) Previously written off accounts recovered Rs.8,000.
The company estimates the uncollectable expense at the rate of 2-1/2% of credit sales.
REQUIRED
(i) Prepare entries in General Journal to record the above transactions.
(ii) Prepare adjusting entry for uncollectable expense at the end of period.

Q.No.6 INVENTORY VALUATION

(a) GIVEN Give the necessary journal entries under both Perpetual and Periodic systems from
the following:-
(i) Purchased merchandise on account Rs.120,000 and cash Rs.30,000.
(ii) Returned merchandise worth Rs.3,000 cash.
(iii) Paid freight on purchases Rs.800.
(iv) Paid to the merchandise creditor’s subject to credit term 2/10, n/30.
(v) Sold merchandise costing Rs.55,000 for cash Rs.10,000 and on account Rs.50,000.

(b) GIVEN The record of Pioneer Sales Co. shows the following data for its sales and purchases:-
Nov. 1, 1996 Beginning inventory 300 units at Rs.55
Purchases Sold
Nov. 4 375 units at Rs.55
Nov. 12 400 units at Rs.56
Nov. 24 200 units at Rs.57
250 units at Rs.60
300 units at Rs.64
100 units at Rs.65
REQUIRED
Compute the ending inventory and the gross profit at the end of November, 1996 under
FIFO and LIFO using Periodic Inventory System.

Q.No.7 ACCOUNTING FOR PLANT ASSETS

(a) Distinguish the following as Capital or Revenue Expenditures:
(1) Annual maintenance of plant and equipment.
(2) Purchase of office furniture for business use.
(3) Three years insurance paid on equipment for fire risk.
(4) Purchase of hard disk for a computer to increase its storage capacity.
(5) Purchase a new battery for a 3 years old truck.
(6) Depreciation of equipment charged for the year.

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(b) GIVEN On January 1, 1993, Ghalib Co. purchased an equipment for Rs.155,000. The
equipment has an estimated life of 5 years and expected salvage value of Rs.5,000. The
accounting year of the Co. ends on December 31, each year.
REQUIRED
Give the necessary computations and the general entries to record the disposal of
equipment on December 31, 1995, under each of the following assumptions:-
(1) The equipment sold for cash and gain realized value Rs.35,000 (assuming that the Co. uses
Straight Line Method).
(2) The equipment was traded-in at Rs.30,000 for new equipment that had a cash price of
Rs.175,000 (assuming that the Co, uses Sum-of-the-Years’ Digit Method).

Q.No.8 CORPORATION – ISSUANCE OF SHARES

GIVEN Dewan Co. Ltd. was incorporated on January 3, 1996, with an authorized capital of
Rs.5,000,000 divided into 500,000 ordinary shares of Rs.10 each. The following information are
available to you:-
Date:
10-1-96: The formation expense of Rs.50,000 were paid by the promoters.
15-1-96: The following shares were issued and fully subscribed at par:
30,000 shares to (NIT)
20,000 shares to the company employees
50,000 shares to the general public
16-1-96: The Company entered into an agreement with M/s. Zulfi Industries to take over its
assets and liabilities at liabilities at the following values:
Equipment Rs.150,000; Building Rs.220,000; Furniture and fixture Rs.40,000;
Accounts payable Rs.10,000.
In exchange 30,000 ordinary shares of Rs.10 each were issued and fully subscribed.
31-12-96: The Company received cash Rs.107,722 in exchange of 5 years, 12% bonds liability
worth Rs.100,000.
31-12-96: Under writer’s commission of Rs.14,500 is outstanding against the company.
REQUIRED
Prepare dated general entries from the above transactions in the book of Dewan Co. Ltd.

Q.No.9 CORPORATE FINANCIAL STATEMENTS

GIVEN Take the data given in question No. 8 above.
REQUIRED
Prepare a balance sheet of M/s. Dewan Company Ltd. as on December 31, 1995.

Instructions: Attempt any five questions.

Q.No.1 ACCOUNTING CONCEPTS AND PRINCIPLES

Define “Concept” and “Principle” from the view-point of accounting. List out the different
concepts and principles used in accounting. Also explain any TWO concepts and any TWO principles.

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Q.No.2 WORK SHEET

GIVEN The following balances were taken from the General Ledger of Mr. Khalid Saeed, for
the year ended on 30th June, 1997.
Cash 12,800
Merchandise inventory on 1st July 1996 11,200
Accumulated depreciation – Furniture 3,600
Office supplies 2,000
Accounts receivable 16,000
Carriage outward 800
Furniture 10,000
Bank overdraft 7,400
Carriage inward 1,250
Accounts payable 12,800
Sales 130,400
Commission income 4,600
Salaries expense 19,000
Khalid Saeed’s Capital 42,000
Purchases 89,950
Insurance expense 1,800
Prepaid rent 36,000
Additional Data to be adjusted:
(1) Merchandise inventory on 30th June 1997, was valued at Rs.15,000.
(2) Rent expired at the rate of Rs.2,000 p.m.
(3) Rs.3,500 of salaries is outstanding.
(4) During the year three-fifth of office supplies was consumed.
(5) One-fourth of the commission income was received for the work to be done next year.
(6) Provide depreciation on furniture at the rate of 10% of written down value.
(7) Six month’s interest on over draft is due at 18% p.a.
(8) Insurance premium is paid for one year upto 31st March, 1998.
REQUIRED
Prepare Ten-Column Work Sheet.

Q.No.3 (a) ADJUSTING, CLOSING AND REVERSING ENTRIES

GIVEN Following are the selected balance extracted from the books of Sana and Nisa
Traders for the year ended on 30th Septemebr, 1997:-
(1) Salaries expense 12,800
(2) Unearned commission revenue 15,700
(3) Prepaid insurance 10,500
(4) Rent income 18,000
(5) Office supplies expense 4,200
Supplementary Data for Adjustments:
(1) Salaries owing to the extent of Rs.2,800.
(2) Unearned commission revenue Rs.4,300.
(3) Insurance premium was paid on 1st October, 1996 for two years.
(4) Rent due but not received Rs.6,000.
(5) One-third office supplies were un-used.
REQUIRED
Pass adjusting, closing and reversing journal entries.

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Q.No.3 (b) CORRECTION OF ERRORS

GIVEN Following errors were made by the book-keeper of M/s. Munshi & Co. for the month
of November 1997:-
(1) Sale of old furniture Rs.1,000 has been entered as sale of merchandise.
(2) Received a cheque from Arshad & Co. for Rs.4,444/= but wrongly posted to Rashid & Co.
(3) Usman, a customer, paid Rs.4,500 but entered in his account as Rs.5,400.
(4) Earned and received Rs.750 as commission but recorded as Rs.705.
(5) The proprietor has taken away merchandise worth Rs.500 for his personal use but the entry
was entirely omitted.
REQUIRED
Pass journal entries to correct the above errors on 30th novemebr, 1997.

Q.No.4 BANK RECONCILIATION STATEMENT

GIVEN A comparison of cash and bank records of M/s. Khalida and Afzal, revealed the
following information on 31st July, 1997:-
(1) Balance as per cash book Rs.13,579/=.
(2) Balance as per bank statement Rs.1,019/=.
(3) Three cheques amounting Rs.1,300/=, Rs.3,100/= and Rs.4,400/= were issued to the
suppliers. Only the first cheque of Rs.1,300/= was presented to the bank till last day of the
month.
(4) Accompanying the bank statement was a cheque of Nizam Bros for Rs.5,000/= marked as
NSF.
(5) The bank statement showed a debit of Rs.510 and Rs.150 being Zakat deduction and charges
for collection respectively.
(6) Collection of dividend by the bank Rs.600 and note receivable of Rs.2,800 has no record in
the cash book.
(7) A cheque of Rs.7,300 issued to Salman Paracha for purchase of office furniture was entered
by the cashier as Rs.3,700 in the cash book.
(8) Four cheques totaling Rs.12,400 were sent to the bank for collection, but only three cheque
of Rs.4,200 was collected and credited by the bank.
(9) The bank statement showed payment of Rs.1,200 as insurance premium and a note payable
of Rs.3,000; but the cash book lacks this record.
(10)A cash deposit of Rs.6,000 into bank was erroneously been recorded by the firm’s cashier as
Rs.600.
(11)Late deposit of Rs.7,200 on the last day did not appear in the bank statement.
REQUIRED
Prepare a Bank Reconciliation Statement on 31st July, 1997. Also pass necessary adjusting
journal entries.

Q.No.5 ACCOUNTS RECEIVABLE

(a) GIVEN On 1st January 1996, the ledger of Sumera Ltd. showed a balance of Rs.112,800 in
accounts receivable and credit balance of Rs.4,625 in allowance for bad debts account.
(1) Total sales Rs.250,000 (including cash sales Rs.117,500).
(2) Sales returns and allowance Rs.15,000.
(3) Sales discount Rs.6,000.
(4) Customer’s account written off Rs.4,000.
(5) Cash collected from customers Rs.175,000 (including Rs.1,800 previously written off).

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REQUIRED
(i) Compute allowance for bad debts if estimated at 3% of net credit sales.
(ii) Record the above transactions and also the adjusting entry of bad debts allowance in the
journal.
(iii) Prepare partial balance sheet.

(b) GIVEN The following selected balances have been taken from the books of Aamna Stores
for the year ended on 30th April, 1997.
Accounts receivable Rs. 76,000
Allowance for bad debts (Debit) Rs. 500
REQUIRED
(i) Pass an adjusting entry if the allowance for bad debts is maintenance at 6% of accounts
receivable.
(ii) Prepare partial balance sheet.

Q.No.6 INVENTORY VALUATION

GIVEN Below given data entries to Umer Nadeem & Bros. for the month of May, 1997. The
firm uses Periodic Inventory System:-
May – 1 Inventory of 150 units costing Rs.25,500.
May – 10 Bought 100 units at Rs.173/= each.
May – 18 Bought 125 units at Rs.178/= each.
May – 24 Bought 75 units at Rs.180/= each.
May – 28 Bought 200 units at Rs.176/= each.
During the month 450 units were sold for Rs.85,500.
REQUIRED
(i) Determine the cost of goods sold under LIFO and FIFO method.
(ii) Quantity and value of ending inventory under Weighted Average Method.
(iii) Compute gross profit under each of the above method.

Q.No.7 DEPRECIATION
(a) GIVEN On 1st April 1994, Tariq Tex. Co. bought five machines at a list price of Rs.40,000/=
each with a trade discount of 5%. The terms of payment were 2/10, n/30. The company
made the payment with in discount period. Additional expenses incurred and paid in cash
were:-
(1) Freight and Octroi Rs.10,400.
(2) Paid interest on the money borrowed from the bank for the purchase of machine
Rs.200.
(3) Installation and testing charges Rs.23,200.
(4) Insurance-in-transit Rs.15,700.
(5) Sales tax 8% of invoice price.
(6) Some parts damaged during installation and get repaired for Rs.4,300.
It is estimated that these machines will have a useful life of 15 years with a salvage value of
Rs.10,700. The company uses “SUM OF THE YEARS’ DIGIT METHOD” of providing depreciation.
REQUIRED
(i) Compute the cost of machinery.
(ii) Pass the journal entries to record the purchase of machinery & expenses.
(iii) Also compute and journalize the adjusting entries of depreciation expense for 1st three years
if accounting year of the company ends on 31st March.

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(b) GIVEN Pass a compound journal entry if an old delivery van originally bought for Rs.80,000
(5 years’ ago) having an accumulated depreciation of Rs.54,000 was disposed for cash
Rs.45,000 on 31st October, 1997.

Q.No.8 ACCOUNTING FOR COMPANIES

(a) GIVEN Bilal Limited (registered with a capital of Rs.5,000,000 divided into Rs.10 share)
made an issue of its shares during the year 1996 as under:-
(1) 15,000 shares to the promoters for the services rendered.
(2) 20,000 shares for purchase of machinery (market value of share being Rs.15/=).
(3) Offered 365,000 shares to the public at 20% premium. Applications (alongwith application
money) received for 400,000 shares. The company allotted the shares and refunded the
excess money through bank.
REQUIRED
Journalize the above transactions of issue.

(b) GIVEN Iqbal Aziz Ltd. received Rs.900,000 against the issue of 10,000 5% debentures of
Rs.100 each, redeemable at par after 5 years.
REQUIRED
Record the above issue into company’s journal.

(c) GIVEN The expense and income summary of Sarfaraz Co. Ltd. for the year ended on 31st
December, 1996 showed a credit balance of Rs.1,880,000 which is transferred to the
retained earnings account. The directors decided:-
(1) To pay a cash dividend of 15% (on 100,000 shares of Rs.50/= each).
(2) Rs.100,000 to be transferred to general reserve.
(3) To appropriate Rs.250,000 and Rs.170,000 for plant expansion and building
extension respectively.
REQUIRED
Pass journal entries for the above appropriation as well as net income’s transfer to retained
earnings.

Q.No.9 ACCOUNTING FOR MODARBA AND MUSHARIKA

GIVEN Define and distinguish Modarba and Musharika.

Instructions: Attempt any five questions.

Q.No.1 WORK SHEET

GIVEN The following are unadjusted balance taken from the books of Mr. Shoukat on
March 31, 1998.
Debit Credit
Cash 5,000
Accounts receivable 12,000
Merchandise inventory (1-4-97) 10,000
Prepaid insurance 4,000
Office equipment 50,000
Allowance for depreciation (O/E) 10,000

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Accounts payable 8,000

Capital, Shoukat 52,300
Drawings, Shoukat 6,000
Sales 80,000
Sales discount 4,000
Purchases 40,000
Purchase return & allowance 5,000
Transportation in 5,800
Advertising expense 8,500
Salaries expense 10,000
155,300 155,300
Data for Adjustment on March 31, 1998
(i) Make allowance for doubtful accounts at 10% of accounts receivable at year end.
(ii) Insurance expired Rs.2,500
(iii) Record for depreciation on office equipment Rs.2,000.
(iv) Advertising prepaid was Rs.1,200.
(v) Unpaid salaries were Rs.2,000.
(vi) Merchandise inventory on March 31, 1998 Rs.15,000.
REQUIRED
Prepare Ten-Column Work Sheet.

Q.No.2 ADJUSTING, REVERSING AND CLOSING ENTRIES

GIVEN Take the data for adjustments as givenin question numbered 1 in this paper.
REQUIRED
Give all necessary adjusting, closing and reversing entries on March 31, 1998 in the General
Journal, giving explanation below each entry

Q.No.3 VOUCHER SYSTEM

GIVEN Jawaid Ltd. follows the voucher system. The following transactions were incurred in
to during the month of August 1998.
August 01 Purchased merchandise on account for Rs.15,000; voucher No. 15.
August 05 Defective merchandise was returned Rs.500 voucher No. 16.
August 10 Paid voucher No. 16 less discount 250.
August 15 Purchased a machine for Rs.18,000 paying Rs.8,000 in cash voucher No. 17 and 18
(voucher No. 17 for Rs.8,000 and 18 for Rs.10,000).
August 25 Paid voucher No. 17.
REQUIRED
Give entries of the voucher register and the cash register in the Genera Journal.

Q.No.4 ACCOUNTS RECEIVABLE

GIVEN Iqbal & Sons provide allowance for uncollectible at 5% of A/R at end: -
A/R balance Rs.10,500 and allowance for uncollectible Rs.2,000 on Jan. 1, 1997. During 1997 the
following transactions were performed:
(1) Credit sales Rs.45,000.
(2) Cash collected from customer Rs.20,000.
(3) A customer’s account written off Rs.1,000.
(4) Over payment by a customer Rs.800 which was included in the collection of A/R.
(5) Sales discount Rs.600.

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REQUIRED
(i) Give journal entries to record above transactions.
(ii) Adjusting entry for providing allowance for uncollectible.
(iii) Prepare partial balance sheet.

Q.No.5 MERCHANDISE INVENTORY

GIVEN Records of Rashid Bros. Ltd. show the following data relative to commodity:
Jan. 1, 1998 Opening inventory 1,000 units Rs.6.00 per unit
Feb. 5, 1998 Purchases 2,500 units Rs.5.50 per unit
Mar. 12, 1998 Purchases 3,500 units Rs.5.60 per unit
Mar. 15, 1998 Sales 4,000 units Rs.9.00 per unit
Apr. 10, 1998 Purchases 4,500 units Rs.6.00 per unit
May 14, 1998 Purchases 1,500 units Rs.8.00 per unit
June 30, 1998 Sales 4,000 units Rs.10.00 per unit
REQUIRED
(i) Compute the cost of ending inventory under the period system on June 30, 1998 using the
following methods:
a) FIFO b) LIFO c) Average Method
(ii) Give the adjusting entries under each method.

Q.No.6 DEPRECIATION
GIVEN Afzal & Co. acquired a computer at a cost of Rs.160,000 as on January 1990. The
computer was depreciated under Straight Line Method with the assumption of a five years life and
no salvage value. After four years on January 1, 1994, the computer was traded in with a new model
computer priced at Rs.200,000. The trade in allowance was for Rs.48,000.
REQUIRED
Record the exchange:
(i) Recognizing loss or gain and
(ii) Without recognizing loss or gain.

Q.No.7 ISSUE PF SHARES AND DEBENTURES

GIVEN Mand Corporation completed the following transaction for the month of January
1998.
Jan. 1 Purchased land for Rs.100,000 and in consideration issued shares of Rs.10 each. The market
price of the share was Rs.12.50.
Jan. 5 Purchased machinery and issued 12,500 shares of Rs.10 each. The market price of share was
Rs.12.00.
Jan. 10 The Corporation allotted 20,000 shares of Rs.10 each to the promoters in consideration of
services rendered.
Jan. 20 The Corporation issued 9,000 share of Rs.10 each in full settlement of bonds payable
Rs.100,000.
Jan. 25 Issued 1,000 debentures of Rs.100 each redeemable after five years at Rs.105.
Jan. 30 Issued 2,000 debentures of Rs.100 each at Rs.95 redeemable after five years.
Jan. 31 Paid preliminary expenses Rs.10,000.
REQUIRED
Give dated entries in the General Journal with narration to record the above transactions.

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Instructions: Attempt any five questions.

Q.No.1 WORK SHEET

GIVEN Following is the pre-closing trial balance of Falcon TradersTrial Balance July 31, 1997.
Debit Credit
Cash 4,755
Accounts receivable 2,000
Merchandise inventory 2,700
Unexpired insurance 486
Advertising supplies expense 835
Office equipment 8,520
Accumulated depreciation – Office equipment 276
Accounts payable 4,800
RH Capital 13,140
Cost of goods sold 4,600
Sales revenue 8,580
Office salaries expense 2,000
Sales discount 500
Sales returns 400
26,796 26,796
Other Data
(a) Insurance expense for the month Rs.18.
(b) Advertising supplies on hand July 31 Rs.507.
(c) Depreciation on equipment Rs.75.
(d) Salaries earned by employees but yet not paid Rs.200, and salaries prepaid Rs.150.
(e) Provide for bad debts at 10% of accounts receivable.
REQUIRED
Prepare Ten-Column Work Sheet.

Q.No.2 ADJUSTING, REVERSING AND CLOSING ENTRIES

GIVEN Take the data as given in question No. 1 of this paper, and also consider the data for
adjustment
REQUIRED
Give the adjusting, closing and reversing entries, and narrate the entries.

Q.No.3 DEPRECIATION
(a) Explain the methods of depreciation based on acceleration principle.
(b) GIVEN Ahmed Company purchased a machine for Rs.110,000 on January 1, 1995 and
estimated its life to be 10 years and scrap value Rs.10,000.
REQUIRED
(i) Calculate depreciation on machine for the years ended June 30, 1995 and 1996, using
Straight Line Depreciation Method.
(ii) Give adjusting entries for the years ended June 30, 1995 and 1996.

(c) GIVEN ABC Company furnishes following balances on January 1, 1996:-

Equipment cost Rs.150,000 (A/c balance).

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Allowance for depreciation Rs.50,000.

The company uses sum of the year’s digits method. The equipment has no salvage value.
REQUIRED
(i) Calculate depreciation for the 2nd year ended December 31st 1996. Assuming the equipment
estimated to have an operating life of five years.
(ii) Set up allowance for depreciation account for equipment for the year ended December 31,
1996 and make posting, balance and rule off the account.

Q.No.4 ISSUE OF SHARE & DEBENTURES

(1) 45,000 shares of each were issued and subscribed at Rs.9/= per share.
(2) The company allotted shares of Rs.10 each in consideration of stock dividend payable
Rs.78,000. The market value of the share was Rs.13.
(3) Directors of the company allotted shares to the promoters in consideration of their services
values Rs.45,000, the market value of shares Rs.15/=.
(4) Issued 40,000 shares of Rs.10 each for the purchase of a machine costing Rs.360,000.
(5) Declared cash dividend Rs.150,000.
(6) The bank reported the amount of dividend paid Rs.130,000 and unclaimed dividend
Rs.20,000.
REQUIRED

Q.No.5 VALUATION OF ACCOUNTS RECEIVABLE

(a) GIVEN Delta Company furnishes the following account balances at year ended June 30,
1998:-
Balances:- A/c receivable Rs.250,000 (including past due accounts Rs.50,000).
Allowance for doubtful a/c (Dr.) Rs.2,500.
Sales Rs.580,000 (including cash sales – Rs.180,000).
REQUIRED
(i) Calculate bad debts expense using balance sheet approach @2% of not yet due accounts
receivable and 5% of the past due A/R.
(ii) Calculate bad debts expense @ 1 ½ % of credit sales.

(b) GIVEN Fast Company reports the following transactions for the half year ended June 30,
1998:-
(i) Credit sales Rs.430,000.
(ii) Sales return allowance Rs.15,000.
(iii) Sales discount Rs.5,000.
(iv) A/c recovered Rs.4,000.
(v) A/R written off Rs.12,000.
(vi) Advance by customers as known through the subsidiary ledger Rs.6,000.
(vii) Provide for bad debts @ 4% of sales.
REQUIRED
Record the above transactions and give also the adjusting entries for bad debts.

Q.No.6 INVENTORY VALUATION

GIVEN Friends Store uses the perpetual inventory system and FIFO method of inventory
valuation, following are the data concerning purchases and sales of merchandise during the month
of January 1998:-

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Quantity Rate per unit

January 1, 98 Merchandise inventory 1,000 Rs.12/per unit
January 5 Purchases 1,200 Rs.13/per unit
January 8 Sales 1,500 Rs.18/per unit
January 15 Purchases 2,000 Rs.14/per unit
January 18 Sales 1,800 Rs.20/per unit
January 25 Purchases 3,000 Rs.15/per unit
January 26 Sales 1,200 Rs.21/per unit
January 30 Purchases 2,500 Rs.15/per unit
January 31 Sales 2,100 Rs.22/per unit
REQUIRED
(i) Cost of inventory at January 31st.
(ii) Set up T account for merchandise inventory and make all the posting and balance the
accounts.

Q.No.7 BANK RECONCILIATION STATEMENT

GIVEN Nawaz Traders reports the following balances at October 31st, 1998.
Balance per bank statement Rs. 12,000/=
Balance per cash book Rs. 8,000/=
Following are the differences between the balances as per cash book and bank statement:
(i) Cheques issued but not paid Rs.2,000.
(ii) Cheques deposited but not yet cleared Rs.3,000.
(iii) Bank collected a note receivable for Rs.4,000 but not recorded in cash book.
(iv) Cheques issued and paid by the bank but not recorded in cash book Rs.2,000.
(v) Cheques deposited by a customer directly into the bank but not recorded in the cash book
Rs.2,000.
(vi) Deposited a cheque into the bank Rs.2,000 but mistakenly recorded in cash book as for Rs.1,000.
REQUIRED
(i) Prepare a bank reconciliation statement for the month ended October 31st 1998, correcting
the two balances.
(ii) Give also the necessary adjusting entries.

Q.No.8 Write short notes on any THREE of the following:-

(a) Mudarba.
(b) Musharika.
(c) Name various books of original entry.
(d) Sources of finance for a joint stock co.

Q.No.9
(a) GIVEN Trace out the effects of over statement of merchandise inventory ending on the
following items of income statement and balance sheet for the year ended:
(i) Cost of goods sold.
(ii) Net income.
(iii) Current assets.
(iv) Owner’s equity.

(b) State and explain any three accounting principles that are strictly followed in the
preparation of income statement.

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Instructions:
(1) Attempt any five questions. All questions carry equal marks.
(2) Support your answer with proper computation.
(3) Use of simple calculator is allowed.

Q.No.1 WORK SHEET

GIVEN Following is the pre-closing trial balance of Adnan & Co. on December 31, 1998:
Debit Credit
Cash 20,000
Accounts receivable 30,000
Allowance for doubtful debts 500
Merchandise inventory 20,000
Prepaid advertising 10,000
Equipments 40,000
Allowance for depreciation – Equipment 2,500
Accounts payable 10,000
Adnan – Capital 50,000
Commission income 10,000
Sales revenue 200,000
Cost of goods sold 123,000
Salaries expense 15,000
Office supplies expense 5,000
Rent expense 6,400
Insurance expense 3,600
273,000 273,000
Data for Adjustments on December 31, 1998:
(i) Office supplies used Rs.2,000.
(ii) Salaries expense for the year amounted to Rs.12,000.
(iii) Commission earned during the year Rs.8,000.
(iv) Prepaid advertising Rs.4,000.
(v) Rent expense for the year amount to Rs.8,000.
(vi) Insurance expense represents a 3-year insurance policy paid on August 1, 1998.
(vii) Depreciation on equipment was estimated Rs.1,000.
(viii) Doubtful debts on accounts receivable was estimated at Rs.1,000.
REQUIRED
Prepare a Ten-Column Work Sheet for the year ended December 31, 1998 from the above
balances and data for adjustments and complete in all respect.

Q.No.2 ADJUSTING, CLOSING, REVERSING AND OPENING JOURNAL ENTRIES

GIVEN Take the data given under question No. (1) of this paper.
REQUIRED
(1) Give the necessary adjusting and closing journal entries as on December 31, 1998 in proper
form.
(2) Give the necessary reversing journal entries as on January 1, 1999 in proper form.
(3) Give the necessary opening journal entries in proper form as on January 1, 1999.

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Q.No.3 INVENTORY VALUATION

(a) GIVEN On the books of Pak Enterprises, on July 1, 1998, the merchandise inventory account
had a balance of Rs.62,300. During July 1998, the following transactions took place:
July 10: Purchased merchandise on credit for Rs.11,950.
July 25: Sold merchandise on account for Rs.18,400 costing Rs.13,600.
REQUIRED
Using the Perpetual System:
(1) Give the necessary dated journal entries in proper form of the above transactions.
(2) Give the necessary adjusting & closing journal entries in proper form as on July 31, 1998.
(3) Prepare partial income statement for the month ended July 31, 1998.

(b) GIVEN During a period of consistent rising cost of purchases, which inventory flow cost
assumption yields the lowest cost of goods sold and the highest net profit?

Q.No.4 ACCOUNTS RECEIVABLE

(a) GIVEN Accounts receivable control in the general ledger is showing a debit balance of
Rs.27,000 representing of 25 customers. There are 24 customers having debit balances and
one customer having credit balance of Rs.3,000.
REQUIRED
Prepare a partial balance sheet reporting the above information.

(b) GIVEN The following information is available in respect of three different companies.
Company (1) Company (2) Company
(3)
1. Balance of A/R on June 30, 1998 100,000 87,500 187,500
2. Balance of allow. for doubtful debts as on July 1, 7,500 10,000 7,500
1997
3. A/R written off during the year 5,000 12,500 5,000
4. Application rate of doubtful debts 2.5% 3.0% 2.0%
REQUIRED
(1) Compute the amounts of doubtful debts for each of the above three companies separately.
(2) Give the necessary adjusting journal entries for each of the above three companies
separately as on June 30, 1998.
(3) Assume that the amount written off is recovered from A/R of Company (3), give the
necessary journal entries to record the recovery.

Q.No.5 DEPRECIATION
(a) Define depreciation, amortization and depletion from the view point of accounting. Give one
example of the assets which are subject to depreciation, amortization and depletion.
(b) GIVEN On July 1, 1995 Noorani Company purchased a machine at s list price of Rs.400,000
subject to a trade discount of 5%. The company paid transportation charges Rs.15,000 and
installation charges Rs.5,000. The machine had estimated life of 10 years and scrap value
Rs.10,000. The company had been using Sum-of-the-year digit method for computing
depreciation. The accounts of the company are closed on December 31, each year. On July 1,
1998, the machine was traded-in with a new one having a market value of Rs.300,000. The
trade-in-allowance of the old machine was agreed at Rs.150,000 and balance was paid in
cash.

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REQUIRED
(a) Compute the cost of machine and depreciable cost of machine.
(b) Compute the depreciation charge for the years ended December 31, 1995, 1996, 1997 and
July 1, 1998.
(c) Prepare journal entries in proper form to record the purchase of machine, depreciation from
December 31, 1995 to July 1, 1998 and the exchange of machine (loss or gain is recognized)
as on July 1, 1998.

Q.No.6 COMPANY – ISSUANCE OF SHARES AND DEBENTURES

GIVEN Karim Company Ltd. completed the following transactions:
(1) The company issued 70,000 shares of Rs.10 each at Rs.12 but received applications for
80,000 shares. The company finalized the allotment and refunded the excess amount.
(2) The company purchased a running business and acquired the following assets and liabilities:
Merchandise inventory Rs.15,000; Office equipment Rs.50,000; Machinery Rs.40,000;
Accounts payable Rs.5,000. Purchase consideration of the above business was paid by issue
of 9,000 shares of Rs.10 each fully paid-up.
(3) Purchased a machine worth Rs.200,000 and in consideration issued shares of Rs.10 each.
Each share had a market value of Rs.12.50.
(4) Purchased office equipment and in consideration issued 10,000 shares of Rs.10 each. The
market value of the share was Rs.13.
(5) Issued 2,000 10% debentures of Rs.100 each at Rs.95 redeemable after five years at Rs.105.
(6) The company declared stock dividend Rs.50,000 and issued 4,500 shares of Rs.10 each.
REQUIRED
Give journal entries in proper form of the above transactions on the books of Karim
Company Ltd.

Q.No.7 VOUCHER SYSTEM

(a) GIVEN Rehman & Company recorded in July voucher No. 51 to Shaheen Company for
Rs.3,000 in respect of purchase of machine which remained unpaid at the end of July. In
August, it was found that the invoice had been incorrectly recorded and the correct amount
was Rs.3,500.
REQUIRED
How this error should be corrected in the books of Rehman & Company?

(b) GIVEN In the books of Salman Company, the following column totals appear in the voucher
register at the end of June 1998:
Voucher payable Rs.51,750; Purchases Rs.18,440; Transportation in Rs.670; Advertising
Rs.1,020; Supplies Rs.940; Repairs Rs.670; Accrued payroll Rs.13,850; Other general ledger
accounts Rs.16,160 (notes payable Rs.16,000 and mark-up Rs.160).
REQUIRED
Give the necessary journal entry in proper form to summarize above totals.

Q.No.8 – A
(a) Why are assets recorded on the left hand side in the accounting equation?
(b) State with source the positive rules of recording assets and equities.
(c) State with source the negative rules of recording assets and equities.
(d) State the two main bases of accounting. Give one example of uncommon item of recognizing
revenue under each.

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Q.No.8 – B
GIVEN The following errors were discovered before closing the books of accounts:
(a) Accrued rent expense of Rs.2,200 was recorded by debiting rent payable and crediting rent
expense.
(b) A recovery of Rs.5,600 was made from a customer Mr. Abid was recorded by debiting cash
and crediting A/R – Mr. Abid accounts only.
REQUIRED
(1) State the effects of the above errors over the specific items of income statement and
balance sheet of the current year.
(2) Give the necessary correcting entries in proper form of the above errors.
(3) Assume that the net income before the above errors was Rs.20,000. Compute the amount of
corrected net income.

Q.No.9
(a) Define the terms CONCEPT, PRINCIPLE and ASSUMPTION from the view point of accounting.
(b) Describe the GENERALLY ACCEPTED PRINCIPLES OF ACCOUNTING.

Instructions: Attempt any five questions.

Q.No.1 WORK SHEET

GIVEN The following is the pre-closing trial balance of Nadir and Company on December 31,
2000:
Debit Credit
Cash 30,000
Accounts receivable 90,000
Allowance for bad debts 1,000
Merchandise inventory 60,000
Prepaid insurance 6,000
Building 230,000
Allowance for depreciation – Building 30,000
Accounts payable 71,000
Capital 250,000
Drawings 20,000
Sales 343,000
Sales return & allowance 3,000
Commission income 72,000
Cost of goods sold 230,000
Salaries expense 50,000
Rent expense 30,000
Supplies expense 16,000
Data for Adjustment at December 31, 2000:
(a) Insurance was prepaid to the extent of Rs.1,500.
(b) The allowance for bad debts was estimated at the rate of 3% of the year end accounts
receivable balance.
(c) Depreciation expense is estimated at the rate of 20% on declining balance.
(d) Commission income is unearned to the extent of Rs.27,000.

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(e) Salaries expense for the year amounted to Rs.50,000.

(f) Rent expense for the year amounted to Rs.27,000.
(g) Supplies consumed during the year Rs.13,000.
REQUIRED
Prepare a Ten-Column Work Sheet.

Q.No.2(a) INCOME STATEMENT AND CLOSING ENTRIES

GIVEN The following is an alphabetical list of the selected balances of Mirza Sports Shop on
September 30, 2001:
Depreciation expense – Equipment 500
Inventory: October 1, 2000 22,500
Purchases 75,000
Purchase discount 1,500
Purchase return & allowances 2,500
Rent expense 6,000
Salaries expense 9,000
Sales 115,000
Sales discount 2,100
Sales return & allowances 3,900
Supplies expense 800
Transportation in 4,200
Ending inventory is valued at Rs.25,800.
REQUIRED
(i) Prepare a multi-step income statement.
(ii) Prepare closing entries.

Q.No.2(b) ERRORS AND THEIR RECTIFICATION

GIVEN Two errors in the preceding year accounting records of Mirza Sports Shop have been
detected in the following year:
1) Depreciation was undercharged by Rs.300.
2) Accrued salaries expense of Rs.600 was over looked.
REQUIRED
(i) Give necessary rectifying entries.
(ii) Compute the correct amount of net income for preceding year.

Q.No.3 CASH CONTROL: BANK RECONCILIATION

GIVEN The accountant of Nawaz Company has extracted the following data from its cash
records and bank statement:
(a) The cash in bank account had a debit balance of Rs.32,400 on August 31, 2001, while the
bank statement showed a credit balance of Rs.25,700 on the same date.
(b) The following items were not recorded in the company books:
(i) Profit credited by the bank Rs.750.
(ii) Direct deposit by a customer Rs.4,100.
(iii) Dividend collection by the bank on behalf of Nawaz Company Rs.1,210.
(iv) Bank service charges Rs.160.
(v) Dishonoured cheque of a customer Rs.1,250.
(vi) Promissory note paid by the bank on behalf of Nawaz Company Rs.4,000 (including
interest Rs.500).

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(c) The following items were not recorded by the bank:

(i) Outstanding cheque Rs.1,140.
(ii) Deposit in transit Rs.8,320.
(d) Comparison of the cash in bank account with the bank statement revealed the following
errors:
(i) Cheque drawn by Niaz Company was debited by the bank to the account of Nawaz
Company Rs.440.
(ii) A cheque for Rs.360 issued in payment of repair expense was credited by the
company accountant as for Rs.630.
REQUIRED
(a) Prepare a Bank Reconciliation for Nawaz Company.
(b) Prepare the general journal entries to adjust the accounts, assuming that the accounts have
not been closed.

Q.No.4 ACCOUNTING FOR ACCOUNTS RECEIVABLE

(a) GIVEN On March 31, 2001 Musharraf Corporation Ltd. estimated allowance for bad debts at
10% of accounts receivable of Rs.90,000.
REQUIRED
Give adjusting entry in each of the following cases, the case requiring no entry be explained
assuming that the allowance for bad debts account, prior to adjustment has:
(i) Debit balance of Rs.3,000.
(ii) No balance.
(iii) Credit balance of Rs.4,000.
(iv) Credit balance of Rs.9,000.
(v) Credit balance of Rs.12,000.

(b) GIVEN During the year Junejo Sons wrote off worthless accounts of Rs.15,000 and
recovered in full a previously written off account of Rs.5,000. At year-end the accounts
receivable subsidiary ledger revealed a credit balance of Rs.1,000 in a customer’s account.
REQUIRED
Record the above facts in general journal.

(c) What does the following balances indicate:

(i) A debit balance in allowance for bad debts account?
(ii) A credit balance in a customer’s account?

Q.No.5 INVENTORY VALUATION

GIVEN On January 1, 2001 Zia Trading Company had 8,000 units in inventory costing
Rs.120,000. During the period ended June 30, purchases were made as follows:
February 4 1,500 units @ Rs.16
April 2 2,500 units @ Rs.18
May 31 6,000 units @ Rs.19
Sales made during the period ended June 30, are as under:-
January 10 Sold 4,000 units at Rs.20 per unit.
February 6 Sold 1,000 units at Rs.21 per unit.
April 15 Sold 2,000 units at Rs.22 per unit.
June 16 Sold 4,000 units at Rs.23 per unit.

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REQUIRED
Determine the cost of ending inventory and cost of goods sold at June 30, assuming that the
business uses the perpetual inventory system and Moving Average Method for inventory valuation.

Q.No.6 DEPRECIATION
GIVEN On January 5, 2000 Laghari Company paid Rs.18,000 for extra-ordinary repair of an
equipment costing Rs.100,000 and having accumulated depreciation of Rs.45,000. This equipment
was estimated to have useful life of 4 years, from the date of repair and a salvage value of Rs.9,000.
On June 22, 2001 the equipment was sold for Rs.36,000 cash. Laghari Company follows calendar
year as its accounting period.
REQUIRED
(i) Give general journal entry to record extra-ordinary repairs.
(ii) Determine depreciation per year after extra-ordinary repairs by Straight Line Method.
(iii) Show the equipment and its accumulated depreciation on a partial balance sheet on
December 31, 2000.
(iv) Give journal entries to record the sale of the equipment.

Q.No.7 PARTNERSHIP – LIQUIDATION

GIVEN PEE and Company balance sheet November 30, 2001:
Cash 30,000 Liabilities 60,000
Other assets 150,000 Pee, Capital 50,000
Tee, Capital 40,000
Cee, Capital 30,000
180,000 180,000
Pee, Tee and Cee share profit and loss in 3:2:1 ratio respectively. At November 30, they
liquidate their partnership business. Other assets are sold for Rs.24,000. Liabilities are paid in full.
Cee is personally solvent; Pee and Tee are both personally insolvent.
REQUIRED
(i) Determine and distribute loss or gain on realization and also capital deficiency, if any.
(ii) Prepare a liquidation summary.
(iii) Give all necessary entries in general journal to record the liquidation proceedings.

Q.No.8 PARTNERSHIP – ADMISSION

GIVEN A and B are partners with capitals Rs.50,000 each, and share profit or loss equally.
They admit C as a new partner. Pass entries in general journal to record C’s admission under each of
the following independent assumptions showing necessary computations.
(a) C purchases one-half (1/2) of each old partner’s capital paying each Rs.35,000 cash.
(b) C invests Rs.50,000 for a 1/4th interest in capital. C is given credit for the entire amount of his
investment.
(c) C invests Rs.50,000 for a 1/2 interest in capital. Total capital is to be increased only by C’s
investment.
(d) C invests Rs.20,000 for a 1/4th interest in capital, and the total capital is to be Rs.130,000.

Q.No.9 COMPANY ACCOUNTING

GIVEN The following transactions relate to Bhutto Limited.
(a) Received applications for 100,000 ordinary shares of Rs.10 each. Issued allotment letters for
80,000 shares and refunded the excess application money.

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(b) Issued 6,000 ordinary shares of Rs.10 each at a market price of Rs.12 per share for acquiring
land.
(c) Issued ordinary shares of Rs.10 each at a premium of Rs.2 per share, in settlement of bonds
payable Rs.60,000.
(d) Declared cash dividend of Rs.30,000 and stock dividend of Rs.50,000.
(e) Appropriate Rs.150,000 for contingencies.
(f) Issued ordinary shares of Rs.10 each in payment of stock dividend of Rs.50,000.
(g) Issued dividend warrants in payment of cash dividend of Rs.30,000.
(h) Record unclaimed dividend of Rs.5,000 as per bank statement.
REQUIRED
Give general journal entries for the above transactions.

Q.No.10
(a) What do you understand by “IAS”?
(b) Describe the qualitative characteristics of financial statements as specified by IAS.

Instructions: Attempt any five questionscarrying equal marks.

Q.No.1(a) Explain the following Principles/Concepts:

(1) Business entity.
(2) Going concern.
(3) Accrual basis.
(4) Consistency.

Q.No.1(b) Distinguish between the following:

(1) Owner’s equity and Creditor’s equity.
(2) Book value and Market value.
(3) Trade discount and Cash discount.
(4) Cash dividend and Stock dividend.

Q.No.2 WORK SHEET

GIVEN The selected account balances taken from the ledger of Noman & Co. on Dec. 31,
2002 the year end are as follows:
Cash 5,000 Plant asset 40,000
Merchandise inventory (1.1.2002) 20,000 Capital 37,800
Unearned rent income 1,900 Purchases 45,000
Accounts receivable 50,000 Sales revenue 67,000
Accounts payable 18,500 Interest expense 200
Notes payable 5,000 Salaries expense 14,000
Allowance for doubtful debts (Dr) 1,000
Goodwill 7,000
Supplementary Data for Adjustments at Dec. 31, 2002 are as Follows:
(a) The allowance for doubtful debts was estimated at 2-1/2% of accounts receivable.
(b) Plant assets are depreciated at 20% using Diminishing Balance Method having a scrap value
of Rs.5,000.
(c) Salaries expense for the year amounted to Rs.15,000.

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(d) Unearned rent at year-end amounted to Rs.1,200.

(e) Accrued interest on N/P Rs.300.
(f) Merchandise inventory on Dec. 31, 2002 was valued at Rs.25,000 using periodic system.
(g) The cash was found short by Rs.500.
REQUIRED
Prepare a partial Ten-Column Work Sheet. The column totals are not required.

Q.No.3 ADJUSTING AND CLOSING PROCESS

GIVEN Take the data given in this paper under question 2.
REQUIRED
Give necessary adjusting, closing and reversing journal entries in proper form.

Q.No.4 COMPANY ACCOUNTING

GIVEN Al-Azam Ltd. entered into the following transactions:
(1) Issued 50,000 ordinary shares of Rs.10 par at Rs.12 each for cash.
(2) Issued 10,000 ordinary shares of Rs.10 in acquisition of machinery costing Rs.120,000.
(3) Declared cash dividend Rs.150,000 and stock dividend Rs.200,000. R.E. account is having
sufficient balance.
(4) Bank reported that the cash dividend in the amount of Rs.30,000 was unclaimed.
(5) Issued 17,500 ordinary shares of Rs.10 in settlement of stock dividend.
(6) Issued to directors 15,000 shares of Rs.10 each in recognition of their services rendered to
the company.
(7) Issued 1,000 debentures of Rs.100 each at Rs.110 payable after 5 years at Rs.120.
REQUIRED
Give the necessary journal entries to record the above transactions in proper form.

Q.No.5 INVENTORY VALUATION

GIVEN The following data relate to Riaz & Co. which uses the Periodic Inventory System:
Jan. 1 Inventory 8,000 units @ Rs.4.00 per unit.
Jan. 10 Purchases 20,000 units @ Rs.4.20 per unit.
Jan. 20 Purchases 30,000 units @ Rs.4.30 per unit.
Jan. 30 Purchases 10,000 units @ Rs.4.50 per unit.
Jan. 31 Sold 56,000 units at a uniform selling price of Rs.8.0 per unit.
REQUIRED
(1) Determine the cost of ending inventory by the following methods:
(a) FIFO.
(b) LIFO.
(c) Weighted Average.
(2) Prepare a comparative income statement showing the gross profit under each of the above
methods separately.

Q.No.6 PARTNERSHIP – ADMISSION

GIVEN Ahmed and Khalil are partners sharing profits and losses in the ratio of 3:2
respectively. Their balance sheet on May 31, 2002 shows their capital as under:
Ahmed, Capital……………………………………….Rs.60,000.
Khalil, Capital………………………………………….Rs.40,000.
Mr. Nadir is admitted to the above partnership under the following separate assumptions.

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(1) Mr. Nadir invests Rs.10,000 cash and merchandise inventory costing Rs.40,000 for a 1/3
interest.
(2) Mr. Nadir invests Rs.100,000 cash for a 1/4 interest (Use goodwill method only).
(3) Mr. Nadir invests sufficient cash to have 1/2 interest.
(4) Mr. Nadir purchases 1/3 interest of Mr. Ahmed and 1/4 interest of Mr. Khalil paying
Rs.50,000 to Mr. Ahmed and Rs.20,000 to Mr. Khalil.
REQUIRED
Give the necessary journal entries ender each of the above assumptions. Show necessary
computations.

Q.No.7 PARTNERSHIP – PROFIT & LOSS DISTRIBUTION

GIVEN Aleem and Faheem are partners sharing profits and losses under the plans given
below:
Plan (i):
(a) Annual salary to partners Rs.50,000 to Mr. Aleem and Rs.30,000 to Mr. Faheem.
(b) Commission to Mr. Aleem Rs.15,000.
(c) Balance to be distributed equally.
Plan (ii):
(a) Mark-up on capitals Rs.18,000 on Mr. Aleem and Rs.60,000 to Mr. Faheem.
(b) Annual salary to partners Rs.80,000 to Mr. Aleem and Rs.30,000 to Mr. Faheem.
(c) Balance to be distributed in the ratio of 2:1 respectively.
Assume that the partnership earned a net profit for the year in the amount of Rs.100,000.
REQUIRED
(1) Prepare an income distribution summary under each of the above plans separately.
(2) Give the necessary journal entries under each of the above plans to record the distribution
of profit between the partners.

Q.No.8 ACCOUNTING FOR DEPRECIATION

(a) Distinguish between capital expenditures and revenue expenditures.
(b) GIVEN Fazil company purchased a machine on April 1, 2001 at a list price of Rs.60,000 with
a trade discount at 5%. The credit terms were 2/10, n/30.
The payment was made within discount period. The company incurred the following
additional expenditure.
(1) 4% Sales tax on the cash price of machine.
(2) Custom duty Rs.11,000.
(3) Installation and testing cost Rs.13,000.
(4) The machine was insured against fire and premium paid Rs.3,500.
(5) Insurance in transit Rs.5,000.
(6) Freight in Rs.2,500.
REQUIRED
(1) Compute the cost of machine.
(2) Compute the depreciable cost and the depreciation charge for the year ended 2001 and
2002, using Straight Line Method assuming that the machine was estimated to have an
operating life of 10 years and a scrap value of Rs.2,780.
(3) Give the necessary journal entries on Dec. 31, 2001.
(4) Prepare a partial balance sheet showing the machine cost and its allowance for depreciation
as on Dec. 31, 2002.

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Instructions: Attempt any five questions, all questions carry equal marks.

Q.No.1(a) ACCOUNTING PRINCIPLES

GIVEN Name the accounting principles indicated by each of the following statements:
(5) Every business unit has a separate existence from its owner.
(6) To use the same accounting principle without changing it and practice year after year.
(7) The assumption that an entity will continue indefinitely.
(8) Recording the assets at their acquisition cost.

Q.No.1(b) ACCOUNTING EQUATION

GIVEN Which of the following is not a correct form of the accounting equation.
(5) Assets = Liabilities + Owner’s Equity.
(6) Assets = Equities.
(7) Assets + Owner’s Equity = Liabilities.

Q.No.1(c) ACCOUNTING TERMINOLOGY

GIVEN Briefly explain and illustrate any six of the following:
(i) Accounting – the language of business.
(ii) Accelerated depreciation methods.
(iii) Limited company.
(iv) Operating cycle.
(v) Extra ordinary repairs.
(vi) Cash short and over.
(vii) Credit balance at a customer account.

Q.No.2 WORK SHEET

GIVEN Following is the trial balance taken from the books of Maha & Co. on 31st Dec. 2002:
Debit Credit
Cash 26,000
Office supplies 14,000
Prepaid rent 24,000
Equipment (at cost) 36,000
Salaries expense 20,000
Insurance expense 16,000
Allowance for depreciation – Equipment 10,000
Maha Capital 50,000
Commission income 76,000
136,000 136,000
Data for Adjustments:
(i) Commission receivable Rs.5,000.
(ii) Unearned commission Rs.3,000.
(iii) Prepaid rent expired Rs.18,000.
(iv) Unpaid insurance expense Rs.4,000.
(v) Office supplies consumed Rs.8,000.
(vi) Provide depreciation on office equipment at 15% of cost.
(vii) Prepaid salaries Rs.5,000.

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REQUIRED
Prepare Ten-Column Work Sheet.

Q.No.3 ADJUSTING AND REVERSING ENTRIES

GIVEN Take the data relating to adjustments in question number 2.
REQUIRED
Prepare necessary adjusting and reversing entries.

Q.No.4 BANK RECONCILIATION STATEMENT

GIVEN The cash book of Liaq & Co. showed a debit balance of Rs.20,452 while the bank
statement for the month of Nov. 2003 showed the balance of Rs.16,365. Following items were
discovered causing the difference:
(i) Bank charges not entered in cash book Rs.52.
(ii) Late deposits not recorded by bank Rs.3,135.
(iii) Cheques issued but not presented Rs.2,500.
(iv) Promissory note collected by bank Rs.4,600.
(v) Cheque deposited but not shown on bank statement Rs.3,000.
(vi) Zakat deducted Rs.1,000 & interest credited Rs.300 by bank.
(vii) Cheques dishonoured and returned by bank Rs.4,300.
REQUIRED
Prepare Bank Reconciliation Statement and adjusting entries in the journal.

Q.No.5 PARTNERSHIP
(a) On March 21, 2003, Mobeen & Zulfi agreed to form a partnership. Mobeen invested
equipment at agreed value of Rs.80,000 the original cost of which was Rs.100,000 and accumulated
depreciation was Rs.20,000.
Zulfi invested merchandise costing Rs.40,000 at an agreed value of Rs.50,000 along with his
supplier, credit value of Rs.10,000 and sufficient cash to make his capital equal to Mobeen.
REQUIRED
(i) Prepare journal entries to record the partner’s investment.
(ii) Prepare initial balance sheet of the partnership firm.

(b) P, Q and R are equal partners with Rs.100,000 each made investment in the firm. R decided
to retire. He is paid Rs.110,000 (Goodwill of the firm to be recorded).
REQUIRED
Prepare journal entries and computation for recording the retirement of R.

Q.No.6 ACCOUNTS RECEIVABLE

GIVEN The following data are taken from the Afaqi Traders:
Dec. 31, 2001 Dec. 31, 2002
Accounts receivable 70,000 156,700
Allowance for bad debts (CR) 300
Allowance for bad debts (CR) 5,000
During the year the following transactions were performed:
(a) Sales on account Rs.240,000.
(b) Accounts receivable written off as uncollectible Rs.3,300.
(c) Previously written off accounts receivable Rs.8,000.
(d) Cash collected from customers Rs.150,000.

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REQUIRED
(i) Prepare journal entries to record the above transactions.
(ii) Give an adjusting entry assuming Afaqi Traders estimate the uncollectible at 3% of credit
sales.
(iii) Give an adjusting entry assuming Afaqi Traders estimate the bad debts at 10% of accounts
receivable at end.
(iv) Prepare partial balance sheet showing accounts receivable and related allowance for bad
debts on Dec. 31, 2002, under both the approaches. Show the computation.

Q.No.7 INVENTORY VALUATION

GIVEN The following data are taken from Mirza Trading Co. at Dec. 31, 2002:
Jan. 1 Balance 9 units @ Rs.500 each
Apr. 12 Purchased 10 units @ Rs.550 each
Aug. 17 Sold 8 units
Oct. 21 Purchased 10 units @ Rs.600 each
Dec. 28 Sold 9 units
REQUIRED
(a) Using FIFO Periodic:
(i) Compute the cost of ending inventory at Dec. 31, 2002.
(ii) Compute the cost of goods sold for the year ended Dec. 31, 2002.
(iii) Prepare journal entries to record purchases and the year-end adjusting entry using
cost of goods sold.
(b) Using FIFO Perpetual:
(i) Prepare the inventory card in good form.
(ii) Give an entry to adjust inventory at Dec. 31, 2002.

Q.No.8 ACCOUNTING FOR COMPANIES

GIVEN The shares issue transactions of Safeer Co. Ltd. for the year ended on 30th Sept.
2003.
(a) The company issued for cash 400,000 shares of Rs.10 each at Rs.13 each.
(b) The promoters were allotted 10,000 shares of Rs.10 each for services.
(c) The company bought equipment costing Rs.100,000. Rs.10 shares were issued in exchange.
The market value per share was Rs.12.50.
(d) For land purchased worth Rs.750,000, 80,000 shares of Rs.10 each were issued.
(e) Declared dividend 25% on the shares issued above.
(f) Paid the dividend through bank.
REQUIRED
(i) Journalize the above transactions.
(ii) Prepare initial balance sheet of the company.

Q.No.9 DEPRECIATION
GIVEN On April 2, 1999 the Global Company acquired an equipment, it has estimated useful
life of 3 years with salvage value Rs.5,000. The following expenditures were incurred on it. (The
accounting year ends on December 31).
(i) Billed price Rs.275,000.
(ii) Freight charges Rs.2,000 and transit insurance Rs.3,000.
(iii) Installation expense Rs.25,000.
(iv) Three year fire insurance Rs.15,000.

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REQUIRED
(a) Compute the cost of equipment.
(b) Give the journal entries from (i) to (iv) above.
(c) Company uses Straight Lien Method. Compute the depreciation expenses and accumulated
depreciation for the whole life of the asset.
(d) Assume that the equipment was traded in with another equipment, costing Rs.400,000 on
Dec. 31, 2001. The trade in allowance was Rs.50,000 and balance to be paid in cash.
Note: Gain or loss is not to be recognized. Give the entries and computation.

Instructions: Attempt any five questions carrying equal marks.

Q.No.1 WORK SHEET

GIVEN Following is the pre-closing trial balance of Rehan Co.at Dec. 31, 2003:
Debit Credit
Cash 20,000 ---
Accounts receivable 60,000 ---
Office supplies 5,000 ---
Office equipment 60,000 ---
Allowance for depreciation – Equipment --- 6,000
Accounts payable --- 20,000
Rehan – Capital --- 95,000
Rehan – Drawings 15,000 ---
Commission income --- 90,000
Salaries expense 31,000 ---
Rent expense 20,000 ---
211,000 211,000
Data for Year End Adjustments:
(i) Office supplies unused Rs.2,000.
(ii) Unpaid salaries Rs.4,000.
(iii) Actual rent for the year was Rs.18,000.
(iv) Commission earned Rs.80,000.
(v) Commission receivable Rs.7,000.
(vi) Salaries paid to office assistant Rs.5,000 was wrongly charged to drawings account.
(vii) Depreciation was estimated at 10% p.a. by the Diminishing Balance Method.
REQUIRED
Prepare a Ten-Column work sheet.

Q.No.2 ADJUSTING, CLOSING AND OPENING ENTRIES

GIVEN Take the data given in question No. 1 of this paper.
REQUIRED
Prepare in the General Journal adjusting and closing entries on December 31, 2003, and
opening journal entry on January 1, 2004.

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Q.No.3 ACCOUNTING FOR CASH CONTROL

GIVEN The following data relate to Zia & Co.
(1) Balance as per bank statement June 30, 2003, Rs.14,775.
(2) Balance as per cash book June 30, 2003, Rs.5,990.
(3) Outstanding cheques Rs.9,900.
(4) Bank deposit of June 30, for Rs.15,700 was not shown in the bank statement.
(5) The bank collected a note receivable for Rs.5,075 but not recorded in the cash book.
(6) Cheques deposited by a customer directly into bank but not recorded in the cash book
Rs.8,000.
(7) A cheque of Rs.890 of Majeed, a customer which had been deposited into bank was
erroneously recorded in the cash book as Rs.980.
(8) A cheque amounting to Rs.2,000 returned by bank marked N.S.F. (dishonored). No entry was
made in the cash book.
(9) Dividend collected by bank but was not recorded in the cash book Rs.4,000.
(10)Bank charges of Rs.400 were not recorded by the company.
REQUIRED
(a) Prepare a bank Reconciliation Statement on June 30.
(b) Prepare adjusting journal entries.

Q.No.4 PARTNERSHIP – ADMISSION

GIVEN Asghar and Zaheer are partners with capital balances of Rs.99,000 and Rs.54,000
respectively. They share profits and losses in the ratio of 3:2.
REQUIRED
Prepare the journal entries to record the admission of Razi to the partnership under each of
the following independent cases:
(a) Razi paid to Zaheer Rs.30,000 for a one-half of Zaheer’s interest on admission.
(b) Razi invested sufficient cash in the firm to acquire a one fourth interest in the capital of new
partnership.
(c) Razi invested Rs.67,000 for a one fifth interest in the capital. Goodwill not to be recorded.
(d) Razi invested Rs.39,000 for a one-fourth interest. (Use goodwill method).

Q.No.5 VALUATION OF ACCOUNTS RECEIVABLE

GIVEN On January 1, 2003 the accounts receivable account in the General Ledger of Rahim
& Co. showed a balance of Rs.204,000 and allowance for bad debts account showed a credit balance
of Rs.13,200. The transactions for the year ended December 31, 2003 were as under:
(1) Sales on account Rs.180,320.
(2) Cash received from customers Rs.182,400.
(3) Customer’s account written off amounted to Rs.4,640.
(4) Aging of accounts receivable at the end of year indicated that Rs.14,640 were estimated to
be uncollectible.
REQUIRED
(a) Record the above transactions in the General Journal including the year-end adjusting
journal entry.
(b) Set up accounts receivable account and allowance for bad debts account. Post the journal
entries in these accounts. Rule off and balance the accounts.
(c) Prepare a balance sheet (partial) at December 31, 2003 showing relevant account balances.

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Q.No.6 INVENTORY VALUATION

GIVEN The following data relate to the business of Arsalan Trading Company which uses
perpetual inventory system and uses FIFO inventory valuation method.
Units Unit Cost
November 1 Inventory 50 Rs.50
November 4 Purchases 30 Rs.55
November 8 Sales 35 Rs.80
November 9 Purchases 40 Rs.60
November 20 Sales 60 Rs.85
November 25 Purchases 40 Rs.65
November 30 Sales 10 Rs.100

REQUIRED
(i) Compute the cost of ending inventory on November 30.
(ii) Compute the gross profit on sales for the month of November.

Q.No.7 DEPRECIATION
GIVEN On March 1, 2002 Baber & Co. purchased a machine for Rs.62,000 cash. The
estimates scrap value was Rs.4,000 and the estimated life was 8 years. The company paid Rs.2,000
for the machine installation. The company closes its books annually on December 31, and computes
depreciation by the Straight Line Method from the first day of the month in which the asset was
acquired.
After using the machine for four months, it was serviced and repaired on July 1, 2002 at a
cost of Rs.3,000.
The company sold the machine on October 1, 2004 for Rs.54,300 cash.
REQUIRED
Prepare journal entries in books of the company for all the transactions mentioned above
including annual adjusting journal entries and entry for disposal of the machine.

Q.No.8 ACCOUNTING FOR COMPANIES

GIVEN Nishat Co. Ltd. made the following issuance of shares and debentures:
(i) The company issued 60,000 ordinary shares of Rs.10 each at Rs.12 per share to public;
applications were received for 70,000 shares. 60,000 shares were allotted and the excess
money was refunded.
(ii) Land was acquired by issuing 40,000 ordinary shares of Rs.10 each. The market price per
share was Rs.15.
(iii) The promoters of the company were allotted 6,000 ordinary shares of Rs.10 each in
consideration of their services rendered.
(iv) Mortgage payable of Rs.60,000 was settled by the issue of ordinary shares of Rs.10 each.
The market value of the share was Rs.15.
(v) Received Rs.95,000 against the issue of 1,000 10% debentures each redeemable at par after
5 years.
REQUIRED
Record the above transactions in the General Journal of the company.

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Q.No.9 ACCOUNTING CONCEPTS AND PRINCIPLES

GIVEN Write short notes on any three of the following:
(i) Going concern concept.
(ii) Principle of consistency.
(iii) Principle of adequate disclosure.
(iv) GAAP.
(v) Time period principle.

Instructions: Attempt any five questions.

Q.No.1 WORK SHEET

GIVEN Following is the pre-closing trial balance of Adnan Traders was on Dec. 31, 2003:
Debit Credit
Cash 30,000
Accounts receivable 20,000
Allowance for bad debts 200
Furniture 60,000
Allowance for depreciation – Furniture 6,400
Adnan – Capital 119,800
Office supplies 6,000
Sales 200,000
Cost of goods sold 160,000
Rent expense 20,000
Prepaid advertising 10,000
Salaries expense 20,000
326,200 326,200
Data for Adjustment on December 31, 2003:
(i) Office supplies unused Rs.2,000.
(ii) Rent expense for the year was Rs.10,000.
(iii) Prepaid advertising was Rs.6,000.
(iv) Salaries expense for the year was Rs.25,000.
(v) Depreciation on furniture was estimated at Rs.6,000.
(vi) Allowance for bad debts was estimated at 10% of year end accounts receivable.
REQUIRED
Prepare a Ten-Column work sheet.

Q.No.2 ADJUSTING, CLOSING AND REVERSING ENTRIES

GIVEN The accountant of Kamran Company collected the following data for adjustments as
of December 31, 2003:
(i) The prepaid insurance account showed a debit balance of Rs.9,000 representing premium of
a 3-year insurance paid on September 1, 2003.
(ii) On October 1, 2003, a pre-payment of Rs.7,200 for advertisement for one year in a monthly
magazine beginning from that date was recorded in the advertisement expense account.
(iii) On August 1, 2003, the company had sub-let a portion of its building receiving one-year’s
rent of Rs.3,600 in advance at that time. This was credited in full to the rent income account.

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(iv) The office supplies expense account had a balance of Rs.5,000 before adjustment. The actual
supplies used during the year Rs.1,500.
(v) The company owned a Rs.12,000 6-month note receivable dated September 1, 2003. The
note bore interest at 10% p.a. Record the interest accrued on December 31, 2003.
(vi) Interest of Rs.60 was accrued on notes payable at December 31, 2003.
REQUIRED
Give in General Journal the necessary adjusting, closing and reversing entries for the above cases.

Q.No.3 INCOME STATEMENT AND BALANCE SHEET

GIVEN Rehan & Co. prepared a work sheet on December 31, 2003. Shown below are the
income statement and balance sheet columns of that work sheet:
Income Statement Balance Sheet
Debit Credit Debit Credit
Cash 25,000
Accounts receivable 20,000
Inventory, January 1, 2003 20,000
Office equipment 80,000
Allowance for depreciation – Equipment 4,000
Rehan – Capital 100,000
Rehan – Drawings 60,000
Sales 300,000
Sales returns & allowance 10,000
Purchase 150,000
Purchase return & allowance 5,000
Salaries expense 25,000
Transportation – in 5,000
General expense 5,000
Insurance expense 3,000
Depreciation expense – Equipment 1,000
Salaries payable 5,000
Prepaid insurance 10,000
Inventory, Dec. 31, 2003 30,000 30,000
219,000 335,000
Net income 116,000 116,000
Rs. 335,000 335,000 225,000 225,000
REQUIRED
From the above data prepare an income statement and a classified balance sheet as on
December 31, 03.

Q.No.4 PARTNERSHIP – LIQUIDATION

GIVEN Azam, Akram and Anwar were partners in a firm. They shared profits and losses in
the ratio of 2:2:1. On June 30, 2003, they decided to liquidate the firm. Before the liquidation, the
balance sheet of the firm was as under:

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BALANCE SHEET
AS ON JUNE 30, 2003
ASSETS EQUITIES
Cash 40,000 Notes payable 7,500
Other assets 110,000 Accounts payable 30,000
Azam – Capital 50,000
Akram – Capital 50,000
Anwar – Capital 12,500
150,000 150,000
The other assets were sold for Rs.3,000. Anwar was personally insolvent.
REQUIRED
(i) Prepare a liquidation summary.
(ii) Give journal entries to record the liquidation process.

Q.No.5 VALUATION OF ACCOUNTS RECEIVABLE

GIVEN On December 31, 2002, the balance sheet of Karim & Co. showed the following
balance:
Accounts receivable Rs. 200,000
Less: Allowance for bad debts Rs. 4,000
Rs. 196,000
During the year 2003 total sales (including cash sales Rs.50,000) amounted to Rs.300,000. An
accounts receivable Rs.3,500 was written off. A previously written off accounts receivable of
Rs.1,000 was subsequently recovered to the extent of Rs.300.
On December 31, 2003 the accounts receivable showed a debit balance of Rs.250,000.
However, an analysis of accounts receivable subsidiary ledger revealed that a customer’s account
showed a credit balance of Rs.10,000. On this date the company estimated 5% accounts receivable
at the year-end as uncollectible.
REQUIRED
(a) Give the General Journal entries relating to the above information including entries to adjust
& close the bad debts expense.
(b) Set up allowance for bad debts account and post the above entries in the account. Rule off
and balance the account.
(c) Show how the relevant account will be reported in balance sheet on December 31, 2003.

Q.No.6 INVENTORY VALUATION

GIVEN Vaqar & Co. uses Perpetual System and uses LIFO inventory valuation method. The
records of the company show the following purchases and sales transactions for the month of
September 2003:
September 1 Inventory 5,000 units @ Rs.5
September 9 Purchase 2,500 units @ Rs.6
September 14 Sales 2,500 units @ Rs.12
September 19 Purchase 1,600 units @ Rs.7
September 21 Sales 2,200 units @ Rs.12
September 24 purchase 3,000 units @ Rs.8
September 29 Sales 2,500 units @ Rs.12

REQUIRED

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Give entries in General Journal to record total purchases, total cost of goods sold and total
sales on September 30. Assume that all transactions were on account.

Q.No.7 ACCOUNTING FOR COMPANIES

GIVEN The following transactions related to Salman Co. Ltd.:
1. The company offered 50,000 shares of Rs.10 each at Rs.15. the company received
application for 65,000 shares. The company finalized the allotment and the excess money
was refunded.
2. The company declared stock dividend of Rs.100,000. The company issued 9,000 shares of
Rs.10 each in settlement of stock dividend.
3. The company purchased land worth Rs.500,000 and issued 45,000 shares of Rs.10 each to
vendor.
4. The company purchased machine and in consideration thereof issued 16,000 shares of Rs.10
each. The market price of the share was Rs.12.50.
5. The company issued 2,000 debentures of Rs.100 each at par, repayable after five years at 5%
redemption premium.
6. The company issued 1,000 debentures of Rs.100 each at Rs.95 repayable after five years at
Rs.105.
REQUIRED
Record the above transactions in the General Journal of the company.

Q.No.8 DEPRECIATION
GIVEN Arsalan & Co. records the acquisition of Vehicles in the account titled as “Delivery
Equipment”. Following are the details of vehicles purchased.
Date of Purchase Type of Vehicles Cost
January 1, 2001 Truck 500,000
July 1, 2001 Car 250,000
October 1, 2002 Van 300,000
It was decided to depreciate delivery equipment at 10% per annum on the Straight Line
Method.
REQUIRED
(a) Write up delivery equipment account, depreciation expense account and allowance for
depreciation account for the year ended December 31, 2001, 2002 and 2003. Close and
balance (as the case may be) the accounts at each year end. Show computations of each
year’s depreciation charges.
(b) Prepare balance sheet (partial) on December 31, 2003 showing the relevant account.

Q.No.9 Write short notes on the following, giving appropriate examples in each case.
(i) Principle of conservatism.
(ii) Principle of consistency.
(iii) Concept of business entity.
(iv) Concept of going concern.

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Instructions: Attempt any five questions.

Q.No.1 WORK SHEET
GIVEN Following are the balances taken from the records of Qasim & Bros on Dec. 31, 2004:
Cash at bank 40,000 Unearned commission 54,000
Merchandise inventory 50,000 Qasim Capital 230,000
Prepaid rent 9,000 Sales 184,000
Accounts receivable 60,000 Bonds payable 50,000
Equipment 100,000
Qasim Drawings 30,000
Cost of goods sold 160,000
Utilities expense 24,000
Wages expense 45,000
Data for Adjustment ofDecember 31, 2004:
(i) Commission earned during the year Rs.48,000.
(ii) Rent expired Rs.6,000.
(iii) Accrued wages Rs.7,000.
(iv) Depreciation on equipment was estimated at 5% on cost.
(v) Provide 1% of sales for uncollectible accounts.
REQUIRED
Prepare a Ten-Column work sheet.

Q.No.2 ACCOUNTING FOR CASH CONTROL

GIVEN The following information pertains to UMER BROS on June 30, 2005:
(i) Balance as per cash book (bank column) Rs.26,700.
(ii) Issued a cheque for Rs.486 to a supplier but it was wrongly recorded in cash book as Rs.846.
(iii) The bank collected a note receivable for Rs.2,000 and interest earned on it Rs.500 but not
recorded in cash book.
(iv) Collection charges of Rs.300 were not recorded by the Co.
(v) A customer’s cheque for Rs.3,500 was returned by bank marked as N.S.F.
(vi) Bank service charges Rs.300 not recorded in cash book.
(vii) Bank collected dividend Rs.4,000 on behalf of Umer Bros but not recorded in cash book.
REQUIRED
(i) Prepare a schedule showing additions to and deductions from the unadjusted balance.
(ii) Prepare necessary adjusting entries.

Q.No.3 ACCOUNTING FOR COMPANIES

GIVEN Chuhan & Co. Ltd. was registered with a capital of Rs.20,000,000 ordinary shares of
Rs.10 each. It was incorporated by acquiring the running business of Yasir, a sole trader. The balance
sheet of the business of Yasir as of January 01, 2005 was as under:
ASSETS EQUITIES
Cash 40,000 Accounts payable 40,000
Accounts receivable 120,000 Notes payable 40,000
Merchandise inventory 160,000 Allowance for bad debts 8,000
Office supplies 8,000 Accumulated depreciation 240,000
Furniture 400,000 Yasir Capital 400,000
728,000 728,000

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Chuhan & Co. Ltd. took over the business assets other than cash and assumed the liabilities.
In exchange, the company issued 30,000 shares of Rs.10 each at Rs.15 per share. The company also
made an additional issue of 10,000 shares of Rs.10 each at Rs.15 per share to the public, which were
subscribed and paid for.
REQUIRED
(i) Give the necessary entries in the General Journal of Chuhan & Company.
(ii) Prepare initial balance sheet.

Q.No.4 DEPRECIATION
GIVEN During 2004 Fast Company engaged in the following transactions:
Jan. 1: The Company traded in its old equipment which had a cost Rs.60,000 and whose
accumulated depreciation was Rs.20,000. The new equipment had a list price of
Rs.84,000. The company was granted Rs.24,000 trade in allowance for the old
equipment.
Apr. 2: The Company sold a building for Rs.255,000. The building cost Rs.335,000 and had
an accumulated depreciation of Rs.135,000 (January 1, 2004). The company uses
Straight Line Method of depreciation. The building was estimated to have a useful
life of 20 years and salvage value of Rs.35,000.
June. 30: the company disposed of a fully depreciated machine which had a cost of Rs.15,000
with no salvage value.
REQUIRED
Record the above transactions in journal.

Q.No.5 ACCOUNTS RECEIVABLE

GIVEN The following information is available in respect of two Co.
Company “A” Company “B”
Accounts receivable balance at December 31, 300,000 200,000
2004
Allowance for bad debts January 1, 2004 10,000 20,000
Accounts receivable written off during the year 2,000 7,000
Rate of bad debts estimated 3% 5%
REQUIRED
(i) Compute the amount of bad debts for the above companies.
(ii) Give necessary adjusting entries at Dec. 31, 04 for both Co.
(iii) Show relevant accounts on balance sheet of the companies.

Q.No.6 INVENTORY VALUATION

(a) Nida & Company have the following items in inventory on June 30, 2005.
Inventory Cots (Rs) Market Price (Rs)
A 15,000 11,000
B 18,000 20,000
C 25,000 23,000
REQUIRED
Compute the value of ending inventory using Lower of Cost or Market, item by item and as a whole.

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(b) The inventory record of Adam Company for the month of December 2005 is as under:
Units Unit Cost
December 1 Inventory 800 Rs.6
December 6 Purchases 500 Rs.7
December 16 Sales @ Rs.13 400 ---
December 26 Sales @ Rs.14 700 ---
December 30 Purchases 900 Rs.8
REQUIRED
Compute the ending inventory and gross profit on sales using the FIFO method and the
perpetual system.

Q.No.7 ADJUSTING AND CLOSING ENTRIES

GIVEN Take the data as given in question No. 1 of this paper and also consider the data for
adjustment.
REQUIRED
Give necessary adjusting and closing entries in General Journal.

Q.No.8 PARTNERSHIP – LIQUIDATION / RETIREMENT

GIVEN Azeem, Fahim and Naeem were partners, sharing P/L in the ratio of their capitals.
The balance sheet of the firm is as under:
ASSETS EQUITIES
Cash 40,000 Accounts payable 80,000
Accounts receivable 60,000 Azeem’s Capital 100,000
Merchandise inventory 30,000 Faheem’s Capital 60,000
Plant assets 150,000 Naeem’s Capital 40,000
280,000 280,000
Naeem retires on the above date and is paid the amount equal to the book value after
making the following adjustments. Available cash is paid to him and issued a note for the balance.
(i) Goodwill of the firm is valued at Rs.120,000.
(ii) Plant assets are revalued at Rs.200,000.
(iii) Allowance for bad debts is to be maintain 5% of the accounts receivable.
(iv) Inventory is revalued at Rs.25,000.
REQUIRED
Give necessary entries in the General Journal to revalue the assets and distribution of
revaluation gain or loss. The retiring partner is to be paid an amount equal to his adjusted capital.

Q.No.9 Write short notes with examples on the following:

(i) Capital Expenditure and Revenue Expenditure.
(ii) Concept of Business Entity.
(iii) Principle of Consistency.

Instructions: Attempt any five questions.

Q.No.1 WORK SHEET

GIVEN The following balances were taken from the General Ledger of Haleem Sons on
December 31, 2004:

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Cash 12,250 Accounts receivable 5,840

Notes receivable 3,000 Allowance for bad debts 100
Merchandise inventory 20,180 Sales revenue 95,000
Building 30,000 Interest revenue 200
Accounts payable 8,720 Cost of goods sold 57,900
Notes payable 5,000 Salaries expense 7,500
Haleem Capital 40,000 General expense 10,900
Property tax expense 750 Interest expense 700
The data for adjustments to be made at year ended December 31, 2004 are:
(i) Property tax still prepaid Rs.250.
(ii) Accrued interest on notes receivable Rs.212.
(iii) Accrued interest on notes payable Rs.150.
(iv) Adjust the allowance for bad debts account to 5% of accounts receivable.
(v) Depreciation on building for the year was Rs.5,000.
REQUIRED
Prepare a Ten-Column work sheet.

Q.No.2 DEPRECIATION
(a) GIVEN Office equipment was purchased by Naeem & Co. for Rs.80,000 on July 1, 2003. The
residual value was estimated at 10% of its purchase price and estimated its life to be 5 years.
REQUIRED
(i) Calculate the amount of depreciation for the year ended Dec. 31, 2003 & Dec. 31, 2004 by
20% Diminishing Balance Method.
(ii) Give necessary entries in General Journal including adjusting and closing entries for the year
ended Dec. 31, 2003 & 04.
(iii) Prepare the allowance for depreciation account & post the above adjusting entries for 2003
& 2004. Balance the a/c.

(b) GIVEN Khalil & Co. sold a computer for Rs.160,000 on January 1, 2004. The cost of
computer Rs.200,000 and had an allowance for depreciation of Rs.38,000. The Co. uses
Straight Line Method.
REQUIRED
Record the necessary transactions in General journal (Show computations).

Q.No.3 VALUATION OF ACCOUNTS RECEIVABLE

(a) GIVEN The following account balance appear on the balance sheet of Hamna & Co. as on
Dec. 31, 2003:
Accounts receivable Rs. 250,000
Allowance for bad debts 8,500
During the year 2004 the following events took place:
(i) Accounts receivables of Rs.7,000 were written off as uncollectible.
(ii) An accounts receivable in the amount Rs.2,000 which had been written off in the year 2003
was recovered.
(iii) The aging of accounts receivable at the end of the year indicated that Rs.15,500 were
estimated to be uncollectible.
REQUIRED
Give the necessary entries to record the above transactions.

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(b) GIVEN On Dec. 31, 2004 the following balances appeared in the trial balance of Zulfiqar &
Co:-
Accounts receivable Rs. 260,000
Sales 500,000
Allowance for bad debts (Dr.) 2,100
Sales returns & allowances 20,000
REQUIRED
Prepare the journal entry to record the estimated bad debts expense at 5% of Net Sales.

Q.No.4 BAN RECONCILIATION STATEMENT

(a) Differentiate between Crossed Cheque and Bearer Cheque.
(b) Following is the information provided by Walayat & Co. at April 30, 2005:
Cash in Bank
April 1 Balance 3,500 April 30 Withdrawal 16,950
April 30 Deposit 27,100
(i) The bank statement showed a debit balance (over draft) of Rs.8,500.
(ii) Deposit in transit Rs.80,000.
(iii) A debit memo for Rs.1,500 accompanied the bank statement for locker rent. The bank had
erroneously charged this to Walayat & Co. instead of Wilayat & Sons.
(iv) The bank charged Rs.100 for service.
(v) Outstanding cheques Rs.48,000.
(vi) A direct remittance in bank account of Rs.8,000 by a customer.
(vii) Dividend collected by the bank in behalf of the company Rs.3,000 but was not recorded in
cash book.
(viii) A cheque for Rs.720 of Azeem, a customer that had been deposits in the bank was
erroneously recorded in cash book Rs.270.
REQUIRED
Prepare a Bank Reconciliation Statement.

Q.No.5 INVENTORY VALUATION

(a) Because of an error in counting for merchandise at Dec. 31, 2003, Mumtaz & Co. overstated
the amount of merchandise on hand by Rs.8,000.
REQUIRED
If the error had not been discovered until the end of 2004, what was its effect on:
Net income 2003, Owner’s equity 2003
Net income 2004, Owner’s equity at Dec. 31, 2004

(b) The inventory records of Essa Company showed the following transactions for the month
ended December 31, 2004:
Units Cost
December 1 Inventory 700 6.20
December 6 Purchases 400 6.40
December 15 Sales @ Rs.14 300 ---
December 22 Sales @ Rs.15 600 ---
December 28 Purchases 600 6.70
REQUIRED
Compute ending inventory under:
(i) LIFO – Perpetual, and (ii) LIFO – Periodic.

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Q.No.6 PARTNERSHIP – ADMISSION

GIVEN Lalani & Mohsin are partners with capital balance of Rs.270,000 and Rs.180,000
respectively, shared profit and losses in the ratio of 3:2. They admit Ashraf as a partner.
REQUIRED
Entries to record the admission of Ashraf in each of the following situations separately:
(i) Ashraf invests Rs.70,000 cash for 1/4 interest. Record goodwill.
(ii) Ashraf purchased 1/3 interest of Lalani for Rs.140,000 cash.
(iii) Ashraf invests Rs.200,000 for 1/4 interest and the total capital of the firm to be Rs.650,000.

Q.No.7 ACCOUNTING FOR COMPANIES

GIVEN The following transactions relate to Khan & Co. Ltd.
(i) The company received application for 200,000 ordinary shares of Rs.10 each. Allotment
letters were issued for 150,000 shares and the excess subscription amount was refunded.
(ii) The promoters paid Rs.20,000 for printing of Memorandum of Association of the company.
(iii) A computer was acquired by issuing 4,000 ordinary shares of Rs.10 each fully paid up. The
market price per share was Rs.18.
(iv) Declared a cash dividend of Rs.200,000 and stock dividend of Rs.300,000.
(v) Created reserve for debenture redemption in the amount of Rs.15,000.
(vi) Issued 5,000 debentures of Rs.100 each at Rs.90 redeemable after 7 years.
(vii) The bank reported that the amount of dividend paid was Rs.150,000 and the unclaimed
dividend was Rs.50,000.
(viii) The company issued 3,000 12% 5 years debentures of Rs.100 at par redeemable after 5
years at Rs.105.
REQUIRED
Give journal entries for the above transactions.

Q.No.8 FINANCIAL STATEMENTS

GIVEN Take the data given in question numbered 1 and the supporting data for
adjustments.
REQUIRED
Prepare classified: (i) Income Statement. (ii) Balance Sheet.

Q.No.9 Write short notes on the following:

(i) Principle of consistency.
(ii) Time period principle.
(iii) Going concern concept.
(iv) Principle of adequate disclosure.

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Instructions: Attempt any five questions.

Q.No.1 WORK SHEET

GIVEN The unadjusted trial balance of Fahad Sons on Dec. 31, 2006 is as under:-
Fahad Sons.
Trial Balance
Dec. 31, 2006
Cash 40,000
Accounts receivable 350,000
Merchandise inventory beg. 100,000
Prepaid insurance 40,000
Office equipment 300,000
Accumulated depreciation (Equipment) 60,000
Accounts payable 85,000
Purchase returns 90,000
Fahad Capital ?
Sales discount 10,000
Sales revenue 850,000
Purchases 600,000
Salaries expense 240,000
Rent expense 180,000
Utilities expense 25,000
Data for Adjustment:
(viii) Salaries unpaid amounted to Rs.15,000 and salaries prepaid amounted to Rs.20,000.
(ix) Insurance premium expired during the year Rs.25,000.
(x) Depreciation on equipment during the year was Rs.30,000.
(xi) Commission earned but not recorded Rs.40,000.
(xii) Merchandise inventory at Dec. 31, 2006 Rs.50,000.
REQUIRED
Prepare a 10-Column work sheet for Fahad Sons.

Q.No.2 ADJUSTING, CLOSING AND REVERSING ENTRIES

GIVEN Take the data given in Q. No. 1 of this paper and prepare dated adjusting, closing
and reversing entries.

Q.No.3 VOUCHER SYSTEM

GIVEN Ali Company uses the voucher system. During Dec. 2006 the company entered into
the following transactions:
Dec. 01 Prepared voucher No. 126 for Imran Real Co. for the Dec. 2006 rent Rs.3,500.
Dec. 02 Bought merchandise on account from Nestle Co. Rs.8,750 terms 2/10, n/30 voucher No. 127.
Dec. 08 Prepared voucher No. 128 for SSGC for gas bill Rs.1,750.
Dec. 12 Bought office supplies from Farhan Company on account Rs.875 term n/30, voucher No. 129.
Dec. 15 Bought merchandise on account from Khan Products Rs.17,500 terms 2/10, n/E.O.M,
voucher No. 130.
Dec. 20 Received a bill for Rs.1,400 from Shani Advertising for advertisement published, prepared
voucher No. 131.

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Dec. 31 Prepare voucher No. 132 for the monthly salaries of the staff Rs.17,500.
REQUIRED
(i) Make entries in General Journal for the above transactions.
(ii) Prepare the Voucher Register as well total and rule off the Voucher Register.

Q.No.4 ACCOUNTS RECEIVABLE

GIVEN The balance sheet prepares by Nazeer Corporation at Dec. 31, 2005 showed
Rs.1,000,000 in accounts receivable and an allowance for doubtful accounts of Rs.50,000. During
2006, transactions relevant to accounts receivable are summarized as follows:
(1) Sales on account Rs.1,500,000
(2) Sales returns and allowances Rs.12,500
(3) Cash payments by customers Rs.750,000
(4) Accounts receivable from Rehman and Company written off as worthless Rs.10,000
After careful aging and analysis of all customers’ accounts at Dec. 31, 2006, it was decided that
allowance for doubtful accounts should be adjusted to a balance of Rs.30,000.
REQUIRED
(i) Give entries General Journal from for each of the above transactions.
(ii) Record the opening balance in accounts receivable account and allowance for bad debts a/c
and post the relevant entries therein.
(iii) Prepare the adjusting entry on Dec. 31, 2006 for provision of doubtful accounts in
accordance with the corporation’s policy.

Q.No.5 INVENTORY VALUATION

GIVEN Inventory data for a merchandise item stocked by Philips Electronics are as follows:
2006 Units Unit Cost
March 1 Beginning inventory 150 2,000
March 4 Purchased 75 1,500
March 15 Sold 100 3,000
March 25 Purchased 175 2,500
March 30 Sold 200 2,500
REQUIRED
(i) Compute (i) the cost of goods sold during March 2006, (ii) the ending inventory and (iii) the
gross profit on March 30, 2006 using the Perpetual Inventory System and LIFO Method.
(ii) Prepare dated necessary journal entries for the above transactions, assuming all
transactions were on credit.

Q.No.6 BANK RECONCILIATION STATEMENT

GIVEN The accountant of Atif and Company extracted the following data from its cash book
(bank column) and its bank statement on Dec. 31, 2006.
(i) Balance as per bank statement Rs.41,603.
(ii) Balance as per cash book Rs.38,400.
(iii) Deposit in transit Rs.3,200.
(iv) Cheque wrongly charged to the Co.’s a/c. by the bank Rs.4,800.
(v) Bank service charges not recorded in the cash book Rs.320.
(vi) Shahid Sons cheque was returned by the bank as dishonored Rs.960.
(vii) A cheque was issued to Javaid for payment of Rs.821 but was erroneously recorded by Co. as
Rs.504.
(viii) The loan granted and credited by the bank was not recorded in the company book Rs.8,000.

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(ix) Outstanding cheques were in the amount of Rs.4,800.

REQUIRED
(i) Prepare a Bank Reconciliation Statement for Atif and Company on Dec. 31, 2006.
(ii) Prepare necessary adjusting entries.

Q.No.7 DEPRECIATION
GIVEN On January 1, 2001, Aasim Co. purchased a machine for Rs.135,000. Its life was
estimated to be 5 years with scrap value of Rs.10,000. The company uses 40% Diminishing Balance
Method. The accounting year ends on Dec. 31, each year. On June 30, 2004 the old machine was
traded in with a new machine costing Rs.200,000. The trade in allowance was agreed at Rs.75,000
and the balance was paid in cash.
REQUIRED
(i) Calculate the depreciation expense on machine for the years ended Dec. 31, 2001, 2002,
2003 and for 6 months of 2004 on June 30.
(ii) Calculate the gain or loss on exchange.
(iii) Calculate the amount to be paid in cash on exchange.
(iv) Give the necessary journal entries to record the depreciation expense on Dec. 31, 2001,
2002, 2003 & June 30, 2004 and the exchange of machine on June 30, 2004.
Note: Gain or loss on exchange is not be recognized in the entry for exchange.

Q.No.8 PARTNERSHIP – ADMISSION

GIVEN A and B are partners with capital investments of Rs.48,000 and Rs.32,000
respectively. They share profit and loss in their capital ratio. They admit C as a new partner. Prepare
necessary journal entries to record C’s admission under each of the following separate cases and
present balance sheet after admission in case (3) and (4) only.
(1) C invests Rs.40,000 cash receiving 1/3 interest.
(2) C invests Rs.64,000 cash and office equipment worth Rs.40,000 receiving 1/2 interest in the
firm (Record Bonus).
(3) C buys 1/3 interest of A and 1/2 interest of B, paying A Rs.28,800 and B Rs.19,200 directly.
(4) C invests Rs.16,000 cash for 1/3 interest. (Record Goodwill).

Instructions: Attempt any five questions.

Q.No.1 WORK SHEET

GIVEN Unadjusted trial balance of Waseem, a chartered accountant, on June, 30, 2006 is as
under:-
Cash 100,000
Accounts receivable 500,000
Prepaid advertising 40,000
Office supplies 10,000
Office equipment 300,000
Waseem’s Capital --- 662,000
Waseem’s Drawings 5,000
Consulting fees --- 400,000
Salaries expense 31,000
Rent expense 60,000

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Insurance expense 10,000

Repairs expense 6,000
1,062,000 1,062,000
Data for Adjustment on June 30, 2006:
(i) Supplies on hand at the end of the period Rs.2,000.
(ii) Unexpired rent amounted to Rs.20,000.
(iii) Salaries Rs.4,000 are payable.
(iv) Consulting fee still unearned amounted to Rs.15,000.
(v) The office equipment is estimate to have an operating life of 10 years with no salvage. Use
the straight line depreciation method.
(vi) Advertising expense for the year amounted to Rs.35,000.
REQUIRED
Prepare a Ten-Column work sheet from the above data.

Q.No.2 FINANCIAL STATEMENTS

GIVEN Take the data given in question No. 1 in this paper and prepare the following:
(i) An Income Statement for the year ended June 30, 2006.
(ii) A classified Balance Sheet on June 30, 2006.

Q.No.3 ADJUSTING AND CLOSING ENTRIES

(a) GIVEN Following cases for adjustment at year ended June 30, 2006 are taken from the
records of Noman & Co.
(1) Accrued interest on notes payable Rs.1,500.
(2) The rent expense account had a balance of Rs.6,000, which was a full year’s rent paid in
advance on May 1, 2006.
(3) On April 1, 2006, commission income account was credited for Rs.4,800 of which Rs.2,000
was unearned.
(4) Salaries expense account showed a debit a balance of Rs.4,500 of which Rs.2,050 was
prepaid.
(5) Allowance for bad debts account showed a debit balance of Rs.3,400, at June 30, 2006 which
is to be adjusted to a credit balance of Rs.3,400.
REQUIRED
For each of the above numbered cases, draft separate adjusting journal entries.

(b) The selected normal balances taken from the books of Faruqui & Co. for the period ended
was as under:
Cash 50,000 Transportation – in 8,000
Faruqui’s Capital 200,000 Commission income 9,000
Sales 180,000 Rent expense 12,000
Purchase 100,000 Depreciation expense 3,000
Merchandise inventory (1.1.05) 30,000 Accounts receivable 40,000
Sales return 15,000 Accounts payable 30,000
Purchase return 18,000 Salaries expense 12,000
Sales discount 5,000 Bad debts expense 2,500
Purchase discount 2,000 Merchandise inventory (31.12.05) 45,000
REQUIRED
On the basis of above data, prepare closing entries in General Journal for the period ended
Dec. 31, 2005.

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Q.No.4 INVENTORY VALUATION

GIVEN Salman & Company uses a Periodic Inventory System. The records of the company
show the following purchases and sales transactions for the month of November 2006.
Nov. 1 Inventory 1,000 units @ Rs.50 each.
Nov. 10 Purchases for cash 1,600 units @ Rs.60 each.
Nov. 15 Sale for cash 1,500 units @ Rs.100 each.
Nov. 20 Purchases on account 2,000 units @ Rs.80 each.
Nov. 26 Sales on account 900 units @ Rs.120 each.
REQUIRED
(a) Give dated entries in the General Journal for purchases and sales of merchandise.
(b) Determine the cost of ending inventory and cost of goods sold separately by:
(i) First in First out method, and
(ii) Last in First out method.

Q.No.5 DEPRECIATION
GIVEN On January 4, 2002 Mansoor and Company purchased a machine for Rs.125,000. The
machine had an estimated service life of 6 years and an estimated residual value of Rs.5,000. The
company uses Straight Line Method of depreciation and the accounts are closed on December 31,
each tear. On January 5, 2004, the company exchanged the machine with a new machine having an
invoice price of Rs.100,000. The new machine had an estimated scrap value of Rs.4,000 and it was to
be depreciated at 20% per annum on Diminishing Balance Method.
REQUIRED
Prepare journal dated entries in proper form to record the purchase of machine,
depreciation for the years ended 2002, 2003 & 2004, and the exchange of machine on January 5, 04.
(Note: show computations in full).

Q.No.6 VALUATION OF ACCOUNTS RECEIVABLE

(a) GIVEN The following balances have been taken from the pre-closing trial balance of Zeenat
Trading Company on June 30, 2006:
Accounts receivable 180,000
Allowance for bad debts 18,000
Gross sales 250,000
Sales return & allowances 10,000
REQUIRED
Give adjusting entries under each of the following independent assumptions. (Show the
necessary computation).
Case – I: Bad debts expense is estimated on June 30, 2006, at 4% of the net credit sales.
Case – II: The allowance for bad debts is estimated on June 30, 2006 at the rate of 10% of the
year-end balance of accounts receivable.
Case – III: The allowance for bad debts on June 30, 2006, is estimated at Rs.20,000.
Case – IV: The allowance for bad debts on June 30, 2006, is estimated at Rs.15,000.

(b) The following have been taken from the pre-closing trial balance of Anjum & Co. on Dec. 31,
2005:
Accounts receivable 250,000
Allowance for bad debts (Debit balance) 2,500
At December 31, 2005, the accounts receivable included Rs.50,000 of the past due accounts.
After careful study of all such past due accounts, the company estimated that probable loss

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contained therein was 20%. In addition, 1% of the remaining accounts receivable might prove
uncollectible.
REQUIRED
Calculate bad debts expense for 2005 and prepare the necessary adjusting entry at the end
of the year on December 31, 2005.

Q.No.7 PARTNERSHIP – ADMISSION

GIVEN Arif and Mubeen are partners sharing profit and loss in the ratio of 1:3 respectively.
The following is the balance sheet of their on January 1, 2006.
ASSETS EQUITIES
Cash 60,000 A/c. payable 40,000
A/c. receivable 50,000 Accrued exp. 10,000
Merchandise inv. 70,000 Arif Capital 100,000
Supplies 30,000 Mubeen Capital 200,000
Equipment 40,000
Land 100,000
350,000 350,000
On January 1, 2006, the partners agree to admit Jawaid as a partner on the terms summarized
below:
Jawaid invests sufficient cash to acquire 1/3rd (one third) interest in the partnership after revaluation
of following assets and liabilities:
(1) A/c. receivable is estimated to realize Rs.40,000.
(2) Inventory is to be realized at its present replacement value of Rs.50,000.
(3) Land is revalued of Rs.180,000.
(4) Equipment is to be restated at a value of Rs.30,000.
(5) Accrued expenses are Rs.6,000.
REQUIRED
(a) Give entries in General Journal of the partnership to give effects to the above valuations and
to record Jawaid’s admission.
(b) Prepare a classified Balance Sheet of the newly formed partnership (Show computation).

Q.No.8 SPECIAL JOURNALS

GIVEN Selected transactions completed by Jamal Super Store during November 2006 are given
below:
Nov. 1: Sold merchandise on credit to Zahoor Rs.10,000.
Nov. 2: Purchased merchandise from Nadeem for Rs.18,000 terms 2/10, n/30.
Nov. 3: Sold merchandise on credit to Adnan Rs.15,000.
Nov. 5: Sold old furniture for cash Rs.20,000.
Nov. 6: Purchased merchandise on account from Nasim for Rs.16,000.
Nov. 7: The defective merchandise was returned by Zahoor costing Rs.1,000.
Nov. 8: Returned defective merchandise Rs.1,500 to Nadeem.
Nov. 15: The damaged merchandise was returned by Adnan worth Rs.1,500.
Nov. 18: Sold merchandise for cash Rs.8,000.
Nov. 25: Sold merchandise on credit to Alam Rs.25,000.
Nov. 30: The inferior quality merchandise was returned by Alam Rs.2,000.
REQUIRED
Record the above transactions in the Sales Journal and the Purchases Journal and the other
transactions in the General Journal.

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Q.No.9 PARTNERSHIP – LIQUIDATION

GIVEN The partners of ABC firm agreed to liquidate the partnership. The condensed balance
sheet at May 31 was as shown below:
The partners share profits and losses equally, and all partners are personally solvent:-
Balance Sheet
Cash 6,000 Accounts payable 160,000
Other assets 294,000 A Capital 60,000
B Capital 50,000
C Capital 30,000
300,000 300,000
Assumptions:
(i) Other assets are sold Rs.249,000 cash.
(ii) Other assets are sold for Rs.114,000 cash.
REQUIRED
(i) Prepare a liquidation summary under assumption (i).
(ii) Prepare journal entries to record liquidation under assumption (ii).

Instructions: Attempt any five questions.

Q.No.1 FINANCIAL STATEMENT

GIVEN On January 5, 2005, Zafar started a business with cash investment of Rs.200,000 and
equipment worth Rs.50,000. He completed the following transactions during the year 2005:
(1) Purchased merchandise on account Rs.60,000.
(2) Merchandise returned to supplier Rs.5,000.
(3) Cash paid to supplier Rs.20,000.
(4) Purchased merchandise for cash Rs.25,000.
(5) Sold merchandise on credit Rs.90,000.
(6) Merchandise returned from customer Rs.10,000.
(7) Cash collected from customer Rs.15,000.
(8) Sold merchandise for cash Rs.60,000.
(9) Purchased equipment for Rs.10,000 and furniture for Rs.20,000 by paying Rs.6,000 cash and
a promissory note for the remainder.
(10)Salaries expenses paid for Rs.25,000.
(11)Commission income collected Rs.15,000.
Supplementary Data for Adjustments on 31.12.2005:
(a) Depreciation on furniture was estimated at Rs.3,000 and on equipment at Rs.4,500.
(b) Prepaid salary was Rs.4,000.
(c) Unearned commission Rs.2,500.
(d) Merchandise inventory is valued at Rs.10,000.
REQUIRED
(a) Set up necessary T accounts and show the effect of the transactions and adjustments in the
account.
(b) Prepare an Income Statement for the year ended on December 31, 2005.

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Q.No.2 INVENTORY VALUATION

(a) GIVEN The condensed Income Statement prepared by Nizam Company for two years are
shown below:
2006 2005
Sales 500,000 400,000
Cost of goods sold 410,000 340,000
Gross profit 90,000 60,000
Operating expenses 25,000 20,000
Net income 65,000 40,000
At the end of 2005, the inventory was understated by Rs.15,000 but the error was not discovered
until after the accounts had been closed & Financial Statement prepared at the end of 06.
REQUIRED
Compute the corrected net income figures of 2005 & 2006.

(b) GIVEN The following data for the year 2006 has been collected from the books of Amjad
Company.
Cost Price Retail Price
Merchandise inventory Jan. 1 80,000 100,000
Purchases during the year 220,000 300,000
Sales during the year 350,000
Sales return & allowance 20,000
Sales discount 10,000
REQUIRED
Compute the amount of ending inventory by Retail Price Method.

Q.No.3 DEPRECIATION
GIVEN Danish Company purchases a machine on October 1, 2004 at a cost of Rs.132,000. Its
useful life is estimated to be 15 years and scrap value is estimated at Rs.12,000. The company uses
the Sum of the year’s Digit Method and the accounts are closed on December 31, each year.
On September 30, 2007, the company traded the machine for a new machine having an
invoice price of Rs.150,000. The trade in allowance of the old machine on the date of exchange was
Rs.50,000.
REQUIRED
Record the transactions for the year 2004 and 2007 in General Journal and show the
necessary computation.

Q.No.4 VALUATION OF ACCOUNTS RECEIVABLE

GIVEN Asim Company presented the following selected information for the year 2006.
(1) Accounts receivable (Jan. 1, 2006) 100,000
(2) Allowance for bad debts (Jan. 1, 2006) 12,000
(3) Total credit sales for the year 210,000
(4) Cash collected form customers 120,000
(5) Sales return and allowance 6,000
(6) Sales discount allowed to customers 4,000
(7) Customers’ accounts written off during the year 18,000
(8) Accounts receivable previously written off collected during the year 15,000

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REQUIRED
(1) Prepare the accounts receivable (control) and allowance for bad debts account.
(2) Record the bad debts expense and prepare a partial balance sheet as on December 31, 2006
under each of the following condition:
(i) Bad debts expense is estimated to be 2% of net sales.
(ii) Allowance for bad debts on December 31, 2006 should equal 6% of accounts
receivable as on December 31, 2006.

Q.No.5 BANK RECONCILIATION STATEMENT

GIVEN The accountant of Faraz Company has extracted the following data from its cash
records and its bank statement on May 31, 2007.
(1) Balance as per cash record Rs.40,000.
(2) Balance as per bank statement Rs.50,000.
(3) Last day deposit not shown in the bank statement Rs.20,000.
(4) Uncleared cheques Rs.10,000.
(5) Unpresented cheques Rs.15,000.
(6) Cheque No. 22 for Rs.1,200 was deposited in the bank but it was recorded by them as
Rs.2,100.
(7) Direct deposit in the bank Rs.12,000 was not recorded in the cash record.
(8) Cheque deposited for Rs.6,500 was recorded in the cash records as Rs.5,600.
(9) Bank service charges were not recorded in the cash records Rs.800.
(10)Promissory note paid by the bank was not recorded in the cash record Rs.5,000.
(11)Dividend collection was credited by the bank but was not recorded in the cash record
Rs.17,000.
REQUIRED
(i) Prepare a Bank Reconciliation Statement on May 31, 2007.
(ii) Prepare necessary entries to adjust Faraz Company record.

Q.No.6 PARTNERSHIP – FORMATION & DISTRIBUTION OF PROFIT OR LOSS

(a) GIVEN Alia, Shahla and Huma formed a partnership on December 1, 2006. They contributed
as under:
Alia contributed Rs.200,000, Rs.80,000 in the shape on equipment, Rs.100,000 for machinery
and Rs.20,000 for furniture.
Shahla contributed Rs.180,000, Rs.80,000 in the shape of merchandise, Rs.60,000 for supplies
and Rs.40,000 for furniture.
Huma invested cash of Rs.220,000.
It was further decided that all partners should contribute equally, being equal partners. Alia and
Shahla invested further sufficient cash to give them interest equal to that of Huma.
REQUIRED
(1) Give necessary entries in General Journal of the firm to record the formation of partnership.
(2) Prepare balance sheet of the firm immediately after the formation.

(b) GIVEN Chohan and Mohsin are partners with capital balance of Rs.150,000 and Rs.140,000.
They share profit or loss equally. The partnership agreement is as under:
(i) Salaries paid to Chohan and Mohsin Rs.100,000 and Rs.20,000 respectively.
(ii) Commission paid to Chohan and Mohsin Rs.80,000 and Rs.30,000 respectively.
At the end of the period, net loss from business is Rs.120,000.

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REQUIRED
Make entries in General Journal and prepare Income/Loss Distribution Summary.

Q.No.7 PARTNERSHIP – LIQUIDATION

GIVEN Aziz, Bilal and Chand were partners sharing profits and losses equally. They decided
to liquidate their business. Prior to liquidation, the balance sheet of the firm showed as under:
BALANCE SHEET
ASSETS EQUITIES
Cash 50,000 A/c. payable 300,000
A/c. receivable 200,000 Aziz Capital 200,000
Merchandise 150,000 Bilal Capital 170,000
Furniture 300,000 Chand Capital 30,000
The accounts receivable realized Rs.170,000; merchandise was sold for Rs.210,000 and
furniture was sold for Rs.150,000. All partners are solvent and can contribute any amount towards
their deficiency, if any.
REQUIRED
(1) Give in General Journal entries relating to the liquidation of the firm till final settlement of
the accounts of the liabilities and payment to partners.
(2) Set up cash account and partners’ capital accounts and show all posting therein.

Q.No.8 SPECIAL JOURNAL

GIVEN The following cash receipts transactions were completed by Sanaullah & Co. during
the month of June 2006.
June 1. Sanaullah invested Rs.250,000 cash to establish business.
June 4. Sold merchandise for cash Rs.30,000.
June 8. Collected from Kaif’s invoice of June 2, Rs.45,000 less 2% cash discount.
June 10. Sold portion of land not needed in business for a total price of Rs.70,000. Consisting
of cash Rs.10,000 and notes receivable Rs.60,000. The cost of land was Rs.50,000.
June 18. Sold merchandise for cash Rs.12,500.
June 20. Sold merchandise for cash Rs.35,000.
June 30. Obtained Rs.40,000 loan from bank and issued a note payable in that amount.
REQUIRED
Record the above transactions in a Six – column Cash Receipt Journal.

Instructions: Attempt any five questions.

Q.No.1 FINANCIAL STATEMENTS
GIVEN The following is the pre-closing trial balance of Tanveer Company on June 30, 2007:
Title of Account Debit Credit
Cash 25,000
Merchandise inventory 20,000
Accounts receivable 80,000
Allowance for bad debts 2,000
Supplies 10,000
Prepaid insurance 15,000
Furniture 40,000
Allowance for depreciation 12,000

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Accounts payable 40,000

Unearned commission 15,000
Tanveer Capital 100,000
Tanveer Drawings 12,000
Sales 200,000
Sales returns & allowance 8,000
Purchases 140,000
Purchase discount 5,000
Salaries expense 15,000
Rent expense 5,000
Total 372,000 372,000
Additional Data for Adjustments:
(1) Merchandise inventory on June 30, 2007 was valued at Rs.25,000.
(2) Salaries expense for the year Rs.20,000.
(3) Insurance expired Rs.5,000.
(4) Depreciation on furniture for the year Rs.3,000.
(5) The allowance for bad debts was estimated at the rate of 5% of the year-end accounts
receivable.
(6) Unearned commission at Rs.5,000.
REQUIRED
(1) Prepare adjusted trial balance for the year ended 30.6.2007.
(2) Prepare Income Statement for the year ended 30.6.2007.
(3) Prepare classified Balance Sheet as on 30.6.2007.

Q.No.2 DEPRECIATION
GIVEN Huma Company purchased various types of assets. Details are as follows:
Assets Date of Purchase Cost Estimated Life/Rate Method
Building Jan. 1, 2004 2,000,000 40 years Straight Line
Machinery July 1, 2005 300,000 5% Diminishing Balance
Equipment April 1, 2006 440,000 10 years Sum of the years digit
On January 10, 2006 the company paid Rs.100,000 for replacing the plaster of walls of
building. It is estimated that the new plaster will extend the life of building from an originally
estimated 40 years to a total of 50 years.
REQUIRED
(1) Compute the depreciation expense for the year 2004, 2005 and 206 (Show your
computation).
(2) Record the extra ordinary repair of building in G. Journal.
(3) Record depreciation expense for the year ended 31.12.2006.
(4) Prepare a partial balance sheet as on December 31, 2006.

Q.No.3 INVENTORY VALUATION

GIVEN Zulfiqar Trading Company uses Periodic Inventory System. The beginning inventory
balance of item “Z” on June 1 and purchases of this item during June were as follows:
June 1 Inventory 10,000 units @ Rs.10.00
June 8 Purchases 15,000 units @ Rs.14.00
June 14 Purchases 18,000 units @ Rs.16.00
June 22 Purchases 12,000 units @ Rs.18.00

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June 27 Purchases 5,000 units @ Rs.20.00

During the month of June, net sales are Rs.875,000 @ Rs.25 per unit.
REQUIRED
(1) Determine the cost of ending inventory under each of the following methods:
(a) FIFO Method.
(b) LIFO Method.
(c) Weighted Average Method.
(2) Prepare Comparative Income Statement for the period ended on June 30, 2007 to determine
gross profit.

Q.No.4 VALUATION OF ACCOUNTS RECEIVABLE

GIVEN Shandar Company has 120 accounts receivable in its subsidiary ledger. All accounts
are due in 30 days. On December 31st, 2006, an aging schedule was prepared. The results are
summarized below:
Not yet due 150,000
1 – 30 days past due 90,000
31 – 60 days past due 60,000
61 – 90 days past due 40,000
Over 90 days past due 10,000
Customers (118 names) subtotal 350,000
Two accounts receivable were accidentally omitted from this schedule. The following data is
an available regarding these a/cs.
Mateen owes Rs.50,000 from two invoices: invoice no. 101 dated September 14 in the amount of
Rs.40,000 and invoice no. 250 dated November 9 in the amount of Rs.10,000.
Nadeem owes Rs.20,000 from two invoices: invoice no. 230 dated November 19 in the amount of
Rs.12,000 and invoice no. 410 dated December 5 in the amount of Rs.8,000.
REQUIRED
(1) Complete the aging schedule as of December 31st by adding the two columns subtotals and
aging of the accounts of Mateen and Nadeem.
(2) Prepare a schedule to compute the estimated portion of each age group that will prove
uncollectible and the required balance in the allowance for doubtful accounts. The following
percentages of each age group are estimated to be uncollectible:
Not yet due 2%; 1 – 30 days 6%; 31 – 60 days 15%; 61 – 90 days 40%; over 90 days 50%.
(3) Prepare the journal entry to bring the allowance for doubtful accounts up to its required balance
at December 31st, 2006. Prior to making this adjustment, the account has credit balance of
Rs.31,060.
(4) Show how accounts receivable would appear in the company’s balance sheet at December 31st,
2006.

Q.No.5 PARTNERSHIP – ADMISSION

GIVEN The following is the balance sheet of Mumtaz and Alam Partnership:-
BALANCE SHEET
ASSETS EQUITIES
Cash 150,000 Mumtaz’s Capital 300,000
Other assets 350,000 Alam’s Capital 200,000
500,000 500,000
Mumtaz and Alam share profit and loss in the ratio of 3:2. They agree to admit Chohan as a partner.

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REQUIRED
Give the necessary journal entries in each of the following cases separately:
(1) Chohan invests Rs.310,000 for 1/3 interest in the firm.
(2) Chohan invests Rs.190,000 for 1/3 interest in the firm. The total capital of the firm after
admission will be Rs.720,000.

Q.No.6 SPECIAL JOURNAL

GIVEN Zakaullah Company uses multiple column cash payment journal. The cash
transactions for the month of September 2007 were as follows:
September 01 Purchased equipment for cash Rs.15,000.
September 06 Rent expenses paid Rs.10,000.
September 08 Paid salesman salaries Rs.6,000.
September 10 Paid to Wajid Co. for invoice of Sept. 5, Rs.30,000 less 2%.
September 14 Purchased furniture Rs.15,000 and machinery Rs.35,000, for future use in business,
paid cash Rs.20,000 and signed a promissory note for the balance of Rs.30,000.
September 18 Purchased merchandise for cash Rs.18,000.
September 22 Paid Tariq Traders for invoice of Sept. 16 Rs.26,000 less 2%.
September 24 Paid for three-year insurance policy Rs.6,000.
September 27 Purchased merchandise for Rs.30,000. Paid cash Rs.14,000 and balance amount on
credit.
September 30 Paid advertising expense Rs.5,000.
REQUIRED
(1) Record the above transactions in a six-column Cash Payment Journal.
(2) Foot and rule the journal.

Q.No.7 VOUCHER SYSTEM

GIVEN Ahmad Company uses a voucher system for all major expenditures. Selected
transactions for May 2007 are presented below:
May 2007:
2. Drew a cheque for Rs.10,000 to establish petty cash fund.
4. Purchased equipment from Aslam Traders for Rs.25,000 terms 2/10, n/30.
7. Purchased furniture Rs.42,000 making a down payment of Rs.12,000 and agreeing to pay the
balance in 20 days.
10. Received credit memorandum from Aslam Traders Rs.15,000 for the return of a part of
equipment purchased from them.
13. Paid Aslam Traders invoice taking the discount.
16. Paid notes plus accrued interest was Rs.27,000 (face value of the notes Rs.24,000).
19. Advance paid by cheque Rs.22,000 for travelling expense of a business trip.
22. Purchased merchandise Rs.50,000 paying Rs.20,000 and signing notes for the balance.
25. Issued 10% 30 days notes for Rs.25,000 and paid Rs.45,000 in settlement of vouchers
payable Rs.68,000.
30. Reimbursed the officer by cheque with Rs.3,000 for expenses incurred by him in excess of
travel advance.
REQUIRED
Using General Journal forms show how the above transactions would be recorded in voucher
register, cheque register or General Journal.

Q.No.8 PARTNERSHIP – DIVISION OF N/I OR LOSS

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GIVEN The selected normal balances of M & I Distributors indicate the following account
balances at the end of the year 2006.
Cash 100,000
Other assets 400,000
Liabilities 210,000
Capital Maqsood 300,000
Capital Irfan 100,000
Sales 420,000
Sales return 15,000
Sales discount 5,000
Cost of goods sold 250,000
Rent expense 20,000
Advertising expense 30,000
Commission income 20,000
The partnership deed has the following provisions regarding distribution of net income:
Each partner is to receive interest @ 10% on capital balance.
Each partner will be allowed a monthly salary of Rs.4,000.
The remaining N/Income or N/L if any will be divided equally.
REQUIRED
(1) Pass the closing entries in General Journal and prepare expense and revenue summary
account.
(2) Prepare an Income Distribution Summary showing the distribution of net income.
(3) Make entries for distribution of net income to each partner and close the expense and
revenue summary account.

Instructions: Attempt any five questions.

Q.No.1 VALUATION OF ACCOUNTS RECEIVABLE

GIVEN Hadi Brothers furnished the following account balances and transactions concluded
during 2008:
Accounts receivable 1.1.2008 150,000
Allowance for bad debts 1.1.2008 6,400
Total cash collected from customers 395,000
Promissory notes received from customers to apply on account 34,000
Credit balance in customers’ accounts end of the year, advance payments 23,300
Customers’ account written off during the year 3,600
Gross credit sales for the year 600,000
Sales return and allowance 32,400
Sales discount allowed to customers 4,500
Previously written off A/c. receivable recovered 8,500
Note: Allowance for bad debts December 31, 2008 should be equal to 5% of the year-end balance
of accounts receivable account.

REQUIRED

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(i) Make posting of the above transactions directly into the accounts receivable and the
allowance for bad debts accounts. Balance both the accounts on December 31, 2008.
(ii) Prepare a journal entry to record the year-end adjustment as required in the note. Prepare a
partial balance sheet showing the accounts receivable and its allowance for bad debts
accounts.

Q.No.2 BANK RECONCILIATION STATEMENT

GIVEN The accountant of Urooj Ltd. has extracted the following data from its cash book
(bank column) and the bank statement on November 30, 2008:
(a) Credit balance (O.D.) as per cash book Rs.74,000.
(b) Debit balance (O.D.) as per bank statement Rs.62,700.
(c) Bank charges not recorded by the Co. Rs.1,200.
(d) Cheque deposited on November 30, 2008 but not shown on bank statement Rs.28,000.
(e) Deposit by a customer directly made in company’s account not recorded by the company
Rs.50,000.
(f) A cheque for purchase of supplies was drawn for Rs.65,000 but was recorded on company’s
records as for Rs.56,000.
(g) The company officer issued a cheque for Rs.5,000 for travelling expense. This cheque was
not recorded by the company.
(h) Cheque issued during November, but not presented to the bank for payment Rs.4,500.
REQUIRED
(i) Prepare a Bank Reconciliation Statement showing the corrected balances.
(ii) Prepare necessary adjusting entries in the General Journal.

Q.No.3 VOUCHER SYSTEM

GIVEN Uroosa Company uses a voucher system for all major expenditures. Selected
transactions for June, 2008 are presented below:
(a) Paid a note including accrued interest Rs.41,500 (face value of note was Rs.40,000).
(b) Gave a 10% sixty day note in settlement of outstanding voucher for Rs.10,000.
(c) Drew a cheque for Rs.5,000 to establish a petty cash fund.
(d) Purchased goods from Adnan Store for Rs.60,000, making a down payment of Rs.20,000 &
agreeing to pay the balance in 15 days.
(e) Received credit memorandum from Adnan Store for Rs.5,000 for the return of goods
purchased from them.
(f) Advance by cheque Rs.18,000 for travelling expense to an officer making business trip.
(g) Drew a cheque for Rs.4,500 to reimburse petty cash fund office expense.
(h) Reimbursed the officer by cheque of Rs.2,000 for trip expenses incurred by him in excess of
advance of Rs.18,000.
(i) Paid Adnan Store invoice taking the discount.
REQUIRED
Using General journal form show how the above transactions would be recorded by the
company is the Voucher Register, Cheque Register and General Journal.

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Q.No.4 WORK SHEET

GIVEN The pre-closing trial balance of Nadir & Company on December 31, 2007 is as under:
Debit Balances:
Cash Rs.1,200; Office supplies Rs.800; Prepaid advertising Rs.6,000; Rent expense Rs.3,000;
Furniture Rs.10,000; Salaries expense Rs.5,000. (Total Rs.26,000).
Credit Balances:
Allowance for depreciation Rs.2,000; Nadir Capital Rs.10,000; Commission income Rs.14,000.
(Total Rs.26,000).
Data for Adjustment on December 31, 2007:
(i) Office supplies on hand Rs.500.
(ii) Advertising cost unexpired Rs.2,000.
(iii) Current year depreciation on furniture 20% on cost.
(iv) Prepaid salaries Rs.800.
(v) Actual rent expense for the year Rs.3,600.
(vi) Commission receivable Rs.300 and unearned commission Rs.700.
REQUIRED
Prepare a 10 column work sheet.

Q.No.5 ADJUSTING, CLOSING AND REVERSING ENTRIES

GIVEN Take the data given in Q. No. 4, prepare dated adjusting, closing and reversing entries.

Q.No.6 DEPRECIATION
GIVEN M/s. Saad Trading Co. acquired a business machine at a cost of Rs.270,000 on Jan. 1,
2003. The life of the machine was estimated at 5 years with a scrap value of Rs.25,000. The company
uses sum of the years’ digit method for computing the depreciation.
On January 8, 2006 extra ordinary repairs were made at a cost of Rs.42,500. As a result of
which the normal life of the machine was extended to four years from January 2006. The company
uses straight line method after the repairs.
On October 1, 2008 the machine was sold for Rs.48,000. The company follows calendar year
for closing its books of accounts.
REQUIRED
Prepare dated General Journal entries for all the transactions between 2003 and 2008.

Q.No.7 CORRECTION OF ERRORS

GIVEN The book keeper of Amen Company prepared the income statement of the company
which revealed:
Cost of goods sold 200,000
Net income 80,000
The company’s auditor detected the following errors:
(1) Ending merchandise inventory was overstated by Rs.6,000.
(2) Sales return of Rs.2,000 were charged to purchase.
(3) Sales included Rs.7,000 of advance from customers.
(4) Sales of equipment for Rs.3,000 was credited to sales account, book value of equipment was
Rs.4,000.
(5) Office supplies of Rs.200 were on hand whereas the office supplies showed a debit balance
of Rs.1,000.

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REQUIRED
(i) Prepare a statement showing the amount that should be added to or deducted from cost of
goods sold and net income so as to arrive at their correct figures.
(ii) Assuming the books have not been closed, give the necessary correcting entries.

Q.No.8 PARTNERSHIP – LIQUIDATION

GIVEN On December 31, 2007, the following balance sheet of M/s. Shireen, Sumaira &
Shabana partners, who share profit and losses in the ratio of 1:2:3 respectively:
ASSETS EQUITIES
Cash 50,000 Accounts payable 70,000
A/c. receivable 60,000 Notes payable Nil
Mrds. Inventory 75,000 Capital – Shireen 90,000
Equipment 30,000 Capital – Sumaira 60,000
Furniture 15,000 Capital – Shabana 10,000
230,000 230,000
On this date they liquidate their business. Collected Rs.50,000 from the accounts receivable
in full settlement. Assets other than cash & furniture were sold out for cash Rs.133,000. The
furniture was taken over by Shireen at agreed market value of Rs.12,000. The creditors were paid
Rs.65,000 in full settlement.
REQUIRED
Give all necessary entries in the General Journal of the firm to record the above process of
liquidation assuming Shabana to be personally insolvent.

Q.No.9 VALUATION OF MERCHANDISE INVENTORY

GIVEN The record of Maria Traders show the following data relating to commodity A:
2008 Units Per Unit
Jan. 1 Opening inventory 100 50
Feb. 5 Purchases 200 55
Mar. 12 Purchases 300 54
Mar. 14 Sales 350 100
Apr. 12 Purchases 500 60
May. 14 Purchases 100 70
Jun. 30 Sales 400 110

REQUIRED
(i) Compute the cost of ending inventory on June 30, 2008 by each of the following methods:
(a) First-in-first-out (FIFO)
(b) Last-in-first-out (LIFO)
Assume that company uses Periodic System of inventory valuation.
(ii) Prepare comparative income statement showing effect of two alternative valuation methods
on gross profit.

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Instructions: Attempt any five questions.

Q.No.1 WORK SHEET
GIVEN Following are the data related to pre-closing trial balance & adjusted balance of
Humna Associates for the month ended November 30, 2008:
Name of Accounts Pre-Closing Trial Balance Adjusted Trial Balance
Cash 4,980 4,980
Commission receivable 3,000 3,850
Office supplies 600 240
Office equipment 6,600 6,600
Accumulated depreciation 2,420 2,530
Accounts payable 1,660 1,660
Salaries payable 550
Unearned commission 400 190
Humna capital 12,300 12,300
Humna Drawings 1,000 1,000
Commission earned 6,900 7,960
Salaries expense 6,000 6,550
Rent expense 1,500 1,500
Office supplies expense 360
Depreciation expense 110
23,680 23,680 25,190 25,190
REQUIRED
(1) Trace out data & prepare necessary adjusting entries.
(2) Prepare a ten-column worksheet from the above data.

Q.No.2 DEPRECIATION
(a) GIVEN Aneel Company purchased equipment for Rs.700,000. The estimated resale value at
the end of its useful life is Rs.60,000. The company uses Straight Line Method for computing
depreciation. The quarterly depreciation of the equipment is Rs.20,000.
REQUIRED
Compute total life in years of the equipment.

(b) GIVEN Qaiser Co. acquired a machine on Jan. 1 2005 at a cost Rs.500,000, its operating life
was estimated to be 5 years with salvage value of Rs.50,000. The company closes its
accounts on December 31 each year & uses sum of the year digits method for computing
depreciation.
On June 30, 2008, the machine was exchanged with a new similar machine having a price of
Rs.700,000 & the trade in allowance of the old machine was agreed upon at 80% of its written down
value / a book value.
REQUIRED
(a) Calculate depreciation charge for the years ended Dec. 31, 2005, 2006, 2007 & upto June 30,
2008.
(b) Calculate balance to pay in cash.
(c) Give an entry to record exchange of the machine.

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Q.No.3 BANK RECONCILIATION

GIVEN The accountant of Fayyaz Co. has extracted the following data from its cash records
and its bank statement on Nov. 30, 2008:
(i) Bank overdraft as per cash book Rs.106,400.
(ii) Bank overdraft as per pass book Rs.10,000.
(iii) Issued a cheque for Rs.50,000 to a supplier (after the expiry of discount period), but it was
wrongly entered in cash book as Rs.49,000.
(iv) A debit memo for Rs.5,000 accompanied by the bank statement for locker rent; the bank
had erroneously charged this to Fayyaz Co. instead of Fazi Co.
(v) Deposited a customer’s cheque for Rs.78,400 (after discount deduction) but it was wrongly
recorded in cash book as Rs.80,000 as if it were received after discount period.
(vi) A customer’s cheque for Rs.200,000 deposited directly in bank was by mistake entered into
cash column of the cash book.
(vii) Issued a cheque for purchase of supplies for Rs.10,000 was recorded on company’s record as
Rs.1,000.
(viii) Mark-up charged by bank was not recorded by the company Rs.2,000.
(ix) Three cheques totaling Rs.20,000 were issued to suppliers, but only one cheque for Rs.5,000
was presented to the bank by the last day of the month.
(x) Four cheques totaling Rs.120,000 were sent to the bank for collection but only one cheque
for Rs.20,000 was cleared & credited by the bank.
REQUIRED
(a) Prepare a Bank Reconciliation Statement for Nov. 30, 2008.
(b) Pass necessary adjusting entries.

Q.No.4 VALUATION OF ACCOUNTS RECEIVABLE

GIVEN On June 30, 2008, before closing the accounts, the Aiman Company shows the
following selected account balances as under:
Accounts receivable – Control 600,000
Allowance for doubtful accounts 10,000
Credit sales 1,000,000
Sales discount 50,000
On this date, the following errors omissions were discovered:
(i) The sales return & allowances for Rs.50,000 were not recorded.
(ii) Promissory note of Rs.10,000 received from customers to apply on account remained
unrecorded.
REQUIRED
Give:
(a) General journal entries to correct the errors.
(b) Prepare adjusting entries and also prepare partial balance sheet at June 30, 2008 under each
of the following assumptions separately:
(i) Uncollectible account expense is estimated at 2% of net credit sales.
(ii) Allowance for doubtful account is estimated at 10% of accounts receivable
(corrected) at the year-end.

Q.No.5 CLOSING ENTRIES & INCOME STATEMENT

GIVEN The following are the incorrect closing entries, prepared by an in-experienced
accountant at the end of the year ended December 31, 2007:

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Dec. 31 Sales 250,000

2007 Sales discount 5,000
Open inventory 10,000
Allowance for bad debts 6,000
Drawings 1,000
Purchases 53,000
Income summary 325,000
Income summary 26,000
Ending inventory 15,000
Commission income 1,000
Salaries expense 10,000
Depreciation expense 5,000
Utility expense 4,000
Bad debts expense 3,000
Allowance for depreciation 20,000
REQUIRED
(a) Prepare FOUR correct closing entries.
(b) Prepare an Income Statement for the year ended December 31, 2007.

Q.No.6 INVENTORY VALUATION

(a) GIVEN Rahat Equipment Co. provides you with the following inventory data:
Date: 2008 Units Cost Per Unit
January 1 Beginning 40 1,250
February 28 Purchases 100 1,220
June 25 Purchases 85 1,200
November 11 Purchases 110 1,800
The inventory on Dec. 31, 2008, of 50 units.
REQUIRED
Determine cost of:
(i) Cost of goods available for sale and
(ii) Required to cost of ending inventory, using FIFO Method, Periodic System.

(b) GIVEN Bushra – Arshad Firm sells goods at a gross profit of 40% of sales. Following are the
information related to sale & purchase of merchandise for the month of November, 2008:
Sales (net) during the month 300,000
Merchandise inventory (1.11.2008) 9,600
Purchases (net) during the month 192,000
During the month a certain class of merchandise costing to Rs.12,000 was sold for Rs.14,400.
Expect for this sale, the gross profit on rest of the sales remained normal at 40%.
REQUIRED
Determine the cost of ending inventory by Gross Profit Method on November 30, 2008.

Q.No.7 PARTNERSHIP – ADMISSION

GIVEN Following is the balance sheet on November 30, 2008 of the partnership firm of
Talha & Tayyab who share profit & loss in the ratio of their capitals:

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ASSETS EQUITIES
Cash 50,000 Capital Talha 25,000
Other assets 75,000 Capital Tayyab 100,000
125,000 125,000
On this date they agree to admit Abdul Hadi as a partner.
REQUIRED
Give the required entries on the firm’s books to record the admission of Abdul Hadi & also
prepare balance sheet after admission under each of the following assumptions separately:
(a) Abdul Hadi purchase 1/4th on each old partner’s capital.
(b) The new partner invests Rs.75,000 for a 1/3rd interest, in the total capital of the firm of
Rs.210,000.
(c) The new partner invests Rs.100,000 for a 1/4th interest in the firm. Record bonus.

Q.No.8 CORRECTION OF ERRORS

(a) GIVEN The following errors/omissions were made during 2007 & were discovered before
closing the books of accounts:
(i) Sales return of Rs.16,000 was charged to purchase.
(ii) Outstanding advertising expense were overlooked Rs.45,000.
(iii) Rs.150,000 spent for extension of building was debited to building repairs account.
(iv) Prepaid salary of Rs.10,000 was included in salary expense account.
(v) Accrued rent income of Rs.15,000 was overlooked.
REQUIRED
Pass rectifying entries in General Journal.

(b) GIVEN The following errors were made during the year 2007 & were discovered in 2008:
(a) Purchase of equipment for Rs.250,000 was debited to repairs expense account in error.
Because of this error, depreciation on equipment Rs.20,000 could not be recorded.
(b) Credit purchase of merchandise of Rs.170,000 was not recorded in 2007 although the goods
were received and included in the ending inventory of 2007.
(c) Merchandise of Rs.180,000 purchased in the month of December 2007 & included in the
ending inventory of 2007, but the purchase was recorded on January 5, 2008.
(d) Ending inventory of 2007 was understated by Rs.5,000.
REQUIRED
Pass correcting entries in General Journal entries in the year 2008.

Instructions: Attempt any five questions.

Q.No.1 SPECIAL JOURNALS

GIVEN From the following data:
2009 Customers Rs.
Feb. 2 Waqar Bros. 15,000
Feb. 16 Naseem & Sons 20,000
Feb. 28 Nasir & Co. 10,000

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2009 Suppliers Rs.

Feb. 1 Maroof Traders 35,000
Feb. 14 Qamar Printers 15,000
Feb. 26 Hameed Merchant 5,000
REQUIRED
(a) Complete the sales journal (page 22).
(b) Complete the purchase journal (page 33).
(c) The control accounts.
(d) The A/c. receivable running balance from subsidiary ledgers.

Q.No.2 WORK SHEET

GIVEN Following information related to Zulfiqar & Sons as at December 31, 2008:
Balance Before Adjustments
Debits Credits
Rent expense 5,000
Salaries expense 20,000
Sales supplies 3,000
Office equipment 60,000
Merchandise inventory 25,000
Cost of goods sold 170,000
Cash 40,000
Zulfi – Capital 113,000
Sales 215,000
Sales return & allowance 5,000
328,000 328,000
Balance Day (31 – 12 – 08) Data:
(i) Rent expense Rs.3,000.
(ii) Salaries expense Rs.25,000 for the year.
(iii) Sale supplies used Rs.2,000.
(iv) 10% depreciation was estimated on office equipment.
REQUIRED
Prepare a ten column work sheet.

Q.No.3 ADJUSTING / REVERSING & BALANCE SHEET

GIVEN Refer to the question No. 2 of this paper and prepare:
(a) Dated adjusting and reversing entries.
(b) The balance sheet as on December 31, 2008.

Q.No.4 CLOSING & INCOME STATEMENT

GIVEN The following extracts are related to Mr. Tariq after adjustments at June 30, 2009:
Sales 250,000 Salaries expense 10,000
Inventory beginning 10,000 Bad debts expense 3,000
Purchases 53,000 Purchase returns 1,000
Commission income 1,000 Depreciation expense 5,000
Sales discount 5,000 Utility expense 4,000
Allowance for bad debts 11,000 Inventory ending 15,000
Rent expense payable 11,000 Tariq Drawings 19,000

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REQUIRED
(a) Necessary date closing entries.
(b) An Income Statement for the year ended June 30, 2009.

Q.No.5 BANK RECONCILIATION

GIVEN M/S. Ali Sher’s cash book showed a debit balance of Rs.204,520, while the bank
statement showed ac credit balance of Rs.163,650 at 31-1-09.
The following items were discovered causing the difference in cash and bank balances:
(i) Bank charges not entered in cash Rs.520.
(ii) Cheques issued but not presented Rs.25,000.
(iii) Promissory note collected by bank, but remained unrecorded in the firm’s books Rs.46,000.
(iv) Cheques deposited but not shown on bank statement Rs.61,350.
(v) Interest credited by the bank, not recorded in cash Rs.3,000.
(vi) NSF cheques returned by the bank Rs.53,000.
REQUIRED
Prepare Bank Reconciliation Statement & also entries to adjust the cash balance in General Journal.

Q.No.6 ACCOUNTS RECEIVABLE

GIVEN The following data is taken over from record of Faizan Co.
Balances
31. 12. 07 31. 12. 08
Accounts receivable 150,000 260,000
Allowance for bad debts 3,000
Allowance for bad debts (before adjustment) (Cr.) 11,000
During 2008, the following transactions were performed:
(i) Total sales of Rs.300,000 including credit sales Rs.240,000.
(ii) Previously written off accounts recovered Rs.8,000.
(iii) Cash collected from customers Rs.100,000.
(iv) Accounts receivable apply on note Rs.50,000.
(v) Overpayment received from a customer Rs.20,000.
REQUIRED
(a) Estimate the bad debts at 10% of receivable.
(b) Give the dated adjusting entry for 2008.
(c) Allowance for bad debts to justify the above information.
(d) Prepare the partial balance sheet as on Dec. 31, 2008.

Q.No.7 INVENTORY VALUATION

GIVEN The following data related to the business of Ashraf Company, which uses the
Perpetual System and FIFO Method.
Nov. 1 Merchandise inventory 500 units @ Rs.50 each.
Purchases Sales
Nov. 4 300 units @ Rs.55 Nov. 8 350 units @ Rs.70
Nov. 9 400 units @ Rs.60 Nov. 20 600 units @ Rs.80
Nov. 25 400 units @ Rs.65 Nov. 30 100 units @ Rs.90
REQUIRED
(i) Prepare an inventory card, indicating each day’s inventory.
(ii) Give the cost of goods available for sale and the cost of goods sold at Nov. 30.
(iii) Compute gross profit.

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Q.No.8 DEPRECIATION
GIVEN Arshad & Co. acquired two machines on 3rd March, 2006 for Rs.440,000 each. The
machines have estimated salvage value of Rs.40,000 each. Other information is as under:
Machines Life in Produces / Uses
A 200,000 units 2006: 50,000 units, 2007: 100,000 units
B 500,000 hours 2006: 70,000 hours, 2007: 80,000 hours
REQUIRED
(i) Compute the depreciation of both the machines for the year ended Dec. 31, 2006 and 2007.
(ii) After producing 150,000 units, the above machine – A was sold at a gain of Rs.10,000.
The machine – B was trade in with a new machine – C at Rs.20,000 less than its book value
after 150,000 hours of use (loss is recognized).
Give the entries for the above disposal. Show necessary computation also.

Q.No.9 PARTNERSHIP – LIQUIDATION

GIVEN Irfan, Imran and Kamran are partners in a firm sharing profits and losses in the ratio
of 2:3:1 respectively. They decided to dissolve the firm on January 1, 2010. On this date, the firm’s
position was as follows:
Cash Rs.140,000; Other assets ?; Acc. payable Rs.120,000; Irfan Capital Rs.240,000; Imran
Capital Rs.360,000; Kamran Capital Rs.120,000.
The other assets were sold for Rs.460,000, liabilities were paid in full. Remaining cash was
distributed among the partners.
REQUIRED
(i) Give necessary entries in the General Journal for the liquidation of firm.
(ii) Prepare liquidation summary.

Instructions: Attempt any five questions.

Q.No.1 TERMINOLOGY
(a) Briefly describe any five of the following:
(i) Contra asset. (ii) Adjunct account.
(iii) Book of original entry. (iv) Discount lost.
(v) Book of final entry. (vi) Discount expense.

(b) JOURNAL ENTRIES

GIVEN Give the journal entries to record any five of the following:
(i) The corrected cash balance at end for a NSF cheque of Rs.1,000.
(ii) The merchandise drawing by the owner valued Rs.2,000.
(iii) The business cash deposited into the business bank account Rs.3,000.
(iv) The discount lost under net price method Rs.4,000.
(v) The closing entry for owner’s drawings of Rs.5,000.
(vi) The correction entry for overcharged bad debts after closing Rs.6,000.

(c) MERCHANDISE BUSINESS

GIVEN Sumsan Traders completed the following related transactions for a month:
(i) Purchased merchandise under the term 2/10, n/30, valued Rs.100,000.
(ii) Paid transportation on it Rs.3,000.
(iii) Returned defective merchandise valued Rs.5,000.

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(iv) Availed the discount as payment made within 10 days.

REQUIRED
Record the above transactions in the General Journal of the trader.

Q.No.2 SUBSIDIARY LEDGER / TRIAL BALANCE

GIVEN Raziq Company started business on 1.1.09 with a capital investment of Rs.100,000.
On May 31, 2009, its special journals revealed the following information:
Purchase Journal (PJ) Rs.15,000
Sales Journal (SJ) Rs.45,000
Columns
Debits Credits
Accounts receivable 8,000
Sales 70,000
Capital 100,000
Cash 178,000
Cash Payment Journal (CPJ)
Sundry accounts:
Salaries expense 6,000
Utility expense 3,000
Accounts payable 4,000
Cash 13,000
REQUIRED
(a) Compute the May 31, 2009, balances of the required items stated above.
(b) Prepare a trial balance in sequence at May 31, 2009.

Q.No.3 ADJUSTING & REVERSING ENTRIES

GIVEN The following are the unadjusted balances taken from the books of Mobeen &
Company on Dec. 31, 2008:
Debit (Rupees):
Cash Rs.26,000; Supplies Rs.14,000; Accounts receivable Rs.24,000; Equipment Rs.36,000;
Salaries expense Rs.20,000 and Advertising expense Rs.16,000.
Credit (Rupees):
Accounts payable Rs.5,000; Accumulated depreciation (Equip) Rs.5,000; Mobeen Capital
Rs.56,000 and Commission income Rs.70,000.
Balance Day Data: (31.12.08):
(i) Unearned commission Rs.5,000.
(ii) Depreciation expense was estimated at Rs.6,000.
(iii) Unrecorded utility expenses for the period Rs.7,000.
(iv) Supplies expense Rs.8,000.
(v) Commission accrued Rs.9,000.
(vi) Advertising expense for the period is 20%.
REQUIRED
Prepare dated:
(a) Adjusting / correcting entries.
(b) Reversing entries and indicate the entries which have no reversing.

Q.No.4 WORK SHEET

GIVEN Refer to the question No. 3 of this paper and prepare a ten column worksheet.

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Q.No.5 CASH CONTROL

(a) GIVEN The following information pertains to Aziz Traders for September 30, 2009.
Balance as per bank statement 220,050
Balance as per cash book 191,025
(i) Proceeds of depositors note collected by the bank Rs.?
(ii) Deposit in transit 12,474
(iii) Outstanding cheques 23,195
(iv) Bank error detected Rs.675 from Aziz account for a cheque actually written 6,750
for
REQUIRED
Prepare:
(a) A Bank Reconciliation Statement.
(b) Adjusting entry OR entries.

(b) GIVEN Hafeez Company uses the voucher system, and performed the following selected
transactions:
Feb. 1 Prepared a voucher No. 27 of Rs.10,000 for merchandise purchased at 2/10, n/30.
Feb. 4 Recorded the voucher No. 28 of Rs.1,000 payable to GEO – TV for advertisement.
Feb. 10 Issued a cheque No. 0033 for the voucher No. 27, after discount and a cheque No. 0035 for
the voucher No. 28.
Feb. 25 Prepared voucher No. 29 and issued the cheque No. 0036, for purchase of an office
typewriter Rs.5,000.
Feb. 28 Prepared voucher No. 30 for the utility bills of Rs.4,000 for the month.
REQUIRED
Record the above transactions of voucher and the cheque register (in general journal).

Q.No.6 ACCOUNTS RECEIVABLE

GIVEN Hadi started business on 1.1.07, the following are his selected transactions:
2007:
Nov. 10 Sales of Rs.320,000 including cash sales Rs.40,000.
Dec. 25 Collected Rs.50,000 for credit sales.
Dec. 31 Hadi estimates the bad debts for the year Rs.9,000.
2008:
May 11 Various accounts were found worthless and written off Rs.20,000.
Jul. 15 Total sales were Rs.350,000 including 10% for cash sales.
Oct. 25 Total cash collected on account Rs.150,000.
Nov. 20 previously written off accounts recovered Rs.8,000.
Dec. 31 Hadi estimates the bad debts for the period Rs.18,000.
REQUIRED
(i) Prepare necessary dated entries in the General Journal for the period 2007 and 2008, using
allowance method for estimating the bad debts.
(ii) Prepare the partial balance sheet as at end of 2007 only.

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Q.No.7 INVENTORY VALUATION

(a) GIVEN The following year’s data is available for a single product of a company:
2007 2008
Units Rate Units Rate
Purchases 900 Rs.35 1,100 Rs.43
1,000 37 750 46
650 40 800 48
Sales 1,000 2,300
The company uses FIFO method.
REQUIRED
(i) Compute the inventory at the end of the each year.
(ii) What is the amount of beginning inventory of 2008?

(b) GIVEN On February 1, 2008, Abid Company had inventory of a commodity 150 units @
Rs.15. during February his transactions were as follows:
Feb. 6 Purchased 150 units @ Rs.16.
Feb. 10 Sold 180 units @ Rs.20.
Feb. 21 Purchased 150 units @ Rs.17.
Feb. 23 Sold 160 units @ Rs.22.
Feb. 25 A customer returned 10 units from Feb. 10 sale.
The company uses perpetual system of inventory applying Moving Average Method.
REQUIRED
Prepare inventory card and find out the value of ending inventory.

Q.No.8 DEPRECIATION
GIVEN Khalil Company uses 40% Reducing Balance Method for its office equipment costing
Rs.300,000 acquired on Sept. 1, 2005.
The salvage value is estimated at 1/6 of the cost. The company closes its books at December
31, each year.
On January 1, 2008, the equipment was disposed off as under each of the following
independent situations:
(i) Discard equipment without any proceeds.
(ii) Sold at loss of Rs.45,000 for cash.
(iii) Exchange with similar type of asset along with cash payment of Rs.16,200 having trade in
loss of Rs.5,000.
REQUIRED
(i) Compute the book value of the asset at 1.1.08.
(ii) Give the adjusting and closing entries at Dec. 31, 2007.
(iii) Prepare journal entries for each type of disposal stated above.

Q.No.9 PARTNERSHIP – LIQUIDATION

GIVEN The IMKO Partnership is being liquidated. After all liabilities have been paid and all
assets sold, the following balances of the partners’ capital accounts are as follows:
Imran Rs.530,000 credit balance; Muneer Rs.160,000 debit balance; and Kamran Rs.420,000 credit
balance.
The partners share profit and losses as follows:
Imran 30%. Muneer 60% and Kamran 10%.

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REQUIRED
If all assets are sold out and all liabilities are paid, estimate the cash and its distribution in
General Journal. Muneer is personally insolvent and nothing can be recovered from him. Show
necessary computations also.

Instructions: Attempt any five questions.

Q.No.1 ADJUSTING ENTRIES

GIVEN The following are selected balances before adjustments and adjustment data for
Qureshi Enterprises at end of annual accounting period, December 31, 2010:
Allowance for bad debts 4,000
Unexpired insurance 48,000
Prepaid rent 16,000
Prepaid salaries 18,000
Prepaid taxes 19,000
Rent payable 8,000
Advertising payable 10,000
Taxes payable 6,000
Salaries expense 64,000
Rent expense 22,000
Advertising expense 20,000
Taxes expense 30,000
Adjustment Data:
(i) Allowance for bad debts was estimated at Rs.3,000.
(ii) Insurance policy was acquired on May 1, 2010 for one year.
(iii) Rent was prepaid to the extent of Rs.12,000.
(iv) Rent payable amounted to Rs.12,000.
(v) Salaries were prepaid to the extent of Rs.6,000.
(vi) Actual salaries expense for the year amounted to Rs.78,000.
(vii) Advertising payable amounted to Rs.14,000.
(viii) Actual advertising expense for the year amounted to Rs.21,000.
(ix) Prepaid taxes were Rs.24,000.
(x) Actual taxes for the year amounted to Rs.27,000.
REQUIRED
Prepare adjusting entries in General Journal.

Q.No.2 WORK SHEET

GIVEN The following are trial balance and adjustment data for Zaidi’s Shop on December
31, 2010:
Cash 9,200
Accounts receivable 21,400
Merchandise inventory, Jan 1 3,200
Prepaid rent 1,800
Furniture 12,000
Accumulated depreciation 2,400

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Unearned commission 3,600

Capital, Zaidi 48,400
Sales 30,000
Sales discount 300
Purchases 32,000
Purchase return 500
Transportation – in 500
Salaries expense 3,300
Rent expense 1,200
Adjustment Data:
(a) Accounts receivable were extracted to realize Rs.20,000.
(b) Book value of furniture was estimated at Rs.9,000.
(c) Rent was prepaid to the extent of Rs.600.
(d) Commission earned during the year amounted to Rs.2,400.
(e) Actual salaries expense for the year amounted to Rs.4,800.
(f) Merchandise inventory on Dec. 31 was valued at Rs.8,800.
REQUIRED
Prepare 10 – column worksheet.

Q.No.3 FINANCIAL STATEMENTS

GIVEN Take the trial balance and the adjustment data given in question No. 2.
REQUIRED
Prepare:
(a) Multi – step Income Statement.
(b) Classified Balance Sheet.

Q.No.4 VOUCHER SYSTEM

GIVEN The following transactions were completed during March 2010 by Khan Company,
which uses voucher system:
01. Issued cheque No. 74 for Rs.20,000 in payment of outstanding voucher No. 99.
02. Issued cheque No. 75 for establishment of petty cash fund in the amount of Rs.5,000
(voucher No. 101).
03. Purchased merchandise for Rs.21,000 from Farooqui Ltd. on a/c. (voucher No. 102). Khan
Co. follows perpetual system.
04. Returned merchandise worth Rs.1,000 to Farooqui Ltd. (voucher No. 103).
05. Issued cheque No. 76 in payment of voucher No. 103 after deducting 2% cash discount.
06. Issued cheque No. 77 for Rs.6,000 for travel advance to an employee (voucher No. 104).
07. Signed a 60-day 10% note of Rs.12,000 in payment of outstanding voucher No. 100.
08. Issued cheque No. 78 for Rs.15,600 in settlement of a note payable including interest Rs.600
(voucher No. 105).
09. Issued cheque No. 79 for Rs.2,000 to reimburse the travel expense incurred by the employee
in excess of travel advance. (Voucher No. 106).
10. Issued cheque No. 80 to reimburse petty cash fund for supplies expense Rs.1,600,
conveyance expense Rs.1,100, and entertainment expense Rs.1,400. (Voucher No. 107).
REQUIRED
Using two – column General Journal form make entries as the case may be, in:
(a) Voucher register.
(b) Cheques register.

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Q.No.5 VALUATION OF ACCOUNTS RECEIVABLE

GIVEN Tariq Traders has the following selected information from its business records during 2009:
(a) Sold merchandise for Rs.220,000 on account and for cash Rs.50,000.
(b) Collected cash from customers Rs.60,000.
(c) Accepted a note from customer on account Rs.6,000.
(d) A customer a/c. reveals a credit balance of Rs.1,000.
(e) A worthless account written off Rs.7,000.
(f) Earlier written off account recovered Rs.5,000.
Balances at 1 – 1 – 2009:
Accounts receivable Rs.150,000
Allowance for bad debts (Cr.) 7,500
Notes receivable 3,000
REQUIRED
(i) Prepare journal entries for (a) to (f) above.
(ii) Compute and prepare the adjusting entry assuming that bad debts are estimated at 5% of
a/c. receivable at end.
(iii) Prepare the partial balance sheet as at Dec. 31, 2009.

Q.No.6 INVENTORY VALUATION

GIVEN Inam Company’s beginning inventory and purchases during the fiscal year ended
June 30, 2010 are as follows:
Units Per Units
Jul. 1, 09 Inventory 1,000 50.00
Jul. 10, 09 Purchases 1,200 52.50
Aug. 30, 09 Purchases 800 55.00
Oct. 1, 09 Purchases 2,000 56.00
Dec. 15, 09 Purchases 1,500 57.00
Feb. 1, 10 Purchases 700 58.00
Mar. 20, 10 Purchases 1,370 60.00
May 21, 10 Purchases 450 62.00
The company uses the Periodic Inventory System and the Co. sold 5,800 units for total
amount of Rs.536,000 during the year.
REQUIRED
Determine the cost of ending inventory on June 30, 2010, under each of the following
inventory costing methods:
(a) FIFO (b) LIFO (c) Weighted Average
(d) Gross Profit Method, assuming that above mentioned sales were made at an estimated
gross profit rate of 40%.

Q.No.7 DEPRECIATION
GIVEN The following data relate to the three machines acquired by Mumtaz Company on
January 1, 2005:
Machine Cost Useful Life Scrap Value Depreciation Method
A 340,000 6 years 40,000 Straight Line
B 500,000 5 years 50,000 Sum of the Year’s Digits
C 400,000 4 years 30,000 50% Diminishing Balance

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REQUIRED
(a) Compute the annual depreciation expense for the whole life of each machine and present
data in the following form:
Year Machine A Machine B Machine C
2005
2006
2007
2008
2009
2010
(b) Record in General Journal the disposal of machines as per the following descriptions:
(i) Machine C is traded in with Machine D priced Rs.480,000 receiving trade in allowance equal
to book value on December 31, 2006.
(ii) Machine B is sold for cash Rs.190,000 on July 1, 2007.
(iii) Machine A is retired without any consideration on September 30, 2009.

Q.No.8 PARTNERSHIP – ADMISSION

GIVEN Shahab and Usman are equal partners with capital of Rs.100,000 each. Jamal is
admitted for 1/3rd interest.
REQUIRED
Make entries in General Journal in each of the following independent cases:
(a) Jamal invests cash Rs.160,000 in a total capital of Rs.360,000.
(b) Jamal invests cash Rs.180,000 in a total capital of Rs.420,000.
(c) Jamal invests cash Rs.60,000 in a total capital of Rs.270,000.
(d) Jamal purchases 1/3rd interest of each of the old partners after recording goodwill of
Rs.100,000.

Instructions: Attempt any five questions.

Q.No.1 MISSING FIGURES

(a) Each of the six horizontal lines in the following table represent a separate set:
Beginning Net Ending Cost of Gross Profit Net Sales
Inventory Purchases Inventory Goods Sold (Loss)
1. 10,000 50,000 ? 40,000 ? 65,000
2. 12,000 ? 10,000 ? 20,000 70,000
3. ? 72,000 18,000 ? 20,000 95,000
4. ? 50,000 15,000 55,000 ? 50,000
5. 20,000 70,000 ? 82,000 (2,000) ?
6. 22,000 ? 18,000 72,000 28,000 ?
REQUIRED
Copy the above table and fill in the missing amounts, showing computations.

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(b) The following are eight independent cases:

Paid Accrued Prepaid Expense
Salaries 33,000 7,000 Nil ?
Rent 40,000 Nil 15,000 ?
Advertising 78,000 15,000 18,000 ?
Utilities 20,000 5,500 ? 22,500
Insurance 77,000 ? 12,000 80,000
Repair ? 8,000 11,000 15,000
Interest 23,000 Nil Nil ?
Taxes ? Nil Nil 22,000
REQUIRED
Copy the above table and fill in the missing amounts, showing computations.

Q.No.2 WORK SHEET

GIVEN The following are pre-adjustment balances taken from the ledger of Amjad Company
and month-ended adjustment data on November 30, 2010:
Cash 75,000
Office supplies 9,000
Prepaid rent 36,000
Unearned commission 27,000
Amjad, Capital 76,000
Commission earned 83,000
Salaries expense 66,000
Adjustment Data:
(a) Office supplies used during the month Rs.6,000.
(b) Unearned commission was nil.
(c) Commission earned during the month Rs.120,000.
(d) Prepaid salaries amounted to Rs.10,000.
(e) Salaries expense for the month Rs.60,000.
(f) Rent expense for the month Rs.30,000.
REQUIRED
Prepare 10 – column worksheet.

Q.No.3 ADJUSTING AND REVERSING ENTRIES

GIVEN Take the balances and the adjustment data given in question No. 2.
REQUIRED
Prepare:
(a) Adjusting entries.
(b) Reversing entries.

Q.No.4 BANK RECONCILIATION STATEMENT

GIVEN The cash in bank account for Imam Company at January 31, of the current year
indicated a balance of Rs.18,380. The bank statement indicated a balance of Rs.29,106. The
comparison of the bank statement with the records revealed the following reconciling items:
(a) Cheques outstanding totals Rs.13,442.
(b) A deposit of Rs.6,918 has been too late to appear on the bank statement.
(c) The bank had collected Rs.4,330 on notes receivable with face value of Rs.4,000.

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(d) A cheque for Rs.93 issued was erroneously recorded in cash book as Rs.39. the cheque was
for the payment to Aleem & Co. for the purchase of office equipment.
(e) A cheque drawn for Rs.505 had been erroneously charged by bank as Rs.550.
(f) Bank service charges for January amounted to Rs.29.
REQUIRED
(a) Prepare bank reconciliation statement.
(b) Record necessary entries in general journal form.

Q.No.5 VALUATION OF ACCOUNTS RECEIVABLE

(a) GIVEN Prior to the year-end adjustments accounts receivable account of Mansoor
Corporation had balance of Rs.140,000 and the allowance for doubtful accounts showed a
credit balance of Rs.2,000. Net credit sales for the year amounted to Rs.900,000.
REQUIRED
Compute the amounts of:
(a) Bad debts expense for the year if 10% of the year-end accounts receivable is estimated to be
uncollectible.
(b) Allowance for doubtful accounts at year-end if 1% of net credit sales is estimated to be
uncollectible.

(b) GIVEN On October 31, 2010 prior to adjustment accounts receivable account of Samsam
Enterprises had a balance of Rs.180,000 and the allowance for doubtful accounts showed a
credit balance of Rs.1,000. During November worthless accounts written off amounted to
Rs.17,000 and the previously written off accounts recovered in the amount of Rs.7,000. On
November 30 accounts receivable control account showed a balance of Rs.170,000 and a
customer’s account in the subsidiary ledger revealed a credit balance of Rs.4,000. The Co.
has a policy of estimating allowance for doubtful debts equal to 5% of the month-end
balance of accounts receivable.
REQUIRED
Prepare:
(a) Adjusting and closing entries on October 31.
(b) General journal entries for November transaction.
(c) Adjusting entries and balance sheet on November 30.

Q.No.6 INVENTORY VALUATION

(a) GIVEN The following are selected transactions performed by Zenat Trading Company:
(i) Purchased merchandise on account Rs.27,000.
(ii) Received allowance on supply of defective goods Rs.2,000.
(iii) Sold merchandise costing Rs.16,000 on account for Rs.20,000.
(iv) Accepted the return of defective merchandise from customer (cost Rs.4,000 sales price
Rs.5,000).
REQUIRED
Prepare general journal entries under:
(i) Periodic System (ii) Perpetual System
(b) State the effects of understatement of ending inventory on:
(i) Cost of goods sold (ii) Net income
(iii) Current assets (iv) Total assets
(v) Owner’s equity

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Q.No.7 DEPRECIATION
(a) GIVEN On March 31, 2007 Safeer Company purchased a machine at a cost of Rs.400,000,
which was expected to be sold for Rs.40,000 after its estimated useful life of 4 years.
Company follows calendar year as its accounting period.
REQUIRED
Compute annual depreciation expense from 2007 to 2010 under:
(i) Sum of the years’ digit method.
(ii) 50% Diminishing balance method. Limit the accumulated depreciation to the amount of
depreciable cost.

(b) GIVEN The following are selected transactions performed by Sanaullah & Sons:
Jan. 1. 2007 Purchased equipment at invoice price of Rs.200,000 on credit terms 2/10, n/30.
Jan. 9. 2007 Paid the invoice of January 01.
Dec. 31. 2010 Sold the equipment for cash Rs.40,000.
The equipment had estimated life of six years and salvage value of Rs.14,000. Straight line
method is used and accounts are closed on December 31.
REQUIRED
Prepare general journal entries to record:
(i) Purchase of equipment and payment of invoice.
(ii) Sale of equipment supported by proper computations.

Q.No.8 PARTNERSHIP – ADMISSION

GIVEN The following are balance sheet data of Lalani & Mohsin Partnership on June 30, 2010:
Cash 30,000 Lalani, Capital 120,000
Inventory 70,000 Mohsin, Capital 180,000
Land 200,000
300,000 300,000
On July 1, Sikander is admitted as a partner after revaluing inventory & land at Rs.50,000 and
Rs.300,000 respectively, recognizing goodwill of Rs.50,000 and recording accrued taxes Rs.10,000.
Sikander is to purchase 25% of Mohsin’s ownership interest for Rs.65,000 & to be contribute
sufficient cash for acquiring 1/3 interest of the entire partnership equity.
Lalani and Mohsin share profit/loss equally.
REQUIRED
Prepare:
(a) General journal entries.
(b) Balance sheet after admission.

Instructions: (1) Attempt any FIVE questions. (2) All questions carry equal marks.
Q.No.1 FINANCIAL STATEMENT
GIVEN: The following is the pre-closing trial balance of Yasir & Co. on December 31, 2010:
Account Titles Debit Credit
Cash Rs.300,000
Accounts receivable 200,000
Merchandise inventory 100,000
Prepaid advertising 90,000
Cost of goods sold 700,000

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Salaries expense 55,000

Supplies expense 15,000
Rent expense 40,000
Accounts payable Rs.100,000
Unearned commission 50,000
Yassir, Capital 250,000
Sales 1,100,000
1,500,000 1,500,000
Additional Information for Adjustments:
(a) Commission income is unearned to the extent of Rs.15,000.
(b) Supplies used during the year Rs.3,000
(c) Commission receivable for the year Rs.14,000.
(d) Prepaid rent Rs.25,000.
(e) Salaries payable for the year amounted to Rs.5,000.
(f) Advertising prepaid Rs.43,000.
REQUIRED
(1) Prepare Income Statement for the year ended on Dec. 31, 2010.
(2) Prepare Balance Sheet as on Dec. 31, 2010.

Q.No.2 WORK SHEET

GIVEN: Following is the unadjusted trial balance of Mansoor Trading Co. at December 31, 2010:
Account Titles Debit Credit
Cash Rs.20,000
Accounts receivable 180,000
Merchandise inventory (1-1-2010) 50,000
Office supplies 4,000
Furniture 100,000
Allowance for depreciation – Furniture 38,000
Accounts payable 50,000
Mansoor, Capital 205,000
Mansoor, Drawings 15,000
Sales 267,000
Rent revenue 80,000
Purchases 180,000
Salaries expense 51,000
Insurance expense 40,000
640,000 640,000
Supplementary Data for Adjustments:
(i) Merchandise inventory on December 31, 2010 was valued at Rs.60,000.
(ii) Salaries expense for the year amounted to Rs.45,000.
(iii) Unexpired insurance Rs.3,500.
(iv) Depreciation on furniture for the year Rs.15,000.
(v) Office supplies on hand on December 31, 2010 Rs.1,000.
(vi) Rent revenue includes an amount received in advance Rs.2,000.
(vii) Goods costing Rs.2,000 were taken by Mansoor for private use was not recorded.
REQUIRED
Prepare Ten – column worksheet.

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Q.No.3 BANK RECONCILIATION STATEMENT

GIVEN During the process of completing the bank reconciliation of Rahim Co. on July 31, 2011, the
following facts were discovered:
Cash book balance Rs.560,000. Bank statement balance (Dr.) Rs.430,000.
(i) A cheque for Rs.51,000 deposited into bank was wrongly entered into bank statement for
Rs.15,000.
(ii) L/c documents retired but not recorded in cash book Rs.450,000.
(iii) Bank charged markup on running finance Rs.3,600.
(iv) Cash withdrew Rs.500,000 was recorded in cash book but withholding tax Rs.1,000 not
recorded.
(v) Bank credited excess L/c margin charged Rs.9,200.
(vi) M/S Asim Co. paid Rs.135,000 through online.
(vii) Cheque of Zulfiqar Co. returned Rs.80,000 by bank. And bank charged Rs.450.
(viii) Rahim Co. paid to Irfan Co. Rs.50,000 through online but not recorded in cash book.
(ix) Bank charged commission Rs.650.
(x) Bank debited Rs.92,500 against L/c margin but not recorded in cash book.
(xi) Uncleared cheques Rs.850,000.
(xii) Unpresented cheques Rs.430,000.
REQUIRED
Prepare Bank Reconciliation Statement and also adjusting entries in the journal.

Q.No.4 INVENTORY VALUATION

GIVEN Following transactions relate to the business of Babar Traders:
November
1: Balance in merchandise inventory 7,000 units @ Rs.7.00
2: Purchased merchandise for cash Rs.21,000 at a unit price of Rs.4.00
5: Purchased merchandise on account Rs.2,500 at a unit price of Rs.5.00
7: Sold 4,100 units on account at Rs.10.00 per unit
10: Purchased 5,000 units at Rs.5.00 per unit
12: Sold 10,100 units at Rs.10.00 per unit
15: Purchased 4,500 units at Rs.8.00 per unit
20: Sold 5,000 units at Rs.10.00 per unit
25: paid carriage outwards on sales Rs.2,500
REQUIRED
(a) Prepare dated journal entries, assuming that company uses FIFO method under Perpetual
Inventory System.
(b) Show necessary computations for cost of ending inventory, cost of goods sold, and sales of
the merchandise.
(c) Compute the amount of gross profit under FIFO method.

Q.No.5 DEPRECIATION
GIVEN Asim Company purchased the following machines under one head i.e. Machinery:
Machine Date of Cost (Rs.) Residual Value Life/Rate Method
Purchase
A June 30, 2008 500,000 20% of cost 20 years Straight Line
B Nov. 1, 2009 400,000 Rs.80,000 15% Reducing Balance
C July 4, 2010 300,000 Rs.20,000 70,000 hours Working Hours
Company year ends on December 31 each year.

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REQUIRED
(1) Prepare adjusting journal entries for 2008, 2009 and 2010 to record depreciation for
machine. The company has operated Machine C 3,000 hours in 2010.
(2) Show allowance for depreciation account for Machinery for the year 2010.
(3) Prepare a partial Balance Sheet on December 31, 2009.

Q.No.6 VALUATION OF ACCOUNTS RECEIVABLE

(a) GIVEN Rafiq & Co. has the following balances on Jan. 1, 2010:
Accounts receivable – Control Rs.450,000
Allowance for bad debts Rs.7,500
During the year company completed the following transactions:
1. Total sales including 60% cash sales of Rs.500,000.
2. Sales discount Rs.10,000.
3. Collected cash from customers Rs.240,000.
4. One of the customer accounts receivable subsidiary ledger showed a credit balance of
Rs.5,000.
REQUIRED
(1) Prepare adjusting journal entries if bad debts estimated @ ½ of 5% of net credit sales.
(2) Prepare partial balance sheet.

(b) GIVEN The following account balances appears on the Balance Sheet of Zafar & Sons as on
Dec. 31, 2010:
Accounts receivable – Control Rs.96,000
Allowance for doubtful debts Rs.1,920.
During the January 2011, the following events took place:
(i) Accounts receivable of Rs.3,500 are written off as uncollectible.
(ii) An accounts receivable of Rs.1,500 was written off in 2010 is recovered.
(iii) Aging of accounts receivable at the end of month indicated that Rs.2,000 to be uncollectible.
REQUIRED
(1) Give the necessary journal entries to give effects to the above transactions.
(2) Prepare a partial balance sheet after giving effect to the above events.

Q.No.7 (a) PARTNERSHIP – ADMISSION

GIVEN Nuvaira and Khuba are partners with capital of Rs.26,000 and Rs.22,000 respectively. They
admit Erma as partner with 1/4th share in the profit of the firm. Erma brings in Rs.26,000 as his share
of capital.
REQUIRED
Give journal entry to record goodwill on Erma’s admission.

Q.No.7 (b) PARTNERSHIP – RETIREMENT

GIVEN Maham, Alvena and Zobia were partners in a firm sharing profits in the ratio of 3:2:1. Zobia
retired and the new profit sharing ratio between Maham and Alvena was 1:2. On Zobia’s retirement
the goodwill of the firm was valued at Rs.30,000.
REQUIRED
Pass necessary entry for the treatment of goodwill on Zobia’s retirement without opening goodwill
account.

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Q.No.8 THEORY
GIVEN Attempt any four of the followings:
(i) Differentiate between the books of original entry and books of final entry. Explain each of
them with three examples.
(ii) Define any two of the following accounting concepts:
(a) Matching (b) Cost (c) Consistency (d) Going concern
(iii) Why does business prepare trial balance, income statement, and balance sheet? Make
comparison between any two.
(iv) Describe the differences between capital expenditures and revenue expenditures.
(v) a) Why do businesses spend a lot of money on accounts department?
b) Who are possible stakeholders of a business?

Instructions: (1) Attempt any FIVE questions. (2) All questions carry equal marks.
(3) Use of calculator is allowed. Do not use abbreviations.
(4) All journal entries should be properly dated, intended and narrated.

Q.No.1 WORK SHEET

GIVEN: Following is the pre-closing trial balance of Mehfooz & Co. on December 31, 2010:
Title of Account Debit Credit
Cash 70,000
Accounts receivable 24,000
Aircraft 1,200,000
Allowance for depreciation – Aircraft 12,000
Accounts payable 18,000
Bank loan 25,000
Capital 1,000,000
Revenue from passengers 260,000
Revenue from cargo 85,000
Maintenance and overhaul 33,000
Passenger services 15,000
Aircraft fuel 26,000
Salaries expense 32,000
1,400,000 1,400,000
Additional Information:
(g) Salaries accrued Rs.3,000 and prepaid salaries for Rs.5,000.
(h) Bad debts estimated at 10% of accounts receivable.
(i) Interest on bank loan Rs.5,000 outstanding.
(j) Unearned revenue from cargo Rs.10,000 and earned receivable Rs.7,000.
(k) Proprietor withdrew cash from the business Rs.5,000 for private use.
(l) Book value of Aircraft was estimated at Rs.1,176,000.
REQUIRED
Prepare 10 – column worksheet from the data given above.

Q.No.2 ADJUSTING AND OPENING ENTRIES

GIVEN: Take the balances and adjustment data given in question No. 1.

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REQUIRED
(a) Adjusting and opening journal entries in General Journal.
(b) Name any three basic principles of accounting observed necessarily for making periodic
adjustments.

Q.No.3 ACCOUNTS RECEIVABLE

(a) GIVEN: The following information is related to Saleem & Co.
Accounts receivable Jan. 01, 2010 ................................................. Rs.1,000,000
Allowance for bad debts (Cr.) Jan. 01, 2010 .................................. Rs.5,000
Credit sales and collected during the year..................................... Rs.800,000
Accounts receivable written off during the year ........................... Rs.20,000
Bad debts estimated 5% on accounts receivable, ending balance.
REQUIRED
Compute the amount of bad debts and give an adjusting entry at Dec. 31, 2010.

(b) GIVEN The following ledgers accounts are extracted from Naeem & Co.
Accounts Receivable
2010 2010
Jan 1 Balance 150,000 ii. Sales return 15,000
i. Sales 600,000 iii. Cash 400,000
iv. Sales discount 10,000
v. Note receivable 25,000
vi. Allowance for bad 10,000
debts

Allowance for Bad Debts

2010 2010
vi. Accounts receivable 10,000 Jan 1 Balance 15,000

REQUIRED
Prepare entries in General Journal from the above postings.

Q.No.4 INVENTORY VALUATION

(a) GIVEN: The following data relate to the business of Aamir & Co.
Date Units Unit Cost / Price
Nov. 1 Beginning inventory 6,000 Rs.100
Nov. 5 Purchased 3,000 Rs.150
Nov. 15 Sold 4,000 Rs.250
Nov. 25 Purchased 7,000 Rs.180
Nov. 30 Sold 6,000 Rs.300
REQUIRED
(i) Prepare inventory card under FIFO Method.
(ii) Assume that Co. uses Periodic Inventory System. Compute cost of goods sold and
merchandise inventory (ending) under LIFO Method & calculate gross profit.

(b) GIVEN Saad Co. sells merchandise. At Dec. 31, 2010 the Co.’s inventory amounted to
Rs.50,000. During the 1st week of Jan. 2011 the Co. made only one purchase and one sale. These
transactions were as follows:

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Jan. 3: Sold merchandise for Rs.20,000 cash. The total cost of merchandise amounted to Rs.11,200.
Jan. 7: Purchased merchandise amounted to Rs.10,000; term 2/10, n/30.
REQUIRED
Prepare journal entries to record the above transactions under Perpetual inventory System.

Q.No.5 VOUCHER SYSTEM

GIVEN: Nazim & Co. uses Voucher System by net price method. Following are the vouchers prepared
and cheques issued during December, 2010:
Dec. 1: Prepared voucher No.348 for Rs.40,000 payable to Amjad & Co. for machinery purchased on
terms 3/10, n/30.
5: Prepared voucher No.349 for Rs.35,000 payable to Samsam & Co. for purchase of
merchandise on terms 2/10, n/30.
7: Issued cheque No.203 in payment of voucher No.348.
10: Prepared voucher No.350 for Rs.4,800 to replenish the petty cash fund for the following
disbursement: Supplies Rs.2,200; Entertainment Rs.1,300; Postage Rs.300; Miscellaneous
general expense Rs.1,000.
20: Issued cheque No.204 for in payment of voucher No.349 because the discount period had
elapsed.
25: Prepared voucher No.351 for Rs.5,000 as drawing by owner.
27: Issued cheque No.205 in payment of voucher No.351.
28: Prepared voucher No.352 for Rs.10,000 payable to employees for December, 2010 salaries.
31: Issued cheque No.206 in payment of voucher No.352.
REQUIRED
Record the above transactions in General Journal form.

Q.No.6 DEPRECIATION
(a) GIVEN: Yasir & Co. provides the following information:
Rate Per Unit Cost Salvage Value Estimated Production Units
Rs. Rs. Rs.
2 80,000 20,000 ?
4 100,000 ? 20,000
? 150,000 30,000 30,000
3 ? 50,000 150,000
REQUIRED
Compute the missing amounts from the above table.

(b) GIVEN: On October 1, 2008, Qasim & Co. purchased a machine for Rs.600,000 on account.
The machine had an estimated service life of 10 years and an estimated residual value of Rs.50,000.
The company uses SUM-OF-THE-YEARS-DIGIT METHOD for depreciation. On September 30, 2010 the
company traded the machine for a new machine having an invoice price of Rs.500,000. The trade-in-
allowance for the old machine on the date of exchange was Rs.400,000.
REQUIRED
Prepare dated entries in General Journal to record purchase of machine, and the exchange of
machine on Sept. 30, 2010. (Show all computations).
Q.No.7 PARTNERSHIP
(a) GIVEN:
(i) Salary payable to partner (ii) Drawings made by partner

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(iii) Fresh capital introduced by a capital (iv) Share of profit earned by a partner
(v) Commission payable to partner (vi) Interest on capital of a partner
(vii) Interest on drawing of a partner
REQUIRED
Assuming the partners’ capital accounts are fixed, record the above entries in relevant accounts.

(b) GIVEN: Ansari and Wilayat were partners sharing profits in the ratio of 3:2. On the date of
dissolution, their capitals: Ansari Rs.76,500; Wilayat Rs.43,000. The amount payable to creditors was
Rs.275,000. The balance of cash was Rs.7,600. The other assets realized Rs.254,300. The expenses on
dissolution were Rs.15,400. All partners were solvent.
REQUIRED
Prepare General Journal entries for the above transactions.

Q.No.8 CORRECTION OF ERRORS

(a) GIVEN: The following errors were made during the current year and were discovered before
closing the books of accounts:
1) Accrued advertising expense of Rs.5,000 was overlooked.
2) Return of goods of Rs.1,500 by Shakeel was entered in error in Raheel’s account.
3) Cash drawings of Rs.4,000 was credited to the bank of the cash book.
4) Repairs to machinery of Rs.3,000 was charged to machinery account.
REQUIRED
Rectify entries in General Journal.

(b) GIVEN: The following errors were made during the year 2009 and were discovered during
2010:
1) Ending inventory was overstated by Rs.10,000.
2) Credit purchase of Rs.8,000 was not recorded in 2009 although goods were received and
included in the inventory of 2009.
3) Additional investment by owner of Rs.100,000 was credited to sales account.
4) Goods taken out for owner’s use Rs.7,000 was debited to general expenses account.
REQUIRED
Rectify entries in General Journal.

Instructions: (1) Attempt any FIVE questions. (2) All questions carry equal marks.
(3) Use of calculator is allowed. Do not use abbreviations.
(4) All journal entries should be properly dated, intended and narrated.

Q.No.1 WORK SHEET

Following trial balance data has been taken from the books of Ali Ltd. for the year ended December
31, 2009:
Cash Rs.220,000; Accounts receivable Rs.75,000; Office supplies expense Rs.5,000; Unearned
commission Rs.50,000; Machine Rs.150,000; Accounts payable Rs.80,000; Allowance for
depreciation – Machine Rs.5,000; Merchandise inventory Rs.50,000; Allowance for bad debts (Dr.)
Rs.3,000; Cost of goods sold Rs.200,000; Prepaid rent Rs.3,600; Salaries expense Rs.6,000; Drawing
Rs.5,000; Capital Rs.296,000; Sales revenue Rs.280,000; Long term loan ?

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Data for Adjustment:

1. Used office supplies Rs.3,000.
2. Rent was paid for 1 year on April 30, 2009.
3. Allowance for bad debts estimated @ 6% of accounts receivable at end.
4. Unexpired salaries Rs.1,500.
5. The machine has a life of 80,000 hours and estimated salvage value is Rs.50,000. Machine
has operated 5,000 hours during 2009.
6. Interest accrued on long term loan @ 6% per annum. Loan acquired on September 1, 2009.
REQUIRED
Prepare ten columns work sheet.

Q.No.2 CORRECTION OF ERRORS

(a) The following errors/omissions were made during 2011 and were discovered before closing
the books of accounts:
1) Purchase return of Rs.20,000 was charged to sales return.
2) Outstanding advertising expense were overlooked Rs.60,000.
3) Rs.50,000 spent for building repairs the extension of building was debited to building
account.
4) Prepaid salary of Rs.15,000 was included in salary expense account.
5) Accrued rent income of Rs.25,000 was overlooked.
REQUIRED
Pass rectifying entries in General Journal.

(b) Describe the four types of adjusting entries with examples of adjusting entries.

Q.No.3 DEPRECIATION
(a) Wazir Company purchased the following machines under one head i.e. Office equipment:
Machine Date of Cost Residual Life/Rate Method
Purchase Value
A 30-6-2009 Rs.500,000 20% of cost 20 years Straight Line
B 01-11-2010 Rs.400,000 80,000 10 years Diminishing Balance
Method
REQUIRED
Prepare adjusting journal entries for 2009, 2010 and 2011 for all machines. Company year ends on
December 31 each year. Co. has operated 3,000 Hrs.

(b) Shah Company purchased machine at a cost of Rs.70,000 which has a book value of
Rs.45,920 on Sept. 30, 2011.
REQUIRED
Prepare journal entries to record the following independent cases:
a) The machine was exchanged with a new machine costing Rs.84,000 with trade in value
Rs.46,900. (Gain/loss is not to be recognized).
b) The machine was sold for Rs.30,000 cash.

Q.No.4 ACCOUNTS RECEIVABLES

(a) XY Company has the following balances on Jan. 1, 2009:
Accounts receivable – control Rs.400,000; Allowance for bad debts Rs.5,000.
During the year company completed the following transactions:

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1. Of the total sales 20% is cash sales which amounts to Rs.80,000.

2. Sales discount Rs.10,000.
3. Advance from customer Rs.150,000.
REQUIRED
(i) Prepare adjusting journal entries if allowance for bad debts is estimated @ ½ of 5% of
net credit sales.
(ii) Prepare partial balance sheet as on Dec. 31, 2009.

(b) AB Company has debit balance in A/R Rs.50,000 and credit balance of Rs.2,000 in allowance
for bad debts account on July 1, 2009.
During the year the company sold merchandise on account Rs.150,000. One of the customers
account written off Rs.7,000. Recovered previously written off account Rs.10,000 to the extent of
Rs.6,000. Company’s policy to estimate its bad debt @ 10% of year end accounts receivable.
REQUIRED
1. Prepare adjusting journal entries to record bad debts expense.
2. Prepare partial balance sheet as on June 30, 2010.

Q.No.5 BANK RECONCILIATION STATEMENT

On September 1, 2010 Sardar Company has credit balance in the bank column of its cash book
Rs.70,000 and debit balance in the bank statement Rs.86,000.
Company found the following errors when preparing its reconciliation statement:
1. Cheques issued to:
Supplier Amount (Rs.) Date of Issue Cheque Number
Mahakamuddin Traders 15,000 June 28, 2010 709087
Babar Company 20,000 July 15, 2010 709123
Nadeem & Sons 40,000 August 10, 2010 709224
Cheque number 709087 and 709224 presented for payment.
2. Issued a cheque of Rs.3,150 it was recorded in the company’s book Rs.2,450.
3. Service charges not recorded in the cash book Rs.800.
4. Following cheques deposited in the bank:
Customer Date of Deposit Cheque Number Amount (Rs.)
Rehman Traders June 28, 2010 50897 65,000
Aftab Company July 15, 2010 60876 50,000
Arsalan Bros. August 10, 2010 32567 60,000
Cheque number 32567 of Aftab Bros. returned by the bank marked NSF, and others are uncleared.
5. Interest on investment credited by the bank Rs.125,000 was not recorded in the cash book.
6. Deposited a cheque of Rs.30,670 but it was wrongly entered in the Co.’s book as Rs.18,670.
REQUIRED
Prepare bank Reconciliation Statement.

Q.No.6 PARTNERSHIP
Following balance sheet relate to the business of Mr. Shahani, Moin and Rasheed as on November
30, 2010:

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AB & C PARTNERSHIP
BALANCE SHEET
AS ON NOVEMBER 30, 2010
ASSETS EQUITIES
Cash 100,000 Accounts payable 68,000
Accounts receivable 70,000 Owner’s Equities:
Allowance for bad debts (2,000) 68,000 Shahani Capital 80,000
Office supplies 15,000 Moin Capital 120,000
Furniture 150,000 Rasheed Capital 100,000 300,000
Accumulated depreciation (25,000) 125,000
Stock 60,000
Total assets 368,000 Total equities 368,000
They share profit and loss in the ratio of their capitals. On this date they decided to admit Mr.
Sanaullah as a new partner under the following cases separately:
(a) If Sanaullah invests sufficient amount of cash to acquire 1/4th interest in the business.
(b) If Sanaullah invests Rs.80,000 for 1/5th interest in the business. Old partners do not agree to
reduce their capitals.
(c) If Sanaullah invests furniture Rs.50,000 and cash Rs.120,000 in the business and old partners
agree to give him a 1/5th interest in the business. The total capital of the firm after his
admission Rs.470,000.
(d) If Sanaullah invests Rs.150,000 for 1/4th interest. The total capital of the firm after his
admission Rs.500,000.
REQUIRED
(i) Prepare journal entries to record the admission of Mr. Sanaullah.
(ii) Prepare Balance Sheet of ABC & D partnership just after the admission of Mr. Sanaullah
in case (a).

Q.No.7 INVENTORY VALUATION

Following transactions relate to the business of Husnain Traders:
November 1: Balance in merchandise inventory 6,000 units @ Rs.7.00.
2: Purchased merchandise for cash Rs.42,000 at a unit price of Rs.4.00.
5: Purchased merchandise on account 5,000 at a unit price of Rs.5.00.
7: Sold 8,200 units on account at Rs.10.00 per unit.
10: Purchased 7,000 units at Rs.5.00 per unit.
12: Sold 12,100 units at Rs.10.00 per unit.
15: Purchased 9,000 units at Rs.8.00 per unit.
20: Sold 12,100 units at Rs.10.00 per unit.
25: Paid carriage out on sales Rs.3,500.
REQUIRED
(i) Prepare dated journal entries (assuming that company uses LIFO method under
perpetual inventory system)
(ii) Compute the amount of gross profit under LIFO.

Q.No.8 THEORY
(a) Define accounting and differentiate it from book keeping.

(b) Define the following accounting concepts:

(1) Matching (2) Cost (3) Consistency (4) Going Concern

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Instructions: (1) Attempt any FIVE questions. (2) All questions carry equal marks.
(3) Use of calculator is allowed. Do not use abbreviations.
(4) All journal entries should be properly dated, intended and narrated.

Q.No.1 BANK RECONCILIATION

A comparison of cash book (bank column) of Shamir & Co. and the bank account for the month of
April 2011 revealed the following:
1. Balance as per cash book, April 30, was Rs.495,000.
2. Balance as per bank statement, April 30, was Rs.950,000.
3. Bill pay charges not recorded by the company Rs.10,000.
4. The bank paid a standing order for insurance of Rs.9,000.
5. The bank received a direct credit transfer a payment of Rs.120,000 from Yahya.
6. Uncleared cheques Rs.150,000.
7. Promissory note paid by the bank was not recorded in the Co.’s cash record of Rs.100,000
(including interest expense Rs.10,000).
8. Dividend collection was credited by the bank was not recorded in the Co.’s cash record of
Rs.170,000.
9. A cheque was issued to Ahmed for payment of Rs.12,000 but was erroneously recorded by
company as Rs.21,000.
10. Unpresented cheques Rs.400,000.
11. Transaction charges Rs.15,000 not recorded in cash book.
12. Zakat deducted Rs.40,000 and mark up credited Rs.60,000 by bank.
13. Withdrawal of cash Rs.20,000 from bank for personal use by Shamir was not recorded in cash
book.
14. Rent earned Rs.40,000 was collected and credited by bank but was not recorded in cash book.
REQUIRED
Prepare adjusting entries in General Journal.

Q.No.2 ACCOUNTS RECEIVABLE

--- Accounts receivable balance Jan. 1, 2011 2,500,000
--- Allowance for bad debts balance 123,000
1. Uncollectible customer’s accounts 78,000
2. Cash collection from customer account (including Ra.25,000 received from an 4,050,000
account previously written off as bad debts)
3. Promissory notes received from customers to apply on account 650,000
4. Credit balance in customer’s account represents advance payment 145,000
5. Gross credit sales for the year 8,100,000
6. Sales discount 55,000
On Dec. 31, 2011 the accounts receivable included Rs.850,000 of the past due accounts. After a
careful study of all past due accounts, the management estimated that the probable loss contained
therein was 20% and that in addition 2% of the current accounts receivable might prove
uncollectible.
REQUIRED
(i) Prepare journal entries in General Journal for all the transactions in 2011.
(ii) Prepare the adjusting and closing entries at Dec. 31, 2011.

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Q.No.3 INVENTORY VALUATION

(a) The Gap uses a periodic inventory system. During the first year of operations, the company
made four purchases of a particular product. Each purchase was for 300 units and the prices paid
was Rs.7 per unit in the first purchase, Rs.8 per unit in the second purchase, Rs.10 per unit in the
third purchase, and Rs.11 per unit in the fourth purchase. At year – end, 350 of these units remain
unsold.
REQUIRED
Compute the cost of goods sold under the FIFO method and LIFO method, respectively.

(b) On the morning of April 10, 2011 a fire destroyed the entire merchandise inventory in the
stores. The merchandise was un-insured. The following data are available:
Sales Mar. 1, 2011 to April 9, 2011 Rs.216,000
Inventory Mar. 1, 2011 30,000
Purchases Mar. 1, 2011 to April 9, 2011 189,000
Gross profit on cost 25%
REQUIRED
Find out the cost of inventory destroyed by fire?

Q.No.4 DEPRECIATION
(a) An extra ordinary repairs was made at a cost of Rs.65,000 to an equipment on Oct. 1, 2010
and it extended its normal life from 5 years to 9 years. Payment was made in cash for the extra
ordinary repairs.
REQUIRED
Record the extra ordinary repairs.

(b) A textile industry depreciates its machinery at 10% per annum on straight line basis. On April
01, 2010 the book value of machinery was Rs.840,000, its original cost was Rs.1,200,000. On July 01,
2010 a new machine was purchased for Rs.25,000. On December 31, 2010 an old machine having
written down value of Rs.40,000 on April 1, 2010 (original cost Rs.60,000) was sold for Rs.30,000.
REQUIRED
Give all necessary entries in the General Journal assuming year ended on Mar. 31, 2011.

Q.No.5 FINANCIAL STATEMENT

The following financial statements for the year ended December 31, 2011 was drawn by an
inexperienced accounts clerk:
NAEEM SHIPPING LTD.
INCOME STATEMENT
FOR THE YEAR ENDED DECEMBER 31, 2011
REVENUES:
Chartering revenue 344,000
EXPENSES:
Depreciation expense 35,000
Fleet expenses 252,000
Vessel fleet 54,000
Insurance expense 7,000
Stores and spare parts 2,000
Accrued salaries 10,000 (360,000)
Net loss (16,000)

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NAEEM SHIPPING LTD.

BALANCE SHEET
DECEMBER 31, 2011
ASSETS LIABILITIES & EQUITY
Cash 40,000 Advertising & publicity 10,000
Workshop equipment 25,000 Unearned chartering revenue 5,000
Diesel fuel, lubricants & 56,000 Capital 123,000
maintenance
Official machinery & appliances 1,000 Less: Net loss (16,000) 107,000
122,000 122,000
REQUIRED
There are number of errors that you are required to check out and reproduce the corrected financial
statements.

Q.No.6 CLOSING ENTRIES

(a) Hassan Trading Co.’s sales during the year Rs.200,000; the net income is 10% of sales,
operating expenses of the Co. allocated as 20% selling expenses and 16% administrative expenses of
sales and remaining as cost of goods sold.
REQUIRED
Prepare closing entries in General Journal.

b) Amjad & Co. shows the balances of the following accounts at Dec. 31, 2011:
Advertising expenses Rs.30,000; Wages expense Rs.5,750; Supplies expense Rs.7,500; Bad debts
expense Rs.1,000; Allowance for depreciation – Equipment Rs.20,000; Utilities expense Rs.1,400;
Insurance expense Rs.15,000; Interest expense Rs.300; Income tax expense Rs.28,000; Commission
income Rs.275,000 which includes Rs.50,000 as advance commission; Drawings Rs.5,000; Accrued
expenses Rs.5,000 and Accrued income Rs.3,000.
REQUIRED
Prepare closing entries in General Journal.

Q.No.7 PARTNERSHIP – ADMISSION

The capital balances of Fahad and Fawad were Rs.190,000 and Rs.180,000 respectively as on March
31, 2012. On this date they decided to admit Hamadan as a new partner:
REQUIRED
Show the necessary entries in the General Journal of the firm to record admission of Hamadan under
each of the following assumption separately:
(i) Hamadan invests furniture Rs.45,000 and sufficient cash for a one – third interest in the
business.
(ii) Hamadan invests cash Rs.200,000 and is to receive a one – half interest. Fahad and
Fawad decide to retain their present capital balances.
(iii) Hamadan invests cash Rs.150,000 and is to receive a one – fourth interest. Total capital
of the firm after his admission is to be Rs.600,000.
(iv) Hamadan purchased a one – third interest of Fahad for Rs.55,000 and one – fourth
interest of Fawad for Rs.50,000 cash.

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Q.No.8 ADJUSTMENT & CORRECTION OF ERRORS

(a) Following data is provided for adjustment by Maqsood & Co.:
5) A one – year bank loan in the amount of Rs.80,000 was obtained on Nov. 1. No interest was
paid or recorded. The interest accrued at Dec. 31 was Rs.2,500.
6) On Dec. 16, a suit of rooms was rented to a corporation for six months at a monthly rental of
Rs.320. The entire six months rent of Rs.1,920 was collected in advance and credited to
unearned rental revenue, at Dec. 31, Rs.160 of which was earned.
7) Salaries earned by employees at Dec. 31 but not yet paid amount to Rs.45,000.
8) Insurance premium paid Rs.24,000 for 2 years and recorded as unexpired insurance. At Dec.
31 insurance for 3 months was converted to expense.
REQUIRED
Pass the adjusting entries in General Journal.

(b) The following errors were made during 2011 and were discovered before closing the books
of accounts of Mansoor Co.:
5) Sales return of Rs.5,000 was charged to purchase account.
6) Rs.75,000 spent for the extension of building was debited to building repairs account.
7) Outstanding advertising expense was overlooked Rs.20,000.
8) Prepaid salary of Rs.48,000 was included in the salary expense account.
REQUIRED
Pass rectifying entries in General Journal.

Instructions: (1) Attempt any FIVE questions. (2) All questions carry equal marks.
(3) Use of calculator is allowed. Do not use abbreviations.
(4) Answers without necessary computations will not be accepted.

Q.No.1 ADJUSTING AND CLOSING ENTRIES

Following data is taken from the books of Rahat Consultation Services:
Account Title Unadjusted Trial Adjusted Trial Balance
Balance
Cash 21,700 21,700
Accounts receivable 16,900 16,900
Unexpired insurance 600 550
Office supplies 720 500
Land and building 160,000 160,000
Office equipment 54,000 54,000
Accumulated depreciation (Office equipment) 195 390
Accounts payable 23,500 23,500
Unearned consultation fee 1,800 1,500
Sarwar Capital 226,420 226,420
Sarwar Drawings 1,500 1,500
Commission income 15,400 15,400
Advertising expense 2,500 2,500
Sales salaries expense 9,395 9,575
Insurance expense 50

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Office supplies expense 220

Depreciation expense 195
Consultation fee earned 300
Salaries payable 180
REQUIRED
(i) With the help of above trial balances record necessary adjusting entries.
(ii) Prepare closing entries for the data above.

Q.No.2 DEPRECIATION
a) Define: (i) Depreciation (ii) Book value (iii) Trade in allowance
b) Noman Industries Ltd. prepares its financial statements on December 31 each year. At
December 31, 2012 following balances were reported:
Machine A Machine B
Cost 450,000 300,000
Accumulated depreciation (180,000) (45,000)
Net book value 270,000 255,000
From January 1, 2013 directors decided to change the depreciation method from Diminishing
Balance to Straight Line. At this date salvage value and useful life of machine “A” were estimated
Rs.10,000 and 5 years, while those of machine “B” Rs.3,000 and 6 years. On September 30, 2013
machine “A” was sold for Rs.255,000.
REQUIRED
(1) Prepare journal entries to record depreciation and disposal of machine “A” on September
30.
(2) Prepare journal entry to record the deprecation of machine “B” for the year ended
December 31, 2013.
(3) Prepare balance sheet on December 31, 2013.

Q.No.3 PARTNERSHIP – ADMISSION

Affan and Ayyan are partners. Their profit and loss sharing ratio is 2:3. Their financial position on
June 30, 2013 was as under:
ALI & BROS.
POSITION STATEMENT
JUNE 30, 2013
Assets Equities
Cash 75,000 Accounts payable 50,000
Other assets 425,000 Affan Capital 150,000
Ayyan Capital 300,000
Total 500,000 Total 500,000
On June 30 their income summary account showed a debit balance of Rs.75,000. On July 5, partners
decided to admit Mr. Ahmed as a new partner for 2/5 interest in firm.
REQUIRED
Taking in consideration all above information record the admission of Mr. Ahmed, in general Journal:
(a) If he invests Rs.275,000 and is credited with his entire investment.
(b) If he brings cash and land Rs.20,000 and Rs.150,000 respectively.

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Q.No.4 ACCOUNTS RECEIVABLE

a) Following is the accounts receivable ledger of Faisal Ltd.:
ACCOUNTS RECEIVABLES
Opening balance 705,600 Written off 27,500
Sales 370,000 Collections 300,000
During the year company recorded sales of Rs.475,000 including cash sales of Rs.105,000.
REQUIRED
Using the above information you are required to prepare adjusting entries for each of the following
assumptions separately. Company uses balance sheet approach to estimate bad debts @ 5%
accounts receivable at end:
(a) The allowance for doubtful accounts has a credit balance of Rs.12,672.
(b) The allowance for doubtful accounts has a debit balance of Rs.4,262.

b) Asad & Sons uses income statement approach to estimate bad debts. On April 1 accounts
receivable amounted Rs.600,000 and allowance for doubtful accounts account had a credit balance
of Rs.3,000. It was estimated that uncollectible accounts expense would amount to 1/4 of 2% of net
credit sales made during the month. During April total sales amounted to Rs.750,000 including 20%
cash sales. On April 20, an accounts receivable of Mr. Arshad of Rs.11,000 was written off.
REQUIRED
(i) Record the adjusting entry for doubtful debts on April 30.
(ii) Prepare partial balance sheet.

Q.No.5 PARTNERSHIP – RETIREMENT

Salman Enterprises is a partnership of three friends, specialized in building construction. At the end
of financial year the firm had the following balance sheet:
SALMAN ENTERPRISES
BALANCE SHEET
JUNE 30, 2013
Assets Equities
Cash 175,000 Liabilities 198,000
Accounts receivable 67,000 Munawwar Capital 264,000
Land and building 470,000 Muzafrar Capital 180,000
Furniture and fixture 98,000 Musharraf Capital 168,000
810,000 810,000
Partners share profit and loss in the ratio of 50%, 30% and 20% respectively. It is agreed that
Musharraf is to retire from business on this date.
REQUIRED
Considering the following cases separately prepare journal entry to record the retirement of Mr.
Musharraf:
Case – 1: Musharraf sells 1/4 of his interest to Muzaffar and balance of his interest is settled
in cash.
Case – 2: Musharraf agrees to accept land worth Rs.150,000 and cash Rs.20,000 as full and
final settlement of his interest. Remaining partners are not ready to reduce their
capital.
Case – 3: Before retirement of Musharraf partners agree on following revaluations:
1. Land revalued at Rs.590,000.
2. Furniture and fixture revalued at Rs.90,000.
Musharraf is paid Rs.175,000 in cash as full and final settlement.

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Q.No.6 BANK RECONCILIATION

a) Answer the following:
(1) Why bank reconciliation statement is prepared?
(2) Is the bank reconciliation a part of financial statement?
(3) Briefly explain: (i) Outstanding cheque (ii) unpresented cheque (iii)
NSF cheque

b) The information listed below is available in reconciling bank balance for the Sona Chandi Co.
on December 31, 2013:
1. The bank statement at December 31 indicated a balance of Rs.10,034.70, however bank
account showed a balance of Rs.12,761.94.
2. Cash receipts of Rs.5,846.20 deposited into bank at December 31 did not appear among the
deposits.
3. Out of cheque issued in December two cheque amounted to Rs.1,938.56 were not included
among the paid cheque.
4. A service charge for Rs.40 by error deducted by the bank from the account of Sona Chandi
Co. instead of Chandi Co.
5. The paid cheque returned by bank disclosed an error that a cheque of Rs.504 had been
recorded as Rs.50.40 in cash book.
6. A cheque for Rs.220 returned by bank marked as NSF cheque.
7. On December 31, the Co. received a memorandum from bank indicating that the note of
Rs.1,904 had been collected.
8. A debit memo for Rs.10 was enclosed with paid cheques for issuance of Co.’s cheque book.
REQUIRED
Prepare a bank reconciliation statement and adjusting entries for Sona Chandi Co.

Q.No.7 INVENTORY VALUATION

Given below is the data of Amna Mariyam Ltd. for the month of June 30, 2013. The firm uses
Periodic Inventory System:
June 1 Beginning inventory 300 units @ Rs.55
June 4 Purchases 375 units @ Rs.58
June 12 Purchases 400 units @ Rs.65
June 20 Sales 375 units @ Rs.60
June 22 Sales 175 units @ Rs.66
June 24 Purchases 300 units @ Rs.70
June 30 Sales 200 units @ Rs.80
REQUIRED
(i) Compute the cost of ending inventory and cost of goods sold at the end of June 30, 2013
under each of the method:
(1) LIFO Method (2) FIFO Method (3) Weighted Average Method
(ii) In your opinion which method is most suitable if company wants to show maximum profits
to its shareholders?

Q.No.8 VOUCHER SYSTEM

Sobia Co. uses a voucher system for all major expenditures. Selected transactions for March 2013
are presented below:
1) Issued cheque no.74 for Rs.20,000 in payment of outstanding voucher no.99.

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2) Issued cheque no.75 for establishment of petty cash fund in the amount of Rs.5,000
(voucher no.101).
3) Purchased merchandise for Rs.21,000 from Ali Ltd. on account (voucher no.102). Sobia
Company follows perpetual system.
4) Returned merchandise worth Rs.1,000 to Ali Ltd. (voucher no.103).
5) Issued cheque no.76 in payment of voucher no.103 after deducting 2% cash discount.
6) Issued cheque no.77 for travel advance to an employee (voucher no.104) Rs.5,000.
7) Signed a 60 – day 10% note for Rs.12,000 in payment of outstanding voucher no.100.
8) Issued cheque no.78 for Rs.15,600 in settlement of a note payable including interest Rs.600
(voucher no.105).
9) Issued cheque no.79 for Rs.200 to reimburse the travel expenses incurred by the employees
in excess of travel advance.
10) Issued cheque no.80 to reimburse petty cash fund for supplies expense Rs.1,600;
conveyance expense Rs.1,100 and entertainment expense Rs.1,400 (voucher no.107).
REQUIRED
Using General Journal form make entries as the case may be in:
(a) Voucher Register (b) Cheque Register

Instructions: (1) Attempt any FIVE questions. (2) All questions carry equal marks.
(3) Use of calculator is allowed. Do not use abbreviations.
(4) Answers without necessary computations will not be accepted.
(5) All journal entries should be properly dated, intended and narrated.

Q.No.1 WORKSHEET
The following trial balance data have been taken from the books of Zaman Ltd. The accounts are
maintained on a calendar – year basis and are adjusted and closed annually:
Cash Rs.66,600; Accounts receivable Rs.98,400; Merchandise inventory (Jan. 1, 2013) Rs.124,000;
Unexpired insurance Rs.3,600; Office supplies Rs.1,600; Building Rs.120,000; Accumulated
depreciation: Building Rs.4,800; Equipment Rs.32,000; Accumulated depreciation: Equipment
Rs.9,600; Accounts payable Rs.95,800; Zaman Capital Rs. ?; Zaman Drawings Rs.36,000; Sales
Rs.652,000; Sales return Rs.10,400; Purchases Rs.380,000; Purchase return Rs.4,000; Transportation
in Rs.9,600; Salaries expense Rs.80,800; Miscellaneous expense Rs.2,200.
Data for Adjustments:
(i) Unexpired insurance on December 31, Rs.1,200.
(ii) Supplies used Rs.1,000.
(iii) The buildings are being depreciated over a 25 – year useful life. The equipment is being
depreciated over a 10 – year useful life (use straight line method).
(iv) Salaries payable as of December 31, were Rs.10,000.
(v) Inventory of merchandise on December 31, was Rs.79,200.
REQUIRED
Prepare 10 – columns work sheet.

Q.No.2 ADJUSTING, REVERSING AND CLOSING ENTRIES

Take the data from Q – 1.
REQUIRED
Prepare adjusting, reversing and closing entries.

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Q.No.3 DEPRECIATION
a) What is the distinction between a capital expenditure and revenue expenditure?
b) Waseem Traders disposed of plant assets in the following transactions:
(i) Office equipment costing Rs.70,000 having accumulated depreciation Rs.59,500 were
disposed, receiving no proceeds from the scrap dealer.
(ii) Traded in old truck for a new one. The old truck has cost Rs.44,000 and accumulated
depreciation Rs.28,000. The price of the new truck was Rs.68,000. Received a Rs.20,000
trade in allowance for old truck and paid the balance in cash.
(iii) Sold an old furniture costing Rs.25,000 having accumulated depreciation Rs.15,000 for
Rs.10,000.
REQUIRED
Record the above transactions in General Journal. Show the necessary computations.

Q.No.4 INVENTORY VALUATION

a) Why do most companies that use perpetual inventory system also take an annual physical
inventory?
b) Record the following transactions in General Journal under periodic and perpetual inventory
system; also prepare inventory account in skeleton T form under perpetual system:
(i) Purchase merchandise on account for Rs.30,000.
(ii) Merchandise returned to supplier costing Rs.2,000.
(iii) Sold merchandise on account for Rs.30,000; cost of merchandise was Rs.24,000.
(iv) Merchandise returned from customer Rs.2,000; cost of which was Rs.1,600.

Q.No.5 ACCOUNTS RECEIVABLE VALUATION

On December 31, 2012, accounts receivable and allowance for uncollectible of M/S. Zia Ltd. had the
following balances:
Accounts receivable Rs.200,000
Allowance for uncollectible (before adjustment) 6,000
Analysis of accounts receivables subsidiary ledger revealed that one customer is having credit
balance of Rs.10,000.
During 2013, following transactions were completed:
(i) Sold merchandise on account for Rs.500,000 (this includes sales of Rs.10,000 to the
customer who made advance payment in 2012).
(ii) Bad debt written off Rs.20,000.
(iii) Receivables collected Rs.430,000 including Rs.30,000 against an accounts receivable which
was previously written off.
Company’s policy is to provide a bad debt provision of 10% on year-end balance of accounts
receivable.
REQUIRED
Prepare all possible entries (including adjusting and closing) for the year 2012 and 2013.

Q.No.6 BANK RECONCILIATION STATEMENT

The cash book of Khalid & Co. showed a debit balance of Rs.19,000 while the bank statement
showed on October 31, 2013 showed the balance of Rs.43,000. Following discrepancies were
discovered:
(i) Dividend collection by the bank on behalf of Khalid & Company Rs.30,000.
(ii) Dishonoured cheque of a customer Rs.6,000.
(iii) Note paid by the bank on behalf of Khalid & Co. Rs.11,200 (including interest of Rs.1,200).

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(iv) A cheque of Rs.13,400 of a customer was erroneously recorded in cash book as Rs.15,200.
(v) A customer’s cheque of Rs.14,000 deposited into bank, did not appear in bank statement.
(vi) Cheque issued to supplier for Rs.18,000, did not appear in bank statement.
(vii) Cheque issued for rent Rs.14,400, appeared wrongly in bank statement as Rs.5,400.
REQUIRED
(i) Prepare a bank reconciliation statement.
(ii) Prepare journal entries needed on Khalid’s Company books as indicated by the
reconciliation.

Q.No.7 PARTNERSHIP – RETIREMENT

Asad, Bilal and Qasim are partners of the firm, sharing profit & loss in the ratio of 3:2:1 respectively.
The following balances appeared in their ledger on September 30, 2013:
Cash Rs.36,250; Fees receivable Rs.16,250; Equipment Rs.17,500; Accounts payable Rs.4,375; Asad
Capital Rs.23,750; Bilal Capital Rs.26,250; Qasim Capital Rs.15,625.
On this date, Bilal retired from the firm.
REQUIRED
Record the retirement of the Bilal under following separate cases and prepare a balance sheet in
case (ii). Show necessary computations:
Case (i): Bilal is paid cash Rs.20,250 (use Bonus method).
Case (ii): Bilal is paid cash Rs.20,000 and is issued a note for Rs.30,000 (use Goodwill method).

Q.No.8 PARTNERSHIP – LIQUIDATION

The following balances were provided by M/S Sun Star Associates on April 30, 2013:
Cash Rs.50,000; Other assets Rs.200,000; Accounts payable Rs.20,000; A – Capital Rs.120,000;
B – Capital Rs.60,000; C – Capital Rs.50,000.
On this date, the partners decided to liquidate their business. The following transactions were made:
(i) Other assets were sold for Rs.35,000.
(ii) Accounts payable were paid in full.
(iii) Liquidation expenses of Rs.30,000 were paid.
A had enough personal resources to meet his capital deficiency (if any). B and C did not have enough
personal resources to meet their capital deficiency (if any).
REQUIRED
All possible entries in General Journal and set up “T” account for cash and partners’ capital accounts.

Instructions: (1) Attempt any FIVE questions. (2) All questions carry equal marks.
(3) Use of calculator is allowed. Do not use abbreviations.
(4) Answers without necessary computations will not be accepted.
(5) All journal entries should be properly dated, intended and narrated.

Q.No.1 ADJUSTED TRIAL BALANCE AND CLOSING ENTRIES

The following is trial balance for Mansoor Traders on 31st December 2014:
Cash Rs.10,000 Accounts payable Rs.10,000
Bank 15,000 Bank loan 60,000
Furniture 17,000 Unearned rent 5,000
Machinery 25,000 Salary payable 1,000
Office equipment 5,000 Mansoor capital 100,000

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Cost of goods sold 75,000 Sales 104,000

Sales return 15,000 Advance from customers 15,000
Salaries expenses 18,000
Prepaid advertisement 16,000
Merchandise inventory 23,000
Goodwill 12,000
Office supplies 4,000
Accounts receivable 60,000
Rs.295,000 Rs.295,000
Adjustments:
(i) Salaries expense for the year Rs.15,000.
(ii) Interest outstanding on bank loan @ 10% for three months.
(iii) Unused office supplies Rs.500.
(iv) Prepaid advertising Rs.2,000.
REQUIRED
(a) Adjusted trial balance. (b) Closing entries.

Q.No.2 FINANCIAL STATEMENTS / WORK SHEET

The following balances relate to M/S Masroor & Co. at year end on December 2014:
Accounts receivable Rs.24,000 Accounts payable Rs.13,000
Cash 30,000 Unearned commission 3,000
Merchandise inventory 15,000 Allowance for bad debts 2,000
Office equipment 50,000 Sales 115,000
Cost of goods sold 100,000 Masroor capital 110,000
Drawings 3,000
Sales return 1,000
Advertising expense 5,000
Salaries expenses 7,000
Rent expense 5,000
Office supplies 3,000
Rs.243,000 Rs.243,000
Adjustments:
(i) Allowance for bad debts 5% on accounts receivable at year end.
(ii) Rent expense of the business Rs.6,000.
(iii) Equipment purchased on 1st April and be depreciated on sum of the years digit method
with the life of five years and scrap value Rs.5,000.
(iv) Commission earned Rs.3,000.
(v) Return of merchandise purchased on credit Rs.1,000 was overlooked.
REQUIRED
Prepare either income statement and balance sheet or 10 columns worksheet.

Q.No.3 ACCOUNTS RECEIVABLE

The accountant of Farman & Co. provided the following:
1. Accounts receivable opening balance Rs.10,000.
2. Allowance for bad debts opening balance Rs.1,000.
During the year following transactions were completed:
(i) Cash sales RS.72,000.
(ii) Credit sales Rs.78,000.

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(iii) Collection from customer Rs.40,000.

(iv) Sales returns and allowances Rs.700.
(v) Customers’ accounts written off Rs.1,500.
(vi) Previously written off account recovered Rs.700.
(vii) At end of the period a customer’s account showed credit balance of Rs.2,000.
REQUIRED
(1) Record bad debts expense, estimating allowance for bad debts @ 5% on ending balance of
accounts receivable.
(2) Record bad debts expense estimating bad debts expense 2% on credit sales.

Q.No.4 BANK RECONCILIATION STATEMENT

The following information is available for preparing bank reconciliation statement of Yousuf & Co. on
March 9, 2015:
1. Credit balance as per cash book Rs.8,420.
2. Debit balance as per bank statement Rs.48,000.
3. Cheques issued in favour of suppliers Rs.35,000 out of which presented cheques were for
Rs.28,000.
4. Cheques deposited into bank Rs.75,000 out of which cheques for Rs.40,000 were cleared.
5. Cheque issued Rs.4,500 to a supplier was not entered in company books.
6. Bank charged interest on overdraft Rs.500, not recorded by company.
7. Bank credited the account Rs.1,500 as dividend.
8. A cheque issued to supplier Rs.8,750 was wrongly entered in business as Rs.5,870.
9. Bank dishonour cheque of a customer which was deposited into bank Rs.5,100. Bank debited
Rs.100 as bank charges.
REQUIRED
(a) Bank reconciliation statement. (b) Adjusting entries to update the business record.

Q.No.5 (a) PARTNERSHIP – FORMATION

Abid, Khalid, Sajid and Zahid contributed capitals in the ratio of 10%, 20%, 30% and 40% respectively.
REQUIRED
Prepare General Journal entries if Sajid invests Rs.150,000.

Q.No.5 (b) PARTNERSHIP – PROFIT OR LOSS DISTRIBUTION

Adam, Akram and Aslam are partners in a firm. Their capital accounts are as under:
Adam Capital
1st April Cash Rs.40,000 1st Jan Balance Rs.400,000
st
1 Oct. Cash Rs.50,000

Akram Capital
1st May Cash Rs.30,000 1st Jan Balance Rs.400,000
1st July Cash Rs.100,000

Aslam Capital
st
1 June Cash Rs.20,000 1st Jan Balance Rs.400,000
1st Sept. Cash Rs.10,000 1st Aug. Cash Rs.60,000
Partnership Deed States that:
(i) Partners will receive respectively Rs.1,000; Rs.2,000 and Rs.3,000 per month as salary.
(ii) 5% interest on beginning capitals will be allowed.

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(iii) Balance to be distributed in their ending capital ratio.

REQUIRED
(1) Prepare income distribution summary, assuming net income for the year Rs.400,000.
(2) Pass the journal entry to close the income summary account on December 31.

Q.No.6 PARTNERSHIP – ADMISSION

Qudsia and Sadia are partners in a firm. Their balance sheet on December 31, 2014 was as under:
Balance Sheet
Assets Equities
Cash Rs.50,000 Accounts payable Rs.100,000
Bank 150,000 Qudsia Capital 200,000
Merchandise 300,000 Sadia Capital 200,000
Rs.500,000 Rs.500,000
They agree to admit Iqra as a partner.
REQUIRED
Record the journal entry and prepare balance sheet for each of the following cases separately:
Case i): Iqra invests Rs.150,000 for 1/3 interest in total capital of the firm of Rs.600,000.
Case ii): Iqra invests Rs.300,000 for 1/3 interest in total capital of the firm of Rs.900,000.

Q.No.7 INVENTORY VALUATION

The following transactions are about inventory of HMB Corporation which uses perpetual inventory
system:
August 1: Balance 7,000 units of Rs.49,000.
August 5: Purchased 3,600 units for cash Rs.18,000.
August 9: Purchased 4,000 units on credit for Rs.32,000.
August 13: Sold 5,000 units for cash Rs.50,000.
August 17: Purchased 3,500 units for Rs.28,000.
August 21: Sold 3,000 units for cash Rs.30,000.
August 25: Sold 3,900 units for cash Rs.39,000.
August 29: Purchase for cash 4,400 units for Rs.22,000.
August 30: Sold on credit 5,000 units for Rs.50,000.
REQUIRED
Prepare inventory ledger card under: (a) Moving Average Method. (b) LIFO Method.

Q.No.8 DEPRECIATION
1) Machine A: Purchased on 1st May 2012 for Rs.500,000. Its life was estimated 8 years and
scrap value Rs.50,000.
Using sum of the year’s digit method, compute depreciation expense on 31st December 2012
and 2013.
2) Machine B: Purchased on 1st August 2012 for Rs.350,000. Its life was estimated 10 years
and salvage value Rs.50,000.
Using 10% Diminishing Balance method, compute depreciation expense on 31st December
2012 and 2013.
3) Machine A mentioned above was sold on 30th April 2014 for cash Rs.300,000. Prepare
General Journal entries for its disposal.

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Q.No.1 BALANCE SHEET, ADJUSTING AND CLOSING ENTRIES

(a) The following are adjusted balances of Tariq & Company on December 31, 2013:
DEBIT BALANCES CREDIT BALANCES
Cash Rs.35,000 Accounts payable Rs.20,000
Merchandise inventory – Jan. 1 20,000 Unearned rent 15,000
Other assets 60,000 Tariq Capital 70,000
Sales return and allowances 15,000 Sales 200,000
Sales discount 5,000 Purchase return and allowances 16,000
Purchases 150,000 Purchase discount 4,000
Transportation – in 10,000 Commission income 5,000
Salaries expenses 25,000
Insurance expenses 10,000
Total 330,000 Total 330,000
Merchandise inventory on December 31, 2013 was valued at Rs.30,000
REQUIRED
Prepare closing entries in General Journal and balance sheet as on December 31, 2013.

(b) The following are selected balances taken from the ledger of Naeem& Company on
December 31, 2013:
Debit Credit
Accounts receivable Rs.80,000
Allowance for bad debts 2,000
Prepaid insurance 9,000
Prepaid rent 20,000
Accrued salary Rs.12,000
Commission income 15,000
Data for Adjustment on December 31, 2013:
(1) Allowance for bad debts is estimated at 2% of the year-end balance of accounts receivable.
(2) Insurance expired for the year Rs.9,000.
(3) Accrued salaries amounted to Rs.15,000.
(4) Prepaid rent on December 31, 2013 was nil.
(5) Commission income for the period Rs.19,000.
REQUIRED
Prepare adjusting entries in General Journal.

Q.No.2 CASH CONTROL

(a) A voucher system is used by Sana Corporation. A few of the transactions are presented
below:
1) Purchase furniture Rs.60,000 paying Rs.25,000 and signing a note for the balance.
2) Issued a 10%, 30-day note of Rs.50,000 and paid Rs.25,000 in settlement of a voucher
payable Rs.72,000.
3) Issued a 12%, 60-day note in settlement of an outstanding voucher for Rs.22,000.
4) Prepared voucher for Rs.45,000 payable to Asim& Company for merchandise purchased.

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REQUIRED
Using General Journal forms, record the above transactions in voucher register, cheque register and
General Journal.

(b) On comparison of cash book entries with those of the bank statement of Nazir& Company
on January 6, 2015, the following differences were found:
1) Cash book balance Rs.31,800.
2) Bank statement balance Rs.9,400.
3) Cheque for Rs.9,500 deposited into bank was wrongly entered in bank statement as for
Rs.5,900.
4) A cheque for Rs.8,000 issued in settlement of accounts payable was erroneously entered in
cash book as for Rs.3,000.
5) Nazir& Company had an error in recording a payment to supplier Rs.13,500 whilst the cheque
was issued for correct amount of Rs.15,300.
6) Cheque deposited on January 6, but not shown on bank statement Rs.12,000.
REQUIRED
Prepare bank reconciliation statement on January 6, 2015.

Q.No.3 INVENTORY VALUATION

(a) The following data relate to the business of Shahab& Co. which uses periodic inventory
system:
November 1: Beginning inventory 2,000 units @ Rs.12.
November 12: Purchases 4,000 units @ Rs.14.
November 18: Purchases 10,000 units @ Rs.18.
November 22: Purchases 8,000 units @ Rs.22.
November 29: Purchases 5,000 units @ Rs.?
November 30: Ending inventory 7,000 units.
Cost of goods sold Rs.438,000. Company uses the LIFO method.
REQUIRED
Determine: (i) Cost of ending units. (ii) Unit cost and total cost of November 29
purchases.

(b): Shahzad& Co. deals in computer and uses perpetual inventory system. The record of the
company show the following transactions for the month of October, 2014:
October 5: Purchased 30 computers @ Rs.10,000.
October 22: Purchased 20 computers @ Rs.12,000.
October 25: Purchased 25 computers @ Rs.11,000.
October 28: Sold 40 computers @ Rs.15,000 on credit.
REQUIRED
Compute the cost of goods sold and gross profit of 40 computers under FIFO method.

Q.No.4 VALUATION OF ACCOUNTS RECEIVABLE

Following is the list of accounts receivable for Zeenat& Co. at December 31, 2013:
Transaction Date Customer Amount Due
January, 30 Shiraz Store Rs.5,000
July, 20 Badar& Co. 20,000
September, 15 Faizan Store 32,000
October, 27 Kamil& Co. 9,000

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November, 10 Saleem& Sons 40,000

November, 12 Akbar Store 120,000
December, 10 Arif Sons 80,000
December, 28 Nazir& Co. 60,000
REQUIRED
(a) Prepare a schedule to compute the estimated portion of each group that will prove
uncollectible and the required balance in the allowance for doubtful accounts. The following
percentages of each group are estimated to be uncollectible 1 – 30 days, 2%; 31 – 60 days,
4%; 61 – 120 days, 10%; Over 120 days, 20%.
(b) Prepare the journal entry to bring the allowances for doubtful accounts up to its required
balance at December 31, 2013. Prior to making the adjustment, the account has debit
balance of Rs.1,650.

Q.No.5 DEPRECIATION
The following selected transactions were completed by Danish & Co.:
1) Beginning balance of Machine A (1-1-12) Rs.220,000 and allowances for depreciation
Machine A (1-1-12) Rs.80,000. Assume that the company uses the Diminishing Balance
method @ 20% on reduced balance every year.
2) Company purchased Machine B for Rs.200,000 on May 1, 2012. The company’s policy is to
use machine 8 hours per day and charge depreciation expense at Rs.5 per hour. The
machine is operated during the year 2012 for only 160 days and operated in year 2013 for
only 220 days.
3) Company purchased Machine C on April 1, 2012 for Rs.260,000. Estimated life 15 years and
its scrap value was Rs.20,000. The company uses sum of the year’s digit method.
4) Company purchased Machine D on September 1, 2012 for Rs.200,000. Its scrap value was
estimated at Rs.20,000 and useful life 20 years. The company uses straight line method.
REQUIRED
(1) Compute the depreciation expense of each machine separately for the year ended
December 31, 2012 and 2013.
(2) Pass journal entries to record the depreciation expense for the year ended on December 31,
2013 for each machine.

Q.No.6 PARTNERSHIP – FORMATION AND LIQUIDATION

(a) Aslam and Akmal were doing separate businesses. On May 5, 2014, they decided to form a
partnership by merging their business. On this date, their balance sheet was as under:
Aslam Akmal
Cash Rs.40,000 Rs.60,000
Other assets 200,000 240,000
Accounts payable 50,000 80,000
The assets and liabilities were taken at the book value in the new partnership. Aslam and Akmal
decided that each partner’s capital in the new partnership will be Rs.210,000. They contributed the
deficiency, if any, from their private fund.
REQUIRED
Prepare journal entries to record formation of partnership firm.
(b) Aziz, Bilal and Chand decided to liquidate the partnership on January 1, 2014. Just before
liquidation, following balances appeared in the balance sheet:
Cash Rs.200,000; Goodwill Rs.100,000; Other assets Rs.700,000; Liabilities Rs.200,000; Aziz Capital
Rs.160,000; Bilal Capital Rs.220,000; Chand Capital Rs.420,000.

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They share profit and losses in the ratio of 2:2:1 respectively. Other assets realized Rs.500,000.
Liabilities were paid. All partners are personally solvent.
REQUIRED
Give General Journal entries relating liquidation and final settlement of partners.

Q.No.7 PARTNERSHIP – ADMISSION

Abid and Shahid are partners with capital balance Rs.120,000 and Rs.180,000 respectively sharing
profit and losses in the ratio 1:2. They admit Khalid.
REQUIRED
Give General Journal entries to record the admission of Khalid in each of the following situations
considered separately:
Situation A – Khalid invests sufficient cash to give him 1/3 interest in the firm.
Situation B – Khalid invests Rs.120,000 for 1/3 interest. Abid and Shahid do not reduce their
capital.
Situation C – Khalid invests Rs.180,000 for 1/3 interest in the firm. His capital account is to be
credited with the entire amount of his investment.
Situation D – Khalid invests Rs.120,000 for 1/4 interest. (Bonus to be recorded).

Q.No.8 MISCELLANEOUS
The following selected transactions related to Nafees& Co.:
1) An equipment costing Rs.80,000 was traded – in with new equipment having a list price of
Rs.100,000, receiving a trade – in – allowance of Rs.40,000. The book value of old equipment
on the date of exchange was Rs.50,000.
2) Sold for Rs.400,000 half portion of land costing Rs.250,000. Received according to term of
sales Rs.300,000 in cash, a 10%, 4 month note for the balance.
3) Purchased 1,500 units of merchandise on credit @ Rs.20 each. (Company uses periodic
inventory system).
4) Sold 1,000 units of merchandise costing Rs.30 each on account @ Rs.40 each. (Company
uses perpetual inventory system).
5) A previously written off account of Rs.20,000 was subsequently recovered to the extent of
Rs.12,000.
6) End of the period analysis of accounts receivable subsidiary ledger revealed one of the
customer’s account showing credit balance of Rs.15,000.
7) Unpaid salary amounted to Rs.18,000.
8) Commission earned but not received Rs.20,000.
REQUIRED
Record the above transactions in General Journal.

Instructions: (1) Attempt any FIVE questions. (2) All questions carry equal marks.
(3) Use of calculator is allowed. Do not use abbreviations.
(4) Answers without necessary computations will not be accepted.
(5) All journal entries should be properly dated, intended and narrated.

Q.No.1 (a) Accounting Principles:

State the rule of debit and credit in terms of increases and decreases in the values of assets,
liabilities and owner’s equity.

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Q.No.1 (b) Trial Balance:

The following transactions related to Shaheer Co.:
1) Shaheer started business by investing cash Rs.15,000; furniture Rs.20,000; merchandise
Rs.45,000.
2) Purchased merchandise from Khan at list price of Rs.10,000 with 10% trade discount. Paid
cash Rs.4,000.
3) Sold goods for Rs.50,000 to Shehzad and received cash from him Rs.20,000.
4) Salaries expense of the business Rs.13,000 out of which Rs.10,000 were paid.
5) A customer paid Rs.5,000 as advance.
REQUIRED
Prepare trial balance in proper form.

Q.No.2 Worksheet:
The following are trial balance and adjustment data for Aslam Company on December 31, 2015:
Debit Credit
Cash Rs.5,000 Capital Rs.150,000
Bank Rs.30,000 Salaries payable Rs.5,000
Office equipment Rs.25,000 Commission revenue Rs.40,000
Office furniture Rs.15,000 Unearned commission Rs.10,000
Prepaid advertisement Rs.7,000 Allowance for depreciation – O/E Rs.1,000
Office salaries expenses Rs.15,000 Allowance for depreciation – O/F Rs.3,000
Commission receivable Rs.5,000
Office supplies Rs.7,000
Investments Rs.100,000
Total Rs.209,000 Total Rs.209,000
Adjustment:
1) Service provided against unearned commission Rs.7,000.
2) Commission receivable Rs.8,000.
3) Commission revenue include an amount of Rs.1,000 advance payment by a customer.
4) Advertisement expense Rs.5,000.
5) Unused office supplies Rs.2,000.
6) Interest on investment receivable Rs.5,000.
7) Fixed assets are depreciated @ 10% per annum under diminishing balance method.
REQUIRED
Prepare 10 column worksheet.

Q.No.3 Adjusting, Closing and Reversing Entries:

Take the data given in question No. 2.
REQUIRED
Record adjusting, closing and reversing entries.

Q.No.4 Voucher System:

Sadia Company uses voucher system. Selected transactions for August 2015 are as given below:
1) Prepared a cheque of Rs.15,000 to establish petty cash fund.
2) Purchased equipment for Rs.10,000 on credit terms 2/10, n/30 from Modern Traders.
3) Purchased furniture for Rs.30,000 paid Rs.10,000 cash and balance is payable.
4) Returned equipment to Modern Traders worth Rs.500.
5) Paid Modern Traders within discount period.

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6) Paid Rs.21,000 to settle notes payable including interest of Rs.1,000.

7) Paid advertisement in advance Rs.15,000.
8) Issued 5% 30 days notes payable of Rs.15,000 and paid Rs.25,000 in full settlement of
vouchers payable of Rs.40,000.
REQUIRED
Using General Journal forms prepare entries in:
(1) Voucher register. (2) Cheque register. (3) General journal.

Q.No.5 Accounts Receivable:

Opening balances on 1, January, 2014:
Accounts receivable Rs.150,000; Allowance for bad debts Rs.5,000
During the year 2014 following transactions were completed:
1) Cash sales Rs.75,000.
2) Credit sales Rs.175,000.
3) Cash collection on account Rs.200,000.
4) Sales return Rs.5,000.
5) Bad debts written off Rs.7,000.
6) Recovery from previously written off account Rs.3,000.
REQUIRED
1) Prepare accounts receivable account.
2) Compute and record bad debts expense estimating bad debts:
(a) @ 5% of accounts receivable under balance sheet approach.
(b) @ 3% of net credit sales under income statement approach.
3) Prepare partial balance sheet under both the approaches.

Q.No.6 Inventory Valuation:

Following transactions are related to Abid Traders:
Dec. 2015 01 Inventory 500 units @ Rs.7.00
05 Purchased 3,000 units @ Rs.6.00
07 Purchased 5,000 units @ Rs.5.00
10 Sold 3,500 units @ Rs.15.00
15 Purchased 7,000 units @ Rs.8.00
17 Sold 5,000 units @ Rs.16.00
20 Purchased 4,000 units @ Rs.6.00
25 Sold 4,500 units @ Rs.17.00
30 Paid carriage outward on sales Rs.3,000
REQUIRED
Find gross profit using periodic system under:
(a) LIFO Method. (b) Weighted Average Method.

Q.No.7 Depreciation:
A manufacturing company purchased machine on 1st July, 2011 for Rs.550,000 with estimated life of
10 years and scrap value of Rs.50,000.
On 1st January 2014 the company decided that depreciation method be changed from straight line to
diminishing balance @ 10% per annum.
On 30 June 2015 machine was sold for Rs.350,000.
The company follows calendar year as accounting period.

Principles of Accounting – B.Com Part – I 111

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REQUIRED
Record general journal entry for disposal of machine, showing computations.

Q.No.8 Retirement of Partner:

The following is balance sheet of a partnership firm:
ASSETS EQUITIES
Cash Rs.400,000 Accrued expenses Rs.100,000
Inventory Rs.100,000 A Capital Rs.100,000
Accounts receivable Rs.50,000 B Capital Rs.200,000
Shop building Rs.150,000 C Capital Rs.300,000
Total Rs.700,000 Total Rs.700,000
C retires and receives Rs.350,000 cash in full settlement.
REQUIRED
You are required to record the retirement of C and prepare balance sheet after his retirement, using
both goodwill and bonus methods separately.

Principles of Accounting – B.Com Part – I 112