MGT101 Final - Term - Solved - Paper - No - 34 - To - 42 - Solved - by - ABr - & - Chanda - Rehman - & - Nomi

Paper No:34
Solved by Chanda Rehman & ABr

FINALTERM EXAMINATION
Fall 2009
MGT101- Financial Accounting (Session - 2)
Time: 120 min
Marks: 87
Question No: 1 ( Marks: 1 ) - Please choose one
We can say that the business is in profit, when:
► Assets exceed Expenditure

► Assets exceed Liabilities
► Income exceeds Expenditure
► Income exceeds Liabilities

Term "Credit" means_______ by the business.
► Receiving of benefits
► It has no effect on business
► Providing of benefits correct
► It depends upon items

According to the double entry system of accounting, an account that obtains
benefit is:
► Debit
► Credit
► Income
► No need to show as accounting record

When a Liability is reduced or decreased, it is recorded on the:
► Right or debit side of the account

► Left or debit side of the account
► Left or credit side of the account
► Right or credit side of the account

When Capital is increased by an amount, it is recorded on the:


Bank book is part of:
► Voucher
► General Journal
► General Ledger
► Trial Balance

What type of expenses are paid out of Gross Profit?
► Selling Expenses
► General Expenses
► Financial Expenses
► All of the given options

Which of the following shows summary of a company's financial position at a
specific date?
► Profit & Loss Account

► Cash Flow Statement
► Balance Sheet
► Income & Expenditure Account

Which of the following is NOT an example of intangible assets?
► Franchise rights
► Goodwill
► Patents
► Land

Which of the following is an example of business liability?
► Land
► Building
► Cash
► Capital

The unfavorable balance of Profit and Loss account should be:
► Added in liabilities
► Subtracted from current assets
► Subtracted from liabilities
► Subtracted from capital

Which of the following account will be credited, if business bought goods on
credit from Mr. Ali?
► Purchases account
► Mr. Ali account
► Cash account
► Sales account

Interest on loan paid by business is an example of :
► Deferred expense
► Revenue expense
► Capital expense
► None of the given options

The allocation of the cost of a tangible plant asset to expense in the periods,
in which services are received from the asset, is termed as:
► Appreciation
► Depreciation
► Fluctuation

Which of the following is NOT a function of bank reconciliation statement?
► To reconcile the difference between the cash book and the bank
statement
► To check for errors in balance sheet
► To update omitted entries into the cash book
► To update omitted entries into the bank statement

Which of the following entry will be recorded when the Bad Debts are
recovered?
► Cash account (Dr.) & Bad Debts recovered account (Cr.)

► Accounts Receivable account (Dr.) & Bad Debts recovered account
(Cr.)
► Bad debts recovered account (Dr.) and Profit & Loss account (Cr.)
► Provision for doubtful debts account (Dr.) & Cash account (Cr.)

Which of the following subsidiary book(s) is (are) maintained for debtors
control account?
► Sales Day Book

► Sales Return
► Debtors Ledger
Sales are calculated by adding:
► Cash sales and cash received from debtors

► Credit sales and cash received from debtors
► Cash sales and credit sales
► Cash ales and credit purchases

Which of the following item will be shown on debit side of debtors account?
► Discount received
► Return inwards
► Discount allowed
► Credit sales

Goods purchased from “Mr. A” for Rs. 2,000 passed through the sales book.
The rectification of error will result in:
► Increase of gross profit

► Decrease of gross profit
► Remains constant and no effect on net profit
► There is no relation between goods purchased and gross profit

Goods of Rs.1,000 purchased from Mr. “A” were recorded in sales book, the
rectification of this error will:
► Increase the gross profit

► Reduce the gross profit
► Have no effect on gross Profit

Which of the following account will be credited when a typewriter is sold that
has been used in the office?
► Cash Account
► Sales Account
► Purchase Account
► Office Equipment Account

When one or both aspects of a transaction are recorded in the wrong class or
category of account, this is called:
► Error of principle
► Error of omission
► Error of commission
► Error of original entry

Which of the following item must be recorded in the adjusted Cash Book in
order to bring it in line with the entries in the Bank Statement?
► Bank charges
► An error on the Bank Statement
► An uncredited deposit
► An unpresented cheque

It is supposed that on 31st December, 2007, the sundry debtors are
amounted to Rs. 40,000. On the basis of past experience, it is estimated that
10% of the sundry debtors are doubtful. Actual bad debts are Rs. 1600. What
amount of new provision for doubtful debts will be credited in profit & loss
account
► Rs. 3,600
► Rs. 4,000 correct
► Rs. 1,600
► Rs. 2, 400

Which of the following is an example of operating expense?
► Purchasing operating equipment

► Purchasing cleaning services
► Purchasing an investment in another company
► Purchasing a computer for the accounting office

Which of the following would NOT be considered as a component of 'cost' of
stock?
► Salaries of selling staff

► Transportation inward costs
► Import duties
► Purchase price

Which of the following will be debited, if cash is drawn by Proprietor?
► Proprietor’s drawings
► Proprietor’s cash
► Proprietor’s capital
► Proprietor’s income

Which of the following is TRUE about the treatment of insurance paid in
advance Rs. 13,000?
► It will be treated as an other income in Profit & Loss Account
► It will be treated as a current asset in Balance Sheet
► It will be treated as a current liability in Balance Sheet
► It will be treated as an accrued expense in Balance Sheet

When closing stock is given in trial balance, then it will effect:
► Trading account only
► Balance sheet only correct
► Owner's equity only
► Both Trading account and Balance sheet

Fixed Assets (WDV) + Working Capital =?
► Total assets employed

► Total liabilities
► Total assets
► Current assets

Current accounts of the partners should be opened when the capitals are:
► Fixed
► Fluctuating
► Floating
► Normal

Which of the following is (are) type(s) of Public Limited Companies?
► Listed company
► Non listed company
► Private limited company
► Both Listed Company and non listed company

The charter of a company which defines the limitations and powers of the
company is called:
► The memorandum of association correct
► Articles of association
► Statutory report
► Certificate of commencement

Merchandise on hand at either the beginning or end of the reporting period is
called__________.
► Raw material
► Cost of good sold
► Work in process
► Inventory
The balance sheet reported a beginning balance of Rs. 20,000 in Accounts
Receivable and an ending balance of Rs. 15,000. Credit Sales of Rs.
200,000 were made during the year. Using this information, compute cash
collected from customers.
► Rs. 205,000
► Rs. 215,000
► Rs. 195,000
► Rs. 200,000
Rs.
Gross profit 50,000
Operating profit 42,000
Sales 250, 000
What is the amount of operating expenses ?
► Rs. 8,000
► Rs. 92,000
► Rs. 62,500
► Rs. 300,000
Particulars Rs.
Debentures 1, 50, 000
Equity Capital 2, 00,000
General Reserve 90, 000
Accumulated profit 60,000
What is debt equity ratio ?
► 15: 20 (or 3:4)

► 15:24 (or 5: 8)
► 15:29
► 15:35 (or 3: 7)

A company declares a cash dividend to be paid to its stockholders next
month. The effect of the transaction is to:
► Decrease assets and liabilities.

► Increase assets and stockholders' equity.
► Decrease assets and stockholders' equity.
► Increase liabilities and decrease stockholders' equity.
Particulars Rs.
Direct materials costs 80,000
Direct labor costs 50,000
Manufacturing overhead costs 60,000
Prime cost ?
► Rs.130, 000
► Rs.110, 000
► Rs.140, 000
► Rs.190, 000

What would be the value of conversion cost, if the cost of material consumed
during the month is Rs. 5,000, labor cost incurred is Rs. 2,000 and the factory
over head cost is Rs. 1,000?
► Rs. 3,000
► Rs. 5,000
► Rs. 7,000
► Rs. 8,000

The amount owed by debtors at the end of a month appears on
the_________ side of the control account.
► Left side or debit
► Left side or credit
► Right side or debit
► Right side or credit correct

Which of the following is correct for an account has debit balance?
► The amount of the debits exceeds the amount of the credits
► There are more entries on the debit side than on the credit side
► Its normal balance is debit without regard to the amounts on the debit
side
► The last entry of the accounting period was posted on the debit side

Mr. A & B entered into a partnership with an equal share in profit or loss. The
agreement provides that Mr. A will receive Rs.10,000 and Mr. B will receive
Rs.8,000 as salary allowance. The net income for the year is Rs.85,000. What
will be the total share of Mr. A?
► Rs.52,500
► Rs.42,500
► Rs.43,500
► Rs.50,500

Mr. A & B entered into a partnership invested Rs.50,000 and Rs.65,000 with
an equal share in profit or loss. Markup on drawings of Mr. A is Rs.1,500 and
of Mr. B is Rs.1,800. The net income for the year is Rs.85,000. What will be
the profit share of Mr. B?
► Rs.42,350
► Rs.44,150
► Rs.41,600
► Rs.40,850
Profit = 85000
Add markup on drawings = 1500 + 1800 = 3300
Total net profit = 88300
Profit share of B = 88300/2 = 44150

Mr. A & B entered into a partnership with an equal investment and equal
share in profit or loss. Markup on capital of Mr. A is Rs.2,500 and markup on
drawings of Mr. B is Rs.2,800. The net income for the year is Rs.95,000. What
will be the amount of distributable profit?
► Rs.89,700
► Rs.94,700
► Rs.95,300
► Rs.100,300

Which of the following can be distributed among the share holders?
► Capital reserve
► General reserve
► Revaluation reserve

Which of the following capital is taken up by the general public?
► Issued capital
► Subscribed capital
► Authorized capital
► Reserve capital

All of the following have an effect on ‘operating activities’ while preparing the
statement of cash flows except:
► Provision for doubtful debts
► Gain or loss on currency exchange rate
► Depreciation charged on fixed asset
► Amount received for disposal of a fixed asset

Primary purpose of the cash flows statement is to provide the information
about:
► Errors or discrepancies between cash book and income statement
► Receipt and payment of cash in the period
► Non cash adjustment that effect the income statement
► Cash paid to the customers and creditors of the business

Which of the following financial statement is helpful for the investors and
creditors to assess the cash and non cash aspects of operating, investing and
financing transactions on an entity’s financial position?
► Balance Sheet
► Income Statement
► Statement of cash flows
► Statement of changes in equity

According to the statement of cash flows following are the examples of
investing activities except:
► Sales of machinery
► Capital invested by the owners
► Purchase of building for the business use
► Cash received from the disposal of equipment

Which of the following items of balance sheet are useful in evaluating a
company’s liquidity?
► Current assets and other assets
► Current liabilities and current assets correct
► Current liabilities and plant and equipment
► Non current liabilities and other assets

Which of the following is measured by debt ratio?
► Short-term liquidity
► Creditors’ long term risk correct
► Short-term risk of the company
Question No: 55 ( Marks: 3 )

If the capitals of the partners are fixed, Pass Journal Entries for the following:
v Drawings made by partner
v Excess drawn amount is returned by partner
v Profit distribution among partner
Partner’s Current A/c Dr.

Cash/Bank A/c Cr.
Cash/Bank Dr.
Partner’s Current A/c Cr.
Profit & Loss A/c Dr.

Partner’s Current A/c Cr.
ABC Company purchased goods of Rs.150,000 on credit from which goods
of Rs.20,000 were defected and returned. Company received 2% discount at
the time of payment from the supplier.
Required:
· What will be the amount of discount received by the company?
· Also show the journal entries
Purchases A/c 150,000

Creditor A/c 150,000
Goods are being purchased
Creditor A/c 20,000

Purchases A/c 20,000
Goods returned to supplier
Creditor A/c 130,000
Discount Received A/c 2600
Cash/Bank A/c 127400
Payment is being made to creditor and 2% discount is received.

Why are receipts and payment of interest classified as operating activities?

On 01-01-2007, the provision for doubtful debts a/c stood at Rs. 12,000
(credit balance). In 2007, the bad debts are amounted to Rs. 10,000. The
debtors on 31-12-2007 are amounted to Rs. 3, 20,000 and a provision for
doubtful debt to be maintained @ 5%.
Required:
Show Journal entries and also show how the items will appear in Profit and
Loss account and Balance sheet. (Show complete working where it is
necessary)
The accounting staff of ABC, Inc., has assembled the following information
for the year ended December 31, 2007:
Cash and cash equivalents, Jan. 1 Rs.35,800

Cash and cash equivalents, Dec. 31 74,800
Cash paid to acquire plant assets 21,000
Proceeds from short-term borrowings 10,000
Loan made to borrowers 5,000
Collection on loans (excluding interest) 4,000
Interest and dividends received 27,000
Cash received from customers 795,000
Proceeds from sale of plant assets 9,000
Dividends paid 55,000
Cash paid to suppliers and employees 635,000
Interest paid 19,000
Income taxes paid 71,000
Using this information, prepare a statement of cash flows. Include a proper

heading for the financial statement, and classify the given information into the
categories of operating, investing and financing activities.
Paper No:35
Solved by Chanda Rehman & Abr
Fall 2009

Which of the following is correct according to the double entry system of
book-keeping?
► Debit = Credit
► Debit > Credit
► Debit < Credit

What is the nature of an expense account?
► Debit
► Credit
► Revenue

Which of the following are the components of General Ledger?
1) Title of account
2) Amount of transaction
3) Date of transaction
► (1) & (2) only
► (2) & (3) only
► (1) & (3) only
► (1), (2) & (3)

Which of the following organizations prepare Income & Expenditure account?
► Public libraries
► NGOs
► Labor unions
Which of the following item will appear on the Balance Sheet as current
assets?
► Prepaid expenses
► Accrued expenses
► Furniture and Equipment
►Unearned revenue

Accounts Receivable & Inventory are the examples of:
► Liquid assets
► Current assets
► Fixed assets
► Capital assets

Which of the following statement is NOT TRUE about Current liabilities?
► These are due within one year

► These are short-term loans
► These are consist of all debts, payable after 12 months
► In working capital, these are deducted from current assets

If the cost of sales is Rs. 60,000, sales are Rs. 95,000 and operating
expenses are Rs. 20,000 during the year, what would be the value of Gross
Profit?
► Rs. 15,000
► Rs. 35,000
► Rs. 55,000
► Rs. 60,000

Which of the following is an alternate term which can be used for “Capital”?
► Liability
►Owner’s net worth
► Working capital
► Asset

In the cost of goods sold statement, Cost of direct material consumed +
Direct labor=?
► Conversion cost
► Prime cost
► Total factory cost
► Cost of goods manufactured

The total of all costs incurred to convert raw material into finished goods is
known as:
► Prime cost
► Conversion cost
► Sunk cost
► Opportunity cost

In cost of goods sold statement the ‘total factory cost’ is equal to:
► Cost of material consumed + Labor cost

► Cost of material consumed + Conversion cost
► Cost of material consumed + Total factory cost
► Cost of material consumed + Factory overhead

All the costs incurred on the incomplete assets up to the balance sheet date
must be transferred to:
► Capital account
► Capital work in progress account
► Relevant asset account
► Owner's equity account

Which one of the following is NOT true about revenue expenditure?
► These are the running expenses of the business

► They improve the financial position of the business
► They reduce the profit of the concern
► They do not appear in the balance sheet

Which one of the following is NOT true for Profit & Loss Account?
► It shows whether a business has made a profit or loss over a financial
year
► It shows the financial performance of a business for the period
► It shows revenues and expenses for the period
► It is used to calculate surplus/deficit for a particular period

Which of the following best describes unpresented cheques?
► Cheques received on behalf of the business by the bank
► Cheques drawn but yet to be recorded in the bank records
► Cheques issued by the bank not recorded in business records
► Cheques received but yet to be recorded in the bank records

Which of the following option is TRUE about the characteristic(s) of Bad
Debt?
► It is a definite loss to the business

► It is not shown in Balance Sheet
► No provision is necessary for it

Which of the following is (are) included in Creditors Control Account?
► Discount received from supplier

► Credit purchases
► Bills payable

Which of the following is shown on credit side of creditors control account?
► Bills Receivable
► Return inwards

Which one of the following is CORRECT about subsidiary ledger?
► It is a special Ledger
► It is a supporting ledger
► It provides detailed information about individual accounts

Amount by which the purchaser (buyer) receives a reduction in price from the
seller is known as:
► Expense
► Discount Allowed
► Discount Received
► Liability

Which of the following entry will be passed to record discount received in
control account?
► Discount Received (Dr) and Creditors Control A/c (Cr)

► Discount Received (Dr) and Creditors A/c (Cr)
► Creditors Control A/c (Dr) and Discount Received (Cr)
► Creditors A/c (Dr) and Discount Received (Cr)

Which of the following account(s) will be affected, while rectifying the error of
sales to Rahim of Rs. 500 were omitted to record in books of accounts?
Sales account
► Rahim’s account
► Cash account
► Both sales and Rahim’s Account

It is supposed that on 31st December, 2007, the sundry debtors are
amounted to Rs. 40,000. On the basis of past experience, it is estimated that
10% of the sundry debtors are doubtful. Actual bad debts are Rs. 1600. What
amount of new provision for doubtful debts will be credited in profit & loss
account
► Rs. 3,600
► Rs. 4,000
► Rs. 1,600
► Rs. 2, 400

The figure of cash received from debtors can be located either from cash
book or:
► Debtor’s Control Account

► Balance Sheet
► Bills Payable Account

Which of the following would NOT be considered as a component of 'cost' of
stock?

► Import duties
► Purchase price
Capital account of sole proprietors is affected by which of the following
items?
a. Profit & Loss account
b. Drawings account
c. Balances of capital account
► a,b
► b,c
► a,c
► a,b,c

Which of the following statement is TRUE about the partnership form of
business?
► Partners must have to share their profits in equal proportion
► Partners are personally liable for the liabilities of the business
► Partnerships must make their accounts available to the general public
► Partnership agreement in writing is called Partnership deed

Which of the following represents the relationship between persons who have
agreed to share the profit of business carried on by all or any of them acting
for all?
► Sole-ownership
► Public limited company
► Partnership

The Joint Stock Company is formed under the Companies Ordinance:
► 1984
► I884
► 1948
► 1965

In which of the following, the Interest paid on debenture will be shown?
► Profit and loss account

► Profit and loss appropriation account
► Balance sheet asset side under the heading of “current assets”
► Trading Account

The primary purpose of preparing a cash flow statement for an entity is to
provide information about:
► Its financial position at the end of an accounting period
► Its cash receipts and cash payments during an accounting period
► Its financial position at the start of an accounting period

Which of the following business publishes the Financial Statements?
► Sole-Proprietorship
► Partnership
► Trust
► Public Limited Company

If the Capitals of partners are fixed then, at the end of financial year a
partner’s drawings are transferred to the:
► Credit side of the partner’s capital account

► Credit side of the partner’s current account
► Debit side of partnership bank account
► Debit side of the partner’s current account

Wages outstanding given in the trial balance will be treated as a (an):
► Asset
► Liability
► Revenue

In balance sheet fixed assets are shown at:
► Residual value
► Market value
► Fair value
► Written down value (WDV)

Suppose a firm has 200 debtors, and each of them owes exactly Rs. 150 at
the start of June. What is the total amount owed by all debtors?
► Rs. 2,000
► Rs. 3,000
► Rs. 30,000
► Rs. 150,000

What will be obtained from the Purchases Returns Book?
► Returns outward

In the heading of financial statement, ___________ is not required?
► Title of financial statement
► Name of the person who prepares financial statement
► Period for which financial statement is prepared
► Name of business entity

Which of the following justifies when profit is earned?
► Cash Inflow exceeds Cash Outflow

A and B entered in partnership in capital ratio of 2:3. They earned a profit of
Rs.6,600 during the year. What will be the share of profit of Mr. A?
► Rs.1,320
► Rs.2,640
► Rs.3,960
► Rs.6,600

In a partnership of Mr. X and Mr. Y, the share of profit of Mr. X is Rs.3,840
and the share of profit of Mr. Y is Rs. 5,760. What will be the ratio of their
share?
► 1:2
► 2:3
► 3:2
► 2:1

Which of the following is decreased when an asset is converted into expense
in adjustment?
► Revenue
► Net income
► Expense
► Liability

Accumulated depreciation is a ____________ account?
► Fixed asset
► Current asset
► Contra asset
► Liability

Adjusting entries are recorded in which of the following?
► Voucher
► General journal
► Ledger
► Trial balance

Expired costs in an accounting period should be reported on ____________
statement for that time period.
► Cash in flow
► Cash out flow
► Income
► Expense

Interest expenses of Epler Corporation shows a debit balance of Rs.200 in its
unadjusted trial balance and Rs.250 in adjusted trial balance. Which of the
following account will be debited in adjusting entry?
► Interest expense
► Interest payable
► Prepaid interest
► Interest paid

Mr. A & B entered into a partnership with an equal investment and equal
share in profit or loss. Markup on capital of Mr. A is Rs.2,500 and markup on
drawings of Mr. B is Rs.2,800. The net income for the year is Rs.95,000. What
will be the amount of distributable profit?
► Rs.89,700
► Rs.94,700
► Rs.95,300
► Rs.100,300

Which of the following can be distributed among the share holders?
► Capital reserve
► General reserve

Which of the following capital is offered to the general public?
► Issued capital
► Reserve capital

Which of the following value of the share is authorized by the memorandum
of association?
► Par value
► Face value
► Nominal value

Which of the following financial statement is helpful for the investors and
creditors to assess the cash and non cash aspects of operating, investing and
financing transactions on an entity’s financial position?
► Balance Sheet
► Income Statement

The financial statement that captures both the current operating result and
the associated changes in the balance sheet is:
► Statement of retained earnings
► Statement of financial position

In statement of cash flows, interest payment made on loan from bank is
related to:
► Investing activity
► Financing activity
► Operating activity
► Net changes in working capital

Mr. Hassan is a partner in a partnership firm. His capital on July 1, 2001 was
Rs. 400,000. He invested further capital of Rs. 150,000 on March 01, 2002.
Markup rate is @6%p.a. The financial year of such a business is from 1st July
to 30th June.
Required: You are required to calculate his markup on Capital at the end of
30th June 2002.
a) Capital invested on july 1 2001 = 400,000

Markup rate on 400,000 = 6% of 40,000 = 24,000
b) Further capital introduced / invested = 150000 on March 1, 2002

Markup rate = 6% of 150000 = 9000 x 4/12 = 3000
Total mark up rate = a + b = 24000 + 3000 = 27000

Calculate cost of goods sold with he help of given data.
Particulars Rs.
Purchases 418,000
Carriage inwards 7,900
Discount Allowed 750
debtors 16,000
Sales man commission 2,000
Office expenses 2,000
Carriage outwards 1,700
Salaries 13,000
Direct labor 3,825
FOH 2,100
Plant & Machinery 53,000
Buildings 35,000
Tools 8,650
Helping data:
d. Plant & Machinery depreciate @ 10% and charged to FOH
e. Buildings depreciate @ 5% and 40% charged to Administrative
expenses and balance to FOH
f. 40% of salaries will be charge to office and balance to Selling
expenses

X and Y were partners in a business sharing profits in the ratio of 3:1. Their
capital were Rs.30,000 and Rs.10,000 respectively. They earned a net profit
of Rs. 160,000. Mr. Y was entitled to a salary of Rs.200 p.m. Prepare Profit
Distribution Account of X & Y Partnership.
X AND Y ARE SHARED WITH the ratio 3:1

X capital = 30000
Y capital = 10000
Net profit = 160,000
Mr. Y salary is = 200 p.m entitled
Total investment = X + Y capital = 30000 +10000 = 40000
X profit distribution = 30,000/40000 x 160000 = 120,000

Y profit distrubtion = 10,000/40000 x 160000 x 40000 = 40000

Mention the effects of following on financial statements.
g. Markup on debentures
Markupdebture – Dr. while Debenture Cr
h. Creation of reserves
i. Payments of dividend
j. Carriage inwards
k. Current Assets are less than Current Liabilities

The following is the trial balance of Sikander’s Photo Studio, Inc., dated
December 31, 2007. The net income for the period isRs.36,000. You are
required to prepare Balance Sheet as on December 31, 2007.
Sikander’s Photo Studio, Inc.
Trial balance
December 31, 2007
Cash Rs.171,100
Accounts receivable 9,400
Prepaid studio rent 3,000
Unexpired insurance 7,200
Supplies 500
Equipment 18,000
Accumulated depreciation: equipment Rs.7,200
Notes payable 10,000
Accounts payable 3,200
Salaries payable 4,000
Income tax payable 6,000
Unearned revenue 8,800
Capital stock 100,000
Retained earnings 34,000
Revenue earned 165,000
Salary expense 85,000
Supply expense 3,900
Rent expense 12,000
Insurance expense 1,900
Advertising expense 500
Depreciation expense: equipment 1,800
Interest expense 900
Income taxes expense 23,000
338,200 338,200
Paper No:36
Solved by Chanda Rehman & Abr
Fall 2009
Time: 120 min Marks: 87
Which of the following is/are the END product of accounting cycle?
► Financial Statements
► General Journal
► General Ledger
► Voucher
An asset on the balance sheet which is expected to be sold or used within
one year is known as:
► Tangible asset
► Current asset
► Fixed asset
► Long term asset
► Liquid assets
► Current assets
► Fixed assets
► Capital assets
Identify the business transaction for given entry below.
Vehicle Account XXX (Dr.)
Bank Account XXX (Cr.)
► Paid for vehicle through cheque
► Paid for vehicle through cash
► Purchased vehicle on credit

Which of the following account will be credited, if the goods are sold on
credit to Mr. Mahmood?
► Cash account
► Mr. Mahood account
► Sales account
► Purchases account
If salaries expense is Rs. 2,500, purchases are Rs. 16,000 and rent (office
building) is Rs. 300 during the year, what would be the total of "general
& administrative expenses"?
► Rs. 300
► Rs. 2,500
► Rs. 2,800
► Rs.18, 800
Which of the following statement is TRUE about the positive working
capital of a company?
► It shows sound position of a company
► It shows that company has sufficient current assets to meet current
liabilities
► It shows that current assets are greater than current liabilities
Cost of Goods Sold = ?
► Beginning inventory + Purchases – Work in Process
► Beginning inventory + Purchases - Sales
► Beginning inventory + Purchases - Ending inventory
► Ending inventory + Purchases - Beginning Inventory
Under the straight line method of depreciation:
► Amount of depreciation increases every year
► Amount of depreciation remains constant for every year
► Amount of depreciation decreases every year
Consider the following inventory record:
Date Item Quantity Cost/Unit Total
2007Jan. 2 Opening 100 Rs.18.00 Rs.1,800
inventory
Mar. 4 Purchase 400 19.00 7,600
May 8 Purchase 800 20.00 16,000
Nov. 3 Purchase 500 21.00 10,500
Four hundred units are unsold, Use the FIFO method of inventory costing
and determine the value assigned to the 400 units on hand at the end of
the period.
► Rs.7, 500
► Rs.7, 978
► Rs.8, 000
► Rs.8, 400
While adjusting the cash balance of cash book, which of the following is
NOT taken into account.
► Mistakes in the cash book
► Mistakes in the pass book
► Interest credited in the pass book but not entered in cash book
► Interest debited in the pass book but not entered in cash book

Consider the following data:
Particulars Rs.
Assets ?
Owner's equity 1,50,000
Liabilities 1,00,000
► Rs. 49,000
► Rs. 55,000
► Rs. 50,000
► Rs. 2, 50,000 Assets = Liabilities + Owner’s Equity
In accounting accumulated depreciation is:
► Treated as a reserve
► Treated as a contra asset
► Treated as a surplus
► Treated as an expense
When the Bank Statement balance is more than the Cash Book balance,
it is because of:
► Unpresented cheques
► Unrecorded bank charges
► Uncredited cheques
Which of the following is an item of a debtors control account?
► Cash sale
► Credit sales
► Credit purchase
► Cash purchases
Which of the following is shown on credit side of creditors control
account?
► Return inwards
A sum of Rs. 200 written off as bad debt now received credited to the
account of debtor would:
► Increase the net profit by Rs.200
► Decrease the profit by Rs.200
► Remains constant and no effect on net profit
► There is no relation between debtor and profit
Which of the following account(s) will be affected, while rectifying the
error of an amount Rs.200 received from Mr.”P” wrongly credited to
Mr.”Q’s” account?
► Only Cash Account
► Only P’s account
► Only Q’s account
► Both of Mr. P's & Mr.Q's Account
When one or both aspects of a transaction are recorded in the wrong
class or category of account, this is called:
(Then there are errors in which an entry is recorded in the wrong class of
account. For example a purchase of fixed asset, say, a vehicle is recorded
in an expense account. These errors are called ERRORS OF
PRINCIPLE.)
Consider the following data and identify the amount which will be
shown in profit & loss account.
Particulars Rs.
Bad debts 1,600
Provision for doubtful debts 2,000
(old)
Current year’s provision (new) 1,000
► Rs. 600
► Rs. 1,600
► Rs. 2,000
► Rs. 2,600
Consider the following data and identify the amount which will be
deducted from Sundry Debtors in Balance Sheet.
Particulars Rs.
Bad debts (from trial balance) 1,600
Provision for doubtful debts 2,000
(old)
► Rs. 600
► Rs. 1,000
► Rs. 2,000
► Rs. 2,600

Which of the following is NOT an item of cost of goods sold statement?
► Purchase of raw material
► Any tax/freight paid on purchases
► Salaries paid to accountant
► Any expense incurred on carriage/transportation of raw material
purchased items
Wages paid to laborers working in the manufacturing department is
treated as an expense of:
► Administrative expenses
► Selling expenses
► Marketing expenses
► Cost of goods sold
Which of the following would NOT be considered as a component of
'cost' of stock?
► Import duties
► Purchase price
Consider the following table:
Financial statement item Classification
A. Inventory Current asset
B. Tangible assets Non-current asset
C. Accrued expenses Current asset
D. Bonds payable Long-term
liabilities
Identify the row above, showing an INCORRECT financial-statement
classification?
► Row A
► Row B
► Row C
► Row D
Which of the following is NOT an operating expense?
► Salaries and wages expense
► Rent expense
► Depreciation expense
The Balance Sheet item that represents the resources invested by the
owner is known as:
► Accounts Receivable
► Cash
► Note Payable
► Owner's Equity
Which account is increased with a debit and decreased with a credit?
► Cash
► Accounts Payable
► Contributed Capital
► Retained Earnings
Which of the following is/are TRUE about the sole trader form of
business?
► Sole traders do not need to consult accountants
► Sole traders must register the name of their business with the
Registrar of Companies
► A sole trader is liable to pay income tax on his/her earnings

Which of the following account is affected from the Drawings of cash in
sole-proprietorship business?
► Capital account
► Shareholder account
► Liability account
► Expense account

Which of the following is CORRECT if depreciation is given in trial
balance?
► All of the given options are correct
► It means depreciation has already been deducted from concerned
asset account
► It will be shown as an expense in income statement only
► It will not be deducted from concerned asset in Balance Sheet

Which of the following statement is TRUE about the Accounts
receivable?
► Accounts receivable arises when a company buys goods or
services from another party on credit
► Accounts receivable is a miscellaneous category that may include
loans to employees
► Accounts receivable are more formal than notes receivable
► Accounts receivable are often called trade receivables
The Joint Stock Company is formed under the Companies Ordinance:
► 1984
► I884
► 1948
► 1965

The amount received; in excess of the face value of the shares is
transferred to which of the following?
► Share capital account
► Right share
► Share premium account
► Share holder account
Preliminary Expenses of the company may write off against:
► Debtors control account
► Creditor control account

The statement of changes in equity basically shows the movement of:
► share capital during the year
► Capital reserves during the year
► Revenue Reserves during the year

Rs.
Gross profit 50,000
Sales 250, 000
► Rs. 8,000
► Rs. 92,000
► Rs. 62,500
► Rs. 300,000

If company has distributable profit is Rs. 4, 90,000. Profit sharing share
ratio of Mr. A, Mr. B and Mr. C is 2:3:5 respectively what will be the
Profit share for Mr. C in distributable profit.
► Rs. 98,000
► Rs. 1, 47,000
► Rs. 2, 45,000
► Rs. 3, 43,000
Mr.” A” sold goods for Rs. 300,000 to Mr. “B”, Rs. 300,000 will be
treated as _____________ for business of Mr. "A".
► Revenue
► Net profit
► Gross profit
► Operating profit

What would be the value of conversion cost, if the cost of material
consumed during the month is Rs. 5,000, labor cost incurred is Rs. 2,000
and the factory over head cost is Rs. 1,000?
► Rs. 3,000
► Rs. 8,000
► Rs. 7,000
► Rs. 5,000

Mr. A provided the following information from his books of accounts at
the end of the month.
Particulars Rs.
Cash 100
Accounts Receivable 500
Accounts
Payable 200
Bank
Loans 1,000
Based on the information provided, what are Mr. A’s total
liabilities?
► Rs.200
► Rs. 900
► Rs. 1,200
► Rs. 1,700
When we close bad debt account, which of the following account is
debited?
► Bad debt account
► Debtor account
► Creditor account

Mr. Ali’s bank book shows a debit balance of Rs. 36,000. He deposited a
cheque of Rs.15,000 but not yet collected by the bank. What will be the
balance of bank statement?
► Rs. 21,000
► Rs. 51,000
► Rs. 36,000
► Rs. 15,000
Suppose a firm has 100 debtors, and each of them owes exactly Rs.150 at
the start of June. During June each debtor has paid-off exactly Rs.100 on
their account, either by cash or by cheque. What should be the revised
total debtors figure?
► Rs. 5,000
► Rs. 9,850
► Rs. 25,000
► Rs. 14,900

We usually allow the customer to deduct a certain amount from the
invoice value for prompt payment. In doing so we are granting a:
► Commission
► Allowance
► Discount
► Rebate

The valuation of closing stock is at:
► Cost price
► Market price
► Cost or market price, whichever is lower
► Cost or market price, whichever is higher

Adjusting costs are reported as:
► Revenues
► Expenses
► Assets
► Net Income

Which of the following is also affected when an adjusting entry is passed
to accrue an incurred expense?
► Total assets
► Current assets
► Total income

Which of the following is known as an asset account?
► Gains
► Prepaid insurance
► Unearned revenue
► Accounts payable

Mr. A & B entered into a partnership with an equal share in profit or
loss. The agreement provides that Mr. A will receive Rs.10,000 and Mr.
B will receive Rs.8,000 as salary allowance. The net income for the year
is Rs.85,000. What will be the total share of Mr. B?
► Rs.52,500
► Rs.42,500
► Rs.41,500
► Rs.50,500

For which of the following share premium can not be utilized?
► To write off preliminary expenses
► To meet the expenses of issue of shares
► To issue bonus shares
Which of the following capital is offered to the general public?
► Issued capital
► Reserve capital
Which of the following is known as the charter of the company?
► Prospectus
► Memorandum of association

Statement of cash flows helps the stakeholders to assess:
► Ability to pay cash dividends in the future
► The ability to generate future cash flows
► The liquidity of the business

How bad debts & provision for doubtful debts (new and old) are
treated in profit and loss account.

You are required to pass rectifying entries of the following errors:
1. Received cash Rs. 500 from Mr. "B" entered as Rs. 300 in the
cash book.
2. A cash sale of Rs. 600 has completely omitted to be recorded
in the books.
3. Goods worth Rs. 200 were returned to Mr. Kamran but no
entry was passed in the books.
The face value of the share of ABC public limited company is Rs.10. the
share is sold at Rs.15. total shares traded in the market are 50,000. What
will be the amount of share premium received and discuss for what it will
be utilized?
On 31st December, 2006, a merchant has to receive Rs. 50,000 from
sundry debtors and creates provision of 5 percent on this amount for
doubtful debts. Actual bad debts during the year 2007 were Rs.1, 400.
The debtors on 31st December, 2007, are Rs. 40,000 on which he again
creates provision of 5 % for doubtful debts. During 2008 actual bad debts
are Rs. 600 and the debtors at the end of 2008 totalled Rs. 25,000, on
which a reserve a reserve of 5 % for doubtful debts is required to be
maintained.
Required: Prepare provision for doubtful debts account with the help of
given data.
The following Trial balance is taken out from the books of Rahman &
Sons as on 31st December, 2008.
Dr. Cr.
Rs. Rs.
Sales 204,000
Capital 120,000
Bank overdraft 103,560
Sundry Creditors 120,000
Opening Stock 60,400
Purchases 231,600
Sundry Debtors 109,660
Returns Inwards 3,640
General Expenses 6,980
Plant 22,620
Wages & Salaries 16,740
Building 50,000
Cash in Hand 680
Cash at bank 8,720
Drawings 16,960
Motive Power 2,300
Dock &clearing
Charges 1,300
Coal, Gas, Water 1,700
Salaries 9,820
Interest on O/D 4,440
Rent rates Taxes 1,400
Discount Allowed 2,000
Interest received 3,400
550,960 550,960
Requirement:
Prepare The Trading and Profit & Loss account of the business for the
year ended. Closing Stock is valued at Rs.40, 000.
Paper No:37
Solved by Chanda Rehman & Abr & nomi chawal
Fall 2009
Ref No: 1195799
Time: 120 min
Marks: 87
Shares for which amount is paid by public are called ________ shares.
► Paid up
► Authorized
► Bonus shares
► All are correct options

Term "Credit" means_______ by the business.
► Receiving of benefits
► It has no effect on business
► Providing of benefits
► It depends upon items

Which of the following is used to record financial transactions in chronological (day-
to-day) order?
► Voucher
► General Journal
► General Ledger
► Trial balance

Which of the following is CORRECT about the flow of recording a transaction?
► Occurrence of event – voucher—Journal—Ledger—Trial Balance—profit and

loss account—Balance Sheet
► Occurrence of event—Journal – voucher —Ledger—Trial Balance—profit

and loss account—Balance Sheet
► Occurrence of event—Ledger – voucher—Journal—Trial Balance—profit and

► Occurrence of event—Trial Balance – voucher—Journal—Ledger—profit and


In an account, if credit side < debit side then the balance is known as:
► Negative Balance
► Debit Balance
► Positive Balance
► Credit Balance

Which one of the following is a type of General Ledger?
► Book of original entry

► ‘T’ Account
► Source document
► Day book

Which of the following is NOT considered a part of financial statements?
► General Ledger
► Balance Sheet
► Profit and Loss Account

The difference between current Assets and current liabilities is known as:
► Working capital
► Opening stock
► Closing stock
► Owner’s equity

If the Company ABC has current assets Rs. 100,000, current liabilities Rs. 75,000
and fixed assets Rs. 200,000, what would be the value of working capital?
► Rs. 25,000
► Rs. 1, 00,000
► Rs. 1, 75,000
► Rs. 3, 00,000

If, Cost of machine = Rs.400, 000
Useful life = 5 years
Residual value = Rs.25, 000
The depreciation of machine per year using straight line method is?
► Rs. 160,000
► Rs. 96,000
► Rs. 75,000
► Rs. 57,600

The cost of moving plant and machinery to a new site will be treated as:
► Revenue expense
► Capital expense
► Administrative expense
► Operating expense

Which of the following account balance is shown on credit side of Trial Balance? (It
is assumed that all account balances are shown on normal balance)
► Cash account
► Furniture account
► Vehicle account
► Capital account

Find out the missing value of an Accounting Equation with the help of given data:
Total Assets Rs. 34,500

Accounts payable Rs. 1, 000
Other liabilities Rs. 11,500
► Rs. 22,000 owner’s equity

► Rs. 23, 000 owner’s equity

Particulars Rs.
Assets ?
► Rs. 49,000
► Rs. 55,000
► Rs. 50,000
► Rs. 2, 50,000

Particulars Rs.
Opening written down value of machine Rs. 2,00,000
Cost of new machine purchased during the year Rs. 50,000
Depreciation during the year Rs. 25,000
Closing written down value (WDV) of machines ?
► Rs. 2, 25,000
► Rs. 2, 50,000
► Rs. 2, 75,000
► Rs. 75,000

A debit balance in the Bank Statement indicates:
► Cash at bank
► Bank overdraft
► Overpayment to creditors
► Cash in hand

Which of the following best describes unpresented cheques?
► Cheques received on behalf of the business by the bank

► Cheques drawn but yet to be recorded in the bank records
► Cheques issued by the bank not recorded in business records
► Cheques received but yet to be recorded in the bank records

Consider the following data and identify the amount which will be shown in profit &
loss account.
Particulars Rs.
Bad debts 3,600
Provision for doubtful debts (old) 6,000
► Rs. (5,100)
► Rs. 5,100
► Rs. (900)
► Rs. 900

It is supposed that on 31st December, 2007, the sundry debtors are amounted to Rs.
40,000. On the basis of past experience, it is estimated that 5 % of the sundry debtors
are doubtful. Actual bad debts are Rs. 1600. What amount of new provision for
doubtful debts will be credited in profit & loss account.
► Rs. 3,600
► Rs. 2,000
► Rs. 1,600
► Rs. 400

Following information are extracted from books of Mr. XYZ
Particulars Rs.
Closing value of stock 40,000
Bad Debts (Given in trial balance) 500
Old provisions (Given in trial balance) 800
Sundry Debtors (Given in trial balance) 44,500
Provision for doubtful debts @ 5%
Which amount of new provision will be deducted from Sundry Debtors ?
► Rs. 2,225
► Rs. 2,525
► Rs. 1,925
► Rs. 3,025

It is supposed that on 31-12-2007, the sundry debtors are amounted to Rs. 40,000. On
the basis of past experience, it is estimated that 5 % of the sundry debtors are
doubtful. It is also suppose that during the year 2008 actual bad debts were Rs. 1,600.
What entry will pass to create provision for doubtful debts?
► Profit & Loss a/c Rs. 2,000 (Dr) & Provision for doubtful debts a/c Rs. 2,000
(Cr)
► Provision for doubtful debts a/c Rs. 2,000 (Dr) & Profit & Loss a/c Rs. 2,000
(Cr)
(Cr)
(Cr)

► Cash sale
► Credit sales
► Credit purchase
► Cash purchases

Which of the following entry is passed to record discount allowed in control account?
► Discount Allowed (Dr) and Debtors Control A/c (Cr)

► Discount Allowed (Dr) and Debtors A/c (Cr)
► Debtors Control A/c (Dr) and Discount Allowed (Cr)
► Debtors A/c (Dr) and Discount Allowed (Cr)

Transaction that has been completely forgotten to enter is called:
Which of the following account will be credited when a typewriter is sold that has
been used in the office?
► Cash Account
► Sales Account
► Purchase Account
► Office Equipment Account

Which of the following item must be recorded in the adjusted Cash Book in order to
bring it in line with the entries in the Bank Statement?
► Bank charges

40,000. On the basis of past experience, it is estimated that 10% of the sundry debtors
doubtful debts will be deducted from Sundry debtors?
► Rs. 3,600
► Rs. 4,000
► Rs. 1,600
► Rs. 2, 400

Consider the following table:
Financial statement item Classification

A. Inventory Current asset
B. Tangible assets Non-current asset
C. Accrued expenses Current asset
D. Bonds payable Long-term liabilities
Identify the row above, showing an INCORRECT financial-statement classification?

► Row A
► Row B
► Row C
► Row D

Which financial statement show what a business owes at a particular point in time?
► A cash flow statement

► The bank statement for the business
► A balance sheet
► A statement of retained earnings

Which of the following account is affected from the Drawings of cash in sole-
proprietorship business?
► Capital account
► Expense account

Capital account of sole proprietors is affected by which of the following items?
a. Profit & Loss account
b. Drawings account
c. Balances of capital account
► a,b
► b,c
► a,c
► a,b,c

► Balance sheet only

Fixed Asset (WDV) + ___________ = Total assets Employed
► Working capital
► Total assets
► Current assets

A, B, C are partners. Their profit sharing ratio is equal. Capital balance on July 1st of
Partner A --- Rs. 40,000 Partner B --- Rs. 30,000 and Partner C--- Rs. 20,000.Their
private property of Partner A is Rs.15,000, Partner B is Rs. 7,000 and Partner C is Rs.
1,500. What is the level of their liabilities under the partnership firm?
► Partner A—Rs. 40,000, Partner B---- Rs. 30,000, Partner C – 20,000

Share premium account is used for what?
► Write off Preliminary Expenses of the company.
► Write off the balance amount, in issuing shares on discount.
► Issue fully paid Bonus Shares.

Which of the following is the most important document of the company?
► Memorandum of Association
► Articles of Association
► Prospectus
► Annual Report

Which of the following documents contains rules and regulations for internal
management of the company?
► Prospectus
► Statutory Declaration

A firm may earn profit during an accounting period but have less money in the bank
at the end of the period then it had at the beginning. Which of the followings, on its
own, could explain this?
► Not paying invoices received from creditors

► The sale of fixed assets during the period
► An increase in trade debtors over the course of the period
► An increase in the depreciation charge relative to the previous accounting
period

Which of the following statement in NOT TRUE about the limited company form of
business?
► The limited company form of business allows ownership of the business to be

spread amongst many people
► Shareholders can appoint professionals
► Shareholders are personally liable for all the liabilities incurred by the
business
► Regular filing of information about the affairs of the company is a legal
requirement

Which of the following ratio tells about “How a company would repays its loans”
► Mark up cover ratio

► Acid test ratio
► Current ratio
► Debt Equity ratio

If Cost of asset=Rs. 100,000, Residual Value (RV) = Rs. 20,000 and Life = 3 years,
what is the depreciation rate under reducing balance method?
► 10%
► 22%
► 42%
► 52%

Mr.” A” sold goods for Rs. 300,000 to Mr. “B”, Rs. 300,000 will be treated as
_____________ for business of Mr. "A".
► Revenue
► Net profit
► Gross profit

An uncollectible account receivable is also termed as:
► Asset
► Uncollectible asset
► Uncollectible accounts expense

Payment is made of a company’s purchases on credit, which of the following is
correct:
► Debit stock account and credit creditors account
► Debit creditors account and credit cash account
► Debit cash account and credit creditors account
► Debit stock account and credit cash account

ABC company makes payment of Rs.50,000 to Mr. Ali Zafar, who is a debtor, is
wrongly recorded in the account of Zafar Ali. The error is classified as:

Deferred revenues will become revenue when they are:
► Realized
► Earned
► Incurred
► Paid

The weekly or biweekly compensation received by hourly-paid employees is called:
► Salary
► Wages
► Income
► Profit

Interest expenses of Epler Corporation shows a debit balance of Rs.200 in its
unadjusted trial balance and Rs.250 in adjusted trial balance. Which of the following
account will be credited in adjusting entry?
► Interest payable
► Prepaid interest
► Interest paid

Insurance premiums paid in advance but not yet expired are reported in which of the
following account?
► Insurance payable
► Advance payment account
► Insurance expense

Dillon Company sold marketable securities Costing Rs.60,000 for Rs.72,000 cash. In
the company’s income statement and statement of cash flows, respectively, this will
appear as:
► A Rs.72,000 gain and a Rs.6,000 cash receipt
► A Rs.72,000 sale and a Rs.72,000 cash receipt

Mr. A & B entered into a partnership with an equal share in profit or loss. The
agreement provides that Mr. A will receive Rs.10,000 and Mr. B will receive
Rs.8,000 as salary allowance. The net income for the year is Rs.85,000. What will be
the total share of Mr. B?
► Rs.52,500
► Rs.42,500
► Rs.41,500
► Rs.50,500

Which of the following is quoted company?
► Private Limited Company
► Listed company
► Non Listed Company

Which of the following is one of the major factors affecting the market value of a
company’s shares?
► Current ratio
► Earning per share
► Return on investment
► Return on asset

You are required to pass rectifying entries of the following errors:
1. Sales of old furniture has been credited to sales account for Rs. 200.
2. Salaries paid Rs. 20,000 were wrongly debited to rent a/c.

3.
Discuss share premium with an example.
4. If dividend is announced in percentage by the directors of the company
how it will be calculated.

ABC Company purchased goods of Rs.150,000 on credit from which goods of
Rs.20,000 were defected and returned. Company received 2% discount at the time of
payment from the supplier.
Required:
5. What will be the amount
of discount received by the company?
6. Also show the journal
entries

The following Trial balance is taken out from the books of Rahman & Sons as on
31st December, 2008.
Dr. Cr.
Rs. Rs.
Sales 204,000
Capital 120,000
Bank overdraft 103,560
Sundry Creditors 120,000
Opening Stock 60,400
Purchases 231,600
Sundry Debtors 109,660
Returns Inwards 3,640
General Expenses 6,980
Plant 22,620
Wages & Salaries 16,740
Building 50,000
Cash in Hand 680
Cash at bank 8,720
Drawings 16,960
Motive Power 2,300
Dock &clearing
Charges 1,300
Coal, Gas, Water 1,700
Salaries 9,820
Interest on O/D 4,440
Rent rates Taxes 1,400
Discount Allowed 2,000
Interest received 3,400
550,960 550,960
Requirement:
Prepare The Trading and Profit & Loss account of the business for the year ended.
Closing Stock is valued at Rs.40, 000.

Adil and Bilal make up their accounts annually to 31st December and have been in
partnership for some years. Interest is charged on drawings at the rate of 10% per
annum and is allowed on capitals also at 10% per annum. Bilal receives salary Rs.
4,000 per annum. The balance of profits or losses is to be shared: Adil 2/3, Bilal 1/3.
At 1st January, 2007, the following balances appeared in the firm’s books:
Capital account: Adil Rs. 10,000

Bilal Rs. 6,000
Current Account: Adil Rs. 5,000 (Cr)
Bilal Rs. 3,000 (Cr)
The net profit for that year was amounted to Rs. 15,000. At that date the balances on
partners’ drawings accounts were: Adil Rs. 6,000 and Bilal Rs. 5,000. It is assumed
that no capital introduced during the year
Required:
(1) The profit & Loss Appropriation account of the partnership for the year ended 31st
December, 2007.
(2) Show Partners’ current accounts and capital accounts in Balance sheet of Adil and
Bilal as on 31st December 2007
Paper No:38
Solved by Chanda Rehman & ABr & Anjum
Fall 2009

► Paid up
► Authorized
► Bonus shares

Which of the following account/s will be affected under the rule of accrual
accounting, when furniture is purchased on cash?

► Only Furniture Account
► Cash & Furniture Account
► Only Purchases Account

A book, in which receipts and payments are recorded, is known as:
► Pass Book
► Cash Book
► Purchase Book
► Sales Book

specific date?

► Balance Sheet

Which of the following is NOT an example of intangible assets?
► Franchise rights
► Goodwill
► Patents
► Land

Which of the following account will be credited in the books of ABC Co. Ltd., if
furniture is purchased on cash?
► Cash account
► Business account
► Bank account
If the working capital and the current assets of company XYZ are Rs. 5,000 and
Rs.15,000 respectively, calculate the current liabilities.
► Rs. 5,000
► Rs. 10,000
► Rs. 15,000
► Rs. 20,000

Cost of Goods Sold = ?
► Beginning inventory + Purchases – Work in Process

► Beginning inventory + Purchases - Sales
► Beginning inventory + Purchases - Ending inventory
► Ending inventory + Purchases - Beginning Inventory

The total of all costs incurred to convert raw material into finished goods is known
as:
► Prime cost
► Conversion cost
► Sunk cost

In cost of goods sold statement the ‘cost of goods manufactured’ is equal to:
► Total factory cost + Opening work in process + Ending work in process

► Total factory cost + Opening work in process – Ending work in process
► Total factory cost - Opening work in process + Ending work in process
► Ending work in process +Total factory cost – Opening work in process

Fixed assets are also called:
► Depreciable assets
► Current assets
► Liquid assets
► Floating assets

2007Jan. 2 Opening inventory 100 Rs.18.00 Rs.1,800
Mar. 4 Purchase 400 19.00 7,600
May 8 Purchase 800 20.00 16,000
Nov. 3 Purchase 500 21.00 10,500
Four hundred units are unsold, Use the FIFO method of inventory costing and
determine the value assigned to the 400 units on hand at the end of the period.
► Rs.7, 500
► Rs.7, 978
► Rs.8, 000
► Rs.8, 400

Increase in an asset is recorded on the:


The allocation of the cost of a tangible plant asset to expense in the periods, in which
services are received from the asset, is termed as:
► Appreciation
► Depreciation
► Fluctuation

Particulars Rs.
Assets ?
► Rs. 49,000
► Rs. 55,000
► Rs. 50,000
► Rs. 2, 50,000

Particulars Rs.
Assets 8,20,000
Liabilities ?
► Rs. 1, 98,000
► Rs. 49,000
► Rs. 55,000
► Rs. 4, 40,000

A debit balance in the Bank Statement indicates:
► Cash at bank
► Bank overdraft
► Overpayment to creditors
► Cash in hand

Bank Statement is a record of transactions between the bank and the holder of:
► A foreign currency account

► A current account
► A saving account

Consider the following data and identify the amount which will be deducted from
Sundry Debtors in Balance Sheet.
Particulars Rs.
Current year’s provision (new) 800
► Rs. 400
► Rs. 800
► Rs. 2,000
► Rs. 2,400

(Cr)
(Cr)
(Cr)
(Cr)

Which of the following is/are the item/s of a Control Account?
► Credit sale only
► Cash sale only
► Credit purchase only
► Both Credit sales and Credit purchase

Control account tells about:
► Details of loyal clients

► Customer attitude of payments
► Complete history of transactions of business clients
► Picture collectively instead of individually

Which of the following account(s) will be affected, while rectifying the error of
purchases return of Rs. 200 to “Mr.P” mistakenly entered in sales book?
► P’s account
► Purchases return account
► Sales account
► Purchases returns account and sales account

Which of the following account(s) will be affected, while rectifying the error of a
purchase return of Rs.200 to Mr. “A” entered in sales book instead of purchase return
book?
► A’s account only

► Sales account only
► Purchase returns account and sales account
► Purchases account only

Which of the following account(s) will be affected, while rectifying the error of an
amount Rs.200 received from Mr.”P” wrongly credited to Mr.”Q’s” account?

Which of the following entry will be recorded, if a cheque deposited is dishonored by
bank?
► Bank Account (Dr.) and Debtor's Account (Cr.)

► Debtor's Account (Dr.) and Bank Account (Cr.)
► Dishonored Cheque Account (Dr.) and Bank Account (Cr.)
► Creditor's Account (Dr.) and Bank Account (Cr.)

Particulars Rs.
Write off Bad debts (given in adjustments) 2,400
Sundry Debtors (given in trial balance) 33,200
Provision is created on Debtors at 10%
Identify the Total amount deducted from Sundry debtors.
► Rs. 460
► Rs. 2,400
► Rs. 3,080
► Rs. 5,480

Particulars Rs.
Provision for doubtful debts be increases by 5%
What will be the amount of new provision ?
► Rs. 2,225
► Rs. 2,425
► Rs. 1,925
► Rs. 3,025

Particulars Rs.
If the Provision for doubtful debts has been increased by 5%, which amount of new
provision will be shown in Profit & Loss Account?
► Rs. 2,240
► Rs. 2,425
► Rs. 1,925
► Rs. 3,025

Wages paid to laborers working in the manufacturing department is treated as an
expense of:
► Cost of goods sold

Which of the following represents the relationship between persons who have agreed
to share the profit of business carried on by all or any of them acting for all?
► Sole-ownership
► Public limited company
► Partnership

In Income Statement, both beginning inventory and ending inventory appear in the
section of:
► Cost of good sold
► Indirect cost
► Selling cost
► Factory over head cost

If dividend is proposed by directors of the company @ 30% for the year, it will be
calculated on:
► Capital Reserve
► Authorized share capital
► Paid up share capital
► Share premium

A company is said to have been registered when:
► It gets certificate of incorporation from registrar of Companies

► It gets certificate of commencement of business from registrar of Companies
► It actually starts its business
► It filed with the Registrar of Companies articles certain documents, like
memorandum and articles of association

6% Debentures Account Rs. 3, 00,000. What amount of interest on debentures should
be shown in profit and loss account?
► Rs. 6,000
► Rs. 3, 00,000
► Rs. 18,000
► Rs. 3, 18,000

What are the effects on financial statements, if provision for Income Tax to be made
Rs. 12,000 is given in adjustment?
► It will be deducted in Income Statement only

► It will be treated as current liability in balance sheet only
► It will be treated as current asset in balance sheet only
► Both it will be deducted in income statement and it will be treated as
current liability in balance sheet

When the current Ratio is 2: 5 and the amount of Current Liabilities is Rs. 25,000.
What will be the amount of Current Assets?
► Rs. 62,500
► Rs. 12,500
► Rs. 10,000 (25000*2/5 = 10000)
► Cannot be calculated with the help of given data

Prepaid interest given in the Trial Balance will be treated as a (an):
► Asset
► Liability
► Revenue

Which one of the following is another name of carrying cost of an asset?
► Book Value
► Residual Value
► Fair Value
► Break up Value

An overdraft will appear as:
► A debit balance in both the bank statement and the cash book
► A credit balance in the bank statement but as a debit balance in the cash book
► A credit balance in the cash book but as a debit balance in the bank
statement
► A credit balance in both the bank statement and the cash book
Recovery of bad debts is treated as:
► Profit
► Revenue
► Expense
► Asset

The amount owed by debtors at the end of a month appears on the_________ side of
the control account.
► Right side or credit

The amount owed by debtors at the start of a month appears on the ___________ side
of the individual debtors account.
► Right side or credit

Ahmad Industries want to make payment to its supplier in the form of a pay order.
The bank deducted Rs.160 as service charges without its knowledge. The error is
known as:

Which of the given statement is CORRECT if both sides of trial balance are equal?
► It is proof that no transaction was completely omitted from the ledger during
the posting process
► It is proof that the correct debit or credit balance has been computed for
each account
► It is proof that the ledger is in balance
► It is proof that transactions have been correctly analyzed and recorded in the
proper accounts

Which of the following justifies when profit is earned?
► Cash Inflow exceeds Cash Outflow

In a partnership of Mr. A and Mr. B, the share of profit of Mr. A is Rs.75,375 and the
share of profit of Mr. B is Rs. 25,125. What will be the ratio of their share?
► 1:2
► 2:3
► 3:2
► 3:1

Income tax expense of Eden Corporation shows a debit balance of Rs.7,000 in its
unadjusted trial balance and Rs.7,600 in adjusted trial balance. Which of the
following account will be credited in adjusting entry?
► Income tax payable
► Prepaid income tax
► Income tax expense
► Income tax paid

Sanders Construction sold a plant asset that originally cost Rs.80,000 for Rs.52,000
cash. If Sanders correctly reports a Rs.5,000 gain on this sale, the accumulated
depreciation on the asset at the date of sale must have been:
► Rs.23,000
► Rs.28,000
► Rs.33,000
► Some other amount

Which of the following is responsible to register the companies?
► State Bank of Pakistan
► Security and Exchange Commission of Pakistan
► Supreme Court
► Stock Exchange

Which of the following can be utilized to set off any loss on revaluation?
► Capital reserve
► General reserve

Which of the following is known as the charter of the company?
► Prospectus
► Memorandum of association


Short term investments in marketable securities and treasury bills that will mature
within ninety days from the date of acquisition, must be classified as:
► Receivables
► Receipts from Capital
► Current and intangible assets
► Cash equivalents

Give four reasons, why capital might change.
1. The entrance or exit of some (new) partner

2. Withdraw by partner(s)
3. Additional Investment by the partner(s)
4. Profit/Loss

Write down the five advantages of Limited Company.
1. It is a legal entity created by law and hence has its own recognition, good will
and brand equity etc.
2. It is a wide form of business and hence a formal approach for various
partners/investors to come and work for the same objectives in an organized
form.
3. Liability limited to company assets only. Investors/partners do not personally
liable for any loss or in state of bankrupty.
4. Being a legal entity, easy to get loans or gather funds from public (for public
limited companies only) or financial institutes.
5. Being a legal entity, it can enjoy more opportunities for mega projects and
trade/operations opportunities in international markets on its on behalf.

ABC Company purchased goods of Rs.150,000 on credit from which goods of
Rs.20,000 were defected and returned. Company received 2% discount at the time of
payment from the supplier.
Required:
What will be the amount of discount received by the company?
Also show the journal entries
Solution:
(A)
Discount Received= (150,000-20,000) x (2/100) = 2600
(B)
Particulars Dr. Cr.
Entry for Purchase
Goods 150,000
A/P 150,000
Entry for Return

A/P 20,000
Goods 20,000
While making Payment (@ 2% discount = 2600)

A/P 130,000
Discount income 2,600
Cash 127,400

State clearly how you will deal with Bad Debts Account, Provision for Bad Debts
Account, Profit & Loss account and Balance Sheet in the following case:
The items appearing in the trial balance are bad debts Rs. 300, provision for bad debts
Rs. 350 and sundry debtors Rs. 12,000. It is required to increase the provision for bad
debts to 5% on sundry debtors.

The unadjusted and adjusted trial balances for Tinker Corporation on December 31,
2007, are shown below:
Tinker Corporation
Trial Balances
December 31, 2007
Unadjusted Adjusted
Debit Credit Debit Credit
Rs. Rs. Rs. Rs.
Cash 35,200 35,200
Accounts receivable 29,120 29,120
Unexpired insurance 1,200 600
Prepaid rent 5,400 5,400
Office supplies 680 380
Equipment 60,000 60,000
Accumulated depreciation: equipment 49,000 50,000
Accounts payable 900 900
Notes payable 5,000 5,000
Interest payable 200 200
Salaries payable - 2,100
Income taxes payable 1,570 1,570
Unearned revenue 6,800 3,800
Capital stock 25,000 25,000
Retained earnings 30,000 30,000
Fees earned 91,530 94,530
Advertising expense 1,500 1,500
Insurance expense 6,600 7,200
Rent expense 19,800 19,800
Office supplies expense 1,200 1,500
Repairs expense 4,800 4,800
Depreciation expense: equipment 11,000 12,000
Salaries expense 26,300 28,400
Interest expense 200 200
Income taxes expense 7,000 7,000
210,000 210,000 213,100 213,100
Journalize the five adjusting entries that the company made on December 31, 2007.
Solution:
Date Particular Dr. Cr.

Dec 31 Insurance expense 600
to Unexpired insurance 600
Dec 31 Office Supplies Expense 300

to Office Supplies 300
Dec 31 Depreciation Expense-Equip. 1000

to Accumulated depreciation-Equip. 1000
Dec 31 Salaries Expense 2100

to Salaries Payable 2100
Dec 31 Unearned revenue 3000

to Fee Earned 3000
Paper no 39
Solved by Abr,Nomi & Chanda Rehman
Fall 2009
Ref No: 1195888
Time: 120 min
Marks: 8
► Paid up
► Authorized
► Bonus shares

The area of accounting concerned with reporting financial information to the
interested parties is called:
► Cost Accounting
► Financial Accounting
► Management Accounting
► Tax Accounting

An organization operating with the objective of making profit from the sale of goods
or services is called:
► Transaction
► Business
► Society
► Trust

Which of the following essentials are shown in Bank Book?
(1) Date of transaction
(2) Narration of transaction
(3) Cheque number
► (1) & (2) only

► (2) & (3) only
► (1) & (3) only
► (1), (2) & (3)

Which of the following summarizes the cash movements during a specified period?
► Trading account
► Profit & Loss account
► Receipts & Payments account
► Balance Sheet

What type of expenses are paid out of Gross Profit?
► Selling Expenses
► General Expenses
► Financial Expenses
Following are the inventories of Manufacturing Concern EXCEPT:
► Raw material
► Work in process
► Finished goods
► Merchandise inventory

In cost of goods sold statement, the ‘cost of material consumed’ is equal to:
► Opening raw material inventory + Purchases – Ending raw material inventory

► Opening raw material inventory - Purchases + Ending raw material inventory
► Ending raw material inventory + Opening raw material inventory - Purchases
► Ending raw material inventory + Opening raw material inventory + Purchases

If, Cost of machine = Rs.400, 000
Useful life = 5 years
Residual value = Rs.25, 000
The depreciation of machine per year using straight line method is?
► Rs. 160,000
► Rs. 96,000
► Rs. 75,000
► Rs. 57,600

The Primary objective of providing depreciation is:
► To calculate true profit

► To show the asset on market value
► To reduce tax Burdon
► To provide funds for replacement
Consider the following:
Beginning inventory 10 units @ Rs. 10 per unit

First purchase 35 units @ Rs. 11 per unit
Second purchase 40 units @ Rs. 12 per unit
Third purchase 20 units @ Rs. 13 per unit
Eighty-five units were sold, what is the value of the ending inventory using the FIFO
method of inventory costing?
► Rs.260
► Rs.232
► Rs.284
► Rs.268
Accounting is the language of:
► Business
► School
► Proprietor
► Management

Owner’s equity Rs. 22,500

Total Liabilities Rs. 80, 385
Cash in hand Rs. 1,000
Cash at bank Rs. 2,000
Debtors Rs. 500
► Rs. 1, 02,885 other assets

► Rs. 1, 02,885 other liabilities
► Rs. 99,885 current liabilities
► Rs. 99,385 other assets

A Bank Reconciliation Statement is prepared to:
► Ascertain that the difference between the Cash Book balance and the Bank
Statement balance has been accounted for
► Correct errors in the Cash Book or errors in the Bank Statement
► Amend the balance of the Bank Statement of the firm
► Amend the balance in the Cash Book of the firm

Particulars Rs.
Current year’s provision (new) 800
► Rs. 400
► Rs. 800
► Rs. 2,000
► Rs. 2,400

(Cr)
(Cr)
(Cr)
(Cr)

► Cash sale
► Credit sales
► Credit purchase
► Cash purchases

Which of the following is an item of a creditors control account?
► Cash purchases
► Cash sales
► Credit sales
► Credit purchase

Which of the following is (are) benefit/s of subsidiary ledger accounts to business?
► It tells about customer attitude of payments

► It can be checked against the control account to pick up recording errors
► It tells about the complete history of transactions of business client

Which of the following rectifying entry will be recorded, if sales to Mr. “A” of
Rs.336 have been debited to Mr. “B” account?
► A’s account (Dr.) and B’s account (Cr.)

► B’s account (Dr.) and A’s account (Cr.)
► Sales account (Dr.) and B’s account (cr.)
► B’s account (Dr.) and Sales account (Cr.)

► Bank charges

doubtful debts will be credited in profit & loss account
► Rs. 3,600
► Rs. 4,000
► Rs. 1,600
► Rs. 2, 400

Which of the following is the first phase of the typical operating cycle?
► Sell goods and services to customers

► Purchase goods and services
► Receive cash from customers
► Pay cash to suppliers

Which one of the following is TRUE about provisions?
► It is necessary to prepare for showing true picture of balance sheet

► It is a reduction from assets
► It is prepared for specific purposes

Which of the following is/are NOT shown in balance sheet of sole proprietor?
► Fixed assets
► Current liabilities
► Profit sharing ratio
► Long term assets


Which of the following is (are) NOT example(s) of distributable profit?
► General reserve
► Accumulated profit and loss (credit balance)
► Revaluation reserves
Which of the following is NOT a cash inflow?
► Sale of fixed asset

► Issue of debentures
► Cash from business operation
► Purchase of fixed asset

Which of the following business publishes the Financial Statements?
► Sole-Proprietorship
► Partnership
► Trust

Particulars
Nominal value of each share Rs.10
No of shares issued 10,000 shares
Net profit Rs. 20,000
Divined paid 10%
What is the EPS ?
► Rs. 1.00
► Rs. 2.00
► Rs. 3.00
► Rs. 4.00

When income exceeds expenses in a specific time period is known as:
► Savings
► Net profit
► Gross profit

Which of the following transaction have NO affect on stockholders' equity?
► Purchase of building on credit

► Dividends to stockholders
► Net loss
► Investment in cash by stockholders

In balance sheet fixed assets are shown at:
► Residual value
► Market value
► Fair value
► Written down value (WDV)

Firms charge depreciation each year:
► To ensure that there is enough money in the firm to replace the asset
► To spread the cost of the asset over its working life
► To reduce the profit and thus reduce the dividends they can pay to share
holders
► Because the law states they must be reduced

Which of the following is(are) CORRECT for Doubtful Debt?
► It is shown in balance sheet

► It is a definite loss to the business
► No provision is necessary for it
► All of the given option

Which of the following is not a cause of difference in balances as per pass book and
cash book?
► Error in cash book

► Error in pass book
► Direct deposit
► Un credited cheques

Stock account is debited and creditors account is credited, which of the following is
reflecting the statement?
► Goods returned
► Purchase of goods on credit
► Payment of goods

A bad debt affects the Balance Sheet because it is a (an):
► Liability
► Asset
► Expense
► Income

The financial year of Atif Brothers & Co. is closed on June 30, 2009. Total cash sales
are Rs. 150,000, credit sales are Rs. 180,000 and total receipts are Rs. 250,000. Credit
receipts will be:
► Rs. 150,000
► Rs. 100,000
► Rs. 220,000
► Rs. 280,000

Which of the following statement is correct? If a company fails to record estimated
bad debts expense,
► Net realizable value is understated
► Expenses are understated
► Revenues are understated
► Receivables are understated

In the heading of financial statement, ___________ is not required?
► Title of financial statement
► Name of the person who prepares financial statement
► Period for which financial statement is prepared
► Name of business entity

Sunset tours has Rs.3,500 account receivable from the Del Mar Rotary. On January
20, the Rotary makes a partial payment of Rs.2,100 to Sunset Tours. The journal entry
made on January 20 by Sunset Tours to record this transaction includes:
► A debit to the Cash Received account of Rs. 3,500
► A credit to the Accounts Receivable account of Rs.2,100
► A debit to the Cash account of Rs.1,400
► A debit to the Accounts Receivables account of Rs.1,400

A and B entered in partnership in capital ratio of 2:3. They earned a profit of
Rs.6,600 during the year. What will be the share of profit of Mr. B?
► Rs.1,320
► Rs.2,640
► Rs.3,960
► Rs.6,600

The amount of prepaid insurance that expired in the current accounting period should
be reported as _____________.
► Insurance paid

Unexpired costs are reported as:
► Revenues
► Expenses
► Assets
► Income

Insurance premiums paid in advance but not yet expired are reported in which of the
following account?
► Advance payment account

Profits earned by partnerships compensate the owners for which of the following?
► Personal services rendered to the business
► Capital invested in the business
► Assuming the risks of ownership

Which of the following can be utilized to issue bonus shares?
► Reserves
► Debentures
► Share premium
► Term finance certificate

Which of the following value of the share is authorized by the memorandum of
association?
► Par value
► Face value
► Nominal value

All of the following have an effect on ‘operating activities’ while preparing the
statement of cash flows except:
► Provision for doubtful debts
► Gain or loss on currency exchange rate
► Depreciation charged on fixed asset
► Amount received for disposal of a fixed asset

According to the statement of cash flows following are the examples of investing
activities except:
The financial statement that captures both the current operating result and the
associated changes in the balance sheet is:
► Statement of retained earnings
► Statement of financial position

What is the reason that some short term creditors prefer quick ratio over current ratio
as a measure of short-term liquidity?
► Short operating cycle of the company
► Long operating cycle of the company
► Liquidity is not affected by operating cycle
► It is the creditor’s choice

Differentiate between salaries & wages and wages & salaries? Also mention in
which financial statements are treated

What is bank overdraft? Mention an example for this. Why companies have to
pay mark up on it. Under which head mark up paid on overdraft is shown in
financial statement.

Prepare Bank Reconciliation Statement with the help of given data
Particulars Rs.
Balance as per Bank statement (Cr) 600
Unpresented cheques 1,440
Uncredited cheques 260

The following is the trial balance of Sikander’s Photo Studio, Inc., dated December
31, 2007. You are required to prepare the Profit and Loss account.
Sikander’s Photo Studio, Inc.

Trial balance
December 31, 2007
Cash Rs.171,100
Accounts receivable 9,400
Prepaid studio rent 3,000
Unexpired insurance 7,200
Supplies 500
Equipment 18,000
Accumulated depreciation: equipment Rs.7,200
Notes payable 10,000
Accounts payable 3,200
Salaries payable 4,000
Unearned revenue 8,800
Revenue earned 165,000
Supply expense 3,900
Rent expense 12,000
Insurance expense 1,900
Advertising expense 500
Interest expense 900
338,200 338,200

Internet Consulting Service, Inc., adjusts its accounts every month. Following is the
company’s year end unadjusted trial balance dated December 31, 2007. (Bear in mind
that adjusting entries already have been made for the first 11 months of 2007, but not
for December.)
Internet Consulting Service, Inc.

Unadjusted Trial balance
December 31, 2007
Cash Rs. 49,100 Rs.

Consulting fees receivable 23,400
Prepaid office rent 6,300
Prepaid dues and subscriptions 300
Supplies 600
Equipment 36,000
Accumulated depreciation: equipment 10,200
Notes payable 5,000
Unearned consulting fees 5,950
Dividends 60,000
Consulting fees earned 257,180
Telephone expense 2,550
Rent expense 22,000
Dues and subscriptions expense 560
Supplies expense 1,600
Miscellaneous expenses 4,200
353,030 353,030
Other Data:
1. The useful life of the equipment has been estimated at five years (60 months)
from date of acquisition.
2. Consulting services valued at Rs.2,850 were rendered during December to
clients who had made payment in advance.
3. Salaries earned by employees but not paid as of December 31 amounted
Rs.1,700.
4. An estimate of supplies on hand was made at December 31; the estimated cost
of the unused supplies was Rs.450.
Instructions:
Determine the amounts to be reported in the company’s year end adjusted trial
balance for each of the following accounts:
Consulting fees earned

Salaries expense
Depreciation expense: equipment
Supplies expense
Income tax expense
Paper no 40
Solved by Chanda Rehman & ABr
Spring 2010
Time: 90 min
Marks: 69
Which of the following is correct according to the double entry system of book-
keeping?
► Debit = Credit
► Debit > Credit
► Debit < Credit

An Asset that is NOT physical in nature is called _________.
► Intangible Asset
► Liquid Asset
► Current Asset
► Fixed Asset

Which of the following account balance will be shown on debit side of Trial
Balance? (It is assumed that all account balances are shown on normal balance)
► Cash account
► Vehicle account

Bank Reconciliation Statement is:
► A memorandum statement
► A ledger account
► A part of cash book
► A part of journal

Particulars Rs.
Opening written down value of machine Rs. 2,00,000
Cost of new machine purchased during the year Rs. 50,000
Depreciation during the year Rs. 25,000
Closing written down value (WDV) of machines ?
► Rs. 2, 25,000
► Rs. 2, 50,000
► Rs. 2, 75,000
► Rs. 75,000

Particulars
Rs.
Provision for doubtful debts be increases by 5%
What will be the amount of new provision

?
► Rs. 2,225
► Rs. 2,425
► Rs. 1,925
► Rs. 3,025

Which of the following is a selling expense?
► Interest on deposits
► Any tax/freight is paid on purchases
► General salaries paid to laborers
► Tax & freight paid on sale PG26

Which account is increased with a debit and decreased with a credit?
► Cash
► Accounts Payable

Which of the following journal entry will be recorded, if cash is drawn by a
Proprietor?
► Proprietor’s drawings a/c (Dr.) and Cash a/c (Cr.)
► Cash a/c (Dr.) and Proprietor’s drawings a/c (Cr.)
► Proprietor’s Capital (Dr.) and Proprietor’s drawings a/c (Cr.)
► Proprietor’s drawings (Dr.) and Proprietor’s Capital a/c (Cr.)

When the capitals are fixed, which of the following account will be debited for
drawings made by a partner?
► Individual Partner’s Current Account
► Partner’s Cash Account
► Partner’s Bank Account
► Partners Capital Account

Authorized share capital is also known as:
► Registered capital
► Issued capital
► Paid up capital
► Called up capital

When goods are acquired from the supplier the gross cost of such goods is
recorded in:
► Debtor Account
► Purchases Account
► Factory overhead account
► Sales Account
Which of the following is NOT a cash inflow?
► Sale of fixed asset
► Issue of debentures
► Cash from business operation
► Purchase of fixed asset

In cash flow statements, which of the following would appear as an inflow of
cash?
► The repayments of a bank loan
► Dividend issue in the current year
► Money received as result of selling fixed assets
► The difference between the valuations of old and new fixed assets

In cash flow statements, which of the following would appear as a cash outflow?
► The payments for purchases made during the year
► A decrease in trade debtors over the course of an accounting period
► Money received as a result of issuing new shares

When we close bad debt account, which of the following account is debited?
► Bad debt account
► Debtor account
► Creditor account

Subsidiary ledgers are maintained for:
► Debtors
► Creditors
► Stock

ABC Company received discount on its credit purchases, which of the following
will be credited while entering in journal?
► Cash
► Creditors
► Bank

Mr. Ali’s bank book shows a debit balance of Rs. 36,000. He deposited a cheque
of Rs.15,000 but not yet collected by the bank. What will be the balance of bank
statement?
► Rs. 21,000
► Rs. 51,000
► Rs. 36,000
► Rs. 15,000

Which of the following indicates cash discount received?
► Discount in paying debt earlier
► Discount in receiving debt earlier
► Discount in purchasing huge goods
► Discount in selling huge goods

Mr. A & B entered into a partnership invested Rs.50,000 and Rs.65,000 with an
equal share in profit or loss. Markup on drawings of Mr. A is Rs.1,500 and of
Mr. B is Rs.1,800. The net income for the year is Rs.85,000. What will be the
profit share of Mr. B?
► Rs.42,350
► Rs.44,150
► Rs.41,600
► Rs.40,850

Mr. A & B entered into a partnership invested Rs.50,000 and Rs.65,000 with an
equal share in profit or loss. Markup on drawings of Mr. A is Rs.1,500 and of
Mr. B is Rs.1,800. The net income for the year is Rs.85,000. What will be the
amount of distributable profit?
► Rs.81,700
► Rs.88,300
► Rs.131,700
► Rs.146,700

Which of the following value of the share is authorized by the memorandum of
association?
► Par value
► Face value
► Nominal value

Which of the following statement is not true regarding the objective of statement
of cash flows?
► It is helpful for decision making by management
► It is used for reporting the net profit of the period
► It can be used for estimations for cash flows in future
► It is used to determine the liquidity of the business


According to the statement of cash flows following are the examples of investing
activities except:

The cash book in book-keeping records:
► All cash and credit purchase of goods
► Only cash payments
► All receipts and payments in cash
► All cash and credit sale of goods

What will be the effect of decrease in closing stock on gross profit?
► Gross profit increased
► Gross profit decreased
► No effect on Gross profit
► Gross profit will become positive

If:
· Direct Material Cost is Rs. 20,000
· Direct labour cost is Rs. 10,000
· Manufacturing Cost is Rs. 45,000
Then:
What is the amount of Factory Overhead?
► Rs. 15,000
► Rs. 30,000
► Rs. 35,000
► Rs. 25,000

Which one of the following methods for inventory valuation may overstate the
income during the periods of rising prices?
► Specific Identification Method
► FIFO Method
► LIFO Method
► Weighted Average Method

Which of the following is NOT a method of calculating depreciation?
► Straight Line Method
► Written Down Value Method
► Diminishing Balance Method
► Specific Identification Method

What is the treatment of Depreciation in accounting?
► Written in balance sheet under the head of fixed assets
► Charged to profit and loss account
► Written in balance sheet under the head of current assets
► Written in balance sheet under the head of liabilities

Which of the following is TRUE?
► Gain on revaluation is credited to Revaluation Reserve Account.
► Gain on revaluation is debited to Revaluation Reserve Account.
► Gain on revaluation is credited to Profit & Loss Account.
► Gain on revaluation is debited to Profit & Loss Account.

The loss on the sale of fixed assets is a:
► Normal loss
► Ordinary loss
► Capital loss
► Revenue loss

Which of the following is NOT included in Debtors Control Account?
► Cash sale
► Credit sale
► Bills receivable

If cash sale is the missing figure, it can be ascertained by the construction of:
► Creditors Control Accounts
► Debtors Control Accounts
► Cash Account

Which of the following is/are the Classification of Current Assets?
► Cash Balance
► Loans and Advances
► Bank Balance

Depreciation expense is charged to which of the following head?
► Cost of sales
► It depends on the nature of expense

Inventory is always considered as:
► Current asset
► Current liability
► Long-term asset
► Stockholders' equity
If:
Ø Capital at the start Rs. 100,000
Ø Profit during the year Rs. 50,000
Ø Withdrawal during the year Rs. 25,000
What would be the closing balance of capital?
► Rs. 175,000
► Rs. 150,000
► Rs. 125,000
► Rs. 75,000

Which of the following Legal Documents of a company contain(s) the rules and
regulations framed for the internal management of the company?
► Both Memorandum of Association and Articles of Association
► Prospectus

Which one of the following refers to the allotment of shares to the existing
shareholders by capitalizing the reserves into additional capital?
► Reserve funds
► Accumulated profit
► Right issue
► Bonus issue

When a share having a face value of Rs.100 issued at Rs.90 then which one of
the following options is correct under this situation?
► Share issued at premium
► Share issued at discount
► Share issued at nominal value
► Share issued at market value

Which of the following would be a suitable head for short term advances from
customers in Balance Sheet?
► Current asset
► Intangible asset
► Tangible asset
Question No: 48 ( Marks: 1 ) - Please vu zs choose one

If there is a portion of long term loan of Rs. 30,000 payable in the current
accounting period. Where it will be shown in financial statement?
► Long term liability
► Current asset
► Owner’s equity

Ø Rent expenses Rs. 20,000
Ø Insurance expenses Rs. 30,000
Ø Bad debts Rs. 35,000
In addition rent payable is Rs. 5,000; calculate the amount of operating expenses
to be shown in profit and loss account.

If:
Ø Retain earning at the beginning Rs. 1,000
Ø Dividend paid 500
Ø Retain earning at the end 2,500
Then:
You are required to prepare statement of Retain earnings to find the
amount of Net income

Given the following data:
Purchases Rs. 4,500, Returns outwards Rs.300, Returns inwards Rs.150,
Carriage outwards Rs.830, Carriage inwards Rs.260, Opening stock Rs.935, and
closing stock Rs. 1,100.
What would be the value of the cost of goods sold?

Mr. Bilal is a member of partnership firm. He drew some amounts from the
business on following dates.
Ø July Rs. 2,500
Ø November 1,500
Ø December 3,000
Ø March 5,000
All drawings were made on the 1st day of the month @ rate of 10 %. It is
assumed that financial year starts at July 1st and ends on 30th June.
Required:
Calculate mark up on drawing.

Particulars Rs.
Raw Material - Opening Stock 10,000
Raw Material – Purchases 2,000
Raw Material - Closing Stock 3,000
Packing Material - Opening Stock 4,000
Packing Material – Purchases 5,000
Packing Material - Closing Stock 6,000
Based on the above information you are required to calculate the following:
Ø Cost of Raw Material Consumed
Ø Cost of Packing Material Consumed
Paper no 41
Solved by Chanda Rehman& ABr
Spring 2009
Time: 120 min
Marks: 85
What will be the effect on accounting equation, when payment is made to the creditor
of the business?
► Increase in an asset, increase in owner's equity

► Increase in an asset, increase in a liability
► Decrease in an asset, decrease in owner's equity
► Decrease in an asset, decrease in a liability Correct


► ‘T’ Account Correct
► Source document
► Day book

Which of the following summarizes the cash movements during a specified period?
► Trading account
► Profit & Loss account
► Receipts & Payments account
► Balance Sheet

Which of the following is/are the END product of accounting cycle?
► Financial Statements
► General Journal
► General Ledger
► Voucher

specific date?

► Balance Sheet

► Liquid assets
► Current assets
► Fixed assets
► Capital assets

Which of the following is an alternate term which can be used for “Capital”?
► Liability
► Owner’s net worth
► Working capital
► Asset

Which of the following particular is NOT included in the specimen of a payment
voucher?
► Name of organization
► Cash payment amount
► Date of transaction
► Bank receipt

The total of all costs incurred to convert raw material into finished goods is known
as:
► Prime cost
► Conversion cost
► Sunk cost

All the costs incurred on the incomplete assets up to the balance sheet date must be
transferred to:
► Capital account
► Capital work in progress account
► Relevant asset account
► Owner's equity account

Particulars Rs.
Opening stock of raw material 100,000
Closing stock of raw material 80,000
Purchases of raw material during the 200, 000
period
Cost of Material Consumed ?
► Rs. 205,000
► Rs. 215,000
► Rs. 220,000
► Rs. 225,000

Which one of the following is NOT true about Capital Expenditure?
► Creates future benefits
► Incurred to acquire fixed assets
► Incurred to increase the economic life of existing fixed assets
► Reduce the profit of the concern

Total Assets Rs. 34,500

Accounts payable Rs. 1, 000
Other liabilities Rs. 11,500

► Rs. 23, 000 owner’s equity

Depreciation arises because of:
► Fall in the market value of an asset

► Fall in the value of money
► Physical wear and tear
When the Bank Statement balance is more than the Cash Book balance, it is because
of:
► Unpresented cheques
► Unrecorded bank charges
► Uncredited cheques

Which of the following account would be credited, when the bad debts are
recovered?
► Allowance for bad debts a/c

► Bad debts recovered a/c
► Doubtful debts a/c
► Cash a/c

Which of the following is/are the item/s of a Control Account?
► Credit sale only
► Cash sale only
► Credit purchase only
► Both Credit sales and Credit purchase

Which of the following is NOT included in Debtors Control Account?
► Cash sales
► Credit sales
► Bills receivable

Which of the following is (are) included in Creditors Control Account?
► Discount received from supplier

► Bills payable

Which of the following account(s) will be affected, while rectifying the error of Sale
to Mr.”A” Rs. 336 was not recorded at all?
► Only sales account
► Only A’s account
► Only cash account
► Both sales account and A’s account
Which of the following account(s) will be affected, while rectifying the error of an
amount Rs.200 received from Mr.”P” wrongly credited to Mr.”Q’s” account?

► Bank charges

Particulars Rs.
► Rs. 600
► Rs. 1,000
► Rs. 2,000
► Rs. 2,600

doubtful debts will be deducted from Sundry debtors?
► Rs. 3,600
► Rs. 4,000
► Rs. 1,600
► Rs. 2, 400

Which of the following is normally treated as the last expense listed in the income
statement of a company?
► General and administrative expenses
► Income tax expense
Which of the following accounts would be increased with a debit?
► Revenues
► Expenses

Which of the following is NOT an operating expense?

► Rent expense
► Depreciation expense

An asset is considered to be a current asset if:
► It has been bought recently and was bought new and not used
► It can be realized in cash or sold or consumed in the business within one
year
► It is a piece of new machinery that is expected to last for at least ten years

Which of the following item will be shown on debit side of capital account of sole
proprietor?
► Cash
► Drawings
► Debtors
► Profit

Which of the following is/are NOT shown in balance sheet of sole proprietor?
► Fixed assets
► Current liabilities
► Profit sharing ratio
► Long term assets


What will the effects on financial statements, if machinery is depreciated @ 10%?
► It will be treated as an expense in income statement only

► It will be subtracted from concerned asset only
► It will be treated as a current asset only
► It will be treated as an expense in income statement and subtracted from
concerned assets in Balance Sheet

Which of the following statement is TRUE about the Accounts receivable?
► Accounts receivable arises when a company buys goods or services from
another party on credit
► Accounts receivable is a miscellaneous category that may include loans to
employees
► Accounts receivable are more formal than notes receivable
► Accounts receivable are often called trade receivables

Fixed Asset (WDV) + ___________ = Total assets Employed
► Working capital
► Total assets
► Current assets

Identify the selling expenses of manufacturing concern with the help of given data.
Particulars Rs.
Salesman’s salary 70,000
Commission on sales 28,000
Carriage outward 10,000
Carriage inward 5,000
► Rs. 80,000
► Rs. 60,000
► Rs. 38,000
► Rs. 1, 08,000

Which of the following statement is TRUE about the partnership form of business?
► Partners must have to share their profits in equal proportion
► Partners are personally liable for the liabilities of the business
► Partnerships must make their accounts available to the general public
► Partnership agreement in writing is called Partnership deed

By which if the following Act/ Ordinance, a company is allowed to issue shares at a
higher price than their face value.
► Companies ordinance 1984
► Contract act 1872
► Sales of Goods act 1930

Preliminary Expenses of the company may write off against:
► Debtors control account
► Creditor control account

Which of the following document(s) define the relation of company with outside
world?
► Prospectus
► Statutory Declaration

What are the effects on financial statements, if provision for Income Tax to be made
Rs. 12,000 is given in adjustment?
► It will be deducted in Income Statement only

► It will be treated as current asset in balance sheet only
► Both it will be deducted in income statement and it will be treated as
current liability in balance sheet

What are the effects on financial statements, if Rs. 6,000 transfer to general reserve is
given in adjustment?
► it will be treated in both profit and loss appropriation account and in the
balance sheet
► It will be treated in Income Statement only
► It will be treated in profit and loss appropriation account only

In cash flow statements, which of the following would appear as a cash outflow?
► The payments for purchases made during the year
► A decrease in trade debtors over the course of an accounting period
► Money received as a result of issuing new shares

Which of the following is CORRECT?
► A cash inflow means increase total cash only
► A cash inflow means increase in cash equivalent only
► A cash inflow means increase in cash and decrease in cash equivalent
► A cash inflow means increase in both cash and cash equivalent

When opening stock is Rs. 50,000, closing stock Rs. 60,000 and cost of goods sold
Rs. 220,000. What will be stock turnover ratio?
► 2 times
► 3 times
► 4 times
► 5 times

Rs.
Gross profit 50,000
Sales 250, 000
► Rs. 8,000
► Rs. 92,000
► Rs. 62,500
► Rs. 300,000

What types of changes (is) are made at the admission of partner in partnership?
► Assets of old business will be revalued
► Liabilities of old business will be revalued
► Good will of business will be revalued

In which situation(s) Partnership is dissolved?
► In case of death of partner

► At the admission of new partner
► If any partner resigned from partnership

If one partner receives a salary which is credited to him at the end of the year, the
share of profit available for distribution will be:
► Increased
► Decreased
► Unchanged
► Changed and become negative

What is the Purpose of Control Accounts?
A business needs to have accounts created for individual creditors and debtors in
its general ledger. Creditors are people/entity to whom company owes money
and debtors are entities/people who owe money to the business. But when a
business grows then the number of creditors and debtors also grows. We know
that trial balance can give us the mathematical accuracy of accounts and if there
is any difference in trial balance we can know it from the general ledger by
actually checking each and every transaction for the year. But it is a very time
consuming job to check each and every transaction if the business of the
company is huge because it will have many many transaction to check. So in this
control accounts are maintained in general one for total creditors and one for
total debtors. Debtor’s account is called debtor’s control account and creditor’s
account is called creditor’s control account. These accounts will not get hit by
individual purchase, purchase returns, payments to creditor in case of creditor’s
control account and by sales, sales return, receipts in case of debtor’s control
account. Periodically this summarized data will be posted from individual
ledgers which will be created for each type of transaction e.g a sales subsidiary
ledger, purchase subsidiary ledger etc which will contain actual details of
transactions with invoice number and periodically the amounts will be
summarized from these subsidiary ledgers and posted to the control accounts at
a single time. This way the transactions in general ledger will decrease and will
become easy to manage and can be easily checked against creditor’s or debtor’s
details in total creditor’s ledger and total debtor’s ledger for accuracy.

What is the effect of given adjustments on Trading & Profit & Loss account and
Balance Sheet?
1. Accrued Expenses or Outstanding Expenses
2. Prepaid Expenses or Unexpired Expenses
3. Accrued Revenue or Revenue Receivable
4. Unearned Revenue or Revenue Received in Advance
5. Depreciation of Asset
1. Accrued Expenses or Outstanding Expenses
Trading and profit and loss account effect
These expenses will be shown in profit and loss account under administrative
expenses and will and be deducted from gross profit. They will be used to calculate
net profit
Balance sheet effect
These expenses will be shown as expense payable or accrued expenses in balance

sheet as current liabilities and will be shown under current liabilities section of
liabilities as they have to be paid by business..
2. Prepaid Expenses or Unexpired Expenses
These will be deducted from relevant expense account to get the actual expenses
for the period and that actual amount of expense will be deducted from gross
profit to arrive at net profit. This amount of prepaid expenses will not be included
in profit and loss account as an expense itself but its effect will be on current
expenses for the period for which profit and loss is being calculated.
These prepaid expenses will be show and current assets in balance sheet and will
be shown under the section of current assets in balance sheet.
3. Accrued Revenue or Revenue Receivable
These will be added to sales in trading account in profit and loss statement and
will be treated as a revenue in the calculation of gross profit by subtracting cost of
goods sold from net sales. This will affect gross profit in trading account.
In balance sheet this revenue will be shown under current assets as receivables
from debtors and will be shown under the section of current assets of the business.
4. Unearned Revenue or Revenue Received in Advance
This will not be added to the sales as sales is recognized when the actual services
have been provided or when goods have been shipped irrespective of whether
payment has been received or not. So this will not affect profit and loss account as
it is still not recognized as sales/revenue.
This is a liability for the company because the company has to give goods or
services to the buyer for the advance payment done by the buyer and will be
shown as a liability in the balance sheet under the current liability section of
balance sheet. Also the same amount will be shown in the bank or cash as current
asset to offset the liability because the cash or cheque has been received for goods
not given or services not rendered yet.
5. Depreciation of Asset
The depreciation of asset is an operating expense for the business and will affect
profit and loss account. It will be added to the administrative expense and will be
appear in the administrative expense section of profit and loss account and will be
deducted from gross profits to arrive at net profits along with other expenses.
In balance sheet it will appear as deduction from the fixed asset as the fixed assets
in balance sheet will be shown at written down value. So this will be added to
previous balance of accumulated depreciation and will be deducted from the total
cost of the fixed assets and will appear in the assets section under the heading of
fixed asset. It might appear in notes as sometimes in balance sheet summarized
figure of fixed asset at WDV will be shown. In any case it is deducted from fixed
asset in balance sheet and affects the total assets side

Prepare profit & loss Appropriation account with the help of given data and show
capital accounts and current account in balance sheet for XY Z & Sons
Particulars Rs.
Net profit for the year 600,000
Opening balance of Capital X:400,000
Y: 250,000
Z: 300,000
Drawings during the year X: 100,000
Y: 150,000
Z: 125,000
Salaries are to be paid X: 12,000
Y:20,000
Z:15,000
Opening Balance of current account X: 50,000
Y: 60,000
Z: 45,000
Mark up rate on capital 5%
Mark up rate on drawings 5%
Profit sharing ratio for X:Y:Z 30: 25:45
It is assumed that no capital introduced during the year.
ANSWER
XYZ Sons
Profit and Loss Appropriation account for the period ending ----
Amount
Particulars Amount Rs Rs
Net Rrofit for the year 600,000

Less Salaries for partners Partner X (12,000)
Partner Y (20,000)
Partner Z (15,000) (47,000)
5 % on 400,000 for partner

Less Interest on Capital(5%) X (20,000)
Y (12,500)
Z (15,000) (47,500)
Partner X's drawing

Add : Markup on drawings(5%) 100,000 5,000
Partner Y's drawing
150,000 7,500
Partner Z's drawing
125,000 6,250 18,750
Net Profit avaialble for distribution 524,250
Profit distributed to partners X's share 30% (157,275)

Y's share 25% (131,063)
Z's share 45% (235,913) (524,250)
Total 0
ANSWER PART 2
CURRENT ACCOUNTS OF PARTNERS
XYZ LTD Partner's X Current Account Account Code --

DEBIT SIDE CREDIT SIDE
Date Narration / Date Narration /
2002 Vr.# Particulars Dr. Rs 2002 Vr.# Particulars Cr. Rs
Drawing 100,000 Opening balance 50,000
Markup on drawing 5,000 Salary 12,000
Interest on
capital 20,000
Profit paid 157,275
Balance c/d 134,275
TOTAL 239,275 TOTAL 239,275
XYZ LTD Partner's Y Current Account Account Code --

Opening
Drawing 150,000 balance 60,000
Interest on
capital 12,500
Profit paid 131,063
Balance c/d 66,063
TOTAL 223,563 TOTAL 223,563
Partner
XYZ LTD Z Current Account Account Code --
Opening
Drawing 125,000 balance 45,000
Interest on
capital 15,000
Profit paid 235,913
Balance c/d 179,663
TOTAL 310,913 TOTAL 310,913

Following is information of Shumile Ltd for the year ended December 31st, 2006
Particular Rs.
Current Asset 160,850
Current Liability 72,500
Plant & Machinery 171,000
Furniture 30,000
Land 100,000
Accumulated profit & Loss c/f (credit balance ) on 31st 7,250
December,2006
Gross Profit on 31st December,2006 125,000
Issued capital 150,000
General Reserve 12,000
Authorized Capital Rs. 10/each 500,000
Long term investment 200,000
Other information:
Depreciation is charged on all Fixed Assets (except Land) @ 10%.
Prepare Balance Sheet as on 31st December, 2006.
Answer :
Shumile Lts
Balance sheet as on date Dec 31st 2006
Amount
Particulars Amount Rs Rs
Assets
Fixed Assets
Fixed Assets at WDV Note 1 280,900
Current Assets
Cuurent Assets 160,850
Current Liability
Current Liability 72,500
Working Captial 88,350
Net Assets employed Note 2 369,250
Financed by
Authorized share
capital (50,000 shares
at Rs 10 each) 500,000
Share Holder's Equity

Issued Capital 150,000
General Reserve 12,000
Accumulated profit ansd loss 7,250
Net Shareholder's Equity 169,250
Long Term Liability

Long Term Investment 200,000
Total 369,250
NOTES TO BALANCE SHEET
Depreciaito
Note 1 n
Depreciation
Total
Accumulate
Openin Depreciatio d Written
Rat g n for the Depreciatio Down
Pariculars Cost of Item e Balance year n Value
Land 100,000 0 0 0 0 100,000
Plant and machinery 171,000 0.10 0 17,100 17,100 153,900
Furniture 30,000 0.10 0 3,000 3,000 27,000
TOTAL 20,100 20,100 280,900
Net assets
Note 2 employed
Partiucular Amount
Working Capital 883,850
Fixed assets 280,900
Net Assets employed =
Working Capital +
Fixed assets 1,164,750
Paper no 42
Solved by Chanda Rehman
Fall 2008

Wages outstanding given in the trial balance will be treated as a (an):
► Asset
► Liability Correct
► Revenue

Prepaid interest given in the Trial Balance will be treated as a (an):
► Asset
► Liability
► Revenue

If company has distributable profit is Rs. 4, 90,000. Profit sharing share ratio of Mr.
A, Mr. B and Mr. C is 2:3:5 respectively what will be the Profit share for Mr. C in
distributable profit.
► Rs. 98,000
► Rs. 1, 47,000
► Rs. 2, 45,000
► Rs. 3, 43,000
2+3+5 = 10
Mr. A
490000*2/10
Mr. A = 98000
Mr. B
490000*3/10
Mr. B = 147000

If the Capitals of partners are fixed then, at the end of financial year a partner’s
drawings are transferred to the:
► Credit side of the partner’s capital account

► Credit side of the partner’s current account
► Debit side of partnership bank account
► Debit side of the partner’s current account

If company has distributable profit of Rs. 490,000, Profit sharing share ratio of Mr.
A, Mr. B and Mr. C is 2:3:5 respectively. What will be the share of profit for Mr. A in
distributable profit?
► Rs. 98,000
► Rs. 147,000
► Rs. 245,000
► Rs. 343,000

In which situation(s) Partnership is dissolved?
► In case of death of partner

► At the admission of new partner
► If any partner resigned from partnership

In calculating earning per share (EPS), the net profit is divided by which of the
following?
► Number of ordinary shares

► Number of preference shares
► Paid up capital

Which of the following statement in NOT TRUE about the limited company form of
business?
► The limited company form of business allows ownership of the business to be

spread amongst many people
► Shareholders can appoint professionals
► Shareholders are personally liable for all the liabilities incurred by the
business Correct
► Regular filing of information about the affairs of the company is a legal
requirement

A private limited company can commence its business:
► Immediately on receiving a certificate of incorporation

► Without receiving a certificate of incorporation
► Only when it receives certificate of commencement of business
► Only when it receives both, the certificate of incorporation as well as
certificate of commencement of business

An example of financing activities in the context of cash flow statement is:
► Capital expenditures on purchase of fixed assets

► Long-term deposit
► Financial charges paid
► Dividend paid

A firm may earn profit during an accounting period but have less money in the bank
at the end of the period then it had at the beginning. Which of the followings, on its
own, could explain this?
► Not paying invoices received from creditors

► The sale of fixed assets during the period
► An increase in trade debtors over the course of the period
► An increase in the depreciation charge relative to the previous accounting
period

The primary purpose of preparing a cash flow statement for an entity is to provide
information about:
► Its financial position at the end of an accounting period
► Its cash receipts and cash payments during an accounting period
► Its financial position at the start of an accounting period

Which of the following option(s) is TRUE about the Sales returns?
► Sales returns reduce the Gross sales of the firm

► Sales returns affect the Net income of the firm
► Sales returns affect the flow of cash

The persons who sign articles and memorandum of the company and contribute in the
initial share capital of the company are called:
► Subscribers
► Shareholders
► Managers
► Directors

The charter of a company which defines the limitations and powers of the company is
called:
► The memorandum of association
► Statutory report
► Certificate of commencement

Which of the following can offer its share to general public at large?
► A private limited company

► A listed company
► A partnership firm
► A trust

Which of the following are the owners of a company?
► Proprietors
► Partners
► Shareholders
► Managers

Current accounts of the partners should be opened when the capitals are:
► Normal
► Floating
► Fixed
► Fluctuating

Rent receivable (given in trial balance) is an item of_____________.
► Balance Sheet
► Trading Account
► Both Balance Sheet and Profit & Loss Account

Which of the following account is affected from the Drawings of cash in sole-
proprietorship business?
► Capital account
► Expense account

An asset is considered to be a current asset if:
► It has been bought recently and was bought new and not used
► It can be realized in cash or sold or consumed in the business within one
year
► It is a piece of new machinery that is expected to last for at least ten years

General office expenses are charged to which of the following head:
► Financial expenses

Which of the following would NOT be considered as a component of 'cost' of stock?

► Import duties
► Purchase price

Particulars Rs.
Write off Bad debts (given in adjustments) 2,400
Sundry Debtors (given in trial balance) 33,200
Provision is created on Debtors at 10%
Identify the Total amount deducted from Sundry debtors.
► Rs. 460
► Rs. 2,400
► Rs. 3,080
► Rs. 5,480

If (Amount of new provision + Amount of bad debts) < Amount of old provision then
amount will be shown on:
► Debit side of P & L account

► Credit side of P & L account
► Asset side of Balance Sheet
► Liability side of Balance Sheet

Which of the following rectifying entry will be recorded, if sales to Mr. “A” of
Rs.336 have been debited to Mr. “B” account?
► A’s account (Dr.) and B’s account (Cr.)

► B’s account (Dr.) and A’s account (Cr.)
► Sales account (Dr.) and B’s account (cr.)
► B’s account (Dr.) and Sales account (Cr.)

Which of the following account(s) will be affected, while rectifying the error of sales
Rs.100 to Mr. “A” recorded in the purchases book?
► Sales account
► Purchase account
► A’s account and Sales account
► Sales account, purchase account and A’s account

Which of the following is shown on credit side of creditors control account?
► Return inwards

Sales are calculated by adding:
► Cash sales and cash received from debtors

► Credit sales and cash received from debtors
► Cash sales and credit sales
► Cash ales and credit purchases

Which of the following is NOT based on the concept of double entry book keeping
system?
► Subsidiary Ledgers
► Creditors Control Accounts
► Debtors Control Accounts

If Bad Debts written off are given in adjustment, then which of the following entry
for bad debts written off is CORRECT?
► Bad debts a/c (Dr) and Trading a/c (Cr)

► Provision for Bad and Doubtful debts a/c (Dr) and Bad debts a/c(Cr)
► Bad debts a/c (Dr) and debtors a/c (Cr)
► Trading a/c (Dr) and Bad debts a/c (Cr)

Provision created in 2006 Rs. 2,500
Bad debts in 2007 Rs. 1,500
Sundry debtors on 31-12- 2007 were Rs. 40,000 and provision is created @ 5%.
Which journal entry is Correct for the provision for doubtful debts for the year 2007.
(Cr)
► Profit & Loss a/c Rs. 2,000 (Dr) & Provision for doubtful debts a/c Rs.
2,000 (Cr)
(Cr)
(Cr)

Particulars Rs.
Opening written down value of machine 4,00,000
Cost of machine purchased during the year 50,000
Depreciation during the year 20,000
closing written down value (WDV) of the Machines ?
► Rs. 4, 30,000
► Rs. 4, 50,000
► Rs. 4, 70,000
► Rs. 70,000

In accounting accumulated depreciation is:
► Treated as a reserve
► Treated as a contra asset
► Treated as a surplus
► Treated as an expense

Cash Rs. 22,500

Debtors Rs. 500
Total Assets Rs. 80, 385
Accounts payable Rs. 1,000
Total liabilities Rs. 20,000


Stock of Trading concern consists of:
► Raw material
► Work in process
► Merchandise inventory

2007Jan. 2 Opening inventory 100 Rs.18.00 Rs.1,800
Mar. 4 Purchase 400 19.00 7,600
May 8 Purchase 800 20.00 16,000
Nov. 3 Purchase 500 21.00 10,500
Four hundred units are unsold, Use the FIFO method of inventory costing and
determine the value assigned to the 400 units on hand at the end of the period.
► Rs.7, 500
► Rs.7, 978
► Rs.8, 000
► Rs.8, 400

Particulars Rs.
Opening stock of raw material 100,000
Closing stock of raw material 85,000
Purchases of raw material during the 200, 000
period
Cost of Material Consumed ?
► Rs. 205,000
► Rs. 215,000
► Rs. 220,000
► Rs. 225,000

In cost of goods sold statement the ‘cost of goods manufactured’ is equal to:
► Total factory cost + Opening work in process + Ending work in process

► Total factory cost + Opening work in process – Ending work in process
► Total factory cost - Opening work in process + Ending work in process
► Ending work in process +Total factory cost – Opening work in process

What would be the value of total factory cost, if the cost of material consumed during
the month is Rs. 6,000, labor cost incurred is Rs. 2,000 and the factory over head cost
is Rs. 2,500?
► Rs. 6,000
► Rs. 8,000
► Rs. 4,500
► Rs. 10,500

Which of the following item appears in Trading Account of a business?
► Interest expenses
► Wages and salaries
► Depreciation expenses
► Discount Allowed

If the cost of sales is Rs. 60,000, sales are Rs. 95,000 and operating expenses are Rs.
20,000 during the year, what would be the value of Gross Profit?
► Rs. 15,000
► Rs. 35,000
► Rs. 55,000
► Rs. 60,000

Identify that which of the following particular(s) would NOT be shown in the format
of a Cash Book?
(1) Cheque number
(2) Date of transaction
(3) Amount of transaction
► (1) only
► (1) & (2) only
► (1) & (3) only
► (2) & (3) only

The process of transferring journal entry information to the ledger is called:
► Journalizing
► Posting
► Balancing
► Analyzing


► ‘T’ Account
► Source document
► Day book
Which of the following is CORRECT about the flow of recording a transaction?
► Occurrence of event – voucher—Journal—Ledger—Trial Balance—

profit and loss account—Balance Sheet
► Occurrence of event—Journal – voucher —Ledger—Trial Balance—profit

and loss account—Balance Sheet
► Occurrence of event—Ledger – voucher—Journal—Trial Balance—profit and

► Occurrence of event—Trial Balance – voucher—Journal—Ledger—profit and


Economic resources owned by a business and expected to benefit for the future
operations are called:
► Expenses
► Assets
► Capital
► Liabilities

With the help of given data prepare Capital account of a sole trader and
calculate closing balance of capital.
Rs.
Balance b/f 550,000
Drawings 50,000
Profit & Loss (debit balance) 45,000
CAPITAL ACCOUNT
PARTICULARS AMOUNT PARTICULARS AMOUNT
Profit and loss 45000 Balance b/f 550,000
Drawings 50,000
Balance c/f 455,000
TOTAL 550,000 TOTAL 550,000

Briefly explain the financial statements prepared by the organization. Why
these are important for manufacturing concern?
ANSWER: The financial statements prepared by any organization are as follows:

1. Profit and loss account: It shows the performance of the business in a given
period. It shows the profitability of business which shows the success or
failure of the business.
2. Balance sheet: Balance sheet shows the position of business at a given point.
It shows the resources available by the business and the resources invested by
the owner and other loans.
3. Cash flow statements: Cash flow statements show the generation of cash and
its usage over a given period.
IMPORTANCE OF FINANCIAL STATEMENTS FOR
MANUFACTURING CONCERN: These financial statements are important for
manufacturing concern organization as they provide information related to
financial affairs of the organization. The profitability and liquidity, the resources
available to the company and the generation of cash and its usage over a given
period which provides reasonable information to the management to take
decisions.

The comparative financial statement data for XYZ Company is given below:
December 31
Assets: 2007 2006
Rs. Rs.
Cash 4,000 7,000
Accounts receivable 36,000 29,000

Inventory 75,000 61,000
Plant and equipment 210,000 180,000
Accumulated depreciation (40,000) (30,000)
Total Assets 285,000 247,000
Liabilities & Stockholder’s equity:
Accounts payable 45,000 39,000
Common stock 90,000 70,000
Retain earnings 150,000 138,000
Total liabilities & Stockholder’s equity 285,000 247,000
For 2007, the company reported net income as follows:
XYZ Company
Income Statement
For the year ended 31st December, 2007
Rs.
Sales 500,000
Less: Cost of goods sold 300,000
Gross margin 200,000

Less Operating expenses 180,000
Net Income 20,000
Required:
Prepare a Statement of Cash Flows if dividend of Rs. 8,000 was declared and paid
during the year 2007. There were no sales of plant and equipment during the year.
ANSWER:
Starting balance:
Net income 20,000
Add: adjustment for non cash items
Depreciation 38,000
Operating profit before working capital changes: 58,000
Working capital changes:

Add: cash 3,000
Less: accounts receivable (7,000)
Add: accounts payable 7,000
Cash generated from operations 61,000
Cash flow from investing activities
Cash flow from financing activities:

Common Stock 20,000
Net decrease in cash 3,000

Net cash flow 78,000

Write a note on legal documents required for the formation of company.
ANSWER:
LEGAL DOCUMENTS REQUIRED FOR FORMATION OF COMPANY:
MEMORENDUM OF ASSOCIATION: It contains the following information

1. Name of company.
2. Place of registered office
3. Objective
4. Amount of share capital with which company registers.
ARTICLES OF ASSOCIATION: It contains the following information

A document that contains all the policies and other matters necessary to run the
business of the company. It is signed by all the members of the company.
Best of Luck

MGT101 Final - Term - Solved - Paper - No - 34 - To - 42 - Solved - by - ABr - & - Chanda - Rehman - & - Nomi

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Paper No:34

Solved by Chanda Rehman & ABr

► Assets exceed Expenditure

Question No: 2 ( Marks: 1 ) - Please choose one

Question No: 3 ( Marks: 1 ) - Please choose one

Question No: 4 ( Marks: 1 ) - Please choose one

► Right or debit side of the account

Question No: 5 ( Marks: 1 ) - Please choose one

► Left or credit side of the account

Question No: 6 ( Marks: 1 ) - Please choose one

Question No: 7 ( Marks: 1 ) - Please choose one

Question No: 8 ( Marks: 1 ) - Please choose one

► Profit & Loss Account

Question No: 9 ( Marks: 1 ) - Please choose one

Question No: 10 ( Marks: 1 ) - Please choose one

Question No: 11 ( Marks: 1 ) - Please choose one

Question No: 12 ( Marks: 1 ) - Please choose one

Question No: 13 ( Marks: 1 ) - Please choose one

Question No: 14 ( Marks: 1 ) - Please choose one

Question No: 15 ( Marks: 1 ) - Please choose one

Question No: 16 ( Marks: 1 ) - Please choose one

► Cash account (Dr.) & Bad Debts recovered account (Cr.)

Question No: 17 ( Marks: 1 ) - Please choose one

► Sales Day Book

► Cash sales and cash received from debtors

Question No: 19 ( Marks: 1 ) - Please choose one

Question No: 20 ( Marks: 1 ) - Please choose one

► Increase of gross profit

Question No: 21 ( Marks: 1 ) - Please choose one

► Increase the gross profit

Question No: 22 ( Marks: 1 ) - Please choose one

Question No: 23 ( Marks: 1 ) - Please choose one

Question No: 24 ( Marks: 1 ) - Please choose one

Question No: 25 ( Marks: 1 ) - Please choose one

Question No: 26 ( Marks: 1 ) - Please choose one

► Purchasing operating equipment

Question No: 27 ( Marks: 1 ) - Please choose one

► Salaries of selling staff

Question No: 28 ( Marks: 1 ) - Please choose one

Question No: 29 ( Marks: 1 ) - Please choose one

Question No: 30 ( Marks: 1 ) - Please choose one

Question No: 31 ( Marks: 1 ) - Please choose one

► Total assets employed

Question No: 32 ( Marks: 1 ) - Please choose one

Question No: 33 ( Marks: 1 ) - Please choose one

Question No: 34 ( Marks: 1 ) - Please choose one

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Question No: 37 ( Marks: 1 ) - Please choose one

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► 15: 20 (or 3:4)

Question No: 39 ( Marks: 1 ) - Please choose one

► Decrease assets and liabilities.

Question No: 41 ( Marks: 1 ) - Please choose one

Question No: 42 ( Marks: 1 ) - Please choose one

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Question No: 44 ( Marks: 1 ) - Please choose one

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