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Monday, July 11, 2011

Final Term VU Past Papers of MGT101- Financial Accounting Completely solved

FINALTERM  EXAMINATION
Spring 2009
MGT101- Financial Accounting (Session - 4)
Time: 120 min
Marks: 85
Student Info
 StudentID:

 Center:
  OPKST
 ExamDate:
  7/5/2009 12:00:00 AM

For Teacher's Use Only
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Question No: 1    ( Marks: 1 )    - Please choose one
 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
   
Question No: 2    ( Marks: 1 )    - Please choose one
 Which one of the following is a type of General Ledger?

       ► Book of original entry
       ► ‘T’ Account
       ► Source document
       ► Day book
   
Question No: 3    ( Marks: 1 )    - Please choose one
 Which of the following summarizes the cash movements during a specified period?

       ► Trading account
       ► Profit & Loss account
       ► Receipts & Payments account
       ► Balance Sheet
   
Question No: 4    ( Marks: 1 )    - Please choose one
 Which of the following is/are the END product of accounting cycle?

       ► Financial Statements
       ► General Journal
       ► General Ledger
       ► Voucher
   
Question No: 5    ( Marks: 1 )    - Please choose one
 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
   
Question No: 6    ( Marks: 1 )    - Please choose one
 Accounts Receivable & Inventory are the examples of:

       ► Liquid assets
       Current assets
       ► Fixed assets
       ► Capital assets
   
Question No: 7    ( Marks: 1 )    - Please choose one
 Which of the following is an alternate term which can be used for “Capital”?


       ► Liability
       ► Owner’s net worth
       ► Working capital
       ► Asset
   
Question No: 8    ( Marks: 1 )    - Please choose one
 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
   
Question No: 9    ( Marks: 1 )    - Please choose one
 The total of all costs incurred to convert raw material into finished goods is known as:

       ► Prime cost
       ► Conversion cost
       ► Sunk cost
       ► Opportunity cost
   
Question No: 10    ( Marks: 1 )    - Please choose one
 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
   
Question No: 11    ( Marks: 1 )    - Please choose one
 Particulars
Rs.
Opening stock of raw material
100,000
Closing stock of raw material
80,000
Purchases of raw material during the period
200, 000
Cost of Material Consumed
?

       ► Rs. 205,000
       ► Rs. 215,000
       ► Rs. 220,000
       ► Rs. 225,000
   
Question No: 12    ( Marks: 1 )    - Please choose one
 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
   
Question No: 13    ( Marks: 1 )    - Please choose one
 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
       ► Rs. 24,000 owner’s equity
       ► Rs. 46,000 owner’s equity
   
Question No: 14    ( Marks: 1 )    - Please choose one
 Depreciation arises because of:

       ► Fall in the market value of an asset
       ► Fall in the value of money
       ► Physical wear and tear
       ► All of the given options
   
Question No: 15    ( Marks: 1 )    - Please choose one
 When the Bank Statement balance is more than the Cash Book balance, it is because of:



       ► Unpresented cheques
       ► Unrecorded bank charges
       ► Uncredited cheques
       ► None of the given options
   
Question No: 16    ( Marks: 1 )    - Please choose one
 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
   
Question No: 17    ( Marks: 1 )    - Please choose one
 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
   
Question No: 18    ( Marks: 1 )    - Please choose one
 Which of the following is NOT included in Debtors Control Account?

       ► Cash sales
       ► Credit sales
       ► Bills receivable
       ► Discount allowed
   
Question No: 19    ( Marks: 1 )    - Please choose one
 Which of the following is (are) included in Creditors Control Account?

       ► Discount received from supplier
       ► Credit purchases
       ► Bills payable
       ► All of the given options
   
Question No: 20    ( Marks: 1 )    - Please choose one
 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
   
Question No: 21    ( Marks: 1 )    - Please choose one
 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
   
Question No: 22    ( Marks: 1 )    - Please choose one
 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
   
Question No: 23    ( Marks: 1 )    - Please choose one
 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 (old)
2,000
Current year’s provision (new)
1,000

       ► Rs. 600
       ► Rs. 1,000
       ► Rs. 2,000
       ► Rs. 2,600
   
Question No: 24    ( Marks: 1 )    - Please choose one
 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 deducted from Sundry debtors? 

       ► Rs. 3,600
       ► Rs. 4,000
       ► Rs. 1,600
       ► Rs. 2, 400
   
Question No: 25    ( Marks: 1 )    - Please choose one
 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
   
Question No: 26    ( Marks: 1 )    - Please choose one
 Which of the following is normally treated as the last expense listed in the income statement of a company?

       ► Interest expense
       ► General and administrative expenses
       ► Salaries and wages expense
       ► Income tax expense
   
Question No: 27    ( Marks: 1 )    - Please choose one
 Which of the following accounts would be increased with a debit?

       ► Contributed Capital
       ► Retained Earnings
       ► Revenues
       ► Expenses
   
Question No: 28    ( Marks: 1 )    - Please choose one
 Which of the following is NOT an operating expense?

       ► Salaries and wages expense
       ► Rent expense
       ► Interest expense
       ► Depreciation expense
   
Question No: 29    ( Marks: 1 )    - Please choose one
 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
       ► All of the given options
   
Question No: 30    ( Marks: 1 )    - Please choose one
 Which of the following item will be shown on debit side of capital account of sole proprietor?

       ► Cash
       ► Drawings
       ► Debtors
       ► Profit
   
Question No: 31    ( Marks: 1 )    - Please choose one
 Which of the following is/are NOT shown in balance sheet of sole proprietor?
       ► Fixed assets
       ► Current liabilities
       ► Profit sharing ratio
       ► Long term assets
   
Question No: 32    ( Marks: 1 )    - Please choose one
 When closing stock is given in trial balance, then it will effect:
       ► Trading account only
       ► Balance sheet only
       ► Owner's equity only
       ► Both Trading account and Balance sheet
   
Question No: 33    ( Marks: 1 )    - Please choose one
 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
   
Question No: 34    ( Marks: 1 )    - Please choose one
 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
   
Question No: 35    ( Marks: 1 )    - Please choose one
 Fixed Asset (WDV) + ___________ = Total assets Employed

       ► Working capital
       ► Total liabilities
       ► Total assets
       ► Current assets
   
Question No: 36    ( Marks: 1 )    - Please choose one
 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
   
Question No: 37    ( Marks: 1 )    - Please choose one
 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
   
Question No: 38    ( Marks: 1 )    - Please choose one
  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
       ► None of the given options
   
Question No: 39    ( Marks: 1 )    - Please choose one
 Preliminary Expenses of the company may write off against:
       ► Share premium account
       ► Share holder account
       ► Debtors control account
       ► Creditor control account
   
Question No: 40    ( Marks: 1 )    - Please choose one
 Which of the following document(s) define the relation of company with outside world?

       ► Prospectus
       ► Statutory Declaration
       ► Memorandum of Association
       ► Articles of Association
   
Question No: 41    ( Marks: 1 )    - Please choose one
 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
   
Question No: 42    ( Marks: 1 )    - Please choose one
 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 as current liability in balance sheet only
       ► It will be treated in profit and loss appropriation account only
   
Question No: 43    ( Marks: 1 )    - Please choose one
 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
       ► Money received as result of selling fixed assets
   
Question No: 44    ( Marks: 1 )    - Please choose one
 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
   
Question No: 45    ( Marks: 1 )    - Please choose one
 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
   
Question No: 46    ( Marks: 1 )    - Please choose one
 
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
   
Question No: 47    ( Marks: 1 )    - Please choose one
 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
       ► All of the given options
   
Question No: 48    ( Marks: 1 )    - Please choose one
 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
       ► All of the given options
   
Question No: 49    ( Marks: 1 )    - Please choose one
 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
   
Question No: 50    ( Marks: 1 )    - Please choose one
 Which one of the following is equal to the carrying cost of an asset?
       ► Original cost minus Accumulated depreciation
       ► Original cost plus Accumulated depreciation
       ► Original cost minus Residual value
       ► Written down value minus Accumulated depreciation
   
Question No: 51    ( Marks: 5 )
 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.
   
Question No: 52    ( Marks: 10 )
 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..


  1. Prepaid Expenses or Unexpired Expenses


Trading and profit and loss account effect

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.

Balance sheet effect

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.


  1. Accrued Revenue or Revenue Receivable

Trading and profit and loss account effect

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.


Balance sheet effect

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.


  1. Unearned Revenue or Revenue Received in Advance

Trading and profit and loss account effect

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.


Balance sheet effect

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.


  1. Depreciation of Asset


Trading and profit and loss account effect

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.


Balance sheet effect

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


   
Question No: 53    ( Marks: 10 )
 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 ----





Particulars
Amount Rs
Amount 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)












Less Interest on Capital(5%)
5 % on 400,000 for partner X
(20,000)


5 % on 250,000 for partner Y
(12,500)


5 % on 300,000 for partner Z
(15,000)
(47,500)








Add : Markup on drawings(5%)
Partner X's drawing 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 2002
Vr.#
Narration / Particulars
Dr. Rs
Date 2002
Vr.#
Narration / 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 --
DEBIT SIDE
CREDIT SIDE
Date 2002
Vr.#
Narration / Particulars
Dr. Rs
Date 2002
Vr.#
Narration / Particulars
Cr. Rs


Drawing
150,000


Opening balance
60,000


Markup on drawing
7,500


Salary
20,000






Interest on capital
12,500






Profit paid
131,063


Balance c/d
66,063














TOTAL
223,563


TOTAL
223,563







XYZ LTD
Partner
 Z Current Account
 Account Code --
DEBIT SIDE
CREDIT SIDE
Date 2002
Vr.#
Narration / Particulars
Dr. Rs
Date 2002
Vr.#
Narration / Particulars
Cr. Rs


Drawing
125,000


Opening balance
45,000


Markup on drawing
6,250


Salary
15,000






Interest on capital
15,000






Profit paid
235,913


Balance c/d
179,663














TOTAL
310,913


TOTAL
310,913



   
Question No: 54    ( Marks: 10 )
 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 December,2006
7,250
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

Particulars
Amount Rs
Amount 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


Note 1
Depreciaiton








Depreciation

Pariculars
Cost of Item
Rate
Opening Balance
Depreciation for the year
Total Accumulated Depreciation
Written Down 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


Note 2
Net assets employed
Partiucular
Amount
Working Capital
883,850
Fixed assets
280,900
Net Assets employed = Working Capital + Fixed assets
1,164,750

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