FINALTERM EXAMINATION
Spring 2009
MGT101- Financial Accounting (Session - 4)
Time: 120 min
Marks: 85
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Center: | OPKST |
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Q No. | 1 | 2 | 3 | 4 | 5 | 6 | 7 | 8 | Total |
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Q No. | 9 | 10 | 11 | 12 | 13 | 14 | 15 | 16 | |
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Q No. | 17 | 18 | 19 | 20 | 21 | 22 | 23 | 24 | |
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Q No. | 25 | 26 | 27 | 28 | 29 | 30 | 31 | 32 | |
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Q No. | 33 | 34 | 35 | 36 | 37 | 38 | 39 | 40 | |
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Q No. | 41 | 42 | 43 | 44 | 45 | 46 | 47 | 48 | |
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Q No. | 49 | 50 | 51 | 52 | 53 | 54 | |||
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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
- 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..
- 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.
- 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.
- 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.
- 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, 2006Particular | 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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