Comprehensive Assignment

Financial Accounting and Reporting- II

Instructions
 There are total of 5 questions. Attempt all of them. They are related to the
concepts covered till cash flow statement.
 Last date of submission of this assignment is 16-May-2020
 This comprehensive assignment carries 20 marks in final exam.
 Best assignments will be those that answer theoretical questions by
reasoning.
 Don’t copy paste. The plagiarism for Question 1 and 2 shall not be more
than 10%
 Marks distribution is: Q-1=10; Q-2=10; Q-3: 05; Q-4=05; Q-5=20.
TOTAL=50

Q-1: Short Questions (Answer in less than 5 lines)

 Assume that you are starting a business. What are the possible sources of financing you
can look for? Briefly explain each with its advantages and disadvantages.
 Why is preferred stock called as “hybrid security”?
 How can you differentiate between “company” from other forms of business?
 What is difference between social and absolute reality? Is accounting an absolute or a
social reality? Comment
 Critically analyze the definition of company. You may take help from documentary
movie “The Corporation”

Q-2 Detailed Question (Minimum 1000 words; Maximum 2000 words)

Describe the process of Initial Public Offering in detail

Q-3: Bank Reconciliation Statement

Kabir&Bros is a famous name in chemist and drug industry. At the end of July 2015 company
received bank statement from its bank showing a balance of 28945.27 PKR as at July 31. It was
of shock for Accounts manager to learn that the company’s account was showing a balance of
26,686.95 PKR as at July 31. He is interested in knowing the factors causing this discrepancy.
An accountant of the company was asked to identify the reasons for such a discrepancy. Given
below are the transactions of this company for the month ended July 2015.

1- Cash receipts on July 31 amounted to PKR 4000. These receipts were left at HBL in night
depository chute after banking hours on July 31 and thus weren’t recorded in bank statement.

2- Following credit memorandum were also attached with statement:

I. Memorandum showing interest earned by Kabir&Bros on account maintained with HBL

in amount of PKR 80.
 II. A non-interest bearing note for PKR 3663 from debtor of Kabir&Bros was left at the
bank for collection. Proceeds had been credited to Kabir&Bros account.

3- Statement also included following debit memorandum:

 Service charges of PKR 19.45 for the month of July.

4- It was revealed that following checks were issued by the company but weren’t paid by HBL.

Check No: Amount (PKR):

921 944.32

924 320.50

935 538.15

5- July bank statement showed that a check drawn by Haseeb and Bros, a costumer of
Kabir&Bros of PKR 168.20 was marked NSF.

6- Comparison of paid checks returned by bank showed that check no 922 for PKR 4,521.50
issued on July 15 in payment of salaries was erroneously entered as PKR 5421.50 in company’s
accounts.

Considering the above data, you as financial analyst are required to:

a) Prepare bank reconciliation statement for Engro at July 31.

b) Prepare journal entries to adjust the accounts at July 31.

Q-4: Shares

Khuzdar Mines ltd. has a nominal capital of Rs. 2,400,000 divided into 240,000 ordinary shares
of Rs. 10 each. The whole of the capital was issued at par on the following terms:

Payable on application Rs. 4

Payable on allotment Rs. 3
First call Rs. 2
Second call Rs. 1

Application were received for 300,000 shares and it was decided to allot the shares on
proportionate basis. The balance of application monies was applied to the allotment, no cash
being refunded. The subscribers paid the balances of allotment monies.

The calls were made and paid in full by the subscribers, with the exception of a subscriber who
failed to pay the first and second calls on the 1000 shares allotted to him. A resolution was
passed by the directors to forfeit the shares. The fortified shares were later issued at Rs 9 each.
Show the ledger accounts recording all the above transactions and the relevant extracts from a
balance sheet after all the transactions had been completed.

Q-5: Accounting Cycle

Using the given data of Bilal Industries limited for the year ended 2017:

(i) Complete the worksheet and attach it with your paper.

(ii) Prepare classified income statement.

(iii) Prepare classified balance sheet.

Data:

1. Stock at June 30, 2017 was valued at Rs. 111,300.

2. The delivery expenses were the only distribution costs during the year.
3. Authorized share capital is as follows:
a. 60,000 Ordinary shares of Rs. 10 each and 15,000 8% Preference shares of Rs. 10
each
4. The remainder of the debenture interest is to be accrued
5. Depreciation is to be provided as follows:
i. Leasehold premises at 4% p.a. on cost, motor vehicles at 20% p.a. on cost
and
ii. fixtures and fittings at 40% on reducing balance
6. A dividend of 5% is proposed on the ordinary shares, and the full year's preference
dividend is to be provided for.
7. Rs. 12,600 is owing for wages and salaries, and Rs. 600 has been prepaid for rent at June
30, 2017
8. Company Tax for the year is to be provided for in the sum of Rs. 23,000
9. The provision for bad debts is to be increased to Rs. 8,700
10. No fixed assets were bought or sold in the year.
 BILAL INDUSTRIES LIMITED.

Particulars Trial Balance Adjustments Adjusted Trial Profit & Loss Balance Sheet
Balance Account

Advertising 31,500

Bad Debts 1,761

Bank interest 7,890

Bank overdraft 53,250

Cash in hand 1,110

Creditors 93,816

Delivery expenses 45,309

Debtors 323,430

Debenture interest 3,900

Directors' salaries 100,800

Fixtures and fittings (cost 53,700

Rs. 105000)

General reserve 210,000

Insurance 5,700
Issued share capital:

Ordinary shares 300,000

8% Preference shares 131,250

Leasehold premises (cost 735,000

Rs. 840,000)

Motor Vehicles (cost Rs. 160,650

168,600)

Profit and Loss account 104,674

Provision for bad debts 7,200

Purchases 805,381

Rent and rates 34,500

Sales 1,407,36
0

Share premium account 105,750

Stock 60,840

Sundry expenses 24,804

Wages and salaries 95,025

10% Debenture 78,000

Net profit

2,491,30 2,491,30
0 0