2015 - Regular - Solved Paper: Compiled & Solved By: Sameer Hussain

PRINCIPLES OF ACCOUNTING – b.
Com part – I
2015 – Regular – Solved Paper
Compiled & Solved by: Sameer Hussain
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Instructions: (1) Attempt any FIVE questions. (2) All questions carry equal marks.
(3) Use of calculator is allowed. Do not use abbreviations.
(4) Answers without necessary computations will not be accepted.
(5) All journal entries should be properly dated, intended and narrated.
Q.No.1 (a) Accounting Principles:

State the rule of debit and credit in terms of increases and decreases in the values of assets,
liabilities and owner’s equity.
SOLUTION 1 (a)
Rules of Debit & Credit:
Head of Accounts Increases Decreases
Assets Recorded as Debit Recorded as Credit
Liabilities Recorded as Credit Recorded as Debit
Owner’s Equity Recorded as Credit Recorded as Debit
Q.No.1 (b) Trial Balance:

The following transactions related to Shaheer Co.:
1) Shaheer started business by investing cash Rs.15,000; furniture Rs.20,000; merchandise
Rs.45,000.
2) Purchased merchandise from Khan at list price of Rs.10,000 with 10% trade discount. Paid
cash Rs.4,000.
3) Sold goods for Rs.50,000 to Shehzad and received cash from him Rs.20,000.
4) Salaries expense of the business Rs.13,000 out of which Rs.10,000 were paid.
5) A customer paid Rs.5,000 as advance.
REQUIRED
Prepare trial balance in proper form.
SOLUTION 1 (b)
SHAHEER CO.
TRIAL BALANCE
O. PARTICULARS P/R DEBIT CREDIT
1 Cash Rs.26,000
2 Accounts receivable Rs.30,000
3 Merchandise Rs.45,000
4 Furniture Rs.20,000
5 Accounts payable Rs.5,000
6 Salaries payable Rs.3,000
7 Advance from customer Rs.5,000
8 Capital Rs.80,000
9 Sales Rs.50,000
10 Purchases Rs.9,000
11 Salaries expense Rs.13,000
Total Rs.143,000 Rs.143,000
Principles of Accounting – B.Com Part – I – 2015 Regular Solution 1

Additional Working:
SHAHEER CO.
GENERAL JOURNAL
Date Particulars P/R Debit Credit
1 Cash 15,000
Furniture 20,000
Merchandise 45,000
Capital 80,000
(To record the investment by the owner)
2 Purchases 9,000
Cash 4,000
Accounts payable (Khan) 5,000
(To record the goods purchased for cash and on
account)
3 Cash 20,000
Accounts receivable (Shehzad) 30,000
Sales 50,000
(To record the goods sold for cash and on credit)
4 Salaries expense 13,000
Cash 10,000
Salaries payable 3,000
(To record salaries expense of the business)
5 Cash 5,000
Advance from customer 5,000
(To record the advance received from customer)
SHAHEER CO.
GENERAL LEDGER
Cash
1 Capital 15,000 2 Purchases 4,000
3 Sales 20,000 4 Salaries expense 10,000
5 Advance from customer 5,000 Balance c/d 26,000
40,000 40,000
Balance b/d 26,000
Accounts Receivable
3 Sales 30,000
Balance c/d 30,000
30,000 30,000
Balance b/d 30,000
Merchandise
1 Capital 45,000
Balance c/d 45,000
45,000 45,000
Balance b/d 45,000

Furniture
1 Capital 20,000
Balance c/d 20,000
20,000 20,000
Balance b/d 20,000
Accounts Payable
2 Purchases 5,000
Balance c/d 5,000
5,000 5,000
Balance b/d 5,000
Salaries Payable
4 Salaries expense 3,000
Balance c/d 3,000
3,000 3,000
Balance b/d 3,000
Advance from Customer

5 Cash 5,000
Balance c/d 5,000
5,000 5,000
Balance b/d 5,000
Capital
1 Assets 80,000
Balance c/d 80,000
80,000 80,000
Balance b/d 80,000
Sales
3 Cash 20,000
Balance c/d 50,000 3 Accounts receivable 30,000
50,000 50,000
Balance b/d 50,000
Purchases
2 Cash 4,000
2 Accounts payable 5,000 Balance c/d 9,000
9,000 9,000
Balance b/d 9,000

Salaries Expense
4 Cash 10,000
5 Salaries payable 3,000 Balance c/d 13,000
13,000 13,000
Balance b/d 13,000
Q.No.2 Worksheet:
The following are trial balance and adjustment data for Aslam Company on December 31, 2015:
Debit Credit
Cash Rs.5,000 Capital Rs.150,000
Bank Rs.30,000 Salaries payable Rs.5,000
Office equipment Rs.25,000 Commission revenue Rs.40,000
Office furniture Rs.15,000 Unearned commission Rs.10,000
Prepaid advertisement Rs.7,000 Allowance for depreciation – O/E Rs.1,000
Office salaries expenses Rs.15,000 Allowance for depreciation – O/F Rs.3,000
Commission receivable Rs.5,000
Office supplies Rs.7,000
Investments Rs.100,000
Total Rs.209,000 Total Rs.209,000
Adjustment:
1) Service provided against unearned commission Rs.7,000.
2) Commission receivable Rs.8,000.
3) Commission revenue include an amount of Rs.1,000 advance payment by a customer.
4) Advertisement expense Rs.5,000.
5) Unused office supplies Rs.2,000.
6) Interest on investment receivable Rs.5,000.
7) Fixed assets are depreciated @ 10% per annum under diminishing balance method.
REQUIRED
Prepare 10 column worksheet.
SOLUTION 2
ASLAM COMPANY
TEN COLUMN WORK SHEET
FOR THE PERIOD ENDED 31 DECEMBER 2015

Particulars Trial Balance Adjustments Adjusted Trial Bal. Income Statement Balance Sheet
DR. CR. DR. CR. DR. CR. DR. CR. DR. CR.
Cash 5,000 5,000 5,000
Bank 30,000 30,000 30,000
Commission receivable 5,000 3,000 8,000 8,000
Office supplies 7,000 5,000 2,000 2,000
Prepaid advertisement 7,000 5,000 2,000 2,000
Investments 100,000 100,000 100,000
Office equipment 25,000 25,000 25,000
Office furniture 15,000 15,000 15,000
Allow for depreciation O/E 1,000 2,400 3,400 3,400
Allow for depreciation O/F 3,000 1,200 4,200 4,200
Salaries payable 5,000 5,000 5,000
Unearned commission 10,000 7,000 1,000 4,000 4,000
Capital 150,000 150,000 150,000
Commission revenue 40,000 1,000 10,000 49,000 49,000
Office salaries expenses 15,000 15,000 15,000
209,000 209,000
Advertisement expense 5,000 5,000 5,000
Office supplies expense 5,000 5,000 5,000
Interest receivable 5,000 5,000 5,000
Interest income 5,000 5,000 5,000
Depreciation expense O/E 2,400 2,400 2,400
Depreciation expense O/F 1,200 1,200 1,200
28,600 54,000 192,000 166,600

Net income 25,400 25,400
29,600 29,600 220,600 220,600 54,000 54,000 192,000 192,000
Q.No.3 Adjusting, Closing and Reversing Entries:

Take the data given in question No. 2.
REQUIRED
Record adjusting, closing and reversing entries.
SOLUTION 3
ASLMA COMPANY
ADJUSTING ENTRIES
1 Unearned commission 7,000
Commission revenue 7,000
(To adjust the unearned commission)
2 Commission receivable 3,000
(To adjust the accrued commission income)
3 Commission revenue 1,000
Unearned commission 1,000
(To adjust the commission revenue)
4 Advertisement expense 5,000
Prepaid advertisement 5,000
(To adjust the prepaid advertisement)
5 Office supplies expense 5,000
Office supplies 5,000
(To adjust the office supplies)
6 Interest receivable 5,000
Interest income 5,000
(To adjust the accrued interest income)
7 Depreciation expenses – O/E {25,000 – 1,000) x 10%} 2,400
Allowance for depreciation – O/E 2,400
(To adjust the depreciation on office equipment)
8 Depreciation expenses – O/F {15,000 – 3,000) x 10%} 1,200
Allowance for depreciation – O/F 1,200
(To adjust the depreciation on office furniture)
ASLMA COMPANY
CLOSING ENTRIES
1 Expense and revenue summary 28,600
Salaries expense 15,000
Advertisement expense 5,000
Office supplies expense 5,000
Depreciation expense – O/E 2,400
Depreciation expense – O/F 1,200
(To close the all expense accounts)


Interest income 5,000
Expense and revenue summary 54,000
(To close the all revenue accounts)
3 Expense and revenue summary 25,400
Capital 25,400
(To close the expense and revenue summary account)
ASLMA COMPANY
REVERSING ENTRIES
FOR THE PERIOD OPENING JANUARY 1, 2016
Commission receivable 3,000
(To reverse the accrued commission income)
2 Unearned commission 1,000
(To reverse the commission revenue)
3 Interest income 5,000
Interest receivable 5,000
(To reverse the accrued interest income)
Q.No.4 Voucher System:

Sadia Company uses voucher system. Selected transactions for August 2015 are as given below:
1) Prepared a cheque of Rs.15,000 to establish petty cash fund.
2) Purchased equipment for Rs.10,000 on credit terms 2/10, n/30 from Modern Traders.
3) Purchased furniture for Rs.30,000 paid Rs.10,000 cash and balance is payable.
4) Returned equipment to Modern Traders worth Rs.500.
5) Paid Modern Traders within discount period.
6) Paid Rs.21,000 to settle notes payable including interest of Rs.1,000.
7) Paid advertisement in advance Rs.15,000.
8) Issued 5% 30 days notes payable of Rs.15,000 and paid Rs.25,000 in full settlement of
vouchers payable of Rs.40,000.
REQUIRED
Using General Journal forms prepare entries in:
(1) Voucher register. (2) Cheque register. (3) General journal.

SOLUTION 4
SADIA COMPANY
GENERAL JOURNAL
(VOUCHER REGISTER)
FOR THE MONTH OF AUGUST 2015
1 Petty cash fund 15,000
Voucher payable 15,000
(To record the voucher issued for petty cash fund)
2 Equipment 10,000
(To record the voucher issued for purchase of equipment)
3 Furniture 30,000
(To record the voucher issued for purchase of furniture)
4 Voucher payable 10,000
Equipment 500
(To record the voucher issued for equipment returned)
6 Notes payable 20,000
Interest expense 1,000
(To record the voucher issued for notes & interest paid)
7 Prepaid advertisement 15,000
(To record the voucher issued for prepaid advertisement)
(To record the voucher issued in settlement of
outstanding voucher)
SADIA COMPANY
GENERAL JOURNAL
(CHEQUE REGISTER)
Bank 15,000
(To record the cheque issued for petty cash fund)
Bank 10,000
(To record the cheque issued for furniture purchased)


Bank 9,310
Equipment (cash discount) 190
(To record the cheque issued for payment to supplier)
Bank 21,000
(To record the cheque issued for payment of notes)
Bank 15,000
(To record the cheque issued for advertisement)
Bank 25,000
(To record the cheque issued for outstanding voucher)
SADIA COMPANY
GENERAL JOURNAL
5% Notes payable 15,000
(To record the note issued for voucher payable)
Q.No.5 Accounts Receivable:

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

SOLUTION 5 (i)
Accounts Receivable
Jan. 1 Balance 150,000 3 Cash 200,000
2 Sales 175,000 4 Sales return 5,000
6 Allowance for bad debts 3,000 5 Allowance for bad debts 7,000
6 Cash 3,000
Dec. 31 Balance c/d 113,000
328,000 328,000
Jan. 1 Balance b/d 113,000
Additional Working:
M/S. ____________
GENERAL JOURNAL
1 Cash 75,000
Sales 75,000
(To record the goods sold for cash)
2 Accounts receivable 175,000
Sales 175,000
(To record the goods sold on account)
3 Cash 200,000
Accounts receivable 200,000
(To record the cash collected from customers)
4 Sales return and allowance 5,000
(To record the goods return by customer)
5 Allowance for bad debts 7,000
(To record the write of customers’ account)
6 (a) Accounts receivable 3,000
Allowance for bad debts 3,000
(To record the recovery of previously written off
customers’ account)
6 (b) Cash 3,000
(To record the cash collected from customer)
SOLUTION 5 (ii)
Computation of Bad Debts Expense by Balance Sheet Approach:
Accounts receivable ending 113,000
Rate of bad debts x 5%
Allowance for bad debts (adjusted/ending) 5,650
Less: Allowance for bad debts (unadjusted/opening) (5,000)
Add: Write – off 7,000
Less: Recovery (3,000)
Bad debts expense 4,650

M/S. ____________
GENERAL JOURNAL
Dec. 31 Bad debts expense 4,650
(To record the bad debts expense for the period)
Allowance for Bad Debts

5 Accounts receivable 7,000 Jan. 1 Balance 5,000
Dec. 31 Balance c/d 5,640 6 (a) Accounts receivable 3,000
12,650 12,650
Computation of Bad Debts Expense by Income Statement Approach:

Credit sales 175,000
Less: Sales return (5,000)
Net credit sales 170,000
Rate of bad debts x 3%
Bad debts expense 5,100
M/S. ____________
GENERAL JOURNAL
(To record the bad debts expense for the period)
Allowance for Bad Debts

5 Accounts receivable 7,000 Jan. 1 Balance 5,000
Dec. 31 Balance c/d 6,100 6 (a) Accounts receivable 3,000
13,100 13,100
SOLUTION 5 (iii)
M/S. ____________
BALANCE SHEET
AS ON DECEMBER 31, 2014
(UNDER BALANCE SHEET APPROACH)
ASSETS EQUITIES
Less: Allowance for bad debts (5,650)
107,350

M/S. ____________
BALANCE SHEET
AS ON DECEMBER 31, 2014
(UNDER INCOME STATEMENT APPROACH)
ASSETS EQUITIES
Less: Allowance for bad debts (6,100)
106,900
Q.No.6 Inventory Valuation:

Following transactions are related to Abid Traders:
Dec. 2015 01 Inventory 500 units @ Rs.7.00
05 Purchased 3,000 units @ Rs.6.00
10 Sold 3,500 units @ Rs.15.00
17 Sold 5,000 units @ Rs.16.00
25 Sold 4,500 units @ Rs.17.00
30 Paid carriage outward on sales Rs.3,000
REQUIRED
Find gross profit using periodic system under:
(a) LIFO Method. (b) Weighted Average Method.
SOLUTION 6 (a)
ABID TRADERS
SCHEDULE OF UNITS PURCHASED, UNITS SOLD AND UNITS AT END
FOR THE PERIOD DECEMBER 2015
Date Particulars Units Unit Cost Total Cost
Dec. 01 Inventory 500 Rs.7.00 Rs.3,500
Dec. 05 Purchased 3,000 Rs.6.00 Rs.18,000
Merchandise available for sale 19,500 Rs.126,500
Less: Units Sold:
Total units sold (13,000)
Ending inventory in units 6,500
Computation of Cost of Ending Inventory by LIFO Method:

Date Particulars Units Unit Cost Total Cost
Dec. 01 Inventory 500 Rs.7.00 Rs.3,500
Ending inventory in units 6,500 Rs.36,500

Computation of Cost of Ending Inventory by Weighted Average Method:

Merchandise available for sale
Average unit cost =
Units available for sale
126,500
Average unit cost =
19,500
Average unit cost = Rs.6.49 per unit
Cost of ending inventory = Units at end x Average unit cost

Cost of ending inventory = 6,500 x 6.49
Cost of ending inventory = Rs.42,185
Computation of Total Sales:

Date Particulars Units Selling Price Total Sales
Dec. 10 Sold 3,500 Rs.15.00 Rs.52,500
Dec. 17 Sold 5,000 Rs.16.00 Rs.80,000
Dec. 25 Sold 4,500 Rs.17.00 Rs.76,500
Total sales 13,000 Rs.209,000
SOLUTION 6 (b)
ABID TRADERS
GROSS PROFIT
FOR THE PERIOD DECEMBER 2015
Particulars LIFO Method Weighted Average Method
Sales 209,000 209,000
Less: Cost of Goods Sold:
Merchandise inventory opening 3,500 3,500
Add: Purchases 123,000 123,000
Merchandise available for sale 126,500 126,500
Less: Merchandise inventory ending (36,500) (42,185)
Cost of goods sold (90,000) (84,315)
Gross profit 119,000 124,685
Q.No.7 Depreciation:
A manufacturing company purchased machine on 1st July, 2011 for Rs.550,000 with estimated life of
10 years and scrap value of Rs.50,000.
On 1st January 2014 the company decided that depreciation method be changed from straight line to
diminishing balance @ 10% per annum.
On 30 June 2015 machine was sold for Rs.350,000.
The company follows calendar year as accounting period.
REQUIRED
Record general journal entry for disposal of machine, showing computations.

SOLUTION 7
Computation of Depreciation Expense by Straight Line Method:
Cost – Salvage value
Annual depreciation =
Estimated life in years
550,000 – 50,000
Annual depreciation =
10
Annual depreciation = Rs.50,000
Depreciation expense for December 31, 2011 = 50,000 x 6/12 = 25,000

Depreciation expense for December 31, 2012 = 50,000
Depreciation expense for December 31, 2013 = 50,000
Computation of Depreciation Expense by Diminishing Balance Method:

Annual depreciation = Book value x Rate
Depreciation Accumulated
Year Cost/Book Value Rate Book Value
Expense Depreciation
2014 550,000 – 125,000 = 10% 42,500 125,000 + 42,500 550,000 – 167,500
425,000 = 167,500 = 382,500
2015 382,500 10% 38,250 x 6/12 = 167,500 + 19,125 550,000 – 186,625
19,125 = 186,625 = 363,375
Computation of Gain or Loss on Sale:

Cost of machine 550,000
Less: Allowance for depreciation (186,625)
Book value 363,375
Less: Sale proceeds (350,000)
Loss on sale 13,375
M/S. ____________
GENERAL JOURNAL
June 30 Cash 350,000
2015 Allowance for depreciation 186,625
Loss on sale 13,375
Machine 550,000
(To record the sale of machine on loss)
Q.No.8 Retirement of Partner:

The following is balance sheet of a partnership firm:
ASSETS EQUITIES
Cash Rs.400,000 Accrued expenses Rs.100,000
Inventory Rs.100,000 A Capital Rs.100,000
Accounts receivable Rs.50,000 B Capital Rs.200,000
Shop building Rs.150,000 C Capital Rs.300,000
Total Rs.700,000 Total Rs.700,000

C retires and receives Rs.350,000 cash in full settlement.

REQUIRED
You are required to record the retirement of C and prepare balance sheet after his retirement, using
both goodwill and bonus methods separately.
SOLUTION 8
Computation of Bonus:
C – Capital 300,000
Less: Paid to C (350,000)
Bonus to C 50,000
_______ PARTNERSHIP
GENERAL JOURNAL
1 C – Capital 300,000
A – Capital (50,000 x 1/2) 25,000
B – Capital (50,000 x 1/2) 25,000
Cash 350,000
(To record the retirement of C)
_______ PARTNERSHIP
BALANCE SHEET
AS ON _______
ASSETS EQUITIES
Current Assets: Liabilities:
Cash 50,000 Accrued expenses 100,000
Inventory 100,000
Accounts receivable 50,000 Owner’s Equity:
Total current assets 200,000 A – Capital 75,000
B – Capital 175,000
Fixed Assets: Total owner’s equity 250,000
Shop building 150,000
Total fixed assets 150,000
Total assets 350,000 Total equities 350,000
Computation of Goodwill:
C – Capital 300,000
Less: Paid to C (350,000)
Goodwill to C 50,000
Total goodwill of firm = 50,000 x 3 = 150,000

_______ PARTNERSHIP
GENERAL JOURNAL
1 Goodwill 150,000
A – Capital (150,000 x 1/3) 50,000
B – Capital (150,000 x 1/3) 50,000
C – Capital (150,000 x 1/3) 50,000
(To record the distribution of goodwill)
2 C – Capital 350,000
Cash 350,000
(To record the retirement of C)
_______ PARTNERSHIP
BALANCE SHEET
AS ON _______
ASSETS EQUITIES
Current Assets: Liabilities:
Cash 50,000 Accrued expenses 100,000
Inventory 100,000
Accounts receivable 50,000 Owner’s Equity:
Total current assets 200,000 A – Capital 150,000
B – Capital 250,000
Fixed Assets: Total owner’s equity 400,000
Shop building 150,000
Goodwill 150,000
Total fixed assets 300,000
Total assets 500,000 Total equities 500,000

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PRINCIPLES OF ACCOUNTING – b.

Compiled & Solved by: Sameer Hussain

Q.No.1 (a) Accounting Principles:

Q.No.1 (b) Trial Balance:

Principles of Accounting – B.Com Part – I – 2015 Regular Solution 1

Principles of Accounting – B.Com Part – I – 2015 Regular Solution 2

Advance from Customer

Principles of Accounting – B.Com Part – I – 2015 Regular Solution 3

Principles of Accounting – B.Com Part – I – 2015 Regular Solution 4

Principles of Accounting – B.Com Part – I – 2015 Regular Solution 5

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

Principles of Accounting – B.Com Part – I – 2015 Regular Solution 6

Date Particulars P/R Debit Credit

Q.No.4 Voucher System:

Principles of Accounting – B.Com Part – I – 2015 Regular Solution 7

Principles of Accounting – B.Com Part – I – 2015 Regular Solution 8

Date Particulars P/R Debit Credit

Q.No.5 Accounts Receivable:

Principles of Accounting – B.Com Part – I – 2015 Regular Solution 9

Principles of Accounting – B.Com Part – I – 2015 Regular Solution 10

Allowance for Bad Debts

Computation of Bad Debts Expense by Income Statement Approach:

Allowance for Bad Debts

Principles of Accounting – B.Com Part – I – 2015 Regular Solution 11

Q.No.6 Inventory Valuation:

Computation of Cost of Ending Inventory by LIFO Method:

Principles of Accounting – B.Com Part – I – 2015 Regular Solution 12

Computation of Cost of Ending Inventory by Weighted Average Method:

Cost of ending inventory = Units at end x Average unit cost

Computation of Total Sales:

Principles of Accounting – B.Com Part – I – 2015 Regular Solution 13

Depreciation expense for December 31, 2011 = 50,000 x 6/12 = 25,000

Computation of Depreciation Expense by Diminishing Balance Method:

Computation of Gain or Loss on Sale:

Q.No.8 Retirement of Partner:

Principles of Accounting – B.Com Part – I – 2015 Regular Solution 14

C retires and receives Rs.350,000 cash in full settlement.

Total assets 350,000 Total equities 350,000

Principles of Accounting – B.Com Part – I – 2015 Regular Solution 15

Total assets 500,000 Total equities 500,000

Principles of Accounting – B.Com Part – I – 2015 Regular Solution 16

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