ALLAMA IQBAL OPEN UNIVERSITY, ISLAMABAD

(Department of Commerce)

PRINCIPLES OF ACCOUNTING (438)

CHECK LIST

SEMESTER: AUTUMN, 2010

This packet comprises following material:-

1. Text book (One)

2. Assignment No. 1 & 2
3. Assignment forms (One set)
4. Schedule for submitting the assignments and tutorial meetings

If you find anything missing in this packet, please contact at the address given below:

Director
Admission & Mailing
Allama Iqbal Open University
H-8, Islamabad
051-9057611-12

S. M. Aamir Shah
Course Coordinator
9057154

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 ALLAMA IQBAL OPEN UNIVERSITY, ISLAMABAD
(Department of Commerce)

WARNING
1. PLAGIARISM OR HIRING OF GHOST WRITER(S) FOR SOLVING
THE ASSIGNMENT(S) WILL DEBAR THE STUDENT FROM AWARD
OF DEGREE/CERTIFICATE, IF FOUND AT ANY STAGE.
2. SUBMITTING ASSIGNMENTS BORROWED OR STOLEN FROM
OTHER(S) AS ONE’S OWN WILL BE PENALIZED AS DEFINED IN
“AIOU PLAGIARISM POLICY”.

Course: Principles of Accounting (438) Semester: Autumn, 2010

Level: B.A/B.Com Total Marks: 100

ASSIGNMENT No. 1
(Units 1–4)

Q.1 a) Distinguish Double entry system of Book- keeping from single entry. (5)

b) Describe accounting cycle giving explanation to each step. (5)

Q.2 a) What do you think about the differences in book of accounts of a services
enterprise, merchandising enterprise and manufacturing enterprise? (10)

b) M/s Nomi and Brothers started a computer repair services business as a sole
proprietor; he is unaware of maintaining accounting record. He desired you
to Journalize the following transactions in Journal General, post them to
concerned ledgers and prepare trial balance account. (10)
1. Nomi started business with Rs. 100,000
2. Bought PC for office use for Rs. 30,000
3. Bought tool kit for Rs. 15000
4. Purchased office furniture for Rs. 10,000
5. Paid office rent Rs. 5000
6. Purchased stationary for Rs. 500
7. Paid salary to office boy Rs. 2000
8. Services rendered during the month worth of Rs. 10,000 and received
cash.
9. Services performed during the month but not yet billed to clients worth
of Rs. 2000

Q.3 Noor ud Din Company operates consultancy business. Some clients are required to
pay in advance for the company’s services, while other are billed after the services

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 have been rendered. The business adjusts and closes its accounts each month. At
May 31, the trial balance appeared as follows: (20)

Trial Balance
May 31, 2008

Title of Accounts Dr. (Rs) Cr (Rs)

Cash 17150
Fees receivable 37800
Unexpired insurance 2000
Prepaid rent 5400
Office supplies 1050
Office equipment 17100
Accumulated depreciation-office equipment 5700
Accounts payable 3900
Unearned consultancy fees 24000
Capital stock 48600
Consultancy Fees earned 24800
Telephone expense 1200
Salaries expense 19500
Utilities expense 2400
Travel expense 3400
Retained earnings 0

Other information:
• The useful life of the office equipment was estimated at five years.
• Fees of Rs. 6400 were earned during the month by performing services for clients
who had paid in advance.
• Salaries earned by employees during the month but not yet recorded or paid
amounted to Rs. 1700.
• One May 1st the business moved into a new office and paid the first three month’s
rent in advance.
• Consultancy services rendered during the month but not yet collected or billed to
clients amounted to 2900.
• Office supplies on hand may 31st amounted to Rs. 600.
• On April 1st Rs. 2400 was paid as the premium for six months insurance.

1. Prepare the adjusting entries required at May 31st.

2. Prepare work sheet.
3. Prepare formal Profit and Loss account for the month and balance sheet as on
May 31st.

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Q.4 M/s Shoukat a trader extracted the following trial balance from his books for the
year ending 31st March 2010. (20)

Purchases and Sales 22860 41970

Opening Stock (1.4.2009) 5160
Capital 7200
Bank Overdraft 4350
Cash 90
Discount 1440 930
Returns Inwards 810
Return Outwards 570
Carriage outwards 2160
Rent and insurance 1740
Provision for Bad & Doubtful debts 660
Fixtures and Fittings 1200
Delivery Van 2100
Debtors and Creditors 11910 6060
Drawings 2880
Wages and Salaries 8940
General Office Expenses 450 _____
61740 61740
The following adjustments are also to be made.
Adjustments:
a) Stock on 31st March 2010 was Rs. 4290.
b) Wages and Salaries accrued at 31st March 2010, Rs. 210
c) Office Expenses owing Rs. 20.
d) Rent prepaid 31st March 2010 Rs. 180.
e) Increase the provision for bad and doubtful debts by Rs. 810.
f) Depreciation is charged as follows:
Fixture & Fitting 10%.
Delivery Van Rs. 300
Required: Prepare profit and loss account and balance as on 31st March 2010.

Q.5 a) On 1st July 1998, Ajmal purchased a second-hand machine for Rs.46000 and
spent Rs.4000 on its repairs and installation. On 30 th June, 2001 the
machinery as disposed off for a sum of Rs.27000. Assuming the books are
closed on 31st December each year and taking the rate of depreciation at 10%
p.a. on diminishing balance, show the machinery account. (10)
st
b) On April 1 2000, Angro industries purchased new equipment at a cost of
Rs.325000. The useful life of this equipment was estimated at 5 years, with a
residual value of Rs.25000. The equipment on expiry of its life was sold for
Rs.20,000.
Computer the depreciation expense for each year using following methods
and also record the journal entry for disposal of assets on expiry. (10)
(1) Straight line method (2) Declining balance method

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 (3) Sum of years digit method
Q.6 Napa Ltd took delivery of a microcomputer and printer on 1st July, 2009, the
beginning of its financial year. The list price of the equipment was Rs. 4999 but
Napa Ltd. was able to negotiate a price of Rs. 4000 with the supplier. However, the
supplies charged on additional Rs. 340 to install and test the equipment. The
supplier offered a 5% discount if Napa Ltd paid for the equipment and additional
installation cost within seven days. Napa Ltd was able to take advantage of this
additional discount. The installation of special electrical wiring for the computer
cost Rs. 110. After initial testing certain modifications costing Rs. 199 proved
necessary. Napa Ltd also insured the machine against fire and theft at a cost or Rs.
50 per annum. A maintenance agreement was entered into with supplier. Under this
agreement supplier promised to provide 24 hours breakdown cover for one year.
The cost of the maintenance agreement was Rs. 350. (10)

Identify the expenditure which will be capitalized and distinguish capital

expenditure with revenue expenditure by giving justification.

ASSIGNMENT No. 2
(Units 5–9)

Q.1 a) How will you differentiate “Receipt and Payment Account” from “income
and Expenditure Account”? Also explain what type of business use these
accounts? (10)
b) Narrate the steps, which you would take to convert receipt and payment
account into an income and expenditure account. (10)

Q.2 On 1st March Jamal Stores cashbook showed debit balance of cash Rs. 1550 and bank
Rs. 13575/-. During the month of March following business was transacted. (20)

March 1 Purchase office typewriter for cash Rs.750/- and cash sales Rs.1315/-.
March 3 Deposited cash Rs.500/-.
March 4 Received from A. Hassan a cheque for Rs.2550/- in part payment of
his account.
March 6 Paid by cheques for merchandise purchased worth Rs.1005/-
March 8 Deposited into bank the cheques received from A Hassan.
March 10 Received from Hayat Khan a cheque for Rs.775/- in full settlement
of his account and allowed him discount Rs.15/-.
March 12 Sold merchandise to Divan Brothers’ for Rs.15000/- who paid by
cheque which was deposited into bank.
March 16 Paid Salman Rs.915/- by cheque, discount received Rs.5/-.
March 27 Paid to Gulzar Ahmed by cheque Rs.650/-.
March 30 Paid salaries by cheque Rs.1750/-.
March 31 Deposited into bank the cheque of Hayat Khan.
March 31 Drew from bank for office use Rs.250/-.
You are required to enter the above transaction in three column cash book and balance it.
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Q.3 On 31st March the bank statement showed the credit balance of Rs.10500/- cheques
amounting to Rs.2750/- were deposited in the bank but only cheques or Rs.750/-
had not been cleared up to 31st March. Cheques amounting to Rs.3500/- were
issued, but cheques for Rs.1200/- had not been presented for payment in the bank
up to 31st March. Bank had given the debit of Rs.35/- for sundry charges and also
bank had received directly from customers Rs. 800/- and dividend of Rs.130/- up to
31st March. Prepare a bank reconciliation statement and find out the balance as per
cashbook. (20)

Q.4 Following is the Receipts and payment account of Faisalabad Club for the year
ended 31-12-2009. (20)
Receipts Rs. Payments Rs.
Opening Balance 350 Salaries 1400
Subscriptions: General expenses 300
2008 250 Electricity charges 200
2009 1000 Books 500
2010 200 1450 Newspaper 400
Rent received for the use of Hall 700 Closing Balance 200
Profit from entertainment 400
Sales of newspaper 100
3000 3000
a) The club has 50 members, each paying an annual subscription of Rs. 25/-
subscriptions outstanding on 31st December 2008 were Rs. 300/-.
b) One 31-12-2009 outstanding general expenses amount to Rs. 100/- salaries
paid in 1989 included Rs. 300/- for the year 2008.
c) On 1-1-2009 the club owned building valued Rs. 10000/-, Furniture
Rs. 1000/- and Books Rs. 1000/-.
d) Provided depreciation of Furniture 10%.
Required: Prepare Income and Expenditure A/c and Balance Sheet for the year
ended 31st December 2009.

Q.5 Kamran, Imran and Sherzaman are partners in a firm. The share profit and loss in
3:5:2 ratios. Their balance sheet on 31st December is as under: (10)
Equities & Liabilities Amount Assets Amount
Sundry creditors 15000 Cash in hand 5650
Bank overdrafts 6000 Cash in bank 3000
Capital – Kamran 90000 Sundry debtors 11500
Capital – Imran 60000 Stock 45850
Capital – Sherzaman 50000 200000 Furniture 6000
Less depreciation 600 5400
Machinery 49000
Less depreciation 4400 44600
Building 76000
______ Tools (less depreciation) 29000
221000 221000

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 They admit Kamram, at the time of admission, assets were re-valued as such:
1. Stock re-valued Rs. 42000/-.
2. Rs. 200/- on sundry debtors is not to be received.
3. Building is appreciated by Rs. 34300/-.
4. Tools are re-valued at Rs. 37000/-.
5. Furniture is valued at Rs. 5000/- Machinery at Rs. 42000.
6. Kamran contributed Rs. 80000/- for share in profit.
7. Goodwill account for Rs. 85000/- is raised.

Required: Journalize the above matters. Prepare balance sheet of the new firm.

Q.6 Write short notes on the following: (10)

a) Accruals based accounting VS cash based accounting
b) Petty cash Vs imprest system.

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