Question 1(a)

Net income without

Adjustments
the adjustment Net income the adjustment

 Net income would be

Net income would be overstated if no
adjustment is made for the prepaid
Prepaid insurance insurance.
Operating expenses would be
understated by 12,000/2= RM6,000.
Consequently, net income would be
overstated by RM6,000
correctly calculated.
Insurance expenses of
RM6,000 will be
included in operating
expenses
 Net income would be
reduced by RM6,000

 Net income would be

correctly calculated.
Net income would be understated if Rental income of
Unearned rent no adjustment is made for the RM12,000 will be
unearned rent. included in other
Revenue would be understated by revenues
16,000/8*6 = RM12,000.  Net income would be
Consequently, net income would be increased by
understated by RM12,000 RM12,000

 Net income would be

Net income would be overstated if no correctly calculated.
adjustment is made for the accrued Interest accrued of
Accrued interest interest RM1,000 will be
expense Non-operating expenses would be included in interest
understated by RM1,000 expense
Consequently, net income would be  Net income would be
overstated by RM1,000 reduced by RM1,000

Question 1(b)

Matching or accrual principle is violated if adjustments are not made.  As per this
principle transactions should be recorded in the time period in which they actually
occurred, irrespective of the actual cash flow. The idea behind the matching / accrual
principle is that financial events are properly recognized by matching revenues
against expenses. Accordingly, any unpaid expense or revenue received in advance
(unearned revenue) should be reported as liabilities instead of reporting them in
income statement. Any advanced paid expense or revenue accrued but not received
should be shown as assets in balance sheet instead f including in income statement.

Question 2
 Proprietorship Partnership Corporation

a Yes No Yes

b Yes Yes No

c Yes Yes Yes

d No Yes No

e No No Yes

a. Proprietorship means a single person who owns the business while a Partnership
must have more than 2 members for commencing business. While a corporation can
also have only one owner who can be the shareholder.

b. Proprietorship and partnership have unlimited liability which means the personal
property is liable for payment of debt. While corporations will have limited liability to
the owner's shareholding.

c. All three are types of business entity

d. Only partnerships have contract for-profit divisions. While Proprietorship has

single owners, there is no division The Corporation pays dividends, which means the
owner is paid only when the company wants.

e. Proprietorship when the owner retires or dies while partnership ends if one partner
is unable to do business, retires, or dies. While corporation and owners are two
different entities if one owner dies or retires or multiple owners retires or dies it
doesn't close the business. The business will go on.

Question 3 (a)
Date Purchased Cost of Inventory
Goods
Sold

Units Cost per Cost Unit Cost

unit Total Units per Total s per Total
unit unit

01-
May 300 15 4500 300 15 4500

03-
May 270 20 5400 300 15 4500

270 20 5400

08-
May 300 15 4500 70 20 1400

200 20 4000

12-
May 300 24 7200 70 20 1400

300 24 7200

14-
May 70 20 1400 120 24 2880

180 24 4320

23-
May 250 30 7500 120 24 2880

250 30 7500

25-
May 800 25 20000 120 24 2880

250 30 7500

800 25 20000

31- 120 24 2880 270 25 6750

May

250 30 7500

530 25 13250
Inventory at 31 May 2021 by using FIFO Method= $6750

Question 3 (b)

Value of sales = $90750

Value of
Sales

Cost
Units per Total
unit

500 55 27500

250 55 13750

900 55 49500

Total 90750

Value of purchases = $44600

Purchas
ed

Cost
Units per Total
unit

300 15 4500

270 20 5400

300 24 7200

250 30 7500

800 25 2000
 0

4460
Total 0

Cost of Goods sold = 2880+7500+13250

= $23630

Question 4

a. Avira Language Center

Bank Reconciliation

September 2021

Balance as per Bank Statement       29,279

Add: Deposit in transit        1,675

      30,954

Less: Outstanding Cheques

Check No 3030       1,525

Check No 3556       1,459        2,984

Adjusted balance     27,970

Balance as per Company record       27,202

Add: Note collected less collection fee         770

Error in check no 3445           90           860

      28,062

Less: NSF check           67

Bank service charge           25             92

Adjusted balance     27,970

b.
 Date General Journal Debit Credit

Sep
30 Cash         770

Miscellaneous Expense           10

Note Receivable           780

Sep
30 Cash           90

Accounts Payable             90

Sep
30 Accounts Receivable           67

Cash             67

Sep
30 Miscellaneous Expense           25

Cash             25

Question 5

Statement of Profit and Loss and Other Comprehensive Income

 for year ending October 31

Sales 165,486.00

Less Cost of Goods Sold

Beginning Inventory 40,360.00

Add Purchase 102,360.00

Less Ending Inventory - 55,000.0 87,720.00

0

Gross Profit 77,766.00

Less Expense

Carriage inward 2,070.00

Carriage outward 1,890.00

Depreciation expenses 5,900.00

(2%*70000) + (45000*10%)

Bad debt expenses 400.00

Sundry expenses (196+1896) 2,092.00

Repair and maintenance expenses 3,744.00

Rates and occupancy expenses 4,735.00

Salaries expenses (18310+1310) 19,620.00

Total expenses 40,451.00

Net Income 37,315.00

Statement of Financial Position as at October 31

 RM RM

Assets

Current Assets

Cash at Bank 6,453.00

Accounts Receivable 18,910.00

Less Allowance for Doubtful Debts - 900.00 18,010.00

Inventory 55,000.00

Property Plant and Equipment

Building 70,000.00

Less Accumulated Depreciation - 23,400.00

Equipment 45,000.00

Less Accumulated Depreciation - 20,500.00

Total Assets 150,563.00

Liabilities and Stockholders’ Equity

Current Liabilities

Account Payable 22,520.00

Salary Payable 1,310.00

Expenses Payable 418.00

Stockholders’ Equity

Flemington Capital 70,000.00

Retained Earnings 27,000.00

Add Net Income 37,315.00

Less Drawing 8,000.00 56,315.00

Total Liabilities and Equity 150,563.00