CONFIDENTIAL 1 AC/AUG 2021/FAR110

UNIVERSITI TEKNOLOGI MARA

FINAL EXAMINATION

COURSE : FINANCIAL ACCOUNTING 1

COURSE CODE : FAR110
EXAMINATION : AUGUST 2021
TIME : 3 HOURS

INSTRUCTIONS TO CANDIDATES

1. This question paper consists of two (2) parts : PART A (10 Questions)
PART B (5 Questions)

2. Answer ALL questions in ENGLISH.

3. Please submit your HANDWRITTEN answers in ONE (1) pdf file. Name the pdf file according
to the following format: name_group_subjectcode.

For example: rosmawatiharon_JAC1101A_FAR110

4. Please make sure EVERY page of your answer sheets contains the followings information:

i) Name
ii) Student ID
iii) Group

DO NOT TURN THIS PAGE UNTIL YOU ARE TOLD TO DO SO

This examination paper consists of 10 printed pages
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CONFIDENTIAL 2 AC/AUG 2021/FAR110

PART A

This part consists of TEN (10) multiple-choice questions. Choose the most suitable
answer.

1. Accounting consists of three basic activities and the first activity is to identify the
economic events relevant to its business. The following are the examples of economic
events EXCEPT

A. Purchase a new computer on credit.

B. Payment of income taxes by cheque.
C. Hire a new employee.
D. Returned goods previously bought to the supplier.
(1 mark)

2. Identify the most CORRECT statement about assets.

A. Assets exist in term of intangible form only.

B. Assets are debt owed by a business to a third party.
C. Assets could not provide future benefits or services to the business.
D. Assets are used by the business to carry out activities such as production and
sales.
(1 mark)

3. Choose the MOST accurate statement about the materiality concept.

A. The recording of assets and liabilities does not necessarily require a strict
adherence to any accounting principles if it is difficult to do so, as long as it does
not significantly affect the reported net income or the financial position of the
business.
B. The purchasing power of the unit of measure in accounting does not change.
C. A business is assumed to continue operating in the foreseeable future.
D. The economic activities of a business can be divided into arbitrary time periods.

(1 mark)

4. Determine the effect on owner’s equity when a business paid salary to its employees.

A. Owner’s equity increase

B. Owner’s equity decrease
C. Owner’s equity increase and decrease
D. No effect on owner’s equity
(1 mark)

5. Debit notes issued by a business is recorded in the _______________________

A. Debit column of the Purchases account

B. Debit column of the Account Payable
C. Debit column of the Purchase Return account
D. Debit column of the Account Receivable
(1 mark)
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6. Identify the INCORRECT statement about a Sales Journal.

A. It is a subsidiary book.
B. It is the original entry for credit sales only.
C. It is recorded with the amount of credit sales after trade discount.
D. At the end of the period, its total is transferred to sales account.
(1 mark)

7. The following errors may occur even though a Trial Balance is balanced, EXCEPT

A. error of omission
B. error of principle
C. error of reversal entries
D. Posting to incorrect side of an account
(1 mark)

8. On 30 June 2020, the accounts clerk of T’neeq Enterprise received the bill from Green
Lane Sdn Bhd for advertisement charges for the month of July 2020 amounted to
RM1,500. The advertisement charges was paid on 30 June 2020. What were the
adjustments to be made on 30 June 2020 if the business closed the accounting books
on that date?

A. Recorded the amount in July 2020.

B. Added the amount in the advertisement charges of June 2020.
C. Deducted the amount in the advertisement charges of June 2020.
D. Add the amount into the bank account of June 2020.
(1 mark)

9. The current ratio and acid test ratio of Unicorn Sdn Bhd are 1.5:1 and 0.8:1
respectively. One reason for such situation is:

A. Value of current liabilities is too low

B. The value of current assets is too high
C. There is too much closing inventory
D. Value of current assets is too high
(1 mark)

10. Cheques received by a business that had been recorded in the bank account but not
yet recorded by the bank in the bank statement are best described as:

A. Bank charges
B. Credit transfer
C. Unpresented cheques
D. Uncredited cheques
(1 mark)
(Total: 10 marks)

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PART B

QUESTION 1

A. Accounting plays a significant role in providing financial information to all business

entities. The management of a business entity is primarily responsible for a
presentation of its financial statement.

Required:

i. State THREE (3) types of business entities.

(3 marks)

ii. State the name of the financial statements and purposes of these statements.

(4 marks)

B. Johan and Zizan are joint owners of Jozan Carpet since the year 2017. At the
beginning of the business, Johan contributed RM60,000 cash while Zizan contributed
a building worth RM150,000 into the business. They also took a loan from bank
amounting RM80,000. In the event of non-performance loan, the bank could extend its
claim to the personal assets of Johan and Zizan. Any contribution and withdrawal by
Johan and Zizan are recorded as capital and drawings respectively.

The business sells its carpets on cash and credit terms. The business will record the
credit sales when the carpets are delivered to the customers and even though
payments are not yet received. Additionally, the business will record all transactions in
Ringgit Malaysia.

During the year 2019, the business bought a delivery van at a price of RM70,000. The
business provides depreciation charges on its non-current assets. As at 31 December
2020, the accumulated depreciation for delivery van and building were RM12,000 and
RM10,000 respectively. Nevertheless, the business maintains to record the value of
these non-current assets at their purchase values in its financial statements. Johan
and Zizan expect the business to survive in the foreseeable future.

Required:

i. Briefly discuss THREE (3) characteristics of the above business set up.
(3 marks)

ii. Suggest FIVE (5) accounting concepts applied in the above scenarios.
(5 marks)

C. Maya started her business, Sihat Trading on 1 June 2020 selling health product
supplement called Vita Care. She invested RM30,000 cash and brought in her
personal furniture worth RM15,000 into the business. The business uses the periodic
inventory system to record the inventory.

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The followings are the transactions of Sihat Trading for the month of June 2021:

June 3 Purchased 100 bottles of Vita Care from Pharma Niaga Bhd worth
RM40 per bottle on credit with credit terms 5/10, n30.
June 5 Sold 10 bottles of Vita Care to Sarah at RM50 each and received cash.
June 7 Returned 5 bottles of Vita Care to Pharma Niaga Bhd due to wrong
delivery.
June 10 Granted a credit sale to Tyra amounting RM2,000 with the terms 2/10,
n30.
June 12 Issued a credit note to Tyra for goods returned worth RM300.
June 16 Took 5 botles of Vita Care worth RM200 to be given to Maya’s parents.
June 19 Received a cheque from Tyra for settlement of her debt.
June 25 Paid amount owing to Pharma Niaga Bhd by cheque.
June 30 Paid cash for utility expenses of RM400 and salaries to employees
amounting to RM1,200.

Required:

Journalise the above transactions in the appropriate special journals. Narration is not
required.
(8 marks)
(Total: 23 marks)

QUESTION 2 transaction analysis is not covered in final exam

A. On 1 May 2021, Sarah set up Sally Boutique, a business selling women attire and
accessories located in Ipoh, Perak. She introduced cash at bank amounting RM50,000
as a capital. At the same time, she brought in furniture valued at RM8,000. On 3 May
2021, she purchased a motor vehicle to be used in the business valued at RM45,000.
A deposit of RM10,000 is made using the business cheque on the same day and the
balance will be paid based on installment of RM700 per month.

On 8 May 2021, she received invoices from two (2) accounts payable, Riezman
Enterprise and Fazz Attire for goods purchased. The values of goods purchased were
RM2,500 and RM1,600 respectively. The credit terms for both purchases were 5/15,
net 30. On 13 May 2021, Sally Boutique issued a debit note to Riezman Enterprise
costing to RM140 for damaged goods. Sally Boutique also issued a cheque amounting
of RM1,000 to Riezman Enterprise as part of settlement on the same day.

On 18 May 2021, Sally Boutique issued a cheque to Fazz Attire for the settlement of
its account. On 30 May 2021, Sally Boutique issues an invoice to Hana Hijab
amounting to RM3,000.

The business uses the periodic inventory system to record the movement of its
inventory.

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Required:

Show the effect of the above transactions on the accounting equation using the
following format.

Example:
January 1: Paid sales commission RM300 by cash.

Date Assets = Liabilities + Owner’s Equity

Capital - Drawings + Revenue - Expenses
Jan 1 -300 -300
(10 marks)

B. The accounts clerk of Rumah Hutan Trading had prepared a trial balance as at 30
June 2021. Although the trial balance was balanced, further observations discovered
the following errors:

1. A new office furniture acquired in the month of June valued at RM12,000 had
been posted to the purchases account.

2. Sales of goods to Style Trading of RM4,400 had been debited to Sales account
and credited to the Style Trading account.

3. A payment of RM1,700 by cheque for advertising had been recorded in the

books of prime entry as RM1,070 in both accounts.

Required:

i. Identify the type of errors made by Rumah Hutan Trading in recording the
above transactions.
(3 marks)

ii. Journalise the correction of the above errors.

(5 marks)
(Total: 18 marks)

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QUESTION 3

Below is the trial balance of Simba Enterprise as at 31 December 2020.

Simba Enterprise
Trial Balance as at 31 December 2020
Debit Credit
(RM) (RM)
Office furniture 20,000
Fixture and fittings 15,000
Accumulated depreciation as at 1 January
2020:
-Office furniture 4,000
-Fixture and fittings 3,000
Inventory as at 1 January 2020 14,750
Account receivables 18,600
Bank 18,500
Cash 2,000
Capital as at 1 January 2020 10,000
Account payables 15,460
4% Short term loan 5,000
Sales 166,800
Sales return 1,200
Sales discount 440
Purchases 26,700
Carriage expenses 4,380
Purchase return 580
Purchases discount 600
Commission received 560
Rental 36,000
Utilities 18,000
Salaries and wages 22,000
Advertisement 8,000
Miscellaneous expense 430
206,000 206,000

Additional information:

1. The closing inventory as at 31 December 2020 was RM12,300. The business used
periodic inventory system to record its inventory.

2. During the year, the owner took inventories worth RM700 for his personal use.

3. The depreciation policy was as below:

Office furniture – 10% per annum, straight line method
Fixture and fittings – 10% per annum, reducing balance method.

4. On 29 December, the business received commission for the month of January 2021
amounting to RM120.

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5. Salaries and wages of RM2,000 for the month of December 2020 is not yet paid.

6. From the total of carriage expenses, RM680 was carriage inwards.

7. The 4% short-term loan above was approved on 31 December 2020.

Required:

a. Prepare the Statement of Profit or Loss for the year ended 31 December 2020 and
Statement of Financial Position as at 31 December 2020.
(20 marks)

b. Explain TWO (2) reasons of charging depreciation on non-current assets.

(2 marks)
(Total: 22 marks)

QUESTION 4

Bahagia Enterprise is a spa that provides services to female customers. The following is the
Statement of Financial Position of Bahagia Enterprise as at 31 March 2021:

Bahagia Enterprise
Statement of Financial Position as at 31 March 2021
(RM) (RM)
Non-Current Assets 28,000

Current Assets
Inventories 25,000
Account receivables 18,700
Prepaid rental 4,300
Cash at bank 2,200
Cash in hand 8,800 59,000
87,000

Financed by: Owner’s Equity

Opening capital 45,000
Add: Net profit 15,000
Closing capital 60,000

Current Liabilities
Account payable 22,600
Accrued salaries and wages 4,400 27,000
87,000

Additional information:

1. The opening inventories were RM5,000.

2. The gross profit for the respective year was RM45,000.

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3. The cash sales and credit sales were RM12,100 and RM48,900, respectively.

4. Below are the ratios of Bahagia Enterprise and Mawar Enterprise for the same
accounting period:

Accounting Ratio Bahagia Enterprise Mawar Enterprise

Current ratio 2.2:1 0.8:1
Gross profit ratio 73.8% 65.2%

Required:

a) Compute the following ratios for Bahagia Enterprise for the year ended 31 March 2021.
Show all workings.

i. Quick ratio
ii. Net profit ratio
iii. Inventory turnover ratio
(10 marks)

b) Based on the above ratios, compare the liquidity and profitability of both businesses.

(4 marks)
(Total: 14 marks)

QUESTION 5

A. State THREE (3) disadvantages for businesses to use cheque as a mode of payment.

(3 marks)

B. Azri, the owner of Azri Enterprise, opened up a current account in Mybank Bhd. The
bank provided overdraft facility to Azri Enterprise. Below is the bank account
maintained by the business and the Bank Statement of Azri Enterprise issued by
Mybank Bhd for the month of December 2020. Azri was concerned about the different
closing balances as shown in both records.

Bank account
Date Particulars Cheque Debit Credit Balance
no. (RM) (RM) (RM)
Dec 1 Balance b/d 15,000
Dec 2 Purchases 112 5,800 9,200
Dec 4 Purchases 113 3,700 5,500
Dec 7 Advertisement 114 1,500 4,000
Dec 8 Utilities 115 600 3,400
Dec 11 Sales 547 8,500 (5,100)
Dec 15 Sales 852 14,000 8,900
Dec 27 Sales 116 5,240 3,660
Commission
Dec 28 Accounts payable 117 8,700 (5,040)
Dec 31 Salaries 118 2,200 (7,240)

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Mybank Bhd
Bank Statement as at 31 December 2020
Date Particulars Cheque Debit Credit Balance
no. (RM) (RM) (RM)
Dec 1 Balance b/d 15,000 Cr
Dec 3 Cheque cleared 112 5,800 9,200 Cr
Dec 5 Cheque cleared 113 3,700 5,500 Cr
Dec 9 Cheque cleared 114 1,500 4,000 Cr
Dec 27 Cheque cleared 116 5,420 1,420 Dr
Dec 27 Standing order 890 2,310 Dr
Dec 28 Cheque deposit 547 8,500 6,190 Cr
Dec 29 Credit transfer 3,000 9,190 Cr
Dec 30 Cheque deposit 954 2,500 11,690 Cr
Dec 30 Cheque deposit 852 14,000 25,690 Cr
Dec 31 Service charges 30 25,660 Cr
Dec 31 Interest 14 25, 674 Cr

Additional information:

1. The bank had wrongly recorded cheque no. 954 which belongs to Azrin Enterprise in
the account of Azri Enterprise.

2. The bookkeeper of Azri Enterprise had made errors in the recording of cheque no. 116
and 547.

Required:

Prepare the bank reconciliation statement for Azri Enterprise as at 31 December 2020.
(10 marks)
(Total: 13 marks)

END OF QUESTION PAPER

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