Last Assignment of PRC-04 August 2022

Last Assignment for
PRC-04
August 2022 Attempt
(Introduction to
Accounting)
Prepared by: Dawood Shahid CA & CIMA Affiliate, CPA, MPhil, MBA, OCE
1) Accrual basis of accounting records revenue when they are
a) Collected b) Earned
c) Contracted d) Readily available for use
2) Which of the following should not be shown as an intangible non-current asset?
a) Purchased goodwill b) Non-purchased goodwill
c) Development cost meeting the d) Other intangible assets having
criteria in IAS 38 readily ascertainable market
value
3) Statement of comprehensive income is prepared for
a) Last day of accounting year b) For whole year
4) Statement of financial position is prepared for
c) Last day of accounting year d) For whole year
5) The matching concept matches
e) assets with liabilities f) income with expenses
g) capital with reserves h) expenses with capital
6) An inexperienced accountant has prepared the current account of one of the
partners as follows:
Rs. Rs.
Interest on capital 33,000 Balance b/d 50,000
Balance c/d 40,000 Drawings 10,000
Share of residual profit 13,000
73,000 73,000
The balance brought down is entered correctly and the amounts of other entries
are correct. However, the accountant is not sure of the difference between debits
and credits.
What should be the correct amount of balance carried down?
a) Rs. 60,000 b) Rs. 70,000
c) Rs. 86,000 d) Rs. 96,000
7) Which of the following errors will create balance in a suspense account?
a) Repairs expense was considered b) Purchase of inventory was
as purchase of asset considered as purchase of non-
current asset
c) An invoice of Rs. 2,500 was totally d) Petty cash expenses of Rs. 500
omitted from the books were only credited to bank
account
8) The purpose of depreciation is to
a) allocate the depreciable cost on a b) write the asset down to its
systematic basis over the asset’s realisable value each period
useful life
c) accumulate a fund for asset d) recognise that assets lose value
replacement over time
9) Zee bought goods on credit from Shan Traders (ST). The goods were not
according to the required specifications and therefore returned to ST. Which
document should Zee send to ST?
a) Credit note b) Debit note
c) Invoice d) Statement of account
10) International Financial Reporting Standards are issued by:
a) Financial Accounting Standards b) International Accounting
Board Standards Board
c) International Accounting d) Generally Accepted Accounting

Standards Committee Principles Board
11) The cost of a wastebasket having an estimated useful life of 5 years is charged off
as an expense upon purchase. This is an example of the application of the:
a) consistency b) matching principle
c) materiality concept d) historical cost principle
12) Debit always means
a) left side of an account b) right side of an account
c) increase d) increase in assets
13) how will these assets expire?
Prepaid rent Office supplies
(a) With the passage of time Through use and consumption
(b) Through use and consumption With the passage of time
(c) With the passage of time With the passage of time
(d) Through use and consumption Through use and consumption
An unearned revenue in the books of a receiver is likely to be
a) a prepaid expense in the books b) a prepaid expense in the books of
of the payer the payer
c) an accrued expense in the books d) an accrued revenue in the books

of the payer of the payer
14) Which of the following is NOT an asset that falls under the scope of IAS 16
Property, Plant and Equipment?
a) Tangible assets b) Assets held for the production or
supply of goods or services
c) Assets held for sale in the d) Assets expected to be used for

normal course of business more than one period
15) Which of the following statements is correct regarding trial balance?

a) Every credit balance represents b) Return inward has debit
income balance
c) Opening stock as well as closing d) Trial balance is a book of prime

stock appear in a trial balance entry
16) Which of the following statements is correct?

a) Directors of a company are b) A sole trader business is owned
personally liable for any losses of by shareholders and operated by
the company the proprietor
c) Partners are liable for losses in a d) A company is run by directors

partnership equally regardless of on behalf of shareholders
their profit-sharing ratio
17) Interest charged on drawings of partners:
a) increases the profit available for b) decreases the profit available for
appropriation to partners appropriation to partners
c) increases expenses of the d) decreases expenses of partnership

partnership business business
18) A motor vehicle was purchased for Rs. 1,395,000 on 1 July 2018. It has an
estimated useful life of 5 years and a residual value of Rs. 255,000. If the sum of
the digits method of depreciation is used, what will be the carrying amount of
motor vehicle as at 30 June 2020?
a) Rs. 711,000 b) Rs. 558,000
c) Rs. 456,000 d) Rs. 303,000
19) During the year 2019, an entity purchased a machine for Rs. 20 million to be used
for 6 years. Which of the following would represent residual value of this machine
in 2019?
a) Rs. 15 million can be currently b) Rs. 4 million can be currently
obtained from disposal of the obtained from disposal of a 6
machine in present condition year old similar machine
c) Rs. 18 million can be obtained in d) Rs. 18 million can be obtained in
2025 from disposal of the machine 2025 from disposal of the
in present condition machine in present condition
20) A, B and C are partners in a firm sharing profit or loss in the ratio of 3:3:4. B is
entitled to an annual commission of 5% on sales. The sales and net profit earned
by the firm during the year are Rs. 12 million and Rs. 3 million respectively. What
is C's share of profit?
a) Rs. 720,000 b) Rs. 1,140,000
c) Rs. 1,560,000 d) Rs. 960,000
21) An entity received electricity bill for the month of June 2020. The bill will be paid on
10 July 2020. The entity's financial year ends on 30 June. How would the payment
be recorded?
a) Debit electricity expense and b) Debit utilities payable and credit
credit utilities payable electricity expense
c) Debit utilities payable and credit d) Debit electricity expense and credit
cash cash
22) Allowance for doubtful debts’ account is:

a) liability account b) asset account
c) contra asset account d) expense account
23) Which of the following does not require journal entry in periodic inventory method?
a) Abnormal loss b) Goods returned by a supplier
c) Closing inventory d) Normal loss
24) For reconciling bank balances, unpresented cheques should be:
a) added to balance of bank b) deducted from balance of bank
statement and deducted from statement or added to balance
balance of cash book of cash book
c) deducted from balance of bank d) added to balance of bank
statement and added to balance of statement or deducted from
cash book balance of cash book
25) Which of the following statement(s) is/are correct?
(I) Higher closing prepaid balance than previous year means that payment for the
year exceeds the expense for the year.
(II) Higher closing accrued income balance than previous year means that receipt for
the year exceeds the income for the year.
a) Only (I) is correct b) Only (II) is correct
c) Both are correct d) None is correct
26) Rent amounts totalling Rs. 150,000 were received during the year ended 31
December 2019. In this respect, opening and closing balances are as under:
31 Dec 2019 31 Dec 2018
----------- Rupees -----------
Unearned rent 16,000 10,000
Rent receivable 13,000 17,000
What should be the rent income for the year ended 31 December 2019?
a) Rs. 144,000 b) Rs. 152,000
c) Rs. 148,000 d) Rs. 140,000
27) A transaction not recorded in any other books of original entry is recorded in:
a) Sales day book b) Purchases day book
c) General journal d) Cash book
28) On 1 February 2019, a loan of Rs. 6,000,000 was taken from a bank for acquisition
of an office building. A portion of the building was rented out on 1 August 2019 at a
monthly rent of Rs. 45,000. Interest is payable at 15% per annum on 31 January
each year and rent is received half yearly in advance.
What amounts of interest payable and unearned rent should be shown in the
statement of financial position as on 31 December 2019?
a) Interest payable Rs. 900,000; b) Interest payable Rs. 825,000;
Unearned rent Rs. 270,000 Unearned rent Rs. 45,000
c) Interest payable Rs. 825,000; d) Interest payable Rs. 825.000;

Unearned rent Rs. 45,000 Unearned rent Rs. 250,000
29) An entity acquired laptops in exchange of desktops which have carrying amount of
Rs. 450,000 and fair value of Rs. 300,000 at the date of exchange. The list price of
the laptops acquired is Rs. 600,000. The entity is also required to pay cash of Rs.
275,000 in this exchange transaction.
The laptops should be initially recognized at:
a) Rs. 300,000 b) Rs. 575,000
c) Rs. 450,000 d) Rs. 600,000
30) Determine the balance as per bank statement using the following information:
Balance as per cash book: 49,100
Cheques received and deposited into the bank, but not yet credited in the bank
statement 4,600
Unpresented cheques; 6,300
Credit transfers appearing in the bank statement but not entered in the cash book;
3,400
a) Rs. 52,500 b) Rs. 54,200
c) Rs. 58,800 d) Rs. 50,800
31) Which of the following statements is correct?
a) Debit balance as per bank b) Debit balance as per cash book
statement means a bank means a bank overdraft
overdraft
c) Credit balance as per bank d) Credit balance as per cash book
statement means a bank overdraft means an asset
32) If a property, plant and equipment remains idle for whole year, the depreciation
expense for the year will be NIL under:
a) straight line method b) reducing balance method
c) units of production method d) all of the above methods
33) On 1 July 2019 a business acquired a shop on rent which is payable quarterly in
advance. Payments of rent were made as follows:
Date Rupees
1 July 2019 75,000
30 September 2019 75,000
31 December 2019 75,000
31 March 2020 75,000
30 June 2020 75,000
What will be the rent expense charged to statement of profit or loss for the year ended
31 August 2020?
a) Rs. 375,000 b) Rs. 300,000
c) Rs. 75,000 d) Rs. 225,000
34) On 4 August 2021 goods were sold on credit for Rs 125,000 with credit terms of
3/10 n/20. On 8 August 2021 goods of Rs 25,000 were returned by the buyer. How
much should the seller expect to receive if the buyer pays on 12 August 2021.
a) Rs 100,000 b) Rs 125,000
c) Rs 97,000 d) Rs 121,250
35) On 30 June 2020, the balance in allowance for doubtful receivables showed Rs
16,000. During the year ended 30 June 2021, receivables of Rs 21,000 were
written off. If allowance for doubtful receivables at 30 June 2021 is Rs 18,000 then
what would be the total effect of bad and doubtful receivables on profit for the
years?
a) Decreased by Rs 19,000 b) Increased by Rs 19,000
c) Decreased by Rs 23,000 d) Increased by Rs 23,000
36) A liability is classified as current liability of it is paid:
a) Within one year or normal b) Within one year or normal
operating cycle, whichever is operating cycle, whichever is
longer shorter
c) Out of current assets d) Out of non-current assets
37) Karachi traders (KT) perform stock count on 10 January 2021 for the year ended
31 December 2021. The stock count revealed inventory value of Rs 480,000.
During 1 January to 10 January 2021, KT sold inventory for Rs 81,000 at a cost
plus mark-up of 35% and purchased inventory of Rs 38,000. The value of
inventory as at 31 December 2020 should be:
a) Rs 523,000 b) Rs 502,000
c) Rs 458,000 d) Rs 437,000
38) On 1 may 2019, an entity hired a firm at an annual fee of Rs 150,000 for
maintaining accounting records. On 1 may 2020 the contract was renewed for
further one year at a revised annual fee of Rs 210,000. The fee is paid quarterly in
arrears on 31 July, 31 October, 31 January and 30 April each year. What figure
should appear for fee in in the financial statements for the year ended 31
December 2020?
Statement of Financial Position Statement of Profit or loss
a) Prepaid of Rs 35,000 Expense of Rs 190,000
b) Prepaid of Rs 17,500 Expense of Rs 180,000
c) Accrual of Rs 35,000 Expense of Rs 190,000
d) Accrual of Rs 17,500 Expense of Rs 180,000
39) Which of the following statements about prudence is correct?
a) Assets and income must be b) The lowest possible values
understated while liabilities and should be applied to income and
expenses must be overstated. assets and the highest possible
values to expenses and liabilities.
c) Assets and income are not d) Understating of assets and
overstated while liabilities and income and overstating of
expenses are not understated. liabilities and expense are
desirable in preparing financial
statements.
40) On 30 June 2021, cashbook of Abbas Enterprises reflected a credit balance of Rs
167,000 and bank statement showed a credit balance of Rs 125,000. Which two of
the following situations can reconcile the balance?
a) Unpresented cheques of Rs b) Unpresented cheques of Rs
304,000 and bank charges of Rs 280,000 and bank charges of Rs
12,000 12,000
c) bank charges of Rs 12,000 and d) Unpresented cheques of Rs
uncleared cheques of Rs 304,000 432,000 and uncleared cheques
of Rs 140,000
41) Income arises from increase in assets or decrease in a liability resulting in:
a. Decrease in equity other than contribution from owner
b. Increase in equity other than contribution from owner
c. Increase in equity including contribution from owner
d. Decrease in equity including contribution from owner
42) Which two of the following would be considered as business transaction?
a. Business paid the electricity bill of previous year
b. Owner received the electricity bill of the owner residence
c. Owner paid the electricity bill of the owner residence from personal cash
d. Business received electricity bill of office premises which will be paid in
next year
43) Which two of the following would be considered as business transaction?

1. Bank set the limit of overdraft of Rs 10 million
2. Interest charged by bank on overdraft.
a) Both are correct b) None is correct
c) Only 1 d) Only 2
44) Which two of the following are not part of a complete set of the financial
statement?
a. Notes to financial statement
b. Statement of financial position
c. Director report
d. Auditor report
45) Total assets of a business would be charged as a result of:

a. Non-current assets being purchased on cash
b. A supplier balance being paid in cheque
c. Wages being paid in cash
d. Non-current assets being purchased on credit
46) A business commenced with capital in cash of Rs. 150,000. Inventory of Rs

100,000 was purchased for cash and half of inventory was sold at a mark-up of
20% on credit. Furniture of Rs. 40,000 was purchased on credit. What will be
accounting equation (A-L=C) after these transactions.
a. Rs. 190,000-Rs. 40,000=Rs. 150,000
b. Rs. 200,000-Rs 40,000=Rs 160,000
c. Rs. 150,000-Rs 40,000=Rs 110,000
d. Rs160,000-Rs 40,000=Rs 120,000
47) Which two of the following would be recorded in General journal?

a. Increase in provision of doubtful debts
b. Advance received from customer
c. Write off of a trade receivable balance
d. Receipt of a written off balance
48) Which of the following document would require a double entry?
a. Sales order
b. Sales invoices
c. Delivery note
d. Statement of account
49) Match each of the following transection with appropriate book of prime entry
Sales made on credit Sales day book
Sales made on cash Cash book
Return by credit customer Return inward journal
Purchase of non-current asset on credit General journal
50) A transection not recorded in any other books of original entry is recorded in:
a. Sales day book
b. Purchase day book
c. Cash book
d. General journal
51) Zee bought goods on credit from Shan traders. The goods were not according to
the required specification and therefore returned to ST. which document should
zee send to ST
a. Statement of account
b. Credit note
c. Debit note
d. Invoices
52) Which two of the following statement are correct regarding trial balances?
a. Opening stock as well as closing stock appear in the trail balance
b. Trail balance is not a book of prime entry
c. Every credit balance represent income
d. Return inward has debit balance
53) On 4 August 2021 goods were sold on credit for Rs. 125,000 with credit term of
3/10, n/20. On 8 August 2021 goods of Rs. 25,000 were returned by the buyer.
How much should the seller expect to receive if the buyer pays on 12 August 2021
a. Rs. 100,000
b. Rs. 121,250
c. Rs. 125,000
d. Rs. 97,000
54) Which two of the following would be appear in trail balance?

a. Gross profit
b. Discount allowed
c. Trade discount received
d. Acc. Depreciation
55) How would these assets will expire?

Prepaid rent Office supplies
Through use and consumption With the passage of time

Through use and consumption Trough use and consumption
With the passage of time Through use and consumption
With the passage of time With the passage of time
56) Consider the following statement:
i. Higher closing prepaid balances than previous year means that payment for the
year exceeds the expense for the year
ii. Higher closing accrued income balances means that receipt for the year exceeds
the income for the year.
Which of the following is/ are correct?

a- None is correct
b- Only 1 is correct
c- Only 2 is correct
d- Both are correct
57) On 1 February 2019 a loan of Rs 6,000,000 was taken from a bank for acquisition
of an office building. A portion of the building was rented out on 1 August 2019 at a
monthly rent of Rs 45,000. Interest is payable at 15% per annum on 31 January
each year and rent are received half yearly in advance.
What amounts of interest payable and unearned rent should be shown in statement of
financial income as on31 December 2019?
a- Interest payable Rs 900,000, unearned rent Rs 270,000
b- Interest payable Rs 450,000, unearned rent Rs 45,000
c- Interest payable Rs 825,000, unearned rent Rs 45,000
d- Interest payable Rs 825,000, unearned rent Rs 250,000
58) An entity received electricity bill for the month of June 20. The bill will be paid on
10 July 20. The entity financial year ends on 30 June. How would the payment be
recorded?
a. Debit utilities payable and credit electricity expense
b. Debit utilities payable and credit cash
c. Debit electricity expense and credit utilities payable
d. Debit electricity expense and credit cash
59) On 1-7-19 a business acquired a shop on rent which is payable quarterly in
advance. Payments are, made as follow:
Date Rupees
1 July 2019 75,000
30 September 2019 75,000
31 December 2019 75,000
31 March 2020 75,000
30 June 2020 75,000
Which will be the rent expense charged to P/L for the year ended 31-08-20
a- Rs 75,000
b- Rs 375,000
c- Rs 300,000
d- Rs 225,000
60) At 31 December 2019 an entity allowance for doubtful receivables amounted to

Rs. 48,000 which was 5% of the receivables at that date. At 31 December 2020
receivables totalled Rs 1,085,000. It was decided to write off Rs 53,000 of debt as
irrecoverable and based on past experience to keep the allowance for doubtful
receivables at 5% of receivables.
What should be the charge in P/L for the year ended 31 December 2020 for bad
and doubtful receivables.
a- Rs 59,250
b- Rs 56,600
c- Rs 49,400
d- Rs 46,750
61) At 31 December 2020 receivables totalled Rs. 785,000 before making the
following adjustment.
i. It was decoded to write off Rs 20,000 of bad debts as irrecoverable and create
specific allowance of 80% against balance of Rs. 75,000.
ii. General allowance for receivables is to be maintained at 5% of receivables.
Allowance for doubtful receivables as at 31-12-19 amount to 31000

What should be the allowance for doubtful receivables at December 2020
a- 110000
b- 109500
c- 95500
d- 94500
62) Which is the purpose of maintaining an allowance for doubtful debt receivables.
a. Records irrevocable debts without taking them out of the books of an entity
b. Records the expense of irrevocable debts
c. Have an estimate of future irrecoverable debts
d. Matches the estimate cost future irrecoverable debts against the revenue earned
in giving rise to the potential irrecoverable debts
63) For reconciling bank balances unpresented cheques should be:

a. Deducted from balance of bank statement or added to balance of cash
book
b. Added to balance of bank statement or deducted from balance of cash book
c. Deducted from balance of bank statement and added to balance of cash book
d. Added to balance of bank statement and deducted from balance of cash book
64) Which of the following statement is correct?

a. Credit balance as per bank statement means a bank overdraft
b. Debit balance as per bank statement means a bank overdraft
c. Debit balance as per cash book means bank overdraft
d. credit balance as per cash book means an asset.
65) Determine the balance as per the bank statement using the following information.
RUPEES
Balance as per cash book 49100
Cheques received and deposited into the bank but not yet credited in the 4600
bank statement
Unpresented cheque 6300
Credit transfer appearing in the bank statement but not entered in the cash 3400
book
a- 52500
b- 54200
c- 58800
d- 50800
66) A business has an overhead absorption rate of RS 425 PER MACHINE HOUR
based on budgeted level of activity. Which is 12400 hours. In the period covered
by the budget actual machine hours worked were 2% more than the budgeted
hours and actual overhead expense incurred was RS. 5638900. What was the
absorbed OH for the period?
a. 5638000
b. 5375400
c. 5270000
d. 5500000
67) What entry should be recorded when actual OH expenditure is incurred
DEBIT CREDIT
COST OF SALE PRODUCTION OH
INVENTORY WIP PRODUCTION OH
PRODUCTION OH CASH
PRODUCTION OH COST OF SALE
68) Consider the following diagram:
Which of the following cost would be most likely to be illustrated by the

diagram given below?
a- Indirect material cost
b- Direct material cost
c- Factory rent
d- Labour cost
69) Which of the following best describes a period cost?

a. A cost that is identifies with a unit produced during the period is included in the
value of inventory. The cost is treated as an expense for the period when the
inventory is actually sold.
b. A cost that can be easily allocated to a particular period without the need for
arbitrary apportionment between periods.
c. A cost that relates to a time period is not included in the inventory
valuation. The entire cost is treated as an expense for the period
d. A cost that is incurred regularly every period e.g., every month or quarter.
70) Which two of the following items would be appearing in analysis of expenses by
nature?
a. Salaries exp
b. Admin exp
c. Distribution exp
d. Finance cost
71) A liability is classified as current liability if it is paid;

a- Out of current assets
b- Within 1 year or normal operating cycle whichever is longer
c- Out of non-current assets
d- Within 1 year or normal operating cycle whichever is shorter
72) The purpose of depreciation is to;

a. Recognize that asset lose value overtime
b. Write the asset down to its realizable value at the end of each period
c. Allocate the depreciable cost on a systematic basis over the asset’s useful
life
d. Accumulate a fund for asset replacement
73) Which of the following is not an asset that falls under the scope of IAS 16 PPE?
a. Assets held for the production or supply of goods or service
b. Tangible assets
c. Assets held for sale in the normal course of business
d. Assets expected to be used for more than one period
74) A motor vehicle was purchased for RS. 1395000 on 1 July 18. It has an estimated
useful life of 5 year and residual value of RS. 255000. If the sum of digit method is
used for depreciation what will be the carrying amount of the motor vehicle as at
30 June 2020
a. RS 303000
b. RS 456000
c. RS 711000
d. RS 558000
75) During the year 2019 an entity purchased a machine for RS. 20 million to be used
for 6 years. Which of the following would represent residual value of the machine
in 2019?
a. Rs 4 million can be currently obtained from disposal of a 6-year-old similar
machine
b. Rs 15 million can be currently obtained from disposal of the machine in present
condition
c. Rs. 18 million can be obtained in 2025 from the disposal of the machine in
present condition.
d. Rs. 7 million can be obtained in 2025 from disposal of a 6-year-old similar
machine.
76) If a PPE remains idle for whole year the depreciation expense for the year will be
NIL under:
a. Straight line method
b. Units of production method
c. Reducing balance method
d. All of the above method
77) Which of the following does not require Journal entry in periodic inventory method?
a. Goods retuned by a supplier
b. Closing stock
c. Abnormal loss
d. Normal loss
78) A company purchased an inventory item at purchase price at RS 1800 and also
incurred freight in cost of RS. 155. The item will be sold at a margin of 15% after
incurring freight out and packing cost of RS 200 and RS 150 respectively. At which
value the item should be carried in the books?
a. RS 1800
b. RS 1955
c. RS 1950
d. RS 2300
e. RS 2150
f. RS 2100
79) Which two of the following is included in cost of inventory?

a. Recoverable taxes paid on purchases
b. Normal wastages of material
c. Selling cost
d. Fixed manufacturing overheads
80) Bilal has started a trading business. He deals in goods where price is usually rising
over the time. Which of the following statement is correct regarding selection of
FIFO and average method in this case?
a. FIFO will result in lower reported profit
b. Average method will give more accurate profit
c. Avg. method will lead will higher cost of ending stock
d. Profit will be unaffected by the selection of inventory method
81) In preparing its financial statement for the current year an entity closing inventory
was understated by RS. 200000. What will be the effect of this error if it remains
uncorrected?
a. The current year profit will be overstated and next year profit will be understated
b. The current year profit will be understated and next year profit will be
overstated
c. The current year profit will be overstated but there will be no effect on next year
profit.
d. The current year profit will be understated but there will be no effect on next year
profit.
82) Which of the following is the correct entry of not-sufficient-fund (NSF)?

Answer: Receivables (Dr) Bank (Cr)
83) Which of the following is the correct entry of not-sufficient-fund (NSF)?

Answer: Receivables (Dr) Bank (Cr)
84) Statement of Comprehensive income is prepared for

a) Whole year b) Last day of Accounting year
85) Statement of Financial Position is prepared for

b) Whole year b) Last day of Accounting year
86) Seller received which note from buyer?

a) Debit note b) Credit Note.
87) Credit sales goes to which of the following books of prime entry?
a) Sales day Book
88) Credit note issued is recorded in which Books of Prime Entry?

a) Sales return Day book.
89) Debit note issued is recorded in which Books of Prime Entry?

a) Purchase return Day book.
90) Credit note received is recorded in which Books of Prime Entry?

A) Purchase return Day book.
91) What is the Journal entry of settlement discount?

Discount Allowed Dr receivables Cr.
92) Dishonour cheques are recorded on which side of the Cash book?
a) Receipt side
b) Payment side
c) Both sides
d) None of these
93) Replenishment in petty cash fund is recorded in

a) Cash book + petty cash b) Petty cash
c) Sales day book d) Purchase day book
94) Accrual for Receiver is Prepayment for Payer
a) True b) False
95) Petty cash book must follow imprest system
a) True b) False
96) Petty expenses may exceed imprest amount.
a) True b) False
97) What are the properties of trial balance?
1) It is a summary of debit and credit balances which are extracted from various
ledger accounts.
2) It is a summary of debit and credit balances.
3) The motive behind the preparation of Trial balance is to establish arithmetical
accuracy of the transactions recorded in the Books of Accounts.
4) It serves as evidence that the double entry system has complied duly
5) It facilitates the preparation of the financial statements.
98) What is materiality concept?
Answer
Materiality concept in accounting refers to the concept that all the material items should be reported
properly in the financial statements. Material items are considered as those items whose inclusion or
exclusion results in significant changes in the decision making for the users of business information.
99) what is cost of conversion?

Answer: Direct labour+ factory Overheads
100) sales are recorded in?

a) Sales day book b) Sales return day book
c) General ledger d) General Journal
101) Which of the following cost is capitalised?
a) Interest paid on loan b) Monthly electricity bill
c) Carriage paid on purchase of d) Annual motor vehicle tax.
plant
102) If we issue amount to replenish petty cash book, then it is recorded in
a) General journal b) Debit side of cash book
c) Credit side of cash book d) General ledger.
103) Which of the following is business transaction?
a) Electricity bill paid of owner house. b) Wages being paid by cash
c) Hiring of salesman for business d) Selection of better quality
material for business
104) If we pay our supplier by bank overdraft, then it is
a) Decrease in asset and increase in b) Decrease in asset and decrease
liability in liability
c) Decrease in liability and d) Increase in liability and increase
increase in another liability in another liability
105) Which of the following is business transaction?
a) Electricity bill paid of owner house. b) Payment to supplier and
electricity bill of factory
c) Hiring of salesman for business d) Selection of better quality
material for business
106) In output method, Depreciation is charged on which basis?
a) Usage of asset basis b) Value of asset basis
c) Useful life basis d) All of these
107) What is consistency basis in accounting?
Answer: In accounting, consistency requires that a company's financial statements follow the
same accounting principles, methods, practices and procedures from one accounting period to
the next. This allows the readers of the financial statements to make meaningful comparisons
between years.
108) What is retail method?

Answer: t is often used in the retail industry for measuring inventories of large numbers of rapidly
changing items with similar margins for which it is impracticable to use other costing methods. The cost
of the inventory is determined by reducing the sales value of the inventory by the appropriate
percentage gross margin.
109) What is the entry of stock given in Charity under periodic system?
a) Debit: charity expense b) Debit: charity expense
Credit: Purchases Credit: inventory
c) Debit: charity expense d) Debit: charity expense
Credit: supplier Credit: purchases return
110) What is the entry of stock given in Charity under perpetual system?
a) Debit: charity expense b) Debit: charity expense
Credit: Purchases Credit: inventory
c) Debit: charity expense d) Debit: charity expense
Credit: supplier Credit: purchases return
111) What is the entry of dishonoured cheques?
a) Debit: Receivables b) Debit: Bank Account
Credit: bank Account Credit: Receivables
c) Debit: Receivables d) Debit: Payables
Credit: Cash Account Credit: bank Account
112) An asset was purchased for Rs. 1,000,000 with the down payment of Rs. 200,000
and bills accepted for Rs. 800,000/-.
What would be the effect on the total asset and total liabilities in the statement of financial position?
a) Assets increased by Rs.800,000 and liabilities decreased by Rs.800,000

b) Assets decreased by Rs.800,000 and liabilities increased by Rs.800,000
c) ) Assets increased by Rs.1,000,000 and liabilities increased by Rs.800,000
d) Assets increased by Rs.800,000 and liabilities increased by Rs.800,000
113) When market prices are declining, which method give less profit?
a) FIFO b) Weighted average
c) Both of these d) None of these
114) The process of classifying amounts from books of prime entry to ledgers is called
a) Posting b) Recording
c) Summarizing d) Presentation
115) What are the limitations of trial balance?
Answer:
Both the debit and credit columns of the trial balance may be equal in spite of certain mistakes of
omissions and principles. These errors may be mentioned as under:
1) Errors of omission in the books of original record

2) Errors of principle (posting on right side of wrong account nature wise)
3) Compensating errors (same amount effect on debit and credit side)
4) Incorrect account in the original books (on both sides)
5) Posting to wrong account (but on right side)
116) What is the entry of discount allowed?

a) Debit: Discount Allowed b) Debit: Discount Allowed
Credit: Sales Credit: Receivables
c) Debit: Discount Allowed d) Debit: Discount Allowed
Credit: purchases Credit: Payables
117) Discount received is recognised as:
a) Reduction from purchases in b) Expense in profit or loss
general journal. statement
c) In purchase return journal d) Deduction in purchase day book
118) Bad debts recovered is recognised as:
a) Increase in allowance b) Other income
c) An expense d) None of these
119) Payment of goods in transit is recorded in BRS
a) Added in Bank statement balance b) Deducted from Bank statement
or deducted from cashbook balance or added in cashbook
balance balance
c) Is never adjusted in BRS d) None of these.
120) Royalty paid is
a) Direct expense b) Indirect expense
c) Capital expenditure d) Admin expense
121) Dishonoured cheque is recorded in
a) Receipt side of cashbook b) Payment side of cashbook
c) Both sides of cashbook d) None of these
122) Prudence concept means that
1. Expenses and liabilities must not be understated
2. Incomes and assets must not be overstated.
a) Only 1 is correct b) Only 2 is correct
c) Both are correct d) None of these
123) Which of the following transaction will affect the receivable account?
a) Bad debts expense b) Allowance for bad debts
c) Purchase return d) Trade discount
124) Increase in liability and increase in capital results in
a) Asset Increase b) Assets Decrease
c) No impact d) None of these.
125) Which of the following elements have same nature?
a) Assets and liabilities b) Capital and liabilities
c) Assets and capital d) Capital and expenses
126) If credit side< debit side in asset account, then difference is
a) Positive balance b) Negative balance
c) Credit balance d) None of these
127) Find depreciation expense in third year of an asset from using the following data:
Cost of asset= 25 million, residual value=2 million, reducing balance method having rate of 20%
After two years’ company shifted its method to straight line with revised residual value 3
million and remaining useful life 6 years.
128) What are the generally accepted accounting principles in Pakistan?
a) IFRSs b) Companies Act 2017.
c) Both a and b d) None of these
129) Son received money Rs 1,000,000 from his father. Is this a business transaction?
a) Yes b) No
130) Equity is residual interest in the assets of business after deducting current
liabilities. Is this definition correct?
a) Yes b) No
131) In which book of prime entry drawings is initially recorded?
a) Purchase day book b) Sales day book
c) Cash book d) General Journal
132) Which of the following is taken as a test of arithmetical accuracy?
a) General Journal b) General ledger
c) Books of prime entry d) Trial balance
133) In the year to 31 December 2018, Saira received Rs. 50,800 rental income. The
amounts of rent received in advance and due in arrears were as follows:
31 Dec 2018 31 Dec 2017
Rs. Rs.
Rent received in advance 4,000 3,000
Rent due in arrears (accrued) 2,500 1,700
What figure for rental income should be recorded in the statement of profit or loss for the year ended
31 December 2018?
a) Rs. 50,800 b) Rs. 50,600

c) Rs. 54,500 d) Rs. 56,000
134) ABC Limited receives advance rent from its tenant of Rs.1 million on 31st
December in respect of office rent for the following year.
ABC Ltd. has an accounting year end of 31st December. What accounting entry is to be passed in this
year?
a) Cash (debit) = Rs.1 million and Advance rent – liability (credit) = Rs.1 million
b) Cash (debit) = Rs.1 million and Accrued rent (credit) = Rs.1 million
c) Cash (debit) = Rs.1 million and Rent income (credit) = Rs.1 million
d) None
135) Doubtful debt allowance account is
a) Asset account b) Liability account
c) Contra asset account d) Expense account
136) Depreciation expense is similar in concept with
a) Prepaid insurance b) Prepaid salary
c) Unearned revenue d) Accrued revenue
137) What is the difference between net asset and total asset?
Total Assets= equity + total Liabilities
Net Asset= Total Assets – Total liabilities = equity
138) What is cost unit?
Answer
A cost unit is defined as “a unit of quantity of product, service, or time (or a combination of these) in
relation to which costs may be ascertained or expressed.” In other words, a cost unit is a standard or
unit of measurement of the goods manufactured or services rendered.
Electric Company: Cost unit per unit
Furniture Industries: Cost unit per number
Brick Industries: Cost unit per 1000 bricks
Oil Companies: Cost unit per liter
139) Which one is incorrect?

1. All items of property plant and equipment must be depreciated
2. Depreciation charged in straight line method when asset is available for use
e) Both are correct f) None is correct
g) Only 1 h) Only 2
140) Which of the following is correct?
1. The balance of allowance for doubtful debts records irrecoverable debts without taking them
out of the books
2. The balance of bad debts recovered will carry down to next accounting period
c) Only 1 d) Only 2
141) Which of the following is not in the trial balance of perpetual inventory system?
a) Cost of goods sold b) Inventory
c) Sales return d) Purchase return
142) Direct cost is?
a) Directly attributable to a cost b)
unit
c) d)
143) In an account if credit side < debit side then the resulting balance is:
a) Debit b) Positive
c) Negative d) Credit
144) Which of the following is/ are correct?
1. Credit entries decrease liabilities and increase income.
2. Credit entries decrease expenses and increase assets
c) Only 1 d) Only 2
145) Balance of which of the following groups of item would appear on opposite sides of
a trial balance?
a) Inventory and drawings b) Carriage in and carriage out
c) Sales and return outwards d) Trade receivables and return
outwards.
146) Which of the following statements are correct?
1. Sum of digits method and reducing balance method gives higher depreciation in early years
2. Straight line method and sum of digit method compute depreciation over economic life
c) Only 1 d) Only 2
147) Which two of the following transactions will affect the assets and liabilities of the
business at the same time?
a) Purchase of office furniture on b) Credit sale of inventory
credit
c) Receipt of cash from customer d) Repayment of principal amount
of a loan
148) Why is it necessary to account for accrued expenses?
a) So that current liabilities are not b) So that current assets are not
overstated understated
c) So that profit is not understated d) So that profit is not overstated
149) What is an asset?
a) An asset is a present economic b)
resource controlled by the
entity as a result of past event.
c) d)
150) Which of the following is correct?
1. The good debts do not require any special accounting treatment unlike bad and doubtful debts
2. The doubtful debts must stay in the accounting records so that the business continues to chase
payments
c) Only 1 d) Only 2
151) Which of the following equation is correct for calculating cost of goods
manufactured?
a) =Prime Cost + Opening inventory (raw material) – Closing inventory (raw material)
b) = Prime Cost + Opening inventory (WIP) – Closing inventory (WIP)
c) =Factory Cost + Opening inventory (raw material) – Closing inventory (raw
material)
d) = Factory Cost + Opening inventory (WIP) – Closing inventory (WIP)
152)
Question-1
Following is the trial balance of Salman for the year ended 30 June 2014:
Rs. In ‘000’
Debit Credit
Drawings 30,500 Salman’s capital 300,000
Trade Debtors 109,420 Creditors 104,724
Goodwill 20,000 Loan taken from bank 40,000
Interest on Bank loan 800 Bad debts provision as on 1 900
July 2013
Cash in hand 728 Sales 353,300
Plant & Machinery-WDV 45,000 Interest received 11,930
Factor building-WDV 42,400 Bills payable 23,150
Sales return 10,000 Accrued expenses 3,460
Cash at bank 13,512 Other income 3,100
Power and utility charges 6,500
Trade discount 2,432
Purchase less return 330,530
Salaries and wages 40,400
Rent and rates 6,992
Insurance 2,000
Advertisement 4,512
Opening stock 127,762
Carriage inward 10,420
Bills receivable 32,526
Miscellaneous expenses 4,130
840,564 840,564
Additional information:
(i) On 1 July 2013 a machine was purchased for Rs. 500 thousand. However, this
cost has wrongly been posted to the purchases account.
(ii) Salman’s son works as the head of administration and received a salary of Rs.
150 thousand per month, which has been included in drawings.
(iii) Insurance premium was paid in advance to the extent of Rs. 650 thousand.
(iv) Depreciation is to be charged on written down value (WDV) as follows:
Plant and machinery 10%
Factory and building 5%
(v) Provision for bad debts is maintained at 2% of trade debtors.
(vi) Closing stock as on 30 June 2014 amounted to Rs. 237,500 thousand.
Required:
Prepare statement of comprehensive income (Trading and Profit and Loss account) for
the year ended 30 June 2014 and statement of financial position (Balance Sheet) as at
30 June 2014. (20)
Question-2
Following is the summarized trial balance of Fortune Traders (FT) for the year ended
30 June 2016:
Debit Credit
Rs. In “000”
Buildings - cost 3,700
Buildings - accumulated depreciation as at 1 July 2015 1,436
Plant and machinery - cost 6,650
Plant and machinery - accumulated depreciation as at 1 July 2015 2,414
Stock-in-trade as at 1 July 2015 1,045
Purchases 16,000
Purchase returns 220
Sales 28,900
Sales returns 90
Capital as at 1 July 2015 3,000
Selling and administration expenses 5,855
12% loan payable 5,000
Trade receivables 3,600
Provision for doubtful debts as at 1 July 2015 180
Prepayments and other receivables 380
Trade and other payables 2,080
Cash and bank balances 5,850
Suspense account 60
43,230 43,230
(i) FT depreciates its fixed assets from the month of addition. Depreciation is to be
charged on written-down value (WDV) as follows:
Plant and machinery 10%
Building 5%
(ii) On 1 March 2016, FT paid an advance of Rs. 330,000 for purchase of a machine
and debited it to plant and machinery. The machine was delivered on 1
September 2016.
(iii) Closing inventory was valued at Rs. 1,560,000. This included goods costing Rs.
35,000 returned by a customer on 30 June 2016 but not yet accounted for. These
goods were earlier sold at cost plus 40%.
(iv) The loan was acquired on 1 January 2016 and the principal amount is repayable
in eight equal half yearly instalments commencing from 1 January 2017. Interest
is payable half yearly on 1 January and 1 July each year.
(v) Selling and administration expenses include fire insurance premium amounting to
Rs. 430,000 and Rs. 240,000 paid for office and owner's personal premises
respectively. The policies are valid up to 31 December 2016.
(vi) Rent and salaries amounting to Rs. 137,000 and Rs. 89,000 respectively are to
be accrued at 30 June 2016.
(vii) At 30 June 2016, the provision for doubtful debts is to be reduced by Rs. 30,000.
(viii) Suspense account represents an error which occurred when a credit note of Rs.
30,000 received for goods returned to a supplier was mistakenly posted as credit
to trade payable account.
Required:
(a) Prepare a statement of comprehensive income for the year ended 30 June 2016.
(08)
(b) Prepare a statement of financial position as at 30 June 2016. (09)
Question 3:
Azam owns a retail outlet with the name Azam Autoparts Store. The trial balance as at
30 June 2015 is as follows:
Debit Credit
Rs. In ‘000’
Shop equipment- net 5,880
Motor vehicles- net 3,820
Stock as at 1 July 2014 14,500
Prepaid rent 2,000
Bank 8,500
Cash 50
Bank loan 5,050
Creditors 2,500
Accrued expenses 60
Capital 27,883
Sales 131,943
Purchases 105,950
Utility expenses 1,060
Vehicle expenses 1,205
Interest expenses 600
Renovation expenses 5,500
Salaries and wages 10,250
Depreciation expenses 2,075
Operating expenses 6,046
167,436 167,436
(i) Closing stock as at 30 June 2015 was Rs. 24,090 thousand.
(ii) Depreciation on fixed assets is charged at the rate of 20% on reducing balance
method.
(iii) Shop equipment was purchased on 1 July 2014 for Rs. 1,400 thousand. No
depreciation has been charged on it.
(iv) Renovation expenses represent cost of fixtures purchased for the shop.
(v) Rent is payable on yearly basis on 30 September. The expired rent till 30
September 2014 is included in operating expenses.
(vi) Bank loan was received on 1 July 2014. Interest payable for the month of June
2015 has been credited to the loan account.
(vii) Azam withdrew goods costing Rs. 4,000 thousand for personal use during the
year. However, no entry was made to record the withdrawal of goods.
(viii) Operating expenses include annual payment of fire insurance for shop and
personal expenses of Azam amounting to Rs. 725 thousand and Rs. 215 thousand. Fire
insurance policy would expire on 30 November 2015.
Required:
Prepare statement of comprehensive income for the year ended 30 June 2015 and
statement of financial position as at 30 June 2015. (20)
Question 4:
Following information has been extracted from the records of Falcon Traders (FT) for
the year ended 31 December 2013:
Non-current assets Rupees
Freehold land 100,000
Building 610,000
Plant and machinery 330,000
Office equipment 115,000
Current assets
Stock 183,000
Debtors 177,000
Bank 45,000
Non-current liabilities
10% long term loan from 190,000
bank
Current liabilities
Trade creditors 75,000
Creditors for office 35,000
expenses
Non-current assets Rupees
Freehold land 100,000
Building 610,000
Following information is available for the year 2014:
(i) Cash sales made during the year amounted to Rs. 375,000. Credit sales were
75% of the total sales and the amount collected from debtors was Rs. 1,035,000.
Provision for doubtful debts has to be made equal to 5% of the debtors’ balance
at the end of 2014. The provision for doubtful debts at the end of 2013 was nil.
(ii) Payments made to trade creditors amounted to Rs. 641,450. Credit purchases
were Rs. 664,950 whereas cash purchases were 35% of the total purchases.
(iii) FT paid Rs. 38,000 against salaries, Rs. 30,000 against office expenses and Rs.
45,000 against selling expenses.
(iv) Cash discount allowed to customers during the year amounted to Rs. 21,000
whereas discount received from suppliers was Rs. 13,000.
(v) On 1 July 2014 FT sold one of the old machinery at a loss of Rs. 15,000. On 31
December 2013 this old machinery had a book value of Rs. 54,800. On 1
October 2014 a new machine Z was purchased in its place at a cost of Rs.
164,800.
(vi) On 1 January 2014, office equipment was sold at its book value for Rs. 20,000.
(vii) Depreciation is to be provided on building at 10%, plant and machinery at 15%
and office equipment at 20% per annum on their book value.
(viii) Interest on long term loan at 10% per annum together with part payment of the
principal sum of Rs. 25,000 was made on 31 December 2014.
(ix) On 31 December 2014 closing stock was Rs. 90,000 and creditors for office
expenses were Rs. 28,000.
Required:
(a) Prepare a statement of comprehensive income for the year ended 31 December
2014. (09)
(b) Prepare a statement of financial position as at 31 December 2014. (11)
Question-5
Following summarised trial balance as at 31 December 2015 pertains to Moon Trading
(MT) who deals in office machines:
Debit Credit
Rs. In million
Fixed assets at cost 150
Accumulated depreciation 45
Trade debtors 200
Provision for doubtful debts 6
Inventory 410
Prepayments, advances and other receivables 9
Cash and bank balances 5
Capital 50
Bank loan 160
Trade creditors 320
Accruals and other payables 25
Sales revenue 2,840
Purchases 2,141
Selling and administration expenses 540
Interest on bank loan 8
Bank charges 2
Other income 15
Suspense account 4
3,465 3,465
(i) Inventory is valued under the FIFO method. Value of inventory as at 31
December 2015 amounted to Rs. 530 million.
(ii) During stock taking, it was noted that:
 A photocopy machine appearing in inventory is being used in the office since
1 October 2015. The cost of the machine is Rs. 0.78 million.
 Four computers were found to be short. It was discovered that these
computers costing Rs. 0.32 million had been issued for use by the proprietor’s
family members.
 Items costing Rs. 4.5 million were returned to a supplier on 31 December
2015. The return was recorded in January 2016.
 Items having invoice value of Rs. 2.4 million sold on credit were returned by a
customer on 31 December 2015. A credit note was issued and recorded by
MT on 12 January 2016. The profit margin on these items was 20% of cost.
(iii) Depreciation is charged on all fixed assets at 20% per annum under the straight
line method.
(iv) A recovery of Rs. 3.5 million against debts written off in prior years was credited
to trade debtors. MT’s policy is to provide doubtful debts at 3% on year-end
balance.
(v) Review of other income revealed the following information:
 Services for certain contracts amounting to Rs. 1.2 million were rendered in
December 2015 but invoices thereof were processed in January 2016.
 On 1 August 2015, MT received an amount of Rs. 1.8 million as 50% advance
against a maintenance contract covering the period from 1 September 2015
to 31 May 2016 and was credited to other income. The balance amount would
be paid on completion of the contract.
(vi) Office supplies purchased during the year are directly debited to expenses.
Unused office supplies at beginning and close of the year amounted to Rs. 0.45
million and Rs. 0.6 million respectively.
(vii) The bank loan was acquired on 1 April 2015. The principal amount is repayable
in five equal annual instalments on 31 March each year. Interest is payable at
10% per annum on six monthly basis and is recorded at the time of payment.
(viii) Suspense account represents a commission (net of bank charges amounting to
Rs. 0.25 million) received on 1 September 2015.
Required:
(a) Prepare a statement of comprehensive income for the year ended 31 December
2015. (11)
(b) Prepare a statement of financial position as at 31 December 2015. (09)
Question-6
Following is the summarised trial balance of Rainbow Lights (RL) for the year ended
31 December 2016:
Debit Credit
Rs. In million
Capital – 1 January 2016 100
Profit and loss account – 1 January 2016 30
Drawings 50
Fixed assets – cost 270
Accumulated depreciation 150
Closing inventory 170
Trade debtors 400
Provision for doubtful debts 12
Cash and bank 20
10% Long-term loan 120
Trade creditors 240
Sales 750
Cost of sales 304
Selling and administration expenses 146
Financial charges 10
Miscellaneous income 45
1,445 1,445
(i) RL uses perpetual inventory method to record its inventory. During the physical
inventory count carried out on 31 December 2016, following matters were noted:
Inventory shortages amounted to Rs. 2 million which is considered to be normal.
Goods costing Rs. 15 million were damaged in fire and have no sales value.
Goods costing Rs. 1 million were withdrawn by the owner for his personal use but no
adjustment was made in the books.
Goods sold on credit for Rs. 7 million were returned but have not been accounted for.
These goods were sold at cost plus 40%.
(ii) Goods sold on credit at a trade discount of 5% were recorded at gross amount of
Rs. 20 million.
(iii) Rs. 2 million were recovered in full and final settlement of an old outstanding
balance of Rs. 3 million which had been written-off last year. The amount
recovered was credited to trade debtors account.
(iv) RL maintains a provision for doubtful debts at 3% of the year-end balance.
(v) Miscellaneous income includes Rs. 12 million received against an annual
maintenance contract expiring on 30 April 2017.
(vi) Annual rent amounting to Rs. 24 million was paid in advance on 1 October 2016
and charged as an expense.
(vii) Long-term loan was acquired on 1 February 2016 and is repayable in 2020.
Interest thereon is due semi-annually on 1 August and 1 February each year.
Interest is charged to expenses at the time of payment.
(viii) An equipment costing Rs. 8 million was purchased on 1 September 2016 against
advance payment. The equipment was not used and returned on 31 December
2016. The supplier agreed to set-off the cost of the equipment against the
amount payable by RL. The return as well as reversal of depreciation is yet to be
recorded in the books.
(ix) Depreciation on fixed assets is charged at 15% per annum from the month of
addition to the month prior to disposal using reducing balance method.
Required:
(a) A statement of comprehensive income for the year ended 31 December 2016. (10)
(b) A statement of financial position as at 31 December 2016. (11)
Question-7
Following is the summarised trial balance of Home Appliances (HA) for the year ended
30 June 2017:
Debit Credit
Rs. in “000”
Fixed assets – cost 35,000
Accumulated depreciation – 1 July 2016 8,000
Inventory – 1 July 2016 8,200
Provision for doubtful receivables – 1 July 2016 750
Prepayments and other receivables 2,350
Capital 25,500
Drawings 4,500
Trade payables 10,200
Accruals and other payables 5,310
Sales 101,120
Return inwards 3,000
Purchases 70,000
Wages and salaries 5,900
Discounts 1,600
Utility charges 2,350
Carriage inwards 1,360
Running and maintenance expenses 3,290
Miscellaneous income 110 110
Suspense account 940
151,930 151,930
(i) Cost of closing physical inventory was Rs. 9,000,000. However, goods returned
by a credit customer on 30 June 2017 were received after completion of the
count, therefore, not included in the inventory. These goods had been sold for
Rs. 400,000 at cost plus 25%. However, the goods are damaged and can be sold
at normal price after a repair cost of Rs. 90,000. The return has not yet been
accounted for.
(ii) Suspense account represents an online transfer of funds by a customer who
availed 5% discount on settlement of the pending amount by 30 June 2017. The
amount was credited by the bank net of its charges of Rs. 10,000.
(iii) HA maintains a 5% provision against trade receivables.
(iv) Running and maintenance expenses totalling Rs. 110,000 were incurred in June
2017. Related invoices were received and accounted for in July 2017.
(v) A machine was rented-out to Zee Trader (ZT) on 1 October 2016. Annual rent of
Rs. 120,000 received in advance is included in ‘Accruals and other payables’.
However, on 16 June 2017, the machine was sold to ZT for Rs. 450,000. The
sale proceed net of rent adjustment was received in July 2017. The disposal has
not yet been accounted for.
The machine had been purchased on 1 January 2016 and had written down
value of Rs. 540,000 as at 1 July 2016.
(vi) HA depreciates its fixed assets at 20% per annum from the month of addition to
the month prior to disposal using reducing balance method. There were no
additions/disposals during the year except as mentioned above.
Required:
(a) Prepare statement of profit or loss for the year ended 30 June 2017. (11)
(b) Prepare statement of financial position as at 30 June 2017. (09)
Question-8
Following is the trial balance of Tulip Enterprises (TE) for the year ended 31
December 2017:
Description Debit Description Credit
Cash and bank balances 2,320 Trade payables 3,250
Trade receivables 4,400 Accruals and other payables 1,320
Stock-in-trade 31-12-2017 3,900 Provision for doubtful 220
receivables
Prepayments and advances 1,740 Accumulated depreciation 4,630
Property, plant & equipment – 12,500 12%Long-term loan 5,150
cost
Drawings 490 Capital 6,000
Cost of sales 23,580 Sales 35,230
Salaries and wages 2,610 Miscellaneous income 940
Fuel and power 450
Bad debt expense 230
Rent and insurance 2,900
Repair and maintenance 920
56,740 56,740
(i) While carrying out the physical inventory count at year-end, following matters
were identified:
 Goods costing Rs. 1,000,000 were slightly defective. These can be sold for
Rs. 1,130,000 after incurring a cost of Rs. 200,000.
 Goods costing Rs. 670,000 purchased on credit were returned to a supplier
on 28 December 2017 but the return was not recorded in the books.
(ii) A machine costing Rs. 450,000 was received on 1 October 2017 against 100%
advance payment. The advance has not yet been adjusted due to non-receipt of
the invoice.
(iii) On 1 October 2017, 50% advance received for an annual maintenance contract
of Rs. 480,000 was credited to miscellaneous income. Remaining amount would
be received at the end of the contract. Services are rendered evenly throughout
the contract period.
(iv) Maintenance services for Rs. 150,000 were rendered in December 2017 but
income has been recorded in January 2018 on receipt of the amount.
(v) Interest on the loan is paid in arrears on 1 April and 1 October each year. Interest
accrued for the quarter ended 31 December 2017 has been credited to loan
account.
(vi) Rent and insurance include:
 annual insurance premium of Rs. 800,000 for the health policy arranged by
TE for the department heads and the owner’s family members. Premium
pertaining to the owner’s family members is Rs. 200,000. The policy is valid
up to 30 June 2018.
 Rs. 1,200,000 paid against the annual rent agreement expiring on 31 August
2018. According to the rent agreement, the rent paid would not be refunded in
case the building is vacated earlier.
(vii) TE maintains provision for doubtful receivables according to the age analysis of
the outstanding balances. Relevant details are as under:
Trade receivables as on 31 December 2017 Total
Less than 3 4 - 6 7 - 12 More than
months months months 1 year
Outstanding Balances 1,970 1,000 900 530 4,400
Required Provision - 5% 10% 20%
(viii) TE depreciates property, plant & equipment at 15% per annum on reducing
balance method.
Required:
Prepare the following:
(a) Statement of profit or loss for the year ended 31 December 2017 (11)
(b) Statement of financial position as at 31 December 2017 (10)
Question-9
Following is the trial balance of Sofia Trader (ST) for the year ended 30 June 2018:
Debit Credit
---------- Rs.'000 ----------
Equipment - cost 17,000
Equipment - accumulated depreciation - 1 Jul 2017 4,800
Vehicles - cost 3,000
Vehicles - accumulated depreciation - 1 Jul 2017 1,200
Inventory - 1 Jul 2017 5,500
Provision for doubtful receivables 220
Prepaid insurance - 1 Jul 2017 140
Advance 384
Bank deposit (invested on 1 Feb 2017 at 7%) 1,400
Capital 16,000
Drawings 352
Accruals and other payables 1,520
Sales 32,350
Purchases 21,000
Returns 950 700
Salaries and utilities 2,790
Rent 1,000
Discounts 270 220
Other expenses 480
Insurance 300
Bad debts 106
Interest income on bank deposit 82
Suspense account 50
60,642 60,642
Following further information is available:
(i) Cost of closing physical inventory was Rs. 7,400,000. Inventory included
goods costing Rs. 240,000 which were damaged in the warehouse. These goods
can be sold for Rs. 250,000 after incurring a cost of Rs. 16,000.
(ii) Rent includes payment of annual rent of Rs. 240,000 expiring on 30
November 2018 for owner’s residence.
(iii) Prepaid insurance represents premium which expired on 31 January 2018
while insurance represents annual premium which is expiring on 31 January
2019.
(iv) (iv) Suspense account represents goods returned by ST which were debited
to supplier's account.
(v) On 29 June 2018, dishonoured cheque of Rs. 285,000 was returned by a
bank. No entry has been made in the books for this return. This cheque was
received from a customer net of 5% settlement discount.
(vi) ST maintains a 4% provision against trade receivables.
(vii) ST paid Rs. 388,000 (net of 3% settlement discount) which was debited to
supplier's account with the same amount.
(viii) On 1 March 2018, an equipment was sold for Rs. 400,000 and its sale
proceeds were credited to the equipment account. This equipment had been
purchased at a cost of Rs. 500,000 and on 1 July 2017 its book value was
Rs. 360,000.
(ix) Advance represents 40% payment made for purchase of vehicle. Remaining
balance would be paid in September 2018. No entry was passed when the
vehicle was delivered on 1 June 2018.
(x) ST depreciates equipment and vehicles at 15% and 25% respectively using
reducing balance method.
Required:
a) Prepare statement of profit or loss for the year ended 30 June 2018
b) Prepare statement of financial position as at 30 June 2018 (Marks 22)
Question-10
Following is the summarized trial balance of Delta Enterprises (DE), for the year
ended 30 June 2019:
Rs. in '000
Property, plant and equipment 230,600 Capital 145,000
Inventory - 30 June 2019 67,800 Profit or loss - 1 July 2018 34,500
Cash and bank balances 4,600 12% Bank loan 90,000
Trade receivables 94,800 Accumulated depreciation 44,300
Prepayments 3,000 Trade payables 41,400
Other receivables 5,300 Sales revenue 487,800
Cost of sales 354,700 Other income 2,600
Selling expenses 29,400
Administration expenses 25,900
Depreciation 19,800
Interest on bank loan 9,000
Bank charges 700
845,600 845,600
(i) Goods returned by a customer on 30 June 2019 were recorded on 1 July 2019.
These goods had been sold on credit for Rs. 1,950,000 at cost plus 30%.
(ii) On 1 October 2018, a printer was acquired on rent from Qazi & Co. The annual
rent of Rs. 480,000 was paid in advance and debited to prepayments. However,
the printer was purchased by DE on 1 April 2019 for Rs. 1,240,000. The
payment net of rent adjustment was made in July 2019. The purchase has not
been accounted for. DE depreciates office equipment at 20% using reducing
balance method.
(iii) DE allocates depreciation to selling and administration in the ratio of 4:6
respectively.
(iv) Annual fire insurance premium of Rs. 4,500,000 was paid in advance on 1
January 2019 and debited to administration expenses. The payment also
includes Rs. 1,350,000 pertaining to the owner's personal property.
(v) Other income includes Rs. 900,000 collected on 1 April 2019 in respect of a
service agreement for the six months ending 30 September 2019.
(vi) An amount of Rs. 960,000 receivables on 1 August 2019 on completion of a
service agreement for the six months ended 31 July 2019 has not been accounted
for.
(vii) 12% bank loan was acquired on 1 April 2018. The principal is repayable in ten
equal yearly instalments commencing from 1 April 2019. Interest is payable on 1
October and 1 April each year.
Required:
a) Prepare statement of profit or loss for the year ended 30 June 2019.
b) Prepare statement of financial position as at 30 June 2019. (Marks 18)
Question-11
Following is the summarized trial balance of Bajang Aamad Limited (BAL) for the
year ended 30 June 2020:
Head office building 15,000 1,900
Delivery vehicles 9,350 4,500
Opening stock 5,500
Provision for doubtful trade receivables 400
Advance 2,160
Cash and bank 1,255
balances
Share capital (Rs. 10 each) 8,000
Share premium 2,800
Retained earnings 6,660
Long-term loans 3,000
Short-term loan 1,500
Sales revenue 39,770
Purchases 26,200
Operating expenses (excluding depreciation) 3,510
Sales supplies 840
Sales offices rent 1,800
(i) Cost of closing stock was Rs. 7,400,000, of which goods costing Rs. 500,000
were slightly damaged and can be sold for Rs. 600,000 after incurring
repacking cost of Rs. 160,000.
(ii) 60% of the sales offices rent represents payment of annual rent upto
30 September 2020.
(iii) Advance from a customer amounting to Rs. 475,000 (net of 5% discount) has
been included in sales. Goods will be delivered to the customer after year-end.
(iv) Advance represents 60% payment made on 1 February 2020 for the purchase
of a delivery vehicle. Remaining balance would be paid in September 2020. No
entry was made when the vehicle was delivered on 1 April 2020.
(v) Delivery vehicles’ cost includes an amount of Rs. 150,000 paid in June 2020
for repainting of an old delivery vehicle. However, due to heavy workload,
vehicle was not painted till year-end.
(vi) BAL depreciates building at 4% using straight line method while delivery
vehicles are depreciated at 15% using reducing balance method. 30% of cost
of the building represents land.
(vii) A specific provision at 75% is to be made against Asad Baker’s balance of Rs.
380,000. A general provision for doubtful receivables is maintained at 4% of
the remaining trade receivables.
(viii) Unused sales supplies at year-end amounted to Rs. 320,000.
(ix) The amount of operating expenses (excluding depreciation) is to be allocated
into selling and administration expenses in the ratio of 60:40 respectively.
Required:
(a) Prepare statement of profit or loss for the year ended 30 June 2020. (12)
(b) Prepare statement of financial position as at 30 June 2020. (08)
Question-12
Following is the summarized trial balance of Valsafe Traders (VT) for the year
ended 31 December 2020:
Debit Credit
-------- Rs. in '000 ------
--
Property, plant and equipment 32,500
Accumulated depreciation at 31 December 2020 - 8,750
Inventory at 1 January 2020 34,300 -
Trade receivables 36,800 -
Prepayments 780 -
Advances 240 -
Cash and bank balances 5,550 -
Capital - 60,395
Drawings 8,480 -
14% Loan - 17,500
Trade and other payables - 28,740
Revenues - 181,100
Purchases 149,800 -
Selling expenses 12,450 -
Distribution expenses 8,800 -
Administrative expenses 7,460 -
Rent income - 1,125
Interest on bank overdraft 450 -
297,610 297,610
(i) Cost of closing inventory in hand on 31 December 2020 amounted to Rs. 46,300,000.
Physical inventory count revealed that goods costing Rs. 950,000 were returned by a
customer for which no entry has been made. These goods were sold for Rs. 1,300,000
on credit in last week of December 2020. VT determined that these goods are out
of fashion and can be sold at 40% of original selling price.
(ii) During the year, goods having cost and selling price of Rs. 500,000 and Rs 800,000
were withdrawn by the owner for personal use but were not recorded.
(iii) Prepayments represent fire insurance premium amounting to Rs. 480,000 and Rs.
300,000 paid for office and owner's personal premises respectively. These annual
policies are valid upto 31 March 2021.
(iv) On 1 June 2020, a machine was given at a quarterly rent of Rs. 375,000, receivable in
advance.
(v) Advances represent three months’ advance salary taken by a salesman on 1
November 2020.
(vi) The loan was acquired on 1 July 2020 and the entire principal along with interest is
repayable on 30 November 2021.
(vii) Depreciation of property, plant and equipment has been incorrectly calculated at 5% on
reducing balance method instead of 10% on straight line method. The incorrect
depreciation has been included in distribution expenses though depreciation should
have been equally divided between selling and administrative expenses.
(viii) A balance of Rs. 320,000 included in trade and other payables needs to be written
back as it is no more payable.
(ix) Cash and bank balances include bank overdraft of Rs. 1,490,000.
Required:
(a)Prepare statement of profit or loss for the year ended 31 December 2020. (10)
(b)Prepare statement of financial position as at 31 December 2020. (10)
Question-12
Following is the summarized balance of onion traders (OT) for the year ended 30 June 2021
Rs. In Rs. In
million million
Property plant and equipment 142.0 Accumulated depreciation as on 66.5
30 June 2021
Inventory 89.6 Provision for doubtful debts 4.5
Trade debtors 42.0 Capital 99.4
Prepayments 9.0 Long term loan 55.4
Bank deposit account 40.0 Trade debtors 33.4
Bank current account 8.3 Accruals 9.4
Owner’s drawing 17.8 Sales 397.6
Cost of sales 245.0
Operating expenses 63.7
Financial charges 8.8
666.2 666.2
Additional information
1. During the physical inventory count carried out on 30 June 2021, following matters were
noted for which nothing has been recorded in the books
 Goods having cost and selling price of Rs. 4.2 million and Rs. 5.8 million
respectively were withdrawn by the owner for his personal use.
 Goods costing Rs. 14.0 million were found damaged and would be sold at 90% of
purchase cost after incurring a rectification cost of Rs. 1.9 million.
 Goods purchased on credit costing Rs. 3.5 million were returned to a supplier on
30 June 2021
2. A payment of Rs. 7.2 million being 40% amount of a yearly maintenance contract
commenced from 1st October 2020, was included In prepayments .remaining amount is
payable on completion of contract.
3. the bank deposit account was opened on 1 October 2020 for 1.5 year at 12% per
annum. interest is credited at every 6 months. Interest received was credited to sales.
4. The figure in the trial balance for the bank current account represent balance prior to the
reconciliation with bank statement. Upon comparison with bank statement, it was
discovered that :
 cheque of Rs. 3.1 million deposited into bank were not credited.
 As per standing instruction to the bank, quarterly office rent (till 31 august 2021)
amounting to Rs. 4.2 million was debited.
 Bank charges of Rs. 0.2 million were debited.
 A cheque of Rs.0.9 million was returned by bank as dishonoured. this cheque
was received from a customer net of 10% settlement discount.
5. On 30 June 2021 fully depreciated assets costing Rs. 8.2 million with a residual value of
Rs. 2.1 million were sold on credit for Rs. 2.6 million. No entry in this respect has been
recorded in the books .
6. In addition to a specific provision of Rs. 3.9 million against trade debtors of Rs. 13
million. OT needs to maintain a general provision for doubtful debtors at 5% of the
remaining closing debtor balance.
Required
a) Prepare statement of profit or loss for the year ended 30 June 2021.
b) Prepare statement of financial position as on 30 June 2021.
Solution to Question No. 1
Salman
Statement of Comprehensive Income
For the year ended 30-06-2014
Rs. Rs.
Sales (353,300 – 10,000 – 243) 340,868
Cost of Sales:
Opening Stock 127,762
Add: Purchases (330,530 – 500) 330,030
Add: Carriage Inwards 10,420
Less: Closing Stock (237,500) (230,712)
Gross Profit 110,156
Other Income
Interest Received 11,930
Other Income 3,100
Operating Expenses:
Interest 800
Power and utilities 6,500
Salaries (40,400 + 1,800) 42,200
Rent 6,992
Insurance (2,000 – 650) 1,350
Advertisement 4,512
Miscellaneous Expenses 4,130
Depreciation (4,550 + 2,120) 6,670
Bad debts 1,288 (74,442)
Net Profit 50,744
Salman
Statement of Financial Position
As on June 30, 2006
Rs. Rs. Rs.
Non-Current Assets:
Goodwill 20,000
Plant & Machinery (45,000 – 4,550 + 500) 40,950
Factory Building (42,400 – 2,120) 40,280
Current Assets:
Stock 237,500
Trade Receivable 109,420
Allowance for bad debts (2,188) 107,232
Bills Receivable 32,526
Prepaid Insurance 650
Cash at Bank 13,512
Cash in Hand 728
493,378
Capital & Liabilities:
Capital 300,000
Add: Net Profit 50,744
Less: Drawings (30,500 – 1,800) (28,700) 322,044
Non-Current Liabilities:
Loan from Bank 40,000
Current Liabilities:
Bills Payable 23,150
Accrued Expenses 3,460
Creditors 104,724
493,378
Working & Adjustments
Rs. Rs.
(i) Machine 500
Purchases 500
(ii) Salary (150 × 12) 1,800
Drawings 1,800
(iii) Prepaid Insurance 650
Insurance Expense 650
(iv) Calculation of Depreciation:

Plant & Machinery = 45,000 × 10% 4,500
Add: 500 × 10% 50
4,550
Factory Building = 42,400 × 5% 2,120
(v) Allowance
Rs. Rs.
b/d 900
Bad debts (balance) 1,288
c/d (109,420 × 5%) 2,188
Rs. Rs.
Bad debts 1,288
Allowance 1,288
Solution-2
Salman
For the year ended 30-06-2014
Rs. Rs.
Sales (353,300 – 10,000 – 243) 340,868
Cost of Sales:
Add: Purchases (330,530 – 500) 330,030
Add: Carriage Inwards 10,420
Less: Closing Stock (237,500) (230,712)
Other Income
Interest Received 11,930
Other Income 3,100
Operating Expenses:
Interest 800
Power and utilities 6,500
Salaries (40,400 + 1,800) 42,200
Rent 6,992
Insurance (2,000 – 650) 1,350
Advertisement 4,512
Miscellaneous Expenses 4,130
Depreciation (4,550 + 2,120) 6,670
Bad debts 1,288 (74,442)
Net Profit 50,744
Salman
As on June 30, 2014
Rs. Rs. Rs.
Non-Current Assets:
Goodwill 20,000
Plant & Machinery (45,000 – 4,550 + 500) 40,950
Factory Building (42,400 – 2,120) 40,280
Current Assets:
Stock 237,500
Trade Receivable 109,420
Allowance for bad debts (2,188) 107,232
Bills Receivable 32,526
Prepaid Insurance 650
Cash at Bank 13,512
Cash in Hand 728
493,378
Capital & Liabilities:
Capital 300,000
Less: Drawings (30,500 – 1,800) (28,700) 322,044
Non-Current Liabilities:
Current Liabilities:
Bills Payable 23,150
Accrued Expenses 3,460
Creditors 104,724
493,378
Working & Adjustments
Rs. Rs.
(i) Machine 500
Purchases 500
(ii) Salary (150 × 12) 1,800
Drawings 1,800
(iii) Prepaid Insurance 650
Insurance Expense 650
(iv) Calculation of Depreciation:

Plant & Machinery = 45,000 × 10% 4,500
Add: 500 × 10% 50
4,550
Factory Building = 42,400 × 5% 2,120
(v) Allowance
Rs. Rs.
b/d 900
Bad debts (balance) 1,288
c/d (109,420 × 5%) 2,188
Rs. Rs.
Bad debts 1,288
Allowance 1,288
Solution-3
Fortune Trader
For the year ended 30 June 2016
Rs. Rs.
Sales (W-3) 28,761
Cost of Sales:
Opening Stock 1,045
Purchases (16,000 – 220) 15,780
Closing Stock (1,560) (15,265)
Gross Profit 13,496
Expenses
Selling & Admin Expenses (5,855-430/2 adj.(v)-240 adj.(v)+137 (6,130)
adj.(v)+89 adj.(vi)+113 (W-1)+391(W-1))
Finance Charges (W-4) (300) (6,430)
Other income
Provision for doubtful debts (W-2) 30
Net Profit 7,096
Fortune Trader
As on 30 June 2016
Rs.000 Rs.000
Assets
Non-Current Assets
Building 37,00
Accumulated Depreciation (1,436 + 113) (1,549)
Plant & Machinery (6,650 – (W-1) 330) 6,320
Accumulated Depreciation (2,414 – 391) (2,805) 5,666
Current Assets
Trade Receivables (W-2) 3,551
Provision for doubtful debts (150)
Closing Inventor 1,560
Cash and Bank balances 5,850
Advance for machine (W-1) 330
Fire insurance prepaid (430/2) 215 11,736
17,402
Equity & Liabilities

Capital
Opening balance 3,000
Profit for the year 7,096
Drawings (240) 9,856
Long-term Loans (5,000 – (5,000/8 x 1) 4,375

Current Liabilities
Current Maturity of long term loan (5,000 – 4,375) 625
Trade and other payables (2,080 – (W-5) 60) 2,020
Interest payable 300
Rent payable 137
Salary payable 89 3,171
17,402
WORKINGS:
(W-1)
Depreciation and rectification adjustment of advance
Building (3,700 – 1,436) x 5% 113
Plant & machinery (6,320 – 2,414) x 10% 391
Rectifying Original Wrong

Advance for machine 330 Adv. For machine 330 Plant & machinery 330
Plant & machinery 330 Cash 330 Cash 330
(W-2)
Debtor
Unadjusted 3,600 Sales return (35/100) x 140) 49
Unadjusted cl. (Bal.) 3,551
Provision
P/L (bal.) 30 b/d 180
c/d (180 – 30) 150
(W-3)
Sales 28,900
Sales return (90 + 49 (W-2)) (139)
28,761
(W-4)
Finance charges (5,000 x 12% x 6/12) 300
(W-5)
Rectifying Original Wrong
Trade payables 60 Trade payable 30 Trade payable 30
Suspense 60 Purchase return 30 Purchase return 30
Solution-4
Azam Autoparts Store
Rs.000 Rs.000
Sales 131,943
Cost of Sales:
Purchases (105,950 – 4,000) 101,950
Closing Stock (24,090) (92,360)
Gross Profit 39,583
Salaries expenses 10,250
Depreciation expenses (W-1) 3,455
Operating expenses (W-2) 7,029
Interest expenses 600
1,060
Utility expenses
1,205
Vehicle expenses
(23,599)
Net Profit
15,984
Azam Autoparts Store
As on 30 June 2015
Non-Current Assets
Fixed Assets (W-1) 13,820
Current Assets:
Stock in trade 24,090
Prepaid insurance 302
Prepaid rent 500
Cash and bank 8,550
47,262
Liabilities and Equity
Opening capital 27,883
Less: Drawings (W-3) (4,215)
39,652
Current Liabilities
Creditors 2,500
Interest payable 50
Accrued expenses 60
47,262
W-1: fixed assets and depreciation Rs.000

Shop equipment purchased 1,400
Fixture purchased 5,500
6,900
Depreciation (6,900 @ 20%) 1,380
5,520
Shop equipment balance (5,880 – 1,400) 4,480
Motor vehicles 3,820
13,820
Depreciation as per trial 2,075
Add: depreciation shop equipment and fixtures 1,380
3,455
Rs. 000
W-2: Operating expenses
As per trial 6,046
Add: prepaid rent to be recorded as expense 1,500
Less: prepaid insurance (302)
Less: personal expenses (215)
7,029
W-3: Drawings Rs. 000

Drawings of goods by Azam 4,000
Insurance 215
4,215
Solution-5
Falcon Traders
Trading and Profit and Loss Account
For the year ended 31 December 2014
Sales ((W-1) 1,125,000 + 375,000) 1,500,000
Less: Cost of sales (W-6) (1,116,000)
Less: Admin Expenses
Salaries 38,000
Selling expense 45,000
Office expense (W-4) 23,000
Disc. Allowed 21,000
Interest Expense (190,000 x 10%) 19,000
Provision for Doubtful Debts (W-5) 12,300
Depreciation
Building 61,000
Plant and Machinery (W-10) 51,570
Office Equipment (W-16) 19,000
Loss on disposal 15,000
(304,870)
Other income (Discount received) 13,000
Net Profit 92,130
Falcon Traders
Balance Sheet
As on 31 December 2014
Capital and Liabilities
Capital
Opening Capital (W-9) 1,260,000
Capital Introduces -
Less: Drawings
1,352,130
Bank Loan(190,000 – 25,000) 165,000
Current Liabilities
Trade Creditors (W-2) 85,500
Payable for expense 28,000
113,500
Total 1,630,630
Assets
Non-Current Assets
Freehold Land 100,000
Building 549,000
Plant and Machinery 392,540
Office Equipment 76,000
1,117,540
Current Assets
Debtors 233,700
Stocks 90,000
Bank 172,440
Cash 16,950
513,090
Total 1,630,630
(W-1)
Debtor Account
Opening 177,000 Bank 1,035,000
Sales 1,125,000 Discount allowed 21,000
(375,000/25% x 75%) Cl. (bal.) 246,000
(W-2)
Creditor Account
Bank 641,450 Opening 75,000
Discount Received 13,000 Purchases 664,950
Closing balance 85,500
(W-3)
Bank Account
Opening 45,000 Creditors 641,450
Disposal 35,690 Salaries 38,000
Debtors 1,035,000 Selling expense 45,000
Disposal (W-8) 20,000 Office expense 30,000
Interest expense 19,000
P&M A/C 164,800
Loan (repaid) 25,000
Closing (bal.) 172,440
(W-4)
Office Expense
Bank 30,000 Opening 35,000
Closing 28,000 P/L (Bal.) 23,000
(W-5)
Provision for Doubtful Debts
Opening
Closing (246,000 x 5%) 12,300 P/L(Bal.) 12,300
(W-6)
Inventory account
b/d 183,000 COS (bal.) 1,116,000
Creditor 664,950
Cash 358,050 Closing inventory 90,000
(664,950/65% x 35%)
(W-7)
Plant and Machinery account-BV
b/d 330,000 Disposal A/c 50,690
Depreciation (W-10) 51,570
Bank 164,800 Closing (bal.) 392,540
(W-8)
Disposal account
Machinery-BV 50,690 Bank (bal.) 35,690
P/L 15,000
(W-9)
Opening Assets (100,000+610,000+330,000+115,000+183,000+177,000+45,000)
1,560,000
Opening Liabilities (190,000+75,000+35,000) (300,000)
Opening Capital 1,260,000
(W-10)
Depreciation of Plant & Machinery:
On opening excluding Disposal (330,000-54,800) x 15% 41,280
On additions (164,800 x 15% x 3/12) 6,180
On disposals (54,800 x 15% x 6/12) 4,110
51,570
(W-11)
Disposal WDV
54,800 – (W-10) 6,180) 48,620
(W-12)
Particulars Dr. Cr.
Interest exp. 19,000
Loan 25,000
Bank 44,000
(W-13)
Cash
Sales 375,000 Inventory 358,050
Cl. (bal.) 16,950
(W-14)
Office Equipment-BV
b/d 115,000 Disposal 20,000
Depreciation (W-16) 19,000
Cl. (bal.) 76,000
(W-15)
Disposal account
Office equipment-BV 20,000 Cash 20,000
P/L (bal.) -
(W-16)
Depreciation of office equipment
(115,000 – 20,000) x 20% 19,000
Solution-6
Moon Trading
Sales Revenue (2,840 - 2.4) 2,837.60
Less: Cost of sales
Opening inventory 410
Purchases 2,135.40
Closing inventory (529.22)
(2,019)
Gross Profit 821.42
Less: Selling and Admin Expenses (W-1) (539.92)
Less: Finance Charges (8 + (160x 10% x 3/12) + 2 (14.25)
+0.25) 23.75
Other income 291.00
Net Profit before tax
Moon Trading
Equity and Current Liabilities
Capital:
Opening Capital (W-9) 50
Profit for the year 291
Less: Drawings (0.32)
340.68
Long term Loan 160
Current Liabilities
Trade Creditors (320 – 4.5) 315.50
Accruals and other payables 25 +(160x 10% x3 + 12)+(1.8 29.20
(3.6x 4/9)
Total 845.38
Assets
Non-Current Assets
Fixed assets (150 + 0.78) 150.78
Accumulated Depreciation (45 + 0.04) (45.04)
105.74
Current Assets
Trade Debtors (200 + 3.5 – 2.4) 201.10
Provision for doubtful debts (201.1 x 3%) (6.03)
Closing inventory 529.22
Prepayments, advances and other receivable 10.35
9+1.2+0.45+0.6
Cash and bank balances 5.00
Total 845.38
(W-1) Selling and administration expenses:
Rs. in
“Million”
As per trial 540
Add: Dep. on items in office use 0.04
Add: Increase in Provision 0.03
Less: Office supplies in hand (0.15)
539.92
(W-2)
Provision for doubtful debts
Rs. In Rs. In
million million
P/L a/c (bal.) 0.03 b/d 6
c/d (200-2.4+3.5) 3% 6.03
Solution-7
Rainbow Lights
Sales Revenue [750–(20×5%)–7] 742
Less: Cost of sales [304+2–(7/1.4)] (301)
Gross Profit 441
Less: Selling and Admin Expenses (W-1) (140.42)
Less: Finance Charges [10+(120×10%×5/12)] (15)
Other income [45–(12/12×4)] 41
Net Profit before tax 326.58
Rainbow Lights
Rs. In
Equity and Liabilities million
Equity:
Opening Capital 100
Profit for the year (326.58–30) 296.58
Less: Drawings(50+1) (51)
345.58
Long term Loan 120
Current Liabilities
Trade Creditors (240 – 8) 232
[28+(120×10%×5/12)+(12×4/12)]
Total 734.58
Assets
Non-Current Assets
Property, plant and equipment - cost (270–8) 262
(149.60)
Accumulated Depreciation (150–0.4) (W.1)
112.40
Current Assets
Trade Debtors (W-2) 394
Provision for doubtful debts (W-2) (11.82)
Closing inventory [170–2–15–1+(7/1.4)] 157
Prepayments, advances and other receivable 63
[45+(24/12×9)]
Total 734.58
(W-1) Selling and administration expenses
Rs. in
“Million”
As per trial 146.00
Decrease in bad debts expense W.2 (2.18)
Inventory damaged in fire (abnormal loss) 15.00
Building rent paid in advance (24/12×9) (18.00)
Reversal of depreciation on equipment returned (8×15%×4/12) (0.40)
140.42
(W-2)
Trade Provision for
debtors doubtful
debts
As per trial balance 400.00 12.00
Sales return - (7.00)
Sales net of 5% trade discount recorded at gross (1.00)
(20×5%)
Correction of recovery of previously written off debtors 2.00 2.00
394.00 14.00
Decrease in provision Balancing (2.18)
Provision at 3% of the year-end balance (394×3%) 11.82
Solution- 8
Home Appliances
Statement of Profit and Loss
Rs in
million
Sales 101,120
Sales return (3,000+400) 3,400
Net Sales 97,720
Cost of Sales:
Opening Inventory 8,200
Purchases 70,000
Carriage Inwards 1,360
Available for sale 79,560
Closing Inventory (9,310)
(70,250)
Gross Profit 27,470
Operating expenses:
Wages and salaries 5,900
Discounts 1,600+50 [(940+10)÷95%×5%] 1,650
Utility charges 2,350
Running and maintenance charges (3,290+110) 3,400
Financial Charges (580+10) 590
Depreciation expense: Excl. sold machine [34,400 − (8,000 60)]×20% 5,292
Sold machine (600-60)×20%×11÷12
*99
(19,281)
Other income:
Machine rent income 120×8.5÷12 85
Gain on disposal of machine (600×20%×6÷12) 450-WDV i.e. [600–(99+60)] 9
Decrease in provision for doubtful debts 750−555 195
Misc. income 110
399
Net profit 8,588
Home Appliances
As on 30 June 2017
Equity and Current Liabilities
Capital:
Opening Capital 25,500
Less: Drawings (4,500)
29,588
Current Liabilities
Trade Creditors 10,200
Accruals and other payables (5,310 – 120+110) 5,300
Total 45,088
Assets
Non-Current Assets
Fixed assets 35,000 – (540÷90%) 34,400
Accumulated Depreciation 8,000 + [(5,292+99) – (60+99) (13,232)
21,168
Current Assets
Trade Debtors [12,500–400] – [(940+10)÷95%] 11,100
Provision for doubtful debts (11,100×5%) (555)
Closing inventory 9,310
Prepayments and other receivable 2,350+[450 – (120×3.5÷12)] 2,765
Total 45,088
Solution- 9
Tulip Enterprises
Statement of Profit and Loss
Sales 35,230
Cost of sales 23,580+70{1,000-(1,130-200)} (23,650)
Gross profit 11,580
Selling and administration expenses:
Salaries and wages (2,610)
Fuel and power (450)
Bad debt expense 230+[ 246(BS)-220] (256)
Rent and insurance 2,900-200-300{(800-200)×0.5)}-800(1,200×8÷12) (1,600)
Depreciation expense [1,180.5{(12,500-4,630)×0.15}]+{16.88(450×0.15×3÷12)} (1,197)
Repair and maintenance (920)
(7,033)
Miscellaneous income 940-120(480×0.5×3÷6)+150 970
Profit from operation 5,517
Financial charges (700)
Net profit 4,817
Tulip Enterprises
Assets
Non-current assets
Property, plant and equipment – cost 12,500+450 12,950
Accumulated depreciation 4,630+ 1,197(PL) (5,827)
7,123
Current assets
Provision for doubtful debts (1,000×0.05)+(900×0.1)+(530×0.2) (246)
4,154
Stock-in-trade 3,900-70(PL)-670 3,160
Prepayments & advances 1,740+300(PL)+800(PL)-450 2,390
Other receivables 150
Cash and bank 2,320
12,174
19,297
Equity and liabilities
Equity
Capital 6,000
Net profit 4,817
Drawings 490 +200 (690)
10,127
12% Long-term loan 5,150-150(5,150×3÷103) 5,000
Current liabilities
Trade payables 3,250-670 2,580
Accruals and other payables 1,320+120(PL)+150(BS) 1,590
4,170
19,297
Solution- 10
Sofia Traders
(a)Statement of profit or loss for the year ended 30 June 2018
Rs. in '000'
Revenues
Sales 32,350
Return inward (950)
Net sales 31,400
Cost of sales
Opening inventory 5,500
Purchases 21,000
Return outward 700+50 (750)
Closing inventory 7,400–6{240–(250–16)} (7,394)
Cost of sales (18,356)
Gross profit 13,044
Selling and administration expenses:

Salaries and utilities 2,790
Rent 1,000–240 760
Discount allowed 270–15[300(BS)–285] 255
Insurance 300–175(300×7/12)+140 265
Bad debts 106+{226(BS)–220} 112
Depreciation - equipment 1,872
Disposal(500–140)×15%×8/12 = 36
Others[(17,000+400–500)–(4,800–140)]×15% = 1,836
Depreciation- vehicle 470
Addition960(BS)×25%×1/12 = 20
Others(3,000–1,200)×25% = 450
Other expenses 480
(7,004)
Other income
Gain on disposal 400–[360–36(PL)] 76
Discount received 220+12(388/97×3) 232
Interest income 82+16{1,400×7%–82} 98
406
Net profit 6,446
Statement of financial position as at 30 June 2018 Rs. in '000

Assets
Non-current assets
Equipment - cost 17,000+400–500 16,900
Accumulated depreciation 4,800+1,872(PL)–176(140+36) (6,496)
10,404
Vehicle - cost 3,000+960(384/0.4) 3,960

Accumulated depreciation 1,200+470(PL) (1,670)
2,290
Current assets
Trade debtors 5,350+300(285/0.95) 5,650
Provision of doubtful debts (5,650×4%) (226)
5,424
Closing inventory 7,400–6(PL) 7,394
Prepayments PL 175
Accrued income/Interest receivable PL 16
Deposits at 7% 1,400
Cash and bank balances 620–285 335
13,344
27,438

Equity
Capital 16,000
Drawings 352+240 (592)
21,854
Current liabilities
Trade creditors 3,500–12(PL) 3,488
Accruals and other payables 1,520+576[960(BS)×0.6] 2,096
5,584
27,438
Solution- 11
(a) Delta Enterprises
Statement of profit or loss for the year ended 30 June 2019
Rs. in '000'
Net sales 487,800-1,950 485,850
Cost of sales 354,700–1,500(1950÷1.3) (353,200)
Gross profit 132,650
Selling W-1 (37,345)
expenses
Administration expenses W-1 (35,132)
Financial 9,000+2,700(90,000×0.12×3÷12)+700 (12,400)
charges
Other income 2,600–450(900×3÷6)+800(960×5÷6) 2,950
Net profit 50,723
(b) Statement of financial position as at 30 June 2019

Rs. in '000'
Assets
Non-current assets
Property, plant and equipment (230,600+1,240)–(44,300+62(W-1)) 187,478
Current assets
Inventory 67,800+1,500(PL) 69,300
Trade receivables 94,800–1,950 92,850
Prepayments 3,000+1,575(W-1) –240–240 4,095
Other receivables 5,300+800(PL) 6,100
176,945
364,423
Equity
Capital 145,000
Profit or loss 34,500+PL 85,223
Drawings (1,350)
228,873
Long-term loan 90000×8÷9 80,000
Current liabilities
Trade & other payables 41,400+(1,240–480×6÷12) 42,400
Unearned revenue PL 450
Interest payable PL 2,700
Current maturity of long- 90,000×1÷9 10,000
term loan
55,550
364,423
W-1: Selling and administration expenses Selling Administration

-------- Rs. in ‘000 --------
As given 29,400 25,900
Depreciation 7,945 11,917
[19,800+62(1,240×0.2×3÷12)] in 40:60
Printer's rent 480×6÷12 - 240
Insurance pertaining to the owner's property (1,350)
Prepaid [(4,500–1,350)÷2] - (1,575)
insurance
37,345 35,132
Solution- 12
(a) Bajang Aamad Limited
Statement of profit or loss for the year ended 30 June 2020
Rs. in '000
Revenues 39,770–475 39,295
Cost of sales (W-1) (24,360)
Gross profit 14,935
Selling expense (W-2) (4,996)
Administration expense (W-2) (1,904)
Operating profit 8,035
Finance cost (560)
Net profit 7,475
W-1: Cost of sales Rs. in '000
Opening stock 5,500
Purchases 26,200
Closing inventory 7,400–60[500–(600–160)] (7,340)
24,360
W-2: Selling & administrative expense Selling Administrati

ve
-------- Rs. in '000 --------
Operating expenses 3,510 in 60:40 2,106 1,404
Sales office rent 1,800–270(1,800×0.6×3÷12) 1,530
Depreciation (W-3) 840 420
Bad debt (480(W-5)–400) 80
Sales supplies 840-320 520
4,996 1,904
W-3: Depreciation expense Rs. in '000

Vehicle:
On opening balance (9,350–150–4,500)×15% 705
On addition 3,600×15%×3/12 135
840
Building 15,000×0.7×4% 420
1,260
(b) Statement of financial position as at 30 June 2020

Rs. in '000
Assets
Non-current assets
Property, plant and (W-4) 20,140
equipment
Current assets
Stock in trade (W-1) 7,340
Sales supplies 320
Trade receivables – net (W-5) 4,775
Prepayment 270 PL +150 PL 420
14,110
34,250
Equity
Share capital (Rs. 10 each) 8,000
Share premium 2,800
Retained earnings 6,660+7,475 14,135
24,935
Non-current liabilities
Long-term loan 3,000
Current liabilities
Trade and other payables 2,900+1,440(3,600 –2,160) 4,340
Advance from customer 475
Short term loan 1,500
6,315
34,250
W-4: Property, plant & equipment Rs. in '000

Head office building 15,000
Accumulated depreciation 1,900+420(W-3) (2,320)
12,680
Delivery vehicles 9,350+3,600(2160÷0.6)–150 12,800
Accumulated depreciation 4,500+840(W-3) (5,340)
7,460
20,140
W-5: Trade receivables – net Rs. in '000

Provision for doubtful 380×75%+( 5,255–380)×4% (480)
receivables
4,775
Solution- 13
Valsafe Traders
Statement of profit or loss for the year ended 31 December 2020
Rs. in '000
Revenue 181,100–1,300 179,800
Cost of goods sold
Opening inventory 34,300
Purchases 149,800
Closing inventory 46,300–950+520(40%×1,300) (45,870)
Goods withdrawn (500)
Cost of goods sold (137,730)
Gross profit 42,070
Selling expense 12,450+160(240×2÷3)+1,625(32,500×10%×50%) (14,235)
Distribution expense 8,800–1,250{(32,500–8,750)×5%÷95%} (7,550)
Administration expense 7,460+360(480×9÷12)+1,625 (9,445)
(31,230)
Operating profit 10,840
Other income 1,125–250(375×2÷3)+320 1,195
Financial charges 450+1,225(17,500×14%×6÷12) (1,675)
Net profit 10,360
(b) Statement of financial position as at 31 December 2020

Rs. in '000
Assets
Non-current assets
Property, plant and equipment 32,500
Accumulated depreciation (8,750–1,250(PL)+3,250(PL) (10,750)
21,750
Current assets
Inventory (PL) 45,870
Trade receivables 36,800–1,300 35,500
Advance 240–160(PL) 80
Prepayments 780–360(PL)–300 120
Cash and bank balances 5,550+1490 7,040
88,610
110,360
Equity
Capital 60,395
Net profit 10,360
Drawings 8,480+500+300 (9,280)
61,475
Current liabilities
Trade and other payables 28,740–320 28,420
Short term loan 17,500
Unearned rent PL 250
Interest payable PL 1,225
Bank overdraft 1,490
48,885
110,360

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c) International Accounting d) Generally Accepted Accounting

c) an accrued expense in the books d) an accrued revenue in the books

c) Assets held for sale in the d) Assets expected to be used for

15) Which of the following statements is correct regarding trial balance?

c) Opening stock as well as closing d) Trial balance is a book of prime

16) Which of the following statements is correct?

c) Partners are liable for losses in a d) A company is run by directors

c) increases expenses of the d) decreases expenses of partnership

22) Allowance for doubtful debts’ account is:

c) Interest payable Rs. 825,000; d) Interest payable Rs. 825.000;

43) Which two of the following would be considered as business transaction?

45) Total assets of a business would be charged as a result of:

46) A business commenced with capital in cash of Rs. 150,000. Inventory of Rs

47) Which two of the following would be recorded in General journal?

54) Which two of the following would be appear in trail balance?

55) How would these assets will expire?

Through use and consumption With the passage of time

Which of the following is/ are correct?

60) At 31 December 2019 an entity allowance for doubtful receivables amounted to

Allowance for doubtful receivables as at 31-12-19 amount to 31000

63) For reconciling bank balances unpresented cheques should be:

64) Which of the following statement is correct?

Which of the following cost would be most likely to be illustrated by the

69) Which of the following best describes a period cost?

71) A liability is classified as current liability if it is paid;

72) The purpose of depreciation is to;

79) Which two of the following is included in cost of inventory?

82) Which of the following is the correct entry of not-sufficient-fund (NSF)?

83) Which of the following is the correct entry of not-sufficient-fund (NSF)?

84) Statement of Comprehensive income is prepared for

85) Statement of Financial Position is prepared for

86) Seller received which note from buyer?

88) Credit note issued is recorded in which Books of Prime Entry?

89) Debit note issued is recorded in which Books of Prime Entry?

90) Credit note received is recorded in which Books of Prime Entry?

91) What is the Journal entry of settlement discount?

93) Replenishment in petty cash fund is recorded in

99) what is cost of conversion?

100) sales are recorded in?

108) What is retail method?

a) Assets increased by Rs.800,000 and liabilities decreased by Rs.800,000

1) Errors of omission in the books of original record

116) What is the entry of discount allowed?

a) Rs. 50,800 b) Rs. 50,600

Net Asset= Total Assets – Total liabilities = equity

Electric Company: Cost unit per unit

Furniture Industries: Cost unit per number

Brick Industries: Cost unit per 1000 bricks

Oil Companies: Cost unit per liter

139) Which one is incorrect?

(iv) Calculation of Depreciation:

(iv) Calculation of Depreciation:

Equity & Liabilities

Long-term Loans (5,000 – (5,000/8 x 1) 4,375

Rectifying Original Wrong

W-1: fixed assets and depreciation Rs.000

W-3: Drawings Rs. 000

Selling and administration expenses:

Statement of financial position as at 30 June 2018 Rs. in '000

Vehicle - cost 3,000+960(384/0.4) 3,960

Equity and liabilities

(b) Statement of financial position as at 30 June 2019

Long-term loan 90000×8÷9 80,000