CONFIDENTIAL 1 AC/JULY2023/FAR110

UNIVERSITI TEKNOLOGI MARA

FINAL EXAMINATION

COURSE : FINANCIAL ACCOUNTING 1

COURSE CODE : FAR110
EXAMINATION : JULY 2023
TIME : 3 HOURS

INSTRUCTIONS TO CANDIDATES

1. This question paper consists of six (6) questions.

2. Answer ALL questions in the Answer Booklet. Start each answer on a new page.

3. Do not bring any material into the examination room unless permission is given by the
invigilator.

4. Please check to make sure that this examination pack consists of:

i. the Question Paper

ii. an Answer Booklet – provided by the Faculty

5.

Answer ALL questions in English.

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

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This examination paper consists of 8 printed pages

QUESTION 1

a. Accounting is a business language where financial information is communicated

among all businesses to provide insights of the economic transactions of a business
organisation. Thus, the basic knowledge of accounting is necessary for the
interpretation of these information.
Required:

Briefly explain the term” accounting”.

(3 marks)
b. Cik Syuhada owns a boutique for Malaysia Batik Craft. Currently, she operates her
business as sole proprietorship. She intends to expand her business and for this
purpose, she needs more capital. She plans to invite a few of her friends to be a
partner of her business as she believes, the increase in the number of owners could
possibly lead to increase in the amount of business capital. She seeks your opinions
on this matter.
Required:
Advise Cik Syuhada regarding the characteristics of business forms under a general
partnership type of business.
(3 marks)
c. The financial statements are useful to external users as a means of communicating
the information of an organisation. Identify TWO (2) of the external users of financial
statement. Briefly explain the reason of using financial information for each type of
external users that you have identified.
(4 marks)
d. Small type of business normally being established as a sole-proprietorship. Similar
with other forms of businesses, a sole-proprietorship would have some advantages
and disadvantages.
Required:
i. Describe TWO (2) disadvantages of the sole-proprietorship form of business.
(2 marks)

ii. Describe THREE (3) advantages of the sole-proprietorship business.

(3 marks)
(Total: 15 marks)

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QUESTION 2

A. Maisarah started a business, MyCantik Enterprise on 1 September 2020. The following

are the opening balances as at 31 December 2022:

RM
Cash in hand 3,000
Cash at bank 58,600
Office equipment 15,700

Below are the transactions of January 2023:

January Transactions
2023
2 Received a receipt from Awon Bhd worth RM8,000 for purchasing goods.
The seller provided a trade discount of 2% for the bulk purchase.
Payment was made on the same day by cheque.

4 Received an invoice from Saiyang Bhd on credit. The amount was

RM20,000 which its credit term was 4/15, net 30.

7 Awon Bhd refunded RM100 in cash due to defect goods being returned.

8 Received a credit note from Saiyang Bhd with the amount of RM200.

14 Issued an invoice of RM5,000 to Nina. The credit term was 2/10, net 30.

16 Maisarah introduced additional capital. RM20,000 was deposited into

bank account of the business while RM2,000 was kept as cash-in-hand.

17 Made a full settlement to Saiyang Bhd by cheque.

28 Issued a receipt to Nina for full settlement of her account by cash.

30 Received a receipt from TNB for the payment of electricity bill of RM230
by cash.

Required:

a. Explain two (2) reasons of using special journals instead of general journals.
(2 marks)

b. Journalise the above transactions in the appropriate special journals. Narration is

not required.
(8 marks)

B. The following errors were detected in the books of Deeba Enterprise:

1. Loan of RM80,000 from Mybank Bhd was recorded as an additional capital.

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2. Payment to a creditor, Juara Bhd of RM14,800 was debited to bank account of

the business and credited in the account payable.

3. Both return accounts are overstated by RM180.

Required:

a. Identify the type of errors made by the accounts clerk in recording each of the
above transactions.
(3 marks)
b. Prepare the correcting entry of the above error either in the ledger or journal.
Narration is not required.
(5 marks)
(Total: 18 marks)

QUESTION 3

A. Pn. Farhana, the owner of Kaori Cha Café has decided to use a petty cash imprest
system for her business. On 1 October 2022, the opening balance is RM80. The petty
cash imprest system is used by the business with the amount of RM200 monthly. The
following were some transactions that took place during the month of October 2022:

Date Transactions Amount (RM)

Oct 1 The amount of petty expenditures for the previous 120
month reimbursed by the chief cashier
5 Paid for stationery 5
8 Paid for hand wash to be used by the customers. 10
12 Paid for toilet paper for use by customers. 10
15 Paid for fuel costs to deliver orders to customers. 15
19 Paid for printing brochures to advertise new drinks 15
introduced during the month.
21 Paid for receipts book. 5
23 Paid for air fresheners to be used in the toilet café. 25
27 Paid for repair of the leaking sink in the café. 50
30 Paid for printing flyers for promotion of year-end sales. 35

Required:

Prepare the petty cash book with an analysis column for office expenses, promotions,
toiletries, and sundry expenses.
(8 marks)

B. The draft trial balance of Garden Daydream Trading as at 31 December 2022

disagreed and revealed a difference of RM8,800 on the debit side. However, the
business proceeded with the preparation of the draft final accounts, and these showed
a profit of RM15,800. A subsequent investigation check revealed the following errors:

a. Purchase of goods amounted to RM5,000 had been credited to the purchases

account in error.

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b. Payment for insurance expenses of RM1,500 through standing order had been
omitted from the adjusted cash account.

c. Return to suppliers during the year were correctly posted individually to the
respective individual accounts but were incorrectly totalled. The total, overstated
by RM600 was posted to the return account.

d. A cash payment of RM600 for electricity expenses was entered on the debit side
of the electricity expenses account as RM900.

Required:

a. Prepare the journal entries necessary to correct the above errors. Narration is not
required.
(4 marks)
b. Show the suspense account.
(3 marks)
c. Calculate the corrected net profit.
(3 marks)
(Total: 18 marks)

QUESTION 4

The following is the Trial Balance of LK Trading owned by Mr Chu as at 31 December 2022:

LK Trading
Trial Balance as at 31 December 2022
Debit (RM) Credit (RM)
Inventories as at 1 January 2022 75,000
Carriage inwards 9,000
Returns 36,000 35,400
Purchases and Sales 450,000 762,000
Office equipment at cost 120,000
Furniture and Fittings at cost 160,000
Building at cost 520,000
Accumulated depreciation as at 1 January 2022:
Office equipment 48,000
Furniture and fittings 32,000
Building 187,200
Discounts 17,100 27,600
Interest on 10% fixed deposit 15,000
Commissions 12,300 18,900
Utility expenses 45,300
Salary 40,000
Advertising expenses 56,100
Drawings 19,650
Interest on loan from Bank Kita 8,400
Accounts receivables and accounts payables 138,000 81,051
10% fixed deposit 150,000
Cash in hand 6,150
Cash at bank 108,000
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Loan from Bank Kita 280,000

Capital 483,849
1,971,000 1,971,000

Additional information:
1. As at 31 December 2022, the inventories are valued at RM128,000.

2. During the year, Mr Chu has constantly drawn RM200 from the business bank
account to pay his daughter’s monthly tuition fees starting from March 2022. No
record was made for this transaction.

3. The business has accrued utility bills of RM2,800 and a prepaid advertising
expense of RM700 during the year.

4. The business started to invest in a 10% fixed deposit since 1 May 2022.

5. The bank loan was taken in January 2022 with an interest rate of 5% per annum.

6. Depreciation for the year is charged as follows:

Office equipment 20% on cost

Furniture and fittings 10% on cost
Building 20% on reducing balance

Required:

a. Explain the accounting treatment of accrued utility expenses in the Statement of

Financial Position.
(2 marks)

b. Prepare the Statement of Profit or Loss for the year ended 31 December 2022 and the
Statement of Financial Position as at that date for LK Trading. (Round up the figures to
the nearest RM).
(20 marks)
(Total: 22 marks)

QUESTION 5

The following information had been extracted from the financial statements of Amix
Enterprise during the year ended 30 June 2023.

Particulars RM
Credit Sales 180,000
Cash Sales 50,000
Cost of goods sold 150,300
Operating expenses 35,000
Dividend received 5,000
Non-current assets 190,000
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Currents Assets 104,000

Non-current liabilities 60,000
Current liabilities 80,000
Capital 90,000

Additional information:

1. The opening and closing inventories for the year are RM15,000 and RM23,000
respectively.

2. The account receivable is valued at RM44,000.

3. Accrued expense is RM550.

Required:
a) One of the tools used to analyse and asses the financial situation of a business entity
is accounting ratio analysis. While ratios are important tools, they would have some
limitations. Briefly explain FOUR (4) limitation of accounting ratio analysis.
(4 marks)
b) Compute the following ratios for Amix Enterprise.
i. Current ratio
ii. Quick ratio
iii. Inventory turnover ratio
iv. Gross profit margin
v. Net profit margin
(10 marks)
(Total: 14marks)

QUESTION 6
a. State THREE (3) possible reasons for dishonoured cheques that might be returned by
the bank.
(3 marks)

b. The following were extracted from the books of Khaliq Enterprise for the month of June
2023.
Cash Receipts Journal (Bank Column)
Date Particulars Receipt/ Amount (RM)
Cheque No
2023
June 3 Sales 324502 2,720
6 Bunga Enterprise 353650 5,880
14 Zalisya Enterprise 375300 3,230
20 Hannah Trading 379405 1,970
28 Mary Bhd 381610 1,725
Total 15,525

Cash Payments Journal (Bank Column)

Date Particulars Cheque No Amount (RM)

2023
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June 8 Purchases 411233 1,050

21 Salary Expense 412410 2,724
27 Lesti Enterprise 413444 1,678
Total 5,452

On 5 July 2023, Khaliq Enterprise received its monthly bank statement from Cimbi Bank
Berhad for June 2023. The bank statement reported the following:

Cheque No/
Debit Credit Balance
Date Particulars Document
(RM) (RM) (RM)
No
2023
June 1 Balance b/d 35,000 CR
3 Cash deposited 324502 2,720 37,720
7 Cheque deposited 353650 5,880 43,600
18 Cheque cleared 411233 1,050 42,550
19 Cash deposited 375300 3,230 45,780
20 Bank Giro Credit 026500 1,780 47,560
23 Service charges 027000 62 47,498
24 Cheque deposited 379405 1,970 49,468
26 Standing instruction 028400 870 48.598
28 Cheque cleared 412410 2,724 45,874
29 Cheque cleared 423220 890 44,984

Additional information:

1. The bank account of Khaliq Enterprise on 1 June 2023 indicates a debit balance of
RM35,000.

2. The bookkeeper of the Khaliq Enterprise had mistakenly incorporated in the cash
receipts journal a cheque no. 381610 paid to Mary Bhd.

3. RHB Bank Berhad had unintentionally debited Khaleeq Enterprise’s cheque no.
423220 of RM890 into Khaliq Enterprise’s account.

Required:

Prepare the bank reconciliation statement as at 30 June 2023.

(10 marks)
(Total: 13 marks)

END OF QUESTION PAPER

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