Introduction to Accounting Suggested Answers Certificate in Accounting and Finance Autumn 2016

Transcription

1 A.1 (a) Documents used in a system designed to control and account for purchases. Document Purpose for issuance of document (i) Purchase order Sent by a buyer to place an order (ii) Goods receiving note Prepared to record goods received and for verification of invoice prior to its payment. (iii) Purchase invoice A request for payment from the supplier for goods delivered. (iv) Credit note/debit note Issued by a supplier/customer on return of goods or allowing any discount. (v) Statement of account A document from a supplier listing the outstanding invoices at a point in time. (b) (i) Entries in the books of prime entry Purchase day book Suppliers Rs. 5-Aug-2016 Bravo Traders 950,000 Alpha & Sons 438,000 1,388, Aug-2016 Alpha & Sons 800,000 Bravo Traders 635,000 1,435,000 Total 2,823,000 Purchase return day book Suppliers Rs. 8-Aug-2016 Bravo Traders 60,000 General journal Debit (Rs.) Credit (Rs.) 9-Aug-2016 Purchases 540,000 Advance to supplier 540,000 (To record purchases against advance payment) 11-Aug-2016 Insurance claim 79,000 Purchases/inventory 79,000 (Goods lost in fire and recoverable from the insurance company) 31-Aug-2016 Purchases 2,823,000 Trade payable control account 2,823,000 (To record credit purchases) 31-Aug-2016 Trade payable control account 60,000 Purchases return 60,000 (To record return of goods purchased on credit) (ii) Main ledger accounts: Purchases 9-Aug-2016 Adv. to suppliers 540, Aug-2016 Insurance claim 79, Aug-2016 Trade payable control account 2,823,000 Purchase Return 31-Aug-2016 Trade payable control account 60,000 Advance to suppliers 9-Aug-2016 Purchases 540,000 Page 1 of 6

2 Trade payable control account Rupees Rupees 31-Aug-2016 Purchase return 60, Aug-2016 Purchases 2,823,000 Insurance Claim 11-Aug-2016 Purchases 79,000 Subsidiary purchase ledger accounts Alpha & Sons 5-Aug-2016 Purchases day book 438, Aug-2016 Purchases day book 800,000 8-Aug-2016 Purchase return day book Bravo Traders 60,000 5-Aug-2016 Purchase day book 950, Aug-2016 Purchase day book 635,000 A.2 (a) Ravi Enterprises Provision for doubtful debts Rs. in Rs. in million million (iv) Trade debtors-ray W. off Aug Balance b/d ( ) (vi) Trade debtors (General debtors 1.50 (iii) Bank (recovery of old written-off) written-off balance) Aug Bad debt exp. (balancing) 0.53 (v) Bad debt exp. TAJ & Co Aug Balance c/d (W-1) W-1: Trade debtors and provision of doubtful debts Dr./(Cr.) (i) Opening balance (ii) Credit sales (iii) Collection from trade debtors ( ) (845.50) (iii) Adj. for collection net of 10% payment discount (7.2 90% 10%) (0.80) (iv) RAY's balance written off on declaration of its bankruptcy (6 60%) (10.00) (vi) Amount due from general debtors written-off (1.50) Trade debtors balance as at (v) Less: Trade debtors subject to specific provision: - TAJ balance (2.80) - BEE Traders (opening balance) (8.00) Trade debtors subject to general provision General provision ( %) Specific provision: Taj & Co. (2.8 50%) 1.40 BEE Traders 8.00 Provision for bad debts as at 31 August (b) Bad debt expense Rs. in million (iv) Trade debtors RAY ( ) Aug Prov. for doubtful debts 0.53 (v) Prov. for doubtful debts TAJ Aug Profit or loss account (bal) Page 2 of 6

3 A.3 Chenab Enterprises Adjusting and closing entries Description Debit Credit ---- Rs. in ' Jun-2016 Drawings 500 Purchases 500 (To record issue of goods to proprietor) No accounting entry for normal inventory losses as CE uses periodic inventory method 30-Jun-2016 Closing inventory (W-1) 19,610 Statement of comprehensive income/cost of sales 19,610 (To record closing inventory) 30-Jun-2016 Sales 380,000 Opening inventory 15,000 Purchases (250, ) 249,500 Statement of comprehensive income 115,500 (Closing of accounts to statement of comprehensive income) W-1: Inventory as at 30 June 2016 Rs. in '000 Physical inventory as at 10 July ,000 Adjustments for transactions of intervening period 1 July to 10 July 2016: Sales (12, ) 9,600 Sales return (Goods returned by customers) ( ) (640) Purchases (7,000) 1,960 Damaged goods (damaged prior to 1 July 2016) having no sales value (350) 19,610 A.4 (i) (a) Accounting concept that effects preparation of QT's financial statements for the year ended 30 June 2016 is 'going concern'. This means that financial statements are prepared on the assumption that the entity will continue to operate for the foreseeable future and does not intend to go into nor will be forced into liquidation. (b) After QT's decision to discontinue its operations, QT is no more a going concern. Therefore, as at 30 June 2016, its assets and liabilities should be valued at their estimated disposal value. (ii) (a) Accounting concept pertaining to this situation is 'true and fair view' (faithful representation). According to this concept, financial statements should give true and fair view/faithful representation of the financial position, financial performance, and changes in financial position of an entity. (b) Making provisions just to even out the profits is against the true and fair view/faithful representation and should be avoided. Therefore, any provisions made on this basis should be reversed immediately. Page 3 of 6

4 A.5 Arish Enterprises S.No. Head of account Assets = Equity + Liabilities Rupees [Increase/(Decrease)] (i) Account payable - (842,000) Purchase return - 842,000 - (ii) Sales - 96,000 - Cash 38, Account payable - - (57,600) (iii) Bank charges - (1,000) - Trade debtors (12,000) - Suspense - - (11,000) (iv) Bad debt expense - (139,200 ) - Provision for doubtful debts (139,200) - - (v) Drawings - (100,000) - Purchases - 65,000 - Cash (35,000) - - A.6 (a) Gulfishan Paints Partners'capital accounts J R W Z Balance as at 30 June Shop taken over by J (5.00) J's share of goodwill (15 40%) 6.00 Revaluation account profit (W.2) %, 40%, 20% Reversal of J's share of goodwill ( %, 33.33%) (4.00) (2.00) Bank - 40% immediate payment to J on retirement (8.80) Payable to J - 60% balance payable after 6 months (13.20) Capital on retirement of J Z's share of goodwill (15 25%) (3.75) Reversal of Z's share of goodwill ( %, 33.33%) Cash (brought by Z - for his share of goodwill) 3.75 Cash ( brought by Z - for his share of capital) [( ) ] W-1: Partners' profit sharing ratio: Share capital Rs Profit sharing ratio before retirement of J and admission of Z 40.00% 40.00% 20.00% - Profit sharing ratio after retirement of J and before admission of Z 66.67% 33.33% - 25% share given to Z, adjusted from R and W (16.67%) (8.33%) 25.00% New profit sharing ratio on retirement of J and admission of Z 50.00% 25.00% 25.00% W-2: Revaluation account Prov. for slow moving items 2.50 Fixed assets (shop) (5 4.2) 0.80 Prov. for doubtful debts 4.00 Fixed assets Est. liability for pending claims 1.80 Gain on revaluation (balancing) (b) Statement of financial position as at 1 July 2016 Assets Capital and liabilities Fixed assets (net) [ ] Capital: R (From (a) above) Stock-in-trade (net) (25 2.5) W (From (a) above) 9.75 Trade and other receivables (net) [28 4] Z (From (a) above) 8.5 Cash and bank ( ) 8.45 Trade and other payables (70+1.8) Payable to J Page 4 of 6

5 A.7 (a) Fortune Traders Statement of comprehensive income for the year ended 30 June 2016 Rs. in '000 Sales revenue [28, (35 1.4)] 28,761 Cost of sales: Opening inventory (1,045) Purchases (16, ) (15,780) Closing inventory 1,560 (15,265) Gross profit 13,496 Selling and administration expenses (W-1) (6,130) Bad debt expense (reversal of excess provision) 30 Finance charges (5,000 12% 1 2) (300) Net profit 7,096 W-1: Selling and administration expenses Selling and administration expenses 5,855 Depreciation expense building (3,700 1,436) 5% 113 Depreciation expense plant and machinery (6, ,414) 10% 391 Fire insurance prepaid (215) Fire insurance for owner private property (240) Office rent accrued 137 Salaries accrued 89 6,130 (b) Statement of financial position as at 30 June 2016 Rs. in '000 Assets Non-current assets Property, plant and equipment cost (3,700+6, ) 10,020 Accumulated depreciation (1,436+2, ) (4,354) 5,666 Current assets Trade receivables [3,600 (35 1.4)] 3,551 Provision of doubtful debts (180 30) (150) 3,401 Closing inventory 1,560 Prepayments and other receivables [380+(430 2)+330] 925 Cash and bank balances 5,850 11,736 17,402 Equity and liabilities Capital: Opening balance 3,000 Profit for the year As above 7,096 Drawings (240) 9,856 Long-term loans [5,000 (5, )] 3,750 Current liabilities Current maturity of long-term-loan (5,000 3,750) 1,250 Trade and other payables (2, ) 2,246 Interest payable (5,000 12% 1 2) 300 3,796 17,402 Page 5 of 6

6 A.8 (a) Eden Garments Bank account Description Rupees Description Rupees 30-Jun Balance b/d 760,000 (i) Account payable (i) Account payable 50,000 ( 85,000 58,000) 27,000 (i) Repair charges 4,630 (ii) Account receivable 366,000 (iii) Account receivable 354,000 (ii) Discount expense (iv) Dividend income 50,000 (76, ) 76,000 4,000 (iv) Bank charges (7,850 1,250) 6,600 (iv) Subscription charges 12, Jun Balance c/f 803,030 1,218,630 1,218,630 (b) Bank reconciliation statement for the month of 30 June 2016 Rupees Balance as per bank statement - overdraft (1,490,850) (i) Cheques issued by EG but not yet paid by the bank: As given in question paper (3,856,300) Cheque returned from the bank now recorded 50,000 Misplaced cheque now reversed 4,630 (3,801,670) (ii) Cheques deposited but not credited by the bank: As given in question paper 6,460,000 Cheque deposited and returned by the bank now recorded (366,000) 6,094,000 (iv) Bank charges over charged 1,250 Unidentified difference (balancing) 300 Balance as per bank book 803,030 (THE END) Page 6 of 6