Institute of Certified Management Accountants of Sri Lanka

Transcription

1 Copyright Reserved Serial No Technician Stage September 2011 Examination Examination Date : 17 th September 2011 Number of Pages : 07 Examination Time: 9.30 a:m p:m. Number of Questions: 06 Instructions to Candidates 1. Time allowed is three (3) hours 2. Answer all questions 3. The answers should be given in the English Language Subject Subject Code Financial Accounting Fundamentals (FAF / 501) Question No. 1 (20 Marks) (a) (i) State what Accounting means, mentioning its elements giving a brief explanation as necessary. (04 Marks) (ii) Explain briefly what going concern is and the importance of observing this concept when preparing accounts and presenting financial statements. (03 Marks) (iii) Explain briefly what a provision is, as used in financial statements. (02 Marks) (iv) Explain briefly what a Reserve is and distinguish between Revenue Reserves and Capital Reserves. (03 Marks) (b) Prepare the Manufacturing a/c of Modest Industries Ltd. from the following information. Dr. () Cr. () Stocks at beginning of year Stocks at end of year Raw materials 50,000 Raw materials 52,000 Partly manufactured goods 60,000 Partly manufactured goods 60,800 Finished Goods 40,000 Finished Goods 30,000 Raw materials purchased 150,000 Factory Lighting & Heating 20,000 Factory Wages 43,400 Repairs & Renewals Tools & Machinery 2,400 Salaries 200,000 Freight paid on raw materials purchased 5,000 Expenses 12,000 Welding Charges 3,600 1

2 The Company s Non-Current Assets at 1 st January 2010 included: Factory Buildings (cost) 80,000 Office Furniture & Equipment (cost) 60,000 Plant & Machinery (cost) 100,000 Loose Tools (cost) 40,000 Salaries included Factory Manager s and Supervisor s salaries at 26,000/-. Expenses included Factory Cleaning Expenses of 8,000/-. Machinery with written down value of 500/- had to be scrapped during the year, due to overheating during production. Certain parts of the product have to be welded at an outside plant. Depreciation to be 3% on Factory 7 ½ % on Plant & Machinery 15% on Loose Tools. Prepare Manufacturing a/c to show Prime Cost and Production Cost of Manufactured Goods. (08 Marks) (Total 20 Marks) Question No. 2 (14 Marks) Jayantha is in business as a retail grocer for the last two years. However he has not kept a full set of accounting records. In august he needed to prepare accounts to declare business income to Inland Revenue. His rough cash book for the year ended 31 st March 2010 showed the following. Receipts Total cash sales 804,000 Payments Total cash purchases 170,000 General shop expenses 1,000 Telephone bill paid 1,000 Wages of salesman and driver 30,000 Rates 3,000 Drawings 70,000 An analysis of the bank statements for the year revealed the following information. Receipts Payments Total cash banked during the year 528,500 Electricity 4,000 Cheques received from Sales Telephone bills 3,000 Debtors who banked 87,500 Property insurance 1,500 Cheques drawn to pay suppliers 472,000 Motor vehicle expenses 10,000 Loan repayment (Capital 50,000 & Interest) 51,000 Drawings 17,500 2

3 Following details were ascertained. 31/12/2010 () 01/01/2010 () Freehold Land and Buildings, at cost 100, ,000 Motor Vehicle, (Cost 30,000) 15,000 22,500 Stocks, at cost 40,000 35,000 Trade Debtors 10,000 5,000 Trade Creditors 18,000 15,000 Prepayments Motor Vehicle Expenses 3,000 2,000 Property Insurance 1, Loan from Bank 50, ,000 Accruals Electricity 4,000 2,000 Motor Vehicle Expenses 1,000 2,000 Cash at Bank 62,500 5,500 Cash in Hand 1,500 1,000 Depreciation is to be provided on the motor vehicle, used for sales, at 25% per annum, on cost. You are required to: (i) Ascertain Jayantha s Capital a/c balance on 1 st January, (04 Marks) (ii) Prepare his Trading, Profit & Loss a/c for the year ended 31 st December (10 Marks) (Total 14 Marks) Question No. 3 (16 Marks) (a) Simon & Co. are manufactures and traders. When preparing accounts at end of the year the following circumstances were revealed. (i) (ii) A purchase made by a staff member from the company s business for 10,000/- had not been included as sales, a similar amount has been deducted from his salary and the net payment made to him has been posted to the salaries a/c. Wages paid amounting to 7,500/- to own company workmen for repairs and additions to office equipment have been posted to the wages account. (iii) Sale of goods to P. Jacob for 5,000/- has been entered at 500/- in the Sales Day Book (Quantity reckoned 100 as 10). (iv) A Dishonoured Bill for 5,000/- returned by the Bank with which it had been discounted had been credited to Bank a/c and debited to Bills receivable account. Present journal entries if any of these need rectification. (08 Marks) 3

4 (b) The Cash Book of Alvares & Co. showed an overdraft of 32,750/- in the bank column on 31 st December The company closes its books on 31 st December. Following circumstances had been revealed. (1) A cheque for 1,000/- issued to L. Jayapala (Creditor), on 27 th December had been omitted from recording in the cash book, but presented to Bank on 31 st December. (2) Dividends of 500/- received direct into the Bank a/c in December had not been recorded in the cash book, even though an intimation had been received on 7 th December. (3) A cheque for 4,000/- drawn in favour of a supplier had not been presented to the bank. (4) The Bank had debited 2,000/- as interest on overdraft and 600/- as commission but the Bank advices had been received only on 15 th January (5) The credit side of the Cash Book had been under cast by 100/-. (6) Cheque drawn for office expenses for 2,000/- was encashed only 2 nd January. (7) Cheques amounting to 8,800/- had been deposited in the Bank on 26 th December but cheques totaling 3,300/-, the bank had collected only on 6 th January You are required to prepare: (i) Cash Book Adjustments. (04 Marks) (ii) Bank reconciliation for the month of December (04 Marks) (Total 16 Marks) Question No. 4 (14 Marks) (i) Following details relate to the position of Kinross Sports Club at the beginning and at end of At 1/1/2011 Club Premises, at cost 29,000/- Depreciation to date 18,800/- Motor Car, at cost 12,190/- Depreciation to date 10,290/- At 01/01/2010 () At 31/12/2010 () Members Subscriptions due 1, Printing Charges accrued Creditors for Bar Purchases Value of Bar Stocks

5 (ii) Given below are the receipts and payments of the Sports Club for the year ended 31 st December Opening Balances Rates & taxes 1,260 Cash on hand 150 Printing & Stationery 470 Balance at Bank 8,230 Groundsman s wages 840 Subscriptions received 10,710 Anniversary expenses 2,390 Anniversary collections 2,400 Bar purchases payments 5,770 Proceeds variety entertainment 4,270 Expenses on Treasurer 4,800 Bar takings 7,450 Sundry Expenses 1,840 Bank interest 250 Barman s wages 1,000 Purchase of new car 12,600 Closing Balance at Bank 2,490 33,460 33,460 The new car was purchased on 1 st January 2010, after exchanging the old car to the vendor for 3,000/-. Depreciation is to be provided on 5% on written down value; on motor 15% on cost. You are required to prepare: (a) A separate account for the Club s Bar Trading. (02 Marks) (b) Club s Income and Expenditure account for the year ended 31/12/2010. (06 Marks) (c) The Balance Sheet as at 31/12/2010. (06 Marks) (Total 14 Marks) Question No. 5 (22 Marks) (a) XY Ltd. incorporated on 1 st January 2011 invited applications for issuing 10,000 ordinary shares of nominal value 10 each payable, as follows. On application On allotment On 1 st and final call 3 per share 5 per share (including 2 premium) 4 per share Applications were received for 12,000 shares and share allotment was made pro rata. Money received in excess was adjusted against allotment money payable. All allotment and call money was received except from one applicant who applied for 2400 shares and was allotted 2000 shares. Present journal entries to record the receipt of money on application, allotment of shares and those dealing with the Call. (12 Marks) 5

6 (b) The following balances appeared in the books of Arunodaya (Pvt.) Ltd. on 31 st December Preliminary Expenses 20,000 Plant & Machinery 100,000 Stock in Trade 15,000 Land & Buildings 60,000 6% Debentures 20,000 Creditors 44,000 Cash in Hand 10,000 Dividends Payable 16,000 Stated Capital: 10,000 Ordinary Goodwill 24,000 Shares of 10/ each 8/ called up 80,000 Motor Vehicles 150,000 6% Preference Shares of 10/ 30,000 Trade Debtors 45,000 Provision for Taxation 20,000 Bank Balance 20,000 Bank Loan (secured) 50,000 Accrued Expenses 9,000 General Reserve 20,000 Retained Profits 30,000 Accumulated Depreciation: Buildings 20,000/- Plant & Machinery 30,000/- Motor Vehicles 75,000/- You are required to present the Balance Sheet of Arunodaya (Pvt.) Ltd. for internal purposes under proper headings and in good form. (10 Marks) (Total 22 Marks) Question No. 6 (14 Marks) Anil and Bimal are partners operating Ikebana Restaurant, sharing profits and losses in the ratio of 3:2. The partnership agreement provided for: Interest, on capital at 6% p.a. on partner s loans, 6% p.a. on drawings a/c balances and Salaries for 8,000/- and 6,000/-. They had the following assets and liabilities as on 1 st January Liabilities Assets Partners Capital Fixed Assets Anil 150,000 Premises, at cost 200,000 Bimal 100, ,000 Less: Depreciation 60, ,000 Current a/c Anil 2,500 Restaurant Furniture 80,000 Trade Creditors 12,000 Less: Depreciation 25,000 55,000 Accrued Gas & Electricity 1,700 Kitchen Plant 55,000 Loan Anil 20,000 Less: Depreciation 20,000 35,000 Current Assets Stocks, at cost 6,500 Trade Debtors 10,500 Current a/c Bimal 1,000 Cash at Bank 38,200 56, , ,200 6

7 Their cash book for year 2010 showed: Receipts Payments Balance b/f 12,800 Trade Creditors 100,500 From Debtors 22,000 Gas & Electricity 6,300 Cash Sales 303,000 Rates 4,200 Current a/c Anil 1,000 Salaries & Wages 74,500 Repairs & Renewals 5,700 Cash Purchases 52,500 Advertising 3,100 Partner Salaries Anil 8,000 Bimal 6,000 Drawings Anil 4,000 Bimal 3,000 7,000 Balance c/f 71, , ,800 At 31 st December stocks were valued at 4,500/-. Trade Creditors amounted to 11,000/- and Debtors were 2,000/-. Provide for depreciation as follows Premises 4,000/- Restaurant Furniture 6,000/- Kitchen Plant & Equipment 6,000/- You are required to prepare: (a) Trading, Profit & Loss a/c for the year ended 31 st December (04 Marks) (b) Profit & Loss Appropriation a/c. (05 Marks) (c) Partners Current Accounts. (05 Marks) (Total 14 Marks) End of Question Paper 7