G.C.E. (A.L.) Support Seminar- 2014

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Transcript of G.C.E. (A.L.) Support Seminar- 2014

01. The effect of a transaction of a business is reflected through the accounting equation as follows. Assets = Liabilities + Equity - 45 000 - 50 000 + 5 000 The transaction presented here is: ^1& Sale of goods costing Rs. 45 000 for Rs. 50 000 on credit basis. ^2& Settlement of a bank loan of Rs. 50 000 with an interest of Rs. 5 000. ^3& Payment of Rs. 45 000 to a creditor with a balance of Rs. 50 000. ^4& Purchase of goods worth of Rs. 50 000 inclusive of 10% Value Added Tax (VAT) on credit basis. ^5& Sale of a machine with a carrying amount of Rs. 45 000 for Rs. 50 000 on credit basis. (........)
02. The following information is provided in relation to a business which incurred a loss of Rs. 75 000 for the year ending 31.03.2014. This business was commenced on 01.04.2013. Rs. '000 Increase in liabilities during the year 900 Drawings 50 Additional capital employed 225 How much is the increase or decrease of assets for the year ending 31.03.2014 ? ^1& Rs. 825 000 increase ^2& Rs. 975 000 decrease ^3& Rs. 975 000 increase ^4& Rs. 1 000 000 increase ^5& Rs. 1 150 000 increase (........)
03. In which of the following ways are the accounts-building maintenance, income tax for the year, drawings and provision for doubtful debts classified respectively ? ^1& Expense, Expense, Equity, Asset ^2& Expense, Liability, Expense, Income ^3& Expense, Income, Equity, Asset ^4& Asset, Asset, Equity, Liability ^5& Asset, Income, Equity, Asset (........)
04. During the month of January, an entity has invoiced Rs. 100 000 worth of goods to a customer. But later it was revealed that only Rs. 90 000 worth of goods have been sent to the customer. The journal entry made to record this difference in the entity's books is: Dr Cr ^1& Sales Return Account Debtors Account ^2& Creditors Account Purchase return Account ^3& Sales Account Purchase return Account ^4& Creditors Account Purchase Account ^5& Sales Account Debtors Account (........)
05. Which of the following statements is correct regarding petty cash imprest system ? ^1& Debit note is used as a source document for petty cash payments. ^2& Petty cash imprest system cannot be considered as an internal control system for cash. ^3& At the end of each imprest period same amount of money is reimbursed for petty cash payments. ^4& The amount reimbursed at the end of each imprest period is equal to the amount held by the petty cash controller. ^5& The total of amount of petty cash held by the petty cash controller at the end of the imprest period and the amount that was spent during the period is equal to the petty cash of imprest. (........)
06. Monthly gross salary of employees of a business was Rs. 400 000 and the contribution to the Employee Provident Fund (EPF) by the employer and the employees were Rs. 60 000 and Rs. 40 000 respectively. Even though the salary has been paid in cash, the contribution to the EPF is paid in the following month. In which one of the following ways is the effect of this transaction shown in the accounting equation? Assets (Rs.) = Liabilities (Rs.) + Equity (Rs.) ^1& - 360 000 = + 40 000 - 400 000 ^2& - 360 000 = + 60 000 - 420 000 ^3& - 360 000 = + 100 000 - 460 000 ^4& - 400 000 = + 100 000 - 500 000 ^5& - 460 000 = + 40 000 - 500 000 (........)
[ See page 2
Instructions ( ∗ Answer all the questions. ∗ Select the correct answers for questions No. 1-30 and write its number on the dotted line given. ∗ Write Short answers for questions No. 31-50 on the dotted line given.
Accounting I
Two hours
07. Which of the following statement/ statements is/are correct ? A - All assets of a business not having a going concern are considered as current assets. B - According to the prudence concept, an increase in the market value of a land should be accounted. C - According to the consistency concept, a business should use the selected accounting policies continuously. ^1& A only. ^2& B only. ^3& C only. ^4& A and B only' ^5& A and C only. (........)
08. Which of the following criteria need to be satisfied in order to recognise a liability in the financial statements of an entity as per the conceptual framework of financial reporting? A - It should comply with the definition of a liability of the item B - There is a probability that resources embodying future economic benefits of the item will flow out of the entity. C - There should be a cost or value for the item which can be measured reliably. ^1& A only. ^2& A and B only. ^3& A and C only. ^4& B and C only. ^5& All A, B and C. (........)
09. The inventory as at 31.03.2013 of a business has been overvalued by Rs. 30 000 and its inventory as at 31.03.2014 has been undervalued by Rs. 10 000. What is the effect of this on the profits of the two years ? Year ending 31.03.2013 Year ending 31.03.2014 ^1& Increase of Rs. 30 000 Decrease of Rs. 10 000 ^2& Decrease of Rs. 30 000 Increase of Rs. 10 000 ^3& Increase of Rs. 30 000 Decrease of Rs. 20 000 ^4& Increase of Rs. 30 000 Decrease of Rs. 40 000 ^5& Decrease of Rs. 30 000 Increase of Rs. 40 000 (........)
10. A business acquires a new equipment worth of Rs. 100 000 on 31.03.2014 exchanging an equipment which had a carrying amount of Rs. 70 000 on this date. Rs. 40 000 was paid together with the old equipment for this transaction. What is the profit or loss on exchange of the equipment? ^1& Profit Rs. 10 000 ^2& Loss Rs. 10 000 ^3& Profit Rs. 30 000 ^4& Loss Rs. 30 000 ^5& Loss Rs. 50 000 (........)
11. The following are few definitions included in the Sri Lanka Accounting Standard No. 16 - Property, Plant and Equipment. A - Value of an asset less its accumulated depreciation stated in the Statement of Financial Position B - Exchange value of an asset in an arm's length transaction between knowledgeable and willing parties. C - Value of an asset that is derived by deducting its residual value from the cost or revalued amount. From the above definitions, the fair value, carrying amount and depreciable amount of an asset are indicated respectively by: ^1& A, B and C ^2& A, C and B ^3& B, A and C ^4& B, C and A ^5& C, A and B (........)
÷ Use the following information to answer questions no. 12, 13 and 14.
The following information relates to the partnership of Pasidu, Dileepa and Rukshan for the year ending 31.03.2014. A - The annual salary of Dileepa is Rs. 24 000. B - Rs. 12 000 of above salary has been paid during the year. C - Profit shares distributed among Pasidu, Dileepa and Rukshan are Rs. 40 000, Rs. 30 000 and Rs. 20 000 respectively. D - Loan interest of Rs. 3 000 payable to Rukshan is not recorded in the books. E - Goods drawings of Pasidu and Rukshan are Rs. 3 000 and Rs. 2 000 respectively and these are not recorded in the books.
12. Which of the above items can be considered as appropriation of profits and losses among the partners ? ^1& A and B only. ^2& A and C only. ^3& A, B and C only. ^4& A, B, C and D only. ^5& All A, B, C, D and E. (........)
13. The correct profit of the partnership for the year ending 31.03.2014 is: ^1& Rs. 90 000 ^2& Rs. 102 000 ^3& Rs. 106 000 ^4& Rs. 114 000 ^5& Rs. 116 000 (........)
14. When all above information is considered, the increase in equity for the year ending 31.03.2014 is: ^1& Rs. 94 000 ^2& Rs. 97 000 ^3& Rs. 100 000 ^4& Rs. 104 000 ^5& Rs. 116 000 (........)
15. During a particular financial year, a business entity has purchased packing materials worth of Rs. 20 000. Out of this, Rs. 4 000 worth of packing material were damaged and Rs. 9 000 worth of inventory has been used. The increase in expenses during the year due to the above events is: ^1& Rs. 4 000 ^2& Rs. 7 000 ^3& Rs. 9 000 ^4& Rs. 13 000 ^5& Rs. 20 000 (........)
[ See page 3
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÷ Use the following information to answer questions no. 16 and 17.
The following transactions relate to Laknath Company which is engaged in production of goods. A - Purchase of a machine on cash basis for the purpose of production. B - Purchase of Rs. 50 000 treasury bills with a maturity period of three months. C - Payment of the installment for a motor vehicle purchased under a financial lease. D - Issue of 10 000 ordinary shares to existing shareholders for a purchase consideration of Rs.50 per share by utilising reserves.
16. Which of the above transactions result in cash flows ? ^1& A and B only. ^2& A and C only. ^3& A, B and C only. ^4& B and D only. ^5& B, C and D only. (........)
17. Which of the above transactions result in cash flows from relating to financing activities? ^1& B only. ^2& C only. ^3& B and C only. ^4& B and D only. ^5& C and D only. (........)
18. The following information relates to Ravidu's business. 31.03.2014 31.03.2013 Inventory 300 000 200 000 Debtors 180 000 140 000 During the year ending 31.03.2014, Rs. 920 000 was received from debtors and cash sales were Rs. 790 000. The business sells goods with a 40% mark up on cost. What is the amount of purchases for the year ending 31.03.2014? ^1& Rs. 1 134 000 ^2& Rs. 1 150 000 ^3& Rs. 1 350 000 ^4& Rs. 1 550 000 ^5& Rs. 1 564 000 (........)
÷ Use the following information to answer questions no. 19, 20 and 21.
The following information relates to Dushmantha Company Ltd. 31.03.2014 31.03.2013 Stated Capital (Rs.'000) (Rs.'000) Ordinary shares at Rs. 200 per share 13 000 13 000 200 000 Non-redeemable preferences shares with a dividend of Rs. 5/- per share 4 000 4 000 Reserves General reserves 3 400 3 000 Retained earnings 3 600 2 000 Non current liabilities 15% long-term loan 2 000 2 000 Current liabilities Income tax payable 100 80 Creditors 140 150
Income tax paid by the year ending 31.03.2014 was Rs. 280 000
19. Profit before tax for the year ending 31.03.2014: ^1& Rs. 1 600 000 ^2& Rs. 2 400 000 ^3& Rs. 2 700 000 ^4& Rs. 3 000 000 ^5& Rs. 3 300 000 (........)
20. Interest cover ratio for the year ending 31.03.2014: ^1& 08 times. ^2& 09 times ^3& 10 times ^4& 11 times. ^5& 12 times (........)
21. Return on equity for the year ending 31.03.2014 (based on closing equity):
^1& 10.0% ^2& 12.5% ^3& 13.7% ^4& 15.0% ^5& 16.5% (........)
÷ Use the following information to answer questions no. 22 and 23
Nanasa Library Association's life membership account balance was Rs. 150 000 as at 31.03.2013, out of which, 10% is added annually to subscription income. Annual subscription per member is Rs. 500 and number of members as at 31.03.2014 excluding life members was 200. 20 members had not paid subscription as at 31.03.2013 and 25 members have paid the subscription for the following year too. 30 members had not paid subscription as at 31.03.2014 and 20 members have paid for the following year too. 22. Subscription income recognized for the year ending 31.03.2014: ^1& Rs. 67 500 ^2& Rs. 90 000 ^3& Rs. 102 500 ^4& Rs. 115 000 ^5& Rs. 150 000 (........)
23. Subscription received in cash for the year ending 31.03.2014: ^1& Rs. 52 500 ^2& Rs. 75 000 ^3& Rs. 87 500 ^4& Rs. 92 500 ^5& Rs. 100 000 (........)
[ See page 4
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÷ Use the following information to answer questions no. 24 and 25. The information relating to salaries of a business for the month of March 2014 is as follows.
Basic Salary Rs. 75 000 Overtime Allowance Rs. 3 000 Other Allowances Rs. 15 000 Rs. 93 000 Deductions Festival Advance Rs. 3 000 Salary Advance Rs. 7 500
Employee Provident Fund ^EPF& contribution - Employee 8% Employer 12% Employee Trust Fund (ETF) contribution 3%
(Overtime allowance is ignored in the calculation of EPF and ETF contribution.)
24. Total employee related expense for the month of March 2014: ^1& Rs. 90 000 ^2& Rs. 93 000 ^3& Rs. 106 500 ^4& Rs. 106 950 ^5& Rs. 113 700 (........)
25. Which of the following entries are correct regarding EPF contribution for the month of March 2014? EPF Expense Account Salary Account EPF payable Account Dr (Rs.) Dr (Rs.) Cr (Rs.) ^1& 9 000 6 000 15 000 ^2& 10 800 7 200 18 000 ^3& 11 160 7 440 18 600 ^4& 18 000 - 18 000 ^5& 18 600 - 18 600 (........)
26. The following information relates to a product Fixed overheads Rs. 400 000 Margin of safety Rs. 200 000 Contribution to sales ratio 60%
How much is the total contribution relevant to the product? ^1& Rs. 200 000 ^2& Rs. 240 000 ^3& Rs. 360 000 ^4& Rs. 520 000 ^5& Rs. 600 000 (........)
÷ Use the following information to answer questions no. 27 and 28.
Isuru Company Ltd. is planning to invest money to replace an old machine with a new machine. Estimated information is as follows. Rs. Purchase price of new machine 200 000 Installation charges 25 000 Cost of old machine 100 000 Saleable price of old machine 50 000 Opening working capital 35 000
Useful life of the new machine is 5 years. Net cash flows are given below.
Year 1 2 3 4 5 Net cash flows ^Rs.& 80 000 60 000 50 000 40 000 60 000
27. Initial investment of this machine is: ^1& Rs. 160 000 ^2& Rs. 200 000 ^3& Rs. 210 000 ^4& Rs. 250 000 ^5& Rs. 275 000 (........)
28. Payback period of the investment is: ^1& 4 years ^2& 3 years and 6 months ^3& 3 years and 9 months ^4& 5 years ^5& 4 years and 6 months (........) ÷ Use the following information to answer questions no. 29 and 30.
For the production of a unit of a product, a cost of Rs. 300 direct material and a cost of Rs. 200 for direct labour will be incurred. There are 2 production departments and 01 service department in the factory. The information relating to these departments for a year is as follows.
Departments Indirect Labour
No. of stores
requisitions Production Department - 01 80 000 75 000 15 000 5 1 330 01 2 000
Production Department - 02 60 000 75 000 10 000 3 916 02 3 000 Service (Warehouse) 15 000 20 000 5 000 2 - - -
Further, the following budgeted information is also provided. Factory rent Rs. 120 000 Employee welfare expenses Rs. 50 000 Overheads are absorbed based on direct labour hours.
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[ See page 5
29. Total overheads allocated to the production departments 01 and 02: ^1& Rs. 169 000 and Rs. 156 000 ^2& Rs. 237 000 and Rs. 208 000 ^3& Rs. 240 000 and Rs. 190 000 ^4& Rs. 266 000 and Rs. 229 000 ^5& Rs. 272 500 and Rs. 222 500 (........)
30. Unit cost of the product is: ^1& Rs. 500 ^2& Rs. 790 ^3& Rs. 825 ^4& Rs. 950 ^5& Rs. 1 200 (........)
÷ Write short answers for question no. 31 - 50 on the dotted lines.
31. Use a ''√'' mark in the relevant column to indicate whether the following statements are True or False
True False
A - The primary objective of accounting is to provide an comprehensive analysis of business transactions to the management . ................ ................
B - All errors that occur in recording transactions can be identified through the trial balance. ................ ................
C - According to the money measurement concept it is assumed that the value of money is constant. ................ ................
D - The trade discount deducted from the list price when a product is purchased is credited to the discount received account. ................ ................
32. State the prime entry book and the source document relevant to the following transactions of a trading business.
Transaction Prime entry book Source document
^1& Purchase of goods for resale on credit basis '''''''''''''''''''''''''''''' ''''''''''''''''''''''''''''''
^2& Purchase of a motor vehicle on credit basis for the use in business '''''''''''''''''''''''''''''' ''''''''''''''''''''''''''''''
33. State whether the bank balance increases or decreases due to the following transactions of a business.
Transaction Bank balance of the business
^1& Depositing a cheque by a debtor in the current account of the business '''''''''''''''''''''''''''''''''''''''''''''''''''''''''''
^2& Cheque book charges of the bank '''''''''''''''''''''''''''''''''''''''''''''''''''''''''''
^3& Payment of the electricity bill of the business by a cheque '''''''''''''''''''''''''''''''''''''''''''''''''''''''''''
^4& Dishonor of a cheque deposited in the bank '''''''''''''''''''''''''''''''''''''''''''''''''''''''''''
34. A purchase invoice of Rs. 13 000 of a business is recorded as Rs. 31 000 in the purchase journal and posted to the general ledger.
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(1) '''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''' '
(2) '''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''' '
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36. Information regarding inventory purchased by a business during a particular financial year is as follows. Rs. '000
List price (Rs. 6 000 each for 1 000 units) 6 000 Trade discounts 300 Carrying charges 100 Distribution expenses 600 Inventory at the year end is 100 units.
'''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''' '
37. Information regarding a manufacturing business for the year ending 31.03.2014 as follows. Rs. '000
Raw Material Purchases 1 500 Direct Production Salaries 800 Production Overheads 1 100 Decrease in raw material inventory 200 Increase in inventory of work in progress calculated at prime cost 150
Calculate the following:
(ii) Total production cost (Rs.) '''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''' '
38. Information regarding debtors of a business for the year ending 31.03.2014 are as follows. Rs. 2013.04.01 debtor balance 120 000 2014.03.31 debtor balance 180 000 Bad debts written off during the year 4 800 Receipt of bad debt written off 6 000 A provision of 4% for doubtful debts is made based on closing debtor balance for each year.
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(ii) What is the increase or decrease in net amount of debtors as at 31.03.2014? '''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''''' '
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40. Some provisions of the Partnership Ordinance 1890 relating to accounting are as follows. A - Profits should be shared equally B - No entitlement to interest on capital C - In the case of retirement or death of a partner, an annual interest of 5% should be paid when his or her entitlement is transferred to a loan account. D - Loans provided by partners in addition to the capital are entitled to a 5% of interest.
Complete the table given below using above information. Relevant provision / provisions (State only the letter)
(i) Appropriation of profits and losses ........................ (ii) Section 24 ........................ (iii) Section 42 ........................
[ See page 7
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41. Information regarding…