Accounts Payable & General Ledger Kathleen Graw. Accounts Payable & General Ledger2.
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PRINCIPLES OF ACCOUNTING B.com-1 Regular Annual Examination 2015
Compiled & Solved By: JAHANGEER KHAN
B.com-1
Compiled & Solved By: JAHANGEER KHAN
PRINCIPLES OF ACCOUNTING - 2015 B.com1 Regular Annual Examination 2015
pg. 1
Q.1(a): ACCOUNTING PRINCIPLES:
State the rules of debit and credit in terms of increase and decrease in the value of assets, liabilities and owner’s equity.
SOLUTION 1 (a):
Debit Nature of Accounts Credit Increase Assets Decrease Decrease Liabilities Increase Decrease Owner’s Equity Increase
Q.1(a): TRIAL BALANCE: The following transactions relates to Shaheer Co.
1) Shaheer started business by investing cash Rs.15,000, furniture Rs.20,000, Merchandise Rs.45,000.
2) Purchased merchandise from Khan at list price of Rs.10,000 with 10% trade discount paid cash Rs.4,000.
3) Sold goods for Rs.50,000 to Shehzad and received cash from him Rs.20,000. 4) Salaries expense of the business Rs.13,000 out of which Rs.10,000 were paid. 5) A customer paid Rs.5,000 as advance.
REQUIRED: Prepare trial balance in proper form. SOLUTION 1 (b):
S.no Account Titles P/R Debit Credit 1. Cash 26,000 2. Accounts Receivable 30,000 3. Merchandise 45,000 4. Furniture 20,000 5. Accounts Payable 5,000 6. Salaries payable 3,000 7. Advance from Customer 5,000 8. Shaheer Capital 80,000 9. Sales 50,000
10. Purchases 9,000 11. Salaries Expense 13,000
Total 143,000 143,000
Additional Working:
SHAHEER CO. GENERAL JOURNAL
S.no Particulars P/R Debit Credit 1. Cash 15,000 Merchandise 20,000 Furniture 45,000 Shaheer Capital 80,000 (To record started business by Shaheer)
2. Purchases 9,000 Cash 4,000 Accounts Payable 5,000 (To record purchase of merchandise)
Compiled & Solved By: JAHANGEER KHAN
PRINCIPLES OF ACCOUNTING - 2015 B.com1 Regular Annual Examination 2015
pg. 2
S.no Particulars P/R Debit Credit
3. Cash 20,000 Accounts Receivable 30,000 Sales 50,000 (To record sale of merchandise)
4. Salaries Expense 13,000 Cash 10,000 Salaries Payable 3,000 (To record salaries expense)
5. Cash 5,000 Advance from Customer 5,000 (To record cash received from customer in advance)
SHAHEER CO. GENERAL LEDGERS
Cash
1. Capital 15,000 2. Purchases 4,000 3. Sales 20,000 4. Salaries Expense 10,000 5. Advance from customer 5,000 Balance c/d 26,000 40,000 40,000
Balance b/d 26,000
Furniture 1. Capital 20,000 Balance c/d 20,000 20,000 20,000
Balance b/d 20,000
Merchandise 1. Capital 45,000 2. Balance c/d 45,000 45,000 45,000
Balance b/d 45,000
Shaheer Capital Balance c/d 80,000 1. Assets 80,000 80,000 80,000
Balance b/d 80,000
Purchases 2. Cash and A/c Payable 9,000 Balance c/d 9,000 9,000 9,000
Balance b/d 9,000
Accounts Payable Balance c/d 5,000 2. Purchases 5,000 5,000 5,000
Balance b/d 5,000
Compiled & Solved By: JAHANGEER KHAN
PRINCIPLES OF ACCOUNTING - 2015 B.com1 Regular Annual Examination 2015
pg. 3
Sales Balance c/d 50,000 3. Cash and A/c Receivable 50,000 50,000 50,000
Balance b/d 50,000
Accounts Receivable 3. Sales 30,000 Balance c/d 30,000 30,000 30,000
Balance b/d 30,000
Salaries Expense 4. Cash and Salaries Payable 13,000 Balance c/d 13,000 13,000 13,000
Balance b/d 13,000
Salaries payable Balance c/d 3,000 4. Salaries Expense 3,000 3,000 3,000
Balance b/d 3,000
Advance from Customer Balance c/d 5,000 5. Salaries Expense 5,000 5,000 5,000
Balance b/d 5,000 Q.2: WORK SHEET:
The following are Trial balance and adjustment data for Aslam Company on 31, Dec 2015. Debit Credit
Cash Rs.5,000 Capital Rs.150,000 Bank 30,000 Salaries Payable 5,000 Office Equipment 25,000 Commission Revenue 40,000 Office Furniture 15,000 Unearned Commission 10,000 Prepaid Advertisement 7,000 Allowance for Depreciation O/E 1,000 Office Salaries Expense 15,000 Allowance for Depreciation O/F 3,000 Commission Receivable 5,000 Office Supplies 7,000 Investments 100,000
Total 209,000 Total 209,000 ADJUSTMENTS:
1) Services provided against unearned commission Rs.7,000. 2) Commission receivable Rs.8,000. 3) Commission revenue includes an amount of Rs.1,000 advance from customer. 4) Advertisement expense Rs.5,000. 5) Unused office supplies Rs.2,000. 6) Interest on investment receivable Rs.5,000. 7) Fixed assets are depreciated at 10% per annum under diminishing balance method.
REQUIRED: Prepare 10 column work sheet.
Compiled & Solved By: JAHANGEER KHAN
PRINCIPLES OF ACCOUNTING - 2015 B.com1 Regular Annual Examination 2015
pg. 4
Compiled & Solved By: JAHANGEER KHAN
PRINCIPLES OF ACCOUNTING - 2015 B.com1 Regular Annual Examination 2015
pg. 5
Q.3: ADJUSTING, CLOSING AND REVERSING ENTRIES: Take the data given in Question No. 2. REQUIRED: Record adjusting, closing and reversing entries. SOLUTION 3:
ASLAM COMPANY ADJUSTING ENTRIES
S.no Particulars P/R Debit Credit 1. Unearned Commission 7,000 Commission Revenue 7,000 (To record a part of unearned commission
recognized as earned)
2. Commission Receivable 3,000 Commission Revenue 3,000 (To record accrued commission revenue)
3. Commission Revenue 1,000 Unearned Commission 1,000 (To record a part of commission revenue recognized
as unearned)
4. Advertising Expense 5,000 Prepaid Advertising 5,000 (To record advertisement expense)
5. Office Supplies Expense 5,000 Office Supplies 5,000 (To record office supplies expense)
6. Interest Receivable 5,000 Interest Income 5,000 (To record accrued interest on investment)
7. Depreciation Expense 3,600 Allowance for Depreciation O/E 2,400 Allowance for Depreciation O/F 1,200 (To record depreciation expense on equipment and
furniture)
ASLAM COMPANY CLOSING ENTRIES
S.no Particulars P/R Debit Credit 1. Income Summary 28,600 Office Salaries Expense 15,000 Advertisement Expense 5,000 Office Supplies Expense 5,000 Depreciation Expense 3,600 (To close various expenses into income summary)
2. Commission Revenue 49,000 Interest Income 5,000 Income Summary 54,000 To close Various revenues into income summary
3. Income Summary 25,400 Capital 25,400 (To close income summary into capital)
Compiled & Solved By: JAHANGEER KHAN
PRINCIPLES OF ACCOUNTING - 2015 B.com1 Regular Annual Examination 2015
pg. 6
ASLAM COMPANY REVERSING ENTRIES
S.no Particulars P/R Debit Credit 1. Commission Revenue 3,000 Commission Receivable 3,000 (To reverse accrued commission revenue)
2. Unearned Commission 1,000 Commission Revenue 1,000 (To reverse unearned commission)
3. Interest income 5,000 Interest Receivable 5,000 (To reverse accrued interest on investment)
Q.4: VOUCHER SYSTEM:
Sadia Company uses voucher system, Selected transactions for August 2015 were as given below. 1) Prepared a cheque of Rs.15,000 to establish petty cash fund. 2) Purchased equipment for Rs.10,000 on credit term 2/10, n/30 from Modern Traders. 3) Purchased furniture for Rs.30,000. Paid cash Rs.10,000 and balance is payable. 4) Returned equipment to Modern Traders worth Rs.500. 5) Paid Modern Traders within discount period. 6) Paid Rs.21,000 to settle notes payable including interest of Rs.1,000. 7) Paid advertisement in advance Rs.15,000. 8) Issued 5% 30 days notes payable of Rs.15,000 and paid Rs.25,000 in full settlement of
voucher payable of Rs.40,000. REQUIRED: Using general journal form prepare entries in:
(1) Voucher Register (2) Cheque Register (3) General Journal SOLUTION 4:
SADIA COMPANY GENERAL JOURNAL
VOUCHER REGISTER S.no Particulars P/R Debit Credit
1. Petty Cash fund 15,000 Voucher Payable 15,000 (To record issued voucher against petty cash fund)
2. Equipment 10,000 Voucher Payable 10,000 (To record issued voucher against purchase of
equipment from Modern Traders)
3. Furniture 30,000 Voucher Payable 10,000 Voucher Payable 20,000 (To record issued voucher against purchase of
furniture)
4. Voucher Payable 10,000 Equipment 500 Voucher Payable 9,500 (To record issued voucher against return of
equipment to Modern Traders )
Compiled & Solved By: JAHANGEER KHAN
PRINCIPLES OF ACCOUNTING - 2015 B.com1 Regular Annual Examination 2015
pg. 7
S.no Particulars P/R Debit Credit
6. Notes Payable 20,000 Interest Expense 1,000 Voucher Payable 21,000 (To record issued voucher against notes payable
including interest)
7. Prepaid Advertisement 15,000 Voucher Payable 15,000 (TO record issued voucher against prepaid
advertisement)
8. Voucher Payable 40,000 Voucher Payable 15,000 Voucher payable 25,000 (To record issued voucher against due voucher)
SADIA COMPANY
GENERAL JOURNAL CHEQUE REGISTER
S.no Particulars P/R Debit Credit 1. Voucher Payable 15,000 Bank 15,000 (To record issued cheque for petty cash fund)
5. Voucher payable 9,500 Bank 9,310 Equipment (9,500 x 2%) 190 (To record issued cheque to Modern Traders within
discount period)
6. Voucher payable 21,000 Bank 21,000 (To record issued cheque for notes payable including
interest)
7. Voucher Payable 15,000 Bank 15,000 (To record issued cheque for prepaid advertisement)
8. Voucher Payable 25,000 Bank 25,000 (To record issued cheque for due voucher)
SADIA COMPANY
GENERAL JOURNAL S.no Particulars P/R Debit Credit
3. Voucher Payable Cash (To record paid cash against voucher payable)
8. Voucher Payable 25,000 5% Notes Payable 25,000 (To record note issued for due voucher)
Compiled & Solved By: JAHANGEER KHAN
PRINCIPLES OF ACCOUNTING - 2015 B.com1 Regular Annual Examination 2015
pg. 8
Q.5: ACCOUNT RECEIVABLE:
Opening balance on 1, Jan 2014 Accounts Receivable Rs.150,000 Allowance for Bad Debts Rs.5,000
During the year 2014 following transactions were completed; 1) Cash sales Rs.75,000. 2) Credit sales Rs.175,000. 3) Cash collected on account Rs.200,000. 4) Sales return Rs.5,000. 5) Bad debts written off Rs.7,000. 6) Recovery from previously write off account Rs.3,000.
REQUIRED: 1) Prepare Accounts Receivable account 2) Compute and record bad debts expense estimating bad debts;
(a) @ 5% of account receivable under balance sheet approach. (b) @ 3% of net credit sales under income statement approach.
3) Prepare partial balance sheet under both the approaches. SOLUTION 5 (1):
M/S._______________ GENERAL LEDGER
Accounts Receivable
Balance 150,000 3. Cash 200,000 2. Sales 175,000 4. Sales Return 5,000 6 (a). Allowance for Bad Debts 3,000 5. Allowance for Bad Debts 7,000 6 (b). Cash 3,000 Balance c/d 113,000 328,000 328,000
Balance b/d 113,000 SOLUTION 5 (2) (a):
COMPUTATION FOR BAD DEBTS Accounts Receivable 113,000 Rate of Bad Debts 5% Estimated Bad Debts (113,000 x 5%) 5,650 Less: Credit Balance of Bad Debts before Adjustment (1,000) Bad Debts Expense 4,650
Allowance for Bad Debts
5. Accounts Receivable 7,000 Balance 5,000 Balance c/d 5,650 6 (a). Accounts Receivable 3,000 Adjustment 4,650 12,650 12,650
Balance b/d 5,650
Compiled & Solved By: JAHANGEER KHAN
PRINCIPLES OF ACCOUNTING - 2015 B.com1 Regular Annual Examination 2015
pg. 9
M/S._______________
GENERAL JOURNAL S.no Particulars P/R Debit Credit
1. Bad Debts Expense 4,650 Allowance for Bad Debts 4,650 (To record bad debts expense)
2. Income Summary 4,650 Bad Debts Expense 4,650 (To close bad debts expense into income summary)
SOLUTION 5 (2) (b):
COMPUTATION FOR BAD DEBTS Credit Sales 175,000 Less: Sales Return (5,000)
Net Credit Sales 170,000
Rate of Bad Debts 5% Bad Debts Expense (170,000 x 3%) 5,100
Allowance for Bad Debts
5. Accounts Receivable 7,000 Balance 5,000 Balance c/d 6,100 6 (a). Accounts Receivable 3,000 Adjustment 5,100 13,100 13,100
Balance b/d 6,100
M/S._______________ GENERAL JOURNAL
S.no Particulars P/R Debit Credit 1. Bad Debts Expense 5,100 Allowance for Bad Debts 5,100 (To record bad debts expense)
2. Income Summary 5,100 Bad Debts Expense 5,100 (To close bad debts expense into income summary)
SOLUTION 5 (3):
M/S._______________ BALANCE SHEET (PARTIAL) AS ON DECEMBER 31, 2014
ASSETS Current Assets: Accounts Receivable 113,000 Less: Allowance for Bad Debts (5,650) 107,350
Compiled & Solved By: JAHANGEER KHAN
PRINCIPLES OF ACCOUNTING - 2015 B.com1 Regular Annual Examination 2015
pg. 10
M/S._______________
BALANCE SHEET (PARTIAL) AS ON DECEMBER 31, 2014
ASSETS Current Assets: Accounts Receivable 113,000 Less: Allowance for Bad Debts (6,100) 106,900 Q.6: INVENTORYVALUATION:
The following transactions are related to Abid Traders. Dec, 2015 01 Inventory 500 Units @ Rs.7.00 05 Purchased 3,000 Units @ Rs.6.00 07 Purchased 5,000 Units @ Rs.5.00 10 Sold 3,500 Units @ Rs.15.00 15 Purchased 7,000 Units @ Rs.8.00 17 Sold 5,000 Units @ Rs.16.00 20 Purchased 4,000 Units @ Rs.6.00 25 Sold 4,500 Units @ Rs.17.00 30 Paid carriage outward on sales Rs.3,000.
REQUIRED: Find Gross Profit using periodic system under: (a) LIFO Method (b) Weighted Average Method
SOLUTION 6 (a):
COMPUTATIONS 1. UNITS IN ENDING INVENTORY:
Units in Beginning Inventory 500 Add: Units Purchased
05-12-2015 Purchased 3,000 07-12-2015 Purchased 5,000 15-12-2015 Purchased 7,000 20-12-2015 Purchased 4,000
Total Units Purchased 19,000 Units Available for Sale 19,500
Less: Units Sold 10-12-2015 Sold 3,500 17-12-2015 Sold 5,000 25-12-2015 Sold 4,500
Total Units Sold (13,000) Units in Ending Inventory 6,500
2. COST OF ENDING INVENTORY BY LIFO METHOD: Date Particulars Units Unit Cost Total Cost
01-12-2015 Inventory 500 RS.7.00 3,500 05-12-2015 Purchased 3,000 Rs.6.00 18,000 07-12-2015 Purchased 3,000 Rs.5.00 15,000
Cost of Ending Inventory 6,500 ----- 36,500
Compiled & Solved By: JAHANGEER KHAN
PRINCIPLES OF ACCOUNTING - 2015 B.com1 Regular Annual Examination 2015
pg. 11
3. GROSS PROFIT:
Sales 10-12-2015 (3,500 x 15) 52,500 17-12-2015 (5,000 x 16) 80,000 25-12-2015 (4,500 x 17) 76,500
Total Sales 209,000 Less: Cost of Goods Sold Merchandise Inventory Beginning (500 x 7) 3,500 Add: Purchases
05-12-2015 (3,000 x 6) 18,000 07-12-2015 (5,000 x 5) 25,000 15-12-2015 (7,000 x 8) 56,000 20-12-2015 (4,000 x 6) 24,000
Total Purchases 123,000 Goods Available for Sale 126,500 Less: Merchandise Inventory Ending (36,500)
Cost of Goods Sold (90,000) Gross Profit 119,000
SOLUTION 6 (b):
COMPUTATIONS 1. COST OF ENDING INVENTORY BY WEIGHTED AVERAGE METHOD
Per Unit Cost =
Per Unit Cost =
Per Unit Cost = Rs.6.49 Cost of Ending Inventory = Units in Ending Inventory x Per Unit Cost Cost of Ending Inventory = 6,500 x 6.49 Cost of Ending Inventory = 29,185
2. GROSS PROFT: Sales 209,000 Less: Cost of Goods Sold Merchandise Inventory Beginning 3,500 Add: Purchases 123,000 Goods Available for Sale 126,500 Less: Merchandise Inventory Ending (29,185)
Cost of Goods Sold (97,315) Gross Profit 111,685
Q.7: DEPRECIATIO:
A manufacturing company purchased machine on 1st July 2011 for Rs.550,000 with estimated life of 10 years and scrape value of Rs.50,000. On 1st Jan, 2014 the company decided that depreciation method be changed from Straight line to Diminishing balance @ 10% per annum. On 30 June 2015 machine was sold for Rs.350,000.
REQUIRED: Record general journal entry to record disposal of machine, showing computations.
Compiled & Solved By: JAHANGEER KHAN
PRINCIPLES OF ACCOUNTING - 2015 B.com1 Regular Annual Examination 2015
pg. 12
SOLUTION 7:
COMPUTATIONS 1. DEPRECIATION EXPENSE BY STRAIGHT LINE METHOD:
Annual Depreciation =
Annual Depreciation =
Annual Depreciation =
Annual Depreciation = 50,000 Depreciation Expense for 31-12-2011 (50,000 x 6/12) 25,000 Depreciation Expense for 31-12-2012 50,000 Depreciation Expense for 31-12-2013 50,000
2. DEPRECIATION EXPENSE BY DIMINISHING BALANCE METHOD:
Annual Depreciation = Net Book Value x Rate Cost of Machine 550,000 Less: Allowance for Depreciation upto 31-12-2013 (125,000) Net Book Value 01-01-2014 425,000 Less: Depreciation Expense for 31-12-2014 (425,000 x 10%) (42,500) Net Book Value 01-01-2014 382,500 Less: Depreciation Expense for 30-06-2015 (382,500 x 10% x 6/12) (19,125) Net Book Value 30-06-2015 363,375
3. LOSS/GAIN ON SALE:
Cost of Machine 550,000 Less: Allowance for Depreciation upto 30-06-2015 (186,625) Net Book Value 30-06-2015 363,375 Less: Cash Sale (350,000) Loss on Sale 13,375
_______________MANUFACTURING COMPANY
GENERAL JOURNAL Date Particulars P/R Debit Credit
30-06-2015 Cash 350,000 Allowance for Depreciation 186,625 Loss on Sale 13,375 Machine 550,000 (To record sale of machine on loss)
Compiled & Solved By: JAHANGEER KHAN
PRINCIPLES OF ACCOUNTING - 2015 B.com1 Regular Annual Examination 2015
pg. 13
Q.8: RETIREMENT OF PARTNER:
The following balance sheet of a partnership firm: ASSETS EQUITIES
Cash Rs.400,000 Accrued expenses Rs.100,000 Inventory 100,000 A Capital 100,000 Account receivable 50,000 B Capital 200,000 Shop Building 150,000 C Capital 300,000
Total 700,000 Total 700,000 C retires and receives Rs.350,000 cash in full settlement. REQUIRED: You are required to record the retirement of C and prepare balance sheet after his
retirement, using both goodwill and bonus methods separately. SOLUTION 8:
COMPUTATION FOR BONUS C is to be paid 350,000 Less: C Capital 300,000 Bonus to C 50,000
______________ PARTNERSHIP
GENERAL JOURNAL S.no Particulars P/R Debit Credit
1. C Capital 300,000 A Capital (50,000 x 1/2) 25,000 B Capital (50,000 x 1/2) 25,000 Cash 250,000 (To record retirement of C)
______________ PARTNERSHIP
BALANCE SHEET ASSETS EQUTIES
Current Assets: Liabilities: Cash 50,000 Accrued Expenses 100,000 Account Receivable 50,000 Inventory 100,000
Owner’s Equity: Fixed Assets: A Capital 75,000 Shop Building 150,000 B Capital 175,000
Total 350,000 Total 350,000
COMPUTATION FOR GOODWILL C is to be paid 350,000 Less: C Capital (300,000) Goodwill of C 50,000
C’s Interest 1/3 Firm’s total Goodwill (50,000 x 3) 150,000
Compiled & Solved By: JAHANGEER KHAN
PRINCIPLES OF ACCOUNTING - 2015 B.com1 Regular Annual Examination 2015
pg. 14
______________ PARTNERSHIP
GENERAL JOURNAL S.no Particulars P/R Debit Credit
1. Goodwill 150,000 A Capital (150,000 x 1/3) 50,000 B Capital (150,000 x 1/3) 50,000 C Capital (150,000 x 1/3) 50,000 (To record distribution of goodwill)
2. C Capital 350,000 Cash 350,000 (To record retirement of C)
______________ PARTNERSHIP
BALANCE SHEET ASSETS EQUTIES
Current Assets: Liabilities: Cash 50,000 Accrued Expenses 100,000 Account Receivable 50,000 Inventory 100,000
Owner’s Equity: Fixed Assets: A Capital 150,000 Shop Building 150,000 B Capital 250,000 Goodwill 150,000
Total 500,000 Total 500,000