1992 Accounting Paper Xii

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1992
XII ACCOUNTING
REGULAR /
PRIVATE
Compiled and Solved by:
S.Hussain
Compiled & Solved by: S.Hussain

[email protected]
ACCOUNTING 1992
REGULAR / PRIVATE
Q.No.1
SINGLE ENTRY
GIVEN Mr. Azmat started business with cash investment of Rs.100,000 on January 1, 1991. He
keeps his accounting records on Single Entry basis. On December 31, 1991, the following information
was obtained from his accounting records:Cash at bank
Rs.
25,500
Accounts receivable
55,000
Merchandise inventory
40,000
Office equipment
60,000
Furniture
30,000
Unexpired insurance
2,500
Accounts payable
39,000
Additional information on December 31, 1991:(i) Mr. Azmat had withdrawn Rs.2,500 per month during the year for his personal use.
(ii) He invested additional capital of Rs.25,000 during the year.
(iii) The bank statement showed a debit of Rs.750 for Zakat deduction and credit of Rs.1,200 for
profit.
(iv) Insurance of Rs.1,500 had expired.
(v) Depreciation on furniture was estimated at 20% and on office equipment at 10%.
(vi) Bad debts expenses were estimated at 5% of accounts receivable.
REQUIRED
(a) Prepare statement showing the calculation of capital on December 31, 1991.
(b) Prepare a Statement of Profit and Loss for the year ending December 31, 1991.
(c) Prepare a Statement of Affairs (Balance Sheet) as of December 31, 1991 in classified account
form.
SOLUTION 1 (a)
Computation of Capital at End:
Cash at bank
Accounts receivable
Office equipment
Furniture
Unexpired insurance
Total assets
Less: Total Liabilities:
Accounts payable
Capital at end
25,500
55,000
40,000
60,000
30,000
2,500
213,000
(39,000)
174,000
XII Accounting 1992 (Regular / Private)
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SOLUTION 1 (b)
MR. AZMAT
STATEMENT OF PROFIT AND LOSS
FOR THE PERIOD ENDED 31 DECEMBER 1991
Capital at end
Add: Drawings (2,500 x 12)
174,000
30,000
204,000
(100,000)
104,000
(25,000)
79,000
Less: Capital at start

Less: Additional investment
Unadjusted profit
Less: Operating Expenses:
Zakat deduction
Insurance expense
Depreciation expense Furniture (30,000 x 20%)
Depreciation expense office equipment (60,000 x 10%)
Bad debts expense (55,000 x 5%)
Total operating expenses
Profit from operation
Add: Other Income:
Profit given by bank
Adjusted net profit
750
1,500
6,000
6,000
2,750
(17,000)
62,000
1,200
63,200
SOLUTION 1 (c)
MR. AZMAT
STATEMENT OF AFFAIRS
AS ON 31 DECEMBER 1991
ASSETS
Current Assets:
Cash at bank
Accounts receivable
55,000
Less: All. For Bad debts
(2,750)
Unexpired insurance
Total current assets
Fixed Assets:
Office equipment
Less: All for depreciation
Furniture
Less: All for depreciation
Total fixed assets
Total assets
60,000
(6,000)
30,000
(6,000)
EQUITIES
Liabilities:
25,950 Accounts payable
Total liabilities
52,250
40,000 Owners Equity:
1,000 Capital
100,000
119,200 Add: Net profit
63,200
Add: Additional investment
25,000
188,200
Less: Drawings
(30,000)
54,000 Total owners equity
158,200
24,000
78,000
197,200 Total equities
197,200
39,000
39,000
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Additional Working:
Date
1
MR. AZMAT
ADJUSTING ENTRIES
Particulars
P/R
Zakat deduction
Bank
(To record the zakat deducted by bank)
Bank
Profit
(To record the profit credited by bank)
Insurance expense
Unexpired insurance
(To adjust the unexpired insurance)
Depreciation expense
Allowance for depreciation Furniture
Allowance for depreciation Office equipment
(To adjust the depreciation expense for the year)
Bad debts expense
Allowance for bad debts
(To adjust the bad debts expense)
Debit
750
Credit
750
1,200
1,200
1,500
1,500
12,000
6,000
6,000
2,750
2,750
Q.No.2
DIVISION OF NET INCOME OR LOSS

GIVEN Abid, Saleem and Khalid are partners in a business. On January 1, 1991 their capital
balances were Rs.60,000; Rs.50,000 and Rs.40,000 respectively. The partnership deed has the following
provisions regarding distribution of net income:(i) Each partner is to receive profit @10% on capital balances as it stands on the first day of each
accounting year.
(ii) Each partner will be allowed a monthly salary of Rs.1,000.
(iii) The remaining net income or net loss, if any, will be divided equally.
On December 31, 1991, the business operation showed net income of Rs.48,000.
REQUIRED
(a) Prepare an Income Distribution Summary showing the distribution of net income.
(b) Make entries in the General Journal for distribution of net income to each partner.
(c) Prepare capital account of each partner post, rule and balance each account.
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SOLUTION 2 (a)
________ PARTNERSHIP
INCOME DISTRIBUTION SUMMARY
Abid
Saleem
60,000
50,000
Capital balances
Net profit
Interest @10% on capital balances
Salary (1,000 x 12)
Distribution of remaining loss equally
Total
6,000
12,000
(1,000)
17,000
5,000
12,000
(1,000)
16,000
Khalid
40,000
4,000
12,000
(1,000)
15,000
Total
150,000
48,000
15,000
36,000
(3,000)
4,000
SOLUTION 2 (b)
Date
1
GENERAL JOURNAL
Particulars
P/R
Expense and revenue summary
Abids current account
Saleems current account
Khalids current account
(To record the distribution of net income)
Debit
48,000
Credit
17,000
1,000
3,000
SOLUTION 2 (c)
GENERAL LEDGER
Abid Capital
c/d balance
Balance
60,000
b/d balance
60,000
60,000
Balance
50,000
b/d balance
50,000
50,000
Balance
40,000
b/d balance
40,000
40,000
60,000
60,000
Saleem Capital
c/d balance
50,000
50,000
Khalid Capital
c/d balance
40,000
40,000
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Q.No.3
PARTNERSHIP ADMISSION
GIVEN Akhtar and Hafeez are partners in a firm sharing profit s and losses in the ratio of 3:2.
The balance sheet of the firm on December 31, 1991 was as under:
Total assets
255,000 A/c payable
55,000
Akhtar Capital
120,000
Hafeez Capital
80,000
255,000
255,000
On January 1, 1992 Kashif is admitted as a partner.
REQUIRED
Give entries in the General Journal for admission of Kashif under each case separately. Show
computation along with each entry:
Case (i):
Kashif is to purchase 1/4 interest from Akhtar and 1/4 from Hafeez and pay to them
privately Rs.60,000 and Rs.30,000 respectively.
Case (ii):
Kashif invests Rs,80,000 and gets 1/4 interest in the capital and profit.
Case (iii):
Kashif invests Rs.80,000 and gets 1/4 interest in the capital and profit. The new capital is
agreed at Rs.280,000.
SOLUTION 3
Case (i):
Computation:
Akhtar =
120,000 x 1/4 =
Hafeez =
80,000 x 1/4 =
Kashif Capital =
Date
1
30,000
20,000
________________
50,000
________________
GENERAL JOURNAL
Particulars
P/R
Akhtar Capital
Hafeez Capital
Kashif Capital
(To record the admission of Kashif)
Case (ii):
Check:
Kashifs investment
Opposite ratio of Kashif
Total capital of firm
Less: Old partners capital (120,000 + 80,000)
Less: Kashifs investment
Positive value shows goodwill to old partners
Debit
30,000
20,000
Credit
50,000
80,000
4/1
320,000
(200,000)
(80,000)
40,000
Computation:
For 1/4 interest, Kashifs investment
Therefore total capital of firm (80,000 x 1/4)
For 3/4 interest old partners capital (320,000 x 3/4)
Less: Old partners capital before admission of Kashif (120,000 + 80,000)
Goodwill to old partners
80,000
320,000
240,000
(200,000)
40,000
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Date
1
GENERAL JOURNAL
Particulars
P/R
Cash
Kashif Capital
Goodwill
Akhtar Capital (40,000 x 3/5)
Hafeez Capital (40,000 x 2/5)
Debit
80,000
Credit
80,000
40,000
24,000
16,000
Case (iii):
Computation:
For 1/4 interest, Kashif capital (280,000 x )
Less: Kashifs investment
70,000
(80,000)
10,000
For 3/4 interest, old partners capital (280,000 x 3/4)

Less: Old partners capital before admission of Kashif (120,000 + 80,000)
210,000
(200,000)
(10,000)
10,000
Bonus to old partners
Date
1
GENERAL JOURNAL
Particulars
Cash
P/R
Debit
80,000
Akhtar Capital (10,000 x 3/5)

Hafeez Capital (10,000 x 2/5)
Kashif Capital
Credit
6,000
4,000
70,000
Q.No.4
CONVERSION
(Not included in the new course)
Q.No.5
(i)
(ii)
(iii)
(iv)
(v)
CORPORATION ISSUE OF SHARES

GIVEN The following transactions were completed by Al-Murtuza Company Limited:Issued 50,000 ordinary shares of Rs.10 each at Rs.12.50 per share to the public payable in full on
application. The company received applications for 80,000 shares. The company allotted the
shares offered and refunded the amount received in excess.
The company issued to the public 50,000 ordinary shares of Rs.10 each payable in full on
application. The entire issue was guaranteed by the underwriters. The company received
applications for 40,000 shares. As per agreement the underwriters subscribed the balance of the
issuance.
The company purchased machinery at a price of Rs.450,000 and consideration issued to the
vendors its own 43,000 ordinary shares of Rs.10 each.
The company issued 10,000 debenture bonds of Rs.100 each redeemable at Rs.105 per
debenture after five years. All the debentures were subscribed.
The company issued 10,000 debenture bonds of Rs.10 each at Rs.95 per debenture. The
debentures are redeemable at par after five years. All the debentures were subscribed.
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REQUIRED
Give entries in the General Journal of the company to record the above transactions.
SOLUTION 5
Date
1
AL-MURTUZA COMPANY LIMITED

GENERAL JOURNAL
Particulars
P/R
Bank (80,000 x 12.50)
Ordinary shares application
(To record the shares application received at par)
Ordinary share capital (50,000 x 10.00)
Share premium (50,000 x 2.50)
(To record the ordinary shares issued at premium)
Bank (30,000 x 12.50)
(To record the refund of excess money to the public)
Bank (40,000 x 10)
(To record the shares application received at par)
Ordinary shares capital (40,000 x 10)
(To record the shares issued to public at par)
Bank (10,000 x 10)
(To record the shares issued to underwriter at par)
Machinery
Shares premium
(To record the purchase of machinery by issuing shares at
premium)
Bank (10,000 x 100)
Loss on redemption (10,000 x 5)
Debentures payable (10,000 x 100)
Premium on redemption (10,000 x 5)
(To record the issue of debentures at par and payback at
premium)
Bank (10,000 x 95)
Discount on debentures (10,000 x 5)
Debentures payables (10,000 x 10)
(To record the issue of debentures at discount and
payback at par)
Debit
1,000,000
Credit
1,000,000
625,000
500,000
125,000
375,000
375,000
400,000
400,000
400,000
400,000
100,000
100,000
450,000
430,000
20,000
1,000,000
50,000
1,000,000
50,000
950,000
50,000
1,000,000
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Q.No.6
DISPOSAL OF NET INCOME

GIVEN The data were extracted from the balance sheet of Al-Mehran Company Limited on
December 31, 1990:Authorized Capital:
200,000 ordinary shares of Rs.10 each
Rs.2,000,000
Issued and Paid-up Capital:
100,000 ordinary shares of Rs.10 each
Rs.1,000,000
Retained earnings
Rs.150,000
On December 31, 1991, the income summary of the company sowed net income of Rs.300,000.
At this date the company decided as under:(i) To declare cash dividend of 15%.
(ii) To appropriate Rs.100,000 for plant expansion.
(iii) To appropriate Rs.50,000 for contingencies.
(iv) To appropriate Rs.50,000 for debenture redemption.
REQUIRED
(a) Give the entry in the General Journal of the company to transfer the net income to retained
earnings account.
(b) Give entries in the General Journal to give effect to the above decision of the company.
(c) Prepare partial balance sheet of the company as of December 31, 1991.
SOLUTION 6 (a & b)
Date
1

GENERAL JOURNAL
Particulars
P/R
Expense and revenue summary
Retained earnings
(To record the net income transferred to retained
earnings account)
Retained earnings
Cash dividend payable (1,000,000 x 15%)
(To record the cash dividend declared)
Retained earnings
Reserve for plant expansion
(To record the reserve for plant expansion)
Retained earnings
Reserve for contingencies
(To record the reserve for contingencies)
Retained earnings
Reserve for debenture redemption
(To record the reserve for debenture redemption)
Debit
300,000
Credit
300,000
150,000
150,000
100,000
100,000
50,000
50,000
50,000
50,000
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SOLUTION 6 (c)
BALANCE SHEET
AS ON 31 DECEMBER 1991
EQUITIES
ASSETS
Authorized Capital:
200,000 ordinary shares
@ Rs.10 each
Shareholders Equity:
100,000 ordinry shares
@ Rs.10 each
Retained earnings
Total shareholders equity
Current Liabilities
Cash dividend payable
Total liabilities
Total equities
2,000,000
1,000,000
100,000
100,000
50,000
50,000
1,300,000
150,000
Additional Working:
Statement of Retained Earnings:
Retained earnings (opening balance)
Add: Net income for the period
Total retained earning
Less: Reserves:
Total reserves
Less: Cash dividend
Retained earnings (ending balance)
150,000
1,450,000
150,000
300,000
450,000
150,000
50,000
50,000
(200,000)
250,000
(150,000)
100,000
Q.No.7
DEPRECIATION
GIVEN On July 1, 1991, Huma Corporation purchased a machine for cash Rs.120,000. It was
estimated that the machine will have scrap value of Rs.20,000 at the end of its estimated service life of
10 years. The manufacturers of the machine also estimated that the service life of the machine will be
25,000 hours and it will produce approximately 50,000 units. The machine was used in the year 1991 for
1,000 hours and produced 2,000 units. The accounting year ends on December 31.
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REQUIRED
(a) Determine the depreciation rate under each of the following methods separately:(i) Straight Line Method.
(ii) Service Hours Method.
(iii) Units Production Method.
(b) Give adjusting and closing entries in the General journal of Huma Corporation on December 31,
1991 under each of the above three methods separately.
SOLUTION 7 (a)
Computation of Depreciation Expense by Straight Line Method:
Annual depreciation = Cost Scrap value
Estimated life in years
Annual depreciation = 120,000 20,000
10
Annual depreciation = 10,000
Depreciation expense for the period 31 December 1991 =
10,000 x 6/12 =
5,000
Computation of Depreciation Expense by Service Hours Method:

Rate per hour =
Cost Scrap value
Estimated life in hours
Rate per hour =
120,000 20,000
25,000
Rate per hour =
Rs.4
1,000 x 4 =
4,000
Computation of Depreciation Expense by Units Production Method:

Rate per unit =
Cost Scrap value
Estimated life in units
Rate per unit =
120,000 20,000
50,000
Rate per unit =
Rs.2
2,000 x 2 =
4,000
SOLUTION 7 (b)
HUMA CORPORATION
GENERAL JOURNAL
(UNDER STRAIGHT LINE METHOD)
Date
Particulars
P/R
31.Dec Depreciation expense
1991
Allowance for depreciation
(To record the depreciation expense)
31 Dec Expense and revenue summary
1991
(To close the depreciation expense account)
Debit
5,000
Credit
5,000
5,000
5,000
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HUMA CORPORATION
GENERAL JOURNAL
(UNDER SERVICE HOURS METHOD)
Date
Particulars
P/R
1991
1991
HUMA CORPORATION
GENERAL JOURNAL
(UNDER UNITS OF PRODUCTION METHOD)
Date
Particulars
P/R
1991
1991
Debit
4,000
Credit
4,000
4,000
4,000
Debit
4,000
Credit
4,000
4,000
4,0000
Q.No.8
RESERVE AND FUND
(a) From the point of view of accounting distinguish between a Reserve and a Fund.
(b) Give necessary journal entries to record the creation and disposal of different types of reserves.
(c) Give the necessary journal entries to record the creation and disposal of fund.
SOLUTION 8 (a)
1.
2.
3.
4.
5.
6.
7.
RESERVE
It is created out of retained earnings.
Reserve is a voluntary provision made out
of net income.
Reserve is part of owners equity.
It is shown on the credit side of the
balance sheet under owners equity.
It represents a portion of profits or
liability.
Reserve has normally credit balance.
It is part of retained earnings.
1.
2.
3.
4.
5.
FUND
It is created out of cash.
A provision is a change expense and
revenue.
Fund is an asset.
It is shown on the debit side of the balance
sheet among assets.
It represents on assets.
6. Fund has normally debit balance.

7. It is not part of retained earnings.
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SOLUTION 8 (b)
(i) Allowance for depreciation on machine is a Valuation Reserve.
(ii) Reserve for income tax is a Liability Reserve.
(iii) Reserve for contingencies is a Surplus Reserve.
CREATION OF RESERVES
GENERAL JOURNAL
Date
Particulars
P/R
1
2
Income tax expense
Reserve for income tax
(To record the reserve for income tax)
3
Retained earnings
(To record the reserve for contingencies)
Date
1
DISPOSAL OF RESERVES
GENERAL JOURNAL
Particulars
Machine
(To record the disposal of machine)
Reserve for income tax
Cash/Bank
(To record the income tax paid)
Retained earnings
(To record the disposal of reserve for contingencies)
P/R
Debit
Credit
DR.
CR.
DR.
CR.
DR.
CR.
Debit
Credit
DR.
CR.
DR.
CR.
DR.
CR.
SOLUTION 8 (c)
Date
1
CREATION OF FUND
GENERAL JOURNAL
Particulars
P/R
Debit
Sinking fund
Cash
(To record the creation of sinking fund)
Credit
DR.
CR.
DISPOSAL OF FUND
GENERAL JOURNAL
Date
1
Particulars
Bonds payable
Sinking fund
(To record the disposal of sinking fund)
P/R
Debit
Credit
DR.
CR.
Page 13

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1992 Accounting Paper Xii

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The workings under the heading of Additional Working

are not required according to the requirement of the examiner.

Compiled and Solved by:

Compiled & Solved by: S.Hussain

XII Accounting 1992 (Regular / Private)

Compiled & Solved by: S.Hussain

Less: Capital at start

XII Accounting 1992 (Regular / Private)

Compiled & Solved by: S.Hussain

DIVISION OF NET INCOME OR LOSS

XII Accounting 1992 (Regular / Private)

Compiled & Solved by: S.Hussain

XII Accounting 1992 (Regular / Private)

Compiled & Solved by: S.Hussain

Compiled & Solved by: S.Hussain

For 3/4 interest, old partners capital (280,000 x 3/4)

Bonus to old partners

Akhtar Capital (10,000 x 3/5)

CORPORATION ISSUE OF SHARES

XII Accounting 1992 (Regular / Private)

Compiled & Solved by: S.Hussain

AL-MURTUZA COMPANY LIMITED

XII Accounting 1992 (Regular / Private)

Compiled & Solved by: S.Hussain

DISPOSAL OF NET INCOME

AL-MURTUZA COMPANY LIMITED

XII Accounting 1992 (Regular / Private)

Compiled & Solved by: S.Hussain

XII Accounting 1992 (Regular / Private)

Compiled & Solved by: S.Hussain

Computation of Depreciation Expense by Service Hours Method:

Computation of Depreciation Expense by Units Production Method:

XII Accounting 1992 (Regular / Private)

Compiled & Solved by: S.Hussain

6. Fund has normally debit balance.

XII Accounting 1992 (Regular / Private)

Compiled & Solved by: S.Hussain

XII Accounting 1992 (Regular / Private)

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