INSTITUTE OF COST AND MANAGEMENT ACCOUNTANTS OF PAKISTAN

Winter (November) 2011 Examinations

Thursday, the 17th November 2011
FUNDAMENTALS OF FINANCIAL ACCOUNTING - (S-101)
STAGE – 1

Time Allowed – 2 Hours 45 Minutes Maximum Marks: 90 Roll No.:

(i) Attempt all questions.

(ii) Answers must be neat, relevant and brief.
(iii) In marking the question paper, the examiners take into account clarity of exposition, logic of arguments,
effective presentation, language and use of clear diagram/ chart, where appropriate.
(iv) Read the instructions printed inside the top cover of answer script CAREFULLY before attempting the paper.
(v) Use of non-programmable scientific calculators of any model is allowed.
(vi) DO NOT write your Name, Reg. No. or Roll No. anywhere inside the answer script.
(vii) Question No.1 – “Multiple Choice Question” printed separately, is an integral part of this question paper.
(viii) Question Paper must be returned to invigilator after finishing/ writing the exam.

Marks
Q.2 (a) What is the difference between ‘nominal’ and ‘real’ accounts? Give at least two 05
examples of each.

(b) What are the required steps in an ‘accounting cycle’? 05

(c) The following is the adjusted trial balance of Ahmed Ali & Company as on June 30, 2011:
Amounts in Rs.
Title of Account
Debit Credit
Cash 25,000
Accounts receivable (net) 23,000
Office supplies 9,500
Merchandise inventory (1.7.2010) 11,500
Sales equipment (net) 22,000
Accounts payable 23,000
Ali capital 45,000
Ali drawings 4,500
Sales 174,000
Sales return 11,500
Discount allowed 2,000
Purchases 100,000
Carriage inward 2,500
Purchase return 2,000
Discount received 6,000
Commission income 10,000
Salaries expense 22,000
Rent expenses 16,000
Advertising expenses 7,500
Depreciation expense 3,000
260,000 260,000
Note:
Inventory as on June 30, 2011 was valued at Rs.9,500.
Required:
Prepare closing entries as on June 30, 2011. 10

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Q.3 (a) What is the difference between ‘trade bill’ and ‘accommodation bill’? 02

(b) Following data relates to Usman Traders for the month of October 2011:
Rs.
Sales ledger control account (01.10.2011) 65,500
Sales: Cash 35,300
Credit 331,100
Cash received from debtors 315,270
Discount allowed 7,820
Bad debts written off 8,370
Goods returned by credit customers 25,600
Cash received from a customer whose debt was written off
previously 2,440
A cheque of a credit customer was dishonoured 13,390
Balances in sales ledger accounts offset against purchase
ledger accounts 5,430
Required:
Prepare Sales Ledger Control Account for the month of October 2011. 06

(c) Home Appliance Company began its operation on May 1, 2011. It uses perpetual
inventory system. During the month of May, the company had the following purchases
and sales relating to item No. S1.
Date Purchases (Units) Cost/ Unit Sales (Units)
May 01 7 Rs.150
04 5
08 8 Rs.170
12 8
15 5 Rs.150
20 4
25 2
Required:
Determine the ending inventory under the perpetual inventory system using:
(i) FIFO Method 06
(ii) Weighted Average Cost Method 06

Q.4 (a) Show the journal entries necessary to correct the following errors: 08
(i) A sale of goods for Rs.5,000 to Mahmood & company was treated as a sale to
Ahmed & company.
(ii) A printer was purchased on credit from Jabbar for Rs.6,000, which was
completely omitted from the books.
(iii) The purchase of a computer for Rs.45,000 was debited, in error, to the office
expense account.
(iv) Both debit and credit relating to a sale of Rs.1,200 to Abu Yousuf were treated as
Rs.10,200 in the books.
(v) Commission received amounting to Rs.16,400 was entered in the sales account.
(vi) A receipt of cash amounting to Rs.680 from Tabish was entered on the credit side
of the cash book and debit side of Tabish account.
(vii) A purchase of goods for Rs.37,200 was debited to the drawing account.
(viii) Discounts allowed Rs.480 was wrongly entered on the debit side of the discount
received account.

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 Marks
(b) On January 01, 2007, Jugnu Corporation purchased a machine costing Rs.200,000. The
machine has an estimated life of 4 years after which, it will have a salvage value of
Rs.12,500. It is expected that the output from the machine will be:
Year Output (units)
2007 7,500
2008 8,500
2009 9,500
2010 12,000
Total 37,500
Required
Calculate the annual depreciation charges for 2007, 2008, 2009 and 2010 for this
machine on the following bases:
(i) The straight-line method. 04
(ii) The diminishing balance method at 50% per annum, and 04
(iii) The units-of-output method. 04

Q.5 While making the “bank reconciliation statement” for the month of March 31, 2011, the
accountant of Akash & Company discovered the following facts:
 Balance as per cash book Rs.2,190.
 Bank statement showed an overdraft of Rs.3,020.
 The bank statement showed debits of Rs.1,540 and Rs.2,330 for bank charges and
interest on overdraft respectively.
 A cheque for Rs.35,600 deposited into the bank was shown in the bank statement as
Rs.36,500.
 A cheque for Rs.7,950 deposited into the bank was recorded in the cash book as
Rs.8,950.
 A cheque for Rs.2,540 received from a customer and deposited into the bank was returned
dishonoured by the bank.
 Cash amounting to Rs.25,250 was deposited into the bank late in the evening on March
31, 2011, but it was recorded by the bank on April 1, 2011.
 A cheque for Rs.26,550 issued to a supplier has not so far been presented to bank for
payment.
Required:
(a) Prepare Bank Reconciliation Statement as on March 31, 2011. 08

(b) Pass entries in the General Journal to adjust the cash record of the company. 02

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Q.6 Mr. Akram drew up the following trial balance as at June 30, 2011:

Dr. (Rs.) Cr. (Rs.)

Capital 149,025
Drawing 85,800
Cash at bank 13,260
Cash in hand 336
Accounts receivable 114,300
Accounts payable 78,900
Inventory July 01, 2010 217,230
Van 16,950
Office equipment 22,410
Sales 1,174,200
Purchases 764,430
Returns inwards 6,330
Returns outwards 3,720
Carriage inwards 2,280
Carriage outwards 8,550
Motor expense 4,470
Rent 24,600
Telephone charges 2,040
Wages & salaries 118,800
Insurance 2,235
Office expense 1,176
Sundry expenses 648
Total 1,405,845 1,405,845

Additional Information as at June 30, 2011:

 Closing inventory Rs. 258,212
 Wages and salaries outstanding Rs. 13,000
 Prepaid rent Rs. 8,200
 Accrued sundry expenses Rs. 216
 Prepaid insurance Rs. 843
 Depreciation to be charged: Van (20 % of book value)
 Office equipment (10 % of book value)

Required:
Prepare the following:

(a) Income Statement for the year ended June 30, 2011. 12

(b) Statement of Financial Position as at June 30, 2011. 08

THE END

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