THE OPEN UNIVERSITY OF SRI LANKA

BACHELOR OF MANAGEMENT STUDIES HONOURS DEGREE

PROGRAMME
LEVEL 3
ACADEMIC YEAR: 2020/2021
MCU1206/ MSU3506 – FINANCIAL AND COST ACCOUNTING

Tutorial 07

Duration: two (02) hours

Date: 26.03.2022 Time: 03.30 pm – 05.30 pm

INSTRUCTIONS
 Answer all Three (03) questions.
 Marks have been mentioned end of each question.
 All the workings should be shown clearly.
 Use of non-programmable calculator is

allowed. Question No (01)

Following Trial Balance was extracted from the books of Yasunthara Enterprises
as at 31st March 2020 (Value in Rs.)

Description Dr. Cr.

Capital 4,230,000
Fixed deposit at Bank 6,050,000
Bank Balance 78,500
Sales 50,750,000
Cost of Sales 44,550,000
Freehold Land 2,100,000
Motor Vehicle 2,233,500
Furniture and Fittings 123,500
Provisions for depreciation as at 01/04/2019 1,234,500
Bank Interest 23,500
Computer Purchased 54,500
Discount Allowed/Received 13,500 33,500
Disposal of Van 1,200,000
Drawings 455,000
Electricity 45,500
Insurance 34,500
Telephone 345,000
Motor vehicle repair 39,500
Interest received from deposits 665,500
Rent 198,000
Rent-Received 35,000
Salaries & Wages 567,800
Sales Returns 45,000
Stamp duty & Legal Fees 181,700

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 Inventory 31/03/2020 678,000
Provision for bad and doubtful debts – 01/04/2019 12,300
Accounts payables (Trade Creditors) 486,700
Accounts receivable (Trade Debtors) 987,500
58,726,000 58,726,000

You are given the following information

i. The value of goods taken by the proprietor for his personal use is Rs.23,500
ii. Stamp duty and Legal fees have been paid for the freehand land purchased during the
financial year.
iii. The business is operated in rented premises. Monthly rent is Rs. 18,000. Rent for March
2020 has not been paid.
iv. Part of the building rented out by the company has been sub-let at Rs.5,000 rent per
month from 1st October, 2019.
v. Break up of provisions for depreciation as at 01.04.2019 is as follows
Rs.
 Motor Vehicle 1,200,000
 Furniture & Fittings 30,000
 Computers 4,500

vi. VKU Enterprises depreciates its property, plant and equipment on the straight line method
at the following rates, No depreciation is provided in the year of purchase and a full year’s
depreciation is provided in the year of disposal
 Motor Vehicle 20%
 Furniture & Fittings 10%
 Computers 20%

vii. Provision for bad debts and doubtful debts has to be adjusted at 8% of Accounts
receivable. (Trade Debtors).

viii. Yasunthara Enterprises has sold a Van on 1 st January 2020 which was purchased on 01 st
September 2018 for Rs.800,000/-. The amount received is credited in the disposal of van
account. No other entries had been made in this respect.

You are required to prepare followings of Yasunthara Enterprises

a) The Income Statement for the year ended 31st March 2020
b) Statement of Financial Position as at 31st March 2020
(50 Marks)

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Question No. (02)

(I) List the occasions, when a suspense account is required to be created? (5 Marks)

(II) The Trial Balance of Chandrala Traders as at 31st March 2020 did not balance. The
difference of Rs.149,100/= was debited to the Suspense Account. After investigating,
following errors were identified:
(a) Electricity payment of Rs.15,000/= had been mistakenly debited to Insurance
Expense account. However, this has been correctly recorded in the cash book.
(b) Cash withdrawn by the owner of the business for his personal use was
Rs.10, 000/= and it was only recorded in the cash book.
(c) Discount received of Rs.4, 350/= was recorded twice in the respective ledger
accounts.
(d) Rent income of Rs.5, 000/= was debited to rent expense account. However, this
was correctly recorded in the cash book.
(e) Rates payment of Rs.12,000/= was incorrectly credited to the discount received
account as Rs.120,000/= However, this was correctly recorded in the cash book.
(f) Credit purchase of Rs.50,000/= from Ram Enterprises has not been recorded in
the books of accounts.
(g) The rent payment of Rs.4,500/= has been correctly recorded in the cash book
and debited to rent expense account as Rs.5, 400/=
(h) Discount allowed to a customer amounting to Rs.64,000/= has been correctly
recorded in the Trade Receivables’ account. However, it has been debited to
discount received account as Rs.46, 000/=

You are required to prepare the following

i. Journal Entries to rectify the above errors. (20 Marks)
ii. Suspense Account. (05 Marks)
(Total 30 Marks)

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Question No (03)

a) What are the advantages of preparing a Bank Reconciliation Statement for a business
organization? (04 Marks)
b) On 31st December 2019, the bank column of cash book of Damitha Stores, Showed a
debit balance of Rs.77,900. This balance did not agree with the balance given in the
Bank Statement of the same date and following transactions caused for the differences.
i. A standing order of Rs.50,250 for rates had been paid by the bank on 3rd December.
ii. Bank charges of Rs.4,650 had been deducted from the company’s bank account on
16th December.
iii. Cheque issued on 20th December for Rs.80,850 had been entered in the cash book as
Rs.50,580.
iv. A cheque issued in November 2019 for Rs.18,550 and another cheque issued in
December 2019 for Rs.25,000 had not been presented to the bank by 31 st December
2019.
v. The total value of cheques deposited in the Bank on 30 th December but not appeared
in the bank statement, was Rs.39,000.

You are required to prepare adjusted cash book and bank reconciliation statement for
the month of December 2019.
(16 Marks)
(20 Marks)

(Total 100 Marks)

END