Module-10

Q-01:
You are required to write the appropriate accounting heads to be debited in second column
against each case given in first column, from the following list of accounts.
 Machinery account
 Purchase account
 Merchandises account
 Supplier’s account
 Depreciation account
 Provision for depreciation account
 Cash account
 Bank account

First Column Second Column

Cases Accounting head
to be debited

Machinery bought and payment is ?

made through cheque

Merchandises purchased on credit basis ?

from supplier

Recording the provision for ?

depreciation

*Note: You must follow the above format to fill the missing particulars of second
column.

Solution:
First Column Second Column
Cases Accounting head
to be debited

Machinery bought and payment is Machinery

made through cheque account

Merchandises purchased on credit basis Purchases account

from supplier

Recording the provision for Depreciation

depreciation account
Q-02:
You are required to write the appropriate accounting heads to be credited in second column
against each case given in first column, from the following list of accounts.
 Machinery account
 Purchase account
 Merchandises account
 Supplier’s account
 Depreciation account
 Provision for depreciation account
 Bank account

First Column Second Column

Cases Accounting head
to be credited

Machinery bought and payment is ?

made through cheque

Merchandises purchased on credit basis ?

from supplier

Recording the provision for ?

depreciation

*Note: You must follow the above format to fill the missing particulars of second
column.

Solution:
First Column Second Column
Cases Accounting head
to be credited

Machinery bought and payment is Bank account

made through cheque

Merchandises purchased on credit basis Supplier’s account

from supplier

Recording the provision for Provision for

depreciation depreciation
account
Q-03:
Following information is available regarding the disposal of a fixed asset.

Particulars Rs.
Opening balance of machinery 25,000
Cost of disposed machinery 5,000
Machinery disposed on cash basis 2,500
Bought new machinery on cash basis 20,000

Note: Organization transfers the cost of sold machinery to machinery disposal account in case
of disposing the machinery.

Required:
Prepare Machinery account according to ledger account format given below.

Machinery Account
Particulars Dr. Particulars Cr.
Rs. Rs.

Solution:

Machinery Account
Particulars Rs. Particulars Rs.

Opening balance 25,000 Machinery disposal a/c 5,000

Cash account 20,000 Closing balance 40,000

Total 45,000 Total 45,000

Q-04:
Following information is available regarding disposal of a fixed asset.

Particulars Rs.
Original cost of machinery on the start of the year 100,000
Per year depreciation by using straight line method 10,000
Machinery is sold at the end of 4th year and payment is made through 55,000
cash

Required:
Prepare Fixed Asset Disposal account according to ledger account format given
below.

Machinery Disposal Account

Particulars Dr. Particulars Cr.
Rs. Rs.

Solution:

Machinery Disposal Account

Particulars Rs. Particulars Rs.

Machinery cost a/c 100,000 Accumulated depreciation a/c 40,000

(10,000 x 4)

Cash a/c 55,000

Profit and loss a/c 5,000

(Balancing figure)
Total 100,000 Total 100,000

Depreciation  Depreciation is the systematic allocation of the

depreciable amount of an asset over its useful life
 Module-11

Q-05:
Following information is available for ABC traders.

 Opening balance of debtors control account Rs. 100,000

 Total of sales journal Rs. 40,000
 Total of purchase journal Rs. 30,000
 Cash receipt from customers Rs. 20,000
 Cash payment to suppliers Rs. 25,000
 Discount allowed Rs. 10,000
 Discount received Rs. 15,000
 Trade discount Rs. 12,500
 Closing balance of debtors control account is the balancing figure in required
account.

Required:
Based on the above information, you are required to prepare the Debtors Control
Account by following the format given below.

Debtors Control Account

Debit Credit
Particulars Rs. Particulars Rs.

Solution:
Debtors Control Account
Particulars Rs. Particulars Rs.
Opening balance 100,000 Cash a/c 20,000
Sales a/c 40000 Discount allowed a/c 10,000
Closing balance 110,000
Total 140,000 Total 140,000
Q-06:
Following information is available for ABC traders.

 Opening balance of creditors control account Rs. 100,000

 Total of sales journal Rs. 40,000
 Total of purchase journal Rs. 30,000
 Cash receipt from customers Rs. 20,000
 Cash payment to suppliers Rs. 25,000
 Discount allowed Rs. 10,000
 Discount received Rs. 15,000
 Trade discount Rs. 12,500
 Closing balance of creditors control account is the balancing figure in required
account.

Required:
Based on the above information, you are required to prepare the Creditors Control
Account by following the format given below.

Creditors Control Account

Debit Credit
Particulars Rs. Particulars Rs.

Solution:
Creditors Control Account
Particulars Rs. Particulars Rs.
Cash a/c 25,000 Opening balance 100,000
Discount received a/c 15,000 Purchases a/c 30,000
Closing balance 90,000
Total 130,000 Total 130,000
Q-07:
Prepare the “Sales Journal” and “Sales Return Journal” based on the following transactions of
a furniture showroom.

Date Transactions
2020
July 10 tables @ Rs. 200 sold on credit basis to Mr. Ali.
10
15 tables @ Rs. 300 sold on cash basis to Mr. Ali.

July
15 5 tables returned from Mr. Ali which were sold on credit
basis on July 10, 2020.

10 tables returned from Mr. Ali which were sold on cash

basis on July 10, 2020.

July 20 tables @ Rs. 250 sold on credit basis to Mr. Ahmed.

20
40 Chairs @ Rs. 90 sold on cash basis to Mr. Ahmed.

30 Chairs @ Rs. 95 sold on cash basis to Mr. Afzal.

July 10 tables returned from Mr. Ahmed which were sold on

25 credit basis on July 20, 2020.

25 chairs returned from Mr. Ahmed which were sold on

cash basis on July 20, 2020.

Note: You must follow the format given below to prepare the following Journal.
Sales Journal
Date Description (Name of Debtor) Rs.
2020

Total

Sales Return Journal

Date Description (Name of Debtor) Rs.
2020
Total
Solution:
Sales Journal
Date Description (Name of Debtor) Rs.
2020
July Mr.Ali:
10 10 tables @ Rs. 200 2,000

Mr. Ahmed:
July 20 tables @ Rs. 250 5,000
20
Total 7,000

Sales Return Journal

Date Description (Name of Debtor) Rs.
2020
July Mr.Ali:
15 05 tables @ Rs. 200 1,000

July Mr. Ahmed:

25 10 tables @ Rs. 250 2,500

Total 3,500
Q-08:
Prepare the “Purchase Journal” and “Purchases Return Journal” based on the following
transactions of a furniture showroom.

Date Transactions
2020
July 10 tables @ Rs. 200 bought on credit basis from Mr. Ali.
10
15 tables @ Rs. 300 bought on cash basis from Mr. Ali.

July
15 5 tables returned to Mr. Ali which were bought on credit basis on
July 10, 2020.

10 tables returned to Mr. Ali which were bought on cash basis on

July 10, 2020.

July 20 tables @ Rs. 250 bought on credit basis from Mr. Ahmed.
20
40 Chairs @ Rs. 90 bought on cash basis from Mr. Ahmed.

30 Chairs @ Rs. 95 bought on cash basis from Mr. Afzal.

July 10 tables returned to Mr. Ahmed which were bought on credit

25 basis on July 20, 2020.

25 chairs returned to Mr. Ahmed which were bought on cash basis

on July 20, 2020.

Note: You must follow the format given below to prepare the following Journal.

Purchase Journal
Date Description (Name of Creditor) Rs.
2020

Total

Purchase Return Journal

Date Description (Name of Creditor) Rs.
2020
Total
Solution:
Purchase Journal
Date Description (Name of Creditor) Rs.
2020
July Mr.Ali:
10 10 tables @ Rs. 200 2,000

Mr. Ahmed:
July 20 tables @ Rs. 250 5,000
20
Total 7,000

Purchase Return Journal

Date Description (Name of Creditor) Rs.
2020
July Mr.Ali:
15 05 tables @ Rs. 200 1,000

July Mr. Ahmed:

25 10 tables @ Rs. 250 2,500

Total 3,500
 Module-12
Q-09:
Briefly explain the following types of error with the help of suitable examples
 Error of Omissions
 Error of Commission
 Error of Principles
 Compensating errors
 Error of Original entry

 Error of Omissions: This occurs when a transaction is completely omitted from the
books of accounts. For example, if a purchase transaction is not recorded in the purchase
book, it is an error of omission.

 Error of Commission: This occurs when an entry is made in the books of accounts but is
incorrect in terms of amount, account, or both. For instance, if a transaction of $500 is
recorded as $50, or if a transaction meant for one account is recorded in another account, it is
an error of commission.

 Error of Principles: This occurs when a transaction is recorded against the fundamental
accounting principles. For example, if a revenue expense is treated as a capital expense or
vice versa, it is an error of principle.

 Compensating Errors: These are errors that cancel each other out. For instance, if one
account is overstated by $100 and another account is understated by $100, the net effect on
the trial balance is zero, and these are compensating errors.

 Error of Original Entry: This occurs when the original entry itself is incorrect. For
example, if a transaction amount is incorrectly entered in the books of original entry
(journal), it will be carried forward to the ledger and other books of accounts.

Q-10:
What original journal entries should have been passed in each of the following case?

1. Rental income received through cheque for Rs. 30,000 wrongly debited to
cash account.
2. Rent income received through cash payment of Rs. 50,000 wrongly debited to
bank account.

Note: You must follow the format given below to pass the required original journal entries.

Debit Credit
Date/Case Particulars
Rs. Rs.
 1 Debit account? ???

Credit account? ???

2
Debit account? ???
???
Credit account?

Solution

Original Entries

Debit Credit
Date/Case Particulars
Rs. Rs.
1 Bank account 30,000

Rental income account 30,000

Cash account
2 50,000
Rental income account
50,000

Q-11:
You are required to pass rectifying journal entries for each of the following case?

1. Rent received through cheque for Rs. 40,000 wrongly debited to cash account.
2. Rent received through cash payment of Rs. 50,000 wrongly debited to bank
account.

Note: You must follow the format given below to pass the required rectified entries.

Debit Credit
Date/Case Particulars
Rs. Rs.
1 Debit account? ???

Credit account? ???

Debit account?
2 ???
Credit account?
???
Solution:

Rectified Entries:

Debit Credit
Date/Case Particulars
Rs. Rs.
1 Bank account 40,000

Cash account 40,000

Cash account
2 50,000
Bank account
50,000
 Module-13
Q-12:
Following information is available for the books of ABC Brothers.

Particulars Rs.
Gross sales 110,000
Return inwards (sales return) 10,000
Return outwards (purchase return) 20,000
Gross purchases 140,000

Net sales refer to the total revenue from goods sold or services provided by a company, after
deducting returns, allowances for damaged or missing goods, and any discounts allowed.

The formula to calculate net sales is:

Net Sales = Gross Sales−Sales Returns−Sales Allowances−Sales Discounts

Required:
Calculate the amount of “Net sales” from the information given above.

Solution:

Particulars Rs.
Gross sales 110,000

Less: Return inwards 10,000

Net sales 100,000

Q-13:
Following information is available in the Trial balance of ABC Brothers.

Particulars Rs.
Capital at the start of the period 100,000
Withdrawals during the period 20,000

Required:
Calculate the amount of closing capital to be shown in balance sheet if net profit
for the period is Rs. 50,000.
Solution:

Particulars Rs.
Opening capital 100,000

Less: Drawings (20,000)

Add: Net profit 50,000

Closing capital to be shown in balance sheet 130,000

Q-14:

1. Salaries paid in advance at the end of accounting period is Rs. 50,000

2. Outstanding rent at the end of accounting period is Rs. 15,000

Required:
Pass adjusting entries of “Prepaid salaries” and “Outstanding rent” based on the
information given above.

Solution:

Prepaid salaries A/C Rs. 50,000

Salaries expense A/C Rs. 50,000

(Advanced paid salaries are recognized)

Rent expenses A/C Rs. 15,000

Outstanding rent A/C Rs. 15,000

(Unpaid rent for current period is recognized)

Q-15:
Following information is available in trial balance of ABC Brothers at the end of year 2020.

Particulars Rs.
Cash at bank 100,000
Sundry debtors 200,000
Accounts payable 300,000
Short term loan 400,000
Salaries payable 500,000
Rent expense 250,000
Insurance expense 430,000
Opening stock 210,000

Additional Information:
 Bad debt of Rs. 40,000 is to be written off.
 Insurance paid in advance at the end of accounting period is Rs. 50,000
 Accrued rent expenses at the end of accounting period is Rs. 90,000

Required:
Calculate the amount of "Current Assets" and “Current Liabilities”to be shown
in Balance sheet as on 31st December 2020.
Note: It is necessary to mention Add or Plus sign (+) / Less or Minus sign (-) in
the working otherwise marks for working will not be awarded.

Solution:

Particulars Rs.
Cash at bank 100,000

Sundry debtors 200,000

Less: Bad debts - 40,000 160,000

Prepaid insurance 50,000

Current Assets 310,000

Particulars Rs.
Accounts payable 300,000

Short term loan 400,000

Salaries payable 500,000

Accrued rent expenses 90,000

Current Liabilities 1290,000

 Module-14
Q-16:
Following information is available of ABC manufacturing business.

Particulars Rs.
Opening stock of raw material 10,000
Purchase of raw material 20,000
Indirect material cost 40,000
Indirect labor cost 35,000
Closing stock of raw material 5,000

Required:
Calculate the cost of material used based on information given above.

Solution:

Particulars Rs.
Opening stock of raw material 10,000

Add: Purchase of raw material 20,000

Less: Closing stock of raw material 5,000

Cost of material used 25,000

Q-17:
Following information is available of ABC manufacturing business.

Particulars Rs.
Prime cost 43,000
Direct labour cost 17,000
Indirect material cost 10,000
Depreciation of machinery used in factory 30,000
Rent of factory building 40,000
Rent of office building 12,000

Required:
Calculate the factory overhead cost based on information given above.
Note: It is necessary to mention Add or Plus sign (+) / Less or Minus sign (-) in
the working otherwise marks for working will not be awarded.
Solution:

Particulars Rs.
Indirect material cost 10,000

Add: Depreciation of machinery used in factory 30,000

Add: Rent of factory building 40,000

Factory overhead cost 80,000

Q-18:
Following information is available of ABC manufacturing business.

Particulars Rs.
Total factory cost 40,000
Opening inventory of work in process 10,000
Closing inventory of work in process 30,000
Opening inventory of finished goods 15,000
Closing inventory of finished goods 17,000

Required:
Based on the information given above, calculate the cost of goods manufactured.
Note: It is necessary to mention Add or Plus sign (+) / Less or Minus sign (-) in
the working otherwise marks for working will not be awarded.

4 marks for working and 1 for answer.

Particulars Rs.
Total factory cost 40,000

Add: Opening inventory of work in process 10,000

50,000

Less: Closing inventory of work in process 30,000

Cost of goods manufactured 20,000

Q-19:
Following information is available of ABC manufacturing business.

Particulars Rs.
Cost of goods manufactured 30,000
Opening inventory of finished goods 10,000
Closing inventory of finished goods 5,000
Opening inventory of work in 13,000
process
Closing inventory of work in process 18,000

Required:
Based on the information given above, calculate the cost of goods sold.
Note: It is necessary to mention Add or Plus sign (+) / Less or Minus sign (-) in
the working otherwise marks for working will not be awarded.

4 marks for working and 1 for answer.

Particulars Rs.
Cost of goods manufactured 30,000

Add: Opening inventory of finished goods 10,000

40,000

Less: Closing inventory of finished goods 5,000

Cost of goods sold 35,000

 Module-15
Q-20:
ABC Textile Ltd. imported raw material for use in production of goods with following
details:

Particulars Rs.
Invoice price 12,000
Trade discount 1,000
Other cost directly attributable to acquisition 2,000
of material
Refundable sales tax 350
Sundry debtors 338

[NOTE: Trade discounts are not added to the purchase or sale amounts and Trade discounts
are subtracted from the purchase or sale amounts before recording.]

Required:
Calculate the cost of purchase of raw material inventory.
Solution:

Particulars Rs.
Invoice value 12,000

Add: Other cost directly attributable to 2,000

acquisition of material
1,000
Less: Trade discount

Cost of purchase of raw material 13,000

Q-21:
1- Bought goods of Rs. 20,000 on cash basis from LMN Store.
2- Bought goods of Rs. 15,000 on account.
Required:
Pass the journal entries of above transactions under:
1. Periodic inventory system
2. Perpetual inventory system
Note: You must follow the following format to pass the required journal entries.

Date / Debit Credit

S.No. Particulars Rs. Rs.

??? ???
 1
??? ???

??? ???
2
??? ???

Solution:
1. Periodic inventory system

Debit Credit
Date Particulars Rs. Rs.

Purchases account 20,000

1
Cash account 20,000

Purchases account 15,000

2
Sundry creditors account 15,000

Note: Inventory/Stock or Inventory/Stock purchase account is incorrect in this case. Student

should write purchase account.
 2. Perpetual inventory system

Debit Credit
Date Particulars Rs. Rs.

Inventory purchases account 20,000

1
Cash account 20,000

Inventory purchases account 15,000

2
Sundry creditors account 15,000

Or
Next Page

Debit Credit
Date Particulars Rs. Rs.

Inventory account 20,000

1
Cash account 20,000

Inventory account 15,000

2
Sundry creditors account 15,000

Note: Purchase account is incorrect in this case. Student should write inventory or Inventory
purchase account.
 Module-16
Q-22:
Following information is available of a partnership business.

Particulars Rs.
Net profit of partnership business 320,000
Partners interest on drawings 20,000
Partners salaries 40,000
Selling expenses 10,000
Partners interest on capital 15,000
Admin expenses 15,000

Required:
Calculate the Distributable profit of partnership business.
Solution:

Particulars Rs.

Net profit of partnership business 320,000

Add: Interest on drawings 20,000

Less: Partners salaries (40,000)

Less: Partners interest on capital (15,000)

Distributable profit 285,000

Q-23:
Following information is available of Partner “A” of a partnership business.

Particulars Rs.
Current account opening balance 60,000
(Cr.)
Profit share of partner 20,000
Interest on capital 10,000
Current account closing balance is the balancing figure
of required account.

Required:
Prepare Partner A’s Current Account from the information given above.
Note: You must follow the format given below to prepare the required account.

Partner A’s Current Account

Debit Credit
Particulars Rs. Particulars Rs.

Solution:

Partner A’s Current Account

Particulars Rs. Particulars Rs.
Balance b/d 60,000

Profit share 20,000

Balance c/d 90,000 Interest on capital 10,000

Total 90,000 Total 90,000

Q-24:
Following information is available of Partner “B” of a partnership business.

Particulars Rs.
Current account opening balance 60,000
(Cr.)
Loss share of partner 10,000
Drawings 40,000
Interest on drawings 1,000
Current account closing balance is the balancing figure
of required account.

Required:
Prepare Partner B’s Current Account from the information given above.
Note: You must follow the format given below to prepare the required account.

Partner B’s Current Account

Debit Credit
Particulars Rs. Particulars Rs.

Solution:

Partner B’s Current Account

Particulars Rs. Particulars Rs.
Loss share 20,000 Balance b/d 60,000

Drawings 10,000

Interest on drawings 1,000

Balance c/d 29,000

Total 60,000 Total 60,000

 Module-17

Q-25:
Following information is available of a company.

Particulars Rs.
Profit from operations 320,000
Administration expenses 17,000
Cost of goods sold 95,000
Interest on loan 2,000
Income tax expense 5,000
Gain on revaluation of property plant and 15,000
equipment
Cash in hand 12,000
Advertisement expenses 14,000
Loss on revaluation of property plant and 10,000
equipment

Required:
Based on the information given above, calculate total comprehensive income.
Note: It is necessary to mention Add or Plus sign (+) / Less or Minus sign (-) in
the working otherwise marks for working will not be awarded.
1 mark for answer and 4 marks for working

Particulars Rs.

Profit from operations 320,000

Less: Interest on loan 2,000

Less: Income tax expense 5,000

Less: Loss on revaluation 10,000

Add: Gain on revaluation 15,000

Total comprehensive income 318,000

Q-26:
Following information is available of a company.

Particulars Rs.
Gross profit 320,000
Cash in hand 14,000
Closing stock 17,000
Selling and marketing expenses 10,000
General and administration expenses 5,000
Financial expenses 20,000
Income tax expenses 15,000
Actuarial loss on defined benefit plan 30,000
Gain on revaluation of property plan and 12,000
equipment
Cost of goods sold 95,000

Required:
Based on the information given above, calculate profit after tax.
Note: It is necessary to mention Add or Plus sign (+) / Less or Minus sign (-) in
the working otherwise marks for working will not be awarded.
1 mark for answer and 4 marks for working

Particulars Rs.

Gross profit 320,000

Less: Selling and marketing expenses 10,000

Less: General and administration expenses 5,000

Less: Financial expenses 20,000

Less: Income tax expenses 15,000

Profit after tax 270,000

 Module-18
Q-27:
What are the three components/activities of Statement of cash flows?
Operating Activities: Cash flows from primary operations (day-to-day activities).
Investing Activities: Cash flows from acquiring and disposing of long-term assets and
investments.
Financing Activities: Cash flows from transactions with owners and creditors, including
equity and debt financing.
Q-28:
Briefly explain “Cash and cash equivalents” with the help of examples.

Cash and cash equivalents are a group of assets owned by a company.

Cash: Physical currency and coin held by the company, and funds available in checking
accounts.
Examples: Cash in hand, cash in bank accounts.

Cash Equivalents: Short-term, highly liquid investments that are easily convertible to a
known amount of cash and have an insignificant risk of changes in value. Typically, these
investments have maturities of three months or less from the date of acquisition.
Examples: Treasury Bills: Short-term government securities with maturities of less than one
year. Gold and Silver.

Q-29:

FIRST COLUMN SECOND COLUMN

Particulars/Descriptions Flows of cash
Cash inflow, Cash outflow, Non cash item

Dividend received ?

Dividend paid to shareholders ?

Depreciation and amortization ?

Required:
Being an accountant, identify the flows of cash of each description given in first
column and write “Cash inflow” or “Cash outflow” or “Non-cash item” in
second column against each description of first column.

Solution:
 FIRST COLUMN SECOND COLUMN
Particulars/Descriptions Flows of cash
Cash inflow, Cash outflow, Non cash item

Dividend received Cash inflow

Dividend paid to shareholders Cash outflow

Depreciation and amortization Non-cash item

Q-30:
Following information is available of a company.

Particulars Rs.
Total operating expense 320,000
Amortization 10,000
Cash in hand 12,000
Cash at bank 14,000
Opening due operating expenses 15,000
Closing advance operating expenses 20,000
Sundry creditors 17,000
Bad debts 5,000
Closing due operating expenses 25,000
Opening advance operating expenses 35,000

Required:
Based on the information given above, calculate the cash paid for operating
expenses.
Note: It is necessary to mention Add or Plus sign (+) / Less or Minus sign (-) in
the working otherwise marks for working will not be awarded.

Solution:

Particulars Rs.

Total operating expenses 320,000

Less: Bad debts (5,000)

Less: Amortization (10,000)

Add: Opening due operating expenses 15,000

Add: Closing advance operating expenses 20,000

Less: Closing due operating expenses (25,000)

Less: Opening advance operating expenses (35,000)

Cash paid for operating expenses 280,000

Q-31:
Following information is available of a company.

Particulars Rs.
Shares issued to public 400,000
Dividend paid to shareholders treated as 80,000
financing activity
Increase in long term debts 100,000
Cash paid for redemption of loan certificates 50,000
Cash received on sale of non-current assets 250,000
Cash paid on purchases of non-current assets 750,000
Depreciation and Amortization 200,000

Required:
Based on the information given above, calculate the cash generated from
financing activities.
Note: It is necessary to mention Add or Plus sign (+) / Less or Minus sign (-) in
the working otherwise marks for working will not be awarded.

1 mark for answer and 4 marks for working

Particulars Rs.

Issue of shares 400,000

Less: Dividend paid to shareholders 80,000

Add: Increase in long term debts 100,000

Less: Cash paid for redemption of loan certificates 50,000

Cash generated from financing activities 370,000