Accountancy & Auditing, Paper I

Particulars Rs. Commissions earned during the year 125,000 Collected in cash 110,000 Remaining cash to collect early next year 15,000 Various operating expenses incurred and paid in cash 105,000 Salman withdrew from office to pay utility bills of his residence 5000 At the beginning of 2019, Mr. Salman decided to open an advertising agency called The Top Agency. During 2019, the following transactions occurred. Salman invested Rs. 300,000 cash in the business. In addition, the local bank lent the firm Rs.100,000. The firm used the cash to purchase land for Rs. 50,000, building for Rs. 100,000 and office furniture and fixture for Rs. 80,000. In addition, the firm purchased another Rs. 50,000 of furniture and fixture on account, all of which will be paid for next year. REQUIRED: Using the above information, prepare the following Financial statements. (a) Income statement for the year ended December 31, 2019. (b) Statement of the owner's equity at December 31, 2019. (c) Balance sheet as at December 31, 2019.

Particular Debit Credit Furniture 6,400 Motor Vehicle 62,500 Building 75,000 Capital Account 12,800 Bad debts 1,250 Provision for Bad debts 2,000 Sundry debtors and creditors 38,000 25,000 Stock on January 1, 2019 34,600 Purchase and sales 54,750 154,500 Bank overdraft 25,500 Sales and purchase returns 2,000 1,250 Advertising 4,500 Markup (on overdraft) 1,180 Commission 3,750 Cash 6,500 Taxes and Insurance 12,500 General expenses 7,820 Salaries 33,000 Total 340,000 340,000 The following adjustments are to be made: Stock in hand on December 31, 2019 was Rs. 32,000. Depreciation: building at the rate of 5%, Furniture & Fittings @ 10% and motor vehicle @ 20%. Rs. 850 is due for markup on bank overdraft. Salaries Rs. 3000 and taxes Rs. 12000 are outstanding. Insurance amounting to Rs. 1000 is prepaid. One-third commission received in respect of the work to be done next year. Write off a further sum of Rs. 1000 as bad debt and provision for bad debts to be made equal to 10% on Sundry debtors. Required: Prepare a Trading and Profit & Loss account for the year ended December 31, 2019 and balance sheet as on that date.

Answer the following short questions briefly:

Write short notes on the following:

A, B and C were partners sharing profits and losses in the ratio of 2:2:1. C decided to retire on December 31, 2019. The following is the balance sheet of the partnership firm. Assets Rs. Equity & Liabilities Rs. Stock of Goods 10,000 Sundry Creditors 10,000 Sundry Debtors 10,000 Reserve Account 2,000 Bills receivable 4,000 Capital - A 24,000 Bank 10,000 Capital - B 16,000 Land and Building 30,000 Capital - C 12,000 Total 64,000 Total 64,000 A and B decided to share profit and losses in the ratio of 3:2 in future. Goodwill is valued at Rs.10,000. Land and building was appreciated by Rs. 6000 and stock by Rs. 2000. There was bad debt loss of Rs. 1000 but not recorded on books. A and B decided to bring sufficient cash to settle the account of C and to make their capital proportionate. They also decided to maintain Rs. 15000 bank balance for meeting the day-to-day business expenses. Prepare necessary Journal Entries and prepare Balance Sheet of newly constituted firm.

Define differences among Financial, Cost and Management Accounting.

ABC sports items manufacturing industries uses process costing. Information relating to cost incurred in assembly department during the month of June 2019 is as follows: Per unit cost received from cutting department: Rs. 10 Units received from cutting department: 20,000 Cost incurred by the department: Direct material cost: Rs. 240,000 Conversion cost: Rs. 139,200 Units completed: 10,000 Normal loss: 1,000 Work in progress: 8,000 Work in process is 80% complete as to conversion cost and 50% as to material. REQUIRED: Quantity schedule, EPU, total cost of goods manufactured, total cost of WIP, cost of abnormal loss and cost schedule for the department.

ABC Laboratories purchased inventory for Rs. 200,000. Supplier allowed cash discount @ 10%. Further costs incurred by the laboratory are as follows: Duty and taxes on inventory purchased: Rs. 1000. Carriage inward: Rs. 2000. Handling cost (loading and unloading): Rs. 1500. Inventory of Rs. 12000 was lost at the way towards company due to carelessness of managers. Laboratory has taken a warehouse on rent to store the inventory. Rent of the warehouse is Rs. 20,000. Administrative cost incurred on inventory amounts to Rs. 2000. Required: Determine cost of inventory in the books of ABC Laboratories.

A manufacturing company has two production departments, Department 1 and Department 2. It also has two services departments, the factory canteen and the repairs department. Allocation overhead costs and apportioned general overhead costs for each cost centre are as follows: Department 1: Rs. 100,000 Department 2: Rs. 200,000 Canteen: Rs. 150,000 Repairs: Rs. 220,000 Department | Total | Dep A | Dep B | Canteen | Repairs Canteen | 100% | 20% | 40% | | 40% Repairs | 100% | 65% | 25% | 10% | Required: Apportionment of FOH using: (a) Repeated distribution method. (b) Simultaneous equation method.