CAF 1 – Double Entry Bookkeeping Double Entry Bookkeeping 02kashifadeel.com/.../2020/04/02-Double-Entry-bookkeeping.pdf · 2020. 4. 2. · Double entry Every transaction that affects

CAF 1 – Double Entry Bookkeeping

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- Double Entry Bookkeeping

02 DOUBLE ENTRY BOOK-KEEPING

Financial Transactions

Any transaction that has a monetary impact on the business’ accounts is a financial transaction. A financial transaction has an effect on the business’ assets and liabilities. A business is legally bound to capture and account for all financial transactions.

Double entry

Every transaction that affects assets, liabilities, capital, income or expenses must have an offsetting effect to maintain the accounting equation. Every transaction must be recorded (entered) in two places. The process of doing this is called double entry book-keeping.

Debit (Dr) and Credit (Cr)

Each business transaction has two aspects which are named as debit and credit by norm in accounting. Total debit entries and total credit entries must always be equal, this maintains the accounting equation.

Rules of debit and credit

Increase Decrease Assets, Expenses and Drawings Debit Credit Liabilities, Income and Capital Credit Debit

.

An account A record of an individual type of asset, liability, income, expense or equity. A record of amounts owed by an individual customer (an asset) or amounts owed to an individual supplier (a liability).

TERMINOLOGY

Capitalisation The IASB defines ‘capitalisation’ as recognising a cost as an asset or part of the cost of as an asset. So, when an item of cost is ‘capitalised’ it is treated as an asset rather than an expense.

Recognition This refers to putting an item into the bookkeeping system (performing double entry on it).

Cost The amount of cash or cash equivalents paid, or the value of the other consideration given to acquire an asset at the time of its acquisition or construction.

Gross This is presenting an asset, liability, income or expense without deducting any related amount.

Net This refers to the result of adding a positive and negative number together. The result might be a net asset, net liability, net income or net expense.


Latest update: April 2020

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CHART OF ACCOUNTS

Definition This is a list of accounts created by a business to be used to organise its financial transactions into identified categories of assets, liabilities, income and expenses.

Unique coding Each general ledger account is identified by a unique code and heading. This allows a business to generate instructions and policies to be followed by those members of staff responsible for recording information.

Arrangement

The list is typically arranged in the order of the customary appearance of accounts in the financial statements, statement of financial position general ledger accounts followed by statement of comprehensive income general ledger accounts. The structure and headings in the list aim to result in consistent posting of transactions.

Design

A company might have complete freedom in designing its chart of accounts (within the boundaries set by the rules of accounting). In some countries, the government might issue a generic chart of accounts from which a business selects those codes that are appropriate to its needs.

Objective

The aim of the chart is to ensure that all transactions are recognised in accordance with the requirements of the business. The organisation aim to maintain appropriate chart of accounts in order to cater the present and future monetary transactions with an objective of coming up with timely, accurate and meaningful financial reporting. The chart of accounts will act as a guiding and referring tool to the finance personnel while they post accounting entries to their respective head of accounts.

Amendments in chart of accounts

In order to keep a vigilant control over accounting framework of the organization, no accounting personnel is allowed to make amendment (including opening a new head of account) in the chart of accounts unless specific written approval thereof is duly sanctioned by the Head of Finance.

Specimen

Each major heading in the financial statements might be given a range of codes from which codes can be selected for individual general ledger accounts:

Code range Non-current assets 100 – 199

Land 110 Office buildings 120 Warehouses 130 Factories 140

Current assets 200 – 299 Inventory 210 Receivable 240 Cash 280

Non-current liabilities 300 – 399 Current liabilities 400 – 499 Equity 500 – 599 Income 600 – 699 Expenses 700 – 799

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ACCOUNTING RECORDS IN A TYPICAL BUSINESS For effective and accurate maintenance of accounting records, a set of internal documents, forms are designed which is used for initiating and recording financial transactions.

Payment Voucher

Payment can be made after approval of payment voucher supported with bills or other relevant supporting documents. All cash payments are recorded through cash payment vouchers and all bank payments are recorded through bank payment vouchers

Receipt Voucher

Receipt voucher are prepared to record the receipts and collections in bank accounts. Cash receipt transactions will be recorded through cash receipts.

Journal Voucher

Journal voucher (JV) is prepared to evidence the authorization to record non-cash transactions. As a pre-requisite of the accrual basis of accounting, all accruals will be recorded on a monthly basis. Such accounting entries will be routed through JVs.

Additional records

Cash / Bank Book General Ledger Salary Register Employee Personal Files Fixed Assets Register Invoices and bills

Bank Deposit Slips Cheque Books Bank Statements & Reconciliations Purchase Orders and invoices Sale Orders and invoices Any other necessary record

Pre numbering entries

All entries will be allotted sequential numbers so as to ensure completeness and proper authorization thereof. Any entry recorded out of the prescribed sequence would require immediate action.

Review of accounting entries

All accounting entries are reviewed whether they are supported through documentary evidences originating such transaction(s). After necessary approval, such entries should be posted in their relevant head of account.

Segregation of Duties

Segregation of duties means distributing the execution of one activity over more than one person in order to ensure that no single individual is capable of handling the whole of a transaction individually. If it is not practical to segregate any duty due to its operational nature and / or limited staff members, the management should ensure that all transactions are duly authorized and supported with all necessary documents and properly recorded in books of account in a timely manner.

Correction of entries

Ensure that in case of omission, error of disposition / classification, etc. the correction should always be routed through JV. To confirm this procedure in the computerized accounting software, access controls are placed which prohibits and restricts the individual responsible for data entry from re-entering and accessing the recorded data.

Audit Trail At the time of approval, it is ensured that adequate and reliable audit trial of the subject transaction exists, and that the entry would be easily auditable at the time of internal or external audit.

Custody of Accounting Records

All the accounting records should be in the custody of the accounting personnel. Such records should be kept and maintained for a minimum 10 years from the relevant year-end.



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ACCOUNTING FOR SALES

DOCUMENTS IN SALES CYCLE

Document Purpose Impact on double entry?

1. Sales Quotation

Before ordering, customers often require a sales quotation for review in their company. It is created as a proposal of your goods and services to a customer.

No

2. Sales order From the customer placing an order. No

3. Goods dispatched note

A notice to the customer to inform them that the goods have been dispatched. No

4. Delivery note

A note that accompanies the goods. (A customer will check this to make sure that it agrees with his order and that it is consistent with what has actually been delivered.

No

5. Sales invoice A request for payment from the customer for goods delivered. Invoices normally show a date, details of transaction and payment terms.

Yes

6. Statement

A document to show the customer the amount still owed at a point in time. It will be the net amount of all invoices issued less cash received by the business up to a point in time.

No

7. Credit note issued

Issued when a customer returns goods and the business agrees to this. The business issues a credit note to acknowledge that the amount specified is no longer owed to them by the customer.

Yes

DISCOUNT ALLOWED This is the discount given by a business to its customers.

Trade discount

This is price reduction given to a customer. The invoice is issued at the reduced amount so there are no double entry problems caused by this type of discount. There is simply a sale at a lower price.

Cash discount

A settlement discount might be offered in order to persuade credit customers to pay earlier. When a business makes a sale, it does not know whether the customer will take advantage of the settlement discount or not so the invoice is issued at the full amount. An adjusting entry is made if a customer subsequently takes the discount. This is recorded in cash book.

Dishonoured cheques

These are cheques received from customers where subsequently the bank refuses to make payment.

When a business receives a cheque from a customer it recognises that as an amount paid. If the business presents the cheque to the bank for payment and the bank refuse to accept it (perhaps because of insufficient funds in the customer’s account) the business is still owed the money and must reverse the original entry by (Dr Receivables, Cr Bank).


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ACCOUNTING FOR PURCHASES

DOCUMENTS IN PURCHASES CYCLE

Document Purpose Impact on double entry?

1. Purchase requisition

An item should be requisitioned first if not lying in the stock. No

2. Quotation and approval

Where value of goods exceeds certain limit, quotations will be obtained from at least three suppliers. Purchase order is then initiated after evaluating quotations.

No

3. Purchase order

A document sent by the business to place an order. No

4. Goods received note

A document produced when goods are received. It is produced after the goods have been checked against the delivery note and what has actually been received. The GRN is sent to accounts staff who will check that what has been received is what was ordered and that the invoice agrees with what was received.

No

5. Purchase invoice

A request for payment from the supplier for goods delivered. Yes

6. Statement A document from the supplier to show the amount still owed at a point in time. No

7. Credit note received

Issued by supplier when we return goods or get credit because of damaged goods. Yes

DISCOUNT RECEIVED This is the discount given by a supplier to the business.

Trade discount

This is price reduction given by a supplier. The invoice is issued at the reduced amount so there are no double entry problems caused by this type of discount. There is simply a purchase at a lower price.

Cash discount

A settlement discount might be offered by supplier in order to persuade the business to pay earlier. When a business makes a purchases, it does not know whether it will take advantage of the settlement discount or not so the invoice is recorded at the full amount. An adjusting entry is made if business subsequently takes the discount. This is recorded in cash book.

Contra entries RA & PA

A business might sell goods or services to another business, and also buy goods or services from that same business. The other business is both a customer and a supplier and might therefore be a receivable and a trade payable at the same time. When this happens, the two businesses might agree to offset the amounts that they owe each other, leaving a net amount payable by the business with the higher debt.



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GENERAL JOURNAL

Scope The general journal (journal for short) is a book of prime entry that is used to record transactions that are not recorded in any other book of original entry.

Uses

The journal might be used to provide a record and explanation of: postings from books of prime entry; year-end adjustments; correction of errors; or any other adjustment.

Journal entries requirement

In practice, not all entries are recorded in a journal or journalised but of course it is possible to write a journal for any transaction. You might be required to record double entry transactions as ‘journal entries. This is simply a requirement to show the debit and credit entries for a transaction, without preparing T accounts.

GENERAL JOURNAL – FORMAT

Date Particulars LF Debit Rs. Credit Rs. 31 Aug Account debited 000

Account credited 000 (brief narration)

ACCOUNTING FOR CASH

THE CASH BOOK Book of prime entry

The cash book is often a book of prime entry. It is used to record receipts and payments of cash into the business bank account.

Ledger The cash book also serves as ledger account of cash in hand and cash at bank as the balance of these two is readily available from cash book.

Types of cash book

Single column cash book Two column cash book Three column cash book Three column cash book (Receipt and payments categorised) Petty cash book

SINGLE COLUMN CASH BOOK A simple cash book or a single column cash book is just like an ordinary account that carries one amount column on each side. The left hand side is for recording receipts of cash and the right hand side is for recording payments of cash. It is balanced just like any other ledger account. TWO COLUMN CASH BOOK The double column cash book has two columns i.e. the cash column and the bank column on both the sides of the cash book. All the cash receipts and cash payments are recorded in the cash columns and all the deposits in and withdrawals from the bank are entered in the bank columns accordingly.


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THREE COLUMN CASH BOOK Many businesses maintain a Three-column cash book instead of the Two-column cash book. The only difference is the extra column that is meant to record cash discount (memo only). THREE COLUMN CASH BOOK (Categorised) Cash receipts – specimen Cash from cash sales is banked on a regular basis. It is entered as a cash receipt in the cash book when it has been banked.

Date Particulars Total Receivables Other receipts

Discount allowed (memo)

Rupees 01.03 Saleem Ltd 28,500 28,500 1,500 03.03 Shahzad Traders 5,000 5,000 07.03 Sales on cash 1,000 1,000 09.03 Dividend 5,000 5,000 15.03 Ali Traders 57,000 57,000 3,000 24.03 Khan Traders 87,000 87,000 183,500 177,500 6,000 4,500

. Cash payments – specimen Cash payments are also recorded in similar fashion.

Date Particulars Total Payables Expenses Discount received (memo)

Rupees 01.03 KPT Supplies 59,000 59,000 1,000 03.03 Duck Company 86,000 86,000 07.03 Rent 74,500 74,500 24.03 Fast Supplies 2,200 2,200 221,700 147,200 74,500 1,000

. PETTY CASH BOOK

Definition

Petty cash is cash (notes and coins) held by a business to pay for small items of expense, in situations where it is more convenient to pay in notes and coin than to pay through the bank account. Petty cash might be used, for example, to pay for bus fares, taxi fares, tea and coffee for the office, and so on.

Recording When petty cash transactions take place, for example petty cash is spent on tea and coffee for the office, the entity needs to record both an expense, and a reduction in the asset “petty cash”.

Imprest system

A very common petty cash system is called the imprest system. Under this system a set amount is established (say Rs.10,000). This set amount is called the imprest. At any moment in time, the petty cash balance plus the amounts on invoices and notes should sum to the imprest. Periodically the invoices are removed and replaced by cash to re-establish the imprest in cash.



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Example of imprest

A business uses an imprest system to control its petty cash. The imprest is set at Rs. 10,000. At the start of the month there is Rs. 10,000 cash in the petty cash tin. An amount of Rs. 600 is paid to Laila to compensate her for a payment she made out of her own pocket on behalf of the business.

After this transaction the petty cash tin will contain Rs.9,400 cash and an invoice from Laila for Rs.600. These two amounts add back to the imprest.

ACCOUNTING PROCESS

1. Transactions A business usually has thousands of transaction in an accounting period.

2. Books of prime entry

This is the first place where transactions are recorded according to the type of transactions.

3. Ledgers Transactions (or transaction totals) are entered into the appropriate accounts in general ledger.

4. Trial balance A list of balances can be extracted from the ledgers and this list is called trial balance.

5. Financial statements

The figures in trial balance are adjusted for period-end adjustments and financial statements are prepared.

BOOKS OF PRIME (ORIGINAL) ENTRY

Book Type of transactions Source document

1. Sales day book Records sales of inventory items on credit to customers.

Sales invoices issued to customers.

2. Sales returns day book

Records items returned by credit customers (Return inwards).

Credit notes issued to customers.

3. Purchases day book

Records purchases of inventory items on credit from suppliers.

Purchase invoices from suppliers.

4. Purchases returns day book

Records items returned to credit suppliers (Return outwards).

Credit notes received (or debit not issued).

5. Cash book

All cash transactions including cash sales and cash purchases and payment of expenses and cash transactions with credit customers and suppliers.

Cheques, counterfoils, bank statement, receipts, etc.

6. General Journal

Records transactions that are not recorded in any of the other books of original entry, e.g. non-current asset bought on credit.

Invoice, bill or other authorised document.

Alternative terminology

Sales day book Sales journal

Sales return day book Return inwards day book Sales returns journal

Purchases day book Purchases journal

Purchases return day book Return outwards day book Purchases returns journal


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FORMATS: BOOKS OF PRIME ENTRY

SALES DAY BOOK

Date Customer Inv. # Rs. TOTAL

SALES RETURNS DAY BOOK

Date Customer CN # Rs. TOTAL

PURCHASES DAY BOOK

Date Supplier Inv. # Rs. TOTAL

PURCHASES RETURNS DAY BOOK

Date Supplier CN # Rs. TOTAL

CASH BOOK

Date Receipts Disc. Cash Bank Date Payments Disc. Cash Bank Balance b/d Balance c/d

GENERAL JOURNAL Date Particulars LF Debit Rs. Credit Rs.

21 Nov Van 4,950 Turnkey Motors 4,950 (Van bought on credit)



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LEDGERS

INTRODUCTION

T account

A simplified form of an account and is widely used in studies, exams and workings. Debit transactions are recorded on left side with reference to account of credit entry. Credit transactions are recorded on right side with reference to account of debit entry.

Cash A/c Date Particulars Dr. (Rs.) Date Particulars Cr. (Rs.) 04.11 Capital 5,000 06.12 Equipment 3,500 26.12 Loan 4,000 31.12 Balance c/d 5,500 9,000 9,000

.

Balancing of a ledger account

Once the transactions for a period have been recorded, it will be necessary to find the balance on the ledger account:

1. Total both sides of the T account and find the larger total. 2. Put the larger total in the total box on the debit and credit side. 3. Insert a balancing figure to the side of the T account which does

not currently add up to the amount in the total box. Call this balancing figure ‘balance c/f’ (carried forward) or ‘balance c/d’ (carried down).

4. Carry the balance down diagonally and call it ‘balance b/f’ (brought forward) or ‘balance b/d’ (brought down).

Running balance account

This is an alternative to T account and is widely used in practice. Cash A/c

Date Particulars Dr. (Rs.)

Cr. (Rs.)

Balance Rs.

04.11 Capital introduced 5,000 5,000 Dr 16.12 Paid for Equipment 3,500 1,500 Dr 26.12 Loan received 4,000 5,500 Dr

. The accounts A term used to refer to the accounting records of a business.

Ledger Accounts are kept together in a ledger. A ledger is a collection of related accounts.

A set of accounts A term used to refer to a set of financial statements.

TYPE OF LEDGERS

1. Receivables Ledger

It contains all individual customers’ accounts (to whom we sell inventory on credit) in it.

2. Payables Ledger It contains all individual suppliers’ accounts (from whom we purchase inventory on credit) in it.

3. General Ledger It contains all the other accounts.


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ACCOUNTING SYSTEM – NO CONTROL ACCOUNTS Book of

Prime Entry Transaction POSTING IN LEDGERS Amount Dr. / Cr. Account (s) Ledger

Sales Day Book Sales on credit Single Debit Individual customers

General Ledger

Total Credit Sales A/c Sales Return Day Book

Sales returns from credit customers

Total Debit Sales Returns A/c Single Credit Individual customers

Purchases Day Book

Purchases on credit

Total Debit Purchases A/c Single Credit Individual suppliers

Purchases Return Day Book

Purchases returns to credit suppliers

Single Debit Individual suppliers

Total Credit Purchases Returns A/c

Cash Book

Cash received from RA Single Credit Individual customers

Discount allowed Single Credit Individual customers Total Debit Discount Allowed A/c

Other receipts All Credit Relevant accounts Cash paid to

Payables Single Debit Individual suppliers

Discount received Single Debit Individual suppliers Total Credit Discount received A/c

Other payments All Debit Relevant accounts General Journal

All other transactions All Dr / Cr. Relevant accounts

TRIAL BALANCE

Definition Trial balance is simply a list of all accounts in general ledger with their final debit or credit balance at a specific date.

Source Cash and bank balance from cash book All other balances from general ledger

Purposes of a trial balance

1. It is a starting point for producing a statement of comprehensive income and a statement of financial position at the end of an accounting period.

2. It is a useful means of checking for errors in the accounting system. Errors must have occurred if the total of debit balances and total of credit balances on the main ledger accounts are not equal.

List of Balances

This is a simple list of balances made from Receivable Ledgers and Payables Ledgers.



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LIMITATIONS OF TRIAL BALANCE

Arithmetical accuracy

Trial balance is taken as test of arithmetical accuracy. If both the debit and credit columns of trial balance are equal to each other, we assume that there is no mistake in the posting of journal and subsidiary books to ledger accounts, in carrying forward balances of ledger accounts to trial balance and even in the balancing of ledger accounts.

Not conclusive proof

This assumption is correct but should never be taken as conclusive proof of accuracy. It means that there are certain errors which remain undetected by trial balance. Both the debit and credit columns of the trial balance may be equal in spite of certain mistakes of omissions and principles. These errors may be mentioned as under:

Examples

1. Errors of omission in the books of original record 2. Errors of principle (posting on right side of wrong account nature wise) 3. Compensating errors ·(same amount effect on debit and credit side) 4. Incorrect account in the original books (on both sides) 5. Posting to wrong account (but on right side)

FINANCIAL STATEMENTS

Formats

The format of following two relevant financial statements have already been covered: Statement of comprehensive income Statement of financial position

Source / Data

The financial statements are prepared after: Trial Balance has been prepared A list of adjustments (for example, closing inventory) has been

finalised.

Cost of Sales

The cost of sales in the statement of comprehensive income is not the cost of goods purchased or the cost of goods produced. It must be the cost of the goods sold. The accruals or matching concept must be applied. To calculate the cost of sales for a statement of comprehensive income, it is necessary to make an adjustment for changes in the amount of inventory. Rs. Opening inventory 500 Purchases (net) 10,000

10,500 This is the total cost of goods that were available to be sold.

Closing inventory (600) This is the total cost of goods still held at the end of the period.

Cost of sales 9,900 Therefore, this is the total cost of goods that were sold.

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TRANSITION TO NEXT ACCOUNTING PERIOD

Closing entries

Balances on expense accounts and income accounts are transferred to the statement of comprehensive income. (Note: There might be some accruals and prepayments on expense accounts which we will discuss later)

Transfer of all income and expenses to profit or loss

All Income accounts Debit All Expenses Credit Profit or loss Credit

Transfer of profit for the period to capital Profit or loss Debit Capital account Credit

Transfer of drawings for the period to capital

Capital account Debit Drawings account Credit

Balancing off

Balances on the asset, liability and capital accounts are carried forward as closing balances at the end of the period and become opening balances at the beginning of the next period, usually an opening trial balance is prepared as well and accounting for the next period is started.

ALTERNATE EXAM QUESTIONS’ STYLE

Journal entries for every transaction

One possibility is that examiner asks to give General Journal entries for all the transaction. In that case all debits and credits are processed through General Journal and other books of prime entry are not prepared.

Direct T accounts for every transaction

Another possibility is that question requires to prepare ledgers (T accounts). Without wasting our time on books of prime entry at all, we may directly record transactions in ledger accounts.

ACCOUNTING PROCESS WITH CONTROL ACCOUNTS

TYPE OF LEDGERS

1. Receivables Ledger

It contains all individual customers’ accounts (to whom we sell inventory on credit) in it.

2. Payables Ledger It contains all individual suppliers’ accounts (from whom we purchase inventory on credit) in it.

3. General Ledger

It contains all the other accounts and following two accounts representing totals of receivables and payables.

1. Total Receivable (Control) Account 2. Total Payables (Control) Account

Control Account: This is an account which represents a total value of a number of separate balances.

ALTERNATIVE TERMINOLOGY Receivables ledger Debtors ledger, Sales ledger

Receivables control account

Receivables ledger control account Sales ledger control account Total sales control account Debtor control account Account receivable control account



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Payables ledger Creditors ledger, Purchases ledger

Payables control account

payables ledger control account Purchases ledger control account Total Purchases control account Creditors control account Account payables control account

ACCOUNTING SYSTEM – WHEN CONTROL ACCOUNTS ARE MAINTAINED Book of

Prime Entry Transaction POSTING IN LEDGERS Amount Dr. / Cr. Account (s) Ledger

Sales Day Book Sales on credit

Total Debit RA Control A/c GL

Total Credit Sales A/c

Single Debit Individual customers RL

Sales Return Day Book

Sales returns from credit customers

Total Debit Sales Returns A/c GL

Total Credit RA Control A/c

Single Credit Individual customers RL

Purchases Day Book

Purchases on credit

Total Debit Purchases A/c GL

Total Credit Payables Control A/c

Single Credit Individual suppliers PL

Purchases Return Day Book

Purchases returns to credit suppliers

Total Debit Payables Control A/c GL

Total Credit Purchases Returns A/c

Single Debit Individual suppliers PL

Cash Book

Cash received from Receivables

Total Credit

Receivable Control A/c GL

Single Individual customers RL

Discount allowed

Total Credit

Receivable Control A/c GL

Single Individual customers RL

Total Debit Discount Allowed A/c GL

Other receipts All Credit Relevant accounts GL

Cash paid to Payables

Total Debit

Payables Control A/c GL

Single Individual suppliers PL

Discount received

Total Debit

Payables Control A/c GL

Single Individual suppliers PL

Total Credit Discount received A/c GL

Other payments All Debit Relevant accounts GL

General Journal

All other transactions All Dr / Cr. Relevant accounts GL


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Receivable Control A/c – Specimen Date Particulars Dr. (Rs.) Date Particulars Cr. (Rs.)

01.03 Balance b/d 5,000 31.03 Bank (from customers) 68,000

31.03 Sales (Credit) 90,000 31.03 Sales returns / credit notes 15,000

31.03 Bank (Dishonoured cheques) 2,000 31.03 Discount allowed 2,000

31.03 Bad debts 1,000 31.03 Contra entries 5,000

31.03 Balance c/d (advance from customers) - 31.03 Balance c/d 6,000

97,000 97,000 01.04 Balance b/d 6,000 Balance b/d -

Payables Control A/c – Specimen Date Particulars Dr. (Rs.) Date Particulars Cr. (Rs.)

31.03 Purchases returns 10,000 01.03 Balance b/d 4,000 31.03 Bank (Paid to suppliers) 64,000 31.03 Purchases (credit) 80,000 31.03 Discount received 3,000 31.03 Contra entries 5,000

31.03 Balance c/d 2,000 31.03 Balance c/d (advance to suppliers) -

84,000 84,000 Balance b/d - 01.04 Balance b/d 2,000



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SYLLABUS

Reference Content/Learning outcome

A4

Double Entry book keeping system Rules of debit and credit and Chart of accounts Books of prime entry Ledgers Trial balance

LO1.4.1 Identify financial and non-financial transactions in a well-defined scenario LO1.4.2 Understand and apply the concept of double entry accounting LO1.4.3 Understand the use of business documents as source of information LO1.4.4 Understand the meaning of a chart of accounts and explain its purpose.

LO1.4.5 Describe the basic contents of the sales day book, sales ledger, customer/debtors’ ledger, purchase day book, purchase journal and purchase ledger/creditors’ ledger

LO1.4.6 Understand the use and format of the cash book and its types LO1.4.7 Record their respective entries. LO1.4.8 Describe the main features of the general ledger LO1.4.9 Post entries in the general ledger

LO1.4.10 Balance the ledger accounts as required, make transfers to the final accounts. LO1.4.11 Understand the purpose of the trial balance

LO1.4.12 Understand and demonstrate mapping between general ledger balances and the trial balance

LO1.4.13 Identify the limitations of a trial balance. Proficiency level: 2 & Testing level: 2 Past Paper Analysis A14 S15 A15 S16 A16 S17 A17 S18 A18 S19 A19 S20 20+4 8+103 16 10 20 12 13 15 152 5+151 152 153 Objective Type 02 01 Control Accounts Reconciliation (not part of syllabus now) 12 - - - - - 10 - - -

1 Includes accrual and prepayment adjustments 2 Includes one adjustment related to non-current assets 3 Includes adjustments of rectification of error


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PRACTICE Q&A

Sr.# Description Marks Reference DOUBLE ENTRY BOOKKEEPING

1H Chart of accounts 04 PE A14 2CH Effect of transactions on elements of FS 09 FW KA 3CH Identify debit and credit accounts from transactions 11 FW KA 4CH General Journal from transactions 12 FW KA 5H Theory: Sales cycle documents 05 PE S19 6C Single column cash book 05 CI 7C Two column cash book 07 CI 8C Three column cash book and imprest system 15 OT 9C Petty cash book 10 CI

ACCOUNTING PROCESS 10C Adeel Traders – Books of Prime Entry 15 KA 11C Adeel Traders – Ledger posting and balancing 20 KA 12C Adeel Traders – Trial Balance 05 KA 13C Adeel Traders – Financial Statements 12 KA 14C Adeel Traders – Transition to next period 08 KA 15H Kashif Traders – Prime Entry to Financial Statements 35 KA

PRACTICE QUESTIONS 16H Alpha Traders – Books of prime entry 13 PE A17 17C Omega Limited – Books of prime entry 15 PE A19 18H Henry Brothers – Books of prime entry 15 PE A18 19H Abdullah – JE, Ledgers and Trial Balance 20 PE A14 20H Theory – Purpose of TB and sales cycle documents 08 PE S15 21C Ravi Traders – Trial balance from books of prime entry 15 PE S18

ACCOUNTING PROCESS WITH CONTROL ACCOUNTS 22CH Adeel Traders: Complete process 20 KA 23C Lotus Pharma: Purchase day book – related accounts 10 PE S16 34C Gul Brothers: Books of prime entry – Control Accounts 12 PE S17 25H Ali: Books of prime entry and control accounts 16 PE A15 26C Rana Brothers: Purchase related process 20 PE A16



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QUESTION 01 What is meant by Chart of Accounts? Explain the purpose of creating a chart of accounts.

(04) QUESTION 02 Complete the columns to show the effects of the following transactions: (09) Effect upon Assets Liabilities Capital Income Expenses 1. We pay a creditor Rs. 70 in cash. 2. Bought fixtures Rs. 200 paying by

cheque. 3. Bought goods on credit Rs. 275. 4. The proprietor introduces another

Rs. 500 cash into the firm. 5. Ali lends the firm Rs. 200 in cash. 6. A debtor pays us Rs. 50 by

cheque. 7. We return goods costing Rs. 60 to

a supplier whose bill we had not paid.

8. Bought additional shop fixtures paying Rs. 5,000 by cheque.

9. Bought a van on credit Rs. 8,700. 10. Repaid by cash a loan owed to Ali

Rs. 10,000.

11. Bought goods for Rs. 1,400 paying by cheque.

12. The owner puts further Rs. 4,000 cash into the business.

13. Sold goods on cash Rs. 100 14. Sold goods on credit Rs. 100 15. A debtor returns to us Rs. 150

goods. We agree to make an allowance for them.

16. Bought goods on credit Rs. 760. 17. The owner takes out Rs. 200

cash for his personal use. 18. We pay a creditor Rs. 1,150 by

cheque.


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QUESTION 03 Complete the following table: (11) Account to be Debited Credited 1. Bought lorry for cash. 2. Paid creditor, T Lake, by cheque. 3. Repaid P Logan’s loan by cash. 4. Sold lorry for cash. 5. Bought office machinery on credit from Ultra Ltd. 6. A debtor, A Hill, pays us by cash. 7. A debtor, J Cross, pays us by cheque. 8. Proprietor puts a further amount into the

business by cheque.

9. A loan of Rs. 200 in cash is received from L Lowe.

10. Paid a creditor, D Lord, by cash. 11. Bought office machinery on credit from D Ltd. 12. The proprietor paid a creditor, C Jones, from his

private funds.

13. A debtor, N Fox, paid us in cash. 14. Repaid part of loan from P Exeter by cheque. 15. Returned some of office machinery to D Ltd. 16. A debtor, N Lyn, pays us by cheque. 17. Bought van by cash. 18. Bought goods on credit from Arslan 19. Returned good to supplier Amjad 20. Sold goods to Habib on credit 21. Customer Rizwan returned goods to us 22. Owner took cash for his personal use QUESTION 04 Pass Journal entries for following transactions: (12)

20X7 March 1 Started business with Rs. 750 cash and Rs. 9,000 in the bank.

== 2 Received a loan of Rs. 2,000 from B Blane by cheque. == 3 Bought a computer for cash Rs. 600. == 5 Bought display equipment on credit from Clear Count Ltd Rs. 420. == 8 Took Rs. 200 out of the bank and put it in the cash till.

== 15 Repaid part of Blane’s loan by cheque Rs. 500. == 17 Paid amount owing to Clear Count Ltd Rs. 420 by cheque. == 24 Repaid part of Blane’s loan by cash Rs. 250. == 31 Bought a printer on credit from F Jones for Rs. 200. == 31 Bought goods on credit from ABC for Rs. 1,000 == 31 Sold goods on credit to XYZ for Rs. 1,200 == 31 Owner took cash from bank of Rs. 100 for his personal use.

QUESTION 05 List and briefly explain the purpose of any five documents issued/used in sales cycle. (05)



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QUESTION 06 Following data has been extracted from Sara Shah’s records for the month of June 2016.

June 2016 Rs. 1 Opening balance of cash 12,000 2 Received cash from Akhtar 3,800 5 Paid rent by cash 4,000 9 Made sales on cash 3,000

14 Paid to Bilal 1,760 18 Purchased Furniture on cash 3,000 23 Paid salaries 3,600 26 Rent due, yet not paid for June 2,700

Enter the above transactions in the single column cash book of Sara. (05) QUESTION 07

July 2016 1 Naeem Traders started business with a capital of Rs.40,000. The amount

was paid into the business’s bank account. 2 Paid rent of Office premises Rs.1,700 by cheque. 5 Purchased goods worth Rs.12,000 on credit from Shahzaib Traders. 9 Withdrew Rs.1,000 from the bank account for office use.

14 Paid advertising expenses, Rs.700 in cash. 18 Sold goods, Rs.8120 to Niazi Trading and received cheque. 23 Paid Shahzaib Traders by cheque. 26 Purchased Motor Vehicle Rs.30,000 and paid by cheque. 28 Naeem took Rs.2,000 from the business through cheque for personal use.

Enter the above transactions in the cash book of Naeem Traders. The cash and bank accounts should be shown in a two columnar cash book. (07) QUESTION 08 A three-column cash book for a wine wholesaler is to be written up from the following details, and to be balanced off.

20X8 Mar 1

Balances brought forward: Cash Rs.620; Bank Rs.7,142.

2 The following paid their accounts by cheque, in each case deducting 5% cash discounts: G Slick Rs.260; P Fish Rs.320; T Old RS.420 (all amounts are pre-discount).

4 Paid rent by cheque Rs.430. 6 F Black lent us Rs.5,000 paying by cheque.

8 We paid the following accounts by cheque in each case deducting a 2.5% cash discount: R White Rs.720; G Green Rs.960; L Flip Rs.1,600 (all amounts are pre-discount).

10 Paid motor expenses in cash Rs.81. 12 J Pie pays his account of Rs.90, by cheque Rs.88, deducting Rs.2 cash discount. 15 Paid wages in cash Rs.580.

18 The following paid their accounts by cheque, in each case deducting 5 per cent cash discount: A Pony Rs.540; B Line & Son Rs.700; T Owen Rs.520 (all amounts are pre-discount).

21 Cash withdrawn from the bank Rs.400 for business use. 24 Cash Drawings Rs.200.


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25 Paid W Peat his account of Rs.160, by cash Rs.155, having deducted Rs.5 cash discount.

29 Bought fixtures paying by cheque Rs.720. 31 Received commission by cheque Rs.120.

(12) Define “imprest system” with reference to petty cash book. (03) QUESTION 09 Shanzay Industries keeps an analysed petty cash book using the imprest system. The imprest amount is Rs.2,000. The following information is available for the month of June 2016.

2016 June Rs. Voucher

Number 1 Balance 2,000 6 Paid window cleaner 200 1 8 Bought pens and pencils 100 2

11 Paid for bus fare 60 3 16 Paid for printer cartridge 400 4 18 Purchased envelops 270 5 20 Paid for coffee and milk for office staff 70 6 22 Bought printing papers 80 7 23 Paid taxi fare 200 8 24 Paid office cleaner 170 9 26 Paid for biscuits and tea 100 10 28 Purchased paper pins 40 11 29 Paid for petrol 70 12

Required: Write up the petty cash book for the month of June 2016 for Shanzay Industries. Balance the petty cash book and carry down the balance. Show the restoration of imprest as on July 1 2016. (10)

QUESTION 10 The following details relate to a carpet retailer Adeel Traders for the month of November 20X7:

20X7 Nov Transaction Book

1 Started in business with Rs. 15,000 in the bank. 3 Bought goods on credit from: Jamal Rs. 290; Faisal Rs. 1,200; Talal

Rs. 610; Rashid (List price Rs. 550, trade discount Rs. 20)

5 Cash sales Rs. 610. 6 Paid rent by cheque Rs. 175. 7 Paid business rates by cheque Rs. 130.

11 Sold goods on credit to: Taseer Rs. 85; Jawad Rs. 48; Touseef Rs. 1,640.

17 Paid wages by cash Rs. 290. 18 We returned goods to: Jamal Rs. 18; Rashid Rs. 27. 19 Bought goods on credit from:

Rashid Rs. 110; Talal Rs. 320; Fahad Rs. 165.

20 Goods were returned to us by: Jawad Rs. 6; Taseer Rs. 14. 21 Bought van on credit from Turnkey Motors Rs. 4,950. 23 We paid the following by cheque:

Jamal Rs. 265 (after settlement discount of Rs. 7); Faisal Rs. 1,200; Talal Rs. 480 (after discount of Rs. 20)



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25 Bought another van, paying by cheque immediately Rs. 6,200. 26 Received a loan of Rs. 750 cash from BBL. 28 Received cheques from: Taseer Rs. 65 (after cash discount of Rs. 6);

Jawad Rs. 40 (after cash discount of Rs. 2).

30 Proprietor brings a further Rs. 900 into the business, by a payment into the business bank account.

Requirement: Write the name of relevant book of prime entry opposite to each transaction. (05) Prepare all relevant books of prime entry. (10) QUESTION 11 See the Books of Prime Entry of Adeel Traders prepared in previous Question. Required: Prepare all relevant ledger accounts. (20) QUESTION 12 See the Ledgers of Adeel Traders prepared in previous Question.

Required: Prepare Trial Balance as at 30 November 20X7. (05) QUESTION 13 See the Trial Balance of Adeel Traders prepared in previous Question. The business had inventory in hand of Rs. 1,500 as at 30 November 20X7.

Required: Prepare statement of comprehensive income and statement of financial position. (12) QUESTION 14 See the Trial Balance of Adeel Traders prepared in previous Questions along with further data . Required: Prepare journal entries for closing of accounts (closing entries) (04) Prepare opening trial balance as at 1 December 20X7 (04) QUESTION 15 Record the following transactions for the month of January of Kashif Traders, balance off all the accounts, and then extract a trial balance as at 31 January 20X8:

20X8 Jan Transaction Book

1 Started in business with Rs. 10,500 cash. CB 2 Put Rs. 9,000 of the cash into a bank account. CB 3 Bought goods for cash Rs. 550. CB 4 Bought goods on credit from: Taimoor Rs. 800; Fazal (List price Rs.

950 and trade discount of Rs. 20); Momin Rs. 160; Gul Rs. 510. PDB

5 Bought stationery on credit from Buttons Ltd Rs. 89. GJ 6 Sold goods on credit to:

Ramiz Rs. 170; Latif Rs. 240; Mahad Rs. 326; Tariq Rs. 204. SDB

8 Paid rent by cheque Rs. 220. CB 10 Bought fixtures on credit from Chiefs Ltd Rs. 610. GJ


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11 Paid salaries in cash Rs. 790. CB 14 Returned goods to: Fazal Rs. 30; Momin Rs. 42. PRDB 15 Bought van by cheque Rs. 6,500. CB 16 Received loan from Bilal by cheque Rs. 2,000. CB 18 Goods returned to us by:

Ramiz Rs. 5; Mahad Rs. 20. SRDB

21 Cash sales Rs. 145. CB 24 Sold goods on credit to:

Latif Rs. 130; Tariq Rs. 410; Rida Rs. 158. SDB

26 We paid the following by cheque: Fazal Rs. 890 (Cash discount Rs. 10); Momin Rs. 115 (Cash discount Rs. 3). CB

29 Received cheques from: Rida Rs. 155 (Cash discount Rs. 3); Latif Rs. 365 (cash discount Rs. 5). CB

30 Received a further loan from Bilal by cash Rs. 500. CB 30 Received Rs. 614 cash from Tariq CB

Required: (a) Prepare books of prime entry from above. (08) (b) Prepare all relevant ledger accounts (no control accounts are maintained) (13) (c) Prepare trial balance (04) (d) Prepare financial statements (the closing inventory is Rs. 1,270) (10) QUESTION 16 Following information pertains to Alpha Traders (AT): Balances as at 1 August 2017:

Rupees Cash in hand 178,000 Bank overdraft 769,000

Transactions for the month of August 2017: Date Transactions 02-Aug Office furniture purchased from RABBIT for cash and on credit for Rs. 38,000 and

Rs. 129,000 respectively. 03-Aug Goods purchased for cash from Bena & Co. for Rs. 85,000. 05-Aug Goods purchased on credit in bulk (net of 5% trade discount) from Moon & Co.

and Shan Traders for Rs. 475,000 and Rs. 513,000 respectively. 08-Aug Goods sold on credit for Rs. 236,000 and Rs. 198,000 to A-Z Super Store and

Apollo Center respectively. 10-Aug Goods costing Rs. 68,000 were returned to Moon & Co. 12-Aug Cash sales to Danish & Sons for Rs. 40,000. 16-Aug Cheques (net of 5% discount) amounting to Rs. 194,750 and Rs. 243,200 were

received from A-Z Super Store and Bright & Co. respectively. 20-Aug It was agreed with Columbus Traders to adjust Rs. 200,000 payable to AT against

receivables from AT. 25-Aug Payment of Rs. 225,000 (net of 10% discount) to Al-Shams. Required: Record the above transactions in relevant books of prime entry in a proper format. (13)



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QUESTION 17 Following information pertains to Omega Limited (OL) for the month of July 2019: (i) Opening balances:

Rupees Cash in hand 85,000 Cash at bank - as per cash book 650,000 - as per bank statement 780,000

OL maintains two columns cash book.

(ii) Transactions for the month: Date Transactions

02-Jul Goods purchased on credit from Danish Stores for Rs. 475,000 (net of 5% trade discount).

04-Jul Goods sold on credit to XYZ & Co. for Rs. 500,000 after a trade discount of 10%. In this respect, transportation charges of Rs. 15,000 were paid in cash by OL.

05-Jul Goods sold on credit to Zaid Brothers for Rs. 640,000 and offered a discount of 5% on payment within 30 days.

07-Jul Cheques issued to Zee & Co. for Rs. 400,000 in full and final settlement of one of its old invoice of Rs. 425,000 and ABC Stores for Rs. 190,000 (net of 5% payment discount).

09-Jul Goods sold to Qavi & Sons and received a cheque of Rs. 58,000. 10-Jul Cash payment of utility bills amounted to Rs. 45,000. This included a bill

of Rs. 5,000 belonged to the owner’s residence. 12-Jul Goods returned by Zaid Brothers amounted to Rs. 135,000. 12-Jul Goods returned to Danish Stores amounted to Rs. 50,000. 13-Jul Goods purchased on credit for Rs. 700,000 from Chenab Stores subject

to 10% discount on payment within 30 days. 15-Jul A cheque of Rs. 100,000 was encashed for day to day cash

requirements. 20-Jul Fully depreciated laptops costing Rs. 134,000 were scrapped. 21-Jul New laptops were purchased for Rs. 245,000 from Shifa Electronics and

issued a cheque of Rs. 100,000 in part payment. 23-Jul 40% of the goods sold to Qavi & Sons on 9 July were returned and the

amount was refunded in cash. These goods were sold at cost plus 25%. 26-Jul Goods purchased for cash from Ravi Brothers having list price of Rs.

68,000 and availed discount of 5%. 30-Jul Cheques received from Zamil Store of Rs. 285,000 (net of 5% payment

discount) and Zaid Brothers of Rs. 500,000 in settlement of an old invoice of Rs. 550,000.

Required: Enter the above transactions in the books of prime entry in a proper format. (Narrations are not required) (15) QUESTION 18 Henry Brothers (HB) is engaged in trading of textile products. As at 1 July 2018, HB had cash and bank balances of Rs. 76,000 and Rs. 286,000 respectively. Following transactions pertain to the month of July 2018:

4 July Purchased goods on credit amounting to Rs. 250,000 and Rs. 180,000 from Alpha Enterprises (AE) and Bravo Traders respectively. AE offered 3% discount if payment was made within 15 days.


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6 July Purchased office furniture costing Rs. 90,000 from Lavish Designs and paid Rs. 50,000 through cheque. Rs. 40,000 had already been paid in June 2018 and debited to Advances.

8 July Sold goods to HRS Garments and received a cheque of Rs. 300,000. Also sold goods on cash to Shan Garments having list price of Rs. 250,000 and offered discount of 2%.

14 July 20% goods sold to Shan Garments on 8 July were returned and the amount was refunded in cash. These goods were sold on mark up of 25% of cost.

16 July Sold old office furniture on cash for Rs. 12,000. The cost of furniture was Rs. 75,000 and its book value was nil.

17 July Goods costing Rs. 35,000 were returned to AE and the remaining amount was paid through cheque.

23 July Sold goods on cash to Salim Sons for Rs. 236,500. 26 July Saleh & Co. offered discount of 5% on list price of Rs. 500 per unit if at least

250 units are purchased. HB purchased 300 units to avail the discount and paid through cheque.

28 July Paid loan instalment of Rs. 150,000 including interest of Rs. 35,000 in cash. 30 July Deposited cash into bank Rs. 200,000.

Required: Record the above transactions in the relevant books of prime entry in a proper format. (Narrations are not required) (15) QUESTION 19 In July 2014, Abdullah established a business for providing van service to private schools in the city of Gujarat. The transactions during the month are listed below:

1 July A bank account was opened with a cash deposit of Rs. 20,000,000. 3 July A property was purchased at a cost of Rs. 10,000,000, of which Rs.

7,200,000 was considered as applicable to the land and Rs. 2,800,000 to the building. The transaction involved a cash payment of Rs. 3,000,000 and the issuance of a note payable for the balance amount.

5 July 10 new vans were purchased for at Rs. 300,000 each from City Showroom, Lahore. Abdullah paid Rs. 600,000 in cash and agreed to pay Rs. 1,000,000 by 31 July and the remaining balance by 15 August.

7 July Upon inspection, a van was found to be defective and was returned to City Showroom, Lahore.

8 July Office equipment was purchased against cash payment of Rs. 2,400. 15 July Abdullah signed an agreement with a petrol pump for supply of CNG on

credit. As per agreement, he issued a cheque for Rs. 15,000 as security deposit.

30 July 25% of the property acquired on 3 July was rented out from 1 August 2014 at a monthly rent of Rs. 30,000. A three month advance was received from the tenant.

31 July Cheque for Rs. 1,000,000 was issued to City Showroom, Lahore. Required: Prepare the following: (a) Journal entries for the month of July 2014. (08) (b) All the ledger accounts. (07) (c) A trial balance as at 31 July 2014. (05)



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QUESTION 20 (a) What are the two main purposes of a trial balance? (02) (b) Briefly describe the primary reason for issuance of various documents used in a

system designed to account for sales. (06) QUESTION 21 Ravi Traders (RT) commenced its business on 1 January 2018. The books of prime entry as maintained by RT for the month of January 2018 are reproduced below:

CASH BOOK - RECEIPTS

Date Description Discount Cash Bank -------------- Rupees -------------- 1-Jan Capital - 1,000 8,000 10-Jan Return outward - 50 - 11-Jan Trade debtors - Quality Traders 150 – 6,100 14-Jan Sales - - 1,250 20-Jan Trade debtors - Himalaya Super Store 90 300 1,410 26-Jan Bank – 500 - 240 1,850 16,760

CASH BOOK - PAYMENTS

Date Description Discount Cash Bank -------------- Rupees -------------- 4-Jan Office rent - 200 300 5-Jan Fixed assets (Office equipment) - - 1,500 7-Jan Purchases – - 650 14-Jan Trade debtors - Quality Traders - - 6,100 15-Jan Trade creditors - Zee Traders 100 500 3,400 20-Jan Return inward - 60 - 21-Jan Fixed assets (Computers) – 250 - 24-Jan Drawings - 100 180 25-Jan Utility bills – 120 140 26-Jan Cash - - 500 100 1,230 12,770

PURCHASES DAY BOOK Date Suppliers’ name Rupees 2-Jan ABC & Co. 4,500 10-Jan Zee Traders 6,000 28-Jan Unity Enterprises 7,500 18,000

PURCHASES RETURNS DAY BOOK Date Suppliers’ name Rupees 12-Jan Zee Traders 900

SALES DAY BOOK Date Customers' name Rupees 8-Jan Quality Traders 6,250 19-Jan Himalaya Super Store 2,350 24-Jan ABC & Co. 8,000 16,600


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GENERAL JOURNAL Date Particulars Debit Credit -------- Rupees --------

1-Jan Fixed assets (Furniture) 300 Capital 300

14-Jan Drawings 100 Purchases 100

14-Jan Trade debtors - Quality Traders 150 Discount allowed 150

31-Jan Drawings 50 Fixed assets (Computers) 50

31-Jan Trade creditors - ABC & Co. 4,500 Trade debtors - ABC & Co. 4,500

Required: Prepare trial balance for the month ended 31 January 2018. (Preparation of ledger accounts is not necessary) (15) QUESTION 22 The following details relate to a carpet retailer Adeel Traders for the month of November 20X7:

20X7 Nov Transaction

1 Started in business with Rs. 15,000 in the bank. 3 Bought goods on credit from: Jamal Rs. 290; Faisal Rs. 1,200; Talal Rs. 610;

Rashid (List price Rs. 550, trade discount Rs. 20) 5 Cash sales Rs. 610. 6 Paid rent by cheque Rs. 175. 7 Paid business rates by cheque Rs. 130.

11 Sold goods on credit to: Taseer Rs. 85; Jawad Rs. 48; Touseef Rs. 1,640.

17 Paid wages by cash Rs. 290. 18 We returned goods to: Jamal Rs. 18; Rashid Rs. 27. 19 Bought goods on credit from:

Rashid Rs. 110; Talal Rs. 320; Fahad Rs. 165. 20 Goods were returned to us by: Jawad Rs. 6; Taseer Rs. 14. 21 Bought van on credit from Turnkey Motors Rs. 4,950. 23 We paid the following by cheque:


25 Bought another van, paying by cheque immediately Rs. 6,200. 26 Received a loan of Rs. 750 cash from BBL. 28 Received cheques from: Taseer Rs. 65 (after cash discount of Rs. 6); Jawad Rs.

40 (after cash discount of Rs. 2). 30 Proprietor brings a further Rs. 900 into the business, by a payment into the

business bank account.

Required: Prepare all relevant ledger accounts (control accounts are maintained) and trial balance and list of balances from receivable and payables ledger. (20)



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QUESTION 23 Lotus Pharma (LP) was established on 1 January 2016. Following transactions pertain to the first month of business:

Transaction date Description 1-Jan-2016 Bought medicines on credit from the following suppliers:

Rs. in million Shan Traders 8.50 Rahat Stores 12.50 Quality Medicos 15.00

. 12-Jan-2016 Bought medicines on cash for Rs. 3.8 million. 20-Jan-2016 Medicines worth Rs. 2.5 million were returned to Rahat Stores. 24-Jan-2016 A part payment of Rs. 5.8 million was made to Shan Traders. 28-Jan-2016 Amount payable to Quality Medicos was fully settled to avail an

early payment discount of 2%. 31-Jan-2016 Rahat Stores was paid in full after adjusting Rs. 1.2 million against

its account receivable balance. Required: (a) Prepare extracts of purchase day book for the above transactions. (02) (b) Prepare subsidiary and control accounts for trade payables. (08) QUESTION 24 Following transactions pertain to Gul Brothers (GB) for the month of February 2017:

3-Feb Bought goods on credit from QT Stores for Rs. 295,000. 3-Feb Purchased goods in bulk on 15 days credit from Bana & Co. at a price of Rs.

190,000 (net of 5% trade discount). 8-Feb Sold goods on cash for Rs. 300,000. 15-Feb Issued a cheque of Rs. 90,000 to XYZ in full and final settlement of an old

outstanding balance of Rs. 100,000. 18-Feb Sold goods on 15 days credit to Qavi for Rs. 275,000. Qavi would be entitled to

2% discount if payment is made on the due date. 18-Feb Sold goods on credit to Child Care Centre at a concessional price of cost plus

10%. The cost of goods was Rs. 158,000. 23-Feb Johar & Sons, a debtor owing a balance of Rs. 65,000 was declared bankrupt.

The balance due was written-off. GB maintains adequate provision against its debtors.

25-Feb Received cheques from debtors – Chenab Rs. 68,000 and Ameen Stores Rs. 32,000.

Required: (a) Enter the above transactions in the related books of prime entry. (09) (b) Post the entries to Receivables Control Account and Payables Control Account.

(Balancing of control accounts is not required) (03)


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QUESTION 25 In August 2015, Ali established a stationery store named as Ali Baba Stationers. The transactions during the month are listed below:

Date Transactions 3 August A bank account was opened with cash Rs. 5,000,000. 3 August Purchase shop furniture worth Rs. 170,000 on credit. 3 August Bought stationery on credit from The Pen Store: Rs. 450,000 less trade

discount of Rs. 25,000, The School Shop: Rs. 200,000, Galaxy Stationers: Rs. 350,000, The Stationery Store: Rs. 400,000, The Office Store: Rs. 800,000.

5 August Supplied stationery on credit to Murjeena Traders: Rs. 200,000, Qasim and Company: Rs. 550,000 less trade discount of Rs. 50,000, Chiragh Limited: Rs. 250,000, Sameer Enterprises: Rs. 400,000, Hamid and Company: Rs. 800,000.

6 August Purchase returns to Galaxy Stationers: Rs. 10,000 and The Stationery Store: Rs. 40,000.

7 August Paid shop rent amounting to Rs. 300,000. 7 August Recovered Rs. 150,000 from Murjeena Traders, Rs. 250,000 from Qasim

and Company, Rs. 200,000 from Chiragh Limited, Rs. 300,000 from Sameer Enterprises, Rs. 400,000 from Hamid and Company.

10 August Paid Rs. 300,000 to The Stationery Store, Rs. 290,000 to The Office Store and Rs. 250,000 to The Pen Store after availing early payment discount of Rs. 25,000.

11 August Paid Rs. 60,000 for shop repairs. 12 August Sold stationery on cash amounting to Rs. 250,000. 15 August Sales return from Murjeena Traders: Rs. 25,000 and Chiragh Limited: Rs.

30,000. 18 August Bought stationery for cash Rs. 150,000 21 August Supplied stationery on credit to Murjeena Traders: Rs. 300,000, Qasim and

Company: Rs. 200,000, Chiragh Limited: Rs. 550,000, Sameer Enterprises: Rs. 200,000.

25 August Following amounts were received from debtors: Murjeena Traders: Rs. 150,000, Qasim and Company: Rs. 150,000 after allowing early payment discount of Rs. 25,000, Chiragh Limited: Rs. 300,000 after allowing early payment discount of Rs. 50,000.

Required: (a) Enter the purchase and sale transactions in the related books of prime entry other

than cash book and journal. (b) Prepare the following:

(i) Receivables Control Account (ii) Payables Control Account (iii) Cash and Bank Account (16)



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QUESTION 26 (a) List the documents used in a system designed to control and account for purchases

and briefly describe the purpose for issuance of these documents. (04)

(b) Following transactions pertain to Rana Brothers for the month of August 2016: Date Suppliers names Description Rupees 05-Aug Bravo Traders Credit purchase 950,000 05-Aug Alpha & Sons Credit purchase 438,000 08-Aug Bravo Traders Return of goods purchased on credit 60,000 09-Aug Charlie Brothers Goods received against advance

payment made on 3 July 2016 540,000

10-Aug Alpha & Sons Credit purchase 800,000 10-Aug Bravo Traders Credit purchase 635,000 11-Aug Goods destroyed in fire to be

recovered from Rahat Insurance Co. 79,000

Required: (i) Enter the above transactions in the related books of prime entry. (08) (ii) Prepare relevant general ledger accounts and subsidiary ledger accounts.

(Balancing of ledger accounts is not required) (07)


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ANSWER 01 Chart of accounts (COA) is a list of accounts created by a business to be used to organize its financial transactions into identified categories of assets, liabilities, equity, income and expenses. The main purpose of creating the chart of accounts are as follows: (i) COA forms the framework for summarizing business operations and to segregate

assets, liabilities, income and expenses. (ii) Each account is identified by a unique code and heading. This allows a business to

generate instructions and policies to be followed by the staff responsible for recording information.

(iii) The list is typically arranged in the order of the customary appearance of accounts in the financial statements. The structure and headings in the list bring consistency in the posting of transactions.

ANSWER 02

Effect upon Assets Liabilities Capital Drawings Income Expenses 1. We pay a creditor Rs. 70 in

cash. ↓ ↓

2. Bought fixtures Rs. 200 paying by cheque. ↑↓

3. Bought goods on credit Rs. 275. ↑ ↑

4. The proprietor introduces another Rs. 500 cash into the firm.

↑ ↑

5. Ali lends the firm Rs. 200 in cash. ↑ ↑

6. A debtor pays us Rs. 50 by cheque. ↑↓

7. We return goods costing Rs. 60 to a supplier whose bill we had not paid.

↓ ↓

8. Bought additional shop fixtures paying Rs. 5,000 by cheque.

↑↓

9. Bought a van on credit Rs. 8,700. ↑ ↑

10. Repaid by cash a loan owed to Ali Rs. 10,000. ↓ ↓

11. Bought goods for Rs. 1,400 paying by cheque. ↓ ↑

12. The owner puts further Rs. 4,000 cash into the business. ↑ ↑

13. Sold goods on cash Rs. 100 ↑ ↑ 14. Sold goods on credit Rs. 100 ↑ ↑ 15. A debtor returns to us Rs.

150 goods. We agree to make an allowance for them.

↓ ↓

16. Bought goods on credit Rs. 760. ↑ ↑



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17. The owner takes out Rs. 200 cash for his personal use. ↓ ↓

18. We pay a creditor Rs. 1,150 by cheque. ↓ ↓

ANSWER 03 Account to be Debited Credited 1. Bought lorry for cash. Lorry Cash 2. Paid creditor, T Lake, by cheque. T Lake (PA) Bank 3. Repaid P Logan’s loan by cash. Loan P Log. Cash 4. Sold lorry for cash. Cash Lorry 5. Bought office machinery on credit from Ultra Ltd. Machinery Ultra Ltd 6. A debtor, A Hill, pays us by cash. Cash A Hill (RA) 7. A debtor, J Cross, pays us by cheque. Bank J Cross 8. Proprietor puts a further amount into the

business by cheque. Bank Capital

9. A loan of Rs. 200 in cash is received from L Lowe. Cash Loan L Lo.

10. Paid a creditor, D Lord, by cash. D Lord Cash 11. Bought office machinery on credit from D Ltd. Machinery D Ltd 12. The proprietor paid a creditor, C Jones, from his

private funds. C Jones (PA) Capital

13. A debtor, N Fox, paid us in cash. Cash N Fox (RA) 14. Repaid part of loan from P Exeter by cheque. Loan P Ex. Bank 15. Returned some of office machinery to D Ltd. D Ltd Machinery 16. A debtor, N Lyn, pays us by cheque. Bank N Lyn (RA) 17. Bought van by cash. Van Cash 18. Bought goods on credit from Arslan Purchases Arslan (PA) 19. Returned good to supplier Amjad Amjad (PA) Pur. Returns 20. Sold goods to Habib on credit Habib (RA) Sales 21. Customer Rizwan returned goods to us Sales Returns Rizwan (RA) 22. Owner took cash for his personal use Drawings Cash / Bank ANSWER 04

GENERAL JOURNAL Date Particulars LF Debit Rs. Credit Rs. Mar 1 Cash 750

Bank 9,000 Capital 9,750

Mar 2 Bank 2,000 Loan from B Blane 2,000

Mar 3 Computer 600 Cash 600

Mar 5 Display equipment 420 Clear Count Limited 420

Mar 8 Cash 200 Bank 200

Mar 15 Loan from B Blane 500 Bank 500

Mar 17 Clear Count Limited 420 Bank 420


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Mar 24 Loan from B Blane 250 Cash 250

Mar 31 Printer 200 F Jones 200

Mar 31 Purchases 1,000 ABC (Trade payables) 1,000

Mar 31 XYZ (Trade receivables) 1,200 Sales 1,200

Mar 31 Drawings 100 Bank 100

ANSWER 05

Document Purpose Sales order It is issued by customers to place their order. Goods dispatched note

To inform the customers that the goods have been dispatched and are on their way.

Delivery note A note that accompanies the goods. A customer will check this to make sure that it agrees with his order and that it is consistent with what has actually been delivered.

Sales invoice A request to the customer demanding payment for goods delivered. Invoices normally show a date, details of transaction and payment terms.

Credit note Issued when a customer returns goods and the business agrees to this. The business issues a credit note to acknowledge that the amount specified is no longer owed to them by the customer.

ANSWER 06

Sara Shah Cash Book

Date Details Cash (Rs.) Date Details Cash (Rs.) June 1 Balance b/d 12,000 June 5 Rent 4,000

2 Akhtar 3,800 14 Bilal 1,760 9 Sales 3,000 18 Furniture 3,000 23 Salaries 3,600 30 Balance c/d 6,440 18,800 18,800

Aug 1 Balance b/d 6,440

ANSWER 07 Naeem Traders

Cash Book Date Details Cash

Rs. Bank Rs. Date Details Cash

Rs. Bank Rs.

July 1 Capital 40,000 July 2 Rent 1,700 9 Bank 1,000 9 Cash 1,000

18 Sales 8,120 14 Advertising 700 23 Shahzaib Traders 12,000 26 Motor vehicles 30,000 28 Drawings 2,000 31 c/d 300 1,420 1,000 48,120 1,000 48,120

Aug 1 b/d 300 1,420



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ANSWER 08 Part (a) Date Receipts Disc. Cash Bank Date Payments Disc. Cash Bank Mar

1 Bal. b/d 620 7,142 Mar

4 Rent 430

2 G Slick 13 247 8 R White 18 702 2 R fish 16 304 8 G Green 24 936 2 T Old 21 399 8 L Flip 40 1,560 6 F Black:

loan 5,000 10 Motor

expenses 81

12 J Pie 2 88 15 Wages 580 18 A Pony 27 513 21 Cash 400 18 B Line &

Son 35 665 24 Drawings 200

18 T Owen 26 494 25 W Peat 5 155 21 Bank 400 29 Fixtures 720 31 Commission 120 31 Bal. c/d 4 10,224

140 1,020 14,972 87 1,020 14,972 Part (b) Imprest system A very common petty cash system is called the imprest system. Under this system a set amount is established (say Rs.10,000). This set amount is called the imprest. At any moment in time, the petty cash balance plus the amounts on invoices and notes should sum to the imprest. Periodically the invoices are removed and replaced by cash to re-establish the imprest in cash. ANSWER 09

Date Details Total Rec. Date Details V# Total

paid Cleaning St’nary Travel Postage Food

2016 Jun 1 Bal b/d 2,000 2016

Jun 6 Window cleaner 1 200 200

8 Pens & pencils 2 100 100

11 Bus fare 3 60 60 16 Printer

cartridge 4 400 400 18 Envelopes 5 270 270 20 Coffee &

milk 6 70 70

22 Printing paper 7 80 80

23 Taxi fare 8 200 200 24 Office

cleaner 9 170 170

26 Biscuits & tea 10 100 100

28 Paper pins 11 40 40 29 Petrol 12 70 70 1,760 370 620 330 270 170 30 Bal. c/d 240 2,000

July 1 Bal b/d 240 Cash 1,760


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ANSWER 10

20X7 Nov Transaction Book

1 Started in business with Rs. 15,000 in the bank. CB 3 Bought goods on credit from: Jamal Rs. 290; Faisal Rs. 1,200; Talal

Rs. 610; Rashid (List price Rs. 550, trade discount Rs. 20) PDB

5 Cash sales Rs. 610. CB 6 Paid rent by cheque Rs. 175. CB 7 Paid business rates by cheque Rs. 130. CB

11 Sold goods on credit to: Taseer Rs. 85; Jawad Rs. 48; Touseef Rs. 1,640. SDB

17 Paid wages by cash Rs. 290. CB 18 We returned goods to: Jamal Rs. 18; Rashid Rs. 27. PRDB 19 Bought goods on credit from:

Rashid Rs. 110; Talal Rs. 320; Fahad Rs. 165. PDB

20 Goods were returned to us by: Jawad Rs. 6; Taseer Rs. 14. SRDB 21 Bought van on credit from Turnkey Motors Rs. 4,950. GJ 23 We paid the following by cheque:


CB

25 Bought another van, paying by cheque immediately Rs. 6,200. CB 26 Received a loan of Rs. 750 cash from BBL. CB 28 Received cheques from: Taseer Rs. 65 (after cash discount of Rs. 6);

Jawad Rs. 40 (after cash discount of Rs. 2). CB

30 Proprietor brings a further Rs. 900 into the business, by a payment into the business bank account. CB

SALES DAY BOOK

Date Customer Inv. # Rs. 11 Nov Taseer 85 11 Nov Jawad 48 11 Nov Touseef 1,640 30 Nov TOTAL 1,773

SALES RETURNS DAY BOOK

Date Customer CN # Rs. 20 Nov Jawad 6 20 Nov Taseer 14 30 Nov TOTAL 20

PURCHASES DAY BOOK

Date Supplier Inv. # Rs. 03 Nov Jamal 290 03 Nov Faisal 1,200 03 Nov Talal 610 03 Nov Rashid 530 19 Nov Rashid 110 19 Nov Talal 320 19 Nov Fahad 165 30 Nov TOTAL 3,225



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PURCHASES RETURNS DAY BOOK Date Supplier CN # Rs.

18 Nov Jamal 18 18 Nov Rashid 27 30 Nov TOTAL 45

CASH BOOK

Date Receipts Disc. Cash Bank Date Payments Disc. Cash Bank 1 Nov Capital 15,000 6 Nov Rent 175

5 Sales 610 7 Business rates 130 26 BBL Loan 750 17 Wages 290 28 Taseer 6 65 23 Jamal 7 265 28 Jawad 2 40 23 Faisal 1,200 30 Capital 900 23 Talal 20 480 25 Van 6,200 Balance c/d 1,070 7,555

8 1,360 16,005 27 1,360 16,005

GENERAL JOURNAL Date Particulars LF Debit Rs. Credit Rs.

21 Nov Van 4,950 Turnkey Motors 4,950 (Van bought on credit)

ANSWER 11

GENERAL LEDGER

Receivable – Taseer A/c 11 Nov Sales 85 20 Nov Sales return 14

28 Nov Bank 65 28 Nov Discount 6 85 85

Receivable – Jawad A/c

11 Nov Sales 48 20 Nov Sales return 6 28 Nov Bank 40 28 Nov Discount 2 48 48

Receivable – Touseef A/c

11 Nov Sales 1,640 30 Nov Balance c/d 1,640 1,640 1,640

1 Dec Balance b/d 1,640


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Sales A/c 30 Nov RA (SDB TOTAL) 1,773

30 Nov Balance c/d 2,383 5 Nov Cash 610 2,383 2,383 1 Dec Balance b/d 2,383

Sales Returns A/c

30 Nov RA (SRDB TOTAL) 20 30 Nov Balance c/d 20 20 20

1 Dec Balance b/d 20

Jamal A/c 18 Nov Purchases returns 18 03 Nov Purchases 290 23 Nov Bank 265 23 Nov Discount received 7

290 290

Faisal A/c 23 Nov Bank 1,200 03 Nov Purchases 1,200

1,200 1,200

Talal A/c

23 Nov Bank 20 03 Nov Purchases 610 23 Nov Discount received 480 19 Nov Purchases 320 30 Nov Balance c/d 430

930 930 1 Dec Balance b/d 430

Rashid A/c

18 Nov Purchases returns 27 03 Nov Purchases 530 30 Nov Balance c/d 613 19 Nov Purchases 110


Fahad A/c

30 Nov Balance c/d 165 19 Nov Purchases 165 165 165 1 Dec Balance b/d 165

Purchases A/c

30 Nov PA (PDB TOTAL) 3,225 30 Nov Balance c/d 3,225 3,225 3,225




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Purchases Return A/c 30 Nov Balance c/d 45 30 Nov PA (PRDB TOTAL) 45


Capital Account

1 Nov Bank 15,000 30 Nov Balance c/d 15,900 30 Nov Bank 900

15,900 15,900 1 Dec Balance b/d 15,900

BBL Loan

30 Nov Balance c/d 750 26 Nov Cash 750 750 750 1 Dec Balance b/d 750

Discount allowed A/c

30 Nov CB TOTAL 8 30 Nov Balance c/d 8 8 8

1 Dec Balance b/d 8

Rent A/c 6 Nov Bank 175 30 Nov Balance c/d 175

175 175


Business Rates 7 Nov Bank 130

30 Nov Balance c/d 130 130 130


Wages

17 Nov Cash 290 30 Nov Balance c/d 290 290 290


Discount Received 30 Nov Balance c/d 27 30 Nov CB TOTAL 27



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Van 25 Nov Bank 6,200 21 Nov Turnkey Motors 4,950 30 Nov Balance c/d 11,150

11,150 11,150 1 Dec Balance b/d 11,150

Turnkey Motors

21 Nov Van 4,950 30 Nov Balance c/d 4,950

4,950 4,950 1 Dec Balance b/d 4,950

ANSWER 12

Adeel Traders Trial Balance as at 30 November 20X7

Sr. # Item Ref. Debit Rs. Credit Rs. 1 Cash in hand 1,070 2 Cash at Bank 7,555

3A Taseer 0 3B Jawad 0 3C Touseef 1,640 4 Sales 2,383 5 Sales returns 20

6A Jamal 0 6B Faisal 0 6C Talal 430 6D Rashid 613 6E Fahad 165 7 Purchases 3,225 8 Purchases returns 45 9 Capital 15,900

10 BBL Loan 750 11 Discount allowed 8 12 Rent 175 13 Business Rates 130 14 Wages 290 15 Discount received 27 16 Van 11,150 17 Turnkey Motors 4,950 TOTAL 25,263 25,263



Page | 40

ANSWER 13 Adeel Traders

Statement of Comprehensive Income For the period ended 30 November 20X7

Rs. Rs. Sales 2,383 Less: Sales return (20) 2,363 Less: Cost of Sales Opening inventory 0 Purchases 3,225 Less: Purchases return (45) 3,180 Closing inventory J1 (1,500) (1,680) Gross Profit 683

Other income Discount received 27 710 Operating expenses Rent 175 Discount allowed 8 Business rates 130 Wages 290 (603) Net profit 107

Adeel Traders Statement of Financial Position

As at 30 November 20X7 Rs. Non-current assets Van 11,150 11,150 Current assets Inventories J1 1,500 Trade Receivables 1,640 Cash at bank 7,555 Cash in hand 1,070 11,765 22,915

Capital Balance 15,900 Add: Net profit 107 Less: drawings 0 16,007 Non-current liabilities Loan from BBL 750 750 Current liabilities Trade payables 1,208 Turnkey motors (payable for van) 4,950 6,158 22,915


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# Particulars LF Debit Rs. Credit Rs. J1 Inventory 1,500 Cost of sales 1,500 (closing inventory adjustment)

ANSWER 14

# Particulars LF Debit Rs. Credit Rs. CE1 Sales 2,383

Purchase return 45 Discount received 27 Closing Inventory (COS) 1,500 Purchases 3,225 Sales Return 20 Rent 175 Discount allowed 8 Business rates 130 Wages 290 Profit or loss 107 (transfer of income and expenses)

CE2 Profit or loss 107 Capital 107 (Transfer of profit)

CE3 Capital 0 Drawings 0 (Transfer of drawings)

Trial Balance (Opening) As at 01 December 20X7

Sr. # Item Ref. Debit Rs. Credit Rs. 1 Cash in hand 1,070 2 Cash at Bank 7,555 3 Receivables account 1,640 4 Payables account 1,208 5 Capital (15,900 + 107) 16,007 6 BBL Loan 750 7 Van 11,150 8 Turnkey Motors 4,950 9 Inventory (01.12.20X7) 1,500 TOTAL 22,915 22,915



Page | 42

ANSWER 15 Part (a)

Sales day Book Date Customer Inv. # Rs. 6 Jan Ramiz 170 6 Jan Latif 240 6 Jan Mahad 326 6 Jan Tariq 204

24 Jan Latif 130 24 Jan Tariq 410 24 Jan Rida 158 31 Jan TOTAL 1,638

Sales Returns day Book Date Customer CN # Rs.

18 Jan Ramiz 5 18 Jan Mahad 20 31 Jan TOTAL 25

Purchases day Book Date Supplier Inv. # Rs. 4 Jan Taimoor 800 4 Jan Fazal 930 4 Jan Momin 160 4 Jan Gul 510

31 Jan TOTAL 2,400

Purchases Returns day Book

Date Supplier CN # Rs. 14 Jan Fazal 30 14 Jan Momin 42 31 Jan TOTAL 72

CASH BOOK Date Receipts Disc. Cash Bank Date Payments Disc. Cash Bank 1 Jan Capital 10,500 2 Jan Bank (C) 9,000

2 Cash (C) 9,000 3 Purchases 550 16 Loan – Bilal 2,000 8 Rent 220 21 Sales 145 11 Salaries 790 29 Rida 3 155 15 Van 6,500 29 Latif 5 365 26 Fazal 10 890 30 Loan - Bilal 500 26 Momin 3 115 30 Tariq 614 Balance c/d 1,419 3,795

8 11,759 11,520 13 11,759 11,520


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General Journal - Format Date Particulars LF Debit Rs. Credit Rs. 5 Jan Stationery expense 89

Buttons Limited 89 (Stationery bought on credit)

10 Jan Fixtures 610 Chief Ltd 610 (Bought fixtures on credit)

Part (b)

Ramiz A/c 6 Jan Sales 170 18 Jan Sales return 5

31 Jan Balance c/d 165 170 170

1 Feb Balance b/d 165

Latif A/c 6 Jan Sales 240 29 Jan Bank 365

24 Jan Sales 130 29 Jan Discount 5 370 370

Mahad A/c

6 Jan Sales 326 18 Jan Sales Returns 20 31 Jan Balance c/d 306 326 326


Tariq A/c 6 Jan Sales 204 30 Jan Cash 614

24 Jan Sales 410 614 614

Rida A/c 24 Jan Sales 158 29 Jan Bank 155

29 Jan Discount 3 158 158

Sales A/c

31 Jan SDB TOTAL 1,638 31 Jan Balance c/d 1,783 31 Jan Cash 145

1,783 1,783 1 Feb Balance b/d 1,783

Sales Returns A/c

31 Jan SRDB TOTAL 25 31 Jan Balance c/d 25 25 25




Page | 44

Taimoor A/c 4 Jan Purchases 800

31 Jan Balance c/d 800 800 800 1 Feb Balance b/d 800

Fazal A/c

14 Jan Purchases return 30 4 Jan Purchases 930 26 Jan Bank 890 26 Jan Discount 10

930 930

Mahad A/c

14 Jan Purchases return 42 4 Jan Purchases 160 26 Jan Bank 115 26 Jan Discount 3

160 160

Gul A/c

4 Jan Purchases 510 31 Jan Balance c/d 510

510 510 1 Feb Balance b/d 510

Purchases A/c

31 Jan PDB TOTAL 2,400 31 Jan Cash 550 31 Jan Balance c/d 2,950

2,950 2,950 1 Feb Balance b/d 2,950

Purchases Return A/c 31 Jan PRDB TOTAL 72


Capital Account

1 Jan Cash 10,500 31 Jan Balance c/d 10,500

10,500 10,500 1 Feb Balance b/d 10,500

Loan Bilal

16 Jan Bank 2,000 31 Jan Balance c/d 2,500 30 Jan Cash 500

2,500 2,500 1 Feb Balance b/d 2,500


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Discount allowed A/c 31 Jan CB TOTAL 8


1 Feb Balance b/d 8

Rent A/c 8 Jan Bank 220



Salaries 11 Jan Cash 790



Discount Received 31 Jan CB TOTAL 13


Van

15 Jan Bank 6,500 31 Jan Balance c/d 6,500 6,500 6,500

1 Feb Balance b/d 6,500

Stationery 5 Jan Buttons Ltd 89



Button Ltd 5 Jan Stationery 89


Fixtures

10 Jan Chief Ltd 610 31 Jan Balance c/d 610 610 610




Page | 46

Chief Ltd 10 Jan Fixtures 610


Part (c) Trial Balance

As at 31 January 20X8 Sr. # Item Ref. Debit Rs. Credit Rs.

1 Cash in hand 1,419 2 Cash at Bank 3,795

3A Ramiz 165 3B Latif 0 3C Mahad 306 3D Tariq 0 3E Rida 0 4 Sales 1,783 5 Sales returns 25

6A Taimoor 800 6B Fazal 0 6C Momin 0 6D Gul 510 7 Purchases 2,950 8 Purchases returns 72 9 Capital 10,500

10 Loan - Bilal 2,500 11 Discount allowed 8 12 Rent 220 13 Salaries 790 14 Discount received 13 15 Van 6,500 16 Stationery 89 17 Buttons Ltd 89 18 Fixtures 610 19 Chief Ltd 610 TOTAL 16,877 16,877

Part (d)

# Particulars LF Debit Rs. Credit Rs. J1 Inventory 1,270 Cost of sales 1,270 (closing inventory adjustment)


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Statement of Comprehensive Income For the period ended 31 January 20X8

Rs. Rs. Sales 1,783 Less: Sales return (25) 1,758 Less: Cost of Sales Opening inventory 0 Purchases 2,950 Less: Purchases return (72) 2,878 Closing inventory J1 (1,270) (1,608) Gross Profit 150

Other income Discount received 13 163 Operating expenses Rent 220 Discount allowed 8 Salaries 790 Stationery 89 (1,107) Net loss (944)

Statement of Financial Position As at 31 January 20X8

Rs. Non-current assets Van 6500 Fixture 610 7,110 Current assets Inventories J1 1,270 Trade Receivables 471 Cash at bank 3,795 Cash in hand 1,419 6,955 14,065

Capital Balance 10,500 Add: Net loss (944) Less: drawings 0 9,556 Non-current liabilities Loan from Bilal 2,500 2,500 Current liabilities Trade payables 1,310 Buttons Limited 89 Chief Limited 610 2,009 14,065



Page | 48

ANSWER 16 Alpha Traders

Purchases day Book Date Supplier Inv. # Rs.

05 Aug 2017 Moon & Co 475,000 05 Aug 2017 Shan Traders 513,000 TOTAL 988,000

Purchases returns day Book Date Supplier Inv. # Rs.

10 Aug 2017 Moon & Co 68,000 TOTAL 68,000

Sales day Book Date Customer Inv. # Rs.

10 Aug 2017 A-Z Super Store 236,000 10 Aug 2017 Apollo Center 198,000 TOTAL 434,000

CASH BOOK Date Receipts Disc. Cash Bank Date Payments Disc. Cash Bank 01-08 b/d 178,000 01-08 b/d 769,000 12-08 Sales 40,000 02-08 Furniture 38,000 16-08 AZ Super 10,250 194,750 03-08 Purchases 85,000 16-08 Bright &

Co 12,800 243,200 25-08 Al-Shams 25,000 225,000

31-08 c/d 556,050 31-08 c/d 95,000 23,050 218,000 994,000 25,000 218,000 994,000

General Journal Date Particulars LF Debit Rs. Credit Rs.

02 Aug Office furniture 129,000 RABBIT (Other liabilities) 129,000 (Purchased office furniture on

credit)

20 Aug Payable Account 200,000 Receivable Account 200,000 (Contra – Columbus Traders)

ANSWER 17 Omega Limited – Books of prime entry

Purchases day book Date Supplier Rupees 2-Jul Danish Stores 475,000

13-Jul Chenab Stores 700,000 1,175,000

Sales day book

Date Customer Rupees 4-Jul XYZ & Co. 500,000 5-Jul Zaid Brothers 640,000

1,140,000


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Purchases returns day book Date Supplier Rupees

12-Jul Danish Stores 50,000

Sales returns day book Date Customer Rupees

12-Jul Zaid Brothers 135,000 General Journal

Date Description Debit Credit ------ Rupees ------

7-Jul Trade payables – Zee & Co. (425,000–400,000) 25,000 Trade payables – ABC stores (190,000 x 5 / 95) 10,000 Discount received 35,000

20-Jul Accumulated depreciation office equipment (laptops) 134,000 Office equipment (laptops) 134,000

21-Jul Office equipment (laptops) 145,000 Other payables – Shifa Electronics 145,000

30-Jul Discount allowed 65,000 Trade receivables – Zamil Stores 285,000 x 5 / 95) 15,000 Trade receivables – Zaid Brothers (550,000–500,000) 50,000

Cash book

Receipts Payments Date Description Cash Bank Date Description Cash Bank

1-Jul Balance 85,000 650,000 4-Jul Transportation exp. 15,000 9-Jul Sales 58,000 7-Jul PA - Zee & Co. 400,000 15-Jul Bank 100,000 7-Jul PA - ABC Stores 190,000 30-Jul RA - Zamil Store 285,000 10-Jul Utility bills 40,000 30-Jul RA - Zaid Brothers 500,000 10-Jul Drawings 5,000 15-Jul Cash 100,000 21-Jul Office equipment 100,000 23-Jul Sales return

(58,000×40%) 23,200

26-Jul Purchases (68,000×95%)

64,600

31-Jul Balance 37,200 703,000 185,000 1,493,000 185,000 1,493,000

ANSWER 18

PURCHASES DAY BOOK Date Supplier Inv. # Rs.

4-Jul-18 Alpha Enterprises 250,000 4-Jul-18 Bravo Traders 180,000

TOTAL 430,000

PURCHASES RETURNS DAY BOOK Date Supplier CN # Rs.

17-Jul-18 Alpha Enterprises 35,000 TOTAL 35,000



Page | 50

CASH BOOK (Two column) Date Receipts Cash Bank Date Payments Cash Bank 01 Jul Balance b/d 76,000 286,000 06 Jul Office furniture 50,000 08 Jul Sales 300,000 14 Jul Return in 20% 49,000 08 Jul Sales 98% 245,000 17 Jul Alpha Ent. 97% 208,550 16 Jul Disposal 12,000 26 Jul Purchases 95% 142,500 23 Jul Sales 236,500 28 Jul Loan 115,000 30 Jul Cash 200,000 28 Jul Interest 35,000

30 Jul Bank 200,000 31 Jul Balance c/d 170,500 384,950 569,500 786,000 569,500 786,000

GENERAL JOURNAL

Date Particulars LF Debit Rs. Credit Rs. 6 Jul 18 Office furniture 40,000

Advances 40,000 16 Jul 18 Accumulated depreciation* 75,000

Office furniture* 75,000 17 Jul 18 Payables 6,450

Discount received 3% 6,450 *Advanced level ANSWER 19 Part (a) Date Particulars Dr. Cr. Amount in Rupees 1- Jul-2014 Bank 20,000,000 Abdullah’s capital 20,000,000 3- Jul-2014 Land 7,200,000 Building 2,800,000 Bank 3,000,000 Notes payable 7,000,000 5- Jul-2014 Vans 3,000,000 Bank 600,000 Payable – City Showroom 2,400,000 7- Jul-2014 Payable – City Showroom 300,000 Vans 300,000 8- Jul-2014 Office equipment 2,400 Bank 2,400 15- Jul-2014 Deposits 15,000 Bank 15,000 30- Jul-2014 Bank 90,000 Advances received 90,000 31- Jul-2014 Payable – City Showroom 1,000,000 Bank 1,000,000


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Part (b) Bank

10-Jul Abdullah’s capital 20,000,000 3-Jul Land & Building 3,000,000 30-Jul Advance received 90,000 5-Jul Van 600,000 8-Jul Office equipment 2,400 15-Jul Deposit 15,000 31-Jul Payable City Showroom 1,000,000 31-Jul Balance c/d 15,472,600 20,090,000 20,090,000

Abdullah’s capital 31-Jul Balance c/d 20,000,000 1-Jul Bank 20,000,000 20,000,000 20,000,000

Land 3-Jul Bank 7,200,000 31-Jul Balance c/d 7,200,000 7,200,000 7,200,000

Building 3-Jul Bank 2,800,000 31-Jul Balance c/d 2,800,000 2,800,000 2,800,000

Notes payable 31-Jul Balance c/d 7,000,000 31-Jul Land & Building 7,000,000 7,000,000 7,000,000

Vans 5-Jul Bank 600,000 7-Jul City Showroom 300,000 5-Jul City Showroom 2,400,000 31-Jul Balance c/d 2,700,000 3,000,000 3,000,000

Payable – City Showroom 7-Jul Vans 300,000 5-Jul Vans 2,400,000 31-Jul Bank 1,000,000 31-Jul Balance c/d 1,100,000 2,400,000 2,400,000

Office equipment 8-Jul Bank 2,400 31-Jul Balance c/d 2,400 2,400 2,400

Deposit 15-Jul Bank 15,000 31-Jul Balance c/d 15,000 15,000 15,000

Advances received 31-Jul Balance c/d 90,000 30-Jul Bank 90,000 90,000 90,000



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Part (c) Abdullah

Trial Balance as at 30 June 2014 Description Dr. Cr. Amount in Rupees Bank 15,472,600 Abdullah’s capital 20,000,000 Land 7,200,000 Building 2,800,000 Notes payable 7,000,000 Vans 2,700,000 Payable city - Showrooms 1,100,000 Office equipment 2,400 Deposit 15,000 Advance received 90,000 28,190,000 28,190,000

ANSWER 20 Part (a) – Purposes of a trial balance: Following are the two main purposes of a trial balance: (a) It is a starting point for producing a statement of comprehensive income and a

statement of financial position at the end of an accounting period. (b) It is a useful means of checking arithmetical errors in the accounting system. Errors

must have occurred if the totals of debit and credit balances are not equal. Part (b) Following are the documents which may be used in a system designed to account for sales:

Document Purpose (i) Sales order From the customer placing an order. (ii) Goods

despatched note A notice to the customer to inform them that the goods have been despatched and are on their way.

(iii) Delivery note

A note that accompanies the goods. (A customer will check this to make sure that it agrees with his order and that it is consistent with what has actually been delivered.

(iv) Sales invoice A request for payment from the customer for goods delivered. (v) Statement A document to show the customer the amount still owed at a

point in time. (vi) Credit note Issued when a customer returns goods and the business agrees

to this.


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ANSWER 21 Ravi Traders

Trial balance for the month of January 2018 Description Reference Debit Credit

Rupees Capital +1,000 + 8,000 CB + 300 GJ 9,300 Purchase return +50 CB + 900 PRDB 950 Trade debtors –QT -150 – 6,100 + 6,100 CB + 6,250 SDB +150 GJ 6,250 Sales +1,250 CB + 16,600 SDB 17,850 Trade debtors – HSS -90 – 300 – 1,410 CB + 2,350 SDB 550 Discount allowed +240 CB – 150 GJ 90 Cash in hand + 1,850 – 1,230 CB 620 Cash at Bank + 16,760 – 12,770 CB 3,990 Office rent +200 + 300 CB 500 Fixed assets +1500 + 250 CB + 300 – 50 GJ 2,000 Purchases + 650 CB + 18,000 PDB – 100 GJ 18,550 Trade creditors - ZT -100 – 500 – 3,400 CB + 6,000 PDB – 900 PRDB 1,100 Sales return +60 CB 60 Drawings +100 + 180 CB + 100 + 50 GJ 430 Utility bills +120 + 140 CB 260 Discount received +100 CB 100 Trade creditors - ABC +4500 PDB – 4,500 GJ 0 Trade creditors – Unity +7,500 7,500 Trade debtors - ABC +8,000 SDB – 4,500 GJ 3,500 36,800 36,800 ANSWER 22

RECEIVABLES’ LEDGER

Receivable – Taseer A/c 11 Nov Sales 85 20 Nov Sales return 14

28 Nov Bank 65 28 Nov Discount 6 85 85

Receivable – Jawad A/c

11 Nov Sales 48 20 Nov Sales return 6 28 Nov Bank 40 28 Nov Discount 2 48 48

Receivable – Touseef A/c

11 Nov Sales 1,640 30 Nov Balance c/d 1,640 1,640 1,640




Page | 54

List of balances - Receivables As at 30 November 20X7

Sr. # Item Ref. Debit Rs. Credit Rs. 1 Taseer 0 2 Jawad 0 3 Touseef 1,640 TOTAL 1,640

PAYABLES’ LEDGER

Jamal A/c

18 Nov Purchases returns 18 03 Nov Purchases 290 23 Nov Bank 265 23 Nov Discount received 7

290 290

Faisal A/c 23 Nov Bank 1,200 03 Nov Purchases 1,200

1,200 1,200

Talal A/c

23 Nov Bank 20 03 Nov Purchases 610 23 Nov Discount received 480 19 Nov Purchases 320 30 Nov Balance c/d 430


Rashid A/c

18 Nov Purchases returns 27 03 Nov Purchases 530 30 Nov Balance c/d 613 19 Nov Purchases 110


Fahad A/c

30 Nov Balance c/d 165 19 Nov Purchases 165 165 165 1 Dec Balance b/d 165

LIST OF BALANCES - PAYABLES As at 30 November 20X7

Sr. # Item Ref. Debit Rs. Credit Rs. 1 Jamal 0 2 Faisal 0 3 Talal 430 4 Rashid 613 5 Fahad 165 TOTAL 1,208


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GENERAL LEDGER

Receivable Control A/c 30 Nov Sales (Total) 1,773 30 Nov Sales Return (Total) 20

30 Nov Bank (Total) 105 30 Nov Discount allowed (T) 8 30 Nov Balance c/d 1,640 1,773 1,773


Payables Control A/c 30 Nov Purchase Return (T) 45 30 Nov Purchases (Total) 3,225 30 Nov Bank (Total) 1,945 30 Nov Discount received (T) 27 30 Nov Balance c/d 1,208

3,225 3,225 1 Dec Balance b/d 1,208

Sales A/c

30 Nov RA (SDB TOTAL) 1,773 30 Nov Balance c/d 2,383 5 Nov Cash 610

2,383 2,383 1 Dec Balance b/d 2,383

Sales Returns A/c

30 Nov RA (SRDB TOTAL) 20 30 Nov Balance c/d 20 20 20


Purchases A/c 30 Nov PA (PDB TOTAL) 3,225 30 Nov Balance c/d 3,225

3,225 3,225


Purchases Return A/c 30 Nov Balance c/d 45 30 Nov PA (PRDB TOTAL) 45


Capital Account

1 Nov Bank 15,000 30 Nov Balance c/d 15,900 30 Nov Bank 900

15,900 15,900 1 Dec Balance b/d 15,900



Page | 56

BBL Loan 30 Nov Balance c/d 750 26 Nov Cash 750


Discount allowed A/c

30 Nov CB TOTAL 8 30 Nov Balance c/d 8 8 8

1 Dec Balance b/d 8

Rent A/c 6 Nov Bank 175 30 Nov Balance c/d 175

175 175


Business Rates 7 Nov Bank 130

30 Nov Balance c/d 130 130 130


Wages

17 Nov Cash 290 30 Nov Balance c/d 290 290 290


Discount Received 30 Nov Balance c/d 27 30 Nov CB TOTAL 27


Van

25 Nov Bank 6,200 21 Nov Turnkey Motors 4,950 30 Nov Balance c/d 11,150

11,150 11,150 1 Dec Balance b/d 11,150

Turnkey Motors

21 Nov Van 4,950 30 Nov Balance c/d 4,950

4,950 4,950 1 Dec Balance b/d 4,950


© kashifadeel.com

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Adeel Traders Trial Balance

As at 30 November 20X7 Sr. # Item Ref. Debit Rs. Credit Rs.

1 Cash in hand 1,070 2 Cash at Bank 7,555 3 Receivables Control Account 1,640 4 Sales 2,383 5 Sales returns 20 6 Payables Control Account 1,208 7 Purchases 3,225 8 Purchases returns 45 9 Capital 15,900

10 BBL Loan 750 11 Discount allowed 8 12 Rent 175 13 Business Rates 130 14 Wages 290 15 Discount received 27 16 Van 11,150 17 Turnkey Motors 4,950 TOTAL 25,263 25,263

ANSWER 23 Part (a)

Loctus Pharma Purchase day book

Date Rs. in million 1 – June - 2016 Shan Traders 8.50 Rahat Store 12.50 Quality Medicos 15.00 36.00 Part (b) Ledger accounts

Shan Traders Date Particulars Rupees Date Particulars Rupees 24-Jan Bank 5.80 1-Jan Purchases 8.50 31-Jan Bal c/f 2.70 8.50 8.50

Rahat Store

Date Particulars Rupees Date Particulars Rupees 20-Jan Purchase returns 2.50 1-Jan Purchases 12.50 31-Jan Accounts Receivables 1.20 31-Jan Bank 8.80 12.50 12.50

Quality Medicos

Date Particulars Rupees Date Particulars Rupees 28-Jan Bank (15x98%) 14.70 1-Jan Purchases 15.00 28-Jan Discount received (15x2%) 0.30 15.00 15.00



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Trade payables control account Date Particulars Rupees Date Particulars Rupees 20-Jan Purchase return – Rahat 2.50 1-Jan Purchases 36.00 24-Jan Bank – Shan traders 5.80 28-Jan Bank – Quality Medicos 14.70 28-Jan Discount received 0.30 31-Jan Trade account rec.- Rahat 1.20 31-Jan Bank – Rahat 12.5-2.5-1.2 8.80 31-Jan Bal c/f 2.70 36.00 36.00

ANSWER 24 Part (a)

Purchases day Book Date Supplier Inv. # Rs.

03 Feb QT Stores 295,000 03 Feb Bana & Co 190,000 TOTAL 485,000

Sales day Book Date Customer Inv. # Rs.

18 Feb Qavi 275,000 18 Feb Child Care Centre [158,000 x 1.10) 173,800 TOTAL 448,800

CASH BOOK Date Receipt

s Disc. Cash Bank Date Payments Disc. Cash Bank

8 Feb Sales 300,000 15 Feb XYZ 10,000 90,000 25 Feb Chenab 68,000 25 Feb Ameen 32,000

General Journal Date Particulars LF Debit Rs. Credit Rs.

23 Feb Bad debts 65,000 Receivable Control Account 65,000 (write off of balance of Johar and

Sons)

Part (b)

Payables Control A/c Rupees Rupees Discount received (XYZ) 10,000 Purchases 485,000 Bank 90,000


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Receivables Control A/c Rupees Rupees Sales 448,800 Bad debts (Johar & Sons) 65,000 Bank (68,000 + 32,000) 100,000 ANSWER 25 Part (a) Ali Baba Stationers - Day books

Purchase Day Book Date Supplier Rupees 3-Aug-15 The pen store 425,000 The School Shop 200,000 Galaxy Stationers 350,000 The Stationary Store 400,000 The Office Store 800,000 2,175,000

Sales Day book Date Customer Rupees 5-Aug-15 Murjeena Traders 200,000 Qasim and Company 500,000 Chiragh Limited 250,000 Sameer Enterprises 400,000 Hamid and Company 800,000 2,150,000 21-Aug-15 Murjeena Traders 300,000 Qasim and Company 200,000 Chiragh Limited 550,000 Sameer Enterprises 200,000 1,250,000

Purchase Return Book Date Supplier Rupees 6-Aug-15 Galaxy Stationers 10,000 Stationary Store 40,000 50,000

Sales Return Book Date Customer Rupees 15-Aug-15 Murjeena Traders 25,000 Chiragh Limited 30,000 55,000



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Part (b) Receivable control account

Rupees Rupees 5-Aug-15 Sales 2,150,000 7-Aug-15 Cash & bank 1,300,000 21-Aug-15 Sales 1,250,000 15-Aug-15 Sales return 55,000 25-Aug-15 Cash and bank 600,000 25-Aug-15 Sales discount 75,000 31-Aug-15 Balance c/d 1,370,000 3,400,000 3,400,000

Payable control account Rupees Rupees 6-Aug-15 Purchase return 50,000 3-Aug-15 Purchases 2,175,000 10-Aug-15 Cash 840,000 10-Aug-15 Purchase discount 25,000 31-Aug-15 Balance c/d 1,260,000 2,175,000 2,175,000

Cash and Bank Rupees Rupees 3-Aug-15 Capital 5,000,000 7-Aug-15 Shop rent 300,000 7-Aug-15 Receivable control 1,300,000 10-Aug-15 Payable control 840,000 12-Aug-15 Sales 250,000 11-Aug-15 Shop repairs 60,000 25-Aug-15 Receivable control 600,000 18-Aug-15 Purchases 150,000 31-Aug-15 Balance c/d 5,800,000 7,150,000 7,150,000 ANSWER 26 Part (a) Documents used in a system designed to control and account for purchases. Document Purpose for issuance of document

(i) Purchase order Sent by a buyer to place an order (ii) Goods receiving

note Prepared to record goods received and for verification of invoice prior to its payment.

(iii) Purchase invoice A request for payment from the supplier for goods delivered. (iv) Credit note/debit

note Issued by a supplier/customer on return of goods or allowing any discount.

(v) Statement of account

A document from a supplier listing the outstanding invoices at a point in time.

Part (b)(i) Entries in the books of prime entry

Purchase day book Date Suppliers Rs. 5-Aug-2016 Bravo Traders 950,000 Alpha & Sons 438,000 1,388,000 10-Aug-2016 Alpha & Sons 800,000 Bravo Traders 635,000 1,435,000 Total 2,823,000


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Purchase return day book Date Suppliers Rs. 8-Aug-2016 Bravo Traders 60,000

General journal Date Particulars Debit (Rs.) Credit (Rs.) 9-Aug-2016 Purchases 540,000 Advance to supplier 540,000 (To record purchases against advance payment) 11-Aug-2016 Insurance claim 79,000 Purchases/inventory 79,000 (Goods lost in fire and recoverable from the insurance company) 31-Aug-2016 Purchases 2,823,000 Trade payable control account 2,823,000 (To record credit purchases) 31-Aug-2016 Trade payable control account 60,000 Purchases return 60,000 (To record return of goods purchased on credit) Note: the last two JE are optional and usually are not passed through journal. Part (b)(ii) Main ledger accounts:

Purchases Date Particulars Rupees Date Particulars Rupees 9-Aug-16 Adv. to suppliers 540,000 11-Aug-16 Insurance claim 79,000 31-Aug-16 Payable control 2,823,000

Purchase Return Date Particulars Rupees Date Particulars Rupees 31-Aug-16 Payable Control 60,000

Advance to suppliers Date Particulars Rupees Date Particulars Rupees 9-Aug-16 Purchases 540,000

Trade payable control account Date Particulars Rupees Date Particulars Rupees 31-Aug-16 Purchase return 60,000 31-Aug-16 Purchases 2,823,000

Insurance Claim Date Particulars Rupees Date Particulars Rupees 11-Aug-16 Purchases 79,000 Subsidiary purchase ledger accounts

Alpha & Sons Date Particulars Rupees Date Particulars Rupees 5-Aug-16 Purchases 438,000 10-Aug-16 Purchases 800,000

Bravo Traders Date Particulars Rupees Date Particulars Rupees 8-Aug-16 Purchase return 60,000 5-Aug-16 Purchase 950,000 10-Aug-16 Purchase 635,000



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ICAP OBJECTIVE BASED QUESTIONS

01. Samreen has made following transactions during current week: Sales Rs. 15,000 out of which Rs. 4,000 are on cash A customer paid 800 after availing discount of 2% Rent paid Rs. 100 What is the total of receipt column of cash book?

(a) Rs. 15,800

(b) Rs. 4,800

(c) Rs. 4,700

(d) Rs. 15,700

02. A business has made following sales: Credit sales Rs. 1,500 Cash sales Rs. 1,200 Which statement is correct for recording of sales transactions?

(a) Sales day book Rs. 1,500, Cash receipt book Rs. 1,200

(b) Cash receipt book Rs. 2,700

(c) Sales day book Rs. 1,500, Petty cash book Rs. 1,200

(d) Sales day book Rs. 2,700

03. Sufyan has purchased certain goods on credit from Aliyan. List price of the goods was Rs. 10,000. Trade discount of 2% was allowed. Aliyan also offered a discount of 1% if the amount due is paid within 10 days. Sufyan availed the discount. For recording the above transactions by Sufyan; which books of prime entry are involved and at what amount?

(a) Purchase day book Rs. 10,000, Cash book discount column Rs. 298 and Cash book payment column Rs. 9,702

(b) Purchase day book Rs. 9,702, Cash book Rs. 9,702

(c) Purchase day book Rs. 9,800, Cash book discount column Rs. 98 and payment column Rs. 9,702

(d) Sales day book Rs. 9,800, Cash book discount column Rs. 98 and receipt column Rs. 9,702

04. A businessman maintains petty cash book under imprest system. The imprest amount is Rs. 500. During a month, payments totaling Rs. 300 were made. How much amount will be reimbursed at the end of the month to restore the petty cash to the imprest amount?

(a) Rs. 200

(b) Rs. 300

(c) Rs. 500

(d) Rs. 800



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05. Following information is available about Saim:

Rs.

Receivable as on January 1, 2018 70,000

Receivable as on December 31, 2018 25,000

Cash received from customers during the year 250,000

Discount allowed to customers 4,000

What is the amount of total sales on credit during the year?

(a) Rs. 291,000

(b) Rs. 151,000

(c) Rs. 209,000

(d) Rs. 250,000

06. Alia’s Account payable control ledger has a balance of Rs. 95,000 credit as on January 1, 2018. During the year, following transactions were performed:

Rs.

Credit purchases 221,000

Cash purchases 85,000

Cheques issued to credit suppliers

(after receiving discount of Rs. 2,000) 148,000

Credit purchases return 8,000

What is the amount shown in Account payable control ledger as on January 31, 2018?

(a) Rs. 158,000

(b) Rs. 160,000

(c) Rs. 243,000

(d) Rs. 245,000

07. In the books of Faizan; Sarmad has a debit balance of Rs. 3,000 and credit balance of Rs. 1,500. Sarmad has requested to adjust debit balance with credit.

What is the contra entry to be passed to adjust the balance?

(a) Dr Accounts receivable control a/c Rs. 3,000 Cr Accounts payable control a/c Rs. 3,000

(b) Dr Accounts payable control a/c Rs. 3,000 Cr Accounts receivable control a/c Rs. 3,000

(c) Dr Accounts receivable control a/c Rs. 1,500 Cr Accounts payable control a/c Rs. 1,500

(d) Dr Accounts payable control a/c Rs. 1,500Cr Accounts receivable control a/c Rs. 1,500


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08. Usuf made following transactions during a certain month: Credit sales 15,000 out of which Rs. 3,000 were returned by the customers subsequently

Cash sales amounting Rs. 8,000

Cash received from customers Rs. 4,000

What is the total of sales day book for the month?

(a) Rs. 15,000

(b) Rs. 12,000

(c) Rs. 23,000

(d) Rs. 20,000

09. Which of the following document is prepared by the business’s store keeper on receiving goods in store?

(a) Goods dispatched note

(b) Goods received note

(c) Remittance advice

(d) Debit note

10. In which of the following book returns inwards are recorded?

(a) Sales returns book

(b) Purchase returns books

(c) Cash receipts book

(d) Cash payment book

11. Gross amount of purchases must be equal to:

(a) Total of all invoices issued to customers

(b) Total of all credit notes issued to customers

(c) Total of all debit notes sent by customers

(d) Total of all invoices received from supplier

12. Which of the following statement describes the nature of weekly imprest system for petty cash?

(a) Maximum amount of weekly petty cash expense is defined

(b) For maintaining a fixed float; an amount equal to weekly expenses incurred is reimbursed

(c) Proper authorization is required for all expense

(d) Business transfers an equal amount to petty cash balance at regular intervals



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13. Hussain runs a business of purchase and sales of furniture. During a particular period Hussain made following transactions:

Sales to A Rs. 12,000

Sales to B Rs. 10,000 list price and trade discount 2%

Sales returns from A Rs. 3,000

What is the total of sales day book for the period?

(a) Rs. 22,000

(b) Rs. 21,800

(c) Rs. 19,000

(d) Rs. 18,800

14. A business made following transactions during a certain period:

Credit purchases Rs. 12,000; out of which Rs. 2,000 were rejected and subsequently returned to the supplier. Supplier allowed a discount of 1% on settlement of amount.

What is the net amount of cash paid to the supplier?

(a) Rs. 10,000

(b) Rs. 12,000

(c) Rs. 9,900

(d) Rs. 11,880

15. Which of the following items will appear on the debit side of a payable control ledger?

(a) Payment to credit supplier

(b) Cash purchases

(c) Refunds from a credit supplier

(d) Balance b/d

16. An Account receivable control ledger account had a closing balance of Rs. 23,200. This control account receivable ledger contained a contra to the account payable ledger of Rs. 1,100; but it had been posted to wrong side of control account.

What is the correct closing balance in account receivable control ledger account after correction of the above?

Rs. ___________

17. Following information relates to Sales transaction of Sabir during March 2019

Receivables as at 1 March Rs. 35,000

Receivables as at 31 March Rs. 42,000

Receipts during the period (after allowing discount of Rs. 4,000) Rs. 29,000

What is the amount of credit sales during March?

Rs. ___________


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18. A payable control account contains the following relevant entries for the year ended 31 December 2018:

Rs.

Payment through bank 160,000

Credit purchases during the year 185,000

Discount received 16,000

Contra with receivable control account 7,000

Balance c/d as on Dec 31, 2018 22,000

There are no other transactions related to account payable.

What is the amount of balance b/d of account payable control account as on 1 January 2018?

Rs. ___________

19. A receivable ledger control account at 1 June 2017 had balances of Rs. 32,850 debit.

During the year, sales (net) of Rs. 245,000 were made on credit.

Receipts from customers amounted to Rs. 210,200 and cash discounts of Rs. 700 were allowed. Refunds of Rs. 1,300 were made to customers.

What should be the closing balance at 31 May 2018 of account receivable control account?

Rs. ___________

20. Sadia maintains an imprest system of petty cash. Float is maintained at Rs. 1,000. During February 2019 Sadia has made payments of Rs. 650. At end of February it is decided to increase float by Rs. 100.

What amount is needed to achieve the required float?

Rs. ___________

21. Which of the following is not a book of prime entry?

(a) Sales day book

(b) Petty cash book

(c) Journal

(d) Trial balance

22. The sales day book is a book of primary entry:

(a) For recording all sales

(b) For recording credit sales

(c) In which cash sales are first recorded

(d) In which credit sales are first recorded



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23. The purchases day book is a book of primary entry:

(a) For recording all purchases

(b) For recording credit purchases

(c) In which cash purchases are first recorded

(d) In which credit purchases are first recorded

24. A Credit Note is issued to a:

(a) Customer for return of goods

(b) Supplier for return of goods

(c) Customer to accept the goods

(d) Supplier to accept the goods

25. A debit note is issue to a:

(a) Customer for return of goods

(b) Supplier for return of goods

(c) Customer to accept the goods

(d) Supplier to accept the goods

26. In which book of prime entry does receipt from a debtor worth Rs.200,000 enter?

(a) Petty cash book

(b) Cash book

(c) Receivable ledger

(d) Debtor book

27. In which book of prime entry does payment to supplier worth Rs.300,000 enter?

(a) Petty cash book

(b) Accounts payable journal

(c) Cash payment journal

(d) None of the above

28. In which book of prime entry does payment of entertainment expense worth Rs.1,500 is recorded?

(a) Petty cash book

(b) Cash payment journal

(c) Bank book



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29. In which book of prime entry does purchases on account of Rs. 500,000 would be recorded?

(a) Cash book

(b) Accounts payable book

(c) Purchase day book


30. In which book of prime entry does cash purchases worth Rs. 500,000 would be recorded?

(a) Petty cash book

(b) Cash book

(c) Purchase day book

(d) Accounts payable book

31. In which book of prime entry does debit note received worth Rs.100,000 would be recorded?

(a) Accounts payable book

(b) Purchase journal

(c) Return inwards journal

(d) Returns outward journal

32. In which book of prime entry does sales on account of Rs. 700,000 would be recorded?

(a) Sales journal

(b) Accounts receivable journal

(c) Cash book

(d) Return inwards journal

33. In which book of prime entry does cash sales worth Rs. 250,000 would be recorded?

(a) Petty cash book

(b) Cash book

(c) Sales day book

(d) Accounts receivable book

34. In which book of prime entry does credit note received worth Rs.150,000 would be recorded?

(a) Accounts receivable book

(b) Sales day book

(c) Return inwards journal

(d) Returns outward journal



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35. The Return Inwards account would be found in

(a) The Sales ledger

(b) The Nominal ledger

(c) The Purchases Returns ledger

(d) The Purchases ledger

36. The process of transferring transaction from journal to ledgers is called?

(a) Journalizing

(b) Summarizing

(c) Posting

(d) Analyzing

37. Any transaction which cannot be recorded in any other book of prime entry is recorded in?

(a) Cash book

(b) Petty cash book

(c) General journal

(d) Day books

38. What ledger entries would be made to record the purchase of an item of machinery on credit?

(a) Debit machinery, credit cash

(b) Debit machinery, credit accounts payables

(c) Debit purchases, credit trade payables

(d) Debit trade payables, credit machinery

39. What transaction is presented by the entries: debit bank, credit Receivables?

(a) Sale of goods for cash

(b) Purchase of goods for cash

(c) Receipt of cheque from receivables

(d) Payment of cheque to payables

40. A debit entry usually represents

(a) Assets and Income

(b) Liabilities and Income

(c) Assets and Expenses

(d) Liabilities and Expenses


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41. The double entry to record the withdrawal of cash from a business bank account by the owner is?

(a) Debit: drawings Credit: bank

(b) Debit: drawings Credit: capital

(c) Debit: liability Credit cash

(d) Debit: capital Credit: drawings

42. Which of the following would normally be a credit balance in the trial balance? (i) Loan (ii) Owner’s capital (iii) Drawings (iv) Purchases

(a) (i) and (ii)

(b) (i) and (iii)

(c) (ii) and (iii)

(d) (ii) and (iv)

43. A debit balance would be expected to arise when the accounts are balanced at the period end on which of the following accounts?

(a) Capital

(b) Sales

(c) Electricity

(d) Loan

44. A business sells Rs. 100,000 worth of goods to a customer, the customer pays Rs. 50,000 in cash immediately and will pay the remaining Rs. 50,000 in 30 days time.

What is the double entry to record the purchase in the customer’s accounting records?

(a) Dr. cash Rs. 50,000; Cr. payables Rs. 50,000; Cr. purchases Rs. 50,000

(b) Dr. payables Rs. 50,000; Dr. cash Rs. 50,000 ;Cr. purchases Rs. 100,000

(c) Dr. purchases Rs. 100,000 ;Cr. payables Rs. 50,000; Cr. cash Rs. 50,000

(d) Debit purchases Rs. 100,000; credit cash Rs. 100,000

45. A trial balance is made up of a list of debit balances and credit balances.

Which of the following statements is correct?

(a) Every debit balance represents an expense

(b) Assets are represented by debit balances

(c) Liabilities are represented by debit balances

(d) Income is included in the list of debit balances



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46. Basheer has extracted the following list of balances from his general ledger at 31 October 2015:

Rs. Sales 258,542

Opening inventory 9,649

Purchases 142,958

Expenses 34,835

Non-current assets (carrying amount) 63,960

Receivables 31,746

Payables 13,864

Cash at bank 1,783

Capital 12,525

What is the total of the debit balances in Basheer's trial balance at 31 October 2015?

(a) Rs. 267,049

(b) Rs. 275,282

(c) Rs. 283,148

(d) Rs. 284,931

47. At 31 October 2016 Zahid’s trial balance included the following balances:

Rs. Machinery 12,890

Inventory 5,754

Trade receivables 11,745

Trade payables 7,830

Bank overdraft 1,675

Cash at bank 150

What is the value of Zahid's current assets at 31 October 2016?

(a) Rs. 17,649

(b) Rs. 17,499

(c) Rs. 15,974

(d) Rs. 13,734

48. Mariam has the following transactions:

(i) Receipt of cash from Nauman in respect of an invoice for goods sold three weeks ago

(ii) Receipt of cash from Amjad for cash sales

What are the ledger entries required to record the above transactions?


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(a) Dr Cash; Cr Sales

(b) Dr Cash; Cr Sales; Cr Trade Receivables

(c) Dr Sales; Cr Cash

(d) Dr Trade Receivables; Dr Sales; Cr Cash

49. A business has purchased machinery on credit. Which of the accounts mentioned below are affected by the transactions?

(a) Trade payables

(b) Purchases

(c) Machinery

(d) Capital

50. A business has provided following information in the trial balance;

Rs.

Machinery 150,000

Equipment 120,220

Trade receivables 35,150

Trade payables 40,220

Bank overdraft 18,997

Cash at bank 32,112

What is the amount of non – current assets to be shown in the financial position?

(a) Rs. 337,482

(b) Rs. 270,220

(c) Rs. 356,479

(d) Rs. 318,485

51. A business buys machinery costing Rs. 120,000 and sells machinery costing Rs. 18,000 in the year. The opening balance of the machinery account is Rs. 80,000. What will be the balance brought down in the next period?

Rs. ___________

52. A company had a cash balance of Rs. 18,000 at the start of the month. During the month, the following transactions occurred.

(i) Sales on credit Rs. 72,000 (ii) Cash from trade receivables Rs. 49,000 (iii) Purchases on credit Rs. 33,000 (iv) Payments to trade payables Rs. 35,000

What was the cash balance at the end of the month?

Rs. ___________



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53. An accountant has inserted all the relevant figures into the trade payables account, but has not yet balanced off the account.

Accounts payable a/c

Particulars Rs. Particulars Rs.

Bank a/c 100,750 b/d 250,225

Purchases 325,010

Assuming there are no other entries to be made, other than to balance off the account, what is the closing balance on the trade payables account?

Rs. ___________

54. You are given the following information:

Rs.

Receivables at 1 January 2018 10,000

Receivables at 31 December 2018 9,000

Total receipts during 2018 (including cash sales of Rs.5,000) 85,000

What are sales on credit during 2018?

Rs. ___________

55. The following totals appear in the day books for March 2018.

Rs. Sales day book 40,000

Purchases day book 20,000

Returns inwards day book 2,000

Returns outward day book 4,000

Opening and closing inventories are both Rs. 3,000.

What is the gross profit for March 2018?

Rs. ___________

56. The terms accounting and book keeping are classified as

(a) Same

(b) Different

(c) Opposite

(d) None of these


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57. Which one is the principle of Double Entry System?

(a) Purchase increases Debit, income decreases Credit

(b) Expense increases Debit, Income decreases Credit

(c) Receiver is Debit and Giver is Credit

(d) Receiver is Credit and Giver is Debit

58. Payment of insurance through the bank involves entries in which of the two accounts

(a) Insurance account (Debit) and petty cash account (Credit)

(b) Insurance account (Debit) and bank account (Credit)

(c) Insurance account (Debit) and rent account (Credit)

(d) Insurance account (Debit) and capital account (Credit)

59. X Ltd. purchases a vehicle for Rs. 1.5 million for business use, paying by cheque, what is the double entry:

(a) Purchases account (debit) and bank account (credit)

(b) Vehicle account (debit) and bank account (credit)

(c) Vehicle account (credit) and bank account (debit)

(d) Debit vehicle account (debit) and petty cash account (credit)

60. The journal entry for return of goods purchased from Khan Limited on account is:

(a) Cash (debit) and purchases (credit)

(b) Accounts payable (debit) and purchases (credit)

(c) Accounts payable (debit) and purchases return (credit)


61. Accounting entry for payment of a telephone bill is;

(a) Telephone expense (debit) and cash (credit)

(b) Office equipment (debit) and cash (credit)

(c) Office supplies (debit) and cash (credit)

(d) Cash (debit) and utilities (credit)

62. Khalid is a dealer in electronic goods (refrigerator, washing machine, air conditioners, televisions, etc.). He purchased two air conditioners and installed in his showroom. In the books of Khalid, the cost two air conditioners will be debited to

(a) Drawing account

(b) Capital Account

(c) Fixed assets

(d) Purchases account



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63. An asset was purchased for Rs.1,000,000 with the down payment of Rs.200,000 and bills accepted for Rs.800,000/-.

What would be the effect on the total asset and total liabilities in the statement of financial position?

(a) Assets increased by Rs.800,000 and liabilities decreased by Rs.800,000

(b) Assets decreased by Rs.800,000 and liabilities increased by Rs.800,000

(c) Assets increased by Rs.1,000,000 and liabilities increased by Rs.800,000

(d) Assets increased by Rs.800,000 and liabilities increased by Rs.800,000

64. BS Corporation provides laptop repair services. It offers services on the advance part-payment policy. A customer walked into their shop for services, paid Rs.2,000 in the beginning, and once the laptop got repaired, he paid Rs.2,000 upon delivery. What would be the accounting entry?

(a) Laptop = 2,000 (debit) and Cash = 2,000 (credit)

(b) Labour = 2,000(debit) and Accounting receivable = 2,000 (credit)

(c) Cash= 2,000 (debit), Accounts receivable = 2,000(debit) and Service revenue = 4,000 (credit)

(d) Purchases = 2,000 (debit), Accounts receivable = 2,000 (debit) and Service revenue = 4,000 (credit)

65. BS Corporation provides laptop repair services. It offers services on the advance part-payment policy. A customer walked into their shop for services, paid Rs.2,000 in the beginning, and once the laptop got repaired, he paid Rs.2,000 upon delivery

Post the accounting entry for the above when the laptop is repaired and handed over to the customer.

(a) Cash = 2,000 (Debit) and Accounts receivable = 2,000 (credit)

(b) Cash = 2,000 (Debit) and Service revenue = 2,000 (credit)

(c) Cash = 2,000 (Debit) and Accounts payable = 2,000 (credit)

(d) Cash = 2,000 (Debit) and Other income = 2,000 (credit)

66. Zee bought goods on credit from Shan Traders (ST). The goods were not according to the required specifications and therefore returned to ST. Which document should Zee send to ST? [A19]

(a) Credit note (b) Debit note (c) Invoice (d) Statement of account (01) 67. Debit always means: [A19] (a) left side of an account (b) right side of an account (c) increase (d) increase in assets (01)


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OBJECTIVE BASED ANSWERS

01. (b) Cash sales Rs. 4,000+800 = Rs. 4,800

02. (a) Credit sales are recorded in sales day book and cash sales are recorded in cash receipt book

03. (c) Purchase day book : Rs. 10,000 x 98% = 9,800

Discount received column in Cash book: Rs. 9,800x1%=Rs. 98

Cash payment column in cash book = Rs. 9,800-Rs. 98 = Rs. 9,702

04. (b) The amount spent is reimbursed so that imprest amount becomes available again.

05. (c) Sales

= Rs. 250,000 Credit +4,000 Credit +25,000 credit -70,000 debit

=Rs. 209,000

06. (a) Closing balance

= Rs. 95,000+221,000- [148,000 + 2,000] -8,000= Rs. 158,000

Cash purchases have no effect on payables.

07. (d) Payables (Liabilities) decreased, resulting in debit

Receivables (assets) decreased, resulting in credit

Only lower amount may be offset.

08. (a) Credit sales are entered in the sales day books; sales returns are entered in sales returns day book (not deducted from sales day book total); cash sales and cash received from customers are entered in cash receipt book

09. (a)

10. (a)

11. (d)

12. (b)

13. (b) Total sales = Rs. 12,000+ (Rs. 10,000x0.98) = Rs. 21,800

14. (c) Net amount payable = Rs. 12,000-Rs. 2,000 = Rs. 10,000

Cash paid = Rs. 10,000 x 99%= Rs. 9,900

15. (a)

16. Rs. 21,000 =Rs. 23,200 – [Rs. 1,100 x 2] = Rs. 21,000

Due to posting on wrong side; for correction double amount is to be credited

17. Rs. 40,000 =Rs. 42,000+4000+29,000-35,000= Rs. 40,000

18. Rs. 20,000 =Rs. 160,000+16,000+7,000+22,000-185,000=Rs. 20,000

19. Rs. 65, 650 =Rs. 32,850+245,000-210,200 – 700 - 1,300 = Rs. 65,650

20. Rs. 750 New float = Rs. 1,000+100 = Rs. 1,100

Amount required to restore and increase = Rs. 100+Rs. 650 = Rs. 750



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21. (d)

22. (b)

23. (b)

24. (a)

25. (b)

26. (b)

27. (c)

28. (a)

29. (c)

30. (b)

31. (d)

32. (a)

33. (b)

34. (d)

35. (b)

36. (c)

37. (c)

38. (b)

39. (c)

40. (c)

41. (a)

42. (a)

43. (c)

44. (c)

45. (b)

46. (d)

47. (a)

48. (b)

49. (c)

50. (b)


© kashifadeel.com

Page | 79

51. Rs. 282,000 Machinery a/c

Particulars Rs. Particulars Rs. b/d 80,000 Disposal 18,000

Purchases 120,000 c/d 282,000

300,000 300,000

52. Rs. 32,000 Cash a/c

Particulars Rs. Particulars Rs. b/d 18,000 Payables 35,000

Receivables 49,000 c/d 32,000

67,000 67,000

53. Rs. 474,485 Accounts payable a/c

Particulars Rs. Particulars Rs. Bank a/c 100,750 b/d 250,225

c/d 474,485 Purchases 325,010

575,235 575,235

54. Rs. 79,000 Accounts receivables a/c

Particulars Rs. Particulars Rs. b/d 10,000 Cash 80,000

Sales 79,000 c/d 9,000

89,000 89,000

55. Rs. 22,000 Rs. Rs. Sales 40,000

Returns inwards (2,000)

38,000

Opening inventory 3,000

Purchases 20,000

Returns outwards (4,000)

Closing inventory (3,000) (16,000)

Gross profit 22,000

56. (b)

57. (c)



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58. (b)

59. (b)

60. (c)

61. (a)

62. (c)

63. (d)

64. (c)

65. (a)

66. (b) Debit note

67. (a) On left side of an account