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Sunday 9 January 2011

Complete Solved Final Term Paper Of MGT101- Financial Accounting

FINALTERM  EXAMINATION
Fall 2008
MGT101- Financial Accounting (Session - 3)
Ref
Time: 120 min
Marks: 85
Question No: 1    ( Marks: 1 )    - Please choose one
 If company has distributable profit is Rs. 4, 90,000. Profit sharing share ratio of Mr. A, Mr. B and Mr. C is 2:3:5 respectively what will be the Profit share for Mr. B in distributable profit.

       ► Rs. 98,000
       Rs. 1, 47,000 (Correct)
       ► Rs. 2, 45,000
       ► Rs. 3, 43,000
   
Question No: 2    ( Marks: 1 )    - Please choose one
 What does a credit balance in a partner’s current account represent to a business?

       ► Current Assets
       ► Current Liability
       ► Long-term liability
       Share of profit (Correct)
   
Question No: 3    ( Marks: 1 )    - Please choose one
 Which of the following ratio tells about “How a company would repays its loans”

       Mark up cover ratio (Correct)
       ► Acid test ratio
       ► Current ratio
       ► Debt Equity ratio
   
Question No: 4    ( Marks: 1 )    - Please choose one
 Which of the following is CORRECT about Gross Profit Ratio?

       ► (Gross profit / Net Sales) x 100
       ► (Gross profit / Operating Income) x 100
       (Gross profit / Sales Return) x 100 (Correct)
       ► (Gross profit / Net Income) x 100
   
Question No: 5    ( Marks: 1 )    - Please choose one
 Current ratio may be increased by:

       ► Overstating current Assets
       ► Overstating current Liabilities
       Understating current Assets (Correct)
       ► Understating current assets and overstating current liabilities

Question No: 6    ( Marks: 1 )    - Please choose one
 Which of the following is a type of business formed under the Companies Ordinance 1984?

       ► Sole-Proprietorship
       ► Partnership
       Joint Stock Company (Correct)
       ► All of the given options
   
Question No: 7    ( Marks: 1 )    - Please choose one
 When preparing cash flow statements, the repayments of a loan during the year should be included under which of the following heading?
       ► Operating activities
       ► Financing activities
       ► Investing activities
       ► None of the given options
   
Question No: 8    ( Marks: 1 )    - Please choose one
 In  cash flow statements, which of the following would appear as an inflow of cash? 
       ► The repayments of a bank loan
       ► Dividend issue in the current year
       Money received as result of selling fixed assets (Correct)
       ► The difference between the valuations of old and new fixed assets
  
Question No: 9    ( Marks: 1 )    - Please choose one
 What are the effects on financial statements, if Rs. 6,000 transfer to general reserve is given in adjustment?

       ► It will be treated in Income Statement only
       ► It will be treated as current liability in balance sheet only
       ► It will be treated in profit and loss appropriation account only
         it will be treated in both profit and loss appropriation account and in the balance sheet (Correct)
   
Question No: 10    ( Marks: 1 )    - Please choose one
 Which of the following is the most important document of the company?
       Memorandum of Association (Correct)
       ► Articles of Association
       ► Prospectus
       ► Annual Report
   
Question No: 11    ( Marks: 1 )    - Please choose one
 Preliminary Expenses of the company may write off against:
       Share premium account (Correct)
       ► Share holder account
       ► Debtors control account
       ► Creditor control account
   
Question No: 12    ( Marks: 1 )    - Please choose one
 Which of the following clause/s are discussed in Memorandum of Association of Companies?

       ► Name of company
       ► Place of registered office of company
       ► Objective of the company
       All of the given options (Correct)
   
Question No: 13    ( Marks: 1 )    - Please choose one
 The Joint Stock Company is formed under the Companies Ordinance:
       1984 (Correct)
       ► I884
       ► 1948
       ► 1965
   
Question No: 14    ( Marks: 1 )    - Please choose one
 When the capitals are fixed, which of the following account will be debited for drawings made by a partner?


       ► Individual Partner’s Current Account
       ► Partner’s Cash Account
       ► Partner’s Bank Account
       Partners Capital Account (Correct)
   
Question No: 15    ( Marks: 1 )    - Please choose one
 Which of the following account will be debited when the interest on drawings is charged?

       ► Partner’s capital account
       ► Interest account
       ► Partner’s current account
       Profit & Loss account (Correct)
   
Question No: 16    ( Marks: 1 )    - Please choose one
 Which of the following is CORRECT if depreciation is given in trial balance?
       ► It means depreciation has already been deducted from concerned asset account
       It will be shown as an expense in income statement only (Correct)
       ► It will not be deducted from concerned asset in Balance Sheet
       ► All of the given options are correct
   
Question No: 17    ( Marks: 1 )    - Please choose one
 An asset which is NOT easily convertible to cash or not expected to become cash within a period of twelve months is called:

       Liquid asset
       Current asset (Correct)
       Fixed asset
       ► Floating asset
   
Question No: 18    ( Marks: 1 )    - Please choose one
 Which one of the following is TRUE about provisions?

       ► It is necessary to prepare for showing true picture of balance sheet
       ► It is a reduction from assets
       It is prepared for specific purposes (Correct)
       ► All of the given options
   
Question No: 19    ( Marks: 1 )    - Please choose one
 The Balance Sheet item that represents the resources invested by the owner is known as:
       ► Accounts Receivable
       ► Cash
       ► Note Payable
       Owner's Equity (Correct)
   
Question No: 20    ( Marks: 1 )    - Please choose one
 Which of the following is NOT an operating expense?

       ► Salaries and wages expense
       ► Rent expense
       ► Interest expense
       Depreciation expense (Correct)
   
Question No: 21    ( Marks: 1 )    - Please choose one
 A financial statement that indicates the success or failure of a business, over a period of time is called:

       ► A cash flow statement
       ► A retained earnings statement
       ► An income statement
       A balance sheet (Correct)

Question No: 22    ( Marks: 1 )    - Please choose one
 Which of the following is the first phase of the typical operating cycle?

       ► Receive cash from customers
       ► Pay cash to suppliers
       ► Sell goods and services to customers
       Purchase goods and services (Correct)
   
Question No: 23    ( Marks: 1 )    - Please choose one
 Following information are extracted from books of Mr. XYZ

Particulars
Rs.
Closing value of stock
40,000
Write off Bad debts (given in adjustments)
2,400
Sundry Debtors (given in trial balance)
33,200
Provision is created on Debtors at 10%
 Identify the Total amount deducted from Sundry debtors.
       ► Rs. 460
       ► Rs. 2,400
       Rs. 3,080
       Rs. 5,480 (Correct)
  
Question No: 24    ( Marks: 1 )    - Please choose one
 It is supposed that on 31st December, 2007, the sundry debtors are amounted to Rs. 40,000. On the basis of past experience, it is estimated that 10% of the sundry debtors are doubtful. Actual bad debts are Rs. 1600.  What amount of new provision for doubtful debts will be deducted from Sundry debtors? 

       ► Rs. 3,600
       ► Rs. 4,000
       ► Rs. 1,600
       Rs. 2, 400 (Correct)
   
Question No: 25    ( Marks: 1 )    - Please choose one
 When one or both aspects of a transaction are recorded in the wrong class or category of account, this is called:

       Error of principle (Correct)
       ► Error of omission
       ► Error of commission
       ► Error of original entry
   
Question No: 26    ( Marks: 1 )    - Please choose one
 Which of the following account(s) will be affected, while rectifying the error of sales Rs.100 to Mr. “A” recorded in the purchases book?


       ► Sales account
       ► Purchase account
       ► A’s account and Sales account
       Sales account, purchase account and A’s account (Correct)
    
Question No: 27    ( Marks: 1 )    - Please choose one
 A receipt of cash Rs. 10,000 from Mr. Bilal is recorded as Rs. 1,000. What amount will be adjusted in rectifying entry?

       ► Rs. 1,000
       Rs. 9,000 (Correct)
       ► Rs. 10,000
       ► Rs. 11,000
   
Question No: 28    ( Marks: 1 )    - Please choose one
 _____ are committed in those cases where proper distinction between revenue and capital items is not made.

       ► Error of principle
       ► Error of omission
       Error of commission (Correct)
       ► Error of original entry
   
Question No: 29    ( Marks: 1 )    - Please choose one
 Which of the following is (are) benefit/s of subsidiary ledger accounts to business?

       ► It tells about customer attitude of payments
       ► It can be checked against the control account to pick up recording errors
       ► It tells about the complete history of transactions of business client
       All of the given options (Correct)
   
Question No: 30    ( Marks: 1 )    - Please choose one
 Which of the following is NOT included in Debtors Control Account?

       Cash sales (Correct)
       ► Credit sales
       ► Bills receivable
       ► Discount allowed
   
Question No: 31    ( Marks: 1 )    - Please choose one
 Which of the following is/are the item/s of a Control Account?
       Credit sale only
       Cash sale only (Correct)
       Credit purchase only
       Both Credit sales and Credit purchase

Question No: 32    ( Marks: 1 )    - Please choose one
 It is supposed that on 31st December, 2007, the sundry debtors are amounted to Rs. 40,000. On the basis of past experience, it is estimated that 5 % of the sundry debtors are doubtful. Actual bad debts are Rs. 1600.  What amount of new provision for doubtful debts will be credited in profit & loss account. 

       ► Rs. 3,600
       ► Rs. 2,000
       ► Rs. 1,600
       Rs.  400 (Correct)
   
Question No: 33    ( Marks: 1 )    - Please choose one
 Which of the following is NOT a function of bank reconciliation statement?
       ► To reconcile the difference between the cash book and the bank statement
       To check for errors in balance sheet (Correct)
       ► To update omitted entries into the cash book
       ► To update omitted entries into the bank statement
   
Question No: 34    ( Marks: 1 )    - Please choose one
 Which one of the following transactions will cause the balance in Mr. Terry's Cash Book to be greater than his Bank Statement balance?
       ► A cheque is drawn but not yet presented at the bank for payment
       ► The bank has not yet notified to Mr. Terry about a dishonoured cheque
       A credit transfer into Terry's Bank Account (Correct)
       ► A cheque payment of Rs.101 is recorded in the Cash Book as Rs.110

Question No: 35    ( Marks: 1 )    - Please choose one
 The following balance and discrepancies were found on 31 March 2008:

Particulars
Rs.
Cash book balance (Dr)   
5 000
Unpresented cheques
1 000
Uncredited cheques
500

The Bank Statement balance on 31 March 2008 should be:
       ► Rs. 5 500 (Dr)
       ► Rs. 5 500 (Cr)
       ► Rs. 4 500 (Dr)
       Rs. 4 500 (Cr) (Correct)
   
Question No: 36    ( Marks: 1 )    - Please choose one
 Which of the following is NOT a characteristic of Joint Stock Company?

       ► Separate Legal Entity
       ► Limited Liability
       Easy Formation (Correct)
       ► Common Seal
   
Question No: 37    ( Marks: 1 )    - Please choose one
 Consider the following data:     

Particulars
Rs.
Assets
1,98,000
Owner's equity
95,000
Liabilities
?

       ► Rs. 49,000
       ► Rs. 55,000
       ► Rs. 1, 25,000
       Rs. 1, 03,000 (Correct)
   
Question No: 38    ( Marks: 1 )    - Please choose one
 The basic purpose of depreciation is to achieve the:
       Matching principle  (Correct)
       ► Dual aspect principle
       ► Separate entity concept
       ► Money measurement concept
   
Question No: 39    ( Marks: 1 )    - Please choose one
 Accountancy covers which of the following area(s):

       ► Book-keeping
       ► Accounting
       ► Auditing
       All of the given options (Correct)
   
Question No: 40    ( Marks: 1 )    - Please choose one
 Bank Reconciliation Statement is prepared by:

       ► Bankers
       Accountant of the business (Correct)
       ► Statutory auditor
       ► Manger

Question No: 41    ( Marks: 1 )    - Please choose one
 Under the reducing balance method, deprecation is calculated on:

       ► Scrap value of an asset
       Original cost of an asset
       Book value of an asset (Correct)
       ► Fair value of an asset 
   
Question No: 42    ( Marks: 1 )    - Please choose one
 The products that are ready for sale are known as:


       ► Raw material
       ► Work in process
       Finished goods (Correct)
       ► Closing stock 
   
Question No: 43    ( Marks: 1 )    - Please choose one
 Which of the following item appears in Trading Account of a business?


       ► Interest expenses
       Wages and salaries (Correct)
       ► Depreciation expenses
       ► Discount Allowed
   
Question No: 44    ( Marks: 1 )    - Please choose one
 Which of the following financial statement DO NOT show the financial health of a business at a specific date?

       Profit and loss account (Correct)
       Balance sheet
       Statement of financial position
       ► All of the given options
   
Question No: 45    ( Marks: 1 )    - Please choose one
 Which of the following account will be credited in the books of XYZ Co. Ltd, if the business purchased a vehicle though cheque?


       ► Vehicle account
       ► Cash account
       ► Business account
       Bank account (Correct)
   
Question No: 46    ( Marks: 1 )    - Please choose one
 Gross Profit > Operating Expenses=?


       Net Profit (Correct)
       ► Cost of Goods Sold
       ► Net Loss
       ► Gross Loss
  
Question No: 47    ( Marks: 1 )    - Please choose one
 Bank book is part of:

       ► Voucher
       ► General Journal
       General Ledger (Correct)
       ► Trial Balance
   
Question No: 48    ( Marks: 1 )    - Please choose one
 What would be the affect on the components of the accounting equation, if goods are purchased on cash? 

       ► Increase in cash and decrease in equity
       ► Increase in cash and increase in goods
       Increase in goods and decrease in cash (Correct)
       ► Increase in equipment and increase in equity
   
Question No: 49    ( Marks: 1 )    - Please choose one
 We can say that the business is in profit, when:


       ► Assets exceed Liabilities
       Income exceeds Expenditure (Correct)
       ► Income exceeds Liabilities
       ► Assets exceed Expenditure

Question No: 50    ( Marks: 1 )    - Please choose one
 A business event which can be measured in terms of money and must be recorded in books of accounts is called:
       ► Information
       ► Condition
       Transaction (Correct)
       ► Record
   
Question No: 51    ( Marks: 5 )
 Calculate Net income with the help of given date for the year 2007 and also show complete working to support your answer.                                                                                              
Raw material Stocks on 1-1-2007
Rs. 30,000
Work in process on 1-1-2007
35,600
Finished Goods on 1-1-2007
35,400

Raw material Stocks 31-12-2007
Rs.  31,000
Work in process  31-12-2007
25,000
Finished Goods 31-12-2007
53,900
Total factory Cost     
543,339

Additional data
v         Other income for the year is Rs. 5,000.
v         Operating expenses for the year Rs. 15,000.
v         Sale for the year Rs. 1,000,000.

   
Question No: 52    ( Marks: 10 )
 The following Trial Balance was extracted from the books of Naeem & Sons on 31st December, 2007. From this you are required to prepare an Income Statement for the year ended on 31st December, 2007,

Particulars
Debit
Credit
Rs.
Rs.
Cash
5,000

Accounts Receivable
9,000

Merchandise Inventory on 1.1.2007
6,000

Plant and Machinery
24,000

Land and Building
82,000

Furniture and Fixtures
2,600

Capital

136,000
Accounts Payable

3800
Purchases
60,000

Purchases returns and allowances

2,800
Sales

70,000
Sales returns and allowances
4,600

Insurance Prepaid
3,400

Advertisement expenses
4,000

Salaries expenses
12,000

Total
212,600
212,600

ADDITIONAL INFORMATION:
      Prepaid insurance on 31st December, 2007 is Rs. 1,400
      Outstanding salaries Rs. 1,000
      Depreciation on Plant and Machinery @ 10% p.a.
      Merchandise inventory on 31st December, 2007 was valued at  Rs. 6,000

Answer:

Trading Account for the year ending 31.12.2007













Opening stock

6000

Sales
70000





Less : Sales Return
4600

Purchase
60000




65400
Less Return
2800







57200







Closing Stock
6000














Gross Profit


8200






71400


71400







Profit & Loss Account for the year ending 31.12.2007













Advertisement Exp

4000

Gross Profit

8200







Salaries
12000





Add: Outstanding
1000







13000


















Depreciation






Plant & Mach

2400











Insurance
3400






1400







2000








Net Loss

13200









19400



21400







Balance Sheet as on 31.12.2007











Accouts Receivable
9000

Capital
136000





Less :Net Loss
13200

Cash

5000



122800







Plant & Mach
24000


Accounts Payable
3800
Less: Depr
2400







21600

Outstanding salaries
1000







Land & Building
82000











Furniture

2600











Prepaid Insurance
1400











Closing Stock
6000




















127600



127600



    
Question No: 53    ( Marks: 10 )
 Prepare Profit and Loss Account for the year ending 31st December 2007 from the Trial Balance and adjustments of MS Company given below:

Particulars
Debit
Credit
Rs.
Rs.
Drawings
14,000

Capital Account

80,000
Opening Stock
55,000

Purchases
485,000

Sales

610,000
Sundry Debtors
80,000

Sundry Creditors

60,500
Sales Returns
5,000

Carriage Inwards
6,000

Salaries
28,000

Rent, Rates, Taxes
15,000

Insurance
4,000

Machinery
50,000

Furniture
5,000

Cash in hand
3,500

Total
750,500
750,500

Adjustments:
      Depreciate machinery and furniture @20%p.a.
      Outstanding Salaries Rs. 2,000
      Insurance paid in advance Rs. 500
      Maintain @5% reserve for doubtful debts on debtors.
      Closing Stock was valued at Rs. 60,000

Answer:

Trading Account for the year ending 31.12.2007













Opening stock

55000

Sales
610000





Less : Sales Return
5000

Purchase

485000



605000
Caririage Inward

6000

Closing Stock

60000














Gross Profit

119000






665000



665000







Profit & Loss Account for the year ending 31.12.2007













Salaries
28000


Gross Profit

119000
Add: Outstanding
2000







30000




Rent, Rates, Taxes

15000











Insurance
4000





Less :Advance
500







3500











Depreciation






Machinery
10000





Furniture
1000







11000











Provision on Doubtful Debts

4000











Net Profit

55500













119000



119000


   
Question No: 54    ( Marks: 10 )
 What is the difference between public and private company?

Answer:
Private Limited Company
Ø      Number of members in a private limited company varies from 2 to 50.
Ø      Any 2 members can subscribe their names in memorandum and articles of association along with other requirements of the companies’ ordinance 1984. They can also apply to security exchange commission for company’s registration.
Ø      The shareholders of the private limited company elect two members of the company as Directors. These directors form a board of directors to run the affairs of the company.
Ø      The head of board of directors is called chief executive.
Ø      Private limited company can not offer its shares to general public.
Ø      In case a investor decides to sell his/her/her shares, his/her shares are first offered to existing shareholders. If all existing shareholders decide not to buy these shares, then an outsider investor can buy.
Ø      Words and digression “(Private) Limited” are added at the end of the name of a private limited company.

Public Limited Company
Ø      Least number of members in a public limited company is 7 with no upper limit in number of members.
Ø      Any 7members can subscribe their names in memorandum and articles of association along with other requirements of the companies’ ordinance 1984. They can also apply to security exchange commission for company’s registration.
Ø      The shareholders of the public limited company elect seven members of the company as Directors and these directors form a board of directors to run the daily affairs.
Ø      The head of board of directors is called Chief Executive.
Ø      Public limited company can offer its shares to general public at large.
Ø      Word “Limited” is added at the end of the name of a public limited company.
Ø      Each subscriber of the memorandum shall write opposite to his name, the number of shares held by him/her.

On top of that there are two types of public limited company:
  1. Listed Company
  2. Non Listed Company

LISTED COMPANY
Listed company is the one whose shares are quoted and traded on stock exchange. It is also called quoted company.

NON LISTED COMPANY
Non listed company is the one whose shares are not quoted or traded.


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