VU MGT101- Financial Accounting Complete Solved FinalTerm Paper 2008

FINALTERM  EXAMINATION

Fall 2008

MGT101- Financial Accounting (Session - 1)

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Question No: 1    ( Marks: 1 )    - Please choose one

 Wages outstanding given in the trial balance will be treated as a (an):

       ► Asset

       ► Liability

       ► Revenue

       ► Deferred expense

   

Question No: 2    ( Marks: 1 )    - Please choose one

 Prepaid interest given in the Trial Balance will be treated as a (an):

       ► Asset

       ► Liability

       ► Revenue

       ► Deferred expense

   

Question No: 3    ( 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. C in distributable profit.

       ► Rs. 98,000

       ► Rs. 1, 47,000

       ► Rs. 2, 45,000

       ► Rs. 3, 43,000

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Question No: 4    ( Marks: 1 )    - Please choose one

 If the Capitals of partners are fixed then, at the end of financial year a partner’s drawings are transferred to the:

       ► Credit side of the partner’s capital account

       ► Credit side of the partner’s current account

       ► Debit side of partnership bank account

       ► Debit side of the partner’s current account

   

Question No: 5    ( Marks: 1 )    - Please choose one

 If company has distributable profit of Rs. 490,000, Profit sharing share ratio of Mr. A, Mr. B and Mr. C is 2:3:5 respectively. What will be the share of profit for Mr. A in distributable profit?

       ► Rs. 98,000

       ► Rs. 147,000

       ► Rs. 245,000

       ► Rs. 343,000

   

Question No: 6    ( Marks: 1 )    - Please choose one

 In which situation(s) Partnership is dissolved?

       ► In case of death of partner

       ► At the admission of new partner

       ► If any partner resigned from partnership

       ► All of the given options

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Question No: 7    ( Marks: 1 )    - Please choose one

 In calculating earning per share (EPS), the net profit is divided by which of the following?

       ► Number of ordinary shares

       ► Number of preference shares

       ► Paid up capital

       ► Authorized capital

   

Question No: 8    ( Marks: 1 )    - Please choose one

 Which of the following statement in NOT TRUE about the limited company form of business?

       ► The limited company form of business allows ownership of the business to be spread amongst many people

       ► Shareholders can appoint professionals

       ► Shareholders are personally liable for all the liabilities incurred by the business

       ► Regular filing of information about the affairs of the company is a legal requirement

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Question No: 9    ( Marks: 1 )    - Please choose one

 A private limited company can commence its business:

       ► Immediately on receiving a certificate of incorporation

       ► Without receiving a certificate of incorporation

       ► Only when it receives certificate of commencement of business

       ► Only when it receives both, the certificate of incorporation as well as certificate of commencement of business

   

Question No: 10    ( Marks: 1 )    - Please choose one

 An example of financing activities in the context of cash flow statement is:

       ► Capital expenditures on purchase of fixed assets

       ► Long-term deposit

       ► Financial charges paid

       ► Dividend paid

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Question No: 11    ( Marks: 1 )    - Please choose one

 A firm may earn profit during an accounting period but have less money in the bank at the end of the period then it had at the beginning. Which of the followings, on its own, could explain this?

       ► Not paying invoices received from creditors

       ► The sale of fixed assets during the period

       ► An increase in trade debtors over the course of the period

       ► An increase in the depreciation charge relative to the previous accounting period

   

Question No: 12    ( Marks: 1 )    - Please choose one

 The primary purpose of preparing a cash flow statement for an entity is to provide information about:           

       ► Its financial position at the end of an accounting period

       ► Its cash receipts and cash payments during an accounting period

       ► Its financial position at the start of an accounting period

       ► None of the given options

   

Question No: 13    ( Marks: 1 )    - Please choose one

 Which of the following option(s) is TRUE about the Sales returns?

       ► Sales returns reduce the Gross sales of the firm

       ► Sales returns affect the Net income of the firm

       ► Sales returns affect the flow of cash

       ► All of the given options

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Question No: 14    ( Marks: 1 )    - Please choose one

 The persons who sign articles and memorandum of the company and contribute in the initial share capital of the company are called:

       ► Subscribers

       ► Shareholders

       ► Managers

       ► Directors

   

Question No: 15    ( Marks: 1 )    - Please choose one

 The charter of a company which defines the limitations and powers of the company is called:

       ► The memorandum of association

       ► Articles of association

       ► Statutory report

       ► Certificate of commencement

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Question No: 16    ( Marks: 1 )    - Please choose one

 Which of the following can offer its share to general public at large?

       ► A private limited company

       ► A listed company

       ► A partnership firm

       ► A trust

   

Question No: 17    ( Marks: 1 )    - Please choose one

 Which of the following are the owners of a company?

       ► Proprietors

       ► Partners

       ► Shareholders

       ► Managers

   

Question No: 18    ( Marks: 1 )    - Please choose one

 Current accounts of the partners should be opened when the capitals are:

       ► Normal

       ► Floating

       ► Fixed

       ► Fluctuating

   

Question No: 19    ( Marks: 1 )    - Please choose one

 Rent receivable (given in trial balance) is an item of_____________.

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       ► Balance Sheet

       ► Profit & Loss Account

       ► Trading Account

       ► Both Balance Sheet and Profit & Loss Account

   

Question No: 20    ( Marks: 1 )    - Please choose one

 When closing stock is given in trial balance, then it will effect:

       ► Trading account only

       ► Balance sheet only

       ► Owner's equity only

       ► Both Trading account and Balance sheet

   

Question No: 21    ( Marks: 1 )    - Please choose one

 Which of the following account is affected from the Drawings of cash in sole-proprietorship business?

       ► Capital account

       ► Shareholder account

       ► Liability account

       ► Expense account

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Question No: 22    ( Marks: 1 )    - Please choose one

 An asset is considered to be a current asset if:

       ► It has been bought recently and was bought new and not used

       ► It can be realized in cash or sold or consumed in the business within one year

       ► It is a piece of new machinery that is expected to last for at least ten years

       ► All of the given options

   

Question No: 23    ( Marks: 1 )    - Please choose one

 General office expenses are charged to which of the following head:

       ► Administrative expenses

       ► Marketing expenses

       ► Selling expenses

       ► Financial expenses

   

Question No: 24    ( Marks: 1 )    - Please choose one

 Which of the following would NOT be considered as a component of 'cost' of stock?

       ► Salaries of selling staff

       ► Transportation inward costs

       ► Import duties

       ► Purchase price

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Question No: 25    ( 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

   

Question No: 26    ( Marks: 1 )    - Please choose one

 Which of the following is NOT correct about income tax?

       ► Different companies pay tax on different rates

       ► It is treated as an expense and debited in Profit & Loss account

       ► When financial statements are prepared, an estimate of expected tax liability is made

       ► It is treated as an expense and credited in Profit & Loss account

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Question No: 27    ( 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

   

Question No: 28    ( Marks: 1 )    - Please choose one

 If (Amount of new provision + Amount of bad debts) < Amount of old provision then amount will be shown on:

       ► Debit side of P & L account

       ► Credit side of P & L account

       ► Asset side of Balance Sheet

       ► Liability side of Balance Sheet

   

Question No: 29    ( Marks: 1 )    - Please choose one

 Which of the following rectifying entry will be recorded, if sales to Mr. “A” of Rs.336 have been debited to Mr. “B” account?

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       ►  A’s account (Dr.) and B’s account (Cr.)

       ► B’s account (Dr.) and A’s account (Cr.)

       ► Sales account (Dr.) and B’s account (cr.)

       ► B’s account (Dr.) and Sales account (Cr.)

   

Question No: 30    ( 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

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Question No: 31    ( Marks: 1 )    - Please choose one

 Which of the following is shown on credit side of creditors control account?

       ► Bills Receivable

       ► Return inwards

       ► Credit purchases

       ► Discount allowed

   

Question No: 32    ( Marks: 1 )    - Please choose one

 Sales are calculated by adding:

       ► Cash sales and cash received from debtors

       ► Credit sales and cash received from debtors

       ► Cash sales and credit sales

       ► Cash ales and credit purchases

   

Question No: 33    ( Marks: 1 )    - Please choose one

 Which of the following is NOT based on the concept of double entry book keeping system?

       ► Subsidiary Ledgers

       ► Creditors Control Accounts

       ► Debtors Control Accounts

       ► All of the given options

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Question No: 34    ( Marks: 1 )    - Please choose one

 If Bad Debts written off are given in adjustment, then which of the following entry for bad debts written off is CORRECT?

       ► Bad debts a/c (Dr)  and  Trading a/c (Cr)

       ► Provision for Bad and Doubtful debts a/c (Dr) and Bad debts a/c(Cr)

       ► Bad debts a/c (Dr) and debtors a/c (Cr)

       ► Trading a/c (Dr) and Bad debts a/c (Cr)

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Question No: 35    ( Marks: 1 )    - Please choose one

 Consider the following data:

Provision created in 2006	Rs. 2,500
Bad debts in 2007	Rs. 1,500
Sundry debtors on 31-12- 2007 were Rs. 40,000 and provision is created @ 5%.
Which journal entry is Correct for the provision for doubtful debts for the year 2007.

       ► Provision for doubtful debts a/c Rs. 1,000 (Dr) & Profit & Loss a/c Rs. 1,000 (Cr)

       ► Profit & Loss a/c Rs. 2,000 (Dr) & Provision for doubtful debts a/c Rs. 2,000 (Cr)

       ► Provision for doubtful debts a/c Rs. 2,000 (Dr) & Profit & Loss a/c Rs. 2,000 (Cr)

       ► Profit & Loss a/c Rs. 1,000 (Dr) & Provision for doubtful debts a/c Rs. 1,000 (Cr)

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Question No: 36    ( Marks: 1 )    - Please choose one

Particulars	Rs.
Opening written down value of machine	4,00,000
Cost of machine purchased during the year	50,000
Depreciation during the year	20,000
closing written down value (WDV) of the Machines	?

       ► Rs. 4, 30,000

       ► Rs. 4, 50,000

       ► Rs. 4, 70,000

       ► Rs. 70,000

   

Question No: 37    ( Marks: 1 )    - Please choose one

 In accounting accumulated depreciation is:

       ► Treated as a reserve

       ► Treated as a contra asset

       ► Treated as a surplus

       ► Treated as an expense

   

Question No: 38    ( Marks: 1 )    - Please choose one

 Find out the missing value of an Accounting Equation with the help of given data:

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Cash	Rs. 22,500
Debtors	Rs. 500
Total Assets	Rs. 80, 385
Accounts payable	Rs. 1,000
Total liabilities	Rs. 20,000

       ► Rs. 60,385 owner’s equity 

       ► Rs. 61,385 owner’s equity 

       ► Rs. 99,885 owner’s equity 

       ► Rs.  99,385 owner’s equity

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Question No: 39    ( Marks: 1 )    - Please choose one

 Stock of Trading concern consists of:

       ► Raw material

       ► Work in process

       ► Merchandise inventory

       ► All of the given options

   

Question No: 40    ( Marks: 1 )    - Please choose one

          Consider the following inventory record:

Date	Item	Quantity	Cost/Unit	Total
2007Jan. 2	Opening inventory	100	Rs.18.00	Rs.1,800
Mar. 4	Purchase	400	19.00	7,600
May 8	Purchase	800	20.00	16,000
Nov. 3	Purchase	500	21.00	10,500

Four hundred units are unsold, Use the FIFO method of inventory costing and determine the value assigned to the 400 units on hand at the end of the period.

       ► Rs.7, 500 

       ► Rs.7, 978

       ► Rs.8, 000

       ► Rs.8, 400

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Question No: 41    ( Marks: 1 )    - Please choose one

Particulars	Rs.
Opening stock of raw material	100,000
Closing stock of raw material	85,000
Purchases of raw material during the period	200, 000
Cost of Material Consumed	?

       ► Rs. 205,000

       ► Rs. 215,000

       ► Rs. 220,000

       ► Rs. 225,000

   

Question No: 42    ( Marks: 1 )    - Please choose one

 In cost of goods sold statement the ‘cost of goods manufactured’ is equal to:

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       ► Total factory cost + Opening work in process + Ending work in process

       ► Total factory cost + Opening work in process – Ending work in process

       ► Total factory cost - Opening work in process + Ending work in process

       ► Ending work in process +Total factory cost – Opening work in process

   

Question No: 43    ( Marks: 1 )    - Please choose one

 What would be the value of total factory cost, if the cost of material consumed during the month is Rs. 6,000, labor cost incurred is Rs. 2,000 and the factory over head cost is Rs. 2,500? 

       ► Rs. 6,000

       ► Rs. 8,000

       ► Rs. 4,500

       ► Rs. 10,500

   

Question No: 44    ( Marks: 1 )    - Please choose one

 Which of the following item appears in Trading Account of a business?

       ► Interest expenses

       ► Wages and salaries

       ► Depreciation expenses

       ► Discount Allowed

   

Question No: 45    ( Marks: 1 )    - Please choose one

 If the cost of sales is Rs. 60,000, sales are Rs. 95,000 and operating expenses are Rs. 20,000 during the year, what would be the value of Gross Profit?

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       ► Rs. 15,000

       ► Rs. 35,000

       ► Rs. 55,000

       ► Rs. 60,000

   

Question No: 46    ( Marks: 1 )    - Please choose one

 Identify that which of the following particular(s) would NOT be shown in the format of a Cash Book?

(1) Cheque number

(2) Date of transaction

(3) Amount of transaction

       ► (1) only

       ► (1)  & (2) only

       ► (1) & (3) only

       ► (2) & (3) only

   

Question No: 47    ( Marks: 1 )    - Please choose one

 The process of transferring journal entry information to the ledger is called:

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       ► Journalizing

       ► Posting

       ► Balancing

       ► Analyzing

   

Question No: 48    ( Marks: 1 )    - Please choose one

 Which one of the following is a type of General Ledger?

       ► Book of original entry

       ► ‘T’ Account

       ► Source document

       ► Day book

   

Question No: 49    ( Marks: 1 )    - Please choose one

 Which of the following is CORRECT about the flow of recording a transaction?

       ► Occurrence of event – voucher—Journal—Ledger—Trial Balance—profit and loss account—Balance Sheet 

       ► Occurrence of event—Journal – voucher —Ledger—Trial Balance—profit and loss account—Balance Sheet

       ► Occurrence of event—Ledger – voucher—Journal—Trial Balance—profit and loss account—Balance Sheet 

       ► Occurrence of event—Trial Balance – voucher—Journal—Ledger—profit and loss account—Balance Sheet 

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Question No: 50    ( Marks: 1 )    - Please choose one

 Economic resources owned by a business and expected to benefit for the future operations are called:

       ► Expenses

       ► Assets

       ► Capital

       ► Liabilities

   

Question No: 51    ( Marks: 5 )

 With the help of given data prepare Capital account of a sole trader and calculate closing balance of capital.

	Rs.
Balance b/f	550,000
Drawings	50,000
Profit & Loss (debit balance)	45,000

CAPITAL ACCOUNT
DEBIT SIDE		CREDIT SIDE
PARTICULARS	AMOUNT	PARTICULARS	AMOUNT
Profit and loss	45000	Balance b/f	550,000
Drawings	50,000
Balance c/f	455,000
TOTAL	550,000	TOTAL	550,000

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Question No: 52    ( Marks: 10 )

 Briefly explain the financial statements prepared by the organization. Why these are important for manufacturing concern?

ANSWER: The financial statements prepared by any organization are as follows:

1. Profit and loss account: It shows the performance of the business in a given period. It shows the profitability of business which shows the success or failure of the business. 
2. Balance sheet: Balance sheet shows the position of business at a given point. It shows the resources available by the business and the resources invested by the owner and other loans. 
3. Cash flow statements: Cash flow statements show the generation of cash and its usage over a given period.

   IMPORTANCE OF FINANCIAL STATEMENTS FOR MANUFACTURING CONCERN:  These financial statements are important for manufacturing concern organization as they provide information related to financial affairs of the organization. The profitability and liquidity, the resources available to the company and the generation of cash and its usage over a given period which provides reasonable information to the management to take decisions.

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Question No: 53    ( Marks: 10 )

 The comparative financial statement data for XYZ Company is given below:

                                                                                                     

	December 31
Assets:	2007	2006
	Rs.	Rs.
Cash	4,000	7,000
Accounts receivable	36,000	29,000
Inventory	75,000	61,000
Plant and equipment	210,000	180,000
Accumulated depreciation	(40,000)	(30,000)
Total Assets	285,000	247,000
Liabilities & Stockholder’s equity:
Accounts payable	45,000	39,000
Common stock	90,000	70,000
Retain earnings	150,000	138,000
Total liabilities & Stockholder’s equity	285,000	247,000

           

For 2007, the company reported net income as follows:

XYZ Company

Income Statement

For the year ended 31^st December, 2007

                                                                                               

                           Rs.

Sales                                                                                      500,000

Less: Cost of goods sold                                                      300,000        

Gross margin                                                                         200,000

Less Operating expenses                                                    180,000

Net Income                                                                              20,000

Required:

Prepare a Statement of Cash Flows if dividend of Rs. 8,000 was declared and paid during the year 2007. There were no sales of plant and equipment during the year.

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ANSWER:

Starting balance:

    Net income                                                                               20,000

Add: adjustment for non cash items                                                            

    Depreciation                                                                             38,000

Operating profit before working capital changes:                         58,000

Working capital changes:

Add: cash                                                                                      3,000

Less: accounts receivable                                                             (7,000)

Add: accounts payable                                                                   7,000

Cash generated from operations                                                  61,000                                                                                  

Cash flow from investing activities

Cash flow from financing activities:

Common Stock                                                                              20,000  

Net decrease in cash                                                                       3,000

Net cash flow                                                                                 78,000

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Question No: 54    ( Marks: 10 )

 Write a note on legal documents required for the formation of company.

ANSWER:

 LEGAL DOCUMENTS REQUIRED FOR FORMATION OF COMPANY:

MEMORENDUM OF ASSOCIATION: It contains the following information

         1. Name of company.

         2. Place of registered office

         3. Objective

         4. Amount of share capital with which company registers.

         

ARTICLES OF ASSOCIATION: It contains the following information

      A document that contains all the policies and other matters necessary to run the business of the company. It is signed by all the members of the company.

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