Complete Solved Final Term Paper Of MGT101- Financial Accounting

FINALTERM  EXAMINATION

Fall 2008

MGT101- Financial Accounting (Session - 3)

Ref

Time: 120 min

Marks: 85

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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

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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

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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

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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)

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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

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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

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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)

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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)

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

 It is supposed that on 31^st 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?

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       ► 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?

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       ► 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

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

 It is supposed that on 31^st 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

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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:     

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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

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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

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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

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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

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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

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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 31^st December, 2007. From this you are required to prepare an Income Statement for the year ended on 31^st 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:

ท      Prepaid insurance on 31^st December, 2007 is Rs. 1,400

ท      Outstanding salaries Rs. 1,000

ท      Depreciation on Plant and Machinery @ 10% p.a.

ท      Merchandise inventory on 31^st December, 2007 was valued at  Rs. 6,000

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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

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Question No: 53    ( Marks: 10 )

 Prepare Profit and Loss Account for the year ending 31^st 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

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Adjustments:

ท      Depreciate machinery and furniture @20%p.a.

ท      Outstanding Salaries Rs. 2,000

ท      Insurance paid in advance Rs. 500

ท      Maintain @5% reserve for doubtful debts on debtors.

ท      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

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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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