Solution ACC180 Jan 2012
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1) The document contains an answer scheme for accounting questions with explanations and examples of accounting concepts and transactions. 2) It provides the accounting entries for various transactions, extracts of financial statements including income statement, balance sheet and appropriation account. 3) Sample questions assess understanding of accounting concepts such as errors, revenue and expense recognition, accounting principles and preparation of final accounts for sole proprietorship.
Solution ACC180 Jan 2012
- 1. ANSWER SCHEME QUESTION 1 a. Error of Omission – Entire transaction not recorded or completely omitted from the books of account. There is no debit or credit entries. Example Error of Commission – Correct amount is posted into wrong account of the same category of accounts. Example Error of Principle - Correct amount is posted into an account but of a different category. Example Complete Reversal of Entries - amount and the accounts are correct but each item is shown on the wrong side of the account. Example Compensating Errors – an error on the debit side is compensated by an error of an equal amount on the credit side. The error cancels out each other. Example Error of Original Entry – errors were made in the books of original entry (journals). Example b. i. Bad Debts – Some customers may never pay for the goods sold to them, even though reminders have been sent. The business then decides to write off the amount due and is classified as bad debt. Bad debts is an expense to the business and will be charged in the Income Statement. Example Allowance for bad and doubtful debts – The business, through bad experiences of bad debts, may decide to allow a certain percentage as provision for bad and doubtful debts. Estimation is made as to the amount that will not be collectable. Example ii. Accrued revenue – also known as revenue owing. It is revenue earned from services performed but payment is not yet received; and shown as current asset in the Balance Sheet. Expenses prepaid – also known as expenses paid in advance. It is payment of expenses that will benefit more than one accounting period and shown as current asset in the Balance Sheet. c. Consistency Concept - This concept deals with the consistent use of basis or methods. This means when a business has once fixed a method for the accounting treatment of an item, it will enter all similar items that follow in exactly the same way.
- 2. QUESTION 2 a. DEBIT CREDIT EFFECT EFFECT i. Machinery Papan Trading Asset Mach. Liab. Creditor Incr. Papan Incr. ii. Supplier/Creditor Ret. Out Liab.Creditor Asset Stock Decr. Decr. Purchases Decr iii. Bank Interest Rec. Asset Bank Revenue Int. Incr. Rec. Incr. iv. Drawings Bank Capital Decr. Asset Bank Decr. v. Bank Loan- B.Islam Asset Bank Liab. Creditor Incr. B.Islam Incr. b. Insurance a/c Bal b/d 562 P& L 1,236 Bank 1,019 Bal c/d 345 1,581 1,581 . Wages a/c Cash 15,000 Bal b/d 306 Bal c/d 419 P& L 15,113 15,419 15,419 Rent Received a/c P& L 2,741 Bal b/d 36 Bank 2,600 Bal c/d 105 2,741 2,741 Income Statement Extract Revenue Rent Received 2,741 Expenses Insurance 1,236 Wages 15,113
- 3. QUESTION 3 a. Lorries A/c 1 Nov 2009 Bal b/d 1,060,000 31 Oct 2009 Bal c/d 1,060,000 1 Nov 2010 Bal b/d 1,060,000 1 Jan 2011/ Disposal 270,000 (Nissan) 31 Oct 2011 Bal c/d 790,000 1,060,000 1,060,000 1 Nov 2011 Bal b/d 790,000 Workings 1 Nov 2009 – 31 Oct 2010 ~ 1,060,000 x 25% = 265,000 1 Nov 2010 – 31 Oct 2011 ~ 790,000 x 25% = 197,500 Nissan: Acc Depr – 25/12/08 – 31/10/09 2 years x 25% x 270,000 = 135,000* 1/11/09 – 31/10/10 Daihatsu: 11/3/09 – 31/10/09: 1 Year- 25% x 440,000 = 110,000* Toyota: 30/11/07 – 31/10/08 ; 1/11/08 – 31/10/09 - 2 Years x 25% x 350,000 = 175,000* Acc. Depreciation - Lorries A/c 31 Oct 2010 Bal c/d 685,000 1 Nov 2009 Bal b/d * 420,000 Depreciation 265,000 685,000 685,000 1 Jan 2011 Disposal 135,000 1 Nov 2010 Bal b/d 685,000 (Nissan) 31 Oct 2011 Bal c/d 747,500 Depreciation 197,500 882,500 882,500 Disposal A/c – Lorry Nissan Lorries 270,000 Acc. Department 135,000 P&L – Profit / 4,000 Bank 139,000 274,000 274,000 Balance Sheet Extract Cost Acc Deprn. Net Book Value 31 Oct 2010 1,060,000 685,000 375,000 31 Oct 2011 790,000 747,500 42,500
- 4. b. 1. Dr Suspense 4,100 Cr Purchases 4,100 2. Dr Discount Allowed/ 190 Cr Suspense/ 190 3. Dr Suspense 335 Cr Debtor Anaz 335 4. Dr Premises 270,000 Cr Purchases 270,000 5. Dr Suspense 99 Cr Sales 99 6. Dr Sales Ret/Ret In. 120 Cr Debtor 120 QUESTION 4 a. Opening Capital = Assets – Liabilities = 17,573 – 2,030 = RM15,543 Workings TOTAL SALES = Cash Sales + Credit Sales = 3,921 + 46,215 = 50,136 Shop Fittings: 4,200 + 2,550 – (300 + 250) = 6,200 x 10% = 620 Creditors Control A/c Bank 22,177 Bal b/d 1,598 Bal c/d 2,445 Purchases 23,024 24,622 24,622 Debtors Control A/c Bal b/d 2,643 Bank 44,846 Sales 46,215 Bal c/d 4,012 48,858 48,858
- 5. M.Vehicle Exp.A/c Bank 2,116 Bal b/d 432 Bal c/d 291 P&L (Inc. St) 1,975 2,407 2,407 Income Statement for the year ended 30 September 2011 Sales 50,136 Less C.O.G.S Op. Stock 3,210 Add Purchases 23,024 26,234 Less Closing stock 4,063 22,171 Gross Profit 27,965 Less Expenditure M. Veh Exp 1,975 Insurance 769 Electricity 1,090 Advertising 1,430 Rent 2,000 Telephone 360 Depreciation – M. Veh. 1,020 - Shop Fittings 620 9,264 Net Profit 18,701 Statement of Financial Position as at 30 September 2011 Non Current Assets Acc. Depr NBV Cost Motor Vehicle 5,100 1,020 4,080 Shop Fittings 6,200 620 5,580 9,660 Current Assets Debtors 4,012 Stock 4,063 Bank (1,775 + 300) 2,075 Insurance Prepaid 177 10,327 RM19,987 Owner’s Equity Capital 15,543
- 6. Add Net Profit 18,701 34,244 Less Drawing 16,993 (16,743/ + 250/) 17,251 Current Liabilities Creditors 2,445 M.Veh Exp. Accrued 291 2,736 RM19,987 QUESTION 5 Income Statement for the year ended 30 November 2011 Sales 508,000 Less Sales Return 6,000 502,000 Less C.O.G.S Op. Stock 75,000 Add Purchases 380,000 + Purchases 3,000 383,000 +Carr. In. 21,500 404,500 Less Partner’s Drawings 1,130(500 + 630 ) 403,370 Less Purch.Ret. 12,000 391,370 466,370 Less Closing Stock 68,000 398,370 Gross Profit 103,630 Add Disc. Rec. 1,000 104,630 Less Expenditure Disc. allowed 1,200 Bad debts 1,400 Carr. out 3,000 Advertising 5,000 Rates 2,600 Staff salaries 42,900 Office expenses 7,500 Depreciation – F&F 1,500
- 7. (Incr.)Allow.for D. Debts 400 65,500 Net Profit 39,130 Appropriation Account Add Int.on Drawings: Sun 360 Moon 280 640 39,770 Less Salaries: Sun 12,000 Moon 8,000 20,000 Int.on Capital: Sun 5,000 Moon 2,500 7,500 Int.on Current Acc.: Sun 100 Moon (30) 70 27,570 12,200 Partner’s Approp. Profits: Sun 6,100 Moon 6,100 Current A/c Sun Moon Sun Moon Bal b/d 600 Bal b/d 2,000 Int.on Curr.a/c 30 Salaries 12,000 8,000 Drawings 15,500 10,630 Int.on Cap.a/c 5,000 2,500 Int.on Drawings 360 280 Int.on Curr.a/c 100 Bal c/d 9,340 5,060 Approp. Profit 6,100 6,100 25,200 16,600 25,200 16,600
- 8. Statement of Financial Position as at 30 November 2011 Non Current Assets Freehold Premises 50,000 Fixt.& Fitting(cost) 15,000 Less Acc.Depr. 4,500 10,500 60,500 Current Assets Debtors 52,400 Less All.D.Debts 2,400 50,000 Stock 68,000 Bank 31,600 Rates Prepaid 20 149,800 RM 210,300 Owner’s Equity Capital: Sun 100,000 Moon 50,000 150,000 Curr. Acc.: Sun 9,340 Moon 5,060 14,400 164,400 Non Current Liabilities Loan- Chartered Bank 8,700 Current Liabilities Creditors (33,300+3,000) 36,300 Salaries Accrued 900 45,900 RM210,300