Principles of Accounting I Solved Paper ICOM 1 FBISE 2024 Annual (Latest Exam Solution Guide). This blog post provides a complete and easy-to-understand solution of the Principles of Accounting I paper for ICOM Part 1 (FBISE). It includes fully solved MCQs, short questions, and detailed numerical problems to help students prepare effectively for exams.
Whether you’re revising concepts or practicing past papers, this guide will strengthen your understanding of accounting fundamentals, journal entries, ledger posting, trial balance, and financial statements.
Perfect for FBISE students, ICOM Part 1 learners, and beginners in accounting, this post ensures clarity, accuracy, and exam-focused preparation.
Table of Contents
Principles of Accounting I Solved Paper ICOM 1 FBISE 2024 Annual (Latest Exam Solution Guide)
Q 1: Choose the correct answer A / B / C / D by filling the relevant bubble for each question on the OMR Answer Sheet according to the instructions given there. Each part carries one mark.
| Question | A | B | C | D |
| 1. The prime function of Accounting is to: | Record economic data | Maintain balance transaction | Record, classify and summarize business transaction | Provide the informational basis for action |
| 2. A person who owes money to a business is known as a/an: | Creditor | Debtor | Investor | Solvent |
| 3. Discount received is a/an: | Revenue | Asset | Expense | Liability |
| 4. Sales of goods to X for cash should be debited to: | Sales Account | Goods Account | X account | Cash account |
| 5. Which one of the following has debit balance? | Capital A/c | Creditor’s A/c | Motor vehicle A/c | Loan A/c |
| 6. In case of retirement of bill, the rebate or discount is a revenue for the: | Holder | Drawer | Payee | Acceptor |
| 7. The term imprest system is used in relation to: | Cheque book | Cash book | Petty cash book | Pay-in-Slip book |
| 8. Cheques issued to a creditor but not presented for payment are called: | Uncredited cheques | Uncollected cheques | Dishonored cheques | Unpresented cheques |
| 9. Position statement is similar to: | Trial balance | Balance sheet | Financial statement | Bank reconciliation |
| 10. All those expenses which have not become due but paid in advance are called: | Accrued expenses | Outstanding expenses | Prepaid expenses | Payable expenses |
| 11. A worksheet contains: | Eight pairs of columns | Seven pairs of money columns | Six pairs of money columns | Five pairs of money columns |
| 12. Cost incurred to generate revenue is called: | Prepaid expense | Expense | Revenue | Asset |
| 13. Depreciation on fixed assets used in the business is an example of: | Revenue expenditure | Capital expenditure | Deferred expenditure | Non-recurring expenditure |
| 14. A sale of Rs.1000 to Farid, was credited to his account, it will affect: | Sales A/c | Farid A/c | Sales return A/c | Sales A/c and Farid A/c |
| 15. Errors in casting of subsidiary books are called as: | Error of omission | Compensating error | Error of posting | Clerical errors |
| 16. According to this concept, an asset is recorded at a price at which it is acquired: | Money measurement | Dual aspect concept | Cost concept | Realization concept |
| 17. A trader whose assets exceed his liabilities is called: | Debtor | Creditor | Solvent | Insolvent |
| 18. T account is the simplest form of a: | Ledger | Journal | Trial Balance | Final Accounts |
| 19. Sales return book periodical total is posted to: | Debit of return inwards account | Credit of return inwards account | Debit of return outwards account | Credit of return outwards account |
| 20. Net sales – cost of goods sold – operating expenses = | Net profit | Operating profit | Profit before tax | Gross profit |
SECTION — B (Marks 30)
Q 2: Attempt any TEN parts. The answer to each part should not exceed 3 to 4 lines.
i. Purposes of Trial Balance
Answer: Trial Balance is prepared to check the arithmetical accuracy of accounts. It helps in detecting errors and acts as a base for preparing final accounts. It also summarizes all ledger balances in one place.
ii. Concept of Separate Business Entity
Answer: This concept means the business is treated as separate from its owner. All transactions are recorded from the business point of view only. Personal transactions of the owner are kept separate.
iii. Compare Journal with Ledger
Answer: Journal is the book of original entry where transactions are recorded first. Ledger is the book of final entry where transactions are classified into accounts. Journal shows chronological order, while ledger shows account-wise balances.
iv. Meaning of Accounting Equation
Answer: Accounting equation shows the relationship between assets, liabilities, and capital. It is:
Assets = Liabilities + Capital.
It forms the basis of double-entry accounting.
v. Difference between Pass Book and Cash Book
Answer: Cash book is maintained by the business to record cash and bank transactions. Pass book is maintained by the bank showing transactions of the customer’s account. Cash book shows business records, pass book shows bank records.
vi. Capital Expenditure
Answer: Capital expenditure is money spent on acquiring or improving fixed assets. It gives long-term benefits to the business. Example: purchase of machinery or building.
vii. Error of Omission
Answer: This error occurs when a transaction is completely or partially not recorded. If fully omitted, it does not affect trial balance. It can lead to incorrect financial results.
viii. Outstanding Expenses (with examples)
Answer: Outstanding expenses are expenses incurred but not yet paid. They are liabilities of the business. Examples: unpaid salaries, unpaid rent.
ix. Bank Reconciliation Statement
Answer: It is a statement prepared to reconcile the balance of cash book and pass book. It helps to identify differences due to timing or errors. It ensures accuracy of bank records.
x. Parties in Bill of Exchange
Answer: There are three parties involved.
Drawer (maker of the bill), Drawee (person who accepts), and Payee (person who receives payment).
xi. Debit Note and Credit Note
Answer: Debit note is issued by the buyer to inform the seller about goods returned or amount debited. Credit note is issued by the seller to inform the buyer about goods returned or amount credited.
xii. Examples of Administrative Expenses
Answer: Administrative expenses are general office expenses. Examples include office salaries, office rent, and stationery expenses.
Section — C Part I Marks 50
Q:3 Enter the following transactions in a three column cash book of M/S Khayam Traders:
| Date | Details |
| April 1 | Cash in hand Rs.4,000 |
| April 1 | Balance overdraft with bank Rs.6,000 |
| April 2 | Paid salaries and wages Rs.1,200 and rent by cheque of Rs.400 on personal account of Khayam |
| April 5 | Cash sales amounted to Rs.5,000 |
| April 6 | Paid into bank Rs.2,000 |
| April 8 | Sold investments having a face value of Rs.2,000 at Rs.4,000 and deposited the amount in bank |
| April 12 | Received a cheque from Kamal on account Rs.290 and allowed him discount Rs.40 |
| April 13 | Withdrew from bank for office use Rs.500 |
| April 15 | Purchased goods for cash Rs.1,000 |
| April 17 | Issued a bearer cheque in favour of Amir of Rs.1,080 in full settlement of Rs.1,200 |
| April 18 | Received cheque from Saleem Rs.480 in full settlement of Rs.500 |
| April 20 | Paid insurance premium in cash Rs.100 |
| April 25 | Cheque received from Saleem endorsed to Karim in full settlement of Rs.520 |
| April 29 | Cheque issued to Karim dishonoured |
| April 30 | Deposited cash in excess of Rs.490 in the bank account |
Solution:
| M/S Khayam Traders Three Column Cash Book | |||||||||||
| Date | Particulars | L.F. | Discount (Dr.) | Cash (Dr.) | Bank (Dr.) | Date | Particulars | L.F. | Discount (Cr.) | Cash (Cr.) | Bank (Cr.) |
| April 1 | Balance b/d | 4,000 | April 1 | Balance b/d | 6,000 | ||||||
| April 5 | Sales A/c | 5,000 | April 2 | Salaries & Wages A/c | 1,200 | ||||||
| April 6 | Cash A/c (C) | 2,000 | April 2 | Rent A/c (personal) | 400 | ||||||
| April 8 | Investment A/c | 4,000 | April 6 | Bank A/c (C) | 2,000 | ||||||
| April 12 | Kamal A/c | 40 | 290 | April 13 | Cash A/c (C) | 500 | |||||
| April 13 | Bank A/c (C) | 500 | April 15 | Purchases A/c | 1,000 | ||||||
| April 18 | Saleem A/c | 20 | 480 | April 17 | Amir A/c | 120 | 1,080 | ||||
| April 29 | To Karim (Dishonoured) | 480 | April 20 | Insurance Premium A/c | 100 | ||||||
| April 30 | Cash A/c (C) | 490 | April 25 | Karim A/c (Endorsed) | 40 | 480 | |||||
| April 30 | Bank A/c (C) | 490 | |||||||||
| April 30 | Balance c/d | 120 | 5,200 | 1490 | April 30 | Balance c/d | 5480 | ||||
| Total | 180 | 10750 | 7980 | Total | 180 | 10750 | 7980 | ||||
Q:4 From the following Trial Balance of Mr. Arif, prepare a Trading and Profit & Loss Account and a Balance Sheet for the year ended 31st December 2019.
Trial Balance
| Particulars | Rs. | Particulars | Rs. |
| Sales return | 600 | Capital | 20,000 |
| Plant and Machinery | 8,000 | Creditors | 3,400 |
| Sundry debtors | 4,800 | Purchase return | 1,000 |
| Drawings | 2,000 | Sales | 32,800 |
| Purchases | 21,000 | ||
| Bank | 10,000 | ||
| Repairs | 100 | ||
| Stock (01-01-2019) | 4,000 | ||
| Rent | 800 | ||
| Manufacturing expense | 3,600 | ||
| Trade expense | 1,400 | ||
| Bad debts | 400 | ||
| Fuel and Power | 500 | ||
| Total | 57,200 | 57,200 |
Adjustments
a. Stock on 31st December 2019 was Rs.2,900
b. Depreciate plant and machinery by Rs.800
c. Repairs Rs.80 is outstanding
d. Make a provision of 10% on Debtors for bad and doubtful debts
Solution:
| Mr. Arif | |||
| Trading P&L A/C | |||
| As on 31st December 2019 | |||
| Particulars | Dr. | Particulars | Cr. |
| Opening Stock | 4,000 | Sales 32,800 | |
| Purchases 21,000 | Less: Sales Return (600) | 32,200 | |
| Less: Purchase Return (1,000) | 20,000 | Closing Stock | 2,900 |
| Manufacturing Exp. | 3,600 | ||
| Fuel & Power | 500 | ||
| Cost of Goods Sold | 28,100 | ||
| Gross Profit c/d | 7,000 | ||
| 35,100 | 35,100 | ||
| Repairs 100 | Gross Profit b/d | 7000 | |
| Add outstanding 80 | 180 | ||
| Rent | 800 | ||
| Trade Expenses | 1,400 | ||
| Bad Debts 400 | |||
| Add Write off 0 | |||
| Add New Provision: | |||
| 4800 x 0.10 480 | |||
| Less Old Provision (0) | 880 | ||
| Depreciation on Plant & Machinery: | |||
| 8000 x 0.10 | 800 | ||
| Net profit transferred to capital a/c | 2940 | ||
| 7000 | 7000 | ||
| Mr. Arif | |||
| Balance Sheet | |||
| Year ended 31st December 2019 | |||
| Assets | Rs. | Liabilities & Capital | Rs. |
| Plant & Machinery (8,000 – 800) | 7 ,200 | Capital 20,000 | |
| Sundry Debtors 4800 | Less Drawings (2000) | ||
| Less: Write off: (0) | Add Net Profit 2940 | 20940 | |
| Less New Provision: (480) | 4320 | Creditors | 3,400 |
| Bank | 10,000 | Outstanding Repairs | 80 |
| Closing Stock | 2,900 | ||
| Total | 24,420 | Total | 24420 |
Part II Marks (10 x 3 = 30)
Q:5 2On 1st January 2019, Hassan sells goods to Taimoor for Rs.5,000. Hassan draws a bill on Taimoor for Rs.5,000 for two months. The bill is discounted at bank on 4th January for Rs.4,850. The bill is dishonoured and the bank pays Rs.20 for noting charges. On Taimoor’s request, Hassan draws a second bill on Taimoor for Rs.5,050 including Rs.30 as interest at two months. On maturity the second bill is honoured.
Required: Show the entries in the books of Hassan.
Solution:
| Journal of Hassan | ||||
| Date | Particulars | L.F. | Dr. (Rs.) | Cr. (Rs.) |
| Jan 1, 2019 | Taimoor A/c Dr. | 5,000 | ||
| To Sales A/c Cr. | 5,000 | |||
| (Goods sold to Taimoor) | ||||
| Jan 1, 2019 | Bills Receivable A/c Dr. | 5,000 | ||
| To Taimoor A/c Cr. | 5,000 | |||
| (Bill drawn on Taimoor for 2 months) | ||||
| Jan 4, 2019 | Bank A/c Dr. | 4,850 | ||
| Discount A/c Dr. | 150 | |||
| To Bills Receivable A/c Cr. | 5,000 | |||
| (Bill discounted with bank @ Rs.24,850) | ||||
| Mar 4, 2019 | Taimoor A/c Dr. | 5,020 | ||
| To Bank A/c | 5,000 | |||
| To Bank A/c (Noting charges) | 20 | |||
| (Dishonour of bill + noting charges paid by bank) | ||||
| Mar 4, 2019 | Taimoor A/c Dr. | 30 | ||
| To Interest A/c Cr. | 30 | |||
| (Interest on Taimoor’s request) | ||||
| Mar 4, 2019 | Bills Receivable A/c Dr. | 5,050 | ||
| To Taimoor A/c Cr. | 5,050 | |||
| (Second bill drawn for Rs.5,050 including interest) | ||||
| Apr 7, 2019 | Bank A/c Dr. | 5,050 | ||
| To Bills Receivable A/c Cr. | 5,050 | |||
| (Second bill honoured on maturity) | ||||
Q:6 From the following particulars, prepare a bank reconciliation statement of Mr. Khubaib as on 31st December 2020:
| Particulars | Amount (Rs.) |
| a) Balance as per Pass book | 5,434 |
| b) Cheque issued but not presented | 1,060 |
| c) Cheque deposited but not credited by bank | 690 |
| d) Interest charged by bank | 36 |
| e) Interest on government securities | 70 |
Solution:
| Mr. Khubaib Bank Reconciliation Statement As on 31st December 2020 | |||
| a) | Balance as Per Pass Book | Cr. | 5434 |
| b) | Less Unpresented Cheques | (1060) | |
| c) | Add Uncredited Cheques | 690 | |
| d) | Add interest charged by bank | 36 | |
| e) | Less interest on Govt. Securities | (70) | |
| Balance as per Cash Book (Dr.) | 5030 | ||
Q:7 State with reasons whether the following expenditures should be capital or revenue.
- Cost of plant and machinery.
- A heavy advertising expenditure was made to introduce a new product.
- Wages paid to workers for manufacturing goods.
- Purchase of lease hold land.
- Discount on issue of debentures.
Answer:
i. Cost of plant and machinery → Capital Expenditure
Because it is spent on acquiring a fixed asset that will be used for many years in the business and helps generate long-term benefits.
ii. Heavy advertising expenditure to introduce a new product → Capital Expenditure
Since it creates long-term benefits by establishing the product in the market and increasing future sales, it is treated as capital in nature.
iii. Wages paid to workers for manufacturing goods → Revenue Expenditure
These are routine operating expenses incurred in the day-to-day production process and are fully consumed within the current accounting period.
iv. Purchase of leasehold land → Capital Expenditure
It is the acquisition of a long-term asset (right to use land for a specific period), providing benefits over several years.
v. Discount on issue of debentures → Capital Expenditure (Deferred Revenue Expenditure)
Although it relates to raising finance, the benefit extends over the life of the debentures, so it is treated as a capital (or deferred revenue) expenditure and written off over time.
Q:8 The following errors were found in the books of a firm. Pass the necessary entries to rectify them:
- Rs.8,000 paid for wages to workmen for making show cases had been charged to the Wages A/c.
- A sale of Rs.18,000 has been passed through the Purchase book. The customer’s account has however been correctly debited.
- A sale of Rs.4,500 to Kabir Bros. was credited to their account.
- Rs.30,000 paid for the purchase of a Motorcycle for a partner had been charged to the miscellaneous expense account.
- A purchase of Rs.696 had been debited to Supplier’s account as Rs.632. The supplier was Sarwar.
Solution:
a)
Wrong Treatment
| Wages a/c Dr. | 8000 | |
| Cash a/c Cr. | 8000 |
Correct Treatment
| Show Cases a/c Dr. | 8000 | |
| Cash a/c Cr. | 8000 |
Rectified Treatment
| Show Cases a/c Dr. | 8000 | |
| Wages a/c Cr. | 8000 |
b)
Wrong Treatment
| Customer’s a/c Dr. | 108000 | |
| Purchase a/c Cr. | 18000 |
Correct Treatment
| Customer’s a/c Dr. | 18000 | |
| Sales a/c Cr. | 18000 |
Rectified Treatment
| Purchases a/c Dr. | 18000 | |
| Sales a/c Cr. | 18000 |
c)
Kabeer a/c wrongly credited instead of debit, so Kabeer a/c will be debited with double amount, 4500 for cancellation and 4500 for actual debite.
Sales a/c will be credited with actual 4500.
Suspense a/c will be credited with remaining amount of Rs. 4500
Rectified Treatment
| Kabeer’s a/c Dr. | 9000 | |
| Sales a/c Cr. | 4500 | |
| Suspense a/c Cr. | 4500 |
d)
Wrong Treatment
| Miscellaneous expense a/c Dr. | 30,000 | |
| Cash a/c Cr. | 30,000 |
Correct Treatment
| Drawing a/c Dr. | 30,000 | |
| Cash a/c Cr. | 30,000 |
Rectified Treatment
| Drawing a/c Dr. | 30,000 | |
| Miscellaneous expense a/c Cr. | 30,000 |
e)
Sarwar’s account should be credited with Rs.696 (purchase entry), but wrongly debited with Rs.632. So Sarwar’s account shows debit balance instead of credit; difference = 696 + 632 = 1,328 effect.
Rectified Treatment
| Purchases a/c Dr. | 696 | |
| Suspense a/c Dr. | 632 | |
| Sarwar’s a/c Cr. | 1328 |
