In this post, we are going to solve the paper of Principles of Accounting I, Solved Paper 2018 Annual, ICOM I, FBISE, MCQS, Short Questions, Extensive Questions. This post will also be helpful for the students of BCOM, ADP Commerce and other disciplines related to business, finance and commerce. In other posts, all other chapters related to Principles of Accounting I will be discussed and also solved papers of Principles of Accounting for ICOM I for FBISE, BISE Lahore, BISE Rawalpindi will be presented to you. Solved Papers of Business Statistics are already posted on the website. More solved papers of Principles of Accounting I FBISE can be accessed from links below:
- Solved Paper Principles of Accounting I 2019 Annual FBISE
- Solved Paper Principles of Accounting I 2021 Annual FBISE
Solved by Iftikhar Ali, M.Sc Economics, MCOM Finance Lecturer Statistics, Finance and Accounting
Table of Contents
Principles of Accounting I, Solved Paper 2018 Annual, ICOM I, FBISE, MCQS, Short Questions, Extensive Questions
MCQS
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.
| 1 | Which of the following convention states “accounting practice should remain unchanged from one period to another”? | ||
| A) | Conservatism | B) | Materiality |
| C) | Full disclosure | D) | Consistency |
| 2 | Sold goods costing Rs.1500 for Rs.1750 will increase the owner’s equity by Rs: | ||
| A) | 250 | B) | 1500 |
| C) | 1750 | D) | 3250 |
| 3 | Accounts which keep records of expenses, gain and losses are called: | ||
| A) | Personal Accounts | B) | Nominal Accounts |
| C) | Real Accounts | D) | Partnership Accounts |
| 4 | The bills which become payable at any time when they are presented by the holder are called: | ||
| A) | Trade Bills | B) | Accommodation Bills |
| C) | Term Bills | D) | Demand Bills |
| 5 | Interest on renewal of a bill is an income tothe: | ||
| A) | Drawee | B) | Drawer |
| C) | Acceptor | D) | Debtor |
| 6 | The periodical total of the sales book is posted to the: | ||
| A) | Debit of sales account | B) | Credit of sales account |
| C) | Credit of cash account | D) | Credit of customer’s account |
| 7 | When the goods are returned to the suppliers, an intimation is sent to them it is called: | ||
| A) | Currency note | B) | Invoice |
| C) | Debit note | D) | Credit note |
| 8 | An entry which is recorded on the both sides of cash book it is called: | ||
| A) | Simple entry | B) | Compound entry |
| C) | Combined entry | D) | Contra entry |
| 9 | The term imprest system is used in relation to: | ||
| A) | Cheque Book | B) | Petty Cash Book |
| C) | Cash Book | D) | Pay-in Slip Book |
| 10 | Profit or loss appropriation account is not prepared in the case of: | ||
| A) | Partnership | B) | Join Stock Company |
| C) | Sole Tradership | D) | Partnership at will |
| 11 | Cheques received from debtors but not collected by the bank are called: | ||
| A) | Dishonoured cheques | B) | Un-credited cheques |
| C) | Un-presented cheques | D) | Bounced cheques |
| 12 | A cheque to Ali and Bros, returned dishonoured should be credited to: | ||
| A) | Cheque Account | B) | Cash Account |
| C) | Bank Account | D) | Ali and Bros. Account |
| 13 | Outstanding expense given in adjustment is called: | ||
| A) | A liability | B) | A gain |
| C) | An expense | D) | An asset |
| 14 | If the closing stock appears in the trial balance, it is taken only to the: | ||
| A) | Profit and Loss Account | B) | Trading Account |
| C) | Balance Sheet | D) | Final Account |
| 15 | The body of work sheet contains: | ||
| A) | Five pairs of money column | B) | Three pairs of money column |
| C) | Four pairs of money column | D) | Two pairs of money column |
| 16 | Which one of the following is a direct expense? | ||
| A) | Packing expense | B) | Manufacturing expense |
| C) | Advertising expense | D) | Traveling expense |
| 17 | _____ is the price of goods sold or servicesprovided by a business to its customers. | ||
| A) | Asset | B) | Cost |
| C) | Capital | D) | Revenue |
| 18 | An expenditure, which is non-recurring and irregular is called: | ||
| A) | Capital expenditure | B) | Revenue expenditure |
| C) | Shot-term expenditure | D) | Current expenditure |
| 19 | If sales return for Rs.3000 were incorrectly included in sales book. Gross Profit will be: | ||
| A) | Overstated by Rs.3000 | B) | Understated by Rs.6000 |
| C) | Overstated by Rs.6000 | D) | Understated by Rs.3000 |
| 20 | Errors which affect one account can be: | ||
| A) | Errors of commission | B) | Errors of posting |
| C) | Errors of Omission | D) | Compensating errors |
Short Questions
Total Marks Sections B and C: 80
Q 2: Attempt any TEN parts. The answer to each part should not exceed 3 to 4 lines.
(i) Define the term ‘drawings’.
Answer:
Drawings
Drawing is simply withdrawal of owner’s asset out of business for his/her personal use. It is contra to owner’s equity or capital. It may be in the form of goods or cash.
(ii) What are the three basic elements of accounting equation?
Answer
- Assets
- Liabilities
- Owner’s Equity or Capital
(iii) State the ‘Full Disclosure Convention’.
Answer:
Full Disclosure Convention
It is an accounting principle in which it is stated that all meaningful monetary information must be included in the financial statements which is important for the reader of financial statements.
(iv) Write any three causes of disagreement between the balances asper cash book and pass book.
Answer:
- Cheques issued by the account holder to creditors but not presented for payment.
- Cheques directly paid by the debtors to the bank but no intimation sent by the bank.
- Bank directly credited the account for receiving interest etc.
(v) What are ‘adjusting entries’?
Answer:
Adjusting Entries
Adjusting entries are made at the end of the accounting period. It records any unrecognized revenue and expense. Common types of adjusting entries are accruals, deferrals and estimates.
(vi) What are Revenue Loss? Give two examples.
Answer:
Revenue Loss
Loss incurred in the business in daily routine course of business is called revenue loss such as loss in selling goods or delivering services and bad debts etc.
(vii) Define the term ‘Deferred Revenue Expenditure’.
Answer:
Deferred Revenue Expenditure
Deferred revenue expenditures are expenditures have monetary benefit expected for more than one year such as advertisement campaign for launching new product.
(viii) Write any three advantages of ‘worksheet’.
Answer:
- An accurate way to assess a company’s financial standing before its financial statements are prepared.
- The process of preparing financial statements for each accounting period is made easier by the accounting worksheet.
- It reduces the mathematical errors and omission.
(ix) Define the cash system of accounting.
Answer: In cash system of accounting, only cash related transactions are recorded either for receiving or payment for current year or non-current year.
(x) What does discounting of a bill mean?
Answer:
If drawer of a bill, discounts the bill from the bank for urgent money against discount given to bank before due date of bill is called discounting of bill.
(xi) Why ledger is called ‘king of all books of account’?
Answer:
Ledger is considered as the king of all books of accounts because all journal entries are posted from journal to ledger accounts. It contains classified records of all transactions. Its balances are key to prepare trial balances and all financial statements.
(xii) Define the term ‘Abnormal Loss’. Give two examples.
Answer:
Abnormal Loss
Any loss which occurs due to abnormal reasons is called abnormal loss such as loss due to accident, fire etc. Abnormal loss is also called unavoidable loss.
Section — C Part I Marks 50
Extensive Questions
Q 3: From the following Trial Balance of Mr. Mumtaz, prepare a trading and profit and loss account and a balance Sheet for the year ended on 31st March 2016……
Q 3: From the following Trial Balance of Mr. Mumtaz, prepare a trading and profit and loss account and a balance Sheet for the year ended on 31st March 2016.
| Particulars | Debit (Rs.) | Credit(Rs.) |
| Stock-Opening | 9,600 | |
| Wages | 3,700 | |
| Bills Receivable | 500 | |
| Purchases | 12,000 | |
| Loose Tools | 100 | |
| Rates and Taxes | 220 | |
| Plant and Machinery | 2,000 | |
| Repairs | 660 | |
| Cash | 200 | |
| Office expenses | 600 | |
| Sundry debtors | 3,500 | |
| Income Tax | 50 | |
| Drawings | 500 | |
| Capital | 5,000 | |
| Bills Payable | 900 | |
| Sales | 24,900 | |
| Reserves for bad Debts | 500 | |
| Sundry Creditor | 2,330 | |
| Total | 33,630 | 33,630 |
Adjustments:
- Stock on 31st March. 2016 was Rs.3500.
- Loose Tools on 31st March, 2016 was valued at Rs.70.
- Write off Rs.400 out of Sundry Debtors on account of Bad Debts.
- Depreciate Plant and machinery at 10 per cent.
Solution:
Mr. Mumtaz
Trading Profit & Loss Account
As on 31st December 2016
| Details | Rs. | Details | Rs. |
| Stock-Opening | 9,600 | Sales | 24,900 |
| Wages | 3,700 | Closing Stock | 3500 |
| Purchases | 12,000 | ||
| Gross Profit c/d | 3100 | ||
| 28400 | 28400 | ||
| Depreciation on Plant & Machinery: | Gross Profit b/d | 3100 | |
| (2000 x 0.10) | 200 | Bad Debts Over Provision | 100 |
| Depreciation on Loose Tools: | |||
| (100 – 70) | 30 | ||
| Rates and Taxes | 220 | ||
| Repairs | 660 | ||
| Office expenses | 600 | ||
| Bad Debts 0 | |||
| Add Write Off 400 | |||
| Add New Provision: | |||
| 0 | |||
| Less Old Provision (500) (100) | |||
| Income Tax | 50 | ||
| Net Profit transferred to Capital | 1440 | ||
| 3200 | 3200 | ||
Mr. Mumtaz
Balance Sheet
Year ended 31st December 2016
| Assets | Rs. | Liabilities | Rs. |
| Plant & Mach. Less Depreciation | Capital 5000 | ||
| (2000 – 200) | 1800 | Less Drawings (500) | |
| Loose Tools Less Depreciation | Add Net Profit 1440 | 5940 | |
| (100 – 30) | 70 | Sundry creditors | 2330 |
| Bills Receivable | 500 | Bills Payable | 900 |
| Sundry Debtors 3500 | |||
| Less Write Off (400) | |||
| Less New Provision (0) | 3100 | ||
| Closing Stock | 3500 | ||
| Cash | 200 | ||
| 9170 | 9170 | ||
Q 4: From the following particulars write up a ‘Three Column’ cash book of Mr. Naseem…..
Q 4: From the following particulars write up a ‘Three Column’ cash book of Mr. Naseem.
2015 May 1 Cash in hand Rs.29,650
May 1 Cash at bank Rs.15,000
May 3 Goods sold for cash Rs.4,500
May 5 Goods bought for cash Rs. 9,000
May 8 Received a cheque from M. Farooq for Rs.9,650 in full settlement of his dues Rs.9,800.
May 9 Cheque received from M. Farooq deposited into the bank.
May 11 Paid to Zulfiqar cash Rs.5,000 and a cheque for Rs.4, 700 in full settlement of his dues for Rs.10,000.
May 15 Cash received from M. Kaleem Rs.4,900 in full settlement of his dues Rs.5,000.
May 17 Paid cash to Adnan Rs.1,950 in full settlement of his dues Rs.2,000.
May20 Received a cheque from Asim Rs.3,900 in full settlement of his dues Rs.4,000.
May 21 Cheque received from Mr. Asim deposited into the bank.
May25 Bank credited interest Rs.200
May26 Bank credited commission Rs.300
May29 Bank debited bank charges Rs.400
May30 Bank paid utility bill of Rs.300 on behalf of Mr. Naseem
Solution:
Treble/Triple/Three Column Cash Book
| Date | Particulars | V/No | L.F | Discount Allowed | Cash | Bank | Date | Particulars | V/No | L.F | Discount Allowed | Cash | Bank |
| 2015 | 2015 | ||||||||||||
| 1st May | Balance b/d | 29650 | 15000 | 5th May | Purchases A/C | 9000 | |||||||
| 3rd May | Sales A/C | 4500 | 9th May | Bank A/C | C | 9650 | |||||||
| 8th May | M. Farooq’s A/C | 150 | 9650 | 11th May | Zulfiqar’s A/C | 300 | 5000 | 4700 | |||||
| 9th May | Cash A/C | C | 9650 | 17th May | Adnan’s A/C | 50 | 1950 | ||||||
| 15th May | M.Kaleem’s A/C | 100 | 4900 | 21st May | Bank A/C | C | 3900 | ||||||
| 20th May | Asim’s A/C | 100 | 3900 | 29th May | Bank Charges A/C | 400 | |||||||
| 21st May | Cash A/C | C | 3900 | 30th May | Utility Bill A/C | 300 | |||||||
| 25th May | Interest A/C | 200 | |||||||||||
| 26th May | Commission A/C | 300 | |||||||||||
| 30th May | Balance c/d | 23100 | 23650 | ||||||||||
| 350 | 52600 | 29050 | 350 | 52600 | 29050 | ||||||||
Part II Marks (10 x 3 = 30)
Q 5: Enter the following transactions in the relevant subsidiary books (Special Journals) of a trader and post them in the Ledger Account…..
Q 5: Enter the following transactions in the relevant subsidiary books (Special Journals) of a trader and post them in the Ledger Account.
- Purchased goods from Farid Bros. Rs.5000.
- Sold goods to X on credit Rs.3000
- Goods purchased from Farid and Bros. valued at Rs.500 now returned to them being not according to sample.
- Goods worth Rs.500 sold to X now received back from him as these were found unsuitable.
- Purchased from Noor and Co 100 kg tea@ 30 per kg.
- Sold to Naeem and Sons 30 kg Tea @ Rs.40 per kg.
- Returned by Naeem and Sons 10 kg tea being not according to sample.
- Retuned 10 kg tea to Noor and Co. being damaged.
Solution:
Purchase Journal (Book)
| Date | Description | Invoice No. | L.F | Details Rs. | Amount Rs. |
| I | Fareed Bros | 5000 | 5000 | ||
| V | Noor & Co. | 3000 | 3000 | ||
| 100 kg @ 30 per kg | |||||
| Purchases A/C Dr. | 8000 |
Sales Journal (Book)
| Date | Description | Invoice No. | L.F | Details Rs. | Amount Rs. |
| II | X | 3000 | 3000 | ||
| VI | Naeem & Sons | 1200 | 1200 | ||
| 30 kg @ 40 per kg | |||||
| Sales A/C Cr. | 4200 |
Purchase Return Journal (Book)
| Date | Description | Invoice No. | L.F | Details Rs. | Amount Rs. |
| III | Farid and Bros | 500 | 500 | ||
| VIII | Noor & Co. | 300 | 300 | ||
| 10 Kg @ 30 Per Kg | |||||
| Purchases Return A/C Cr. | 800 |
Sales Return Journal (Book)
| Date | Description | Invoice No. | L.F | Details Rs. | Amount Rs. |
| IV | X | 500 | 500 | ||
| VII | Naeem & Sons | 400 | 400 | ||
| 10 Kg @ 40 Per Kg | |||||
| Sales Return A/C Dr. | 900 |
Ledger Accounts
| Purchases A/C | |||
| Dr. | Amount | Cr. | Amount |
| Sun. Creditors A/C | 8000 | ||
| Farid Bros. A/C | |||
| Dr. | Amount | Cr. | Amount |
| Purchases Return A/C | 500 | Purchases A/C | 5000 |
| Noor & Co. A/C | |||
| Dr. | Amount | Cr. | Amount |
| Purchases Return A/C | 300 | Purchases A/C | 3000 |
| Purchases Return A/C | |||
| Dr. | Amount | Cr. | Amount |
| Sun. Creditors A/C | 800 | ||
| Sales Return A/C | |||
| Dr. | Amount | Cr. | Amount |
| Sundry Debtors A/C | 900 | ||
| Sales A/C | |||
| Dr. | Amount | Cr. | Amount |
| Sundry Debtors A/C | 4200 | ||
| X A/C | |||
| Dr. | Amount | Cr. | Amount |
| Sales A/C | 3000 | Sales Return A/C | 500 |
| Naeem & Sons A/C | |||
| Dr. | Amount | Cr. | Amount |
| Sales A/C | 1200 | Sales Return A/C | 400 |
Q 6: On 1st November 2014. X drew and Y accepted a bill of Rs.1000 at two months. X sent the bill to his banker for collection…..
Q 6: On 1st November 2014. X drew and Y accepted a bill of Rs.1000 at two months. X sent the bill to his banker for collection. On the due date the bill was duly presented to the acceptor but he could not meet his acceptance. The bank paid Rs.25 as noting charges on behalf of X.
Required: Pass the Journal entries in the books of X, Y and the Bank.
Solution:
X’s Journal
| Date | Detail | L/F | Dr. Amount | Cr. Amount |
| 2014 | ||||
| Nov, 1 | B/R A/c | 1000 | ||
| Y’s A/c | 1000 | |||
| (Acceptance received from Y) | ||||
| Nov, 1 | Bank for Collection A/c | 1000 | ||
| B/R A/c | 1000 | |||
| (Bill sent for collection) | ||||
| 2015 | ||||
| Jan, 4 | Y’s A/c | 1000 | ||
| Bank for Collection A/c | 1000 | |||
| (Bill dishonoured by Y) | ||||
| Jan, 4 | Y’s A/c | 25 | ||
| Bank A/c | 25 | |||
| (Noting charges paid to bank and receivable from Y) | ||||
Y’s Journal
| Date | Detail | L/F | Dr. Amount | Cr. Amount |
| 2014 | ||||
| Nov, 1 | X’s A/c | 1000 | ||
| B/P A/c | 1000 | |||
| (Acceptance given to X) | ||||
| 2015 | ||||
| Jan, 4 | B/P A/c | 1000 | ||
| X’s A/c | 1000 | |||
| (Bill dishonoured) | ||||
| Noting Charges A/c | 25 | |||
| X’s A/c | 25 | |||
| (Noting charges claimed by X) | ||||
Bank’s Journal
| Date | Detail | L/F | Dr. Amount | Cr. Amount |
| 2015 | ||||
| Jan, 4 | X’s A/c | 25 | ||
| Cash A/c | 25 | |||
| (Noting charges paid by bank on behalf of X) |
Q 7: The following facts relate to the business of Mr. Shahid……Prepare a Bank Reconciliation Statement as on Dec 31, 2015 with the help of ‘Revised Cash Book’.
Q 7: The following facts relate to the business of Mr. Shahid:
1. The bank overdraft as per cash book on 31st December 2015 was Rs.6000.
2. Interest on overdraft for six months ending 31st December 2015, Rs.200 is debited in the Bank Statement.
3. Bank charges for the above period also debited in the Bank statement amounted to Rs.50.
4. Cheques issued but not cashed, prior to 31st December 2015 amounted to Rs.1500.
5. Cheques paid into Bank, but not cleared and credited before 31st December 2015 were for Rs.2,500.
6. Interest on investments collected by the bankers and Credited in the Bank Statement amounted to Rs.1800.
Required:
Prepare a Bank Reconciliation Statement as on Dec 31, 2015 with the help of ‘Revised Cash Book’.
Solution:
Revised Cash Book
| Date | Particulars | Bank Rs. | Date | Particulars | Bank Rs. |
| Interest A/C | 1800 | Balance b/d | 6000 | ||
| Balance c/d | 4450 | Interest A/C | 200 | ||
| Bank Charges A/C | 50 | ||||
| 6250 | 6250 |
| Mr. Shahid |
| Bank Reconciliation Statement |
| As on 31st December 2015 |
| Balance as per Cash Book (Cr.) | Cr. (4450) | |
| Add Cheques issued but not cashed | 1500 | |
| Less un-cleared cheques | (2500) | |
| Balance as Per Pass Book (Dr.) | Cr. 5450 |
Q 8: A trader by preparing his Trial Balance found Rs. 800 excess debit and transferred it to the suspense account. Later he found the following errors…..
Q 8: A trader by preparing his Trial Balance found Rs. 800 excess debit and transferred it to the suspense account. Later he found the following errors:
- An item of sale for Rs. 5,900 was posted to the sales account as Rs. 9,500.
- The total of the Sales Returns Book had been added Rs.100 short.
- An amount of Rs.3,700 received from a customer had been credited to his account as Rs.7,300.
- Rs.1,50, 000 paid for purchases of building had been charged to the ordinary purchase account.
- A sum of Rs.9,500 written off from building account as depreciation had not been posted to depreciation account.
- An amount received from a debtor of Rs. 9,700 had been debited to his account as Rs. 7,900.
Required:
Give the rectifying entries and prepare the suspense account.
Solution:
Journal
| Date | Details | L/R | Dr. Rs. | Cr. Rs. |
| (i) | Sales A/c | 3600 | ||
| Suspense A/c | 3600 | |||
| (Sales A/c overstated, now rectified) | ||||
| (ii) | Sales Return A/c | 100 | ||
| Suspense A/c | 100 | |||
| (Sales return short by 100, now rectified) | ||||
| (iii) | Customer’s A/c | 3600 | ||
| Suspense A/c | 3600 | |||
| (Customer’s A/c overstated, now rectified) | ||||
| (iv) | Building A/c | 150,000 | ||
| Purchases A/c | 150,000 | |||
| (Purchases A/c debited instead of building, now rectified) | ||||
| (v) | Depreciation on building A/c | 9500 | ||
| Suspense A/c | 9500 | |||
| (Depreciation on building not posted, now rectified) | ||||
| (vi) | Suspense A/c | 17,600 | ||
| Debtor’s A/c | 17,600 | |||
| (being debtors a/c wrongly debited with wrong amount, now rectified) | ||||
Suspense Account
| Date | Detail | J/R | Amount | Date | Detail | J/R | Amount |
| Balance b/d | 800 | ||||||
| Debtor’s A/c | 17,600 | Sales A/c | 3600 | ||||
| Sales Return A/c | 100 | ||||||
| Customer’s A/c | 3600 | ||||||
| Depreciation on building A/c | 9500 | ||||||
| 17,600 | 17,600 |
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