Principles of Accounting I Solved Paper ICOM 1 FBISE 2025 2nd 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 2025 2nd Annual (Latest Exam Solution Guide)
MCQS
| Question | A | B | C | D |
| A prepaid expense is: | An asset | A liability | An expense | An income |
| A gradual decrease in the value of fixed asset is called: | Reduction | Revaluation | Depreciation | Bad debts |
| Claims against assets, owned by business are called: | Assets | Liabilities | Capital | Equities |
| Cash paid to Nadeem will affect: | Cash and owner’s equity | Cash and Creditor | Cash and Debtor | Cash and Goods |
| Any legal activity which is done for the purpose of earning profit is called: | Trust | Society | Non-profit organization | Business |
| A person from whom credit purchases are made is called: | Debtor | Creditor | Banker | Owner |
| The best system of accounting in the modern world is: | Single entry system | Double entry system | Multiple entry system | No entry system |
| The art of recording transactions in a journal is called: | Posting | Journalizing | Ledger entry | Compound entry |
| Excess of credit over debit is called: | Debit balance | Credit balance | Zero balance | Opening balance |
| A person who writes out the order to pay is called: | Drawee | Acceptor | Drawer | Payee |
| A person to whom the bill is transferred will become: | Endorser | Creditor | Debtor | Endorsee |
| Subsidiary books are called books of: | Basic entry | Original entry | Secondary entry | Final entry |
| A book which is used to record small expenses is called: | Expenses book | Cash book | Purchase book | Petty cash book |
| A cash account always shows: | Debit balance | Credit balance | Zero balance | Overdraft balance |
| Unfavorable balance means: | Credit balance in passbook | Debit balance in cashbook | Debit balance in passbook | Credit balance in bank statement |
| Transactions having short term effects are known as: | Revenue transactions | Capital transactions | Non-monetary transactions | Paper transactions |
| Sales is a revenue receipt because: | The amount is small | It relates to routine activity of the business | It is received in many accounting years | No recurring receipt |
| The amount invested by the owner in the business to produce revenue is known as: | Income | Asset | Capital | Liability |
| If a transaction has been completely omitted from the journal, it will be considered as: | Error of commission | Error of principles | Compensating error | Error of omission |
| If any expense omitted to be recorded it will: | Overstate the profit | Understate the profit | Not affect the profit | Not affect the loss |
Q 2: Attempt any TEN parts. The answer to each part should not exceed 3 to 4 lines.
i. What is meant by “Errors of principle”?
Errors of principle occur when a transaction is recorded against the fundamental rules of accounting — for example, treating the purchase of a fixed asset as a revenue expense, or vice versa. These errors do not affect the trial balance.
ii. Briefly explain “deferred revenue expenditure”.
A large revenue expense that provides benefits over several years. Only a portion is charged as an expense each year; the remaining amount is treated as an asset (fictitious asset) and written off over time. Example: heavy advertising costs that benefit multiple periods.
iii. What is depreciation?
Depreciation is the systematic allocation of the cost of a fixed asset over its estimated useful life. It represents the wear and tear, aging, or decline in value of the asset.
iv. What is meant by “outstanding expenses”?
Expenses that have been incurred during the accounting period but have not yet been paid by the end of that period. They are shown as liabilities in the balance sheet.
v. Briefly explain “voucher”.
A voucher is a written document that provides evidence and authorization for a financial transaction. Examples include receipts, invoices, pay slips, and debit/credit notes.
vi. What is meant by “subsidiary books”? Write names of three subsidiary books.
Subsidiary books are special journals used to record similar types of transactions repeatedly. Three examples:
- Purchase Book
- Sales Book
- Cash Book
vii. What is meant by “discounting of bill”?
Discounting of a bill means selling a bill of exchange to a bank before its due date. The bank pays the holder the face value minus a small discount (interest), and the bank later collects the full amount from the acceptor.
viii. Briefly discuss the term “Days of Grace”.
Days of grace are the extra days (typically three) allowed for payment of a bill of exchange after its stated due date without penalty. If the due date is, say, June 10, the payer has until June 13 to pay.
ix. What is the meaning of the term “posting”?
Posting is the process of transferring entries from the journal (or subsidiary books) to the respective ledger accounts. It helps summarize all transactions affecting a particular account.
x. What is the meaning of the term “journal”?
A journal is the book of original entry where transactions are first recorded in chronological order, showing which accounts are debited and credited, along with a brief narration.
xi. Discuss the rules of debit and credit for asset, liability, and expense.
- Asset: Increase is debited; decrease is credited.
- Liability: Increase is credited; decrease is debited.
- Expense: Increase is debited; decrease is credited.
xii. What is meant by “Trade discount”?
A trade discount is a reduction in the list price of goods offered by a seller to a buyer, usually for bulk purchases or trade relationships. It is not recorded separately in the books; only the net amount (after discount) is recorded.
Q. 3 Record the following transactions into the Cash Book of Fazal Corporation and find out the balances at the end of month:
2023
Sep 01 – Cash in hand Rs.6,00,000, Cash at bank Rs.8,00,000
Sep 02 – Received a cheque from Rameez Rs. 19,800, Discount allowed Rs. 200
Sep 05 – Deposited into bank Rs. 80,000
Sep 06 – Purchased goods for Rs. 50,000 and paid by cheque
Sep 08 – Rameez’s cheque deposited into bank
Sep 10 – Sold goods to Ali on credit for Rs. 14,000
Sep 11 – Cash purchases Rs. 16,000 less trade discount @ 5%
Sep 13 – Cash sales Rs. 40,000 and banked
Sep 15 – Received from Shoaib cash Rs. 10,000 and cheque Rs. 6,000 and deposited cheque into bank
Sep 18 – Withdraw from bank for Rs. 60,000 for office use
Sep 20 – Received cash as commission Rs. 5,000
Sep 22 – Withdraw cash from bank for personal use for Rs. 20,000
Sep 25 – Paid rent by cheque Rs. 15,000
Sep 30 – Salary paid for Rs. 40,000
Solution:
| Date | Particulars | Disc. | Cash (Dr) | Bank (Dr) | Date | Particulars | Disc. | Cash (Cr) | Bank (Cr) |
| Sep 1 | Balance b/d | — | 600,000 | 800,000 | Sep 5 | Bank (C) | — | 80,000 | — |
| Sep 2 | Rameez | 200 | 19,800 | — | Sep 6 | Purchases | — | — | 50,000 |
| Sep 5 | Cash (c) | — | — | 80,000 | |||||
| Sep 8 | Cash (C) | — | — | 19,800 | Sep 8 | Bank (C) | — | 19,800 | — |
| Sep 13 | Sales | — | — | 40,000 | Sep 11 | Purchases | — | 15,200 | — |
| Sep 15 | Shoaib | — | 10,000 | 6,000 | Sep 18 | Cash (C) | — | — | 60,000 |
| Sep 18 | Bank (C) | 60,000 | Sep 22 | Drawings | — | — | 20,000 | ||
| Sep 20 | Commission | — | 5,000 | — | Sep 25 | Rent | — | — | 15,000 |
| Sep 30 | Salary | — | 40,000 | — | |||||
| Balance c/d | 539,800 | 800,800 | |||||||
| Total | 200 | 694,800 | 945,800 | Total | — | 694,800 | 945,800 |
Q. 4 The trial balance of Star Trader as on 31-12-2022 is given below. Prepare Trading, Profit and Loss account and balance sheet as on that date after taking into consideration the following adjustments:
Trial Balance
| Particulars | Debit (Rs.) | Particulars | Credit (Rs.) |
| Opening stock | 60,000 | Bills payable | 10,000 |
| Debtors | 80,000 | Capital | 2,22,400 |
| Furniture | 20,000 | Commission | 1,000 |
| Plant & Machinery | 1,00,000 | Sales | 4,62,000 |
| Purchases | 3,40,000 | Interest | 400 |
| Bill receivable | 22,000 | ||
| Carriage outward | 1,800 | ||
| Salaries | 20,000 | ||
| Rent | 5,400 | ||
| Wages | 22,600 | ||
| Cash at bank | 18,000 | ||
| Cash in hand | 6,000 | ||
| Total | 6,95,800 | Total | 6,95,800 |
Adjustments
a. Closing stock valued at Rs. 1,00,000
b. Salary outstanding Rs. 6000
c. Interest receivable for the year 2022 is Rs. 200
Solution:
| Star Trader | |||
| Trading P&L A/C | |||
| As on 31st December 2022 | |||
| Particulars | Dr. | Particulars | Cr. |
| Opening Stock | 60,000 | Sales | 4,62,000 |
| Purchases | 3,40,000 | Closing Stock | 100,000 |
| Wages | 22,600 | ||
| Gross Profit c/d | 139,400 | ||
| 562,000 | 562,000 | ||
| 35,100 | 35,100 | ||
| Salaries 20,000 | Gross Profit b/d | 139400 | |
| Add outstanding 6000 | 26,000 | Interest 400 | |
| Carriage outward | 1,800 | Add accrued 200 | 600 |
| Rent | 5,400 | Commission | 1,000 |
| Net profit transferred to capital a/c | 107800 | ||
| 141,000 | 141,000 | ||
| Star Trader | |||
| Balance Sheet | |||
| Year ended 31st December 2022 | |||
| Assets | Rs. | Liabilities & Capital | Rs. |
| Sundry Debtors | 80,000 | Capital 2,22,400 | |
| Furniture | 20,000 | Add Net Profit 107800 | 330200 |
| Plant & Machinery | 1,00,000 | Bills payable | 10,000 |
| Bill receivable | 22,000 | Outstanding Salaries | 6000 |
| Closing Stock | 100,000 | ||
| Cash at bank | 18,000 | ||
| Cash in hand | 6,000 | ||
| Accrued Interest | 200 | ||
| Total | 346200 | Total | 346200 |
Q. 5 Prepare a Bank Reconciliation Statement with the help of following information as on 31st December 2023.
(a) Bank balance as per cash book Rs. 60,000
(b) Interest on investment credited by bank Rs. 3,000
(c) Bank paid trade subscription Rs. 1,000 on behalf of account holder
(d) Cheque paid into bank but not collected by bank Rs. 8,000
(e) Cheque issued but not presented for payment Rs. 6,000
(f) Bank charges Rs. 200 appeared in the pass book only
Solution:
| Mr. ______ Bank Reconciliation Statement As on 31st December 2023 | |||
| a) | Balance as Per Cash Book | Dr. | 60,000 |
| b) | Add interest credited by bank | 3000 | |
| c) | Less bank paid trade subscriptions | (1000) | |
| d) | Less cheque paid but collected by bank | (8000) | |
| e) | Add Cheque issued but not presented | 6000 | |
| f) | Less Bank charges charged by bank | (200) | |
| Balance as per Pass Book | Cr. | 59800 | |
Q. 6 Show the effect of the following transactions upon the Accounting Equation.
2022
June 01 – Salman started his business with cash Rs. 1,00,000
June 05 – Purchased furniture for cash Rs. 4,000
June 06 – Purchased goods for cash Rs. 25,000
June 10 – Paid transportation on goods purchased Rs. 1,000
June 12 – Sold goods for cash Rs. 15,000 costing Rs. 11,000
June 15 – Purchased goods on credit basis for Rs. 15,000
June 18 – Cash paid to creditor Rs. 9,000
June 22 – Paid rent for month Rs. 4,000
Solution:
| Date | Transaction | Cash | Other Assets (Goods/Furniture) | Liabilities | Capital |
| Jun 1 | Started business | 100,000 | — | — | 100,000 |
| Jun 5 | Furniture purchased | 96,000 | +4,000 | — | 100,000 |
| Jun 6 | Goods purchased (cash) | 71,000 | +25,000 | — | 100,000 |
| Jun 10 | Transport paid | 70,000 | +26,000 | — | 100,000 |
| Jun 12 | Sold goods (profit 4,000) | 85,000 | +15,000 | — | 104,000 |
| Jun 15 | Goods on credit | 85,000 | +30,000 | 15,000 | 104,000 |
| Jun 18 | Paid creditor | 76,000 | +30,000 | 6,000 | 104,000 |
| Jun 22 | Rent paid | 72,000 | +30,000 | 6,000 | 100,000 |
Q. 7 Pass entries for Rectification of Errors given below:
(a) Sales return book has been undercast by Rs. 1,000
(b) A payment of Rs. 8,000 on account of rent has been posted twice to rent account
(c) A sum of Rs. 4,000 received from Nasir has not been posted to his account
(d) A sum of Rs. 15,000 debited to Imran a/c as Rs. 1,500
(e) A sale of Rs. 6,000 has been credited to customer’s a/c but sales was correctly recorded
Solution:
(a) Sales Return Book Undercast by Rs. 1,000
Sales return was recorded less, so increase it.
Entry:
Sales Return A/c Dr. 1,000
To Suspense A/c 1,000
(b) Rent Paid Rs. 8,000 Posted Twice
Rent is recorded extra, so remove extra expense.
Entry:
Suspense A/c Dr. 8,000
To Rent A/c 8,000
(c) Rs. 4,000 Received from Nasir Not Posted
Cash received but not credited to Nasir.
Entry:
Suspense A/c Dr. 4,000
To Nasir A/c 4,000
(d) Rs. 15,000 Debited as Rs. 1,500 (Short by 13,500)
Imran’s account needs more debit.
Entry:
Imran A/c Dr. 13,500
To Suspense A/c 13,500
(e) Sale Rs. 6,000 Credited to Customer Only (Sales Missing)
Sales account not credited, so correct it.
Entry:
Suspense A/c Dr. 6,000
To Sales A/c 6,000
Q. 8 Record the following transactions in Journal, post them in the ledger and prepare a trial balance.
2022
March 01 – Mr. Usman started business with cash Rs. 280,000, machinery Rs. 160,000, and stock Rs. 80,000
March 04 – Brought goods on credit from Noor Sons Rs. 40,000
March 06 – Sold goods to Imran for Rs. 120,000
March 09 – Issue a cheque to Noor Sons of Rs. 39,500 in full settlement of his account
March 10 – Paid salary to clerk for Rs. 20,000
Solution:
- Journal
| Date | Particulars | Debit (Rs.) | Credit (Rs.) |
| Mar 1 | Cash A/c Dr. | 280,000 | |
| Machinery A/c Dr. | 160,000 | ||
| Stock A/c Dr. | 80,000 | ||
| To Capital A/c | 520,000 | ||
| (Being business started) | |||
| Mar 4 | Purchases A/c Dr. | 40,000 | |
| To Noor Sons A/c | 40,000 | ||
| (Being goods purchased on credit) | |||
| Mar 6 | Imran A/c Dr. | 120,000 | |
| To Sales A/c | 120,000 | ||
| (Being goods sold on credit) | |||
| Mar 9 | Noor Sons A/c Dr. | 40,000 | |
| To Bank A/c | 39,500 | ||
| To Discount Received A/c | 500 | ||
| (Being payment made with discount) | |||
| Mar 10 | Salary A/c Dr. | 20,000 | |
| To Cash A/c | 20,000 | ||
| (Being salary paid) |
- Ledger
Cash Account
| Date | Particulars | Debit (Rs.) | Date | Particulars | Credit (Rs.) |
| Mar 1 | Capital | 280,000 | Mar 10 | Salary | 20,000 |
| Balance c/d | 260,000 | ||||
| Total | 280,000 | Total | 280,000 |
Bank Account
| Date | Particulars | Debit (Rs.) | Date | Particulars | Credit (Rs.) |
| — | — | — | Mar 9 | Noor Sons | 39,500 |
| Balance c/d | 39,500 | ||||
| Total | 39,500 | Total | 39,500 |
Capital Account
| Date | Particulars | Debit (Rs.) | Date | Particulars | Credit (Rs.) |
| — | Balance c/d | 520,000 | Mar 1 | Cash, Machinery, Stock | 520,000 |
Machinery Account
| Date | Particulars | Debit (Rs.) | Date | Particulars | Credit (Rs.) |
| Mar 1 | Capital | 160,000 | — | Balance c/d | 160,000 |
Stock Account
| Date | Particulars | Debit (Rs.) | Date | Particulars | Credit (Rs.) |
| Mar 1 | Capital | 80,000 | — | Balance c/d | 80,000 |
Purchases Account
| Date | Particulars | Debit (Rs.) | Date | Particulars | Credit (Rs.) |
| Mar 4 | Noor Sons | 40,000 | — | Balance c/d | 40,000 |
Sales Account
| Date | Particulars | Debit (Rs.) | Date | Particulars | Credit (Rs.) |
| — | Balance c/d | 120,000 | Mar 6 | Imran | 120,000 |
Imran Account
| Date | Particulars | Debit (Rs.) | Date | Particulars | Credit (Rs.) |
| Mar 6 | Sales | 120,000 | — | Balance c/d | 120,000 |
Noor Sons Account
| Date | Particulars | Debit (Rs.) | Date | Particulars | Credit (Rs.) |
| Mar 9 | Bank | 39,500 | Mar 4 | Purchases | 40,000 |
| Mar 9 | Discount | 500 | |||
| Total | 40,000 | Total | 40,000 |
Discount Received Account
| Date | Particulars | Debit (Rs.) | Date | Particulars | Credit (Rs.) |
| — | Balance c/d | 500 | Mar 9 | Noor Sons | 500 |
Salary Account
| Date | Particulars | Debit (Rs.) | Date | Particulars | Credit (Rs.) |
| Mar 10 | Cash | 20,000 | — | Balance c/d | 20,000 |
- Trial Balance
| Account | Debit (Rs.) | Credit (Rs.) |
| Cash | 260,000 | — |
| Bank | — | 39,500 |
| Machinery | 160,000 | — |
| Stock | 80,000 | — |
| Purchases | 40,000 | — |
| Imran | 120,000 | — |
| Salary | 20,000 | — |
| Capital | — | 520,000 |
| Sales | — | 120,000 |
| Discount Received | — | 500 |
| Total | 680,000 | 680,000 |
