Principles of Accounting Solved Paper ICOM 1 FBISE 2021 Annual (Latest Exam Solution Guide). This blog post provides a complete and easy-to-understand solution to the Principles of Accounting ICOM Part 1 paper conducted by the Federal Board of Intermediate and Secondary Education Islamabad. It is specially designed for students who want to prepare effectively for exams by practicing past papers with accurate and step-by-step solutions.
The solved paper includes detailed explanations of important topics such as journal entries, ledger posting, trial balance, bank reconciliation statement, and error rectification. Each question is solved in a clear and structured manner to help students strengthen their concepts and improve problem-solving skills.
Whether you are revising before exams or aiming to understand accounting fundamentals more deeply, this guide will help you gain confidence and perform better in your ICOM Part 1 examinations.
Table of Contents
Principles of Accounting Solved Paper ICOM 1 FBISE 2021 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.
| 1 | The amount of cash or goods invested by the proprietor in a business is called: | ||
| A) | Revenue | B) | Asset |
| C) | Capital | D) | Expenses |
| 2 | Bank loan increases the liabilities as well as: | ||
| A) | Capital | B) | Asset |
| C) | Revenue | D) | Expenses |
| 3 | The concept of offsetting expenses against revenue is called: | ||
| A) | Matching concept | B) | Realisation concept |
| C) | Cost concept | D) | Going concern concept |
| 4 | Accounts which are related with expenses, losses and gains are known as: | ||
| A) | Personal accounts | B) | Real or property accounts |
| C) | Impersonal accounts | D) | Nominal accounts |
| 5 | The process of recording transactions in ledger is called: | ||
| A) | Recording | B) | Posting |
| C) | Journalizing | D) | Transferring |
| 6 | A gradual decrease in the value of fixed asset is called: | ||
| A) | Reduction | B) | Depreciation |
| C) | Revaluation | D) | Appreciation |
| 7 | Drawings are deducted from: | ||
| A) | Sales | B) | Expenses |
| C) | Income | D) | Capital |
| 8 | Closing stock is recorded in: | ||
| A) | Trading account and balance sheet | B) | Profit and loss account only |
| C) | Balance sheet only | D) | Trading account only |
| 9 | Bank reconciliation statement is prepared by: | ||
| A) | Banker | B) | Customers accountant |
| C) | Auditors | D) | Contractors |
| 10 | The favourable balance of cash book bank column is: | ||
| A) | Credit balance | B) | Debit balance |
| C) | Both Debit and Credit balance | D) | Nil balance |
| 11 | The book in which all cash transactions are primarily recorded is called: | ||
| A) | Pass Book | B) | Cheque Book |
| C) | Sales Book | D) | Cash Book |
| 12 | Wages paid for the erection of a machine debited to wages account is an example of: | ||
| A) | Error of omission | B) | Error of commission |
| C) | Error of principle | D) | Compensating error |
| 13 | If the amount is paid by the debtor before the due date, a deduction or allowance given by a creditor to a debtor is called: | ||
| A) | Cash discount | B) | Trade discount |
| C) | Sales returns and allowances | D) | Purchase returns and allowances |
| 14 | If any expense omitted to be recorded it will: | ||
| A) | Have no effect on profit | B) | Overstate the profit |
| C) | Understate the profit | D) | Overstate the expense |
| 15 | The excess of credit column over debit column in profit and loss account is called: | ||
| A) | Net loss | B) | Net profit |
| C) | Gross loss | D) | Gross profit |
| 16 | It is a statement of assets, liabilities and owner’s equity on a particular date: | ||
| A) | Financial statement | B) | Balance sheet |
| C) | Bank reconciliation statement | D) | Income statement |
| 17 | All those expenses which have become due but not paid: | ||
| A) | Accrued revenue | B) | Prepaid revenue |
| C) | Prepaid expenses | D) | Outstanding expenses |
| 18 | The account holder deposited money into the bank with the help of: | ||
| A) | Pay-in-slip book | B) | Cheque book |
| C) | Pass book Pass book | D) | Cash book |
| 19 | An expenditure which is related to sale of goods is shown in: | ||
| A) | Trading account | B) | Sales account |
| C) | Profit or loss account | D) | Balance sheet |
| 20 | All those goods which are lying unsold in a business are termed as: | ||
| A) | Revenue | B) | Expenses |
| C) | Stock | D) | Sale |
Q 2: Attempt any TEN parts. The answer to each part should not exceed 3 to 4 lines.
(i) What is meant by ‘Bad Debt recovered’?
When a debt was earlier written off as uncollectible (bad debt) but the customer pays it later, it’s called bad debt recovered. It is treated as a gain and credited to the Bad Debts Recovered account.
(ii) State the convention of materiality.
This convention says that trivial or insignificant items can be ignored or treated in a simpler way if they don’t affect the decision-making of users. Only material (important) items need to be shown properly in financial statements.
(iii) Define adjustment.
An adjustment is a journal entry made at the end of an accounting period to record income or expenses that have been earned or incurred but not yet recorded. It ensures accounts follow the accrual basis of accounting.
(iv) Pass adjusting entry for prepaid expenses.
Adjusting entry for Prepaid Expenses (at end of period for expired portion):
Expense Account Dr.
To Prepaid Expense Account
Example: Insurance expired during the period:
Insurance Expense A/c Dr.
To Prepaid Insurance A/c
(v) Define Accounting and name the three main branches of accounting.
Accounting is the process of identifying, recording, classifying, summarizing, and interpreting financial transactions.
Three main branches:
- Financial Accounting
- Cost Accounting
- Management Accounting
(vi) What is a compound entry?
A compound entry is a journal entry with more than one debit or more than one credit. It records two or more transactions together. Example:
Cash A/c Dr. 5,000
Bank A/c Dr. 3,000
To Sales A/c 8,000
(vii) Distinguish between selling expenses and administrative expenses.
Selling expenses: Costs to promote and sell products (e.g., advertising, sales commission, delivery charges).
Administrative expenses: Costs for general management and office operations (e.g., salary of office staff, rent, office supplies).
(viii) What is meant by ‘Trial balance’?
A trial balance is a statement listing all ledger account balances (debit and credit) at a particular date. It is prepared to check if total debits equal total credits, which verifies the arithmetic accuracy of bookkeeping.
(ix) Explain treble column cash book.
A treble (three-column) cash book has three money columns on each side:
- Cash column
- Bank column
- Discount column (allowed on debit side and received on credit side)
It records cash, bank, and discount transactions in one book.
(x) Write down three types of bank accounts.
- Savings Account
- Current Account
- Fixed Deposit Account
(xi) Explain ‘Endorsement of the cheque’.
Endorsement means signing on the back of a cheque to transfer ownership to someone else. The person receiving the cheque can then deposit or cash it.
(xii) What is meant by suspense account?
A suspense account is a temporary account used when the correct account for a transaction is not known or when trial balance does not match. Later, errors are corrected and suspense account is closed.
(xiii) State the rules of debit and credit for assets, expenses, revenues, liabilities, and capital.
These are based on the Modern (American) Approach:
| Account Title | Dr. | Cr. |
| Assets | Increase | Decrease |
| Expense | Increase | Decrease |
| Liabilities | Decrease | Increase |
| Capital | Decrease | Increase |
| Revenue (Income) | Decrease | Increase |
Q 3: From the following particulars write up a Treble or three column cash book of MrTalha:
01 May 2020 Mr. Talha started business with cash Rs. 96,000
02 May 2020 Deposited with bank Rs. 26,000.
04 May 2020 Purchase goods from Ramzan for Rs. 1,600 issued cheque for payment
05 May 2020 Purchased iron safe for Rs.1,200, paying cash Rs. 600, issued cheque for the balance.
06 May 2020 Purchased goods on credit from Ali for Rs. 2,200.
07 May 2020 Sold goods on account to Salman for Rs. 2,200
08 May 2020 Transportation paid Rs. 1000
10 May 2020 Defective goods returned by Salman Rs. 100
11 May 2020 Received a cheque from Salman for Rs. 2,100
12 May 2020 Paid Salman’s cheque into bank.
28 May 2020 Goods sold to Kashif for cash Rs. 3,300
28 May 2020 Stationery purchased for cash Rs. 1,500
29 May 2020 Cheque issued to Ali for Rs. 2,150 and Discount received Rs. 50
30 May 2020 Rent received Rs 2,500.
30 May 2010 Salaries paid Rs. 3,300 by cheque
Solution:
MrTalha
Three Column Cash Book
As on 30th May 2020
| Date | Particulars | Disc. | Cash (Rs.) | Bank (Rs.) | Date | Particulars | Disc. | Cash (Rs.) | Bank (Rs.) |
| May 1 | Capital | – | 96,000 | – | May 2 | Bank (C) | – | 26,000 | – |
| May 2 | Cash (C) | – | – | 26,000 | May 4 | Purchases | – | – | 1,600 |
| May 11 | Salman | – | 2,100 | – | May 5 | Iron Safe | – | 600 | 600 |
| May 12 | Cash (C) | – | – | 2,100 | May 8 | Transportation | – | 1,000 | – |
| May 28 | Sales | – | 3,300 | – | May 12 | Bank (C) | – | 2,100 | – |
| May 30 | Rent | – | 2,500 | – | May 28 | Stationery | – | 1,500 | – |
| May 29 | Ali | 50 | – | 2,150 | |||||
| May 30 | Salaries | – | – | 3,300 | |||||
| Balance c/d | 72,700 | 20450 | |||||||
| Total | 0 | 103,900 | 28,100 | Total | 50 | 103,900 | 28,100 |
Q 4: From the following trial balance of Tahir and Sons, prepare a trading and profit and loss account and balance sheet for the year ended on 31st December 2020.
| Particulars | Debit Rs. | Credit Rs. |
| Cash in hand | 15,000 | |
| Debtors | 42,500 | |
| Furniture & Fixtures | 90,000 | |
| Opening Stock | 60,000 | |
| Goodwill | 60,000 | |
| Accumulated depreciation on furniture & fixture | 9000 | |
| Bank overdraft | 27,500 | |
| Capital | 95,000 | |
| Mortgage loan | 60,000 | |
| Sales less returns | 232,500 | |
| Commission earned | 15,000 | |
| Purchases less returns | 145,000 | |
| Rent Expense | 24,000 | |
| Misc. expense | 2500 | |
| 439,000 | 439,000 |
Adjustments:
- Closing stock on December 31, 2020 was Rs. 105,000
- Depreciation on furniture @ 10% p.a
- Rent unexpired Rs. 6000
- Commission earned but not received Rs. 3000.
Solution:
Tahir & Sons
Trading Profit & Loss Account
As on 31st December 2020
| Details | Rs. | Details | Rs. |
| Opening Stock | 60,000 | Sales less returns | 232,500 |
| Purchases less returns | 145,000 | Closing Stock | 105,000 |
| Gross Profit c/d | 56750 | ||
| 132,500 | 337,500 | ||
| Gross Profit b/d | 132500 | ||
| Commission earned 15000 | |||
| Depreciation on Furniture | Add earned but not received 3000 | 18000 | |
| (90,000 x 0.10) | 9000 | ||
| Rent 24,000 | |||
| Less Unexpired (6000) | 18000 | ||
| Misc. expense | 2500 | ||
| Net Profit transferred to Capital | 121,000 | ||
| 150500 | 150500 |
Tahir & Sons
Balance Sheet
Year ended 31st December 2020
| Assets | Rs. | Liabilities | Rs. |
| Furniture & Fixture 90,000 | Capital 95000 | ||
| Less Depreciation (18,000) | 72,000 | Add Net Profit 121,000 | 216,000 |
| Unexpired Rent | 6000 | Bank overdraft | 27,500 |
| Commission earned but not received | 3000 | Mortgage loan | 60,000 |
| Goodwill | 60,000 | ||
| Cash in hand | 15,000 | ||
| Debtors | 42,500 | ||
| Closing Stock | 105,000 | ||
| 303500 | 303500 |
Q 5: Show the effect of following transactions on the accounting equation.
Mr. Kaman commenced business with cash Rs. 200,000.
He purchased furniture for Rs. 10,000.
He purchased goods worth Rs. 50,000 for cash and goods worth Rs. 30,000 on credit.
He sold goods to Saleem for Rs. 20,000 costing Rs. 17,000 on credit basis.
He withdrew cash Rs. 3,000 for his personal use.
He paid rent of building Rs. 2,000.
Solution:
| Transaction | Cash (Rs.) | Furniture (Rs.) | Stock (Goods) (Rs.) | Debtors (Rs.) | = | Liabilities (Creditors) (Rs.) | + | Capital (Rs.) |
| 1. Commenced business with cash Rs. 200,000 | +200,000 | – | – | – | = | – | + | +200,000 |
| Balance after 1 | 200,000 | 0 | 0 | 0 | = | 0 | + | 200,000 |
| 2. Purchased furniture for cash Rs. 10,000 | –10,000 | +10,000 | – | – | = | – | + | – |
| Balance after 2 | 190,000 | 10,000 | 0 | 0 | = | 0 | + | 200,000 |
| 3. Purchased goods: Rs. 50,000 cash, Rs. 30,000 credit | –50,000 | – | +80,000 | – | = | +30,000 | + | – |
| Balance after 3 | 140,000 | 10,000 | 80,000 | 0 | = | 30,000 | + | 200,000 |
| 4. Sold goods to Saleem: Rs. 20,000 (cost Rs. 17,000) on credit | – | – | –17,000 | +20,000 | = | – | + | +3,000 (Profit) |
| Balance after 4 | 140,000 | 10,000 | 63,000 | 20,000 | = | 30,000 | + | 203,000 |
| 5. Withdrew cash for personal use Rs. 3,000 | –3,000 | – | – | – | = | – | + | –3,000 (Drawings) |
| Balance after 5 | 137,000 | 10,000 | 63,000 | 20,000 | = | 30,000 | + | 200,000 |
| 6. Paid rent Rs. 2,000 | –2,000 | – | – | – | = | – | + | –2,000 (Expense) |
| Final Balance | 135,000 | 10,000 | 63,000 | 20,000 | = | 30,000 | + | 198,000 |
Q 6: (i) Journalize the transaction. (ii) Post them in the ledger. (iii) Prepare a trial balance.
01 January 2020 Mr. Ajmal started business with cash Rs. 1,00,000.
02 January 2020 Opened bank account with Rs. 50,000.
05 January 2020 Purchased goods from Karachi stores worth Rs 20,000 on credit basis.
08 January 2020 Sold goods to Rafiq and sons for Rs 11,000.
19 January 2020 Payment made to Karachi stores Rs. 15,000 by cheque.
22 January 2020 Goods lost by fire Rs. 2,000.
24 January 2020 Gods taken away by the proprietor for his personal use Rs 1,500.
31 January 2020 Paid salaries Rs. 3,000 and rent Rs. 2,000 by cheques.
Required:(i) Journalize the transaction. (ii) Post them in the ledger. (iii) Prepare a trial balance.
Solution:
(i) Journal Entries
| Date | Particulars | Debit (Rs.) | Credit (Rs.) |
| Jan 01 | Cash A/c Dr | 100,000 | |
| To Capital A/c | 100,000 | ||
| Jan 02 | Bank A/c Dr | 50,000 | |
| To Cash A/c | 50,000 | ||
| Jan 05 | Purchases A/c Dr | 20,000 | |
| To Karachi Stores A/c | 20,000 | ||
| Jan 08 | Rafiq & Sons Dr | 11,000 | |
| To Sales A/c | 11,000 | ||
| Jan 19 | Karachi Stores A/c Dr | 15,000 | |
| To Bank A/c | 15,000 | ||
| Jan 22 | Loss by Fire A/c Dr | 2,000 | |
| To Purchases A/c | 2,000 | ||
| Jan 24 | Drawings A/c Dr | 1,500 | |
| To Purchases A/c | 1,500 | ||
| Jan 31 | Salaries A/c Dr | 3,000 | |
| Rent A/c Dr | 2,000 | ||
| To Bank A/c | 5,000 |
(ii) Ledger Accounts
Cash Account
| Debit | Rs. | Credit | Rs. |
| Capital | 100,000 | Bank | 50,000 |
| Balance c/d | 50,000 | ||
| Total | 100,000 | Total | 100,000 |
Bank Account
| Debit | Rs. | Credit | Rs. |
| Cash | 50,000 | Karachi Stores | 15,000 |
| Salaries | 3,000 | ||
| Rent | 2,000 | ||
| Balance c/d | 30,000 | ||
| Total | 50,000 | Total | 50,000 |
Purchases Account
| Debit | Rs. | Credit | Rs. |
| Karachi Stores | 20,000 | Loss by Fire | 2,000 |
| Drawings | 1,500 | ||
| Balance c/d | 16,500 | ||
| Total | 20,000 | Total | 20,000 |
Karachi Stores Account
| Debit | Rs. | Credit | Rs. |
| Bank | 15,000 | Purchases | 20,000 |
| Balance c/d | 5,000 | ||
| Total | 20,000 | Total | 20,000 |
Rafiq & Sons Account
| Debit | Rs. | Credit | Rs. |
| Sales | 11,000 | ||
| Balance c/d | 11,000 | ||
| Total | 11,000 | Total | 11,000 |
Sales Account
| Debit | Rs. | Credit | Rs. |
| Balance c/d | 11,000 | Rafiq & Sons | 11,000 |
| Total | 11,000 | Total | 11,000 |
Loss by Fire Account
| Debit | Rs. | Credit | Rs. |
| Purchases | 2,000 | Balance c/d | 2,000 |
| Total | 2,000 | Total | 2,000 |
Drawings Account
| Debit | Rs. | Credit | Rs. |
| Purchases | 1,500 | Balance c/d | 1,500 |
| Total | 1,500 | Total | 1,500 |
Salaries Account
| Debit | Rs. | Credit | Rs. |
| Bank | 3,000 | Balance c/d | 3,000 |
| Total | 3,000 | Total | 3,000 |
Rent Account
| Debit | Rs. | Credit | Rs. |
| Bank | 2,000 | Balance c/d | 2,000 |
| Total | 2,000 | Total | 2,000 |
Capital Account
| Debit | Rs. | Credit | Rs. |
| Balance c/d | 100,000 | Cash | 100,000 |
| Total | 100,000 | Total | 100,000 |
(iii) Trial Balance
| Particulars | Debit (Rs.) | Credit (Rs.) |
| Cash | 50,000 | |
| Bank | 30,000 | |
| Purchases | 16,500 | |
| Rafiq & Sons | 11,000 | |
| Loss by Fire | 2,000 | |
| Drawings | 1,500 | |
| Salaries | 3,000 | |
| Rent | 2,000 | |
| Karachi Stores | 5,000 | |
| Capital | 100,000 | |
| Sales | 11,000 | |
| Total | 116,000 | 116,000 |
Q 7: In-taking out a trial balance the accountant finds that the total of the credit side exceeds that of debit side by Rs. 3290. He places the difference to a suspense account and subsequently detects the following mistakes:
- Stationery purchased for Rs. 890 but debited to stationery Account as Rs. 980.
- A sum of Rs. 650 received from Aslam was credited twice in his account.
- Wages Rs. 250 paid for installing a machine were debited to wages account as Rs. 520.
- A sale of Rs. 1000 to Farid was credited to his account twice.
- Old furniture sold for Rs. 6,000 was wrongly recorded as 600.
Required: Pass the rectifying journal entries and close the suspense account.
| S/No | Particulars | Dr. | Cr. |
| Suspense a/c Dr. | 90 | ||
| Stationery a/c Cr. | 90 | ||
| (Stationery a/c over casted, now corrected) | |||
| Aslam a/c Dr. | 650 | ||
| Suspense a/c Cr. | 650 | ||
| (Aslam a/c credited twice, now corrected) | |||
| Machine a/c Dr. | 250 | ||
| Suspense a/c Dr. | 270 | ||
| Wages a/c Cr. | 520 | ||
| Farid a/c Dr. | 3000 | ||
| Suspense A/c Cr. | 3000 | ||
| (Farid’s a/c wrongly credited twice, now rectified) | |||
| Cash a/c Dr. | 5400 | ||
| Furniture a/c Cr. | 5400 | ||
| (Old furniture sold for 6000, recorded short, no affected account is mentioned) |
Q 8: Prepare a ‘Bank Reconciliation statement” from the following particulars.
- Overdraft balance as per the pass book (Dr.) on 31.12.2020 Rs. 5000.
- Interest on overdraft charged by the bank for half year Rs. 275 debited in the pass book only.
- Two cheques for Rs. 7500 and Rs. 5000 paid in on 30th December 2020 were not credited by the bank.
- Two cheques for Rs. 1,050 and Rs. 4,000 issued in December 2020 had not been presented at the bank during the month.
- A cheque for Rs. 2,000 entered in the cash book (debit side) was not sent to the bank for collection.
Solution:
| Mr. Khubaib Bank Reconciliation Statement As on 31st December 2020 | |||
| a) | Balance as Per Pass Book | Dr. | (5000) |
| b) | Add interest charged by bank | 275 | |
| c) | Add Uncredited Cheques | 12500 | |
| d) | Less Un-presented cheques | (5050) | |
| e) | Add cheque not sent for collection | 2000 | |
| Balance as per Cash Book (Dr.) | 4725 | ||
