This post contains Solved Paper Financial Accounting I 2022 Punjab University, in which different topics of Financial Accountings are addressed such as Bills of Exchange, Final Accounts with Adjustments, Depreciation, Rectification of Errors, Non Trading Concern, Accounts from Incomplete Record, Partnership etc. All questions those are asked in the paper, are solved with great care and accuracy, if any error is found that will be purely mine. Other solutions and lectures posted on the subject such as Business Statistics and Mathematics are also available on the Website bcfeducation. Stay connected for the future solutions and lectures for all other topics of Accounting and Finance at all levels. Solved Paper Financial Accounting I 2023 has already posted.
Table of Contents
Solved by Iftikhar Ali, M.Sc Economics, MCOM Finance Lecturer Statistics, Finance and Accounting
Solved Paper Financial Accounting I 2022 Punjab University
Q.1: On 1st January, 2022, Mr. X bought goods for Rs. 60,000 from Mr. Y and accepted two bill of exchange in settlement, one for Rs. 20,000 at four months and second for Rs. 40,000 payable after six months…..
Q.1: On 1st January, 2022, Mr. X bought goods for Rs. 60,000 from Mr. Y and accepted two bill of exchange in settlement, one for Rs. 20,000 at four months and second for Rs. 40,000 payable after six months. The first bill was honoured on due date, but before the second bill fell due, it was cancelled by mutual consent and a new bill for three months was accepted by Mr. A for the amount of second bill plus interest Rs. 500. Mr. Y sent this bill to his bank for collection, but on due date the bill was dishonoured.
From the above information, prepare journal entries in the books of both parties,
Solution:
X’s Journal
| Date | Detail | L.F | Dr. | Cr. |
| 2022 | ||||
| Jan, 1 | Purchases A/c | 60,000 | ||
| Mr. Y’s A/c | 60,000 | |||
| (Goods bought on credit from Mr. Y) | ||||
| Jan, 1 | Mr. Y’s A/c | 20,000 | ||
| B/P A/c | 20,000 | |||
| (Acceptance given to Y for the 1st bill) | ||||
| Jan, 1 | Mr. Y’s A/c | 40,000 | ||
| B/P A/c | 40,000 | |||
| (Acceptance given to Y for the 2nd bill) | ||||
| May, 4 | B/P A/c | 20,000 | ||
| Cash A/c | 20,000 | |||
| (1st bill paid at maturity) | ||||
| Jul,1 | B/P A/c | 40,000 | ||
| Mr.Y’s A/c | 40,000 | |||
| (2nd bill cancelled for renewal) | ||||
| Jul, 1 | Interest A/c | 500 | ||
| Mr.Y’s A/c | 500 | |||
| (interest amount payable to Mr. Y on 2nd bill) | ||||
| Jul, 1 | Mr. Y’s A/c | 40500 | ||
| B/P A/c | 40500 | |||
| (Acceptance given from Mr. Y for renewed bill including interest) | ||||
| Oct, 4 | B/P A/c | 40,500 | ||
| Mr. Y’s A/c | 40,500 | |||
| (Bill dishonoured on the due date) |
Y’s Journal
| Date | Detail | L.F | Dr. | Cr. |
| 2022 | ||||
| Jan, 1 | X’s A/c A/c | 60,000 | ||
| Sales A/c | 60,000 | |||
| (Goods sold on credit to Mr. X) | ||||
| Jan, 1 | B/R A/c | 20,000 | ||
| Mr. X’s A/c | 20,000 | |||
| (Acceptance received from X for 1st bill) | ||||
| Jan, 1 | B/R A/c | 40,000 | ||
| Mr. X’s A/c | 40,000 | |||
| (Acceptance received from X for 1st bill) | ||||
| May, 4 | Cash A/c | 20,000 | ||
| B/R A/c | 20,000 | |||
| (1st bill received at maturity) | ||||
| Jul,1 | Mr. X’s A/c | 40,000 | ||
| B/R A/c | 40,000 | |||
| (2nd bill cancelled for renewal) | ||||
| Jul, 1 | Mr. X’s A/c | 500 | ||
| Interest A/c | 500 | |||
| (interest amount receivable from Mr. X) | ||||
| Jul, 1 | B/R A/c | 40,500 | ||
| Mr.X’s A/c | 40,500 | |||
| (Acceptance received from Mr. X for renewed bill including interest) | ||||
| Jul, 1 | Bank for collection A/c | 40,500 | ||
| B/R A/c | 40,500 | |||
| (Bill sent to bank for collection) | ||||
| Oct, 4 | Mr. X’s A/c | 40,500 | ||
| Bank for collection A/c | 40,500 | |||
| (Bill dishonoured on the due date) | ||||
Q.2: The following errors were found in the books Faheem Stores…….Give journal entries necessary to correct these errors and prepare Suspense Account.
Q.2: The following errors were found in the books Faheem Stores:
a) Goods bought from a supplier amounting to Rs. 560 had been posted to the credit of his account as Rs. 650.
b) An item of Rs. 1000, entered in the Returns Inwards Book had been posted to the debit of the customers who return the goods.
c) Sundry items of Plants sold amounting to Rs. 5000 had been credited in the Sales Book.
d) An amount of Rs. 8000 owing by a customer had been omitted from the schedule of Sundry Debtors.
e) Discount amounting to Rs. 1500, allowed to a customer had been duly entered in his account but not posted to Discount Account.
Give journal entries necessary to correct these errors and prepare Suspense Account.
Solution:
| Date | Detail | L.F | Dr. | Cr. |
| (a) | Supplier’s A/c | 90 | ||
| Suspense A/c | 90 | |||
| (being supplier’s account overstated, now rectified) | ||||
| (b) | Suspense A/c | 2000 | ||
| Customer’s A/c | 2000 | |||
| (being sales return wrongly debited to customer’s account, now rectified) | ||||
| (c) | Sales A/c | 5000 | ||
| Plant A/c | 5000 | |||
| (Plant sold wrongly credited to sales account, now rectified) | ||||
| (d) | Sundry Debtors A/c | 8000 | ||
| Suspense A/c | 8000 | |||
| Customer’s account not omitted from the schedule of sundry debtors, now rectified) | ||||
| (e) | Discount Allowed A/c | 1500 | ||
| Suspense A/c | 1500 | |||
| (Discount account not posted, now rectified) | ||||
Q.3 The following Trial Balance is taken from the Books of Rehan Stores…..After making the following adjustments, prepare Trading and Profit and Loss Account/Income Statement for the year ended 31st December 2021 and a Balance Sheet on that date.
Q.3 The following Trial Balance is taken from the Books of Rehan Stores:
| Accounts | Amounts Rs. | Accounts | Amounts Rs. |
| Stock (1-1-21) | 80,000 | Purchases returns | 6000 |
| Furniture | 2000 | Capital | 200000 |
| Rent | 4500 | Sales | 450000 |
| Salaries | 19000 | Bank Loan | 80000 |
| Bad debts | 5000 | Sundry creditors | 14000 |
| Sundry debtors | 36000 | ||
| Establishment | 5800 | ||
| Patents | 35000 | ||
| Drawings | 11000 | ||
| Plant and machinery | 34000 | ||
| Purchases | 285000 | ||
| Insurance | 11500 | ||
| Sales returns | 9000 | ||
| Trade expenses | 10000 | ||
| Wages | 20000 | ||
| Investment | 170000 | ||
| Cash | 12200 | ||
| Total | 750000 | Total | 750000 |
After making the following adjustments, prepare Trading and Profit and Loss Account/Income Statement for the year ended 31st December 2021 and a Balance Sheet on that date.
1. Stock on 31st December 2021 Rs. 65000.
2. Depreciate Plant and machinery by 10% & furniture by 15%.
3. Wages Rs. 7000 and salaries Rs. 2500 are outstanding.
4. Interest receivable on investment for the year is Rs. 12000
Solution:
Rehan Stores
Trading, Profit & Loss Account
For the year ended 31st Dec 2021
| Particulars | Rs | Particulars | Rs. |
| Opening Stock | 80,000 | Closing Stock | 65,000 |
| Purchases 285,000 | Sales 450,000 | ||
| Less Returns (6,000) | 279,000 | Less Returns (9,000) | 441,000 |
| Wages 20,000 | |||
| Add Outstanding 7,000 | 27,000 | ||
| Gross Profit c/d | 120,000 | ||
| 506,000 | 506,000 | ||
| Salaries 19,000 | Gross Profit b/d | 120,000 | |
| Add outstanding 2,500 | 21,500 | Accrued Interest | 12,000 |
| Depreciation on Furniture | |||
| 2,000 x 0.15 | 300 | ||
| Depreciation on Plant & Machinery | |||
| 34,000 x 0.10 | 3400 | ||
| Rent | 4500 | ||
| Bad debts | 5000 | ||
| Establishment | 5800 | ||
| Insurance | 11500 | ||
| Trade expenses | 10000 | ||
| Net Profit Transferred to Balance Sheet | 70,000 | ||
| 132,000 | 132,000 | ||
Rehan Stores
Balance Sheet
Year ended 31st Dec, 2021
| Assets | Rs. | Liabilities | Rs |
| Fixed Assets: | Capital & Owner’s Equity: | ||
| Furniture Less Depreciation: | Capital 200,000 | ||
| (2,000 – 300) | 17,00 | Less Drawings (11,000) | |
| Machinery Less Depreciation: | Add Net Profit 70,000 | 259,000 | |
| (34,000 – 3400) | 30,600 | Current Liabilities: | |
| Patents | 35000 | Bank Loan | 80000 |
| Investment | 170000 | Sundry creditors | 14000 |
| Current Assets: | Wages outstanding | 7000 | |
| Cash | 12200 | Salaries outstanding | 2500 |
| Accrued Interest | 12,000 | ||
| Closing Stock | 65,000 | ||
| Sundry debtors | 36000 | ||
| 362,500 | 353,000 |
Q.4: From the following Receipt and Payment Account of a Peoples Library, prepare Income and Expenditure Account for the year ended 30th June, 2022 and a Balance Sheet on that date….
Q.4: From the following Receipt and Payment Account of a Peoples Library, prepare Income and Expenditure Account for the year ended 30th June, 2022 and a Balance Sheet on that date:
| Receipts | Amount Rs. | Payments | Rs. |
| Balance at Bank 01-07-2021 | 70000 | Salaries of librarian | 20000 |
| Subscriptions | 50000 | Rent & other expenses | 25000 |
| Fees from non-members | 10000 | Books purchases | 41000 |
| Municipal grant | 25000 | Repair expenses | 5000 |
| Donations | 30000 | Misc. Expenses | 3000 |
| Furniture purchased | 20000 | ||
| Balance c/d | 71000 | ||
| 185000 | 185000 |
A bill for books purchased during the year amounting to Rs. 6000 was outstanding.
Subscription receivable Rs. 5000.
Charge depreciation on Furniture by Rs. 2000.
Solution
Working 1 Calculation of Capital
| Assets | Rs. | Liabilities | Rs. |
| Cash Balance | 70000 | Capital Fund Balancing Figure | 70,000 |
| 70,000 | 70,000 |
People’s Library
Income & Expenditure A/C
For the year ended 30th Jun, 2022
| Expenditure | Amount | Income | Amount |
| Salaries of librarian | 20000 | Annual Subscription 50,000 | |
| Rent & other expenses | 25000 | Add Outstanding (5000) | 55,000 |
| Repair expenses | 5000 | Fees from non-members | 10000 |
| Misc. Expenses | 3000 | Municipal grant | 25000 |
| Depreciation on Furniture | 2000 | Donations | 30000 |
| Surplus | 65,000 | ||
| 120,000 | 120,000 |
People’s Library
Balance Sheet
As on year ended 30th Jun, 2022
| Assets | Rs. | Liabilities | Rs. |
| Cash Balance | 71,000 | Capital Fund W:1 70,000 | |
| Furniture 20,000 | Add Surplus 65,000 | 135,000 | |
| Less Depreciation (2000) | 18,000 | Books bill outstanding | 6000 |
| Books 41,000 | |||
| Add outstanding 6000 | 47,000 | ||
| Subscription outstanding | 5000 | ||
| 141,000 | 141,000 |
Q.5: Following is the Balance Sheet of M and N as at January 1st 2021…..Give journal entries, ledger accounts and Balance Sheet after S’s admission.
Q.5: Following is the Balance Sheet of M and N as at January 1st 2021:
| Assets | Amount Rs. | Liabilities & Owners Equity | Amount Rs. |
| Cash at Bank | 50000 | Sundry Creditors | 40000 |
| Sundry Assets | 140000 | General Reserve | 40000 |
| M Capital | 60000 | ||
| N Capital | 50000 | ||
| 190000 | 190000 |
M and N were sharing profits and losses in the ratio of 2:1. On the above date, S was admitted as partner as per the following conditions:
a) S brings Rs. 40000 as capital
b) He pays Rs. 50000 as his share of goodwill
c) M and N withdraw half of their share of goodwill
d) The new profit sharing ratio among M, N and S is to be 3:1:1 respectively.
Give journal entries, ledger accounts and Balance Sheet after S’s admission.
Journal
| Date | Particulars | L.F | Dr. | Cr. |
| Cash A/C | 90,000 | |||
| S’s Capital A/C | 40,000 | |||
| Goodwill A/C | 50,000 | |||
| (S introduces capital and goodwill) | ||||
| Goodwill A/C | 50000 | |||
| M’s Capital A/C | 33333 | |||
| N’s Capital A/C | 16667 | |||
| (Goodwill distributed between old partners in ratio 2:1) | ||||
| M’s Capital A/C | 16666.5 | |||
| N’s Capital A/C | 8333.5 | |||
| Cash A/c | 25,000 | |||
| (Half of goodwill withdrawn by partners) |
M’s Capital Account
| Date | Detail | Amount | Date | Detail | Amount |
| Cash A/c | 16666.5 | Balance b/d | 60,000 | ||
| Balance c/d | 76,666.5 | Goodwill A/C | 33333 | ||
| 93,333 | 93,333 |
N’s Capital Account
| Date | Detail | Amount | Date | Detail | Amount |
| Cash A/c | 8333.5 | Balance b/d | 50,000 | ||
| Balance c/d | 58333.5 | Goodwill A/C | 16667 | ||
| 66667 | 66667 |
S’s Capital Account
| Date | Detail | Amount | Date | Detail | Amount |
| Balance c/d | 40,000 | Cash A/c | 40,000 | ||
| 40,000 | 40,000 |
Cash Account
| Date | Detail | Amount | Date | Detail | Amount |
| Balance b/d | 50,000 | M’s Capital A/C | 16666.5 | ||
| S’s Capital A/C | 40,000 | N’s Capital A/C | 8333.5 | ||
| Goodwill A/C | 50,000 | Balance c/d | 115,000 | ||
| 140,000 | 140,000 |
Firm’s Updated Balance Sheet
| Assets | Amount Rs. | Liabilities & Owners Equity | Amount Rs. |
| Cash at Bank | 115,000 | Sundry Creditors | 40000 |
| Sundry Assets | 140000 | General Reserve | 40000 |
| M Capital | 76,666.5 | ||
| N Capital | 58333.5 | ||
| S Capital | 40,000 | ||
| 255,000 | 255,000 |
Q.6: From the following particulars, prepare a Bank Reconciliation Statement of Mr. Akif on 31st March, 2021….
Q.6: From the following particulars, prepare a Bank Reconciliation Statement of Mr. Akif on 31st March, 2021:
a) Balance as per the Pass Book Rs. 72500 Cr.
b) Insurance premium of Rs. 8000 was directly paid by the bank for which there is no record in the cash book
c) Interest of Rs. 5600 is credited by the bank in the Pass Book which is not recorded in the Cash Book. d) Cheques for a total amount of Rs. 45000 were deposited into the bank in March but out of them cheque for Rs. 15000 were credited in April.
e) A cheque for Rs. 20000 was deposited into the bank in March but in April the cheque was returned by the bank as dishonoured.
f) A cheque of Rs. 10000 was issued in March but it was not presented to the bank in the same month.
Solution:
Mr.Akif
Bank Reconciliation Statement
Month ended 31st March 2021
| (a) | Balance as per Pass Book Cr. | 72,500 | |
| (b) | Add Insurance premium directly paid by bank not recorded in cash book | 8,000 | |
| (c) | Less interest credited by the bank but not recorded in the cash book | (5600) | |
| (d) | Add uncredited cheques | 15000 | |
| (e) | Add cheque deposited but returned dishonored | 20,000 | |
| (f) | Less unpresented Cheque | (10,000) | |
| Balance as per Cash Book Dr. | 99,900 |
Q.7: Saad keeps his books under Single Entry. He wishes to ascertain his profits for the year ending 31st December, 2021. His position on 1st January, 2021 was as follows……Prepare a statement showing his trading result for the year ended on 31st December. 2021 and a Balance Sheet as on that date, after.
Q.7: Saad keeps his books under Single Entry. He wishes to ascertain his profits for the year ending 31st December, 2021. His position on 1st January, 2021 was as follows;
“Cash in hand Rs. 13000; Cash at bank Rs. 9000; Stock of goods Rs. 12000; Furniture Rs. 25000; Sundry Debtors Rs. 11000; and Sundry Creditors Rs. 4500.
His position on 31st December 2021 is as under:
Cash in hand Rs. 10000; Cash at Bank Rs. 5000; Stock of goods Rs. 9000; Furniture Rs. 4400; Sundry Debtos Rs. 8900; Sundry Creditors Rs. 7550. During the year he had withdrawn from the business Rs. 2000 per month for private expenses.
Prepare a statement showing his trading result for the year ended on 31st December. 2021 and a Balance Sheet as on that date, after:
- providing 5 per cent depreciation on furniture
- Writing of Rs. 3000 as actual bad debts and making a further provision at 5 percent on Sundry Debtors for bad debts
- One month rent Rs. 10000 is Outstanding and
- Rs. 2000 have been paid in advance in respect of insurances.
Solution:
Mr. Saad
Statement of Affairs
As on 1st Jan 2022
| Assets | Amount (Rs.) | Liabilities | Amount (Rs.) | |
| Fixed Non-Current Assets: | Non-Current Liabilities: | |||
| Furniture | 25,000 | Nil | ||
| Current Assets: | Current Liabilities: | |||
| Cash in hand | 13,000 | Sundry Creditors | 4500 | |
| Cash at Bank | 9,000 | |||
| Stock | 12,000 | Capital (Balancing Figure) | 65,500 | |
| Sundry Debtors | 11,000 | |||
| 70,000 | 70,000 | |||
Mr. Saad
Statement of Affairs
As on 31st Dec 2022
| Assets | Amount (Rs.) | Liabilities | Amount (Rs.) |
| Fixed Non-Current Assets: | Non-Current Liabilities: | ||
| Furniture 4400 | Nil | ||
| Less Depreciation: (220) | 4180 | ||
| 4400 x 0.05 | |||
| Current Assets: | |||
| Cash in hand | 10,000 | Current Liabilities: | |
| Cash at Bank | 5,000 | Sundry Creditors | 7550 |
| Stock | 9,000 | Outstanding Rent | 10000 |
| Sundry Debtors 8900 | Capital (Balancing Figure) | 18,235 | |
| Less Write off (3000) | |||
| Less New Provision: (295) | 5605 | ||
| (8900 – 3000) x 0.05 | |||
| Prepaid Insurance | 2000 | ||
| 35,785 | 35,785 | ||
Mr. Saad
Statement of Profit and Loss
Year ended 31st Dec 2022
| Capital 31st Dec 2022 | 18,235 |
| Add Drawings (2000 x 12) | 24000 |
| Less Additional Capital | (0) |
| Adjusted Capital | 42,235 |
| Less Opening Capital 1st Jan 2022 | (65,500) |
| Net Loss for the year | (23,265) |
Q.8: Differentiate between Financial Accounting and Cost Amounting.
Answer:
Financial Accounting
The area of accounting known as financial accounting maintains a comprehensive record of all the entity’s financial activities, which are then reported in appropriate forms at the conclusion of the financial period to improve the financial statements’ readability for users. Financial data is utilised by a wide range of people, including external parties and internal management.
The main goal of financial accounting is to prepare financial statements in a specified way for a given accounting period of a company. It contains the Income Statement, Balance Sheet, and Cash Flow Statement, all of which are useful in tracking an organization’s performance, profitability, and financial standing over time.
Cost Accounting
The area of accounting known as cost accounting is responsible for periodically recording, summarizing, and reporting cost data. Cost estimation and control are its main responsibilities. The ability to monitor labor efficiency, project plans and activities, regulate costs, determine selling price, and make other decisions is made easier for those who use cost data.
Cost accounting improves the efficacy of financial accounting by offering pertinent data, which eventually leads to an efficient decision-making process inside the company. Every expense incurred during the production process is tracked, starting from the material’s input and ending with the finished product.
Key Differences
- The goal of cost accounting is to keep an organization’s cost data up to date. The goal of financial accounting is to keep an organization’s whole financial record.
- Cost accounting keeps track of both fixed and variable expenses. Financial accounting, on the other hand, merely keeps track of past expenses.
- Cost Accounting information identifies the profit associated with a specific product, activity or process. This is different from Financial Accounting, which identifies the profit for the entire organisation over a specific period.
- Users of Financial Accounting include both internal and external parties, while users of Cost Accounting are restricted to the entity’s internal management.
- Cost Accounting is concerned with controlling costs, whereas financial accounting is concerned with maintaining complete records of financial information on which to report at the end of an accounting period.
- In cost accounting, stock is valued at cost; in financial accounting, it is valued at net realisable value, which is the lower of the two values.
- Cost Accounting is only required for the organisation that deals with manufacturing and production operations. Financial Accounting is required for all organisations.
- Cost Accounting data is reported regularly at regular intervals, whereas financial accounting data is reported after a financial year, which is usually one year.
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