This post contains Solved Paper Financial Accounting I 2023 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 by Iftikhar Ali, M.Sc Economics, MCOM Finance Lecturer Statistics, Finance and Accounting
Solved Paper Financial Accounting I 2023 Punjab University
Table of Contents
Q.1: On 1st January, 2005, X sells goods to Y for Rs. 20,000 and draws three bills on him; the first for Rs.6,000 for one month, the second for Rs. 10,000 for two months and the third for Rs.4,000 for 3 months. Y accepts and returns these bills to X…..
Q1. On 1st January, 2005, X sells goods to Y for Rs. 20,000 and draws three bills on him; the first for Rs.6,000 for one month, the second for Rs. 10,000 for two months and the third for Rs.4,000 for 3 months. Y accepts and returns these bills to X.
The first bill is retained by X till the date of maturity. The second bill is discounted by him at 12% p.a with his banker. The third bill is endorsed by X to his creditor A on 5th Jan. 2005.
On maturity all the bills are honoured by Y.
Required: Give Journal entries in the books of X, Y & A.
Solution:
X’s Journal
| Date | Detail | L.F | Dr. | Cr. |
| 2005 | ||||
| Jan, 1 | Y’s A/c | 20,000 | ||
| Sales A/c | 20,000 | |||
| (Goods Sold to Y on credit) | ||||
| Jan, 1 | B/R A/c | 6000 | ||
| Y’s A/c | 6000 | |||
| (Acceptance received from Y for the 1st bill) | ||||
| Jan, 1 | B/R A/c | 10000 | ||
| Y’s A/c | 10000 | |||
| (Acceptance received from Y for the 2nd bill) | ||||
| Jan, 1 | B/R A/c | 4000 | ||
| Y’s A/c | 4000 | |||
| (Acceptance received from Y for the 3rd bill) | ||||
| Jan,1 | Bank A/c | 9800 | ||
| Discount A/c | 200 | |||
| B/R A/c | 10000 | |||
| (Bill discounted from bank at 12% for two months) | ||||
| Jan,5 | A’s A/c | 4000 | ||
| B/R A/c | 4000 | |||
| (3rd bill endorsed to the creditor A) | ||||
| Feb,4 | Cash A/c | 6000 | ||
| B/R A/c | 6000 | |||
| (Bill received at maturity) |
Y’s Journal
| Date | Detail | L.F | Dr. | Cr. |
| 2005 | ||||
| Jan, 1 | Purchases A/c | 20,000 | ||
| X’s A/c | 20,000 | |||
| (Goods purchased from X on credit) | ||||
| Jan, 1 | X’s A/c | 6000 | ||
| B/P A/c | 6000 | |||
| (Acceptance given to X for 1st bill) | ||||
| Jan, 1 | X’s A/c | 10000 | ||
| B/P A/c | 10000 | |||
| (Acceptance given to X for 2nd bill) | ||||
| Jan, 1 | X’s A/c | 4000 | ||
| B/P A/c | 4000 | |||
| (Acceptance given to X for 3rd bill) | ||||
| Feb, 4 | B/P A/c | 6000 | ||
| Cash A/c | 6000 | |||
| (1st Bill paid at maturity) | ||||
| Mar, 4 | B/P A/c | 10000 | ||
| Cash A/c | 10000 | |||
| (2nd Bill paid at maturity) | ||||
| Apr, 4 | B/P A/c | 4000 | ||
| Cash A/c | 4000 | |||
| (3rd Bill paid at maturity) |
A’s Journal
| Date | Detail | L.F | Dr. | Cr. |
| 2005 | ||||
| Jan, 5 | B/R A/c | 4000 | ||
| X’s A/c | 4000 | |||
| (Bill received from X) | ||||
| Apr, 4 | Cash A/c | 4000 | ||
| B/R A/c | 4000 | |||
| (Bill received at maturity) |
Q.2: From the following particulars ascertain the bank balance as per the Cash Book of Anas & Co. as On 31st March 2022 with the help of Bank Reconciliation Statement…..
Q#2. From the following particulars ascertain the bank balance as per the Cash Book of Anas & Co. as On 31st March 2022 with the help of Bank Reconciliation Statement.
(a) Bank balance as per the Pass Book on 31st March, 2022 was Rs. 120,000.
(b) Cheques issued in the last week of March, 2022 but not presented for payment till 31st March, 2022, amount to Rs. 30,000.
(c) Cheques paid into Bank on 26th March, 2022, but not collected prior to 31st March 2022 amount to Rs. 18,000.
(d) Interest on deposits of Rs. 3,000 was credited in the Pass Book but not recorded in the Cash Book till 31st March, 2022.
(e) A customer paid into the bank 22,500 directly as appeared in the Pass Book but not to the Cash Book.
(f) Dividend money of Rs. 12,000 on the shares held by Anas & Co. was received directly by the bank on 29th March, 2022, but the intimation was sent to them on 2nd April, 2022.
Solution:
Anas & Co
Bank Reconciliation Statement
Month ended 31st March 2022
| (a) | Balance as per Pass Book Cr. | 120,000 | |
| (b) | Less unpresented cheques | (30,000) | |
| (c) | Add un-cleared cheques | 18,000 | |
| (d) | Less interest credited in pass book but not recorded in cash book | (3000) | |
| (e) | Less customer paid directly into bank but not recorded in cash book | (22,500) | |
| (f) | Less dividend received directly by the bank not recorded in cash book | (12,000) | |
| Balance as per Cash Book Dr. | 70,500 |
Q.3: From the following Trial Balance of Ali & Co, you are required to prepare Trading and Profit & Loss A/c for the year ending 31st December, 2021 and a Balance Sheet as at that date…..
Q.3: From the following Trial Balance of Ali & Co, you are required to prepare Trading and Profit & Loss A/c for the year ending 31st December, 2021 and a Balance Sheet as at that date:
| Debit Rs. | Credit Rs. | |
| Income Tax | 7000 | |
| Building | 200,000 | |
| Plant & Machinery | 175,000 | |
| Furniture & Fixtures | 39,000 | |
| Opening Stock | 120,900 | |
| Drawings & Capital | 96,000 | 420,000 |
| Purchases & Sales | 330,000 | 612,000 |
| Debtors & Creditors | 91,200 | 72,000 |
| Returns | 18,000 | 15,000 |
| 10% Loan | 120,000 | |
| Wages | 79,500 | |
| Printing & Stationery | 9300 | |
| Bad debts | 12,600 | |
| Provision for doubtful debts | 10,140 | |
| Cash at bank | 70,640 | |
| 12,49,140 | 12,49,140 |
Adjustments:
1. Closing Stock was valued at Ra. 75,000
2. Depreciate, Building at 5 %, Plant & Machinery at 10 % and Furniture 5%
3. Write off Rs. 7200 as bad debts from debtors.
4. Maintain Reserve for doubtful debts at 8%
5. Interest on loan is outstanding.
Solution:
Ali & Co
Trading Profit & Loss A/C
As on 31st December 2021
| Opening Stock | 120900 | Closing Stock | 75,000 |
| Purchases 330000 | Sales 612000 | ||
| Less Returns (15000) | 315000 | Less Returns (18000) | 594000 |
| Wages | 79,500 | ||
| Gross Profit c/d | 153,600 | ||
| 669,000 | 669,000 | ||
| Printing & Stationary | 9300 | Gross Profit b/d | 153,600 |
| Depreciation on Plant & Machinery | |||
| 175,000 x 0.10 | 17,500 | ||
| Depreciation on Building | |||
| 200,000 x 0.05 | 10,000 | ||
| Depreciation on Furniture & Fixture | |||
| 39000 x 0.05 | 1950 | ||
| Interest on Loan outstanding | |||
| 120,000 x 0.10 | 12,000 | ||
| Bad Debts 12600 | |||
| Add Write Off 7200 | |||
| Add New Provision: | |||
| (91200 – 7200) x 0.08 6720 | |||
| Less Old Provision (10140) | 16380 | ||
| Income Tax | 7000 | ||
| Net Profit Transferred to Balance Sheet | 79470 | ||
| 153,600 | 153,600 |
Ali & Co
Balance Sheet
Year ended 31st December 2021
| Assets | Amount | Liabilities | Amount |
| Cash at bank | 70640 | Capital 420000 | |
| Closing Stock | 75000 | Add Net Profit 79470 | |
| Plant & Machinery Less Depreciation (175,000 – 17500) | 157,500 | Less Drawings (96000) | 403470 |
| Building Less Depreciation | Sundry Creditors | 72000 | |
| (200,000 – 10,000) | 190,000 | 10% Loan | 120000 |
| Furniture & Fixture Less Depreciation | Interest on Loan outstanding | 12,000 | |
| (39000 – 1950) | 37050 | ||
| Sundry Debtors 91200 | |||
| Less Write Off (7200) | |||
| Less New Provision (6720) | 77280 | ||
| 607470 | 607470 |
Q.4: Give Journal entries to rectify the errors….
Q.4: Give Journal entries to rectify the errors.
(a) Machinery sold for Rs. 10,000 has been posted to Sales A/c
(b) Rs. 5000 withdrawn by the proprietor for personal use have been debited to Trade Expenses A/c.
(c) Cost of repairs Rs. 500 has been charged Machinery A/c
(d) Rs. 3900 received from Saleem have been Posted to Waseem A/c
(e) Furniture purchased for Rs. 8000 has been debited to purchase A/c
(f) Purchase of goods from Arshad & Co. Rs. 4000 was omitted to be recorded in the books.
(g) Rs. 9500 paid to Nazir have been wrongly debited to Kabir A/c.
Solution:
| Date | Detail | L.F | Dr. | Cr. |
| (a) | Sales A/c | 10,000 | ||
| Machinery A/c | 10,000 | |||
| (being sales account wrongly credited, now rectified) | ||||
| (b) | Drawing A/c | 5000 | ||
| Trade Expenses A/c | 5000 | |||
| (being trade expense account wrongly debited, now rectified) | ||||
| (c) | Repairs A/c | 500 | ||
| Machinery A/c | 500 | |||
| (being machinery account wrongly debited, now rectified) | ||||
| (d) | Waseem A/c | 3900 | ||
| Saleem A/c | 3900 | |||
| (being waseem account wrongly credited instead of saleem, now rectified) | ||||
| (e) | Furniture A/c | 8000 | ||
| Purchases A/c | 8000 | |||
| (being purchases account wrongly debited, now rectified) | ||||
| (f) | Purchases A/c | 4000 | ||
| Arshad & Co. A/c | 4000 | |||
| (being credit purchases omitted to be recorded, now recorded) | ||||
| (g) | Nazir A/c | 9500 | ||
| Kabir A/c | 9500 | |||
| (being kabir’s account wrongly debited, now rectified) | ||||
Q.5: Zarin keeps her books by the single entry method. Her position on 31st December 2021 was as follows: Cash Rs. 10,000; stock in trade Rs. 25,000; Accounts receivable Rs. 30,000; machinery Rs. 50,000; and accounts payable Rs. 23,000…..
Q.5: Zarin keeps her books by the single entry method. Her position on 31st December 2021 was as follows:
Cash Rs. 10,000; stock in trade Rs. 25,000; Accounts receivable Rs. 30,000; machinery Rs. 50,000; and accounts payable Rs. 23,000.
Her position on 31st December 2022 was as follows:
Cash Rs. 12,000; stock in trade Rs. 40,000; Accounts receivable Rs. 60,000; machinery Rs. 45,000; and accounts payable Rs. 25,000.
During the year Zarin introduced Rs. 8,000 as further capital in business and withdrew Rs. 4000 for her personal use.
From the above, you are required to ascertain the profit or loss made by Zarin for the year ended 31-12-2022.
Solution:
Mr. Zarin
Statement of Affairs
As on 1st Jan 2021
| Assets | Amount (Rs.) | Liabilities | Amount (Rs.) | |
| Fixed Non-Current Assets: | Non-Current Liabilities: | |||
| Machinery | 50,000 | Nil | ||
| Current Assets: | Current Liabilities: | |||
| Cash | 10,000 | Account Payable | 23,000 | |
| Stock in Trade | 25,000 | |||
| Account Receivable | 30,000 | Capital (Balancing Figure) | 92,000 | |
| 115,000 | 115,000 | |||
Mr. Zarin
Statement of Affairs
As on 31st Dec 2021
| Assets | Amount (Rs.) | Liabilities | Amount (Rs.) |
| Fixed Non-Current Assets: | Non-Current Liabilities: | ||
| Machinery Less Depreciation | Nil | ||
| (50,000 – 5000) | 45,000 | ||
| Current Assets: | Current Liabilities: | ||
| Cash | 12,000 | Account Payable | 25,000 |
| Stock in Trade | 40,000 | ||
| Account Receivable | 60,000 | Capital (Balancing Figure) | 132,000 |
| 157,000 | 157,000 | ||
Mr. Zarin
Statement of Profit and Loss
Year ended 31st Dec 2021
| Capital 31st Dec 2021 | 132,000 |
| Add Drawings | 4000 |
| Less Additional Capital | (8000) |
| Adjusted Capital | 128,000 |
| Less Opening Capital 1st Jan 2021 | (92,000) |
| Net Profit During the year | 36,000 |
Q.6: Following is the Receipts and Payments Accounts of an Officer’s Club for the year ended 31st December 2022….
Q.6: Following is the Receipts and Payments Accounts of an Officer’s Club for the year ended 31st December 2022:
| Rs. | Rs. | ||
| Opening Balance | 8,000 | Salaries | 3,600 |
| Subscription: | Stationary | 350 | |
| 2021 | 2,000 | Telephone Charges | 400 |
| 2022 | 18,000 | Insurance | 1,200 |
| 2023 | 1,500 | Miscellaneous expenditure | 480 |
| Entrance Fees | 1,300 | Subscriptions to newspapers | 640 |
| Sale of old Magazines | 50 | Purchase of Sports Material | 6,000 |
| Interest on Investments | 500 | Closing Balance | 19,480 |
| Other Receipts | 800 | ||
| 32,150 | 32,150 |
2021 December 31st — Balances of investments Rs. 10,000, Furniture Rs. 5000, Buildings Rs. 25,000; Subscriptions due Rs. 3,000, Subscriptions received in advance of 2022 Rs. 2,000; Stock of sports material Rs. 4,000; Stock of stationery Rs. 200. The Balance as on 31st December 2022 are — subscriptions due Rs. 2,500; Stock of sports material Rs. 3,000 and stock of stationary Rs. 150. Depreciate furniture by 10 % and buildings by 5 %. Interest due on investments Rs. 500.
Prepare Income and Expenditure Account and Balance Sheet.
Solution:
Officer’s Club
Income & Expenditure Account
For the period ended 31st Dec, 2022
| Expenditures | Rs. | Incomes | Rs. |
| Salaries | 3,600 | Subscription Income: | |
| Stationary Expense: | Received During 2022 18,000 | ||
| Opening Balance 200 | Add: Last year advance received 2000 | ||
| Add: Purchased 350 | Add: Outstanding 2022 2500 | 22500 | |
| Less: Closing Balance (150) | 400 | Sale of Old Magazine | 50 |
| Telephone Charges | 400 | Interest on Investment 500 | |
| Insurance | 1200 | Add Receivable 500 | 1000 |
| Miscellaneous Expenditure | 480 | Entrance Fees | 1300 |
| Subscription to Newspaper | 640 | Other Receipts | 800 |
| Sports Material Expense: | |||
| Opening Balance 4000 | |||
| Add: Purchased 6000 | |||
| Less: Closing Balance (3000) | 7000 | ||
| Depreciation on Building (25000 x 0.05) | 1250 | ||
| Depreciation on Furniture (5000 x 0.10) | 500 | ||
| Surplus | 10180 | ||
| 25650 | 25650 |
Officer’s Club
Balance Sheet
Year ended 31st Dec 2022
| Assets | Rs. | Liabilities | Rs. |
| Cash | 19480 | Advance Subscription received 2023 | 1500 |
| Investments | 10,000 | Capital Fund W:1 53,200 | |
| Accrued interest | 500 | Add Surplus 10,180 | 63,380 |
| Building Less Depreciation | |||
| (25,000 – 1250) | 23,750 | ||
| Furniture Less Depreciation | |||
| (5000 – 500) | 4500 | ||
| Subscription outstanding 2500 | |||
| Add Last year receivable: | |||
| (3000 – 2000) 1000 | 3500 | ||
| Closing Stock: | |||
| Sport Material 3000 | |||
| Stationery 150 | 3150 | ||
| 64,880 | 64,880 |
W:1 Calculation of Capital Fund
| Opening Assets | Rs. | Opening Liabilities | Rs. |
| Investment | 10,000 | Subscription Advance | 2,000 |
| Building | 25,000 | Capital Fund (balancing figure) | 53,200 |
| Furniture | 5,000 | ||
| Subscription Due | 3,000 | ||
| Stock Sports Material | 4,000 | ||
| Stock Stationery | 200 | ||
| Cash Opening Balance | 8000 | ||
| 55,200 | 55,200 |
Q.7: The Balance Sheet of X and Y as on 31st December 2022 is set out below. They share profit & losses in the ratio of 2:1….
Q.7: The Balance Sheet of X and Y as on 31st December 2022 is set out below. They share profit & losses in the ratio of 2:1
| Assets | Rs. | Liabilities | Rs. |
| Freehold Property | 20,000 | X’s Capital | 40,000 |
| Furniture | 6,000 | Y’s Capital | 30,000 |
| Stock | 12,000 | General reserve | 24,000 |
| Debtors | 60,000 | Creditors | 16,000 |
| Cash | 12,000 | ||
| 110,000 | 110,000 |
They agree to admit Z into the firm subject to the following terms and conditions:
(a) Z will bring in Rs. 21,000 of which Rs. 9,000 will be treated as his share of Goodwill to be retained in the business.
(b) He will be entitled 1/4th share of the profits of the firm.
(c) Fifty percent of the General Reserve is to remain as a Reserve for Bad and Doubtful Debts.
(d) Depreciation is to be provided on Furniture at 5%
(e) Stock is to be revalued at Rs. 10,500.
Show the journal entries giving effect to the above said arrangements. (Including cash transaction) and prepare the Opening Balance Sheet of the new partnership.
Solution:
Journal
| Date | Particulars | L.F | Dr. | Cr. |
| General Reserve A/C | 12000 | |||
| Reserve for Bad Debts A/C | 12000 | |||
| (50% of general reserve treated as reserve for bad debt) | ||||
| General Reserve A/c | 12,000 | |||
| X’s Capital A/C | 8,000 | |||
| Y’s Capital A/C | 4,000 | |||
| (Provision Reserve distributed between partners in ratio 2:1) | ||||
| Revaluation A/c | 18,00 | |||
| Furniture A/c | 300 | |||
| Stock A/c | 1500 | |||
| (Revaluation of furniture and stock is made) | ||||
| X’s Capital A/c | 12,00 | |||
| Y’s Capital A/c | 600 | |||
| Revaluation A/c | 18,00 | |||
| (Revaluation loss transferred to partner’s capital accounts with ratio 2:1) | ||||
| Cash A/C | 21,000 | |||
| Z’s Capital A/C | 12,000 | |||
| Goodwill A/C | 9000 | |||
| (Z introduces capital and goodwill) | ||||
| Goodwill A/C | 9000 | |||
| X’s Capital A/C | 6000 | |||
| Y’s Capital A/C | 3000 | |||
| (Goodwill distributed between old partners in ratio 2:1) |
New Firm’s Balance Sheet
| Assets | Rs. | Liabilities | Rs. |
| Freehold Property | 20,000 | X’s Capital: | |
| Furniture 6000 | (40,000 + 8000 – 1200 + 6000 ) | 52,800 | |
| Less Depreciation (300) | 5700 | Y’s Capital: | |
| (30,000 + 4000 – 600 + 3000 ) | 36,400 | ||
| Stock (12000 – 1500) | 10500 | Z’s Capital: | 12,000 |
| Debtors | 60,000 | General Reserve (24000 – 12000) | 12,000 |
| Cash (12,000 +21,000) | 33,000 | Creditors | 16,000 |
| 129,200 | 129,200 |
Q.8: A firm purchased a machinery for Rs. 80,000 on 1st April 2002 and spent Rs. 20,000 on its installation. Depreciation is written off 10% p.a on Original Cost Method. On 31st December, 2005 the machinery was sold for Rs. 25,000 being unsuitable.
Q.8: A firm purchased a machinery for Rs. 80,000 on 1st April 2002 and spent Rs. 20,000 on its installation. Depreciation is written off 10% p.a on Original Cost Method. On 31st December, 2005 the machinery was sold for Rs. 25,000 being unsuitable.
Required: Prepare the Machine Account from 2002 to 2005 assuming that Accounts are closed on 31st December every year.
Solution:
Machinery Account
| Date | Particulars | Rs. | Date | Particulars | Rs. |
| 2002 | 2002 | ||||
| Apr, 1st | Cash A/C | 80,000 | Dec, 31st | Depreciation A/C W:1 | 75,00 |
| Apr, 1st | Cash A/C | 20,000 | Dec, 31st | Balance c/d | 92,500 |
| 100,000 | 100,000 | ||||
| 2003 | 2003 | ||||
| Jan, 1st | Balance b/d | 92,500 | Dec, 31st | Depreciation A/C W:1 | 10,000 |
| Dec, 31st | Balance c/d | 82,500 | |||
| 92,500 | 92,500 | ||||
| 2004 | 2004 | ||||
| Jan, 1st | Balance b/d | 82,500 | Dec, 31st | Depreciation A/C W:1 | 10,000 |
| Dec, 31st | Balance c/d | 72,500 | |||
| 82,500 | 82,500 | ||||
| 2005 | 2005 | ||||
| Jan, 1st | Balance b/d | 72,500 | Dec, 31st | Depreciation A/C W:1 | 10,000 |
| Dec, 31st | Cash A/C | 25,000 | |||
| Dec, 31st | Profit or Loss A/C W:2 | 37,500 | |||
| 72,500 | 72,500 |
W:1 Calculation of Depreciation
![\[ Depreciation\ 2002\ = \ 100,000\ \times \frac{10}{100} \times \frac{9}{12} = 7500\ \]](https://bcfeducation.com/wp-content/ql-cache/quicklatex.com-7573d16741b537760fbfbe2249103bfc_l3.png "Rendered by QuickLaTeX.com")
![\[ Depreciation\ 2003,\ 2004\ \&\ 2005\ = \ 100,000\ \times \frac{10}{100} = 10,000\ \]](https://bcfeducation.com/wp-content/ql-cache/quicklatex.com-d573ad6e059a335ed5bd20b97961d6b1_l3.png "Rendered by QuickLaTeX.com")
W:2 Calculation of Profit or Loss
| Cost of Machinery | 100,000 |
| Less Depreciation 2002 | (7500) |
| Less Depreciation 2003 | (10,000) |
| Less Depreciation 2004 | (10,000) |
| Less Depreciation 2005 | (10,000) |
| Book Value | 62,500 |
| Selling Value Realized | (25,000) |
| Loss of Machinery | 37,500 |
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