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Question Paper in written form:
Pokhara University
Level: Bachelor Semester Year: 2020
Programme: BBA/BI/BCIS/TT Full Marks: 100
Course: Financial Accounting I Pass Marks: 45
Time: – 3hrs.
Candidates are required to give their answers in their own words as far as practicable.
The figures in the margin indicate full marks.
Section ‘A’
Very short answer questions 10×2
Attempt all the questions.
- List out different types of assets.
- What are different items included in investing activities?
- What is the purpose of trial balance?
- What are the four basic types of adjusting entries?
- Why do firms prepare bank reconciliation statements?
- Why do closing entries require?
- Rogers corporation stats the year with a Retained Earning balance of Rs: 55,00. Net income for the year is Rs. 27,00. The ending balance in Retained Earnings is Rs.70,000. What was the number of dividends for the year?
- The opening stock is Rs. 20,000, purchase during the year is Rs. 1,50,000, a purchase expanse is Rs. 10,000 and closing stock is Rs, 30,000. Find the amount of cost of goods sold.
- Shoe the effect on the accounting equation and journal of transaction starting a business with a share capital of Rs. 3,00,000 and bank loan of Rs.1,00,000.
- The provision for tax during the year is Rs. 15,000. The tax is payable on the balance sheet decrease by Rs.5,000. Find the amount of tax during the year.
Section ‘B’
Descriptive answer questions 6×10
Attempt any six questions
11. Himalayan Service Company started business on January 1, 2018. The following transaction during the first month of operation, prepare journal entries, T-accounts and Trial balance.
a) Acquired the articles of incorporation and three shareholders introduced Rs.1,00,000 each in exchange of share.
b) Purchased the office building for Rs. 1,50,000 in cash and building is valued at Rs. 1,00,000 and reminder as land.
c) Signed a three-year promissory note at the bank for Rs.1,2,5000.
d) Purchased office equipment at a cost of Rs. 50,000, paying Rs. 10,000 down and agreeing to repay the remainder in 10 days.
e) Paid wages and salaries of Rs.1,30,000 for the first half of the month.
f) Paid the balance due on the office equipment.
g) Sold Rs. 24,000 of advertising during the first month, customers have until the 15th of the following month to pay their bills.
12. Deuali company was incorporated on 1th January 2018, under a Nepal company Act 2063 that authorized the issuance of 5,000 shares of common stock of Rs. 10 par value. A company provides you the following information as on 31th December 2018.
| Particular | Dr. amount | Cr. amount |
|---|---|---|
| Supplies on hind | Rs. 3,280 | |
| Equipment | 30,000 | |
| Cass | 27,800 | |
| Building | 75,000 | |
| Account receivables | 25,300 | |
| Prepaid insurance | 6,000 | |
| Wages and salaries | 3,400 | |
| Advertising expenses | 1,000 | |
| Capital stock | 50,000 | |
| Accumulated depreciation-equipment | 3,000 | |
| Accumulated depreciation- building | 7,500 | |
| Notes payable | 20,000 | |
| Account payable | 37,280 | |
| Retained earnings | 40,300 | |
| Service revenue | 13,700 | |
| Total | Rs.171,780 | Rs.171,780 |
Additional information:
- A count of supplies on hand at the end reveals a balance of Rs.3,000.
- The company paid cash on September 1, 2018, for a two-year insurance policy.
- Equipment and building depreciate at the rate of 10% per annum.
- Wages and salaries due but not paid Rs. 3,500.
- The company signed six-month promissory notes on December 1 and the interest rate is 12%.
Required:
- Adjustment entries for the above transaction. 2.5
- Develop a 10-column worksheet. 7.5
13. The bank statement for Nepal bank Ltd. Shows a balance of Rs. 15,907,45 on April 30, 2019. On this date, the balance as per the book is Rs. 11,589.45. The following reconciling items are determined:
- Deposit in transit Rs. 2,201,40.
- Outstanding cheques of Rs. 5,904.
- A cheque of Rs. 1,226 correctly written by the company and was correctly paid by the bank. But the company recorded it for Rs. 1,262.
- Bank debited NSF cheque for Rs. 425,60, bank charge of Rs. 30.
- The bank credited note receivable for Rs. 1,000 plus interest earned Rs.50, less bank collection charge of Rs.15.
Required:
- Bank reconciliation statement. 8
- How much cash balance should be reported on Nepal bank`s April 30, balance sheet? 2
14. A) the following balance sheet items, listed in alphabetical order are available from the record of ABC company at December 31, 2018:
Account payable Accumulated depreciation-building Accumulated depreciation- equipment Bond payable Capital stock Equipment Interest payable Marketable securities Notes payable Paid-in capital in excess of par | 34280 40000 12500 250000 200000 84500 2200 15000 6500 75000 | Retained earnings Account receivable Building Cash Income tax payable Land Merchandise inventory Office supplies Prepaid rent Salaries payable patent | 113510 26700 150000 60790 7500 250000 112900 400 3600 7400 45000 |
Required: Classified balance sheet.
B. the following income statement items are arranged in alphabet order of ABC company for the year ended 31th December 2018.
| Advertising expenses | 1,500 | Commission expenses | 2,415 |
| Depreciation office building | 2,900 | Cost of goods sold | 29,200 |
| Income tax expenses | 1,540 | Insurance expenses of sales man | 2,250 |
| Interest expenses | 1,400 | Interest revenue | 1,340 |
| Salaries and wage expenses | 12,560 | Sales revenue | 48,300 |
| Supplies expenses | 890 |
Required: Multi-step income statement.
15. What are the different group users of accounting information? Explain their needs of accounting information?
16. What do you understand by “Annual Report” of a company? Briefly explain the major elements of an Annual Report.
17. Discuss about various accounting concepts, accounting principles and accounting conventions.
Section “C”
- Rani Traders just completed another successful year, as indicated by the following income statement for 2019:
Rani Traders
Income statement
December 31,2019
| Particulars | Amounts (RS.) |
| Sales revenue Less: Costs of goods sold Gross margin Less: Operating expenses Income before interest and tax Interest expenses Net income before tax Less: tax expenses Net income | 12,50,000 700,000 550,000 150,000 400,000 25,000 375,000 150,000 225,000 |
Comparative balance sheet
| Assets | 2019 (Rs.) | 2018(Rs.) |
| Cash Account’s receivable Inventory Prepaid insurance | 52,000 180,000 230,000 15,000 | 90,000 130,000 200,000 25,000 |
| Total current assets | 477,000 | 445,000 |
| Land Plant and equipment Accumulated depreciation | 750,000 700,000 (250,000) | 600,000 500,000 (200,000) |
| Total long-term assets | 12,00,000 | 900,000 |
| Total assets | 16,77,000 | 13,45,000 |
| Accounts payable Salary payable Income tax payable | 130,000 68,000 90,000 | 148,000 63,000 1110,000 |
| Total current liabilities | 288,000 | 321,000 |
| Long term bank loan | 350,000 | 300,000 |
| Common stock Retained earnings | 550,000 489,000 | 400,000 324,000 |
| Total stockholders` equity | 10,39,000 | 724,000 |
| Total liabilities and stockholders` equity | 16,77,000 | 13,45,000 |
Other information is as follows:
- Divided of Rs.60,000 were declared and paid during the year.
- Operating expenses include Rs.50,000 of depreciation.
- Land and plant and equipment were acquired for cash, and the additional stock was issued for cash, cash also was received from additional bank loans.
The president has asked you some questions about the year`s results. She is very impressed with the profit margin of 18% (net income divided by sales revenue). She is bothered, however, by the decline in the company`s cash balance during the year. One of the conditions of the existing bank loan is that the company maintains a minimum cash balance of Rs.50,000.
Required:
a) Prepare a stamen of cash flows for 2019using the direct method in the operating activities section.
b) On the basis of your statement, draft a brief memo to the president to explain why cash decreased during such a profitable year. Include in your explanation any recommendations for improving the company`s cash flow in future years.
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