Allama Iqbal Open University, Islamabad s2

ALLAMA IQBAL OPEN UNIVERSITY, ISLAMABAD (Department of Commerce)

PRINCIPLES OF ACCOUNTING (5401)

CHECKLIST

SEMESTER: AUTUMN, 2017

This packet comprises the following material:

1. Textbook (One) 2. Assignment No. 1 & 2 3. Assignment Forms ( 2 sets )

In this packet, if you find anything missing out of the above mentioned material, please contact at the address given below:

The Mailing Officer Allama Iqbal Open University H-8, Islamabad Ph: 051-9057611-12

ASIA BATOOL (Course Coordinator)

1 ALLAMA IQBAL OPEN UNIVERSITY, ISLAMABAD (Department of Commerce)

WARNING 1. PLAGIARISM OR HIRING OF GHOST WRITER(S) FOR SOLVING THE ASSIGNMENT(S) WILL DEBAR THE STUDENT FROM AWARD OF DEGREE/CERTIFICATE, IF FOUND AT ANY STAGE. 2. SUBMITTING ASSIGNMENT(S) BORROWED OR STOLEN FROM OTHER(S) AS ONE’S OWN WILL BE PENALIZED AS DEFINED IN “AIOU PLAGIARISM POLICY”. Course: Principles of Accounting (5401) Semester: Autumn, 2017 Level: ADC/BS Total Marks: 100 Pass Marks: 50 ASSIGNMENT No. 1 (Units 1–4) Note:You are required to solve all questions if you are unable to understand any question of assignment, do seek help from your concerned tutor. But keep in mind that tutors are not supposed to solve the assignment questions for you.

Q. 1 (i) Define Accounting; explain its objectives and branches. (ii) What do you mean by double entry system of accounting? (10+10)

Q. 2 Mr. Asfer started a sole proprietorship business. The business is newly established and Mr. Asfer hired an accountant for keeping the journal updated. Suppose you are the accountant of Mr. Asfer’s business, prepare the journal book for the month of April, 2017. You are also required to post journal entries into the ledger and prepare the trial balance. Detail of the transactions during April, 2017 are given as follows: April 1. Mr. Asfer commenced business with Cash of Rs. 800,000/- Building Rs.2,500,000/- 2. Purchased Furniture with cash Rs. 100,000/- 5. Purchased goods from Miss Zara Rs.150, 000/- 8. Sold goods to Mr.M.Naeem Rs. 80,000/- 20. Goods returned to Miss Zara Rs.5, 000/- 21. Machinery Purchased Rs.100, 000/- 25. Returned goods to Mr.M.Naeem Rs.3, 000/- 28. Utility bills paid for the month Rs.40, 000/- 30. Rent paid for the month Rs.40, 000/- (20)

Q. 3 A firm whose accounting year is calendar year, purchased on 1st April 2013 machinery costing Rs. 150,000. It purchased further machinery on 1st Oct, 2013 costing Rs. 100,000 and on 1st July 2014, costing Rs. 50,000. On 1st January 2015, machinery installed on 1st April, 2013 became obsolete and was sold for Rs. 45,000. Show how machinery Account would appear in the books of company, if machinery was depreciated by fixed installment method @ 10% p.a. What

2 would be the balance of machinery Account on 1st January 2016? (20)

Q. 4 The following Trial Balance was extracted from the books of Jaffar Brotjers On 30th June, 2017. From the given information you are required to prepare a work sheet for the year ended on 30th June, 2017. (20)

Trial Balance on 30th June, 2017as follows Sr.No Title of Accounts Dr.(Rs.) Cr.(Rs.) 1. Cash 170,000

2. Account receivable 90,000

3. Merchandise inventory on 1st July, 60,000 2016 4. Plant and machinery 170,000

5. Furniture and fixtures 820,000

6. Capital 1,360,000

7. Account payable 38,000

8. Purchases return and allowances 22,000

9. Purchases 600,000

10. Discount on Purchases 6,000

11. Sales 700,000

12. Sales Return and allowances 30,000

13. Sales discount 16,000

14. Insurance prepaid 10,000

15. Advertisement expenses 40,000

16. Salaries expenses 120,000

Total Expenditure 2,126,000 2,126,000 Additional Information

3 1) Prepaid insurance on 30th June 2017 is Rs.14, 000/- 2) Outstanding salaries Rs. 10,000/- 3) Depreciation on plant and machinery @ 10% p.a 4) Merchandise inventory on 30th June 2017 was valued at Rs.60,000/- Q.5 While checking accounts of Nasim and company you come across following expense in the books. (20)

Sr. No. Title Amount (Rs.) 1. Telephone expenses 5,300 2. Office salaries 25,400 3. New weighing machine 856,000 4. New counters for the shop building 600,000 5. Wages incurred on the counters 120,000 6. Rent Paid 50,000 7. Depreciation of machinery 10,000 8. Money borrowed from a bank to acquire fixed 500,000 assets. You are required to classify the above expenses into capital or revenue expenses. State how these expenses would appear in the final accounts of Nasim & C.?

ASSIGNMENT No. 2 (Units 5–9) Total Marks: 100 Pass Marks: 50

Q. 1 Hussain & Co. is a partnership business dealing with the supply of surgical items. Business is facing difficulty in recording its business transactions as there is no person on the payroll with accounting literacy. Hussain & Co. has decided to hire an accountant with sufficient accountancy literacy. Management of Hussain & Co., after interviewing several candidates hired Mr. Asif as an accountant. First assignment of Mr. Asif is to prepare the three column cash book for the month of January, 2017. During the month of January 2017, following transactions were recorded: (20)

Date Particular 2017 Jan.1 Cash balance 500,000 from which deposited into Bank Rs. 300,000. 3. Cash purchases Rs. 35000 less 2.5% trade discount. 5. Received cheque Rs.85, 000 for sale of old furniture and deposited into bank 8. same day. 10. Cash drew from bank Rs. 17,500 and paid to salaries Rs. 7,500 and rent Rs. 12. 10,000. 13. Bank charges Rs. 1,800 15. Purchased furniture paid by cheque. Rs. 25,300. 19. Paid salary Rs. 14,000.

4 23. Cash deposited into Bank Rs. 21,000. 26. Goods sold to Mr. Ali on credit Rs. 28,000. 27. Paid telephone charges Rs. 2000. 28. Received a cheque from Mr. Ali Rs. 27,500 but full settlement of his account 29. Rs. 28,000. 30. Mr. Ali‘s cheque deposited into Bank. 31. Withdrew from the bank for business use Rs. 45,000. Cash drew from business for his personal use. Rs. 5,000. Stationery purchased for cash Rs. 1,500. Received cash from Mr. Faqi-ul-Hasan Rs. 19,500 and discount allowed Rs. 500.

Q. 2 (i) Define partnership and discuss the rights and duties of partners. (10+10)

(ii) If the goods purchased from Ahmer for Rs. 40,000 were recorded in purchase book as Rs. 4,000 and posted to Ahmer account as Rs.400, what rectifying entry will be passed?

Q. 3 The following is a the Receipt and Payment account of Friends Recreation Club, you are required to prepare an Income& Expenditure Account of the Club for the year ending 31st August, 2017. (20)

Receipts Amount Payments Amount Balance b/ f 5,000 Rent 75,000 Entrance fee 10,000 Salaries 58,200 Subscription 2013 5,000 Billiards Table 85,000 Subscription 2014 250,000 Repair & Renewals 10,500 Subscription 2015 4,000 Interest 20,000 commission 12,000 Wages 5,000 Special subscription for 10,000 annual function Balance c/f 42,300

Total 296,000 Total 29,6000 Additional Information: Commission includes Rs. 800 which were received for 2016 and Rs. 1,200 is still due. Rent paid Includes Rs. 12,000 pertaining to 2013 and Rs.12, 000 is still due. Salaries relating to 2013 Rs.7, 500 and is Still due Rs.8, 500 Subscriptions in arrear Rs.5, 800 and subscription for annual function outstanding Rs.1, 100.

Q. 4 Mr. Naeem has a trading business of computer accessories. The business has been successfully run from last 10 years and is considered as one of the leading trading store of the city. Recently, due to the increase in volume of the transactions, Mr. Naeem is unable to identify the difference in the balances of

5 Cash book and the pass book. Details of the transactions are given in the preceding paragraph. On 31st March, 2017 the pass book showed a credited balance of Rs. 500,000 and as per cash book is Rs. 408,750 of Mr. Naeem Trader. These are following discrepancy items between pass book and cash book:- 1. Cheque for Rs. 100,000 was paid on 5 October, 2017, but out of which Rs. 80,000 credited by the bank on 25 March, 2017 and remaining balance on 5 April, 2017. 2. Interest on investments collected by bank Rs. 1,750. 3. Bank charges for the above period also debited in the pass book of Rs. 500 4. Cheque for Rs.85, 000 were issued to creditor but not presented into bank for payment till 31st March, 2017. 5. On 29 March, 2017 a cheque of Rs. 25,000 received was deposited into the bank but was omitted to the entered into cash book. Required: Prepare bank reconciliation statement under double balance method (20)

Q. 5 A and B entered into partnership on 1st January, 2017 contributing Rs. 150,000/- and Rs. 100,000. During the year A invested Rs. 60,000 as additional capital on1st May, 2017 whereas B brought additional capital of Rs. 40,000/- on 1st October, 2017. They earned a profit of Rs. 66,000/- during the year. Profits are to be shared in their capital ratio. Calculate partners share of profit and pass the necessary journal entry. (20)