Advanced Accounting Final - Paksights
Transcript of Advanced Accounting Final - Paksights
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Chapters List
Joint Stock Company (Page 2 – 7)
Issue of Bonus Shares and Right Shares (Page 8 – 21)
Debentures Bonds and TFCs (Page 22 – 43)
Final Accounts (Page 44 – 79)
Analysis of Accounting Ratios (Page 80 – 111)
Consignment Account (Page 112 – 143)
Contract Account (Page 144 – 159)
Hire Purchase and Hire Installment (Page 160 – 205)
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Chapter - 1
JOINT STOCK COMPANIES
INTRODUCTION
Solutions Q.1 (a) JOURNAL Date Details L/F Debit
(Rs.)
Credit
(Rs.)
2010
July. 15
July. 31
Bank Account Dr.
Ordinary Share Application Account
(Money received alongwith application for 200,000
shares @ Rs. 10 each)
20,00,000
20,00,000
20,00,000
20,00,000
Ordinary Share Application Account Dr.
Ordinary Share Capital Account
(Applicants allotted the shares)
(b) JOURNAL Date Details L/F Debit
(Rs.)
Credit
(Rs.)
2010
July. 15
July. 31
Bank Account Dr.
Ordinary Share Application Account
(Money received alongwith application)
23,00,000
23,00,000
23,00,000
23,00,000
Ordinary Share Application Account Dr.
Ordinary Share Capital Account
(200,000 shares allotted to applicants)
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“ Ordinary Share Application Account Dr.
Bank Account
(Refund of money on 30,000 shares)
300,000
300,000
SOHAIL LTD. Balance Sheet as at……….
Share Capital & Liabilities Rs. Assets Rs. Authorized Capital: 400,000 ordinary shares of Rs. 10 each Issued & Subscribed & Paid up: Capital 200,000 ordinary shares of @ Rs. 10 each
40,00,000
Capital Assets: Bank Balance
20,00,000
20,00,000 20,00,000 20,00,000
Q.2 JOURNAL Date Details L/F Debit
(Rs.) Credit (Rs.)
2010 June. 1
June. 15
June. 30
June. 30
Bank Account Dr. Ordinary Share Capital Account (10,000 shares taken by directors)
100,000
350,000
350,000
50,000
100,000
350,000
350,000
50,000
Bank Account Dr. Ordinary Share Application Account (Money received alongwith applications for 35,000 shares) Ordinary Share Application Account Dr. Ordinary Share Capital Account (35,000 shares allotted to applicants) Bank Account Dr. Ordinary Share Capital Account (5000 shares taken up by underwriters as per assignment)
DECENT LTD. Balance Sheet as at 30th June 2010
Share Capital & Liabilities Rs. Assets Rs. Authorized Capital:
50,000 ordinary shares of Rs. 10 each
Issued & Subscribed & Paid up:
Capital 50,000 shares of @ Rs. 10
500,000
Capital Assets:
Bank Balance
500,000
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each 500,000
500,000 500,000
Q.3 JOURNAL Date Details L/F Debit
(Rs.) Credit (Rs.)
2010 Nov. 1
Nov. 15
Nov. 15 - -
Preliminary Expenses Account Dr. Ordinary Share Capital Account (1000 shares taken by promoter)
50,000
100,000
300,000
200,000
100,000
50,000
100,000
300,000
200,000
100,000
Bank Account Dr. Ordinary Share Application Account (5000 shares taken by directors) Bank Account Dr. Ordinary Share Application Account (Money for 6000 shares received) Ordinary Share Application Account Dr. Ordinary Share Capital Account (4000 shares allotted to applicants) Ordinary Share Application Account Dr. Bank Account (2000 applicant money refunded)
A LTD. Balance Sheet as at……….
Share Capital & Liabilities Rs. Assets Rs. Authorized Capital: 10,000 ordinary shares of Rs. 50 each Issued, subscribed & paid up capital: 1000 Shares by promoter 2000 Shares by directors 4000 Shares by public
500,000
Deferred Cost: Preliminary Expenses Capital Assets: Bank Balance
50,000
300,000
50,000
100,000 200,000 350,000 350,000
Q.4 JOURNAL Date Details L/F Debit
(Rs.) Credit (Rs.)
2010 Jan. 15
Bank Account Dr. Ordinary Share Application Account (Money received for 35,000 shares @ Rs. 11 each)
385,000
385,000
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Jan. 30
Jan. 30
Ordinary Share Application Account Dr. Ordinary Share Capital Account Premium on Issue of Shares Account (200,000 shares allotted at a premium of 10%)
220,000
165,000
200,000
20,000
165,000 Ordinary Share Application Account Dr. Bank Account (Money refund for 15,000 shares)
Balance Sheet as at 30th Jan 2010 Share Capital & Liabilities Rs. Assets Rs.
Authorized Capital: 100,000 shares of Rs. 10 each Issued & Subscribed & Paid up: 20,000 shares of @ Rs. 10 each Reserves: Share premium
10,00,000
Capital Assets: Bank Balance
220,000
200,000
20,000
220,000 220,000
Q.5 JOURNAL Date Details L/F Debit
(Rs.) Credit (Rs.)
Bank Account Dr. Ordinary Share Application Account (Money received with applications for 15,000 shares @ Rs. 9 each)
135,000
135,000 15,000
135,000
150,000
Ordinary Share Application Account Dr. Discount on Issue of Shares Account Dr. Ordinary Share Capital Account (15,000 shares to public of 10% discount)
ASIF BASHIR LTD. Balance Sheet as at 30th Jan 2010
Share Capital & Liabilities Rs. Assets Rs. Authorized Capital:
100,000 shares of Rs. 10 each
Issued Capital:
20,000 shares of Rs. 10 each
10,00,000
Deferred Cost:
Discount on Issue of Shares
Capital Assets:
Bank Balance
15,000
135,000
200,000
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Subscribed & Paid up Capital:
15000 share of Rs. 10 each
150,000
150,000 150,000
Q.6 JOURNAL Date Details L/F Debit
(Rs.)
Credit
(Rs.)
2010
Jan. 1
Jan. 1
Jan. 10
Jan. 20
“
Machinery Account Dr.
Asghar Account
(Being purchase of machinery)
50,00,000
50,00,000
2,50,00,000
50,00,000
2,50,00,000
50,00,000
50,00,000
2,50,00,000
50,00,000
2,50,00,000
Asghar Account Dr.
Ordinary Share Capital Account
(5,000 shares issued to vender @ Rs. 1000 each)
Bank Account Dr.
Ordinary Share Application Account
(Application money received for 25,000 shares)
Bank Account Dr.
Ordinary Share Capital Account
(5000 shares taken by underwriters)
Ordinary Share Application Account Dr.
Ordinary Share Capital Account
(25,000 shares allotted to public)
Balance Sheet as at 30th Jan 2010 Share Capital & Liabilities Rs. Assets Rs.
Authorized Capital: Fixed Assets:
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50,000 shares @ of Rs. 1000 each
Issued Capital:
35,000 shares @ of Rs. 10 each
Subscribed & Paid up Capital:
35,000 share @ of Rs. 10 each
5,00,00,000 Machinery
Capital Assets:
Bank Balance
50,00,000
3,00,00,000
3,50,00,000
3,50,00,000
3,50,00,000 3,50,00,000
Q.7
(a) At Per JOURNAL Date Details L/F Debit
(Rs.) Credit (Rs.)
Land & Buildings Account Dr. Machinery Account Dr. Furniture Account Dr. Debtors Account Dr. Sunday Creditors Account M/s Noor & Sons Account (Assets a liabilities acquired for a purchase consideration of Rs. 100,000)
50,000 40,000 14,000
5,000
99,000
10,000 99,000
99,000 M/s Noor & Sons Account Dr. Ordinary Share Capital Account (9,900 shares allotted at Rs. 10 (per value) in full settlement of purchase consideration)
(a) At Per JOURNAL Date Details L/F Debit
(Rs.) Credit (Rs.)
First Entry is Same.
M/s Noor & Sons Account Dr.
Discount on Issue of Share Account Dr.
Ordinary Share Capital Account
(11,000 shares allotted at 10% discount)
99,000
11,000
110,000
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Chapter - 2
ISSUANCE OF BONUS SHARES
& RIGHT SHARES
Solutions
Q.1 Existing capital = C = Rs. 40,00,000
Free Reserves = FR = Rs. 50,00,000
Quantum of Bonus = Q
Increased capital = C+Q
Residual Reserves = FR -Q
Q =
= ( , , ) , ,
= , ,
Q = Rs. 32,00,000
CHECK:
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Residual reserves should be atleast 25 % of increased capital:
Residual Reserves = FR – Q
= 50,00,000 – 32,00,000 = Rs. 18,00,000
Increased Capital = C+ Q
= 40,00,000+32,00,000 = Rs. 72,00,000
Residual Reserves = 72,00,000 x 25 %
= Rs. 18,00,000
Free Reserves = FR = Rs. 32,00,000
Existing Capital = C = , ,
x 100 = Rs. 20,00,000
Maximum amount of bonus = Q
Q =
= ( , , ) , ,
= , , , ,
Q = , ,
= Rs. 21,60,000
CHECK:
Residual reserves should be at least 25 % of increased capital:
Residual Reserves = FR – Q
= 32,00,000 – 21,60,000 = Rs. 10,40,000
Increased Capital = C+ Q
= 20,00,000+ 21,60,000 = Rs. 41,60,000
Residual Reserves = 41,60,000 x 25 % = Rs. 10,40,000
Q.3 JOURNAL ENTRIES Date Details L/F Debit
(Rs.) Credit (Rs.)
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Reserve Fund A/c Dr. Bonus to Shareholders A/c (Being the Bonus declared)
18,00,000
18,00,000
18,00,000
18,00,000 Bonus to Shareholders A/c Dr. Share Capital A/c (Being the issuance of bonus shares at par)
WORKING NOTES:
(w-1) Amount of Bonus:
30,00,000 x 60% = Rs. 18,00,000
Q.4 JOURNAL ENTRIES Date Details L/F Debit
(Rs.) Credit (Rs.)
Reserve Fund A/c Dr. Bonus to Shareholders A/c (Being the Bonus declared)
300,000
300,000
300,000
300,000 Bonus to Shareholders A/c Dr. Share Capital A/c (Being the issuance of bonus shares at par)
WORKING NOTES:
(w-1) No. of Bonus Shares:
= Existing share x
= 6000 x ½ = 3000 shares
(w-2) Amount of Bonus = 3000 share x Rs. 100 = Rs. 300,000
Q.5 JOURNAL ENTRIES Date Details L/F Debit
(Rs.) Credit (Rs.)
Profit & Loss A/c Dr. General Reserve A/c Dr. Bonus to shareholders A/c (Being the Bonus declared)
250,000 150,000
400,000
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Bonus to Shareholders A/c Dr. Share Capital A/c (Being the issuance of bonus shares at par)
400,000 400,000
WORKING NOTES:
(w-1) Amount of Bonus:
= 40% of paid up capital
= 40% of 10,00,000 = Rs. 400,000
Bonus out of Profit & Loss A/c = Rs. 250,000
Bonus out of General Reserve A/c = Rs. 150,000
Q.6 JOURNAL ENTRIES Date Details L/F Debit
(Rs.) Credit (Rs.)
Share Premium A/c Dr. General Reserve A/c Dr. Profit & Loss A/c Dr. Bonus to shareholders A/c (Being the Bonus declared)
100,000 200,000 200,000
500,000
500,000
500,000 Bonus to Shareholders A/c Dr. Share Capital A/c (Being the issuance of bonus shares at par)
WORKING NOTES:
(w-1) No. of Bonus Shares:
= Issued, subscribed & paid up share x
= 100,000 x
= 50,000 shares
(w-2) Amount of Bonus:
50,000 shares x Rs. 10 = Rs. 500,000
Bonus out of Share Premium A/c = Rs. 100,000
Bonus out of General Reserve A/c = Rs. 200,000
Bonus out of Profit & Loss A/c = Rs. 200,000
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AMENDED BALANCE SHEET AS AT 31-12-2010
Liabilities Rs. Authorized Capital: 400,000 shares of Rs. 10 each Issued & Subscribed & Paid up capital: 150,000 shares of Rs. 10 each Reserves: Share premium (200,000 – 100,000) General reserve (600,000 – 200,000) Profit & Loss A/c (350,000 – 200,000)
400,000
15,00,000
1,00,000 4,00,000 150,000
21,50,000
Q.7 JOURNAL ENTRIES Date Details L/F Debit
(Rs.) Credit (Rs.)
Machinery A/c Dr. Vendor A/c (Being the purchase of machinery)
200,000
200,000
250,000 230,000
480,000
200,000
25,000 140,000
35,000
480,000
480,000
Vendor A/c Dr. Bank A/c Share Capital A/c Share Premium A/c (Being the issuance of shares to vendors) Profit & Loss A/c Dr. General Reserve A/c Dr. Bonus to shareholders A/c (Being the Bonus declared) Bonus to Shareholders A/c Dr. Share Capital A/c (Being the issuance of bonus shares)
WORKING NOTES:
(w-1) No. of Shares issued to Vendor:
=
,= 1400 shares
Share Capital = 1400 x 100 = Rs. 140,000
Share Premium = 1400 x 25 = Rs. 35,000
(w-2) No. of Bonus Shares:
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= Existing share x
= 12,000 x 2/5 = 4800 shares
(w-3) Amount of Bonus = 4800 share x Rs. 100 = Rs. 480,000
Bonus out of Profit & Loss A/c = Rs. 250,000
Bonus out of General Reserve A/c = Rs. 230,000
= Rs. 480,000
(w-4) Total No. of Shares:
Existing shares = 12,000
Shares issued to vender = 1,400
Bonus shares = 4,800
18,200
BALANCE SHEET
AS AT 31-12-2010 Liabilities Rs. Assets Rs.
Authorized Capital: Issued, subscribed & paid up capital: 18,200 shares of Rs. 100 each General reserve (800,000 – 230,000) Profit & Loss A/c Share premium Creditors Provision for Tax
30,00,000 Fixed Assets: Land & Building Plant & Machinery 800,000 + Purchased 200,000 Capital Assets: Furniture Stock Debtors Bank (130,000 – 25,000)
900,000
10,00,000 190,000
250,000 220,000 105,000
18,20,000
570,000 -
35,000 175,000
65,000
26,65,000 26,65,000
Q.8 JOURNAL ENTRIES Date Details L/F Debit
(Rs.) Credit (Rs.)
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Long Term Debts A/c Dr.
Share Capital A/c
Share Premium A/c
(Being the long term debts issuing ordinary shares at
premium)
170,000
70,000 30,000
100,000
136,000
34,000
100,000
100,000
Profit & Loss A/c Dr.
General Reserve A/c Dr.
Bonus to shareholders A/c
(Being the Bonus declared)
Bonus to Shareholders A/c Dr.
Share Capital A/c
(Being the issuance of bonus shares)
WORKING NOTES:
(w-1) No. of shares issued against long term debts:
= ,
. = 13,600 shares
Share Capital = 13,600 x Rs. 100 = Rs. 136,000
Share Premium = 13,600 x Rs. 25 = Rs. 34,000
Rs. 170,000
(w-2) Amount of Bonus:
40% of 250,000 = Rs. 100,000
Bonus out of Profit & Loss A/c = Rs. 70,000
Bonus out of General Reserve A/c = Rs. 34,000
= Rs. 100,000
BALANCE SHEET AS AT 31-12-2010
Liabilities Rs. Assets Rs.
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Share Capital: 48,600 shares of Rs. 10 each Reverse: Reverse Fund (110,000 – 30,000) Profit & Loss A/c Share premium
486,000
80,000
36,000
Sundry Assets 600,000
600,000 600,000
Q.9 Market value of 2 shares @ Rs. 250 each = Rs. 500
Add: Issue price of 1 right share @ Rs. 140 each = Rs. 140
Total price of 3 shares = Rs. 640
Average Price =
=
. = Rs. 213.33
Value of Right = Market price - Average price
= Rs. 250-Rs. 213.33
= Rs. 36.67
CHECK:
Value of right =
x (Market price-Offered price)
= x (250 - 140)
= x 110 = Rs. 36.67
Q.10 Market value of 8 shares @ Rs. 50 each = Rs. 400
Add: Issue price of 3 right shares @ Rs. 20 each = 60
Total price of 11 shares = 460
Average Price =
= = Rs. 41.82
Value of Right = Market price - Average price
= Rs. 50- Rs. 41.82 = Rs. 8.18
CHECK:
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Value of right =
x (Market price-Offered price)
= x (50 - 20)
= Rs. 8.18
Q.11 Market value of 10 shares @ Rs. 225 each = Rs. 2,250
Add: Issue price of 4 right shares @ Rs. 120 each = 480
Total price of 14 shares =2,730
Average Price =
= = Rs. 195
Value of Right = Market price - Average price
= Rs. 225 - Rs. 195 = Rs. 30
CHECK:
Value of right =
x (Market price-Offered price)
= x (225 - 120)
= Rs. 30
Q.12 JOURNAL Date Details L/F Debit
(Rs.) Credit (Rs.)
Sundry Shareholders A/c (8000 x 175) Dr. Share Capital A/c (8000 x 100) Share Premium A/c (8000 x 75) (Being the issuance of right shares to shareholders at premium)
14,00,000
960,000
440,000
800,000 600,000
960,000
400,000
Bank A/c Dr. Sundry Shareholders A/c (Being amount received from shareholders) Bonus to Dividend A/c (8000 x 55) Dr. Sundry Shareholders A/c (Being the shareholders account transferred to bonus share dividend a/c)
LEDGER ACCOUNTS:
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Dr. SUNDRY SHAREHOLDERSACCOUNT Cr. Date References Rs. Date References Rs.
Share Capital A/c Share Premium A/c
800,000 600,000
Bank A/c Bonus Share Dividend A/c
960,000
440,000
14,00,000 14,00,000
Dr. SHARE CAPITAL ACCOUNT Cr. Date References Rs. Date References Rs.
Balance c/d 16,00,000 Balance b/d Sundry Shareholders A/c
800,000 800,000
16,00,000 16,00,000
Dr. SHARE PREMIUM ACCOUNT Cr. Date References Rs. Date References Rs.
Balance c/d 600,000 Sundry Shareholders A/c 600,000
600,000 600,000
Dr. BANK ACCOUNT Cr. Date References Rs. Date References Rs.
Sundry Shareholders A/c 960,000 Balance c/d 960,000
960,000 960,000
Dr. BONUS SHARE DIVIDEND ACCOUNT Cr. Date References Rs. Date References Rs.
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Sundry Shareholders A/c 600,000 Balance c/d 600,000
600,000 600,000
Q.13 JOURNAL Date Details L/F Debit
(Rs.) Credit (Rs.)
Sundry Shareholders A/c (300,000 x 13) Dr. Share Capital A/c Share Premium A/c (Being the issuance of right shares)
39,00,000
39,00,000
39,00,000
39,00,000
Bank A/c (300,000 x 13) Dr. Sundry Shareholders A/c (Being amount received from shareholders)
LEDGER ACCOUNTS: Dr. SUNDRY SHAREHOLDERS ACCOUNT Cr. Date References Rs. Date References Rs.
Share Capital A/c Share Premium A/c
30,00,000 900,000
Bank A/c
39,00,000
39,00,000 39,00,000
Dr. SHARE CAPITAL ACCOUNT Cr. Date References Rs. Date References Rs.
Balance c/d 60,00,000 Balance b/d Sundry Shareholders A/c
30,00,000 30,00,000
60,00,000 60,00,000
Dr. SHARE PREMIUM ACCOUNT Cr. Date References Rs. Date References Rs.
Balance c/d 900,000 Sundry Shareholders A/c 900,000
900,000 900,000
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Dr. BANK ACCOUNT Cr. Date References Rs. Date References Rs.
Sundry Shareholders A/c 39,00,000 Balance c/d 39,00,000
39,00,000 39,00,000
Q.14 JOURNAL Date Details L/F Debit
(Rs.) Credit (Rs.)
Profit & Loss A/c Dr. Reserve Fund A/ c Dr. Bonus to shareholders A/c (Being the bonus declared)
200,000 175,000
375,000
900,000
900,000
375,000
375,000
750,000 150,000
900,000
Bank to Shareholders A/c Dr. Sundry Capital A/c (Being the issuance of bonus shares) Sundry Shareholders A/c (7500 x 120) Dr. Share Capital A/c (7500 x 100) Share Premium A/c (7500 x 20) (Being the issuance of right shares)
Bank A/c (7500 x 120) Dr. Sundry Shareholders A/c (Being amount received from shareholders)
WORKING NOTES:
(w-1) No. of Bonus Share:
Existing share x
12,500 x 15/50 = 3750 shares
(w-2) Amount of Bonus:
3750 share x Rs. 100 = Rs. 480,000
Bonus out of Profit & Loss A/c = Rs. 200,000
Bonus out of Reserve Fund A/c = Rs. 175,000
= Rs. 375,000
(w-3) No. of Right Shares:
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Existing share x
= 12,500 x 30/50 = 7500 shares
(w-4) Total No. of Shares:
Existing shares = 12,500
+ Bonus shares = 3,750
+ Right shares = 7,500
23,750
MODERN APPLIANCE LTD.
BALANCE SHEET
AS AT 31-12-2010 Liabilities Rs. Assets Rs.
Authorized Capital: 300,000 shares of Rs. 100 each Issued, subscribed & paid up capital: 23,750 shares of Rs. 100 each Reserve Fund (825,000 – 175,000) Profit & Loss A/c (330,000 – 200,000) Share premium
30,00,000
Sundry Assets (Bal. fig.) Cash in Bank
24,05,000 900,000
23,75,000
650,000 130,000 150,000
33,05,000 33,05,000
Q.15 JOURNAL Date Details L/F Debit
(Rs.) Credit (Rs.)
Profit & Loss A/c Dr. Reserve Fund A/ c Dr. Bonus to shareholders A/c (Being the bonus declared)
200,000 200,000
400,000
200,000
400,000
Bank to Shareholders A/c Dr. Sundry Capital A/c (Being the allotment of bonus shares)
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Sundry Shareholders A/c Dr. Share Capital A/c Share Premium A/c (Being the allotment of right shares)
500,000
500,000
500,000
500,000 Bank A/c Dr. Sundry Shareholders A/c (Being amount received from shareholders)
WORKING NOTES:
(w-1) No. of Bonus Share:
Existing share x
20,000 x 1/5 = 4000 shares
(w-2) Amount of Bonus:
4000 share x Rs. 100 = Rs. 400,000
Bonus out of Profit & Loss A/c = Rs. 200,000
Bonus out of Reserve Fund A/c = Rs. 200,000
= Rs. 400,000
(w-3) No. of Right Shares:
Existing share x
= 20,000 x 1/4 = 5000 shares
(w-4) Total No. of Shares:
Existing shares = 20,000
+ Bonus shares = 4,000
+ Right shares = 5,000
29,000
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ABC CO. LTD.
BALANCE SHEET
AS AT 30-6-2010 Liabilities Rs. Assets Rs.
Authorized Capital: 30,000 shares of Rs. 100 each Issued, subscribed & paid up capital: 29,000 shares of Rs. 100 each Reserve Fund (12,00,000 – 200,000) Profit & Loss A/c (700,000 – 200,000)
30,00,000
Sundry Assets (Bal. fig.) Bank
39,00,000 500,000
29,00,000 10,00,000
500,000
44,00,000 44,00,000
Chapter 3
DEBENTURES BONDS AND TFCs
Solutions Q.1 JOURNAL Date Details L/F Debit
(Rs.) Credit (Rs.)
2010 Jan. 1
”
(a) Issued at par: Bank A/c Dr. 12% Debentures A/c (Being the issuance of 12% debentures at par)
500,000
550,000
500,000
500,000 50,000
(b) Issued at 10% premium: Bank A/c Dr. 12% Debentures A/c Premium on Issuance of Debentures A/c
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”
(Being the issuance of 12% debentures at 10% premium)
450,000 50,000
500,000 (c) Issued at 10% discount:
Bank A/c Dr. Discount on Issue of Debentures A/c Dr. 12% Debentures A/c (Being the issuance of 12% debentures at 10% discount)
Q.2 BOOKS OF HAIDER LTD. JOURNAL Date Details L/F Debit
(Rs.)
Credit
(Rs.)
(a)
(b)
Business Purchase A/c Dr.
Rashid’s A/c
(Being the purchase agreement signed)
460,000
500,000
460,000
480,000
500,000
20,000
460,000
40,000
460,000
460,000
480,000
480,000
40,000
Sundry Assets A/c Dr.
Sundry Liabilities A/c
Business Purchase A/c
(Being the Assets and Liabilities taken over)
Rashid’s A/c Dr.
10% Debentures A/c
(Being amount paid to Rashid by issuing debentures at
par)
Business Purchase A/c Dr.
Rashid’s A/c
(Being the purchase agreement signed)
Sundry Assets A/c Dr.
Goodwill A/c Dr.
Business Purchase A/c
Sundry Liabilities A/c
(Being the Assets and Liabilities taken over)
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(c)
Rashid’s A/c Dr.
10% Debentures A/c
(Being the debentures issued to vendor at par)
480,000
430,000
500,000
430,000
480,000
430,000
430,000
40,000
30,000
430,000
Business Purchase A/c Dr.
Rashid’s A/c
(Being the purchase agreement signed)
Sundry Assets A/c Dr.
Business Purchase A/c
Sundry Liabilities A/c
Capital Reserve A/c
(Being purchase of net assets of Rs. 460,000 at Rs.
430,000)
Rashid’s A/c Dr.
10% Debentures A/c
(Being the debentures issued to vendor)
WORKING NOTES: (b) (c)
Sundry Assets 500,000 500,000
Less: Sundry Liabilities 40,000 40,000
Net Assets 460,000 460,000
Purchase price 480,000 ` 480,000
(Goodwill)/Capital Reserve 20,000 20,000
Q.3 BOOKS OF X COMPANY LTD. JOURNAL Date Details L/F Debit
(Rs.) Credit (Rs.)
Business Purchase A/c Dr. Naeem Bros A/c (Being the purchase agreement signed)
770,000
770,000
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(a)
(b)
(c)
Sundry Assets A/c Dr. Goodwill A/c Business Purchase A/c Sundry Liabilities A/c (Being purchase of net assets of Rs. 730,000 at Rs. 770,000)
760,000 40,000
770,000
770,000 85,550
770,000
770,000
30,000
770,000
8,55,500 50
700,000 70,000
Naeem Bros A/c Dr. Debentures A/c (Being 7700 debentures issued at par to vendor) Naeem Bros A/c Dr. Discount on Issue of Debentures A/c (8555 x 10) Dr. Debentures A/c (8555 x 100) Cash A/c (Being 8,555 debentures issued to vendor at 10% discount) Naeem Bros A/c Dr. Debentures A/c (7000 x 100) Premium on issue of Debentures A/c (7000 x 10) (Being 7000 debentures issued to vendor at 10% premium)
WORKING NOTES:
(w-1) No. of Debentures Issued to Vendor:
=
(a) = ,
= 7700 debentures
(b) = ,
= 8555.556 or 8555 debentures
(c) = ,
= 7000 debentures
Q.4 FIRST METHOD:
No entry will be passed for issue of debentures as collateral security. Only the entry for bank loan will be passed i.e.
Date Details L/F Debit (Rs.)
Credit (Rs.)
1-7-10 Bank A/c Dr. Bank Loan A/c (Being the loan taken from bank)
175,000 175,000
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BALANCE SHEET Liabilities Rs. Assets Rs.
12 % Debentures A/c (In addition, debentures of Rs 200,000 given to bank as Collateral security) Bank Loan (secured against debentures of Rs. 200,000 given as collateral security)
600,000
175,000
Bank
175,000
SECOND METHOD: Date Details L/F Debit
(Rs.) Credit (Rs.)
1-7-10 Bank A/c Dr. Bank Loan A/c (Being the loan obtained from bank)
175,000
200,000
175,000
200,000 Debentures Suspense A/c Dr. Debentures A/c (Issuance of Rs 200,000 debentures as collateral security for a loan of Rs. 175,000)
BALANCE SHEET Liabilities Rs. Assets Rs.
6 % Debentures A/c (Including, debentures of Rs 200,000 given to bank as collateral security) Bank Loan (Secured against debentures of Rs. 200,000)
800,000
175,000
Bank Debentures Suspense A/c
175,000 200,000
Q.5 JOURNAL ENTRIES Date Details L/F Debit
(Rs.) Credit (Rs.)
(1)
(2)
(3)
Bank A/c Dr. 10% Debentures A/c (Being the issued at par but redeemable at par)
500,000
465,000 35,000
540,000
500,000
500,000
500,000 40,000
Bank A/c Dr. Discount on Issue of Debentures A/c Dr. 10% Debentures A/c (Being the debentures issued at 7% discount but redeemable at par) Bank A/c Dr. 10% Debentures A/c Premium on Issuance of Debentures A/c (Being the debentures issued at 8% premium but
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(4)
(5)
redeemable at par) 500,000
20,000
475,000 45,000
500,000 20,000
500,000 20,000
Bank A/c Dr. Loss on Issue of Debentures A/c Dr. 10% Debentures A/c Premium on Redemption of Debentures A/c (Being the debentures issued at par but redeemable at 4% par) Bank A/c Dr. Loss on Issue of Debentures A/c (25,000 + 20,000) Dr. 10% Debentures A/c Premium on Redemption of Debentures A/c (Being the debentures at 5% discount but redeemable at 4% premium)
BALANCE SHEET Liabilities Rs. Assets Rs.
(1) 10 % Debentures (2) 10 % Debentures (3) 10 % Debentures Debentures Premium (4) 10 % Debentures Premium on redemption of debenture (5) 10 % Debentures Premium on redemption of debenture
500,000 Bank Bank Discount on issue of debentures Bank Bank Loss on issue of debentures Bank Loss on issue of debentures
500,000 500,000 500,000 500,000
465,000
35,000 500,000 500,000 500,000
40,000 540,000
540,000 540,000 500,000
20,000
500,000 20,000
520,000 520,000 500,000
20,000
475,000 45,000
520,000 520,000
Q.6 JOURNAL ENTRIES Date Details L/F Debit
(Rs.) Credit (Rs.)
(a)
Bank A/c Dr. 9% Debentures A/c (Being the issued at par & redeemable at par)
90,000
90,000
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(b)
(c)
(d)
(e)
Bank A/c Dr. Discount on Issue of Debentures A/c Dr. 9% Debentures A/c (Being the debentures issued at discount & redeemable at par)
81,000 9,000
94,500
90,000 9,000
85,500 4,500 4,500
90,000
90,000 4,500
90,000 9,000
90,000 4,500
Bank A/c Dr. 9% Debentures A/c Premium on Issuance of Debentures A/c (Being the debentures issued at premium & redeemable at par) Bank A/c Dr. Loss on Issue of Debentures A/c Dr. 9% Debentures A/c Premium on Redemption of Debentures A/c (Being the debentures issued at par & redeemable at par) Bank A/c Dr. Discount on Issue of Debentures A/c Dr. Loss on Issue of Debentures A/c Dr. 9% Debentures A/c Premium on Redemption of Debentures A/c (Being the debentures issued at discount & redeemable at premium)
Q.7 JOURNAL Date Details L/F Debit
(Rs.) Credit (Rs.)
1-1-10
Bank A/c Dr.
12% Debentures A/c
Premium on Issuance of Debentures A/c
(Being the issuance of 12% debentures at 5% premium)
787,500
750,000
37,500
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30-6-10
31-12-10
”
Debentures Interest A/c Dr.
Bank A/c
(Being the interest for first half year paid)
(750,000 x x )
45,000
45,000
90,000
45,000
45,000
90,000
Debentures Interest A/c Dr.
Bank A/c
(Being the interest for second half year paid)
Profit & Loss A/c Dr.
Debentures Interest A/c
(Being the debentures interest transferred to profit &
loss A/c)
Q.8 JOURNAL Date Details L/F Debit
(Rs.) Credit (Rs.)
31-12-09
Debentures Interest A/c Dr. Bank A/c (Being the payment of interest on debentures)
(500,000 x )
60,000
60,000
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” ” ”
31-12-10 ” ” ”
(i) Redemption out of Profit: Profit & Loss Appropriation A/c Dr. Debentures Interest A/c (Being the amount of profit set aside for redemption of debentures)
100,000
100,000
100,000
48,000
100,000
100,000
100,000
100,000
97,000 3,000
97,000 3,000
48,000
100,000
100,000
100,000
12% Debentures A/c Dr. Bank A/c Capital Reserve A/c (Being the debentures redeemed) (ii) Redemption out of capital: 12% Debentures A/c Dr. Bank A/c Capital Reserve A/c (Being the debentures redeemed) Debentures Interest A/c Dr. Bank A/c (Being the payment of interest on debentures)
(400,000 x )
(i) Redemption out of Profit: Profit & Loss Appropriation A/c Dr. Debentures Interest A/c (Being the amount of profit set aside for redemption of debentures) 12% Debentures A/c Dr. Bank A/c (Being the debentures redeemed) (ii) Redemption out of capital: 12% Debentures A/c Dr. Bank A/c (Being the debentures redeemed)
Q.9 JOURNAL Date Details L/F Debit
(Rs.) Credit (Rs.)
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1-1-07 ”
31-12-07 ”
31-12-08 ”
31-12-09 ” ”
31-12-10 ” ”
Bank A/c Dr. Discount on Debentures A/c Dr. 9% Debentures A/c (Being the issuance of 15,000 debentures at 5% discount)
14,25,000 75,000
4,500
135,000
154,500
135,000
150,000
135,000
75,000
150,000
128,250
75,000
143,250
15,00,000
4,500
135,000
4,500 135,000
15,000
135,000
135,000 15,000
135,000
75,000
135,000 15,000
128,250
73,650 4,350
Debentures Issue Expenses A/c Dr. Bank A/c (Being the payment of debentures issue expenses) Debenture Interest A/c Dr. Bank A/c (Being the payment of debentures interest) Profit & Loss A/c Dr. Debentures Issue Expenses A/c Interest on Debentures A/c Discount on Debentures A/c (Being the debentures issue expenses, discount and interest on debentures transferred to profit & loss A/c) Interest on Debenture A/c Dr. Bank A/c (Being the payment of debentures interest) Profit & Loss A/c Dr. Debentures Issue Expenses A/c Discount on Debentures A/c (Being the interest & discount on debentures transferred to profit & loss account) Interest on Debenture A/c Dr. Bank A/c (Being the payment of debentures interest) 9 % Debentures A/c Dr. Bank A/c (Being the cancellation of debentures) Profit & Loss A/c Dr. Debentures Issue Expenses A/c Discount on Debentures A/c (Being the interest & discount on debentures transferred to profit & loss account) Interest on Debenture A/c Dr. Bank A/c (Being the payment of debentures interest) 15,00,000 – 75,000 = 14,25,000 x 9% 9 % Debentures A/c Dr. Bank A/c (73,500 + 150) Profit on Redemption of Debentures A/c (Being the debentures purchased for redemption) Profit & Loss A/c Dr.
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”
Interest on debentures A/c Discount on Debentures A/c (Being the interest & discount on debentures transferred to profit & loss account)
1,350
128,250 15,000
1,350 Profit on Redemption of Debentures A/c Dr. Discount on Debentures A/c (Being the discount on debentures written off against capital profit)
BALANCE SHEET Liabilities Rs. Assets Rs.
9 % Debentures A/c
13,50,000
Discount on Debentures A/c 13,650
Q.10 JOURNAL Date Details L/F Debit
(Rs.) Credit (Rs.)
1-1-10
31-12-10 ” ”
Bank A/c Dr. 12% Debentures A/c Debentures Premium A/c (Being the issuance of 12% debentures at 5% Premium)
630,000
72,000
30,000 1,500
72,000
600,000
30,000
72,000
25,200 6,300
72,000
Interest on Debenture A/c Dr. Bank A/c (Being the interest payable of debentures) 12 % Debentures A/c Dr. Debentures Premium A/c Share Capital A/c (252 x 100) Share Premium A/c (252 x 25) (Being 300 debentures converted into 252 ordinary shares at Rs. 25 per share premium) Profit & Loss A/c Dr. Interest on Debentures A/c (Being the interest on debentures transferred to profit & loss account)
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M LTD. BALANCE SHEET AS ON 31-12-2010
Liabilities Rs. Assets Rs. Share Capital: 252 share of Rs. 100 each Reserves: Share Premium Debenture Premium (30,000 – 1,500) Debentures: 12% Debenture Current Liabilities: Interest on debentures outstanding
25,200
6,00
28,500
570,000
72,000
Deferred Cost: Profit & Loss A/c Current Asset: Cash at Bank
72,000
630,000
702,000 702,000
WORKING NOTES:
No. of shares issued =
= ( ) ( )
.
= = 252 shares
Share Capital = 252 x 100 = Rs. 25,200
Share Premium = 252 x 25 = Rs. 6,300
Rs. 31,500
Note: It has been presumed that debenture holder’s option for conversion will be entitled
to the benefit of premium already paid by them on issue of debentures.
Q.11 JOURNAL Date Details L/F Debit
(Rs.) Credit (Rs.)
2010 Mar. 31
10 % Debentures Account Dr. Interest on Debentures Account Dr. Bank Account Profit on redemption of Debentures Account
40,000 1,000
40,800 200
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June. 30
Aug. 31
Dec. 31 ” ”
(Being purchase of Rs. 40,000 debentures @ 102 cum-interest)
13,000
60,000 1,000
10,000
25,000
2,600
13,000
58,600 2,400
10,000
25,000
2,600
Interest on Debenture Account Dr. Bank Account (Being the payment of interest on debentures of Rs. 260,000 @ 10% for half year) 10 % Debentures Account Dr. Interest on Debentures Account Dr. Bank Account Profit on redemption of Debentures Account (Being purchase of Rs. 60,000 debentures @ 96 ex-interest for cancellation) Interest on Debenture Account Dr. Bank Account (Being the payment of interest on debentures of Rs. 200,000 @ 10% for half year) Profit & Loss Account Dr. Interest on Debentures A/c (Being the interest on debentures transferred to profit & loss account) Profit on Redemption of Debentures Account Dr. Capital Reserve Account (Being the profit on redemption of debentures account transferred to capital reserve account)
Q.12 JOURNAL Date Details L/F Debit
(Rs.) Credit (Rs.)
1-7-09
Bank A/c Dr. 12% Debentures A/c (Being the issuance of 10,000, 12% debentures at par)
10,00,000
10,00,000
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1-12-09 ” ”
30-6-10
31-12-10 ” ” ”
Debentures Interest A/c Dr. Bank A/c (Being the interest for half year paid)
(10,00,000 x x )
60,000
100,000
60,000
60,000
60,000
98,000
120,000
12,000
60,000
100,000
60,000
54,000 6,000
54,000 6,000
98,000
120,000
12,000
Own Debentures A/c Dr. Bank A/c (Being purchase of 1000 own debentures at par) Profit & Loss A/c Dr. Debentures Interest A/c (Being the transfer of debentures interest to profit & loss A/c) Debentures Interest A/c (w-1) Dr. Bank A/c Interest on Own debenture A/c (Being the interest on debentures for half year paid) Debentures Interest A/c Dr. Bank A/c Interest on own debenture A/c (Being the interest on debentures for half year paid) Own Debentures A/c Dr. Bank A/c (Being purchase of 1000 own debentures at Rs. 98 each) Profit & Loss A/c Dr. Debentures Interest A/c (Being the transfer of debentures interest to profit & loss A/c) Interest on Own Debenture A/c Dr. Profit & Loss A/c (Being the interest on debentures transferred to profit & loss account)
(w-1) Debentures Interest on 30-06-09 & 31-12-10:
= 900,000 x x = 54000 (Payment)
= 100,000 x x = 6000 (Revenue)
60,000 (Expense)
Q.13 JOURNAL Date Details L/F Debit Credit
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(Rs.) (Rs.)
30-04-10
30-6-10
01-09-10
31-12-10 ” ” ”
Own Debentures A/c Dr. Interest on Debentures A/c Dr. Bank A/c (Being purchase of Rs. 25,000 own debentures at 97 ex-interest)
24,250 1,000
14,000
24,000 500
14,500
25,000
30,000
3000
25,250
13,500 500
24,500
12,000 2,500
24,250 750
30,000
3000
Interest on Debentures A/c Dr. Bank A/c Interest on Own Debentures A/c (Being the payment of interest on debentures and interest saved on own debentures) Own Debentures A/c Dr. Interest on Debentures A/c Dr. Bank A/c (Being purchase of Rs. 25,000 own debentures at Rs. 98 cum-interest) Interest on Debentures A/c (w-2) Dr. Bank A/c Interest on Own Debentures A/c (Being the payment of interest on debentures and interest saved on own debentures) 12% Debentures A/c Dr. Own Debentures A/c Capital Reserve A/c (Being the own debentures cancellation) Profit & Loss A/c Dr. Interest on Debentures A/c (Being the transfer of debentures interest to P & L A/c) Interest on Debentures A/c Dr. Profit & Loss A/c (Being interest own debentures transferred to P & L A/c)
(w-1) Debentures Interest on 30-06-09: On Rs. 25,000 @ 12% for 2 months = Rs. 500 (Revenue)
On Rs. 225,000 @ 12% for 6 months = 13,500 (Payment)
= 14,000 (Expense)
(w-2) Debentures Interest on 31-12-2010: On Rs. 25,000 @ 12% for 6 months = Rs. 1,500 (Payment)
On Rs. 25,000 @ 12% for 4 months = 1,000 (Revenue)
On Rs. 200,000 @ 12% for 6 months = 12,000 (Payment)
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=14,500 (Expense)
Q.14 JOURNAL Date Details L/F Debit
(Rs.) Credit (Rs.)
31-03-10
30-06-10
01-11-10
31-12-10 ” ” ” ”
Own Debentures A/c Dr. Interest on Debentures A/c Dr. Bank A/c (Being purchase of 300 own debentures at 97 ex-interest)
29,100 900
17,100
14,100 600
17,400
30,000
900
36,000
3,000
30,000
16,200 900
14,700
15,300 2,100
29,100 900
900
36,000
3,000
Interest on Debentures A/c Dr. Bank A/c Interest on Own Debentures A/c (Being the payment of interest on debentures and interest saved on own debentures) Own Debentures A/c Dr. Interest on Debentures A/c Dr. Bank A/c (Being purchase of 150 own debentures at Rs. 98 cum-interest) Interest on Debentures A/c (w-2) Dr. Bank A/c Interest on Own Debentures A/c (Being the payment of interest on debentures and interest saved on own debentures) 12% Debentures A/c Dr. Own Debentures A/c Profit on Redemption of Debentures A/c (Being the own debentures cancellation) Profit on Redemption of Debentures A/c Dr. Capital Reserve A/c (Being the profit on redemption of debentures transferred to capital reserve account) Profit & Loss A/c Dr. Interest on Debentures A/c (Being the transfer of debentures interest to profit & loss A/c) Interest on Debentures A/c Dr. Profit & Loss A/c (Interest on debentures transferred to profit & loss A/c)
BALANCE SHEET AS ON 31ST DECEMBER, 2010
Liabilities Rs. Assets Rs. Reserves: Capital Reserve
900
Own Debentures (Free value Rs. 15,000)
14,100
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12% Debenture 270,000
Q.15 JOURNAL Date Details L/F Debit
(Rs.) Credit (Rs.)
01-05-10
30-06-10
31-12-10 ” ”
(a)
(b)
Own Debentures A/c Dr. Interest on Debentures A/c Dr. Bank A/c (Being purchase of 500 own debentures at Rs. 97 ex-interest)
48,500 2,000
22,000
24,000
48,000
4,000
50,000
52,500
50,500
21,000 1,000
21,000 3,000
48,000
4,000
48,500
48,500 4,000
Interest on Debentures A/c Dr. Bank A/c Interest on Own Debentures A/c (Being the payment of interest on debentures and interest saved on own debentures) Interest on Debentures A/c Dr. Bank A/c Interest on Own Debentures A/c (Being the payment of interest on debentures and interest saved on own debentures) Profit & Loss A/c Dr. Interest on Debentures A/c (Being interest debentures transferred to profit & loss account) Interest on Own Debentures A/c Dr. Profit & Loss A/c (Being interest on own debentures transferred to profit & loss account) 12% Debentures A/c Dr. Own Debentures A/c Capital Reserve A/c (Being the cancellation of own debentures) Bank A/c (500 x 105) Own Debentures A/c Profit & Loss A/c (Being the own debentures sold at Rs. 105)
Q.16 Annual Installment = 400,000 x [.
( . ) - 1]
= 400,000 x 0.2320118
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= Rs. 92,805 Approx
Dr. 6% DEBENTURES ACCOUNT Cr. Date References Rs. Date References Rs.
21-12-07
31-12-08
31-12-09
31-12-10
Balance c/d Balance c/d Balance c/d Bank A/c
400,000
1-1-07
01-01-08
01-01-09
01-01-10
Bank A/c Balance b/d Balance b/d Balance b/d
400,000
400,000 400,000 400,000
400,000
400,000 400,000 400,000
400,000
400,000 400,000 400,000
400,000
400,000 400,000
Dr. DEBENTURES SINKING FUND ACCOUNT Cr. Date References Rs. Date References Rs.
31-12-07
31-12-08
31-12-09
31-12-10
Balance c/d Balance c/d Balance c/d General Reserve
92,805
31-12-07
01-01-08 31-12-08
01-01-09 31-12-09
01-01-10 31-12-10
Profit & Loss Appropriation A/c Balance b/d Bank A/c (Interest) P& L Appropriation A/c Balance b/d Bank A/c (Interest) P& L Appropriation A/c Balance b/d Bank A/c (Interest) P& L Appropriation A/c
92,805
92,805 92,805 190,250
92,805
4,640 92,805
190,250 190,250 292,568 190,250
9,513 92,805
292,568 292,568 400,000
292,568 14,625 92,804
400,000 400,000
Dr. DEBENTURES SINKING FUND INVESTMENT ACCOUNT Cr.
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Date References Rs. Date References Rs.
31-12-07
01-01-08
31-12-08
01-01-09
31-12-09
01-01-10
Bank A/c
Balance b/d
Bank A/c
Balance b/d
Bank A/c
Balance b/d
92,805
31-12-07
31-12-08
31-12-09
31-12-10
Balance c/d
Balance c/d
Balance c/d
Bank A/c
92,805
92,805 92,805
92,805
97,445
190,250
190,250 190,250
190,250
102,318
292,568
292,568 292,568
292,568
292,568
292,568 292,568
Q.17
Dr. 12% DEBENTURES ACCOUNT Cr. Date References Rs. Date References Rs.
01-01-10 Bank A/c
300,000
01-01-10 Balance b/d
300,000
300,000 300,000
Dr. DEBENTURES SINKING FUND ACCOUNT Cr. Date References Rs. Date References Rs.
01-01-10 6% Govt. Securities General Reverse
1,200 220,800
01-01-10 Balance b/d
222,000
222,000 222,000
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Dr. 6% GOVT. SECURITIESACCOUNT Cr. Date References Rs. Date References Rs.
01-01-10 Balance b/d
222,000
01-01-10 Bank A/c Debenture Sinking Fund
220,800 1,200
222,000 222,000
Dr. BANK ACCOUNT Cr. Date References Rs. Date References Rs.
01-01-10 Balance b/d 6% Govt. Securities
123,000 220,800
01-01-10 12% Debenture A/c Balance c/d
300,000 43,800
343,800 343,000
Q.18 JOURNAL Date Details L/F Debit
(Rs.) Credit (Rs.)
31-02-10 ” ” ”
Debentures Interest A/c Dr.
Bank A/c Dr.
Interest on Own Debentures A/c
(Being interest on investment transferred to sinking fund)
14,000
66,000
71,000
646,800
3,200
900,000
80,000
71,000
650,000
99,000
Profit & Loss Appropriate A/c Dr.
Debentures Sinking Fund A/c
(Being amount set aside for annual installment)
Bank A/c Dr.
Debentures Sinking Fund A/c Dr.
10% Stock A/c
(Being the installment sold at 98%)
14% Debentures A/c Dr.
Own Debentures A/c
Bank A/c
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”
Debenture Sinking Fund A/c
(Being the debentures redeemed)
897,800
800,000
1,000
897,800
Debentures Sinking Fund
General Reverse A/c
(Balance of sinking fund transferred to General Reserve)
Dr. 14% DEBENTURES ACCOUNT Cr. Date References Rs. Date References Rs.
31-12-10 Bank A/c
Own Debentures A/c
Sinking Fund A/c
800,000
99,000
1,000
01-01-10 Balance b/d
900,000
900,000 900,000
Dr. OWN DEBENTURESACCOUNT Cr.
Date References Rs. Date References Rs.
01-01-10 Balance b/d
99,000 31-12-10 14% Debenture A/c
99,000
99,000 99,000
Dr. 10% STOCKACCOUNT Cr.
Date References Rs. Date References Rs.
01-01-10 Balance b/d
650,000 31-12-10 Bank A/c
Debenture Sinking Fund
646,800
3,200
650,000 650,000
Dr. DEBENTURES SINKING FUND ACCOUNT Cr.
Date References Rs. Date References Rs.
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31-12-10 10% Stock A/c
General Reverse A/c
3,200
297,800
01-01-10
31-12-10
”
”
”
Balance b/d
Bank
Debenture Interest
Profit & Loss App. A/c
14% Debentures
749,000
66,000
14,000
71,000
1,000
901,000 901,000
Q.19
Dr. 6% DEBENTURESACCOUNT Cr. Date References Rs. Date References Rs.
31-12-10 Bank A/c
750,000
01-01-10 Balance b/d
750,000
750,000 750,000
Dr. DEBENTURE REDEMPTION INSURANCE POLICY ACCOUNT Cr.
Date References Rs. Date References Rs.
01-01-10
”
31-12-10
Balance b/d
Bank A/c
Debenture Red Fund
690,000
30,000
30,000
31-12-10 Bank A/c
750,000
750,000 750,000
Dr. DEBENTURES REDEMPTION FUND ACCOUNT Cr. Date References Rs. Date References Rs.
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31-12-10 General Reverse A/c
750,000 01-01-10 31-12-10
”
Balance b/d Profit & Loss App. A/c Insurance Policy A/c
690,000 30,000 30,000
750,000 750,000
Chapter - 4
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Company Final Accounts
Solutions Q.1 JOURNAL
Date Particulars Debit (RS.)
Credit (RS.)
Profit and Loss Appropriation Account Dr. Reserve Fund Account
(Being amount appropriated for reserve)
6,000 10,000 10,800
6,000 10,000 10,800
Profit and Loss Appropriation Account Dr. Profit for Taxation Account (Being amount appropriated for taxation) Profit and Loss Appropriation Account Dr. Proposed Dividend Account (Being Amount appropriated for final dividend)
Net Profit for the Year
Gross Profit – Operating Expense
65000 – 21,000
Rs. 44,000
Dr PROFIT AND LOSS APPROPRIATION A/C CR
References Rs. References Rs. Reserve Fund Provision for Taxation Proposed Dividend Balance Transferred to B/S
6,000 10,000 10,800 26,200
Net profit for the year Balance of previous year
44,000 9,000
53,000 53,000
Q.2 JOURNAL
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Date Particulars Debit (RS.)
Credit (RS.)
i) ii)
Interim Dividend Account Bank Account
(Being the payment of dividend)
187,500 187,500 187,500 187,500
187500 187500 187,500
187,500
If Dividend Bank (Separate) Opened Dividend Bank Account
Bank Account Interim Dividend Account
Dividend Bank Account (Being the payment of dividend) Profit and Loss Appropriation Account Interim Dividend Account (Being Amount is appropriated)
Q.3
Dr PROFIT AND LOSS APPROPRIATION A/C CR
References Rs. References Rs. Profit for Taxation General Reserve Debenture redemption fund Interim dividend paid Amount for proposed dividend Balance Transferred to B/S
13,000 20,000 6,900 4,100 24,000 107,500
Net profit for the year Balance of Profit & Loss A/C Excess previous year provision not required further
140,000 34,000 1,500
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Q No.4
Hamza Industries LTD Trading and Profit & Loss Account For the year Ended 31st Dec, 2010
Dr. Cr. Particulars Amount
(Rs.) Particulars Amount
(Rs.) Opening Stock Purchases Rs.210,000 Less: Return 10,000 Manufacturing Wages Gross profit transferred to P&L A/c Salaries Insurance Legal Charges Debenture Interest 1/3rd Preliminary Expenses written off Bad Debts Printing and Stationary Auditor’s Remuneration Depreciation
Plant Furniture
Net Profit Transferred to P&L Appropriation A/c
60,000
200,000 75,000
165,000
Sales Rs. 415,000 Less Returns 15,000 Closing Stock Gross profit Transferred from Trading A/c
400,000 100,000
500,000 500,000 34,000 8,000 1,000
12,000
3,000 2,000 5,000
12,500
29,500 2,350
55,650
165,000
165,000 165,000
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Dr PROFIT AND LOSS APPROPRIATION A/C Cr Particulars Rs. Particulars Rs. Transfer to General Reserve Provision for Tax Proposed Final Dividend 400,000 @ 5% Balance Transferred to B/S
8,000 20,000 20,000 37,650 85,650
Balance of Previous year Net Profit for the year 2002
30,000 55,650 85,650
Hamza Industries LTD. CO BALANCE SHEET
AS ON 31st DEC, 2010
Liabilities Amount (Rs.)
Particulars Amount (Rs.)
Authorized Capital: Issued, subscribed and paid up capital (40,000 ordinary shares of Rs.10 each) Reserves: Balance of Profit & Loss Appropriation General Reserves Debenture & Long Term Loan: 6% Debenture Current Liabilities: Sundry Creditor Provision for Tax Proposed Final Dividend
10,00,000
400,000
37,650
8,000
200,000
2,550,000 20,000 20,000
Fixed Assets: Plant & Machinery 295,000 Less: Depreciation 29,500 Furniture 47,000 Less: Depreciation 2,350 Freehold Property Goodwill Deferred Cost: Preliminary Expenses Current Assets: Sundry Debtors Bills Receivable Closing Stock Cash at Bank Cash in Hand
265,500 500,000
44,650
180,000 60,000 6,000 205,000 57,500 100,000 15,000 7,000
940,650 940,650
Q No.5
MOON & CO LTD
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Trading and Profit & Loss Account For the year Ended 31st Dec, 2010
Dr. Cr. Particulars Amount
(Rs.) Particulars Amount
(Rs.) Opening Stock Purchases Wages 140,000 Add: Outstanding 10,400 Gross profit transferred to P&L A/c Discount Allowed Insurance Less: Prepaid Salaries Add: Outstanding Rent: Add: Outstanding General Expense Printing & Stationary Advertisement Postage, Telephone Etc Depreciation:
Plant & Machinery 24,150 Furniture 3,400
Provision for bad debts (W-1) Net Profit (Transferred to P & L App A/C)
100,000 600,000
150,400 200,800
Sales Rs. 850,000 +Unrecorded Credit Sales 1,200 Closing Stock Gross profit b/d Discount Received
851,200 200,000
1,051,200 1,051,200 8,400
6,720
39,400
13,200 17,900 4,800 7,600
21,000
27,550 8,560
51,970
200,800 6,300
165,000 207,100
Dr PROFIT AND LOSS APPROPRIATION A/C Cr Particulars Rs. Particulars Rs.
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Proposed Dividend Balance c/d (transferred to B/S)
25,000 39,410
Balance b/d Current Year Net Profit
12,440 51,970
64,410 64,410 Moon & CO LTD.
BALANCE SHEET AS ON 31-12-2010
Share Capital & Liabilities Amount
(Rs.) Assets Amount
(Rs.) Share Capital: Authorized Capital 100,000 shares @ Rs. 10 each Issued, Subscribed & Paid up capital 50,000 Shares @ Rs. 10 Each Reserves: General Reserves Profit & Loss Appropriation A/C Current Liabilities: Creditors Loan from managing director Outstanding wages Outstanding Salaries Outstanding rent Proposed dividend
10,00,000
500,000
50,000 39,410
70,400 31,400 10,400 2,400 1,200
25,000
Fixed Assets: Plant & Machinery 161,000 Less: Depreciation 24,150 Furniture 34,000 Less: Depreciation 3,400 Current Assets: Closing Stock Debtors 77,400 Add : Unrecorded Credit Sales 1,200
78,600
Less: New Bad debts 600 Less: New Provision for bad debts 1,560 Prepaid Insurance Cash at hand
136,850
30,600
200,000
76,440 6,720
279,600 730,210 730,210
Working Notes:
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(W-1) Provision for Bad Debts:
Old Bad debts Add: New Bad Debts Add: New Provision For Bad Debts (77,400+1,200-600=78,000 ×2/100) Less: Old Provision for bad debts Provision for bad debts
6,400 600 1,560 ______ 8,560 - ______ 8,560
Q No.6
SINDBAD COMPANY Profit & Loss Account
For the year ended 31st Dec, 2010 Dr. Cr.
Particulars Amount (Rs.)
Particulars Amount (Rs.)
Management Expenses Rent and Taxes Director Fee Insurance Repair to Motor Car Repair to Machinery Salaries Bad Debts General Charges Net Profit for the year
170,000 30,000 46,000 17,500 16,000 14,000 83,000 13,000 15,100
742,400
Gross Profit 11,07,000 +Credit Sales Unrecorded 20,000 Misc Receipts
11,27,000 20,000
11,47,000 11,47,000
Dr PROFIT AND LOSS APPROPRIATION A/C Cr Particulars Rs. Particulars Rs. Transfer to General Reserve Provision for Taxation Proposed Final Dividend Balance Transferred to B/S
60,000 150,000 100,000 534,200
Balance from previous year Current Year Net Profit
101,800 742,400
844,200 844,200
SINDBAD LTD. BALANCE SHEET
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AS ON 31-12-2010
Share Capital & Liabilities Amount (Rs.)
Assets Amount (Rs.)
Share Capital: Authorized Capital Issued, subscribed & paid capital Reserves: General Reserves 200,000 Transfer to Reserve 60,000 Profit & Loss Appropriation A/C Long Term Loan: Bank Loan Secured Current Liabilities: Unclaimed Dividend Outstanding Expenses B/P Provision for Taxation Proposed dividend Sundry creditors
10,00,000 10,00,000
260,000 534,200
900,000
45,000 40,000 40,000
150,000 100,000 281,000
Fixed Assets: Furniture & Fixture 117,000 Less: Depreciation 15,000 Land & Building 950,000 Less: Depreciation 300,000 Plant & Machinery 700,000 Less: Depreciation 230,000 Motor Car 10,45,000 Less: Depreciation 680,000 Goodwill Deferred Cost: Preliminarily Expenses Current Assets: Prepaid Expenses B/R Sundry Debtors 580,000 +Unrecorded Credit Sales 20,000 Cash at Bank Cash in Hand Closing Stock
102,000
650,000
470,000
365,000
100,000
30,000
20,000 60,000
600,000
136,700 16,500
800,000 33,50,200 33,50,200
Q No.7
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MUMTAZ LTD Profit & Loss Account
For the year ended 30th June, 2010 Dr. Cr. Particulars Amount
(Rs.) Particulars Amount
(Rs.) Postage & Telegram Telephone charges Interest in Debenture 600 + Outstanding 600 Rent, Rates Advertisement Director’s Remuneration Discount Insurance 450 Less: Prepaid (450/12×3) 150 Repairs Reserve for investment Depreciation:
Plant & Machinery Land & Building Furniture
Net Profit Transferred to P & L App.
800 120
1200 400
1400 900 80
300 150 500
3,200 900 300
8650
Gross Profit Interest Received
18,500 400
18,900 18,900
Dr PROFIT AND LOSS APPROPRIATION A/C Cr Particulars Rs. Particulars Rs. Dividend Equalisation Fund Debenture Redemption Fund Proposed Dividend Balance c/d (Transferred to B/S)
1,000 1,000 2,800 6,600
Profit of Previous Year Profit of Current Year
2,750 8,650
11,400 11,400
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MUMTAZ LTD. BALANCE SHEET
AS ON JUNE 30, 2010
Share Capital & Liabilities Amount
(Rs.)
Assets Amount (Rs.)
Share Capital: Authorized Capital Issued, subscribed & paid capital Reserves: Balance of Profit Share Premium Dividend Equalization Reserve 2,000 + Transfer 1000 Debenture Redemption Reserve 1,000 + Transfer 1000 Debentures: 6% Debentures Current Liabilities: Sundry Creditors Interest on debentures payable Bank Overdraft Provision for Taxation Proposed dividend
-
35,000
6,600 1,000
3,000
2,000
20,000
4,000 600 350
6,500 2,800
Fixed Assets: Plant & Machinery 50,000 Less: Accumulated Depreciation 21,200 Land & Building 30,000 Less: Accumulated Depreciation 12,900 Furniture & Fixture 3,000 Less: Accumulated Depreciation 1,500 Current Assets: Closing Stock Investment 8,000 Less: Reserve 500 Sundry Debtors Advance Income Tax Prepaid Insurance Cash in Hand
28,800
17,100
1,500
12,000
7,500
11,000 1,000 150
2,800 81,850 81,850
Q No.8
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KALAM MANUFACTURING COMPANY Profit & Loss Account
For the year ended Dec.31, 2010 Dr. Cr. Particulars Amount
(Rs.) Particulars Amount
(Rs.) Stock (1-1-10) Purchases Wages and Salaries 39,000 Less: Wages for installation of machinery 2,000 Fuel and Power Custom Duty and Clearing Charges Gross Profit c/d Insurance Director Fee Repair Debenture Interest 9,000 Add: Outstanding 9,000 Written off Preliminary Exp Carriage Outward New Provision 2,925 Add: Bad Debts 1,500 Less: Old Provision 1,800 Depreciation:
Plant (See Note 1) Furniture
Net Profit for the year
75,000 165,000
37,000
2,250 5,250
185,500
Sales Closing Stock Gross Profit b/d Discount Received Dividend on Investment
360,000 110,000
470,000
6,150 6,000 3,600
18,000
6,000 880
2,625
25,850 1,500
118,295
470,000
185,500 2,400 1,000
188,900 188,900 Note 1
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New Value of Plant & Machinery Value in Trial Balance 256,500 +Value of Wages for Installation 2,000 258,500 Depreciation 258,500 @ 10% =25,850 Dr PROFIT AND LOSS APPROPRIATION A/C Cr Particulars Rs. Particulars Rs. Interim Dividend Transfer to General Reserve Provision for Taxation Final Proposed dividend @ 10% Balance (Cr.) Transfer to Balance Sheet
13,500 18,000 37,500 22,500
53,045
Balance From Previous Year Net Profit For Current Year
26,250 118,295
144,545 144,545 KALAM MANUFACTURING CO.
BALANCE SHEET AS ON DEC. 31, 2010
Share Capital & Liabilities Amount
(Rs.) Assets Amount
Rs.
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Share Capital: Authorized Capital (45,000 Ordinary shares of Rs. 10 each) Issued, subscribed & paid capital (22,500 shares of Rs. 10 each) Reserves: P&L Appropriation A/C Balance General Reserve 15,000 Add: Transfer 18,000 Debenture Redemption Reserve Share Premium Debentures& Long Term Loans: 6% Debentures Current Liabilities: Sundry Creditors Interest on debentures payable Proposed dividend Provision for Taxation
450,000
225,000
53,045
33,000
6,750 7,500
300,000
9,750 9,000
22,500 37,500
Fixed Assets: Plant & Machinery 50,000 Less: Accumulated Depreciation 21,200 Land & Building 30,000 Less: Accumulated Depreciation 12,900 Furniture & Fixture 3,000 Less: Accumulated Depreciation 1,500 Current Assets: Closing Stock Investment 8,000 Less: Reserve 500 Sundry Debtors Advance Income Tax Prepaid Insurance Cash in Hand
28,800
17,100
1,500
12,000
7,500
11,000 1,000 150
2,800
704,045 704,045
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Q No.9
RINGO RING COMPANY Profit & Loss Account
For the year ended March 31, 2010 Dr. Cr. Particulars Amount
(Rs.) Particulars Amount
(Rs.) Rent and Taxes Salaries 47,000 Add: Outstanding 3,000 Office Expenses Audit Fee Audit Expenses Compensation to Employees Discount Preliminary Expenses Written off Interest on Debenture
(40,000 × × )
Depreciation:
Plant Furniture
Net profit for the year
24,000
50,000 27,500 4,500 500
6,500 3,500
2,000 700
8,100 1,00
65,950
Gross Profit Discount Received
192,450 2,000
194,450 194,450
Dr PROFIT AND LOSS APPROPRIATION A/C Cr Particulars Rs. Particulars Rs. Interim Dividend Transfer too General Reserve Provision for Taxation Proposed Dividend (5×3,000) Balance Transferred to B/S
12,000 8,000
15,000 15,000 31,950
Profit of Previous Year Profit of Current Year
16,000 65,950
81,950 81,950
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RINGO RING COMPANY.
BALANCE SHEET AS ON March 31, 2010
Share Capital & Liabilities Amount
(Rs.) Assets Amount
(Rs.) Share Capital: Authorized Capital Issued, subscribed & paid capital (3,000 share of Rs.100 each) Reserves: General Reserves 5,000 Add: Transfer 8,000 Profit & Loss Appropriation A/C Debentures & Long Term Loan: 7% Debentures (1-1-2001) Current Liabilities: Sundry Creditors Liability for Expenses Provision for Taxation Proposed Dividend Outstanding Salaries Interest on Debenture
500,000
300,000
13,000
31,950
40,000
33,000 9,550
15,000 15,000 3,000 700
Fixed Assets: Plant 81,000 Less: Depreciation 8,100 Furniture 12,000 Less: Depreciation 1,200 Preliminary Expenses Current Assets: Closing Stock Advance Tax Unexpired Payment Cash in Hand Sundry Debtors
72,900
10,800
20,000
153,000 27,000 8,000 7,500
180,000
461,200 461,200
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Q No. 10
STAR LIMITED COMPANY Profit & Loss Account
For the year ended Dec 31, 2010 Dr. Cr. Particulars Amount
(Rs.) Particulars Amount
(Rs.) Salaries and Wages Carriage Outward Interest on Debentures 4,500 Add: Outstanding 4,500 Depreciation of Furniture Depreciation on Property Provision for Bad debts Net Profit Transferred to P&L App.
68,100 11,600
9,000 7,000
20,000 4,738
59,562
Balance from Trading 176,550 + Unrecorded Cr. Sales 3,450
180,000
180,000 180,000 Dr PROFIT AND LOSS APPROPRIATION A/C Cr Particulars Rs. Particulars Rs. Interim Dividend Transfer too General Reserve Provision for Taxation Proposed Dividend (5×3,000) Balance Transferred to B/S
24,000 10,000 30,000 17,500 52,312
Profit of Previous Year Profit of Current Year
74,250 59,562
133,812 133,812
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STAR COMPANY. BALANCE SHEET
AS ON DEC 31, 2010
Share Capital & Liabilities Amount (Rs.)
Assets Amount (Rs.)
Share Capital: Authorized Capital (60,000 Ordinary Shares) Issued, subscribed & paid capital (35,000 shares of Rs.10 each) Reserves: General Reserves 18,000 Add: Transfer 10,000 Share Premium account Profit & Loss Appropriation A/C Debentures & Long Term Loan: 9% Debentures Current Liabilities: Interest on Debentures Payable Sundry creditors Bills Payable Taxation Reserve Proposed Dividend
600,000 350,000
28,000
40,000
52,312
100,000
4,500 50,400 1,000
30,000 17,500
Fixed Assets: Furniture 100,000 Less: Depreciation 37,000 (30,000+7,000) Freehold Property 300,000 Less: Depreciation 120,000 Deferred Cost Technical Know how Current Assets: Sundry Debtors 115,000 + Unrecorded Cr. Sales 3,450 118,450 -Provision for bad debts 4,738 Bills Receivable Closing Stock Cash in Hand
63,000 180,000
18,000
113,712
12,000
283,000 15,000
684,712 684,712
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Q No.11
LUQMAN AUTO PARTS COMPANY Trading and Profit & Loss Account
For the year ended Dec.31, 2010 Dr. Cr. Particulars Amount
(Rs.) Particulars Amount
(Rs.) Stock Jan 1, 2002 Purchases 359,105 Less: Returns 4,925 Sundry Manufacturing Exp 19,620 Add: Outstanding Wages 1,380 Carriage Clearing Charges Gross Profit c/d Director’s Remuneration Office Salaries & Exp 34,500 + Outstanding 1,500 Auditor Fee Interest on Bank Loan 1,125 +Still Payable 1,125 Deprecation: Plant & Machinery Furniture Net Profit Transferred to P & L App
93,210 354,180
21,000
2,450 12,500
159,310
Sales 584,750 Less: Returns 6,340 Closing Stock Gross Profit b/d
578,410
64,240
642,650
13,230
36,000
11,620
2,250
11,130 750
84,330
642,650
159,310
159,310 159,310 Dr PROFIT AND LOSS APPROPRIATION A/C Cr Particulars Rs. Particulars Rs. Provision for Taxation @ 30 % General Reserve Proposed dividend @ 15% Balance Transferred to B/S
25,299 10,000 30,000 38,351
Balance From Previous Year Net Profit For Current Year
19,320 84,330
103,650 103,650
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Luqman Auto Parts CO.
BALANCE SHEET AS ON DEC. 31, 2010
Share Capital & Liabilities Amount
(Rs.) Assets Amount
(Rs.) Share Capital: Authorized Capital (50,000 Ordinary shares of Rs. 10 each) Issued, subscribed & paid capital (20,000 shares of Rs. 10 each) Reserves: P&L Appropriation A/C Balance General Reserve Loans: 9% Bank Loan Current Liabilities: Outstanding Wages Outstanding Officer Salaries Interest on Loan Payable Sundry Creditors Provision for Taxation Proposed Dividend
500,000
200,000
38,351 10,000
25,000
1,380 1,500 1,125
31,110 25,299 30,000
Fixed Assets: Plant & Machinery 74,200 Less: Depreciation 11,130 Furniture & Fixture 7,500 Less: Depreciation 750 Freehold Premises Deferred Cost: Preliminary Expenses Current Assets: Investment Sundry Debtors Closing Stock Advance Income Tax Cash at Bank Cash in Hand
63,070
6,750
98,000
9,000
4,000 52,700 64,240 35,000 9,765 1,240
363,765 363,765
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Q No. 12
EHSAN Manufacturing Limited Profit & Loss Account
For the year ended Dec 31, 2010 Dr. Cr. Particulars Amount
(Rs.) Particulars Amount
(Rs.) Commission Establishment Charges Rates & Taxes Audit Fee Discount Allowed Interest on Loan Reserve for Investment (100,000-96,000) Depreciation:
- Building - Furniture - Motor Vehicle
Net Profit Transferred to B/S
2,000 101,000 16,000 12,000 3,000 24000
4,000
7,500 5,000
17,500 239,200
Gross Profit Interest on Investment 4,500 +Accrued 1,500 Discount Received
422,700
6,000 2,500
431,200 431,200
Dr PROFIT AND LOSS APPROPRIATION A/C Cr Particulars Rs. Particulars Rs. Interim Dividend Provision for Tax not yet Provided For Year 2009 Provision For Tax Further Required Proposed Dividend Balance Transferred to P&L App.
30,000
11,000 59,800 60,000 93,400
Net Profit for the year Previous year profit
239,200 15,000
254,200 254,200
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EHSAN MANUFACTURING LIMITED
BALANCE SHEET AS ON DEC 31, 2010
Share Capital & Liabilities Amount (Rs.)
Assets Amount (Rs.)
Share Capital: Issued, subscribed & paid capital Reserves: General Reserves Share Premium Balance of Profit Long Term Loans: Long Term Loan Current Liabilities: Provision for tax Proposed Dividend Sundry Creditors
600,000
50,000 12,500 93,400
240,000
59,800 60,000 15,800
Fixed Assets: Building Land Furniture Motor Vehicle Current Assets: Investment 100,000 - Investment Reserve 4,000 Advance Payment of Tax Stocks Sundry Debtors Cash at Bank Accrued Interest on investment
350,000 100,000 10,000
175,000
96,000
40,000 196,500 35,000
127,500 1,500
11,31,500 11,31,500
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Q No. 13
AKRAM ARIF LTD. Profit & Loss Account
For the year ended Dec 31, 2010 Dr. Cr. Particulars Amount
(Rs.) Particulars Amount
(Rs.) Director Fee Interest on debentures 15,000 +Interest Payable 15,000 Salaries Insurance 17,000
Less: Prepaid( ×3) 4,250
Depreciation:
Land & Building Plant & Machinery Motor Truck Furniture
Net Profit Transferred to P&L App.
15,500
30,000
100,000
12,750
90,000 80,000 20,000 5,000
736,250
Balance From Trading (Working) Interest on Investment
10,49,500
40,000
10,89,500 10,89,500
Dr PROFIT AND LOSS APPROPRIATION A/C Cr Particulars Rs. Particulars Rs. Interim Dividend Dividend Equalisation Reserve Provision for Taxation Final Dividend Balance c/d (transferred to B/S)
90,000 80,000
200,000 225,000 441,250
Balance of Profit Net Profit for the Year
300,000 736,250
10,36,250 10,36,250
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AKRAM ARIF LTD BALANCE SHEET
AS ON DEC 31, 2010 Share Capital & Liabilities Amount
(Rs.) Assets Amount
(Rs.) Authorized Capital: Issued, subscribed & paid capital (15,000 shares of Rs.100 each) Reserves: Share Premium Account General Reserve ,Dividend Equalization Reserve 110,000 Add: Transfer 80,000 Balance of Profit (Cr.) Debenture & Long Term Loans: 6% Debenture Current Liabilities: Sundry Creditors Interest on Debentures Payable Provision for Tax Proposed Dividend
15,00,000
15,00,000
40,000 135,000
190,000
441,250
500,000 11,50,000
15,000 200,000 225,000
Fixed Assets: Motor Truck 149,500 Less: Accumulated Depreciation 85,000 (65,000+20,000) Land and Building 900,000 Less: Accumulated Depreciation 400,000 Plant & Machinery 800,000 Less: Accumulated Depreciation 275,000 Furniture 800,000 Less: Accumulated Depreciation 25,000 Investment: Investment at cost Current Assets: Sundry Debtors Advance Tax Tax Deducted at Source Unexpired Insurance Closing Stock Cash in Hand & at Bank
64,500
500,000
525,000
75,000
800,000 12,50,000 150,000 10,500 4,250
850,000 167,000
43,96,250 43,96,250
WORKING:
Balance From Trading A/C 879,500
Add: Depreciation on Land and Building & on Plant & Machinery (90,000+80,000) 170,000 Corrected Balance 10,49,500
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Q No.14
MAKANIG COMPANY Trading and Profit & Loss Account
For the year ended June.30, 2010 Dr. Cr. Particulars Amount
(Rs.) Particulars Amount
(Rs.) Cost of Goods Sold Gross Profit c/d Repair and Maintenance Advertisement Sundry Expenses Insurance Provision for doubtful debts further required (25,000 – 20,000) Interest on Debentures Rs.20,250 + Outstanding 20,250 Establishment (174,000-18,000) Deprecation: Machinery Building Furniture Reserve for Investment Managerial Commission 18,000 Add: Outstanding 6,000 Net Profit Transferred to P & L App
30,00,000 950,000
Sales Gross Profit b/d Income from Investment
39,50,000
39,50,000
15,000 90,000 31,000 29,750 5,000
40,500
156,000
120,000 35,000 16,000 15,000
24,000
392,750
39,50,000 950,000 20,000
970,000 970,000 Dr PROFIT AND LOSS APPROPRIATION A/C Cr Particulars Rs. Particulars Rs. Provision for Taxation Proposed dividend (5 × 35,000) Balance Transferred to B/S
100,000 175,000 157,750
Balance From Previous Year Net Profit For Current Year
40,000 392,750
432,750 432,750
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MAKANGI COMPANY LTD. BALANCE SHEET
AS ON June. 30, 2010
Share Capital & Liabilities Amount (Rs.)
Assets Amount (Rs.)
Share Capital: Authorized Capital Issued, subscribed & paid capital (35,000 ordinary shares of Rs. 100 each) Reserves: Share Premium Balance of Profit (cr.) Debentures &Long Term Loans: 6% Debentures Current Liabilities: Bank Overdraft Sundry Creditors Provision for Tax Proposed Dividend Outstanding interest on debentures Outstanding Managerial Commission
-
35,00,000
175,000 157,750
675,000
100,000 250,000 100,000 175,000 20,250
6,000
Fixed Assets: Freehold Land Building 750,000 Less: Accumulated Depreciation 85,000 Machinery 15,00,000 Less: Accumulated Depreciation 420,000 Furniture 200,000 Less: Accumulated Depreciation 56,000 Current Assets: Investment 300,000 Less: Reserve for investment 15,000 Advances Sundry Debtors 500,000 Less: Provision 25,000 Closing Stock Cash in Hand
20,00,000
665,000
10,80,000
144,000 285,000 60,000
475,000 400,000 50,000
51,59,000 51,59,000
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Q.No. 15
SARA SUNDAS COMPAY
TRADING AND PROFIT AND LOSS A/C
Dr FOR THE YEAR ENDED DEC 31, 2010 Cr
Dr. PROFIT AND LOSS APPROPRIATION A/C CR.
Particulars R.s Particulars Rs. Interim Dividend Provision for Tax Proposed dividend Balance C/d (transferred to BS)
45,000 30,000 45,000 42,716
Balance b/d Current car profit SARA
16,848 145,868
162,716 162,716
Particulars Rs Particulars Rs Opening Stock Purchases Manufacturing Expenses Gross Profit c/d Establishment Expense General Charges Director Fee Depreciation Manager's Commission Repair & renewals Staff provident fund Net profit transferred to P&L App. A/c
172,058 500,903 202,800 258,466
36,814 31,078 18,000 20,000
6,500 10,000
1,500 145,868
Sales 983,947 + Credit Sale not recorded 1,600 Closing Stock Gross Profit b/d Interest on Investment 8,544 + Accrued 2,750
985,547 148,680
258,466
11,294
269,760 269,760
11,34,227 11,34,227
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SARA SUNDUS COMPANY BALANCE SHEET
AS ON DEC.31, 2010
Liabilities Rs. Assets Rs. Share Capital: Issued, subscribed & paid up Capital 60,000 shares of Rs. 10 each Reserves: General Reserve Profit & Loss Appropriation A/c Current Liabilities: Trade Creditors Unclaimed Dividend Commission to Managing Agent Staff Provident Fund 37,500 + Further 1,500 Provision for tax Proposed dividend
600,000
250,000 42,716
36,858
6,526 6,500
39,000 30,000 45,000
Fixed Asset: Building 175,000 ,000 Furniture 15,000 Machinery 200,000 Motor vehicles 95.000 485,000 Less depreciation reserve 91,000 Long Term Investment: Investment Current Asset: Accrued interest on investment Stock Book debts 148,380 +Sales not recorded1,600 Cash
394,000
288,950
2,750 148.680
149,980
72,240 10,56,600 10,56,600
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Q.16 ALPHA LTD.COMPANY
TRADING AND PROFIT AND LOSS ACCOUNT
Dr. FOR THE YEAR ENDED DEC. 31, 2010 CR.
Particulars Rs. Particulars Rs. Opening stock Purchases Rs. 240800 Less: Returns 1800 Wages Fuel and power Gross profit c/d Salaries Insurance Audit fee Repair & Renewal Advertisement Depreciation Provision for doubtful debts New provision Rs. 5,750 (141,250 - 22,000 - 4,250 ) x 5% Add: Bad debts 4.250 10,000 Less: Old provision 4,300 Manager's commission (106,600 x 15 /100) Net profit transferred to P & L App. A/c
200,000
239,000 49,300 29,400
315,300
Sales 790,000 Less: Sale or return 22,000 Closing stock 55,000 Add: Goods on sale or return 10,000 Gross profit b/d Misc. Receipts
768,000
65,000
833,000 833,000 82,000 12,000 16,000
7,000 26,000 85,000
5,700 15,990
90,610
315,300 25,000
340,300 340,300
PROFIT AND LOSS APPROPRIATION A/C
Particulars R.s Particulars Rs. Provision for tax (for last year) Provision for tax required Proposed dividend Balance c/d (transferred to B/S)
8,000 35,000 72,000 62,710
Balance from last year Net profit during the year
87,100 90,610
177,710 177,710
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BALANCE SHEET
AS ON 31ST DEC. 2010
Liabilities Rs. Assets Rs. Share Capital: Authorized Capital 120,000 shares of Rs. 10 each Paid up capital: 80,000 shares of Rs. 10 each Reserves: General Reserve Dividend equalization Reserve Profit & Loss Appropriation A/c Current Liabilities: Sunday Creditors Outstanding expenses Tax payable Unclaimed Dividend Managing Commission Outstanding Provision for tax Proposed dividend
12,00,000
800,000
100,000
45,000 62,710
105,000
26,800 13,000 10,000
3,990
35,000 72,000
Fixed Asset: Land &Building Machinery Motor vehicles Furniture Current Asset: Closing Stock Sunday debtors 141,250 Less: Goods on sales Or return 22,000 119,250 Less: Bad debts 4,250 115,000 Less: provision 5,570 Prepaid Expenses Cash at bank Cash in hand
5,00,000 228,500 220,000 105,000
65,000
109,250 8,000
24,000 13,750
12,73,500 12,73,500
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Q.17 PAKISTAN LIMITED
TRADING AND PROFIT AND LOSS ACCOUNT
Dr. FOR THE YEAR ENDED 30TH JUNE, 2011 Cr.
Particulars R.s Particulars Rs. Opening stock Purchases 210,000 Less Purchase return 10,000 200,000 Less Goods sent on consignment 60,000 Manufacturing wages Gross profit c/d
60,000
140,000
75,000
225,000
Sales 415,000 Less: Sales or return 15,000 Closing stock
400,000
100,000
500,000 500,000 Depreciation on: Plant & machinery 29,500 Patent 6,000 Furniture 2,350 Auditor's Remuneration Insurance Salaries Printing and stationary Legal charges Debentures interest Preliminary expenses (written off) (21,000 x 1/3) Provision for bad debts (w-3) Net profit transferred to P & L Appropriation A/c
37,850 12,500
8,000 34,000
5,000 1,000
12,000 7,000
13,625
139,025
Gross profit b/d Profit on consignment (w-1)
225,000 45,000
270,000 270,000
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PAKISTAN LIMITED
PROFIT AND LOSS APPROPRIATION ACCOUNT
Dr. FOR THE YEAR ENDED 30TH JUNE, 2011 Cr.
Particulars R.s Particulars Rs. Interim dividend Final dividend (21,000-8,000) General reserve Provision for income tax Balance transferred to B/S
8,000 13,000
8,000 20,000
120,025
Balance b/d Current year net Profit
30,000 139,025
169,025 169,025 PAKISTAN LIMITED
BALANCE SHEET
AS ON 30TH DECCEMBER, 2011
Liabilities &Captial Rs. Assets Rs. Authorised Capital: 100,000 shares of Rs. 10 each Paid up Capital: 42,000 shares of Rs. 10 each Reserves: General Reserve Profit & loss A/c Current Liabilities: 6% debentures Current Liabilities: Sunday creditors Final dividend Provision
10,00,000
Fixed Assests: Plant & machinery 295,000 Less: Depreciation 29,500 Patents 60,000 Less: Depreciation 6,000 Furniture 47,000 Less: Depreciation 2,350 Freehold property Deferred Costs: Preliminary Exp. (21,000-7,000) Current Assets: Cash in hand (7,000+ 40,000) Cash at Bank Sundry debtors 205,000 + Dishonoured bills 27.500 232500 -Provision for bad debts. 11.625 (232,500 5/100) Bills receivable 57,500 Less: Bills receivable dishonoured27,500 Closing stock 100,000 Consignment stock 15,000 JS traders (Consigner) (w-2)
265,500
54,000
44,650 180,000
14,000
47,000 15,000
220,875
30,000
115,000 50.000
420,000
8,000 120,025
200,000
255,000
13,000 20,000
10,36,025 10,36,025
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(w-1)
Dr. CONSIGNMENT ACCOUNT Cr.
R.s Rs. Goods sent on Consignment A/c JS traders – Commission (100,000 x 10/100) Profit on consignment
60,000 10,000
45,000
JS Traders – Sales Stock on Consignment (60,000 x ¼)
100,000 15,000
115,000 115,000
(w-2)
Dr. JS TRADERS ACCOUNT (CONSIGNEE) Cr.
Particulars R.s Particulars Rs. Consignment A/c 100,000 Cash A/c
Consignment A/c Balance c/d
40,000 10,000 50,000
100,000 100,000
(w-3) Provision for Bad Debts:
Old bad debts + New bad debts + New provision for bad debts- Old provision for bad debts
= 2000+0 + (232,500x5%) – 0
= 2000 + 11,625
= 13,625
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Q.18 ISLAM AND SALEEM LTD.
PROFIT AND LOSS ACCOUNT
Dr. FOR THE YEAR ENDED ON 31st MARCH 2010 Cr.
Particulars R.s Particulars Rs. Salaries Director fee Management Expenses Interest on debenture Amortization of Franchise Depreciation: Furniture ( 15.000 @ 10 % ) On Building (600,000 @ 10%) On Truck Net profit transferred to P & L App. A/c
150,000 15,200
172,000 7,800 5,000
1,500
60,000 38,750
296,750
Gross profit corrected Commission received
735,000 12,500
747,500 747,500
Dr. PROFIT AND LOSS APPROPRIATION A/C Cr.
Particulars R.s Particulars Rs. Provision for Taxation Proposed Dividend General Reserve Balance c/d (transferred to B/S)
100,000 100,000
50,000 63,250
Balanced of Previous Years Current year Net Profit
16,500 296,750
313,250 313,250
ISLAM AND SALEEM LTD. CO.
BALANCE SHEET
AS ON 31ST MARCH 2010
Liabilities Rs. Assets Rs.
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Share Capital: Authorized Capital Issued, subscribed & paid up capital Reserves: General Reserve Balance of Profit & Loss Appropriation A/c Debentures: 6% Mortgage Debenture Current Liabilities: Provision for taxation 150,000 + Further provided 100,000 Proposed dividend Sunday Creditors
500,000
50,000
63,250
130,000
250,000 100,000
45,000
Fixed Asset: Building 600,000 Less Accumulated Depreciation 210,000 Furniture 15,000 Less Acc. Depreciation 9,000 Truck 450,000 Less Accumulated Depreciation 188,750 Franchise 50,000 Less Amortization 5,000 Deferred Cost: Discount on Issue of Debenture Current Asset: Debtors Closing Stock Cash at bank
390,000
6,000
261,250
45,000
6,000
180,000 230,000
20,000 11,38,250 11,38,250
(W-1) Calculation of Correct Gross Profit:
Gross profit before calculation Rs.750,000
Less Closing stock overcast charged to Trading Account
(245,000-230,000) 15,000
(Lower of Cost OR Market Value Rule IAS2)
735,000
(W-2) Depreciation ON Truck:
Depreciation ON 3 Trucks 300,000 x 10 % 30,000
Depreciation ON New Truck 50,000 x10 % x 7/12 8,750
Total Depreciation ON Trucks 38,750
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Q.19 SUNSHINE COMPANY
TRADING AND PROFIT AN LOSS ACCOUNT
Dr. FOR THE YEAR ENDED DEC. 31, 2009 Cr.
Particulars R.s Particulars Rs. Open Stock Purchases Carriage Gross profit transferred to profit and Loss A/c Salaries Packing charges Rent Director's remuneration Interest on debentures3,000 + Outstanding 3,000 Interest on Bank Overdraft Postage Depreciation on equipment Net profit for the year (transferred to P & L App. A/c
100,000 825,000
3,800
351,200
Sale10,50,000 - Sales of equipment10.000 Closing Stock Gross profit transferred from trading A/c Interest received Gain on sale of equipment (with zero book value)
10,40,000 240,000
12,80,000 12,80,000 82,000
1,350 17,000 22,000
6,000 7,500 1,380
18,000
207,970
351,200
2,500
10,000
363,700 363,700
Dr. PROFIT AND LOSS APPROPRIATION A/C Cr.
Particulars R.s Particulars Rs. Interim dividend Transfer to dividend equalization reserve Provision for Taxation Transfer to general reserve Proposed dividend (60, 000 x 2.5) Balance Transferred to B/S
36,000
25,000 50,000 30,000
125,000 109,970
Balance from last year Net profit for year Provision for Taxation no longer required (71,000-58,000)
155,000 207,970
13,000
375,970 375,970
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SUNSHINE COMPANY
BALANCE SHEET
AS ON DEC. 31, 2009
Liabilities Rs. Assets Rs. Share Capital: Authorized Capital Issued, subscribed & paid up capital Reserves: General Reserve Dividend Equalization Reserve Balance of Profit (Cr.) Debentures: 5% Debenture Current Liabilities: Bills Payable Sunday Creditors Interest on debentures payable Bank Overdraft Provision for taxation Proposed final dividend
500,000
500,000
30,000 25,000
109,970
120,000
75,000 90,000
3,000 100,000
50,000 125,000
Fixed Asset: Equipment 180,000 Less Depreciation 18,000 Freehold Property Investment: Investment in 5% Govt. Bonds Current Asset: Sunday Debtors Bill Received Closing Stock Advance Tax Cash in hand
162,000 530,000
50,000
115,000
78,970 240,000
32,000 20,000
12,27,970 12,27,970
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Chapter - 5
Analysis of Accounting Ratios
Solutions
Q.1 (i) Current Ratio =
= ,
,= 1 : 1
(w-1) Current Assests = Stock + Debtors + Bank+ Prepaid insurance
= 120,000+90,000+ 22,800 + 7,200 = Rs. 240,000
(w-2) Current Liabilities = Creditors + Provision for tax +Bank Overdraft
= 150,000 + 10,000+80,000 = Rs. 240,000
(ii) Liquidity Ratio =
= ,
,= 0.47 : 1
(w-3) Liquid Assets = Current Assets - Stock - Prepaid Exp.
= 240,000-120,000-7,200 = Rs. 112,800
(iii) Stock Turnover Ratio =
.
= ,
,= 4.17times
(w-4) Cost of Goods Sold:
Suppose cost = 100
Gross profit = 20
Sales = 120
Sales : Cost of sales
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120 : 100
600,000 : x
x = ,
= 500,000
(iv) Debtors Turnover Ratio =
.
= ,
,= 6.67 times
Q.2(a) Current Ratio =
= ,
,= 2 : 1
(w-1)Current Assets =Stock + Debtors + Advances +Prepaid Expenses + Cash
= 220,000+ 110,000+ 10,000 +8,000 +52.000 = Rs. 400,000
(w-2)Current Liabilities = Bank overdraft +Creditor + Outstanding Expenses
= 100,000 + 80.000+20,000 = Rs.200,000
(b) Quick Ratio =
= ,
,= 0.86 : 1
(w-3) Quick Assets = Current Assets - Stoke - Prepuid Expenses
= 400,000 - 200,000 - 8.000 = Rs. 172,000
(c)Debt-Equity Ratio =
= ,
,= 1 : 1
(w-4)Long Term Debts = Mortgage Loan + Debentures
= 440,000+ 160,000 = Rs. 600,000
(w 5) Equity = Share Capital + Reserves and surplus
= 500,000 + 100,000 = Rs. 600,000
OR
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= ,
,= 1.33 : 1
(d) Proprietary Ratio =
= ,
, ,= 0.43 : 1
(e) Fixed Assets Ratio =
= , ,
, ,= 0.83 : 1
(w-6)Long Term Funds = Shareholder Funds+Long Term Debts
= 600,000+600,000 = Rs. 12,00,000
Q.3 Current Ratio =
= ,
,= 1 : 1
(w-1)Current Assets = Stock + Investment + Cash
= 60,000 + 20,000 + 60,000 = Rs. 140,000
(w-2)Current Liabilities = Creditors+ Provision for Tax + Overdraft
= 80,000+ 40,000 +20,000 =Rs. 140,000
(ii) Liquidity Ratio =
= ,
,= 0.57 : 1
(w-3) Liquid Assets = Investment+ Cash
= 20,000 +60,000 = 80,000
(i) Proprietary Ratio =
= ,
,= 0.55 : 1
(w-4) Shareholder's Fund = Share Capital + Capital Reserve + Profit & Loss A/c
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= 200,000+40,000 +60,000 = 300,000
(iv) Debt - Equity =
= ,
,= 0.33 : 1
OR
= , ,
,= 0.33 : 1
(v) Return on Equity Ratio =
x100
= ,
,x 100 = 20%
Q.4 Debtors Turnover Ratio =
.
For 2009 = 800,000 + 100,000 = 8 times
For 2010 = 700,000 + 100,000 = 7 times
(w-1) Net Credit Sales: 2009 2010
Gross sales 950,000 800,000
Less: Cash sales 100,000 75,000
Less: Sales returns 50,000 25,000
800,000 700,000
(w-2) Average Total Debtors = / /
For 2009 =( , , ) ( , )
= 100,000
For 2010 =( , , ) ( , , )
= 100,000
Debtors collection period =.
x Days of year
For 2009 =,
,x 365 = 45.62 or 46 days
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For 2010 =,
,x 365 = 52.14 or 52 days
Q.5 Creditors Turnover Ratio =
.
=,
,= 5 times
(w-1) Net Credit Purchases: Rs.
Total Purchases 425,000
Less: Cash Purchases 113,000
Less: Return Outwards 12,000
300,000
(w-2) Average Total Creditors = Creditors + Bills payable
= 53,200+ 6,800 = 60,000
Note: As opening creditors and bills payable are not given so closingcreditor and bills payable are considered as average accounts payable.
Average Payment Period =.
x Days of year
=,
,x 365 = 73 times
Q.6(i) Stock Turnover Ratio =
.
=,
,= 6.96 times
(w-1) Cost of sales = Sales -Gross profit
= 400,000-20 % of 400,000
= 400,000-80,000 = 320,000
(ii) Debtors Turnover Ratio =
.
=,
,= 9.09 times
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(i) Working Capital Turnover Ratio =
=,
,= 14.55 times
(w-2) Net Working Capital = Current Assets- Current Liabilities
= 96,000-74,000 = 22,000
(w-3) Current Assets = Stock + Debtors - Provision for bad debts+ Cash
= 46,000 +44,000 - 4,000+ 10,000 = 96,000
(iv) Fixed Assets Turnover Ratio =
=,
,= 1.54 times
Q.7 (a) Gross Profit Ratio =
x 100
=,
,x100 = 30.82 %
(b)Operating Profit Ratio =
x 100
=,
,x 100 = 16.6 %
(w-1) Operating Profit = Gross Profit -Operating Expenses
= 260,000-120,000 = Rs. 140,000
Operating Expenses = Office Expenses + Selling Expenses + Distribution Expenses + Provision for doubtful debts + Depreciation
= 50,000 +30,000 + 20,000 + 4,000 + 16,000 = 120,000
(c) Operating Ratio =
x 100
=( , , ) ,
,x 100 = 83.4 %
OR
Operating Ratio = 100 – Operating Profit Ratio
= 100 – 16.6 = 83.4 %
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(b) Net Profit Ratio =
x 100
=,
,x 100 = 21.34 %
(e) Stocks Turnover Ratio =
. x 100
=,
,x 100 = 8.68 times
Average Stock = ½ [55,000 + 79,500] = 67,250
Q.8
(a) Current Ratio =
= , ( )
,= 1.8 : 1
(b) Earnings per Share =
.
= ,
,= Rs. 3 per share
(c) Debt-Equity Ratio =
= ,
,= 0.308 : 1
(d) Interest Coverage Ratio =
= ,
,= 5.167 times
(e) Price/Earnings Ratio =
= = 8.33 times
WORKING NOTES:
(w-1) Current Assets: Rs. (w-2) Net Profit after Tax: Rs.
Cash 21,000 Net Profit before tax 50,000
Marketable securities 17,000 Less: Provision for
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Accounts Receivable 47,000 income tax
Inventory 50,000 (50,000 x 40/100) 20,000
135,000 Net profit after tax 30,000
(w-3) Equity: Rs. (w-4) Total Debts: Rs.
Paid up Capital 100,000 Current Liabilities 75,000
Profit & Loss A/c (Cr.) 30,000 Long Term Liabilities 80,000
General Reserve 50,000 155,000
180,000
(w-5) Long Term Funds: Rs. (w-6) Earnings before Interest and Tax: Rs.
Equity 180,000 Net profit before tax 50,000
Long Term Liabilities 80,000 Add: Interest expenses 12,000
Total Long Term Funds 260,000 62,000
Q.9
(i) Net Profit Ratio =
x 100
=,
, ,x 100
= 10.43 %
(ii) Current Ratio =
= , , ,
, ,
= 1.83 : 1
(iii) Fixed Assets Turnover Ratio =
=, ,
, ,
= 4 times
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(iv) Debt-Equity Ratio =
= ,
, , ,
= 0.2 : 1
(v) Stocks Turnover Ratio =
. x 100
=, ,
,x 100
= 8.23 times
(vi) Debtors Turnover Ratio =
.
=, ,
, ,
= 4.43 times
Q.10 (i) Gross Profit Ratio =
x 100
For X Ltd. =,
, ,x 100 = 23.81 %
For Y Ltd. =,
, ,x 100 = 23.6 %
(w-1) Gross Profit = Sales - Cost of Sales
X Ltd. = 25,20,000-19.20,000 = 600,000
Y Ltd. = 21,40,000- 16,35,000 = 505,000
(ii) Working Capital Ratio=
X Ltd. = , ,
,=
, ,
,= 2.1 : 1
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Y Ltd. = , ,
,=
,
, ,= 1.49 : 1
(iii) Stock Turnover Ratio =
.
X Ltd. =, ,
, ,= 4.8 times
Y Ltd. =, ,
, ,= 5.2 times
(iv) Liquid Ratio =
X Ltd. = ,
,=1.27 : 1
Y Ltd. = ,
,=0.96 : 1
Q.11 (a) Gross Profit Ratio =
x 100
=, , ,
, ,x 100
=,
, ,x 100 = 49.5 %
(b) Net Profit Ratio =
x 100
=,
, ,x 100 = 24 %
(w-1) Net Profit: Rs.
Sales 10,00,000
Less: Cost of Sales 5 05,000
Gross Profit 495,000
Less: Operating Expenses 100,000
Operating Profit 395,000
Add: Interest on Investment 25,000
420,000
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Less: Interest on Debentures 20,000
Net Profit before Tax 400,000
Less : Provision for Tax @ 40 % 160,000
Net Profit after Tax 240,000
(c) Return on Capital Employed Ratio:
&
x 100
=,
,x 100 = 29.9 %
(w-2) Net Capital Employed:
= Current Assets – Current Liabilities + Fixed Assets
= 250,000 – 160,000+ 900,000 = 990,000
(d) Return on Shareholder's Fund Ratio:
x 100
=,
, , ,x 100
=,
, ,x 100 = 23.08 %
Q.12 (a) (i) The Working Capital = Current Assets - Current Liabilities
2009 = 142,500-60,000 = Rs.82,500
2010 = 172,500- 100,000 = Rs. 7,500
(w-l) Current Assets: 2009 2010
Cash 16,000 30,000
Marketable securities 20,000 10,000
Trade Receivables (Net) 45,000 55,000
Liquid Assets 81,000 95,000
Inventories 60,000 75,000
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Prepaid Expenses 1,500 2,500
142,000 172,500
(ii) The Capital Ratio =
For 2009 = ,
,= 2.375 : 1
For 2010 = ,
,= 1.725 : 1
(iii) Acid Test Ratio =
For 2009 = ,
,= 1.35 : 1
For 2010 = ,
,= 0.95 : 1
(iv) Ratio of Current Assets to Total Assets =
For 2009 = ,
,= 0.56 : 1
For 2010 = ,
,= 0.6 : 1
(v) Ratio of Cash to Current Liabilities =
For 2009 = ,
,= 0.27 : 1
For 2010 = ,
,= 0.3 : 1
(b)(i) Working capital has decreased by Rs. 10,000 as a result of an increase in current liabilities. This change by itself cannot be regarded as unfavorable.
(ii) The current ratio has decreased significantly. This may have unfavorable implications, and the changes as well as the reasons for the change deserves the attention of management.
(iii) Because of the material increase in current liabilities, there has been a decrease in acid test ratio that would appear to be unfavorable. This, too, deserves careful analysis by management; such a trend cannot be permitted to continue.
(iv) The ratio of current assets to total assets has improved slightly but this change simply indicates that a higher portion of total assets is in current form. There is little that can implied from this change.
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(v) The ratio of cash to current liabilities has improves slightly during the year the However, this change, in itself, may hold little significance in view of the more significant changes in (i), (ii) and (iii).
Q.13 (a) Inventory Turnover Rate =
= ,
,= 6.25 times
(w-1) Cost of Sales:
Suppose cost = 100
+Profit = 20
Sales = 120
Sales : Cost of sales
120 : 100
300,000 : x
x = ,
= Rs. 250,000
(b) Average Age of Inventory =
=
.= 48 days
Q.14 (a) Finished Goods Turnover Ratio =
For 2009 =,
, =14 times
For 2010 = ,
, , = 10.44 times
(b) Goods in Process Turnover Ratio =
For 2009 =,
, = 5 times
For 2010 = ,
, , = 6.25 times
(a) Raw Material Turnover Ratio =
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For 2009 =,
, = 4.8 times
For 2010 = ,
, , = 4 times
Q.15 (i) Working Capital Ratio =
= , ,
, ,= 2.43 : 1
(w-1) Current Assets: Rs.
Investments 400,000
Inventories 60,00,000
Receivables 37,00,000
Cash and Bank 1,00,000
102,00,000
(w-2) Current Liabilities: Rs.
Trade Creditors 33,50,000
Provisions 650,000
Other Current Liabilities 200,000
42,00,000
(ii) Debt-Equity Ratio =
= , ,
, ,= 2.08 : 1
(w-3) Long Term Debts = Secured term loans + Unsecured term loans
= 120,00,000 + 15,00,000 = 1,35,00,000
(w-5) Equity = Share Capital + Reserves & Surplus
= 560,000 + 15,00,000 =65,00,000
(iii) Stock Turnover Ratio =
.
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=, ,
, ,= 1.64 times
(iv) Debtors Turnover Ratio =
. /
=, ,
, ,= 4.32 times
(v) Return on Capital Employed Ratio:
&
x 100
=, ,
, ,x 100 = 20.46 %
(w-5) Net Profit before Interest &Tax:
Sales-Cost of Sales- Administrative Expenses- Selling Expenses - Depreciation = 16,000-9,830-1,200 – 260-700 = 4010
(w-6) Capital Employed = Current Assets + Fixed Assets-Current Liabilities
= 10,200+14,000 - 4,200-400 = 19,600
Q.16 (i) Capital Ratio =
= ,
,= 3.33 : 1
(w-1) Current Assets: Rs.
Cash in hand 20,000
Cash at bank 30,000
Debtors 60,000
Liquid Assets 110,000
Stock 90,000
200,000
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(iii) Acid Test Ratio =
= ,
,= 1.83 : 1
(iv) Debtors Turnover Ratio =
.
=,
( , , ) /= 8 times
(iv) Creditors Turnover Ratio =
.
=,
( , , )/= 4 times
(w-2) Net Credit Purchases:
Creditors on 31-12-2010 Rs, 60,000
+ Cash Paid 105,000
165,000
- Creditors on 1-1-2010 15,000 150,000
(v) Stock Turnover Ratio =
.
=,
( , , )/= 5 times
(w-3) Cost of Sales = Sales - Gross Profit = 500,000-100,000 = 400,000
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Q.17 INCOME STATEMENT
Details (Rs.) (Rs.) (Rs.) Sales: Less: Cost of goods sold: Opening stock +Purchases + Carriage Cost of goods available for sale: - Closing stock Gross Profit: Less: Operating Expenses: Office expenses Sales expenses Operating profit Add: Profit on sales of share Less: Financial Expenses Loss on sale of fixed assets Net profit before interest & tax: Less: Interest on debentures Net profit before tax: Less: Provision for tax Net profit after tax:
109,050 2,850
18,100
111,900
170,000
102,000 130,000
28,000
30,000 6,000
68,00
36,000
2,000 600
32,000 1,800
33,800
2,600
31,200 1,200
30,000 9,000
21,000
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FINANCIAL STATEMENT
(Rs.) (Rs.) Current Assets:
Cash Bills Receivable Debtors Liquid Assets: + Stock
Total Current Assets Less: Current Liabilities:
Creditors Bank overdraft Provision for tax
Working capital Add: Fixed Assets:
Building Plant & Machinery
Capital Employed: Less: Long term debts Shareholder's Fund
2,000 5,000
20,000
27,000 28,000
15,000 6,000 9,000
55,000
30,000
50,000 20,000
25,000
75,000 100,000
20,000 80,000
(i) Current Ratio:
=
= ,
,= 1.83 : 1
(ii) Quick Ratio:
=
= ,
,= 0.9 : 1
(iii) Stock Turnover Ratio:
=
.
=,
,= 4.43 times
(iv) Debtors Turnover Ratio:
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=
.
=,
,= 6.8 times
(w-2) Average Debtors:
= Debtors + Bill receivable
= 20,000 + 5,000
= Rs. 25,000
(v) Return on Shareholder's Fund Ratio:
=
x 100
=,
,x 100 = 26.25 %
(vi) Return on Capital Employed Ratio:
= &
x 100
=,
,x 100 = 31.2 %
Q.18 (i) Current Ratio =
= ,
,=3.2 : 1
(w-1) Current Assets = Stock + Debtors + Cash + Prepaid insurance
= 150,000+ 200,000 + 40,000 + 10,000 = Rs. 400,000
(w-2) Current Liabilities = Creditors + Outstanding Expenses + Provision for tax
= 60,000 + 15,000+ 20,000 = Rs. 125,000
(ii) Liquid Ratio =
= ,
,= 1.92 : 1
(w-3) Liquid Assets = Debtors + Cash
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= 200,000 + 40,000= Rs. 240,000
(iii) Debt-Equity Ratio =
= ,
,=0.71 : 1
(w-4) Equity = Share Capital + General Reserve + Profit & Loss A/c – Preliminary Exp.
= 500,000 + 50,000 + 50,000 – 35,000 = 565,000
(iv) Capital Gearing Ratio =
= ,
,= 1.41 times
(v) Proprietary Ratio =
= ,
, ,= 0.52 : 1
Q.19
(i) Debt-Equity Ratio =
= ,
,
=0.5 : 1
OR
Debt-Equity Ratio =
= , ( )
,
=1 : 1
OR
Debt-Equity Ratio =
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= ,
, ( )
=0.333 : 1
(2) Fixed Assets Ratio =
= ,
, ( )
=0.8 : 1
(v) Proprietary Ratio =
= ,
, , ( )
= 0.5 : 1
(4) Current Ratio =
= ,
,
= 1.6 : 1
(5) Liquid Ratio =
= ,
,
= 1.2 : 1
WORKING NOTES:
(w-) Total Debts: Rs. (w-6) Long Term Funds: Rs.
Long Term Liabilities 250,000 Equity 500,000
Current Liabilities 250,000 Long Term Liabilities 25,000
Total Debts 500,000 Long Term Funds 750,000
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BALANCE SHEET
Liabilities Rs. Assets Rs. Share Capital Long term liabilities Current Liabilities Total Share Capital and liabilities
500,000 250,000 250,000
Fixed Asset Liquid Assets Closing Stock Total Assets
600,000 300,000 100,000
10,00,000 10,00,000
(w-4) Current Assets: Rs.
Liquid assets 300,000
Closing stock 100,000
Total current assets 400,000
Q.20 Gross Profit = 60,000
Sales = ,
x 100 = 200,000
(w-1) Cost of Sales = 200,000 - 60,000 = 140,000
Stock Turnover = 7
=
7 Average Stock = 1 x 140,000
Average Stock = ,
= 20,000
(w-2) Opening Stock = Average Stock – ½ x 5000
= 20,000 – ½ x 5,000
= 20,000 - 2,500 = 17,500
(w-2) Closing Stock = Average Stock + ½ x 5000
= 20,000 + ½ x 5,000
= 20,000 + 2,500
= 22,500
(a) Net Purchases: Rs.
Cost of Sales 140,000
+ Closing Stock 22,500
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162,500
- Opening Stock 17,500
1,45,000
(b) Creditors Turnover Ratio =
=,
( , , )/= 4.26 times
(iii) Average Age of Creditors = .
=,
,= 86 Days Approx.
Q.21 (a) Calculation of Sales:
Gross Profit Ratio = 20
So Sales : Gross Profit
100 : 20
x : 500,000
x = ,
= Rs. 25,00,000
(b) Calculation of Sunday Debtors:
Debtor’s Velocity = 3 months
= 3
12 Debtors = 3 x 25,00,000
Total Debtor = , ,
= 625,000
Sunday Debtor = Total Debtor – Bills Receivable
= 625,000 – 60,000 = Rs. 565,000
(b) Calculation of Stock:
Stock Velocity = 6 months
= 6
12 Avg. Stock = 6 x 20,00,000
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Total Stock = , ,
= 10,00,000
Opening Stock = Avg. Stock - ½ of 20,000
= 10,00,000 – 10,000 = Rs. 990,000
Closing Stock = Avg. Stock + ½ of 20,000
= 990,000 + 20,000 = Rs.10,10,000
(b) Calculation of Sunday Creditors:
Creditor’s Velocity = 2 months
= 2
12 Creditors = 2 x 20,00,000
Total Creditors = , ,
= 625,000
Sunday Creditors = Total Creditor – Bills Receivable
= 336,667 – 36,667
= Rs. 300,000
Credit Purchases:
Cost of Sales = 20, 00,000
+ Closing Stock = 10, 10,000
30, 10,000
- Opening Stock = 9,90,000
Purchases = 20, 20,000
Q.22 Working Capital = Current Assets - Current Liabilities
162,000 = 2.8-1 = 1.8
So Current Assets =,
. 𝑥 2.8 = Rs. 252, 000
Current Liabilities = ,
. 𝑥 1 = Rs. 90, 000
Liquid Assets:
Acid Test Ratio = 1.5
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=
.
Liquid Assets = 1.5 x 90,000 = Rs. 135, 000
Q.23 WORKING NOTES:
(w-1) Current Assets & Current Liabilities:
Current Ratio =
= 2.5 : 1
Working Capital = Current Assets- Current Liabilities
= 2.5 – 1 = 1.5
As Working Capital = Rs. 120,000
So Current Ratio = ,
. x 2.5 = Rs. 200,000
Current Liabilities = ,
. x 1 = Rs. 80,000
(w-2) Liquid Assets &Stock:
Liquid Ratio =
=
.
Liquid Assets = 1.5 x 80,000 = Rs. 120, 000
Stock = Current Assets – Liquid Assets
= 200,000 – 120,000 = 80,000
(w-3) Fixed Assets & Proprietor's Fund:
Proprietary Ratio =
=
.
Proprietor's Fund:
Fixed Assets (Net) = Fixed Assets - Long-term Liabilities
Working Capital = Current Assets - Current Liabilities
Proprietor's Fund = Total Assets - Total Liabilities Proprietor's Fund = Fixed Assets (Net)+ Working Capital
1 = 0.75 +0.25
As Working Capital is Rs. 120,000
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So Proprietor’s Fund = ,
. x 1 = Rs. 360,000
Fixed Assets = ,
. x 0.75 = Rs. 80,000
BALANCE SHEET
AS ON 31-12-2010
Liabilities Rs. Assets Rs. Share Capital & Reserves: Capital 400,000 Reserve & Surplus 80,000 Current Liabilities: Bank Overdraft 20,000 Other Current Liabilities 60,000
480,000
80,000
Fixed Asset Closing Assets: Stock 80,000 Liquid Assets 120,000
360,000
200,000
560,000 560,000
Q.24 WORKING NOTES:
Working Capital = Current Assets - Current Liabilities
1.5 = 2.5 – 1
As Working Capital is Rs. 300,000
So Current Assets = ,
. x2.5 = Rs. 500,000
Current Liabilities = ,
. x1 = Rs. 200,000
(w-2) Stock:
Current Assets - Liquid Assets = Stock
2.5-1.5 = 1
As Current Assets are Rs. 500,000
So Stock = ,
. x1 = 200,000
(w-3) Cost of Sales:
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Stock Turnover = 6
So Cost of Sales = 6 x 200,000 = Rs. 12, 00,000
(w-4) Sales:
Gross profit ratio is 20 %
So Sales = 100
Gross Profit =20
Cost of Sales = 80
Cost of Sales : Sales
80 : 100
12,00,000 : x
x = , ,
= Rs. 15,00,000
(w-5) Sundry Debtors:
Debt Collection Period = 2 months
.
= 2
12 Debtors = 2 x 15,00,000
Debtor = , ,
= 250,000
(w-5) Fixed Assets:
Fixed Asset Turnover = 2 months
= 2
2 Fixed Asset = 12,00,000
Fixed Asset = 600,000
(w-7) Net Worth:
=
.
0.8 Net Worth = 600,000
Net Worth = ,
.= 750.000
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(w-8) Reserve and Surplus to Capital:
Reserves & Surplus to capital = .
Net Worth = Capital +Reserve & Surplus
1.5 = 1 +0.5
So Capital = ,
. x 1 = 500,000
Reserves & Surplus = ,
. x 0.5 = 250,000
BALANCE SHEET
Liabilities Rs. Assets Rs. Share Capital Reserve & Surplus Long term Loans Current Liabilities
500,000 250,000 150,000 200,000
Fixed Asset Closing Assets: Stock200,000 Debtor 250,000 Cash 50,000
600,000
500,000 11,00,000 11,00,000
Q.25 WORKING NOTES:
(w-1) Total Current Assets:
=
5 Total Current Assets = 7 x 500,000
Total Current Assets = ,
= Rs. 700,000
(w-2) Capital:
=
5 Capital = 4 x 500,000
Capital = ,
= Rs. 400,000
(w-3) Total Liabilities:
= ½
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Total Liabilities = 2 x 400,000= Rs. 800,000
(w-4) Net Profit:
=
5 Net Profit = 1 x 400,000
Net Profit = ,
= Rs. 80,000
(w-5) Sales:
Net Profit ratio is 20 %
Net Profit : Sales
20 : 100
80,000 : x
x = ,
= Rs. 400,000
(w-6) Gross Profit:
400,000 x 25% = Rs. 100,000
(w-7) Opening Stock:
Stock Turnover =
= 10
Cost of Sales = Sales - Gross Profit
= 400,000-100,000 = Rs. 300,000
Average Stock = ,
= Rs. 30,000
Average Stock =
30,000 = ,
30,000 x 2 = Opening stock + 50,000
Opening stock = 60,000 – 50,000 = Rs. 30,000
TRADING AND PROFIT and LOSS ACCOUNT
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Dr. FOR THE YEAR ENDED DEC. 31, 2010 Cr.
Details R.s Details Rs. Opening Stock Purchases (Balancing Figure) Gross profit c/d Expenses (Bal. Fig.) Net profit
10,000
340,000 100,000
Sale (w-5) Closing Stock Gross profit b/d
400,000 50,000
450,000 450,000 20,000 80,000
100,000
100,000 100,000
BALANCE SHEET
AS ON 31ST DECEMBER, 2010
Liabilities Rs. Assets Rs. Capital Opening 320,000 + Net profit 80,000 Liabilities (w-3)
400,000 800,000
Fixed Asset Closing Assets: Stock 50,000 Other Current Assets 650,000
500,000
700,000 12,00,000 12,00,000
Q.26 WORKING NOTES:
(w-1) Total Debts:
= 0.6
Total Debts = 0.6 x 200,000= 120,000
(w-2) Short-term Debts:
= 0.4
Short-term Debts = 0.4 x 120,000= 48,000
(w-3) Long-term Debts = Total Debts – Short-term Debts
= 120,000 – 48,000
= 72,000
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(w-4) Fixed Assets:
= 0.6
Fixed Assets = 200,000 x 0.6 = 120,000
(w-5) Total Assets = Owner's Equity + Total Debts
= 200,000 + 120,000 = 320,000
(w-6) Cost of Sales:
= 2
Cost of Sales = 2 x 320,000 = 640,000
(w-7) Inventory:
Cost of Sales / 8 = 640,000/8 = 80,000
(w-8) Current Assets = Total Assets - Fixed Assets
= 320,000 – 120,000 = 200,000
(w-9) Cash = Current Assets – Inventory
= 200,000 – 80,000 = 120,000
BALANCE SHEET
Liabilities Rs. Assets Rs. Short-term Debts Long-term Debts Total Debts Owner’s Equity Total Capital & Liabilities
48,000 72,000
120,000 20,000
Cash Inventory Total Current Assets Fixed Assets Total Assets
120,000 80,000
200,000 120,000
12,00,000 12,00,000
Q.27 Assuming the current ratio and the liquid ratio to be more than 1, the various changes mentioned in the Q will affect these two ratios as stated below:
(i) The ratios will improve since the payment of the amount will reduce both the numerator and the denominator by the same amount. Suppose current assets Rs. 90,000 and current liabilities Rs. 40,000. The ratio will be 2.25. If Rs. 10,000 is paid to a supplier, the current assets and liabilities respectively will be Rs. 80,000 and Rs. 30,000, giving a ratio of 2.67.
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(ii) Collection of an amount due from a customer will not affect the ratios since the total of current assets or liquid assets does not change.
(iii)Sale of goods for cash at the normal profit will lead to an increase in cash of greater than the reduction in the stock of goods. Hence, both the current ratio and the liquidity ratio will improve.
(iv) The repayment of fixed deposits will mean using cash for meeting a non-current liability. This will mean lowering of current ratio as well as liquidity ratio.
(v) Payment of half-early Installment, will be for acquiring a fixed asset. This will lower the current ratio as well as the liquidity ratio.
(vi) Sale of long-term investment will increase cash or debtors and hence current assets. It will improve current ratio as well as liquidity ratio.
Q.28 a) Purchase of Machinery worth Rs. 500,000 on cash will result in decrease of cash to
that extent. Cash being a component of current assets will decline. Revised amount of current assets Rs. 1500,000 and current liabilities remain the same. Hence the current ratio will be 1.5:1, thus it will deteriorate.
b) Purchase of machinery of Rs. 500,000 on short-term credit will result in increase in creditors to that extent. Revised amount of current liabilities Rs. 15,00,000. Hence, the current ratio will be 1.33: 1. Showing deterioration.
c) Purchase of machinery worth Rs. 500,000 by obtaining medium term loan from bank (at 20 % margin) will result in decrease of cash by Rs.100,000. Thus revised amount of current assets shall be Rs. 19,00,000. Medium term loan raised shall not affect current liabilities immediately hence should be static at Rs. 10,00,000. Now current ratio will be 1.9:1 showing deterioration.
d) Payment of dividend Rs. 200,000 of which 50 % deducted as tax at source will result in decrease in bank balance by Rs. 100,000 and increase in Rs. 100,000 current liability (because tax deducted at source should have been paid in near future). Current assets thus amount to Rs. 19,00,000 and current liabilities to Rs. 11,00,000. Hence current ratio will be 1.73:1. Showing deterioration over original position.
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Chapter – 8
CONSIGNMENT ACCOUNTS
Solutions Q.1 RAUF & CO’S JOURNAL Date Details L/F Debit
(Rs.) Credit (Rs.)
Consignment to Farooq Account Dr.
Goods sent on Consignment Account
(Goods sent on consignment)
24,000
2,000
10,000
34,000
1,500
5,100
1,400
24,000
2,000
10,000
34,000
1,500
5,100
1,400
Consignment to Farooq Account Dr.
Cash Account
(Carriage and insurance paid)
Cash Account Dr.
Farooq Account
(Advance received in cash)
Farooq Account Dr.
Consignment to Farooq Account
(Goods sold by consignee)
Consignment to Farooq Account Dr.
Farooq Account
(Transportation and warehousing charges paid by
consignee)
Consignment to Farooq Account Dr.
Farooq Account
(15 % commission charged by consignee)
Consignment to Farooq Account Dr.
General P & L Account
(Profit on consignment transferred to General P & L A/c)
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Goods Sent on consignment Account Dr.
Trading Account
(Goods sent on consignment transferred trading account)
24,000
17,400
24,000
17,400
Bank Account Dr. Farooq Account (Balance amount received from Farooq)
Dr. CONSIGNMENT TO FAROOQ ACCOUNT Cr. References Rs. References Rs.
Goods sent on consignment account
Cash Account (Expenses)
Farooq Account (Expenses)
Farooq Account (Commission)
Profit transferred to G. P & L account
24,000
2,000
1,500
5,100
1,400
Farooq Account (Sales proceeds)
34,000
34,000 34,000
Dr. FAROOQ ACCOUNT (CONSIGNEE) Cr. References Rs. References Rs.
Consignment to Farooq A/C (Sales) 34,000 Cash Account (Advance)
Consignment To Farooq Account
Consignment To Farooq Account
Bank Account
10,000
1,500
5,100
17,400
34,000 34,000
Dr. GOODS SENT ON CONSIGNEMENT ACCOUNT Cr. References Rs. References Rs.
Trading Account 24,000 Consignment To Farooq Account 24,000
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24,000 24,000
FAROOQ’S JOURNAL Date Details L/F Debit
(Rs.) Credit (Rs.)
Rauf & Co. Account Dr. Cash Account (Cash sent as advance)
10,000
34,000
1,500
5,100
17,400
10,000
34,000
1,500
5,100
17,400
Cash Account Dr. Rauf & Co Account (Goods sold and cash received as consignor’s be behalf) Rauf & Co. Account Dr. Cash Account (Expenses paid on consignor’s behalf) Rauf & Co. Account Dr. Commission Account (15% commission on sales charged from consignor) Rauf & Co. Account Dr. Bank Account (Balance amount remitted to consignor)
Dr. RAUF & CO’S ACCOUNT Cr. References Rs. References Rs.
Cash Account (Advance) Cash Account (Expenses) Commission Account Bank Account
10,000 1,500 5,100
17,400
Cash Account (Sales)
34,000
34,000 34,000
Q.2 KARIM & CO’S JOURNAL Date Details L
/F
Debit (Rs.)
Credit (Rs.)
Consignment to Lahore Account Dr. Goods Sent on Consignment Account (Good sent on consignment)
10,500
350
7,000
10,500
350
7,000
Consignment to Lahore Account Dr. Cash Account (Freight, Insurance and Loading charges paid) BTTIs Receivable Account Dr. Salman & Sons Account
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(Acceptance received at two months) 130
504
14,400
2,916
10,500
6,766
130
504
14,400
2,916
10,500
6,766
Consignment to Lahore Account Dr. Salman & Sons Account (Unloading charges, storage and insurance paid by consignee) Consignment to Lahore Account Dr. Salman & Sons Account (Commission charged by consignee, 2 % + 1.5 % = 3.5 % on 14,400) Salman & Sons Account Dr. Consignment to Lahore Account (Gross sales proceed for 60 cases) 30 x 225 = 6750 25 x 250 = 6250 14400 05 x 280 = 1400 Consignment to Lahore Account Dr. General P & L Account (Profit transferred to G. P & L Account) Goods Sent on Consignment Account Dr. Trading Account (Goods sent on consignment transferred to Trading Account) Bank Account Dr. Salman & Sons Account (Balance received from consignee)
CONSIGNMENT TO LAHORE ACCOUNT References Rs. References Rs.
Goods sent on Consignment Account Cash Account (Expenses) Salman & Sons Account (Expenses) Salman & Sons Account (Commission) Profit transferred to G. P & L Account
10,000 350 130
504
2,916
Salman & Sons Account (Sales)
14,400
14,400 14,400
Dr. SALMAN & SONS ACCOUNT Cr. References Rs. References Rs.
Consignment to Lahore Account 14,400 Bill Receivable Account (Advance) Consignment to Lahore Account Consignment to Lahore Account Bank Account
7,000 130 504
6,766
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14,400 14,400
Dr. GOODS SENT ON CONSIGNMENT ACCOUNT Cr. References Rs. References Rs.
Trading Account 10,500 Consignment to Lahore Account
10,500
10,500 10,500
SALMAN & SON’S JOURNAL Date Details L/F Debit
(Rs.) Credit (Rs.)
Karim & Co. Account Dr.
Bill Payable Account
(Acceptance given at two months as advance)
7,000
130
504
14,400
6,766
7,000
130
504
14,400
6,766
Karim & Co. Account Dr.
Cash Account
(Expenses paid on behalf of consignor)
Karim & Co. Account Dr.
Commission Account
(3 % commission charged to consignor)
Cash Account Dr.
Karim & Co. Account
(Goods sold and cash received on consignor's behalf)
Karim & Co. Account Dr.
Bank Account
(Balance remitted to consignor)
Dr. KARIM & CO. ACCOUNT Cr. References Rs. References Rs.
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Bill Payable Account (Advance) Cash Account (Expenses) Commission Account Bank Account
7,000 130 504
6,766
Cash Account (Sales)
14,400
14,400 14,400
Q.3 CONSIGNMENT TO ZEESHAN ACCOUNT Date References Rs. Date References Rs.
2010 July. 1
Dec.31
Goods sent on Consignment Account Cash Account (Expenses) Zeeshan Account (Expenses) Zeeshan Account (Commission)Profit transferred to G. P & L Account
300,000 1,200 1,200
60,000
138,000
2010 Dec. 31
Zeeshan Account (Sales) Stock on Consignment Account
400,000
100,400
500,400 500,400
VALUATION OF STOCK
Rs. Cost of unsold cases = 100 x 1000 = 10,000
Add: Proportionate share of Direct Expenses : = x 100 = 400
10,400
Dr. ZEESHAN ACCOUNT Cr. Date References Rs. Date References Rs.
2010 Dec.31
Consignment to Zeeshan Account (Sales)
400,000
2010 Dec. 31
Consignment Account Cash Account (Expenses) Consignment to Zeeshan Account (Commission) Bank Account Balance c/d
1,200
60,000 90,000
248,800
400,000 400,000
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Dr. GOODS SENT ON CONSIGNMENT ACCOUNT Cr. Date References Rs. Date References Rs.
2010 Dec. 31
Trading Account
300,000
2010 July. 1
Consignment to Zeeshan Account
300,000
300,000 300,000
Q.4 GLOBAL CO’S JOURNAL Date Details L/
F Debit (Rs.)
Credit (Rs.)
Consignment to Rawalpindi Account Dr. Goods Sent on Consignment Account (1000 cases of medicine sent on consignment)
100,000
3,000
150,000
18,750
1,200
25,750
100,000
52,800
100,000
100,000
3,000
150,000
18,750
1,200
25,750
100,000
52,800
100,000
Consignment to Rawalpindi Account Dr. Cash Account (Expenses paid on consignment) Zahid & Bros. Account Dr. Consignment to Rawalpindi Account (Sales proceeds of 750 cases) Consignment to Rawalpindi Account Dr. Zahid & Bros. Account (12.5 % commission charged by consignee) Consignment to Rawalpindi Account Dr. Zahid & Bros. Account (Expenses incurred by consignee) Stock on Consignment Account Dr. Consignment to Rawalpindi Account (Value of 250 cases with consignee) Bank Account Dr. Zahid & Bros. Account (Bank draft received from consignee) Consignment to Rawalpindi Account Dr. General P & L Account (Profit on consignment transferred to General P &LA/C) Goods Sent on Consignment Account Dr. Trading Account (Transfer of goods sent on consignment to trading Account)
Valuation of Stock:
Rs.
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Cost of unsold cases 250 x 100 = 25,000
Add: Proportionate share of Direct Expenses : ,
, x 250= 750
25,750
Dr. CONSIGNMENT TO RAWALPINDI ACCOUNT Cr. References Rs. References Rs.
Goods sent on Consignment Account Cash Account (Expenses) Zahid & Bros. Account (Commission) Zahid & Bros. Account(Expenses) Profit transferred to G. P & L Account
100,000 3,000
18,750 1,200
52,800
Zahid & Bros. Account (Sales) Stock on Consignment Account
150,000 25,750
175,750 175,750
Dr. CONSIGNMENT TO RAWALPINDI ACCOUNT Cr. Date References Rs. Date References Rs.
2010 Mar.1
Sep.30
Goods sent on Consignment Account: Cash Account (Expenses) Freight: 35,000 Insurance: 6,500 Afzal & Sons (Commission) Afzal & Sons (Expenses) Profit transferred to General P & L Account
650,000
41,500 89,000 12,100
169,700
2010 Sep.30
Afzal & Sons (Sales) Stock on Consignment
824,000 138,300
962,300 962,300
VALUATION OF STOCK
Rs. Cost of 1/5 unsold cases 650,000 x 1/5 = 130,000
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Add: Proportionate share of Direct Expenses : ,
, x 130,000 = 8,300
138,300
650,000 𝑥 = 520,000 𝑥
Amount of bill
650,000 x = 975,000 x = 780,000
10 % Commission = 780,000 x = 78,000
Surplus price realized = 824,000 - 780,000 = 44,000
25% Commission on surplus = 44,000 x = 11,000
89,000
Dr. AFZAL & SONS ACCOUNT Cr. Date References Rs. Date References Rs.
2010 Sep.30
Consignment to Multan A/c Balance c/d
824,000
57,100
2010 Mar.1
Bill Receivable A/c Consignment to Multan A/c Consignment to Multan A/c
780,000
89,000 12,100
881,100 881,100
Note: The account of Afzal & Sons (consignee) is showing credit balance of Rs. 57,100 and This amount will be accordingly adjusted against the unsold goods with them:
Dr. KARIM BUX ACCOUNT Cr. Date References Rs. Date References Rs.
2010 Mar.1
Bill Receivable A/c Commission Account Cash Account (Expense)
780,000
89,000 12,100
2010 Sep.30
Cash Account (Sales) Balance c/d
824,000
57,100
881,100 881,100
IN THE LEADER OF AFZAL & SONS
Q.5 CALCULATION OF COMMISSION Rates of Commission: (i) 10 % on normal selling price. (ii) 25 % of any surplus price above normal Selling Price = 824,000 Normal selling price = 780,000
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Q.6
Dr. CONSIGNMENT TO RAWALPINDI ACCOUNT Cr. Date References Rs. Date References Rs.
Goods sent on Consignment Account: Cash Account (Freight) Mr. R Account (Expenses) Mr. R Account (Commission) Stock Reverse Account Profit transferred to General P & L Account
75,000
5,000 6,000 4,200 3,750
11,050
Mr. R Account (Sales) Stock on Consignment Account Goods sent on Consignment Account (Reverse)
70,000
20,000
15,000
105,000 105,000
VALUATION OF STOCK
Rs. Value of unsold stock at invoice price: 18,700
Add: Proportionate share of Direct Expenses = ,
= 1,250
20,000
VALUATION OF STOCK
Rs. Cost of unsold cases 60,000 x ¼ = 15,000
Add: Proportionate share of Direct Expenses : ,
, x 15,000 = 1,250
20,000
Dr. MR. R ACCOUNT Cr. Date References Rs. Date References Rs.
Consignment to Multan A/c
70,000
Bill Receivable A/c Consignment to Multan A/c Consignment to Multan A/c Bank A/c
30,000 6,000 4,200
29,800
70,000 70,000
Q.7 IN THE LEADER OF MR. C
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Dr. CONSIGNMENT TO SARGODHA ACCOUNT Cr. Date References Rs. Date References Rs.
2010 Jan.1
Mar.31
Goods sent on Consignment Account: Cash Account (Expenses) Mr. D Account (Expenses) Mr. D Account (Commission) Stock Reverse Account Profit transferred to General P & L Account
28,000 2,000 1,200 1,350 1,000
1,950
2010 Mar.31
Mr. D Account (Sales) Stock on Consignment Account Goods sent on Consignment Account
24,000
7,500
4,000
35,500 35,500
Dr. MR. R ACCOUNT Cr. Date References Rs. Date References Rs.
2010 Mar.31
Consignment to Sargodha A/c
24,000
2010 Mar.31
Consignment Account Consignment Account Bank Account
1,200 1,350
21,450
24,000 24,000
Dr. GOODS SENT ON CONSIGNMENT ACCOUNT Cr. Date References Rs. Date References Rs.
2010 Mar.31
Consignment Account Trading Account
4,000
24,000
2010 Mar.31
Consignment Account
28,000
28,000 28,000
VALUATION OF STOCK Rs.
Value of ¼ of stock at invoice price: 28,000 x ¼ = 7,000 Add: Proportionate Direct Expenses: 2,000 x ¼ = 500 7,500
CALCULATION OF COMMISSION
5% of goods sold at invoice price: 28,000 x = 21,000 x = 1,050
10% of surplus price realized: 24,000 – 21,000 = 3,000 x = 300
1,350
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CALCULATION OF STOCK RESERVE Cost Invoice Value of good sent 24,000 28,000 Less: Goods sold 18,000 21,000 6,000 7,000 Add: Proportionate direct expenses: 2,000 x ¼ = 500 500 6,500 7,500 Stock Reserve = Invoice price of stock- Cost price of stock = 7,500 - 6,500 = 1,000
Q.8
Dr. CONSIGNMENT ACCOUNT Cr. References Rs. References Rs.
Goods sent on Consignment A/c:
Cash A/c (Expenses)
Babar’s Account
Expenses Rs. 8,400
Commission 9,600
Stock Reverse Account
Profit on Consignment:
Transferred to general P & L Account
144,000
7,500
18,000
8,000
17,000
Babar’s A/c (Sales)
Stock on Consignment A/c
Goods sent on Consignment A/c
120,000
50,500
24,000
194,500 194,500
Dr. CONSIGNMENT ACCOUNT Cr. References Rs. References Rs.
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Consignment A/c:
120,000
Consignment A/c:
Expenses Rs. 8,400
Commission 9,600
Bill Receivable A/c
Cash Account
18,000
40,000
62,00
120,000 120,000
WORKING NOTES:
(w-l) Commission:
Sale price of goods sold = Rs. 120,000
Less: Invoice price of goods sold = 144,000 x 2/3 = Rs. 96,000
Surplus Price = Rs. 24,000
Commission on Rs. 96,000 @ 5 % = Rs. 4.800
Commission on Rs. 24,000 @ 20 % = Rs. 4.800
Rs. 9,600
Value of Stock:
Invoice price of goods unsold = 144,000 x 1/3 = Rs 48,000
Add: Consignor's Expenses = 7,500x 1/3 = 2,500
= Rs. 50,500
Q.9 Dr. CONSIGNMENT ACCOUNT Cr.
References Rs. References Rs. Goods sent on Consignment Account Cash Account (Expenses) Aslam Account (Expenses) Aslam Account (Commission) Aslam Account (Defective Goods) Aslam Account (Bad Debts) Stock Reverse Account (20 x 150) Profit transferred to general P & L A/c
80,000 2,000 3,750 6,300
250 3,500 3,000 3,200
Aslam Account (Sales) Stock on Consignment Account Goods sent on Consignment Account
70,000 17,000 15,000
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102,000 102,000
Dr. MR. ASLAM ACCOUNT Cr. References Rs. References Rs.
Consignment to Hong Kong A/c
70,000
Bill Receivable A/c Consignment to Hong Kong A/c Consignment to Hong Kong A/c Consignment to Hong Kong A/c Consignment to Hong Kong A/c Balance c/d
40,000 3,750 6,300
250 3,500
16,200 70,000 70,000
Dr. GOODS SENT ON CONSIGNMENT ACCOUNT Cr. References Rs. References Rs.
Consignment to Hong Kong A/c Trading A/c
15,000 65,000
Consignment to Hong Kong A/c
80,000
80,000 80,000
VALUATION OF STOCK AT INVOICE PRICE Rs.
Value price of 20 machines: 20 x 800 = 16,000
Add: Proportionate Direct Expenses: x 20 = 1,000
17,000
Q.10 RAZAQ & CO’S JOURNAL Date Details L/F Debit
(Rs.) Credit (Rs.)
2010 Jan.1
”
Mar.1 ”
Consignment to Mardan Account Dr. Goods Sent on Consignment Account (Goods sent on consignment at invoice price)
50,000
500
45,000
2,000
3,150
50,000
500
45,000
2,000
3,150
Consignment to Mardan Account Dr. Cash Account (Packing, carriage & insurance paid) Mushtaq& Co. Account Dr. Consignment to Mardan Account (Good sold by consignee) Consignment to Mardan Account Dr. Mushtaq & Co. Account (Expenses paid by consignee) Consignment to Mardan Account Dr. Mushtag & Co. Account
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(7 % commission due to consignee)
30,000
12,625
8,333
2,083
41,667
8,225
30,000
12,625
8,333
2,083
41,667
8,225
Cash Account Dr. Mushtaq & Co. Account (Cash received from consignee) Stock on consignment Account Dr. Consignment to Mardan Account (Stock with the consignee) Good sent on consignment Accoun tDr. Consignment to Mardan Account Goods Sent on Consignment Account Dr. Stock Reserve Account (Load in closing stock adjusted) Goods Sent on Consignment Account Dr. Trading Account (Goods sent transferred to trading account) Consignment to Mardan Account Dr. General P & LA/c (Profit transferred to general P & L account)
Dr. CONSIGNMENT TO MARDAN ACCOUNT Cr. References Rs. References Rs.
Goods sent on Consignment A/c
Cash A/c (Expenses)
Mushtaq & Co. A/c (Expenses)
Mushtaq & Co. A/c (Commission)
Stock Reverse A/c
Profit transferred to general P & L A/c
50,000
500
2,000
3,150
2,083
8,225
Mushtaq & Co. A/c (Sales)
Stock on Consignment A/c
Goods sent on Consignment A/c
45,000
12,625
8,333
65,958 65,958
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Dr. MUSHTAQ & CO. ACCOUNT Cr. References Rs. References Rs.
Consignment to Mardan Account
45,000
Consignment to Mardan Account
Consignment to Mardan Account
Cash Account
Balance c/d
2,000
3,150
30,000
9,850
45,000 45,000
VALUATION OF STOCK AT INVOICE PRICE Rs.
Value of 25 cycles: 25 x 500 = 12,500
Add: Proportionate Direct Expenses: x 25 = 125
12,625
CALCULATION OF STOCK REVERSE For 100 cycles load included is: 8,333
For 25 cycles: 8,333 x = 2,083
Q.11 IN THE LEDGER OF ZAHEER & SONS
Dr. CONSIGNMENT TO KOHAT ACCOUNT Cr. References Rs. References Rs.
Goods sent on Consignment Account Cash Account (Expenses) Hammad (Expenses) Hammad Account (Expenses) Hammad Account (Commission) Stock Reverse Account Profit transferred to general P & L A/c
180,000 2,000 1,200
700 6,750 9,000
17,150
Hammad Account (Sales) Stock on Consignment Account Goods sent on Consignment Account
135,000 45,800 36,000
216,800 216,800
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Dr. HAMMAD ACCOUNT Cr. References Rs. References Rs.
Consignment to Kohat Account
135,000
Consignment to Kohat Account Consignment to Kohat Account Consignment to Kohat Account Bank Account
1,200 700
6,750 126,350
135,000 135,000
VALUATION OF STOCK AT INVOICE PRICE Rs.
Value of 25% of unsold goods: 180,000 x = 45,000
Add: Proportionate Direct Expenses: ,
, x 45,000 = 800
45,800
CALCULATION OF STOCK REVERSE For goods of Rs. 180,000 load is = 36,000
For goods of Rs. 45,000 = ,
, x 45,000 = 9,000
Q.12 IN THE LEDGER OF MOON TEXTILES MILLS LTD.
Dr. CONSIGNMENT TO AZAM TRADERS ACCOUNT Cr. References Rs. References Rs.
Goods sent on Consignment Account Azam Traders Account (Commission) Stock Reverse Account Profit transferred to general P & L A/c
225,000 25,250 22,500 74,750
Azam Traders Account (Sales) Stock on Consignment Account Goods sent on Consignment Account
205,000 67,500 75,000
347,500 347,500
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Dr. AZAM TRADERS ACCOUNT Cr. References Rs. References Rs.
Consignment Account Balance c/d (Advance) (67,500 x 80%)
205,000
54,000
Bill Receivable A/c (225,000 x 80%) Consignment A/c (Commission) Bank A/c
180,000
25,250 53,750
259,000 259,000
CALCULATION OF COMMISSION
Goods sent on consignment at cost price = 150,000 Unsold goods at cost price = 45,000 45,000
Unsold goods are 30 % of goods sent = ,
, x 100
which means 70 % of the goods sent are sold:
Cost of sold goods = 150,000 x = 105,000
Now the invoice price of 70 % goods sold = ,
, x 105,000 = 157,500
Now 10 % commission on 157,500 = 15,750 Surplus price realized 205,000-157,500 = 47,500 20 % commission on surplus price
= 47500 x =9,500
Total Commission =25,250
Q.13 IN THE LEDGER OF MOHSIN COAL CO.
Dr. CONSIGNMENT TO LAHORE ACCOUNT Cr. References Rs. References Rs.
Goods sent on Consignment Account Cash Account (Expenses) Razman Ltd. Account (Expenses) Razman Ltd. Account (Brokerage 2%) Razman Ltd. Account (Commission 3%) Profit transferred to general P & L A/c
400,000 100,000
5,000 8,000
12,000 122,474.74
Razman Ltd. Account (Sales) Stock on Consignment Account
400,000 247,474.74
647,474.75 647,474.75
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VALUATION OF STOCK IN CASE OF NORMAL LOSS
FORMULA:
= Adjusted per unit cost
= , ,
, =
,
,= 50.505050
Unsold quantity of Coal = 4,900 tons
Value of unsold Coal = 4,900 x 50.505050
= 247,474.74
Q.14 SALEEM CHEMICALS JOURNAL Date Details L/F Debit
(Rs.) Credit (Rs.)
2010 Jan.1
” ”
Consignment to Faisalabad Account Dr. Goods Sent on Consignment Account (Goods sent on consignment)
13,00,000
9,000
1,000
13,00,000
9,000
1,000
Consignment to Faisalabad Account Dr. Cash Account (Carriage &Octrori paid) Consignment to Faisalabad Account Dr. Furqan Account (Unloading charges paid by consignee)
Feb, 28 Furqan Account Dr 12,80,000 Consignment to Faisalabad Account 12,80,000 (Goods sold by consignee) Consignment to Faisalabad Account Dr 5,500 Furqan Account 5,500 (Expenses paid by consignee) Consignment to Faisal Account Dr 64,000 Furqan Account 64,000 (Commission due to consignee) Stock on Consignment Account Dr 240,612.24 Consignment to Faisalabad Account 240,612.24 (Stock with the consignee) Consignment to Faisal Account Dr 141,112.24 General P & L Account 141,112.24 (Profit transferred to G.P & L account)
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Dr. CONSIGNMENT TO FAISLABAD ACCOUNT Cr.
Rs. Rs.
Goods sent on Consignment Account 13,00,000 Furqan Account (Sales) 12,80,000 Cash Account (Expenses) 9,000 Stock on Consignment Account 240,612.24 Furqan Account (Expenses) 1,000 Furqan Account (Expenses) 5,500 Furqan Account (Commission) 64,000 Profit transferred to general P&L A/c 141,112.24
15,20,612.24 15,20,612.24
VALUATION OF STOCK IN CASE OF NORMAL LOSS
= Original cost of Goods + Direct Expenses
= Adjusted per liter cost Total quantity - Quantity lost
= 13,00,000 + 10,000
= 13,10,000
= Rs. 13.36734694 10,000 - 2,000 98,000
Closing Stock = 18,000 liters x Rs. 13.36734694 = Rs. 240,612.24
Q.15 IN THE LEDGER OF BILAL Dr. CONSIGNMENT TO MARDAN ACCOUNT Cr.
Reference Rs. Reference Rs.
Goods sent on Consignment 5,000 Abdullah Account (Sales) 5,400 Cash Account (Expenses) 450 Cash Account (Railway) 300 Abdullah Account (Expenses) 350 Profit & Loss Account 245 Abdullah Account (Commission) 270 (Abnormal Loss)
Goods sent on Consignment Account Dr 13,00,000 Trading Account 13,00,000 (Goods sent transferred to trading account)
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Loss on consignment transferred to General P &L Account 125
6,070 6,070 Dr. ABDULLAH ACCOUNT Cr.
Reference Rs. Reference Rs.
Consignment to Mardan Account 5,400 Consignment to Mardan Account (Expenses) 350 Consignment to Mardan Account (Comm.) 270 Bank Account 4,780
5,400 5,400
CALCULATION OF ABNORMAL LOSS
Rs. Value of 10 damaged cases: 50 x 10 = 500 Add: Proportionate Direct Expenses: 450
x 10 = 45 100 545 Less: Amount received from Railway: 300 Net loss transferred to P&L Account…… 245 Q.16 IN THE LEDGER OF SOHRAB & CO. Dr. CONSIGNMENT TO COLOMBO ACCOUNT Cr.
Reference Rs. Reference Rs. Good sent on Consignment Account 500,000 A & Co. Account (Sales) 600,000 Cash Account (Expenses) 12,000 Profit & Loss Account A & Co. Account (Expenses) 15,000 (Abnormal Loss) 51,200 A & Co. Account (Expenses) 3,000 Stock on Consignment Account 25,867 A & Co. Account (Commission) 30,000 A & Co. Account (Bad Debts) 5x750 3,750 Profit transferred to P&L A/c 140,317 704,067 704,067
VALUATION OF ABNORMAL LOSS
Rs. Cost of 100 damaged bicycle: 500 x 100 = 50,000 Add: Proportionate Direct Expenses: 12,000 x 100 = 1,200
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1,000 Abnormal Loss: ……. 51,200
VALUATION OF STOCK
Rs. Cost of 100 unsold cycles: 100 x 500 = 50,000 Add: Proportionate Direct Expenses by Consignor: 12,000
x 100 = 1,200 1,000 Add: Proportionate Direct Expenses by Consignor: 15,000
x 100 = 1,667 900 52,867
Dr. A & CO. ACCOUNT Cr. Reference Rs. Reference Rs.
Consignment Account (Sales) 600,000 Bank Account (Advance) 300,000
Consignment Account (Expenses) 15,000
Consignment Account (Expenses) 3,000
Consignment Account (Commission) 30,000
Consignment Account (Bad Debts) 3,750
Bank Account 248,250
600,000 600,000
Dr. PROFIT &LOSS ACCOUNT Cr. Reference Rs. Reference Rs.
Consignment Account Consignment Account 140,317
(Abnormal Loss) 51,200
Profit on consignment transferred
to general P & L A/c 89,117
140,317 140,317
Q.17 BOOKS OF KHUBAIB & CO.
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Dr. CONSIGNMENT TO LAHORE ACCOUNT Cr.
Date Reference Amount Rs.
Date Reference Amount Rs.
Goods sent on consignment A/c 30,000 A & Co. A/c – Sales 26,250
Cash A/c Cash A/c – Claim 2,500
Freight 800 P&L A/c – Loss (W-1) 1,469
Cartage 252 Stock on consignment A/c (W-2) 3,969
Other charges 700 1,752
A & Co. A/c:
Commission 900
Storage expenses 200
Other selling expenses 400 1,500
General P&L A/c – Profit 936
34,188 34,188
Dr. A & CO. ACCOUNT Cr Date Reference Amount
Rs. Date Reference Amount
Rs. Consignment A/c – Sales 26,250 Consignment A/c
Commission 900
Storage expenses 200
Other selling expenses 400 1,500
Bill receivable A/c (Bal.fig) 24,750
26,250 26,250
Dr. GOODS SENT ON CONSIGNMENT ACCOUNT Cr Date Reference Amount
Rs. Date Reference Amount
Rs. Trading A/c (Bal. fig.) 30,000 Consignment A/c 30,000
30,000 30,000
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WORKING NOTES:
(W-1) Calculation of Abnormal Loss: Rs.
Value of 1/8 goods lost by fire 3,750 (Rs. 30,000 x 1/8) Add: Proportionate of direct expenses Consignor’s expenses 219 (Rs. 1,752 x 1/8) Total Abnormal loss 3,969 Less: Cash received – Claim 2,500 Profit & Loss account – Loss 1,469 WORKING NOTES:
(W-2) Calculation of Stock on Consignment: Rs.
Value of 1/8 unsold stock(Rs. 30,000 x 1/8) 3,750 Add: Proportionate of direct expenses
Consignor’s expenses (Rs. 1,752 x 1/8) 219
Value of stock on consignment 3,969
Q. 18 BOOKS OF A LTD: Dr. CONSIGNMENT OF KARACHI ACCOUNT Cr.
Date Reference Amount Rs.
Date Reference Amount Rs.
Goods sent on consignment A/c 3,00,00,000 Z Ltd A/c – Sales 1,75,00,000 Cash A/c: Cash A/c – Insurance Co. 50,00,000 Freight Charges 75,5000 P&L A/c – Loss (W-1) 25,43,750 Insurance cost 50,000 Stock on consignment A/c
(W-2) 75,43,750
Other charges 50,000 175,000 Z Ltd A/c: Sales commission 875,000 (1,75,00,000 x 5/100) Storage expenses 200,000 Marketing expenses 350,000 14,25,000 General P&L A/c - Profit 987,500 3,25,87,500 3,25,87,500
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Dr. Z.LTD. ACCOUNT Cr.
Date References Amount Rs.
Date References Amount Rs.
Consignment A/c – Sales
1,75,00,000 Consignment A/c: Sales commission storage expenses Marketing Expenses Bill receivable A/c (Bal.fig)
875,000 200,000 350,000
14,25,000 1,60,75,000
1,75,00,000 1,75,00,000
Dr. Z.LTD. ACCOUNT Cr.
Date References Amount Rs.
Date References Amount Rs.
Consignment A/c 75,43,750
Cash A/c – Insurance Co. Profit & loss A/c - Loss
50,00,000 25,43,750
75,43,750 75,43,750 WORKING NOTES:
(W-1) Calculation of Abnormal Loss: Invoice price of ¼ of goods lost by fire (Rs. 3,00,00,000 x ¼) Add: Proportionate of direct expenses Consignor’s expenses (Rs.175,000 x ¼) Total abnormal loss Less: Cash received from the insurance company Profit & loss account (Loss) (W-2) Calculation of Stock on Consignment: Invoice price of ¼ of goods unsold (Rs. 3,00,00,000 x ¼) Add: Proportionate of direct expenses Consignor’s expenses (Rs.175,000 x ¼) Stock on consignment
Rs. 75,00,000
43,750
75,43,750 50,00,000 25,43,750
Rs. 75,00,000
43,750
75,43,750
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Q.19 BOOKS OF A:
Dr. CONSIGNMENT ACCOUNT Cr.
References Amount Rs.
References Amount Rs.
Good Consignment A/c Cash Account: Freight Insurance Carriage B’s Account: Carriage Godown Rent Commission Repair Charges Profit & Loss Account
Rs.5,000 2,500
500
500,000
8,000
56,150 292,905
B’s A/c (Sales) Abnormal Loss: Insurance Claim Profit & Loss A/c Stock on Consignment Account
Rs.22,500 7,980
750,000
30,480 76,575
Rs.2,350
6,000 45,000
2,800
857,055 857,055
Dr. B’S ACCOUNT Cr.
References Rs. References Rs. Consignment A/c (Sales) 750,000 Consignment Account:
Carriage Godown Rent Commission Repair Charges Balance c/d
Rs.2,350
6,000 45,000
2,800
56,150 693,850
750,000 750,000
Dr. GOODS SENT ON CONSIGNMENT ACCOUNT Cr.
References Rs. References Rs. Trading Account 500,000 Consignment Account 500,000
500,000 500,000
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WORKING NOTES:
(w-1) Value of Abnormal Loss:
Cost price of Radios damaged = 30 Radios x Rs. 1,000 = Rs. 30,000
Add: Consignor’s Expenses = Rs. 8,000 x = Rs. 480
Gross Loss = 30,480 Less: Insurance Claim = 22,500 Net Loss Transferred to P & L A/c = Rs. 7,980
(w-2) Value of stock:
Cost price of stock = 75 Radios x Rs. 1,000 = Rs. 75,00
Add: Consignor’s Expenses = Rs. 8,000 x = Rs. 1,200
Add: Consignor’s Expenses = Rs. 2,350 x = Rs. 375
Rs. 76,575 Q.20 CONSIGNOR’S JOURNAL Date Details L/F Debit
Rs.
Credit
Rs.
Consignment to Lahore Account
Goods Sent on Consignment Account
(Goods sent on consignment)
Dr.
640,000
640,000
M/s Riaz & Co. Account
Consignment to Lahore Account
(Sales made by the consignee)
Dr. 750,000
750,000
Consignment to Lahore Account
M/s Riaz & Co. Account
(Expenses paid by the consignee)
Dr. 40,000
40,000
Consignment to Lahore Account
M/s Riaz & Co. Account
(Commission due to consignee)
Dr. 23,250
23,250
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Cash Account
M/s Riaz & Account
(Cash received from consignee)
Dr. 600,000
600,000
Stock on Consignment Account
Consignment to Lahore Account
(Stock with consignee)
Dr. 106,250
106,250
M/s Riaz & Co. Account
Profit & Loss Account
Consignment to Lahore Account
(Sale of damaged goods and amount recovered from railway
taken into account and balance transferred to P & L A/c)
Dr. 18,000
3,250
21,250
Consignment to Lahore Account
General P & L Account
(Profit transferred to general P & L Account)
Dr. 124,250
124,250
Goods Sent on Consignment Account
Trading Account
(Good sent transferred to trading account)
Dr. 640,000
640,000
References Rs. References Rs.
Balance b/d
Goods Sent on Consignment Account:
M/s Riaz & Co. Account (Expenses)
M/s Riaz & Co. Account (Commission)
Profit transferred to general P & L A/c
50,000
640,000
40,000
23,250
124,250
M/s Riaz & Co. Account (Sales)
Stock on Consignment Account
M/s Riaz & Co. Account
(10,000 + 8,000):
P & L Account
(Abnormal Loss)
750,000
106,250
18,000
3,250
877,500 877,500
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VALUATION OF STOCK Opening Stock: 20,000 kgs Add: Goods Sent: 160,000 kgs 180,000 kgs Less: Goods sold (normal) 150,000 kgs Goods sold (damaged) 50,000 kgs 155,000 kgs
25,000 kgs Cost of 25,000 kgs = 25,000 x 4 = Rs. 100,000 Add: Proportionate Expenses = 40,000
160,000× 25,000
= Rs. 6250
Value of stock closing: 106,250
CALCULATION OF ABNORMAL LOSS Cost of damaged goods: 5,000 x 4 = 20,000
Add: Proportionate direct expenses: 40,000
160,000× 5,000 = 1,250
21,250 Less: Received from Railway: 8,000 From sale of damaged goods: 10,000 18,000 Abnormal Loss: 3,250
Q.21 LEDGER ACCOUNT IN THE BOOKS OF DILAWAR Dr. CONSIGNMENT ACCOUNT Cr.
References Rs. References Rs.
Goods Sent on Consignment
Account
Cash Account:
Carriage
Freight
Insurance
Sarwar’s Account:
Ground Rent
Salesman’s Salaries
Commission
Profit transferred to general P & L
A/c
Rs. 50
250
40,000
500
2,913
1,860
Loss by Accident:
Cash
Profit & Loss
Sarwar’s A/c (Sales)
Stock on Consignment
2,500
1,550 4,050
33,250
7,973 200
Rs.500
750
1,663
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45,273 45,273
Dr. SARWARSs ACCOUNT Cr.
References Rs. References Rs.
Consignment A/c 33,250 Consignment A/c
Expenses 1,250
Commission 1,663 2,913
Balance c/d 30,337
33,250 33,250
Dr. GOODS SENT ON CONSIGNMENT A/C Cr.
References Rs. References Rs.
Trading A/c 40,000 Consignment A/c 40,000
40,000 40,000
WORKING NOTES: Value of Ghee lost & Stock Cost of Ghee sent Rs. 40,000 Add: Consignor’s Expenses 500 40,500 Less: Cost of Ghee lost by accident:
40,000 x 500
5,000
4,050
Cost of 4,500 kg Ghee 36,450
Value of Stock =
36,450
4,500 − 20 × (5,000 − 500 − 3,500 − 20)
=
36,450
4,480 × (980) = Rs. 7,973 Approx
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Q.22 IN THE LEDGER OF M/S NAEEM ACCOUNT Dr. CONSIGNMENT TO HASEEB ACCOUNT Cr.
References Rs. References Rs. Goods Sent to Consignment Account 15,00,000 Haseeb Account (Sales) 105,000 Cash Account (Expenses) 10,000 Insurance company 9,000 Haseeb Account (Expenses) 3,400 Profit & Loss Account (Loss) 3,100 Haseeb Account (Commission) 5,250 Stock on Consignment Account 13,89,200 Stock Reserve Account 276,500 Goods Sent on Consignment
Account 300,000
Profit transferred to general P & L A/c 11,650
18,06,300 18,06,300
CALCULATION OF ABNORMAL LOSS
Rs.
Cost of one car destroyed: 12,000
Add: Proportionate Direct Expenses: 10,000
100 × 1
100
Abnormal Loss….. 12,100
Less: Claim accepted by Insurance Co. 9,000
Net Loss Transferred to P&L Account…… 3,100
CALCULATION OF STOCK At Cost At Invoice Value of 92 unsold cars: 11,04,000 13,80,000 Add: Proportionate Direct Expenses: 10,000
100 × 92;
9,200 9,200
11,13,200 11,13,200
Stock Reserve = Invoice Price - Cost Price = 13,89,200 – 11,13,200 = 276,000
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Q.23 IN THE LEDGER OF SOHAIL Dr. CONSIGNMENT TO LAHORE ACCOUNT Cr.
References Rs. References Rs. Goods sent on Consignment Account: 30,000 Arif Account (Sales) Cash Account (Expenses) 2,000 100 x 160 = 16,000 Arif Account (Expenses) 2,600 40 x 175 = 7,000 23,000 Arif Account (Commission) 1,380 Stock on Consignment Account 6,600
Stocl Reserve Account 2,000 Profit & Loss Account 796 Profit transferred to G.P &L A/c 3,920 Damaged stock to be sold 80 x 20 = 1,600 Less Commission 6% = (96) 1,504 Goods Sent on Consignment
Account 10,000
41,900 41,900
CALCULATION OF LOSS
Rs.
Sales price of 20 units: 80 x 20 = 1,600
Less: Commission (1,600 x 6%) 96
1,504
Cost of 20 units: 20 x 100 = 2,000
Add: Share of Direct Expenses: 3,000
200 × 20
= 300
2,300
So Total cost incurred on 20 units: 2,300
Less: Estimated Sale Price 1,504
Loss transferred to P & L Account 796
Invoice price of 40 units: 40 x 150 = 6,000
Add: Share of Direct Expenses 3,000
200 × 40
= 600
6,600
Note: Assume that damaged goods have not been sold as yet.
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Chapter - 9
Contract Accounts
Solutions
Q.1
Dr. CONTRACT ACCOUNT Cr.
Reference Rs. Reference Rs. Material Wages Plant Business Charges Profit Carried down Profit & Loss A/c (15,000 + 2.3x80 %) Work in progress A/c (Reserve for contingencies) 0.2
120,000 164,400
20,000 8,600
15,000
Work in Progress A/c: Value of Work Certified 240,000 x 100/80 Material on hand Plant (20,000-2,000) Profit brought down
300,000 10,000 18,000
338,000 328,000
8,000
7,000
15,000
15,000 15,000
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Q.2
Dr. CONTRACT ACCOUNT Cr.
Reference Rs. Reference Rs. Materials: From Store From Purchased Labor on Site Depreciation on Plant Overhead Charges Direct Expenses Wages Accrued Direct Expenses Accrued Profit c/d Profit & Loss A/c (33,750 x 2/3 x 220,000/275,000) Balance (Profit) c/f
20,300
105,000 101,250
3,025 9,275 5,750 1,950
400 33,750
Work-in-Progress: Work Certified 275,000 Work Uncertified 4,125 Material on Site Profit b/d
279,125 1,575
280,700 280,700
18,000 15,750
33,750
33,750 33,750
Dr. CONTRACT ACCOUNT Cr.
Reference Rs. Reference Rs. Balance (Profit) c/f 220,000 Cash Account 220,000
220,000 220,000
BALANCE SHEET
AS ON 31ST DECEMBER, 2010
Liabilities Rs. Assets Rs.
Profit & Loss A/C Outstanding Wages Outstanding direct Exp.
18,000 1,950 400
Work in Progress: Value of Work Certified 275,000 Add: Cost of uncertified work 4,125 279,125 Less: Profit c/f 15,750 263,375 Less: Cash received from Contractor 220,000 Material on hand
43,375 1,575
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Q.3
Dr. CONTRACT ACCOUNT Cr.
Reference Rs. Reference Rs.
Material Purchased Material from Stores Depreciation on Plant Wages Direct Expenses Establishment Charges Profit c/d Profit & Loss A/c (7,500 x 2/3 x 80/100) Balance (Profit) c/f
58,063 9,785 1,130
73,634 2,026 8,720 7,500
Work in Progress: Certified (120,800x100/80)151,000 Material on Site Profit b/d
151,000
9,858
160,858 160,858
4,000 3,500
7,500
33,750 7,500
Q.4
Dr. CONTRACT ACCOUNT Cr.
Reference Rs. Reference Rs.
Machinery Installed Materials Labor Direct Expenses Overhead Charges Wages Accrued Profit c/d Profit x Loss A/c: (84,675 x 2/3 540,000/585,000) Balance (Profit) c/f as Reserve
45,000 256,047 223,125
9,501 12,378
8,070 84,675
Material Returned Work in Progress: Work Certified 585,000 Uncertified Work 13,500 Materials on Hand Machinery Profit b/d
1,647
598,500 5,649
33,000
638,796 638,796
52,108 32,567
84,675
84,675 84,675
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Q.5
Dr. CONTRACT ACCOUNT Cr.
Reference Rs. Reference Rs.
Materials by Supplier Materials from Store Wages 41,260 Add: Wages Accrued 2,826 Hire of Plant Expenses Charged Overheads Charged Profit c/d Profit & Loss A/c ( 32,000 x 2/3x 90 % ) Work in Progress (Reserve)
58,966 10,180
44,086 21,030
3,065 8,330
32,000
Material on Site Work in Progress: Work Certified 150,000 Work Uncertified 12,613 Loss of Material: Cash 884 Profit & Loss A/c 2,500 Profit b/d
11,660
162,613
3,384
177,657 177,657
19,200 12,800
32,000
32,000 32,000
Dr. WORK IN PROGESS ACCOUNT Cr.
Reference Rs. Reference Rs.
Contract Account: Work Certified 150,000 Uncertified 12,613
162,613
Contract Account: (Reserve for Contingencies) Balanced c/d
12,800
149,813 162,613 162,613
BALANCE SHEET AS ON 31ST DECEMBER, 2010
Liabilities Rs. Assets Rs.
Wages Accrued Profit & Loss A/C 19,500 - Loss of Material 2,500
2,826
16,700
Material on Site Work in Progress: Work Certified 150,000 + uncertified work: 12,613 162,613 Less: Cash received from Contractor 135,000 Cash
11,660
27,613
884
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Q.6
Dr. CONTRACT ACCOUNT Cr.
Reference Rs. Reference Rs.
Material Purchased Material from Stores Direct Expenses Rs. 61,490 Add: Outstanding 490 Wages Rs. 184,930 Add: Outstanding 3,660 Administration Expenses Depreciation on Plant (121,800/5 x 10/12) Profit c/d Profit & Loss A/c (67,500 x 2/3 x 90/100) Balance (Profit) c/f
280,700 94,110
61,980
188,590
21,460
20,300 67,500
Material on Site Work in Progress: Work Certified (641,700x100/90) Profit b/d
21,640
713,000
734,640 734,640
40,500 27,000
67,500
67,500 67,500
Dr. WORK IN PROGESS ACCOUNT Cr.
Reference Rs. Reference Rs.
Contract Account: Work Certified
713,000
Contract Account: (Reserve for Contingencies) Balanced c/d
27,000
686,000 713,000 713,000
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BALANCE SHEET AS ON 31ST DECEMBER, 2010
Liabilities Rs. Assets Rs.
Profit & Loss A/C Outstanding Expenses Wages Rs. 3,660 Direct Expenses 400
40,500
4,150
Material on Site Work in Progress: Value of Work Certified 150,000 Less: Profit c/f 27,000 686,000 Less: Cash received from Contractor 641,700 Machinery 121,800 Less: Depreciation 20,300
21,640
44,300
101,500
Q.7
Dr. CONTRACT ACCOUNT Cr.
Reference Rs. Reference Rs.
Material Labour Rs. 74,375 Add: Wages Accrued 2,400 Plant Direct Expenses Rs. 3,167 Add: Accrued 240 Establishment Charges Profit c/d Profit & Loss A/c: (28,275 x 2/3 x 180,000/195,000) Balance (Profit) c/f
85,349
76,775 15,000
3,407 4,126
28,275
Material Returned Material in Hand Work in Progress: Work Certified 195,000 Work Uncertified 4,500 Plant Profit b/d
549 1,883
199,500 11,000
212,932 212,932
17,400 10,875
28,275
28,275 28,275
Dr. CONTRACTEE’S ACCOUNT Cr.
Reference Rs. Reference Rs.
Balanced c/d 180,000
Cash A/c 180,000
180,000 180,000
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BALANCE SHEET Liabilities Rs. Assets Rs.
Profit & Loss A/C Outstanding Expenses Wages Rs. 2,400 Direct Expenses 240
17,400
2,640
Work in Progress: Work Certified 195,000 Work Uncertified 4,500 199,500 Less: Cash received for Contingencies 10,875 188,625 Less: Cash received from contractee 180,000 Material in Hand Material in Hand Plant
8,625
1,883
549 11,000
Q.8 COMPUTATION OF ESTIMATED PROFIT: Total expenditure upto 31-03-2010 Rs. 194,000 Add: Estimated Additional Expenditure 40,000 234,000 Add: Provision for Contingencies:
,
.x 2.5 6,000
Estimated Total Expenditure 240,000
Contract Price 280,000
Estimated Total Profit 40,000 Profit to be taken to profit &loss account on 31-03-2010 may be computed as:
= Estimated Total Profit x
x
= 40,000 x,
,x
,
,
= Rs. 28,571
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Q.9
Dr. CONTRACT ACCOUNT Cr.
Reference Rs. Reference Rs.
Material Wages Plant Other Expenses Profit c/d Profit & Loss A/c (27,000 x 2/3 x 80/100) Work in Progress A/c (Reserve for Contingencies)
51,000 81,000 15,000
5,000 27,000
Profit & Loss A/c: Plant Lost Rs. 3,000 Material Lost 2,500 Plant Returned to Store 2,000 Less: Depreciation: 300 Plant at Site 10,000 Less: Depreciation 1500 Material at Site Work in Progress A/c: +Work Certified 160,000 +Work Uncertified 1000 Profit c/d
5,500
1,700
8,500
2,300
161,000 179,000 179,000
14,400
12,600
27,000
27,000 27,000
Dr. CONTRACTEE’S ACCOUNT Cr.
Reference Rs. Reference Rs.
Balanced c/d 128,000 Cash A/c 128,000
128,000 128,000
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BALANCE SHEET AS ON 31ST MARCH 2010
Liabilities Rs. Assets Rs.
Profit & Loss A/C 14,400 Less: Loss of Plant & Material 5,500 Outstanding Expenses Wages Rs. 2,400 Direct Expenses 240
8,900
Work in Progress: Work Certified 160,000 Work Uncertified 1,000 161,000 Less: Reserve 12,600 148,400 Less: Cash received 128,000 Plant less depreciation Material at site
20,400 10,200
2,300
Q.10
Dr. CONTRACT ACCOUNT Cr.
Reference Rs. Reference Rs.
Material Labour Foremen Depreciation of Machine
Supervision:
1200 𝑥 9
12 𝑥
1
2
Other Expenses Profit c/d Profit & Loss c/d (3,017 x 2/3 x 4/5) Work in Progress A/c (Reserve)
2,150 5,011
631 56
450
1,261 3,017
Material at Site Work in Progress: +Certified 10,000 +Uncertified (w-1) 2,328 Profit b/d
248
12,328
12,576 12,576
1,609 1,408
3,017
3,017 3,017
(w-1) Cost of Work Completed: Rs.
Material 2,150
Labour 5,011
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Foremen 631
Supervision 450
Depreciation 56
Other Expenses 1,261
9,559
Less: Material at site 248
9,311
Cost of 2/3 contract = Rs. 9311
Cost of full contract = 9311 x 3/2 = Rs. 13966.5
Cost of work certified = 13966.5 x ,
, = 6983.25
Cost of Work Uncertified:
Cost of 2/3 contract = 9311.00
Less: Cost of work certified = 6983.25
2327.75 or 2328
Q.11
Dr. CONTRACT ACCOUNT Cr.
Reference House (A)
House (B)
Reference House (A)
House (B)
Work in progress(including estimated profit) Material Wages Electric services & fittings Road making charges Plant Establishment charges (10:7) Profit c/d
14,800 23,000 20,000
1,400 8,000
12,000 7,200
-
16,600 14,000
300 6,000 5,040 2,700
Material retuned to store Material in hand Plant returned to store (12,000-10% for 10months) Plant in hand (6,000-10 % for 8 months) Contractee’s A/c Work in Progress:
Certified (22,400x100/66 )
Uncertified Profit& Loss A/c (Loss)
400
11,000
60,000
15,000
540
5,600
36,000 2,500
86,400 44,640 86,400 44,640
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Profit & Loss A/c (2,700 x 2/3 x 2/3) Work in Progress A/c (Reserve)
1,200 1,500
Profit b/d
2,700
2,700 2,700
Date References Rs. Date References Rs. 2008 2009 2010
Material Wages Direct Expenses Indirect Expenses Plant Balance b/d: Work in Progress: Certified Plant at Site Material Wages Direct Expenses Indirect Expenses Profit & Loss A/c: (15,75,000 x 23 x 90 %) Balance c/d Balance b/d Work in Progress Certified Uncertified Plant at Site Material Wages Direct Expenses Profit & Loss A/c
900,000 950,000
35,000 15,000
100,000
2008 2009 2010
Work in Progress: Certified 17,50,000 Plant at site Profit & Loss A/c (Loss) Work in Progress: Certified 56,50,000 Uncertified 1,00,000 Plant at site Work in Progress b/d (Reserve for contingencies) Contractee's A/c Plant returned to store
17,50,000
80,000
170,000 20,00,000 20,00,000
17,50,000 80,000
11,00,000 11,50,000
125,000 20,000
945,000 630,000
57,50,000 50,000
58,00,000 58,00,000
56,50,000 100,000
50,000 630,000 850,000
45,000 825,000
630,000 75,00,000
20,000
81,50,000 81,50,000
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Q.13
Dr. CONTRACT ACCOUNT Cr.
Reference Rs. Reference Rs.
Material Direct Labour Rs. 830,000 Add: Provision 6,000 Expenses Machinery Profit c/d Profit & Loss A/c (147,000 x 2/3 x 80%) Work in Progress A/c(Reserve)
600,000
836,000
40,000 160,000
147,000
Work in Progress A/c: Work Certified 16,00,000 (12,80,000 x 100/80) Work Uncertified 16,000 Material in hand Machinery Returned to Store (32,000 – 4,000) Material at Site (128,000 – 16,000) Profit c/d
16,16,000
27,000 28,000
112,000 17,83,000 17,83,000
78,400 68,600
147,000
147,000 147,000
NASIR CONTRACTORS CO. LTD. BALANCE SHEET
AS ON 31ST MARCH 2010 Liabilities Rs. Assets Rs.
Share Capital Profit & Loss A/C 25,000 Add: Profit on Contract 78,400 103,400 Less: Depreciation 6,500 Provision for Direct Labour Creditors
351,800
96,000 6,000
81,200
Land & Buildings Machinery Rs. (52,000 + 160,000) 212,000 Less: Depreciation (63,000 + 20,000 + 6,500) 89,500 Work in Progress: Work Certified 16,00,000 Work Uncertified 16,000 16,16,000 Less: Reserve 68,600 15,47,400 Less: Cash received 12,80,000 Material at hand Bank
74,000
122,500
267,400 27,000 45,000
535,900 535,900
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Q.14
Dr. CONTRACT ACCOUNT Cr.
Reference 1 2 3 Reference 1 2 3
Material Wages General Charges Plant Wages Accrued Profit c/d Profit & Loss A/c (18,000 x 2/3 x 15/20) Balance (Profit) c/f
72,000 110,00
4,000 20,000
4,000
18,000
58,000 112,400
2,800 16,000
4,000
20,000 14,000
1,000 12,000
1,800
Material in hand Work Certified Work Uncertified Plant 1 (20,000 – 2,000) 2 (16,000 – 800) 3 (12,000 – 300) Profit & Loss A/c Profit b/d
4,000 200,000
6,000
18,000
4,000 160,000
8,000
15,200
6,000
2,000 33,000
2,100
11,700
228,000 193,200 48,800 228,000 193,200 48,800
9,000 9,000
18,000
18,000 18,000
BALANCE SHEET AS ON 31STDECEMBER 2010
Liabilities Rs. Assets Rs.
Profit & Loss A/C 9,000 Less: Loss on Contract #2 6,000 Wages Accrued Contract #1 4,000 Contract #2 4,000 Contract #3 1,800
3,000
9,800
Plant 48,000 Less: Depreciation 3,100 Work in Progress: Contract #1 47,000 Contract #2 48,000 Contract #3 8,100 Material at hand Contract #1 4,000 Contract #2 4,000 Contract #3 2,000
44,900
103,100
10,000
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(w-1) WORK IN PROGRESS:
Details Contract #1 Contract #2 Contract #3
Work Certified Uncertified Work Less Reserve Less Cash Received
200,000 6,000
160,000 8,000
33,000 2,100
206,000 9,000
168,000 35,100
197,000 150,000
168,000 120,000
35,100 27,000
47,000 48,000 8,100
Q.15
Dr. CONTRACT ACCOUNT Cr.
Reference Rs. Reference Rs.
Material Wages paid Rs. 100,000 Add: Accrues 10,000 Plant Expenses Profit c/d Profit & Loss A/c Work in Progress A/c (Reserve)
150,000
110,000
80,000 40,000
109,000
Plant Returned to Store (20,000 – 4,000) Plant at Site (60,000 – 12,000) Material at Site Work in Progress A/c: Work Certified 400,000 Work Uncertified 15,000 Profit c/d
16,000
48,000 10,000
415,000
489,000 489,000 42,500 66,500
109,000
109,000 109,000
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ESTIMATED CONTRACT ACCOUNT (2009-2010)
Reference Rs. Reference Rs.
Material (150,000 + 260,000) Wages (110,000 + 110,000) Plant Expenses(40,000 + 71,000) Profit made to date
410,000 220,000
80,000 111,000 127,500
Plant returned to store: On 31-12-2009 16,000 30-09-2010 32,500 Contractee’s A/c
48,500 900,000
948,500 948,500
(w-1) PROFIT TO BE TAKEN TO PROFIT & LOSS A/C IN 2001:
x 100 x
= 127,500 x 300,000
900,000 = Rs.42,500
NOTE:
(1) Accrued wages for 2009 will be paid in 2010. Thus for 2010 the wages are only Rs. 110,000.
(2) It has been presumed that plant costing Rs. 10,000 would be exhausted on the contract site during the course of second year and it would be a normal loss.
Q.16
Dr. CONTRACT ACCOUNT Cr.
Reference Rs. Reference Rs.
Material Rs. 124,000 Less: Unsuitable 8,000 Wages Plant Sunday Expenses Head Office Charges Profit c/d Profit & Loss A/c (86,000 x 260,000/520,000) Work in Progress A/c (Reserve)
116,000
95,000 30,000
5,000 9,000
65,000
Work in Progress A/c: Work Certified (195,000 x 4/3) 2,60,000 Work Uncertified 30,000 Material at Site Plant at Site Profit c/d
290,000 10,000 20,000
320,000 320,000
43,000 22,000
65,000
65,000 65,000
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ESTIMATED CONTRACT ACCOUNT (2009-2010)
Reference Rs. Reference Rs.
Material (116,000 + 74,400) Wages (95,000 + 64,000) Plant (30,000 + 25,000) Sunday Expenses (5,000 + 9,000) Head Office Charges For 9 months upto 31-12-00 9,000 For 6 months upto 31-06-01 6,000 15,000 +10% on 6,000 600 Provision on Contingencies Estimated Profit
190,400 159,000
55,000 14,000
15,600 15,000 86,000
Contractee’s A/c Plant returned to store
520,000 15,000
535,000 535,000
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Chapter - 10
Hire Purchase and Installment Purchase
Solutions
HIRE PURCHASE AND
INSTALLMENT PURCHASE
Q.1 BREAK UP TABLE
Description Cash Price Installment Total Interest Cash Price
Less Down payment paid Outstanding Balance Less 1st Installment pad at the end of 1 year Outstanding Balance Less 2nd Installment paid at the end of 2 year Outstanding Balance
Rs. Rs. Rs. Rs. 117,750
300,00
4,088
2,792
30,000
25,912
27,208
30,000
30,000
30,000
81,750 25,912 55,838 27,208 28,630
BOOKS OF THE PURCHASE
JOURNAL
Date Particulars L/F Debit (Rs.)
Credit (Rs.)
1st year “ “
Machinery A/c Dr. Hire Vender A/c (Being purchase of machine on H/P)
1,11,750
30,000
4,088
1,11,750
30,000
4,088
Hire Vendor A/c Dr. Bank A/c (Being amount paid as down payment) Interest A/c Dr. Hire Vendor (Being interest due on O/S balance)
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“ “ “
2nd Year “ “ “
Hire Vendor A/c Dr. Bank A/c (Being amount of 1st Installment paid)
30,000
11,175
15,263
2,792
30,000
10,058
12,850
30,000
11,175
4,088 11,175
2,792
30,000
10,058
2,792 10,058
Depreciation A/c Dr. Machinery A/c (Being depreciation charged @ 10 % on diminishing balance method) Profit & Loss A/c Dr. Interest A/c Depreciation A/c (Being the transfer of interest and depreciation to Profit & Loss A/c) Interest A/c Dr. Hire Vendor A/c (Being interest due on O/S balance) Hire Vendor A/c Dr. Bank A/c (Being amount of 2nd Installment paid)
Depreciation A/c Dr. Machinery A/c ( Being depreciation charged @ 10 % on diminishing balance method) Profit & Loss A/c Dr. Interest A/c Depreciation A/c (Being the transfer of interest and depreciation to Profit & Loss A/c)
Q.2 BREAK UP TABLE
Description Cash Price
Installment Total Interest Cash Price
Cash price Less Down payment paid Outstanding Balance Less 1st Installment paid at the end of 1st year Outstanding Balance Less 2nd Installment paid at the end of 2ndyear Outstanding Balance Less 3rd Installment paid at the end of 3rdyear
Rs. Rs. Rs. Rs. 15,980
4,000
599
329
92
4,000
5,401
4,671
1,908
4,000
6,000
5,000
2,000
11,980 5,401 6,579 4,671 1,908 1,908
1,020 15,980 17,000
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(i) MR. SALMAN’S JOURNAL
Date Particulars L/F Debit (Rs.)
Credit (Rs.)
1st year “ “ “ “ “
2nd Year “ “ “
Machine AccountDr. Ahmed Motors Account (Being purchase of machine on hire purchase system)
15,980
4,000
599
6,000
1,598
2,197
329
5,000
1,438
1,767
15,980
4,000
599
6,000
1,598
599 1,598
329
5,000
1,438
329 1,438
Ahmed MotorsAccount Dr. Bank Account (Being amount paid on signing the H.P contract) Interest AccountDr. Ahmed Motors Account (Being interest due on outstanding balance) Ahmed Motors Account Dr. Bank Account (Being amount of 1st Installment paid along interest) DepreciationAccount Dr. Machine A/c (Being depreciation charged @ 10 % on machine) Profit & Loss Account Dr. InterestAccount Depreciation Account (Being the transfer of interest and depreciation to Profit & Loss Account) Interest AccountDr. Ahmed Motors Account (Being interest due on O/S balance) Ahmed Motors Account Dr. Bank Account (Being amount of 2nd Installment along with interest)
Depreciation Account Dr. Machine A/c (Being depreciation charged @ 10 % machine) Profit & Loss Account Dr. Interest Account Depreciation Account (Being the transfer of interest and depreciation to Profit & Loss account)
3rd Year
Interest Account Dr. Ahmed Motors Account (Being interest due on O/S balance)
92
92
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“ “ “
Ahmed Motors Account Dr. Bank Account (Being amount of 3rd Installment along with interest)
2,000
1,294
1,386
2,000
1,294
92 1,294
Depreciation Account Dr. Machine A/c (Being depreciation charged @ 1,070 on machine) Profit & Loss Account Dr. Interest Account Depreciation Account (Being the transfer of interest and depreciation to Profit & Loss account)
(ii) MR. SALMAN
BALANCE SHEET
AT THE END OF 2ND YEAR
Assets side Rs. Machine on cost Rs. 15,980 Less: Depreciation at the end of 2nd year (1,598 + 1,438) 3,036 12,944 Less: Payable to Hire Vendor 1,908
11,036
Q.3 BREAK UP TABLE
Dr. MACHINE ACCOUNT
Description Cash Price
Installment Total Interest Cash Price
On 1-1-2009 Less 1st Installment paid on 31-6-2009 Outstanding Balance Less 2nd Installment paid on 31-12-2009 Outstanding Balance Less 3rd Installment paid on 30-6-2010 Outstanding Balance Less 4th Installment paid on 31-12-2010
Rs. Rs. Rs. Rs. 185,875
44,424
5,576
4,244
2,871
1,434
44,424
45,756
47,129
48,566
50,000
50,000
50,000
50,000
141,451 45,756 95,695 47,129 48,566 48,566
14,125 185,875 200,000
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LEDGER ACCOUNTS IN THE BOOKS OF THE COLLIERY COMPANY Dr. HIRE VENDOR ACCOUNT Cr. Date Particulars Rs. Date Particulars Rs. 2009
Jan. 30 Dec. 31 Dec. 31
2010
June. 30 Dec. 31
2009 Jan. 1
2010 Jan. 1
Bank Account Bank Account Balance c/d Bank Account Bank Account Hire Vendor Account Balance b/d
50,000 50,000 95,695
2009 Jan. 1
June. 30 Dec. 31
2010 Jan. 1
June. 30 Dec. 31
2009
Dec. 31 Dec. 31
2009
Dec. 31 Dec. 31
Wagon Account Wagon Account Interest Account Balance b/d Interest Account Interest Account Depreciation Account Balance c/d Depreciation Account Balance c/d
185,875
5,576 4,244
195,695 195,695
50,000 50,000
95,695
2,871 1,434
100,000 100,000
185,875
18,588 167,287
185,875 158,875
167,287
16,729 150,558
167,287 167,287
Dr. WAGON ACCOUNT Cr. Date Particulars Rs. Date Particulars Rs. 2009 Jan. 1
2010 Jan. 1
Hire Vendor Account Balance b/d
185,875
2009 Dec. 31 Dec. 31
2010
Dec. 31 Dec. 31
Depreciation Account Balance c/d Depreciation Account Balance c/d
18,588
167,287 185,875 158,875
167,287
16,729
150,558 167,287 167,287
Dr. INTEREST ACCOUNT Cr. Date Particulars Rs. Date Particulars Rs. 2009
June. 30 Dec.31
2010
June. 30 Dec.31
Hire Vendor Account Hire Vendor Account Hire Vendor Account Hire Vendor Account
5,576 4,244
2009 Dec. 31
2010 Dec. 31
Profit & Loss Account Profit & Loss Account
9,820
9,820 9,820
2,871 1,432
4,305
4,305 4,305
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Dr. WAGON ACCOUNT Cr. Date Particulars Rs. Date Particulars Rs. 2009
Dec.31
2010 Dec.31
Wagon Account Wagon Account
18,588
2009 Dec. 31
2010
Dec. 31
Profit & Loss Account Profit & Loss Account
18,588
18,588 18,588
16,729
16,729 16,729 16,729
Q.4 BREAK UP TABLE
Description Cash Price
Installment Total Interest Cash Price
On 1-1-2008 Paid on 1-1-2008 Outstanding Balance Less paid on 31-12-2008 Outstanding Balance Less paid on 31-12-2009 Outstanding Balance Less on 31-12-2010 Outstanding Balance
Rs. Rs. Rs. Rs. 81,900 18,000
3,195
2,455
1,677
18,000
14,805
15,545
16,323
18,000
18,000
18,000
18,000
63,900 14,805 49,095 15,545 33,550 16,323 17,227
BOOK OF H LTD. Dr. HIRE VENDOR ACCOUNT Cr. Date References Rs. Date References Rs.
1-1-08 31-12-08
“
31-12-09 “
31-12-10 “
Bank A/c Bank A/c Balance c/d Bank A/c Balance c/d Bank A/c Balance c/d
18,000 18,000 49,095
1-1-08 31-12-08
1-1-09 31-12-09
1-1-10
31-12-10
Wagon A/c Interest A/c Balance b/d Interest A/c Balance b/d Interest A/c
81,900 3,195
85,095 85,095 18,000 33,550
49,095 2,455
51,550 51,550 18,000 17,227
33,550 1,677
35,227 35,227
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Dr. WAGON ACCOUNT Cr. Date References Rs. Date References Rs.
1-1-08
1-1-09
1-1-10
Hire Vendor Account Balance b/d Balance b/d
81,900 31-12-08 “
31-12-09 “
31-12-10 “
Depreciation Account Balance c/d Depreciation Account Balance c/d Depreciation Account Balance c/d
8,190 73,710
81,900 81,900 73,710 8,190
65,520 73,710 73,710 65,520 8,190
57,330 65,520 65,520
Q.5 BREAK UP TABLE
Description Cash Price
Installment Total Interest Cash Price
On 1-1-2008 Less down payment paid Outstanding Balance Less 1st Installment paid on 31-12-2008 Outstanding Balance Less 2nd Installment paid on 31-12-2009 Outstanding Balance Less 3rd Installment paid on 31-12-2010
Rs. Rs. Rs. Rs. 128,940
20,000
5,447
3,719
1,894
20,000
34,553
36,281
38,106
20,000
40,000
40,000
40,000
108,940 34,553 74,387 36,281 38,106 38,106
11,060 128,940 140,000
RAIS & CO. JOURNAL
Date Particulars L/F Debit (Rs.)
Credit (Rs.)
2008 Jan. 1
“
Dec. 31
Machine Account Dr. Amir & Co. Account (Being purchase of machine on hire purchase system)
128,940
20,000
5,447
128,940
20,000
5,447
Amir & Co. Account Dr. Bank Account (Being amount paid as down payment) Interest Account Dr. Amir & Co. Account
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“ “ “
2009 Dec. 31
“ “ “
(Being interest due on outstanding balance) 40,000
25,788
31,235
3,719
40,000
20,630
24,349
40,000
25,788
5,447 25,788
3,719
40,000
20,630
3,719 20,630
Amir & Co. Account Dr. Bank Account (Being amount of 1st Installment paid) Depreciation Account Dr. Machine A/c (Being depreciation charged @ 20 % on written down method) Profit & Loss Account Dr. Interest Account Depreciation Account (Being the transfer of interest and depreciation to Profit & Loss Account) Interest Account Dr. Amir & Co. Account (Being interest due on O/S balance) Amir & Co. Account Dr. Bank Account (Being amount of 2nd Installment paid)
Depreciation Account Dr. Machine Account (Being depreciation charged @ 20 % on written down method) Profit & Loss Account Dr. Interest Account Depreciation Account (Being the transfer of interest and depreciation to Profit & Loss account)
2010 Dec. 31
“ “ “
Interest Account Dr. Amir & Co. Account (Being interest due on O/S balance)
1,894
40,000
16,504
18,398
1,894
40,000
16,504
1,894 16,504
Amir & Co. Account Dr. Bank Account (Being amount of 3rd Installment paid)
Depreciation Account Dr. Machine Account (Being depreciation charged on written down method) Profit & Loss Account Dr. Interest Account Depreciation Account
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(Being the transfer of interest and depreciation to Profit & Loss account)
JOURNAL
AMIR & CO. Date Particulars L/F Debit
(Rs.) Credit (Rs.)
2008 Jan. 1
“
Dec. 31 “ “
2009 Dec. 31
“ “
2010 Dec. 31
Rais & Co. Account Dr. Hire Purchase Sales Account (Being machine on hire purchase basis)
128,940
20,000
5,447
40,000
5,447
3,719
40,000
3,719
1,894
128,940
20,000
5,447
40,000
5,447
3,719
40,000
3,719
1,894
Bank Account Dr. Rais & Co. (Being amount received as down payment) Rais & Co. Account Dr. Interest Account (Being interest due on 1st Installment) Bank Account Dr. Rais & Co. Account (Being amount of 1st Installment received) Interest Account Dr. Profit & Loss Account (Being the transfer of interest to Profit & Loss Account) Rais & Co. Account Dr. Interest Account (Being interest due on 2nd Installment) Bank Account Dr. Rais & Co. Account (Being amount of 2nd Installment received) Interest Account Dr. Profit & Loss Account (Being the transfer of interest to Profit & Loss Account)
Rais & Co. Account Dr. Interest Account (Being interest due on 3rd Installment)
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“ “
Bank Account Dr. Rais & Co. Account (Being amount of 3rd Installment received)
40,000
1,894
40,000
1,894 Interest Account Dr. Profit & Loss Account (Being the transfer of interest to Profit & Loss Account)
Q.6 BREAK UP TABLE
Description Cash Price
Installment Total Interest Cash Price
On 1-1-2008 Less down payment paid Outstanding Balance Less 1st Installment paid on 31-12-2008 Outstanding Balance Less 2nd Installment paid on 31-12-2009 Outstanding Balance Less 3rd Installment paid on 31-12-2010
Rs. Rs. Rs. Rs. 40,000 16,000
2,880
1,920
960
16,000
8,000
8,000
8,000
16,000
10,880
9,920
8,960
24,000 8,000
16,000 8,000 8,000 8,000
5,760 40,000 45,760
BOOK OF H LTD. Dr. HIRE VENDOR ACCOUNT Cr. Date Particulars Rs. Date Particulars Rs. 2008 Jan. 1
Dec.31 Dec.31
2009
Dec.31 Dec.31
2010
Dec.31
Bank Account Bank Account Balance c/d Bank Account Balance c/d Bank Account
16,000 10,880 16,000
2008 Jan. 1
Dec.31
2009 Jan. 1
Dec.31
2010 Jan. 1
Machine Account Interest Account Balance b/d Interest Account Balance b/d
40,000
2,880
42,880 42,880
9,920 8,000
16,000
1,920 17,920 17,920
8,960
8,000
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Dec.31
Interest Account
960
8,960 8,960 Dr. MACHINE ACCOUNT Cr. Date Particulars Rs. Date Particulars Rs. 2008 Jan. 1
2009 Jan. 1
2010 Jan. 1
Hire Vendor Account Balance c/d Balance c/d
40,000
2008 Dec.31 Dec.31
2009
Dec.31 Dec.31
2010
Dec.31 Dec.31
Depreciation Account Balance c/d Depreciation Account Balance c/d Depreciation Account Balance c/d
4,000
36,000 40,000 40,000
36,000
3,600
32,400 36,000 36,000
32,400
3,240
29,160 32,400 32,400
Dr. INTEREST ACCOUNT Cr. Date Particulars Rs. Date Particulars Rs. 2008
Dec.31 2009
Dec.31 2010
Dec.31
Hire Vendor Account Hire Vendor Account Hire Vendor Account
2,880
2008 Dec.31 2009
Dec.31 2010
Dec.31
Profit & Loss Account Profit & Loss Account Profit & Loss Account
2,880
1,920
1,920
960
960
Dr. DEPRECIATION ACCOUNT Cr. Date Particulars Rs. Date Particulars Rs. 2008
Dec.31 2009
Dec.31 2010
Dec.31
Machine Account Machine Account Machine Account
4,000
2008 Dec.31 2009
Dec.31 2010
Dec.31
Profit & Loss Account Profit & Loss Account Profit & Loss Account
4,000
3,600
3,600
3,240
3,240
(b) BALANCE SHEET AS ON 31-12-2009
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Assets side Rs.
Machine on Cost Rs. 40,000 Less: Depreciation upto 31-12-2009 (4,000 + 3,600) 7,600 32,400 Less: Payable to Hire Vendor 8,000
24,400
Q.7 CALCULATION OF CASH PRICE
(i) Under Back Calculation Method:
No. of Installment
Amount due at the time of Installments
Rs.
Interest Rs.
Cash Price Rs.
3rd
2nd
1st
6,300 6,000 + 7,440 = 13,440 12,800 + 8,200 = 21,000
6,300 x
= 300
13,440x
= 640
21,000x
= 1,000
6,300 – 300 = 6,000 13,440 – 640 = 12,800 21,000 – 1000 = 20,000
Total Cash Price = 20,000 + Down Payment
= 20,000 + 10,000
= 30,000
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BOOKS OF HMT LTD. Dr. SAJID PRINTERS LTD. Cr. Date References Rs. Date References Rs.
1-7-09 31-12-09
1-1-10 30-06-10 31-12-10
Hire purchase sales A/c Interest A/c Balance b/d Interest A/c Interest A/c
30,000 1000
1-7-09 31-12-09
“
30-06-10 31-12-10
Bank A/c Bank A/c Balance c/d Bank A/c Bank A/c
10,000 8,200
12,800 31,000 31,000 12,800
640 300
7,440 6,300
13,740 13,740
Q.8 CALCULATION OF CASH PRICE OF MACHINE BREAK UP TABLE
No. of Installment
Amount due at the time of Installments
Rs.
Interest Rs.
Cash Price Rs.
3rd
2nd
1st
27,783 26,460 + 27,783 51,660 + 27,783
27,783 x
= 1,323
54,243 x
= 2,583
79,443 x
= 3,783
27,783– 1,323 = 26,460 54,243 – 2,583= 51,660 79,443 – 3,783 = 75,660
Total Cash Price = 75,660 + Down Payment
= 75,660 + 14,340 = 90,000
BOOKS OF MODEL INDUSTRIES LTD. Dr. MACHINE ACCOUNT Cr. Date Particulars Rs. Date Particulars Rs.
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2008 Jan. 1
2009 Jan. 1
2010 Jan. 1
Ideal Machineries Ltd. A/c Balance b/d Balance b/d
90,000
2008 Dec.31 Dec.31
2009
Dec.31 Dec.31
2010
Dec.31 Dec.31
Depreciation Account Balance c/d Depreciation Account Balance c/d Depreciation Account Balance c/d
9,000
81,000 90,000 90,000
81,000
8,100
72,900 81,000 81,000
72,900
7,290
65,610 72,900 75,900
Dr. IDEAL MACHINERIES LTD.ACCOUNT Cr. Date Particulars Rs. Date Particulars Rs. 2008 Jan. 1
Dec.31 Dec.31
2009
Dec.31 Dec.31
2010
Dec.31
Bank Account Bank Account Balance c/d Bank Account Balance c/d Bank Account
14,340 27,783 51,660
2008 Jan. 1
Dec.31
2009 Jan. 1
Dec.31
2010 Jan. 1
Dec.31
Machine Account Interest Account Balance b/d Interest Account Balance b/d Interest Account
90,000
3,783
93,783 93,783
27,783 26,460
51,660
2,583 54,243 54,243
27,783
26,460
1,323 27,783 27,783
Q.9 Cash price after down payment = v = Rs: 59,685
Annual Installment = a = ?
Interest rate of annual Installment = i = 10%
No. of Installments = n = 3
v = ( 1 −
( ))
59,685 =
.( 1 −
( . ))
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59,685 x 0.1 = a ( 1 −
.)
5,968.5 = a (1-0.7513148)
5,968.5 = 2486852 a
a = .
.= 24,000
Hire purchase price = 24,000 x 3 = Rs. 72,000
BREAK UP TABLE
Description Cash Price
Installment Total Interest Cash Price
On 1-1-2008 Unpaid on31-12-2008 Outstanding Balance Less: Paid on 31-12-2009 Outstanding Balance Less Paid on 31-12-2010
Rs. Rs. Rs. Rs. 59,685 18,032
5,968
4,165
2,182
18,038
19,835
21,818
24,000
24,000
24,000
41,653 19,835 21,818 21,818
12,315 59,685 72,000
BOOK OF P LTD. Dr. Y LTD. ACCOUNT Cr. Date References Rs. Date References Rs.
31-12-08 “
31-12-09 “
31-12-10 “
Bank A/c Balance c/d Bank A/c Balance c/d Bank A/c
24,000 41,653
1-1-08 31-12-08
1-1-09
31-12-09
1-1-10 31-12-10
Machinery A/c Interest A/c Balance b/d Interest A/c Balance b/d Interest A/c
59,685 5,968
65,653 65,653 24,000 21,818
41,653 4,165
45,818 45,818 24,000 21,818
2,182 24,000 24,000
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Dr. MACHINERY ACCOUNT Cr. Date References Rs. Date References Rs.
1-1-08
1-1-09
1-1-10
Y Ltd. Account Balance b/d Balance b/d
59,685
31-12-08 “
31-12-09 “
31-12-10 “
Depreciation A/c Balance c/d Depreciation A/c Balance c/d Depreciation A/c Balance c/d
11,937 47,748
59,685 59,685 47,748 11,937
35,811 47,748 47,478 35,811 11,937
23,874 35,811 35,811
Q.10 BREAK UP TABLE
Year Amount Payable Ratio Interest Cash Price
1st 2nd 3rd
60,000 40,000 20,000
3 2 1
5500 x 3/6 = 2,750 5500 x 2/6 = 1,833 5500 x 1/6 = 917
20,000 – 2,750 = 17,250 20,000 – 1,833 = 18,167 20,000 – 917 = 19,083
6 5,500 54,500
Amount of interest = HPP – Cash Price
= [(20,000 x 3) + 20,000] – 74,500
= 5,500
BOOKS OF X LTD. Dr. CRESENT LTD.ACCOUNT Cr. Date References Rs. Date References Rs.
1st year
2nd year
3rd year
Bank A/c Bank A/c Balance c/d Bank A/c Balance c/d Bank A/c
20,000 20,000 37,250
1st year
2nd year
3rd year
Machine A/c Interest A/c Balance b/d Interest A/c Balance b/d Interest A/c
74,500 2,750
77,250 77,250 20,000 19,083
37,250 1,833
39,083 39,083 20,000
19,083
917 20,000 20,000
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Dr. MACHINERY ACCOUNT Cr. Date References Rs. Date References Rs.
1st year
2nd year
3rd year
Crescent Ltd. A/c Balance b/d Balance b/d
74,500
1st year
2nd year
3rd year
Depreciation A/c Balance c/d Depreciation A/c Balance c/d Depreciation A/c Balance c/d
7,450 67,050
74,500 74,500 67,050
7,450
59,600 67,050 67,050 59,600
7,450
52,150 59,600 59,600
Q.11 BREAK UP TABLE
Description Cash Price Installments Total Interest Cash Price
Less: Down payment paid Outstanding Balance Less 1st Installment paid at the end of 1st year Outstanding Balance
Rs. Rs. Rs. Rs. 450,000 112,500
33,750
22,500
112,500
112,500
112,500
146,250
337,500 112,500 225,000
BOOK OF Z LTD. Dr. Y LTD. ACCOUNT Cr. Date References Rs. Date References Rs.
1st year
2nd year
Bank Account Bank Account Balance c/d Car Account
112,500 146,250 225,000
1st year
2nd year
Car Account Interest Account Balance b/d Interest Account
450,000 33,750
483,750 483,750 247,500
225,000
22,500 247,500 247,500
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Dr. CAR ACCOUNT Cr. Date References Rs. Date References Rs.
1st year
2nd year
Y Ltd. Account Balance b/d
450,000
1st year
2nd year
Depreciation Account Balance c/d Depreciation Account Y Ltd. P & L A/c (Loss)
45,000 405,000
450,000 405,000 405,000
40,500 247,500 117,000
405,000 405,000
BOOK OF Y LTD. Dr. Z LTD. ACCOUNT Cr. Date References Rs. Date References Rs.
1st year
2nd year
H.P. Sales Account Interest Account Balance b/d Interest Account
450,000 33,750
1st year
2nd year
Bank Account Bank Account Balance c/d Goods repossessed A/c
112,500 146,250 225,000
483,750 483,750 225,000
22,500 247,500
247,500 247,500
Q.12 BREAK UP TABLE
Description Cash Price
Installment Total Interest Cash Price
Cash price Less Down payment paid Outstanding Balance Less 1st Installment paid at the end of 1st year Outstanding Balance Less 2nd Installment paid at the end of 2ndyear Outstanding Balance Less 3rd Installment paid at the end of 3rdyear
Rs. Rs. Rs. Rs. 300,000 100,000
20,000
15,000
10,000
100,000
50,000
50,000
50,000
100,000
70,000
65,000
60,000
200,000 50,000
150,000 50,000
100,000 50,000
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Outstanding Balance 50,000 5,000
BOOKS OF X Dr. HIRE VENDOR ACCOUNT Cr. Date References Rs. Date References Rs.
1st year
2nd year
3rd year
4th year
Bank Account Bank Account Balance c/d Bank Account Balance c/d Bank Account Balance c/d Machinery Account
100,000 70,000
150,000
1st year
2nd year
3rd year
4th year
Machinery Account Interest Account Balance b/d Interest Account Balance b/d Interest Balance b/d Interest A/c
300,000 20,000
320,000 320,000 65,000
100,000 150,000
15,000 165,000 165,000
60,000 50,000
100,000 10,000
110,000 50,000 55,000 50,000
5,000 55,000 55,000
Dr. MACHINERY ACCOUNT Cr. Date References Rs. Date References Rs.
1st year
2nd year
3rd year
4th year
Hire Vendor Account Balance c/d Balance c/d Balance c/d
300,000
1st year
2nd year
3rd year
4th year
Depreciation Account Balance c/d Depreciation Account Balance c/d Depreciation Account Balance c/d Depreciation Account Hire Vendor Account Profit & Loss A/c (Loss)
60,000 240,000
300,000 300,000 240,000
48,000
192,000 240,000 240,000 192,000
38,400
153,600 192,000 192,000 153,600 30,720
55,000 67,880
153,600 153,600
BOOKS OF HIRE VENDOR Dr. X ACCOUNT Cr. Date References Rs. Date References Rs.
1st year H.P. Sales Account 300,000 1st year Bank Account 100,000
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2nd year
3rd year
4th year
Interest Account Balance b/d Interest Account Balance b/d Interest Account Balance b/d Interest Account
20,000
2nd year
3rd year
4th year
Bank Account Balance c/d Bank Account Balance c/d Bank Account Balance c/d Goods repossessed A/c
70,000 150,000
320,000 320,000 150,000
15,000 65,000
100,000 165,000 165,000 100,000
10,000 60,000 50,000
110,000 110,000 50,000
5,000 55,000
55,000 55,000 Dr. GOODS REPOSSESSED ACCOUNT Cr. Date References Rs. Date References Rs.
X Account Cash Account Profit & Loss A/c (Loss)
55,000 10,000 35,000
Bank Account(Sale of repossessed Machinery)
100,000
100,000 100,000
Q.13
Dr. BREAK UP TABLE Cr. Description Cash Price Installments Total
Interest Cash Price On 1-1-2005 Less: Down payment paid Outstanding Balance Less: 1st Installment paid on 31-12-2005 Outstanding Balance Less: 2nd Installment paid on 31-12-2005 Outstanding Balance
Rs. Rs. Rs. Rs. 480,000 120,000
36,000
24,000
12,000
120,000
120,000
120,000
120,000
156,000
144,000
360,000 120,000 240,000 120,000 120,000
BOOKS OF FRENCH TRANSPORT AGENCY Dr. RAINBOW AUTO COMPANYACCOUNT Cr. Date Particulars Rs. Date Particulars Rs.
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2005 Jan. 1
Dec.31 Dec.31
2006
Dec.31 Dec.31
2007
Dec.31 Dec.31
Bank Account Bank Account Balance c/d Bank Account Balance c/d Car Account Balance c/d
120,000 156,000 240,000
2005 Jan. 1
Dec.31
2006 Jan. 1
Dec.31
2007 Jan. 1
Dec.31
Car Account Interest Account Balance b/d Interest Account Balance b/d Interest Account
480,000
36,000
516,000 516,000
144,000 120,000
240,000
24,000 264,000 264,000
60,000 72,000
120,000
12,000 132,000 132,000
WORKING: Depreciation
Value of ‘1’ car on the date of repossession Cost price of ‘1’ car on 1-1-2005 Less: Depreciation upto 31-12-2005 Less: Depreciation upto 31-12-2005 Less: Depreciation upto 31-12-2005 Value of ‘1’ car on the date of repossession
@20% Hire Purchases
@20% Hire Vendor
Rs. 240,000 48,000
Rs. 240,000 60,000
192,000 38,400
180,000 60,000
153,600 30,720
120,000 60,000
122,880 60,000
The difference between Rs. 122,880 and Rs. 60,000 is the loss for hire purchaser which is
Rs. 62.880 (122,880 – 60,000).
Dr. CARS ACCOUNT Cr. Date Particulars Rs. Date Particulars Rs. 2005 Jan. 1
Rainbow Auto
2005 Dec.31
Depreciation Account
96,000
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2006 Jan. 1
2007 Jan. 1
Company Account Balance b/d Balance c/d
480,000 Dec.31
2006 Dec.31 Dec.31
2007
Dec.31 Dec.31
Dec.31
Dec.31
Balance c/d Depreciation Account Balance c/d Depreciation Account Rainbow Auto Company Account Profit & Loss Account (Loss) Balance c/d
384,000
480,000 480,000
384,000
76,800 307,200
384,000 384,000
307,200
61,440
60,000
62,880
122,880 307,200 307,200
BOOKS OF RAINBOW AUTO COMPANY Dr. FRENCH TRANSPORT AGENCY ACCOUNT Cr. Date References Rs. Date References Rs.
2005 Jan. 1
Dec.31
2006 Jan. 1
Dec.31
2007 Dec.31
H.P. Sales Account Interest Account Balance b/d Interest Account Balance b/d Interest Account
480,000
36,000
2005 Jan. 1
Dec.31 Dec.31
2006
Dec.31 Dec.31
2007
Dec.31 Dec.31
Bank Account Bank Account Balance c/d Bank Account Balance c/d Goods repossessed A/c Balance c/d
120,000 156,000 240,000
516,000 516,000
240,000 24,000
144,000 120,000
264,000 264,000
120,000 12,000
60,000 72,000
132,000 132,000
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Q.14 BREAK UP TABLE Description Cash Price Installments Total
Interest Cash Price Less: Down payment paid Outstanding Balance Less: 1st Installment paid at the end of 1st year Outstanding Balance Less: 2nd Installment paid at the end of 2nd year Outstanding Balance
Rs. Rs. Rs. Rs. 120,000
30,000
13,500
11,925
10,114
30,000
10,500
12,075
30,000
24,000
24,000
90,000 10,500 79,500 12,075 67,425
BOOKS OF FAST TECH.
Dr. HIRE VENDORACCOUNT Cr. Date Particulars Rs. Date Particulars Rs.
1st year
2nd year
3rd year
Bank Account Bank Account Balance c/d Bank Account Balance c/d Computer Account Balance c/d
30,000 24,000 79,500
1st year
2nd year
3rd year
Computer Account Interest Account Balance b/d Interest Account Balance b/d Interest Account
120,000 13,500
133,500 133,500 24,000 67,425
79,500 11,925
91,425 91,425 20,580 56,959
67,425 10,114
77,539 77,539
WORKING: Depreciation
Value of ‘2’ computers on the date of repossession Cost price of ‘2’ computers Less: Depreciation for 1st year Less: Depreciation for 2nd year Less: Depreciation for3rd year Value of ‘2’ computers on possession
@20% Hire Purchases
@20% Hire Vendor
Rs. 60,000 12,000
Rs. 60,000 18,000
48,000 12,000
42,000 12,000
36,000 12,000
29,400 8,820
24,000 20,580 The difference between Rs. 20,580 and Rs. 24,000 is the loss for hire purchaser which is
Rs. 3,420 (24,000 – 20,580).
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Dr. COMPUTERS ACCOUNT Cr. Date References Rs. Date References Rs.
1st year
2nd year
3rd year
Hire Vendor Account Balance b/d Balance b/d
120,000
1st year
2nd year
3rd year
Depreciation Account Balance c/d Depreciation Account Balance c/d Depreciation Account Hire Vendor Account Profit & Loss A/c (Loss) Balance c/d
24,000 96,000
120,000 120,000 96,000
24,000 72,000
96,000 96,000 72,000 24,000
20,580 3,420
24,000 72,000 72,000
BOOKS OF HIRE VENDOR Dr. FAST TECH. ACCOUNT Cr. Date References Rs. Date References Rs.
1st year
2nd year
3rd year
H.P Sales Account Interest account Balance b/d Interest account Balance b/d Interest account
120,000 13,500
1st year
2nd year
3rd year
Bank Account Bank Account Balance c/d Bank Account Balance c/d Good Repossessed A/c Balance c/d
30,000 24,000 79,500
133,500 133,500 79,500 11,925
24,000 67,425
91,425 91,425 67,425 10,114
20,580 56,959
77,539 77,539
GOODS REPOSSESSED ACCOUNT Date References Rs. Date References Rs.
Hire Vendor Account Bank Account Profit & Loss A/c (Profit)
20,580 1,328 8,092
Bank Account(Sale of repossessed computers)
30,000
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30,000 30,000
BOOKS OF A LIMITED COMPANY Dr. HIRE PURCAHSE TRADINGACCOUNT Cr.
Date Particulars Rs. Date Particulars Rs. 2010 Jan.1
Dec.31
Balance b/d: Goods out on H.P. (at H.P. price) Goods sold on H.P. A/c (at H.P. price) Loss on goods repossessed A/c (4,000-500) Stock Reserve A/c Loading on closing H.P. stock) 30,000 x 50/150 Profit & Loss A/c
15,000
81,000
3,500
10,000 18,500
2010 Dec.31
Cash received Goods repossessed A/c Stock reserve A/c (Loading on opening HP stock) 15,000 x 50/150 Goods sold on H.P. A/c (Loading on goods sold) 81,000 x 50/150 Balance c/d Goods with H.P Customer (at H.P price) Hire purchase Debtors A/c
56,000
4,000 5,000
27,000
30,000
6,000 128,000 128,000
Dr. MEMARENDUM HIRE PURCHASE STOCK A/C Cr. Date Particulars Rs. Date Particulars Rs.
Balance c/d (at H.P. price) Goods sold on hire Purchases (at H.P. price)
15,000
81,000
Hire purchases debtors A/c (Bal. Fig.) Balance c/d (at H.P. price)
66,000
30,000 96,000 30,000
MEMARENDUM HIRE PURCHASE STOCK A/C Date Particulars Rs. Date Particulars Rs.
Balance c/d (at H.P. price Hire Purchases Stock A/c
66,000
Cash Received A/c Goods repossessed A/c Balance c/d (at H.P. price)
56,000 4,000 6,000
66,000 66,000
Q.16 BOOKS OF A TRADER Dr. HIRE PURCAHSE TRADINGACCOUNT Cr. Date Particulars Rs. Date Particulars Rs.
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1-1-10
31-12-10
Balance b/d: Stock with customers at Selling price Installment due* Goods sold on selling price. Stock Reserve A/c Loading on closing H.P. stock) 12,000 x 60/160 Profit & Loss A/c
5,400 500
21,780
4,500 5,693
31-12-10 Cash received Stock reserve A/c (Loading on opening HP stock) 5,400 x 60/160 Goods sold on H.P. A/c (Loading on goods sold) 21,780 x 60/160 Balance c/d Stock with customers at Selling price Installment due but not Yet received
14,430
2,025
8,168
12,000
1,250 37,873 37873
Dr. MEMARENDUM HIRE PURCHASE STOCK A/C Cr. Date Particulars Rs. Date Particulars Rs.
Balance b/d (at H.P. price) (Balancing Figure) Hire purchases stock
500
15,180
Cash received Balance c/d (at H.P. price)
14,430
1,250 15,680 15,680
Dr. MEMARENDUM HIRE PURCHASE STOCK A/C Cr. Date Particulars Rs. Date Particulars Rs.
Balance c/d (at H.P. price) Goods sold on hire Purchases (at H.P. price)
5,400
21,780
Hire purchases debtors A/c (Balancing Figure) Balance c/d (at H.P. price)
15,180
12,000 27,180 27,180
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Q.17 BOOKS OF X Dr. HIRE PURCAHSE TRADINGACCOUNT Cr. Date Particulars Rs. Date Particulars Rs.
1-1-10
31-12-10
Balance b/d: Goods sold on hire purchases Installment due and unpaid Goods sold on hire purchase system at hire purchase price. Loading on goods reposes A/c (4,000-800) Stock Reserve (Loading on Installment not due and unpaid) 72,000 x 60/160 Profit & Loss A/c
32,000
160,000 3,200
27,000
41,800
31-12-10 Cash received Goods repossessed A/c (Installment due and unpaid) Stock reserve A/c Goods sold on H.P. A/c (Loading on goods sold) 160,000 x 60/160 Balance c/d Installment not due but unpaid Installment due and unpaid
112,000 4,000
12,000 60,000
72,000
4,000
264,000 264,000
Dr. MEMARENDUM HIRE PURCHASE STOCK A/C Cr. Date Particulars Rs. Date Particulars Rs.
Balance b/d (at H.P. price) (Balancing Figure) Hire purchases stock A/c
120,000
Cash received A/c Goods repossessed A/c Balance c/d (at H.P. price)
112,000 4,000 4,000
120,000 120,000
Dr. MEMARENDUM HIRE PURCHASE STOCK A/C Cr. Date Particulars Rs. Date Particulars Rs.
Balance c/d (at H.P. price) Goods sold on hire Purchases (at H.P. price)
32,000
160,000
Hire purchases debtors A/c A/c (Balancing Figure) Balance c/d (at H.P. price)
120,000
72,000 192,000 192,000
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Q.18 BOOKS OF A. RAHIM Dr. HIRE PURCAHSE TRADINGACCOUNT Cr. Date Particulars Rs. Date Particulars Rs.
1-1-10
31-12-10
Balance b/d: Hire purchases stock (at H.P. price) Installment due Goods sold on hire purchase (at H.P. price) Loss on goods repossessed A/c (500 - 50) Stock Reserve A/c (Loading on closing hire purchases stock) (10,000 x 1/2) Profit & Loss A/c
8,000 15,000
42,000
450
5,000
19,550
31-12-10 Cash received Goods repossessed A/c Stock reserve A/c (loading on opening hire purchase stock) (8,000 x ½) Goods sold on H.P. A/c (Loading on goods sold) (42,000 x ½) Balance c/d Hire purchases stock (at H.P. price) Installment due
50,000 500
4,000
21,000
10,000
4,500 90,000 90,000
Dr. MEMARENDUM HIRE PURCHASE STOCK A/C Cr. Date Particulars Rs. Date Particulars Rs.
Balance b/d (at H.P. price) (Balancing Figure) Goods sold on hire purchase (at H.P. price)
8,000
42,000
Hire purchases debtors A/c Balance c/d (at H.P. price)
40,000 10,000
50,000 50,000
Dr. MEMARENDUM HIRE PURCHASE STOCK A/C Cr. Date Particulars Rs. Date Particulars Rs.
Balance b/d (at H.P. price) H.P. stock
15,000 40,000
Cash received A/c Good Repossessed A/c Balance c/d (at H.P. price) (Balancing Figure)
50,000 500
4,500
55,000 55,000
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Q.19 BOOKS REFRIGERATOR Dr. HIRE PURCAHSE TRADINGACCOUNT Cr. Date Particulars Rs. Date Particulars Rs.
1-1-10
31-12-10
Balance b/d: Installment due and unpaid Stock out with customers on hire purchase price Goods sold on hire purchase (at H.P. price) Stock Reserve A/c (Loading on closing stock) (18400 x 33.333/133.333) Profit & Loss A/c
1,200
16,000
35,200
4,600
8,200
31-12-10 Cash received Stock reserve A/c (Loading on opening stock out with customers) 16,000 x 33.333/133.333 Goods sold on H.P. (Loading on goods sold) 35,200 x 33.333/133.333 Balance c/d Stock out with customers on Hire purchases price Installment due and unpaid
32,000 4,000
8,800
18,400
2,000 65,200 65,200
Dr. MEMARENDUM HIRE PURCHASE STOCK A/C Cr. Date Particulars Rs. Date Particulars Rs.
Balance b/d (at H.P. price) Goods sold on hire purchases (Bal. Figure)
16,000
35,200
Hire purchases debtors A/c Balance c/d (at H.P. price)
32,800 18,400
51,200 51,200
Dr. MEMARENDUM HIRE PURCHASE STOCK A/C Cr. Date Particulars Rs. Date Particulars Rs.
Balance b/d (at H.P. price) Hire purchases stock A/c (Balancing Figure)
1,200
32,800
Cash received A/c Balance c/d (at H.P. price)
32,000 2,000
34,000 34,000
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Q.20 IN THE BOOKS OF MR. KHUBAB Dr. HIRE PURCAHSE TRADINGACCOUNT Cr. Date Particulars Rs. Date Particulars Rs.
Purchase H.P Profit
810 238
Cash received: Ratio (50 + 125) Cycle (75 + 125) Encyclopedia (100+150) Goods repossessed A/c (Cost of encyclopedia) Stock in hands of customers at cost equivalent
175 200 250 233
190
1,048 1048
Dr. GOODS REPOSSESSED ACCOUNT Cr. Date References Rs. Date References Rs.
Hire purchases trading A/c (Cost of Encyclopedia)
233 Balance c/d 233
233 233
GENERAL TRADING ACCOUNT Particulars Rs. Particulars Rs.
Purchases 14,500 Less: Cost of Goods sold on Hire Purchase 810 Gross profit
13,690 3,310
Sales Closing Stock
12,000 5,000
17,000 17,000
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WORKING:
Calculation of the value of stock at cost Equivalent:
Cost Equivalent =
x Cost Price
Cost
Rs.
H.P. Sale Price Rs.
Initial Payment
Rs.
Installment Paid Rs.
Installment Outstanding
Rs.
Cost Equivalent
Rs. Radio Cycle Encyclopedia
200 210 400
350 350 600
50 75
100
125 125 150
175 150 350
100 90
233 225 400
Q.21 IN THE BOOKS OF SALMAN Dr. HIRE PURCAHSE STOCKACCOUNT Cr. Date Particulars Rs. Date Particulars Rs.
1-1-10 Balance b/d Goods sold on hire purchase A/c
12,000
90,600
27-12-10
31-12-10
Hire purchase debtors A/c Goods repossessed A/c (Installments not yet due) Balance c/d
92,700 600
9,300
102,600 102,600
Dr. HIRE PURCAHSE DEBTORSACCOUNT Cr. Date Particulars Rs. Date Particulars Rs.
1-1-10 Balance b/d Hire purchase stock A/c
300 92,700
31-12-10 Cash A/c Goods repossessed A/c (Installments not yet not paid) Balance c/d
92,400 100
500
93,000 93,000
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Dr. HIRE PURCAHSE ADJUSTMENTACCOUNT Cr. Date Particulars Rs. Date Particulars Rs.
31-12-10 31-12-10
Stock reserve A/c (w-3) Profit & Loss A/c
3,100 31,200
1-1-10 31-12-10
31-12-10
Stock reserve A/c (w-1) Good sold on hire purchase A/c (w-2) Goods repossessed A/c (Profit)
4,000
30,200
100 34,300 34,300
Dr. GOODS REPOSSESSEDACCOUNT Cr. Date Particulars Rs. Date Particulars Rs.
27-12-10 27-12-10 31-12-10
Hire purchase stock A/c Hire purchase debtors A/c Hire purchase Adjustment A/c
600 100 100
31-12-10 Balance c/d (w-4) 800
800 800
WORKING:
(w-1) If cost is Rs. 100, profit is Rs. 50 and hire purchase price is Rs. 100 + Rs. 50 = Rs. 150.
Profit on hire purchases = =
Therefore, loading on opening stock = x Rs. 12,000 = Rs. 4,000
(w-1) Loading on goods sold on hire purchase = x Rs. 90,600 = Rs. 3,000
(w-3) Loading on closing balance on hire purchase stock = x Rs. 9,300 = Rs. 3,100
(w-4) it is assumed that the goods repossessed have been valued at cost i.e.
= x Rs. 1,200 = Rs. 800
Q.22 IN THE BOOKS OF Y LTD. Dr. HIRE PURCAHSE STOCKACCOUNT Cr. Date Particulars Rs. Date Particulars Rs.
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1-1-10 31-12-10
Balance c/d (at H.P. price) Goods sold on hire purchase A/c
120,000
264,000
31-12-10 Hire purchase debtors A/c Balance c/d(at H.P. price)
246,000 138,000
384,000 384,000 Dr. STOCK AT SHOPACCOUNT Cr. Date Particulars Rs. Date Particulars Rs.
1-1-10
Balance b/d Purchase A/c
15,000 204,000
31-12-10 Hire purchase stock A/c
( x Rs. 264,000)
Balance c/d
198,000
21,000 219,000 219,000
Dr. HIRE PURCAHSE DEBTORSACCOUNT Cr. Date Particulars Rs. Date Particulars Rs.
1-1-10 31-12-10
Balance b/d Hire purchase stock A/c
9,000 246,000
31-12-10 Cash A/c Balance c/d
240,000 15,000
255,000 225,000
Dr. STOCK RESERVEACCOUNT Cr. Date Particulars Rs. Date Particulars Rs.
1-1-10 31-12-10
Hire purchase adjust A/c Balance c/d
30,000 34,500
31-12-10 31-12-10
Balance b/d Hire purchase adjustment A/c
30,000
34,500 64,500 64,500
Dr. HIRE PURCAHSE ADJUSTMENTACCOUNT Cr. Date Particulars Rs. Date Particulars Rs.
31-12-10 31-12-10
Stock reserve A/c (w-3) Profit & Loss A/c
34,500 61,500
1-1-10 31-12-10
Stock reserve A/c (w-1) Good sold on hire purchase A/c (w-2)
30,000
66,000 96,000 96,000
WORKING:
(w-1) Goods are sold of a profit of 33.333 % on cost. It means, if the cost is Rs. 100, then profit is Rs. 33.333 and hire purchases price =Rs. 100 + Rs. 33.333 = Rs. 133.333.
Therefore, loading on hire purchases price = .
.=
Loading on opening balance of hire purchase debtors= x Rs. 120,000= Rs. 30,000
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(w-1) Loading on goods sold on hire purchase = x Rs. 264,000 = Rs. 66,000
(w-3) Loading on closing balance on hire purchase stock = x Rs. 138,000 = Rs. 34,500
Q.23 BREAK UP TABLE Dr. MACHINE ACCOUNT Cr.
Description Cash Price Installments Total Interest Cash Price
Less: Down payment paid Outstanding Balance Less: 1st Installment paid at the end of 1st year Outstanding Balance Less: 2nd Installment paid at the end of 2nd year Outstanding Balance Less: 3rd Installment paid at the end of 3rd year
Rs. Rs. Rs. Rs. 22,350
6,000
818
558
274
6,000
5,182
5,442
5,726
6,000
6,000
6,000
6,000
16,350 5,182
11,168 5,442 5,726 5,726
1,650 22,350 24,000
BOOKS OF Z. LTD. JOURNAL
Date Particulars L/F Debit (Rs.)
Credit (Rs.)
1st year “ “
Wagon Account Dr. Interest Suspense Account Dr. Hire Vendor Account (Being wagon purchase on hire purchase system)
22,350 1,650
6,000
24,000
6,000
Hire Vendor Account Dr. Cash Account (Being down payment paid)
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“ “
2nd Year “ “
3rd year “ “
Interest Account Dr. Interest Suspense Account (Being interest due)
818
6,000
2,235
558
6,000
2,012
274
6,000
1,810
818
6,000
2,235
558
6,000
2,012
274
6,000
1,810
Wagon Account Dr. Cash Account (Being 1st Installment paid) Depreciation Account Dr. Wagon Account (Being depreciation charged in 1st year) Interest Account Dr. Interest Suspense Account (Being interest due) Hire Vendor Account Dr. Cash Account (Being 2nd Installment paid) Depreciation Account Dr. Wagon Account (Being depreciation charged in 2nd year)
Interest Account Dr. Interest Suspense Account (Being the interest due) Hire Vendor Account Dr. Cash Account (Being 3rd Installment paid)
Depreciation Account Dr. Wagon Account (Being depreciation charged in 3rd year)
Dr. WAGON ACCOUNT Cr. Date Particulars Rs. Date Particulars Rs.
1st year
2nd year
3rd year
Hire Vendor A/c Balance c/d Balance b/d
22,350 1st year
2nd year
3rd year
Depreciation A/c Balance c/d Depreciation A/c Balance c/d Depreciation A/c Balance c/d
2,235 20,115
22,350 22,350 20,115 2,012
18,103 20,115 20,115 18,103 1,810
16,293 18,103 18,107
Dr. HIRE VENDOR ACCOUNT Cr. Date Particulars Rs. Date Particulars Rs.
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1st year
2nd year
3rd year
Cash A/c Cash A/c Balance c/d Cash A/c Balance c/d Cash A/c
6,000 6,000
12,000
1st year
2nd year
3rd year
Wagon A/c Interest Suspense A/c Balance b/d Balance b/d
22,350 1,650
24,000 24,000 6,000 6,000
12,000
12,000 12,000 6,000 6,000 6,000 6,000
Dr. INTEREST SUSPENSE ACCOUNT Cr. Date Particulars Rs. Date Particulars Rs.
1st year
2nd year
3rd year
Hire Vendor A/c Balance b/d Balance b/d
1,650
1st year
2nd year
3rd year
Interest A/c Balance c/d Interest A/c Balance c/d Interest A/c
818 832
1,650 1,650 832 558
274 832 832 274 274
274 274
BOOKS OF HIRE VENDOR JOURNAL
Date Particulars L/F Debit (Rs.)
Credit (Rs.)
1st year “ “ “
2nd Year
Z Ltd. Account Dr. Sale Account Interest Suspense Account (Being the sale of wagon on Installment system)
24,000
6,000
818
6,000
558
22,350
1,650
6,000
818
6,000
558
Cash Account Dr. Z Ltd. Account (Being down payment received) Interest Suspense A/c Dr. Interest Account (Being interest due) Cash Account Dr. Z Ltd. Account (Being 1st Installment paid) Interest Suspense A/c Dr. Interest Account (Being interest due)
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“
3rd year “
Cash Account Dr. Z Ltd. Account (Being 2nd Installment paid)
6,000
274
6,000
6,000
274
6,000
Interest Suspense A/c Dr. Interest Account (Being interest due) Cash Account Dr. Z Ltd. Account (Being 3rd Installment paid)
Dr. Z LTD. ACCOUNT Cr. Date Particulars Rs. Date Particulars Rs.
1st year
2nd year
3rd year
Sales Account Suspense Account Balance b/d Balance b/d
22,350 1,650
1st year
2nd year
3rd year
Cash Account Cash Account Balance c/d Cash Account Balance c/d Cash Account
6,000 6,000
12,000 24,000 24,000 12,000
6,000 6,000
12,000 12,000 6,000 6,000
6,000 6,000
Dr. INTEREST SUSPENSE ACCOUNT Cr. Date Particulars Rs. Date Particulars Rs.
1st year
2nd year
3rd year
Interest A/c Balance c/d Interest A/c Balance c/d Interest A/c
818 832
1st year
2nd year
3rd year
Z Ltd. Balance b/d Balance b/d
1,650
1,650 1,650 558 274
832
832 832 274 274
274 274
Q.24 BREAK UP TABLE Description Cash Price Installments Total
Interest Cash Price On 1-1-2007 Less: 1st Installment paid on 31-12-2007
Rs. Rs. Rs. Rs. 177,300
41,135
8,865
41,135
50,000
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Outstanding Balance Less: 2nd Installment paid on 31-12-2008 Outstanding Balance Less: 3rd Installment paid on 31-12-2009 Outstanding Balance Less: 4th Installment paid on 31-12-2010
136,165 43,192
6,808
4,649
2,378
43,192
45,351
47,622
50,000
50,000
50,000
92,973 45,351 47,622 47,622
22,700 177,300 200,000
BOOKS OF A. KARIM Dr. WAGON ACCOUNT Cr. Date Particulars Rs. Date Particulars Rs. 2007 Jan. 1
2008 Jan. 1
2009 Jan. 1
2010 Jan. 1
Hire Vendor A/c Balance b/d Balance b/d Balance b/d
177,300
2007 Dec. 31
2008 Dec. 31
2009 Dec. 31
2010 Dec. 31
Depreciation A/c Balance c/d Depreciation A/c Balance c/d Depreciation A/c Balance c/d Depreciation A/c Balance c/d
17,730
159,570 177,300 177,300
159,570
15,957
143,613 159,570 159,570
143,613
14,361
129,252 143,613 143,613
129,252
12,925
116,327 129,252 129,252
Dr. VENDOR’S ACCOUNT Cr. Date Particulars Rs. Date Particulars Rs. 2007 Jan. 1
Dec. 31
2008 Jan. 1
Dec. 31
2009 Jan. 1
Dec. 31
Cash A/c Balance c/d Cash A/c Balance c/d Cash A/c Balance c/d
50,000
150,000
2007 Jan. 1
Dec. 31
2008 Jan. 1
2009 Jan. 1
Motor Car A/c Interest Suspense A/c Balance b/d Balance b/d
177,300
22,700 200,000 200,000
50,000
100,000
150,000
150,000 150,000
50,000 50,000
100,000
100,000 100,000
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2010
Dec. 31
Cash A/c
50,000
2010 Jan. 1
Balance b/d
50,000
50,000 50,000
Dr. INTEREST SUSPENSE ACCOUNT Cr. Date Particulars Rs. Date Particulars Rs. 2007 Jan. 1
2008 Jan. 1
2009 Jan. 1
2010 Jan. 1
Hire Vendor A/c Balance c/d Balance c/d Balance c/d
22,700
2007 Dec. 31 Dec. 31
2008
Dec. 31
2009 Dec. 31
2010 Dec. 31
Interest A/c Balance c/d Interest A/c Balance c/d Interest A/c Balance c/d Interest A/c Balance c/d
8,865
13,835 22,700 22,700
13,835
6,808 7,027
13,835 13,835
7,027
4,649 2,378
7,027 7,027
2,378
2,378
2,378 2,378
Q.25 BREAK UP TABLE Description Cash Price Installments Total
Interest Cash Price On 1-1-2006 Less: 1st Installment paid on 31-12-2006 Outstanding Balance Less: 2nd Installment paid on 31-12-2007 Outstanding Balance Less: 3rd Installment paid on 31-12-2008 Outstanding Balance Less: 4th Installment paid on 31-12-2009
Rs. Rs. Rs. Rs. 4,100
713
287
237
184
126
713
763
816
874
1,000
1,000
1,000
1,000
3,387 763
2,624 816
1,808 874
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Outstanding Balance Less: 5th Installment paid on 31-12-2010
934 934
66
934
1,000
900 4,100 5,000
BOOKS OF Z. LTD. JOURNAL
Date Particulars L/F Debit (Rs.)
Credit (Rs.)
2006 Jan. 1
Dec. 31 “
2007 Dec. 31
“
2008 Dec. 31
“
2009 Dec.31
“
2010 Dec. 31
“
Computer A/c Dr. Interest Suspense A/c Dr. Hire Vendor A/c (Being computer purchase on Installment system)
4,100 900
287
1,000
237
1,000
184
1,000
126
1,000
66
1,000
5,000
287
1,000
237
1,000
184
1,000
126
1,000
66
1,000
Interest A/c Dr. Interest Suspense A/c (Being interest due) Hire Vendor A/c Dr. Cash A/c (Being 1st Installment paid) Interest A/c Dr. Interest Suspense A/c (Being interest due) Hire Vendor A/c Dr. Cash A/c (Being 2nd Installment paid) Interest A/c Dr. Interest Suspense A/c (Being interest due) Hire Vendor A/c Dr. Cash A/c (Being 3rd Installment paid) Interest A/c Dr. Interest Suspense A/c (Being interest due
Hire Vendor A/c Dr. Cash A/c (Being 4th Installment paid) Interest A/c Dr. Interest Suspense A/c (Being interest due
Hire Vendor A/c Dr. Cash A/c
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(Being 5th Installment paid)
LEDGER ACCOUNTS IN THE BOOKS OF ALI Dr. HIRE VENDOR’S ACCOUNT Cr. Date Particulars Rs. Date Particulars Rs. 2006
Dec. 31 Dec. 31
2007 Dec. 31 Dec. 31
2008 Dec. 31 Dec. 31
2009 Dec. 31 Dec. 31
2010 Dec. 31
Cash A/c Balance c/d Cash A/c Balance c/d Cash A/c Balance c/d Cash A/c Balance c/d Cash A/c
1,000 4,000
2006 Jan. 1
2007 Jan. 1
2008 Jan. 1
2009 Jan. 1
2010 Jan. 1
Computer A/c Interest Suspense A/c Balance b/d Balance b/d Balance b/d Balance b/d
4,100
900
5,000 5,000
1,000 3,000
4,000
4,000 4,000
1,000 2,000
3,000
3,000 3,000
1,000 1,000
2,000
2,000 2,000
1,000
1,000
1,000 1,000
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Dr. INTEREST SUSPENSE ACCOUNT Cr. Date Particulars Rs. Date Particulars Rs. 2006 Jan. 1
2007 Jan. 1
2008 Jan. 1
2009 Jan. 1
2010 Jan. 1
Hire Vendor A/c Balance b/d Balance b/d Balance b/d Balance b/d
900
2006 Dec. 31 Dec. 31
2007
Dec. 31 Dec. 31
2008
Dec. 31
2009 Dec. 31
2010 Dec. 31
Interest A/c Balance c/d Interest A/c Balance c/d Interest A/c Balance c/d Interest A/c Balance c/d Interest A/c
287 613
900 900
613
237 376
613 613
376
184 192
376 376
192
126
66 192 192
66
66
66 66
BOOKS OF HIRE VENDOR JOURNAL
Date Particulars L/F Debit (Rs.)
Credit (Rs.)
2006 Jan. 1
Dec. 31
Dec. 31
2007 Dec. 31
Dec. 31
Ali Account Dr. Sale Account Interest Suspense Account (Being the sale of computer on Installment system)
5,000
287
1,000
237
1,000
4,100
900
287
1,000
237
1,000
Interest Suspense A/c Dr. Interest A/c (Being the interest due) Cash Account Dr. Ali Account (Being 1st Installment paid) Interest Suspense A/c Dr. Interest A/c (Being the interest due) Cash Account Dr. Ali A/c (Being 2nd Installment paid)
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2008 Dec. 31
Dec. 31
2009 Dec. 31
Dec. 31
2010 Dec. 31
Dec. 31
Interest Suspense A/c Dr. Interest A/c (Being the interest due)
184
1,000
126
1,000
66
1,000
184
1,000
126
1,000
66
1,000
Cash Account Dr. Ali A/c (Being 3rd Installment paid) Interest Suspense A/c Dr. Interest A/c (Being the interest due) Cash Account Dr. Ali A/c (Being 4th Installment paid) Interest Suspense A/c Dr. Interest A/c (Being the interest due) Cash Account Dr. Ali A/c (Being 5th Installment paid)
Dr. ALI ACCOUNT Cr. Date Particulars Rs. Date Particulars Rs. 2006 Jan. 1 Jan. 1
2007 Jan. 1
2008 Jan. 1
2009 Jan. 1
2010 Jan. 1
Sales A/c Interest Suspense Account Balance b/d Balance b/d Balance b/d Balance b/d
4,100
900
2006 Dec. 31 Dec. 31
2007
Dec. 31 Dec. 31
2008
Dec. 31 Dec. 31
2009
Dec. 31 Dec. 31
2010
Dec. 31
Cash A/c Balance c/d Cash A/c Balance c/d Cash A/c Balance c/d Cash A/c Balance c/d Cash A/c
1,000 4,000
5,000 5,000
4,000
1,000 3,000
4,000 4,000
3,000
1,000 2,000
3,000 3,000
2,000
1,000 1,000
2,000 2,000
1,000
1,000 1,000 1,000
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Dr. INTEREST SUSPENSE ACCOUNT Cr. Date Particulars Rs. Date Particulars Rs. 2006
Dec. 31 Dec. 31
2007
Dec. 31 Dec. 31
2008
Dec. 31 Dec. 31
2009
Dec. 31 Dec. 31
2010
Dec. 31
Interest A/c Balance c/d Interest A/c Balance c/d Interest A/c Balance c/d Interest A/c Balance c/d Interest A/c
287 613
2006 Jan. 1
2007 Jan. 1
2008 Jan. 1
2009 Jan. 1
2010 Jan. 1
Ali Cash A/c Balance b/d Balance b/d Balance b/d Balance b/d
900
900 900
237 376
613
613 613
184 192
376
376 376
126
66
192
192 192
66
66 66 66
Q.26 BREAK UP TABLE Description Cash Price Installments Total
Interest Cash Price On 1-1-2008 Less: Down payment Paid Outstanding Balance Less: 1st Installment paid on 31-12-2008 Outstanding Balance Less: 2nd Installment paid on 31-12-2008 Outstanding Balance Less: 3rd Installment paid on 31-12-2010
Rs. Rs. Rs. Rs. 7,450 2,000
-
273
186
91
2,000
1,727
1,814
1,909
2,000
2,000
2,000
2,000
5,450 1,727 3,723 1,814 1,909 1,909
0 550 7,450 8,000
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BOOKS OF MR. TARIQ Dr. MACHINERY ACCOUNT Cr. Date Particulars Rs. Date Particulars Rs.
2008 Jan. 1
2009 Jan. 1
2010 Jan. 1
Hire Vendor A/c Balance b/d Balance b/d
7,450
2008
Dec. 31
2009 Dec. 31
2010 Dec. 31
Depreciation A/c Balance c/d Depreciation A/c Balance c/d Depreciation A/c Balance c/d
745
6,705 7,450 7,450
6,705
671
6,705 6,705 6,705
6,034
603
5,431 6,034 143,613
HIRE VENDOR BOOKS
Dr. TARIQ ACCOUNT Cr. Date Particulars Rs. Date Particulars Rs. 2008 Jan. 1 Jan. 1
2009 Jan. 1
2010 Jan. 1
Sales A/c Interest Suspense Account Balance b/d Balance b/d
7,450
550
2008 Jan. 1
Dec. 31 Dec. 31
2009
Dec. 31 Dec. 31
2010
Dec. 31
Cash A/c Cash A/c Balance c/d Cash A/c Balance c/d Cash A/c
2,000 2,000 4,000
8,000 8,000
4,000
2,000 2,000
4,000 4,000
2,000
2,000 2,000 2,000
Dr. INTEREST SUSPENSE ACCOUNT Cr. Date Particulars Rs. Date Particulars Rs. 2008
Dec. 31 Dec. 31
2009
Dec. 31 Dec. 31
Interest A/c Balance c/d Interest A/c Balance c/d
273 277
2008 Jan. 1
2009 Jan. 1
Tariq A/c Balance b/d
550
550 550
186 91
277