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Model Paper Answers

The document contains a model paper for accounting semester 1 with answers to sample questions. Question 1 discusses partnerships, advantages and disadvantages. Question 2 covers the objectives and process of accounting. Question 3 provides journal entries. Question 4 presents a trading and profit and loss account and balance sheet for Pathumi Enterprise. Key figures include a net profit of Rs. 102,500 and total assets of Rs. 738,000 in the balance sheet.

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29 views

Model Paper Answers

The document contains a model paper for accounting semester 1 with answers to sample questions. Question 1 discusses partnerships, advantages and disadvantages. Question 2 covers the objectives and process of accounting. Question 3 provides journal entries. Question 4 presents a trading and profit and loss account and balance sheet for Pathumi Enterprise. Key figures include a net profit of Rs. 102,500 and total assets of Rs. 738,000 in the balance sheet.

Uploaded by

Shenali Nupehewa
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Accounting –Model Paper-

Semester I- 2019
Answers

Question 01 (25 marks)


1.

a. Advantages

 Business has a shared financial commitment comparing to sole traders.


 Can obtain pool of resources, expertise, and strengths.
 There are limited startup costs.
 There are few formalities. (less rules and regulations)
 Partners receive income according to terms in partnership agreement.
 Professionally qualified partners can easily start the business.
 Easy to form the business compared to companies.
 Effective decision making

b. disadvantages:

 Partners may have different visions or goals for the business.


 There may be unequal commitment in terms of time and finances.
 There may also be personal disputes.
 Partners are personally liable for business debts and liabilities. (unlimited liability)
 Each partner may also be liable for decisions made, and actions taken by the other partner or
partners.
 At some time, there will be disagreements in management plans, operational procedures,
and future vision for the business.
 Business may encounter difficulty in attracting investors and limited access to additional
funds.
c.

Private limited Companies Public limited Companies


Cannot issue share for the general public Can issue shares for the general public

Cannot issue debentures for the general Can issue debentures for the general public
public

Maximum 50 shareholders No limit to the maximum number of


shareholders
Consent of all shareholders is required to No restriction on the transferability of shares,
transfer shares to a new shareholder if listed in the CSE.

The last two words of the name should be The last word of the name should be read as
read as either “(Private) Limited” or “(Pvt) either as “Public Limited Company” or
Ltd” “PLC” if the company is a listed company

At least one director should be in the At least two directors should be in the
company company

2.

a. The main objective: is to provide useful information about the firm’s financial position
and performance to stakeholders through financial statements.
b. Process of accounting:

 Original record containing the details to substantiate a transaction entered in an


accounting system. This information will be recorded in the journals (sales, sales
return, purchase, purchase returns etc) and then will be posted to ledger accounts.
Trial balance will be prepared to check the arithmetic accuracy and then the
summarization of the details will be in financial statements. Ratio analysis will be
done for interpreting the details within statements.
c.

- Regulatory environment
- International environment
- Business environment

3.

1. Accrual concept

2. Separate entity concept


3. Consistency concept
4.Going Concern Concept

5. Historical cost concept


Question 02 (25 marks)
Question 03 (marks)

General
Journal Debit Credit
i Machine A/C 500,000
Maintenance Expense A/C
(Narrations……………….) 500,000

ii Saduni ’s A/C 500


Purchase A/C
(Narrations…………) 500

iii Amal’s A/C 40,000


Nimal’s A/C
(Narrations…………) 40,000

iv Drawings A/C 8,500


Water bill A/C
(Narrations…………) 8,500

V Equipment A/C 80,000


Purchase A/C
(Narrations…………) 80,000
Question 04 (marks)
‘Pathumi Enterprise ‘
Trading, P/L Account for the year ending 31.12.2018

Sales 1,000,000
less: Return Inwards -1,200
998,800
COS
Opening Stock 200,000
add: Purchases 435,000
less: Return Outwards -1,000
Carriage inwards 4,000
less: Closing Inventories (1) -180,000 **458,000
Gross Profit **540,800
Non-Operating Income
Discount Received 2200 2200
Less: 543,000
Administration Expenses
Rent and rates Expense 100,000
Salaries and wages 100,000
Electricity Expenses 20,000
Building Depreciation 36,000
Furniture Depreciation 3,000
Stationary Expenses 50,000
Insurance Expense 57,000 (366,000)

Selling and Dis. Exp.


Bad debts 15,000
Advertising expenses 14,000
M.V. depreciation 12,000
Under provision of d.d 5000
Selling Expense 20000
Discount Allowed 1000
Carriage outwards 3000 (70,000)
Financial Expenses
4500 (4500)
Bank Loan Interest
Net profit 102,500 (2 marks)
Balance Sheet as at 31.12.2018
Cost Acc. Dep NBV
Fixed Assets
144,000
Building 200000 -56,000
108,000
M.V 150000 -42,000
57,000
Furniture 75000 -18,000
309,000
425000 116,000
Current Assets
Closing stock 180,000
Trade receivables 250000
Less: Provision for D.D -25,000 225,000
Bank Balance 15,000
Cash at hand 9,000 429000
738,000

Capital 415000
less: cash drawings -4000
add: Net profit 102,500 513,500

Long - Term Liabilities


15% Bank Loan 30000 30000

Current Liabilities
Trade creditors 140,000
Accrued insurance 50,000 194500
Accrued loan Interest 4,500
738,000

Workings
1. Stock as at 31.12.2018 is valued at Rs.180,000/=
This is the goods that remained unsold at the end of the accounting period which the
closing stocks.
Accounting Treatment
Income Statement:
Closing Stocks, A/C Dr. 180,000
Income Statement Cr. 180,000
Deduct the amount when
calculating cost of sales

Balance Sheet:
Closing Stocks Rs.180,000 should be recorded in the assets side under current
assets

2. Provision for 2018.12.31 250,000 * 10% = Rs. 25,000


Provision made at 2018.1.1 = Rs. 20,000
Under Provision = Rs.5,000

Doubtful debt A/C

Provision for doubtful debts 5,000 Income Statement 5,000

Deducted as an expense under selling and


distribution expenses

Doubtful debt A/C

B.B.F 1.1.2018 20,000

Provision for doubtful debts 5,000


31/12/18 B.C.D 25000

25,000 25,000

01/01/19 B.B.F 25000

Deducted from closing debtors under current assets


3. Insurance payable Rs. 50,000/- as at 31.12.2018.
Insurance
Insurance Paid = 7,000
Accrued Insurance = 50,000 Recorded under Current Liability
Total for the period = 57,000 as Insurance payable

Recorded as an expense in Income statement


under administration expenses

4. Bank loan was obtained on 01.01.2018


Loan Amount = 30,000 (1)
Loan Interest for the period (12 months) = 4,500
(30000* 15%) (2)
Accrued loan interest 4,500

(1) Here the Bank loan amount 30,000 has not been settled during the period, therefore it should be
recorded under Long Term Liability

(2) Pathumi Enterprise has also not paid any interest amount related to the bank loan during the
period. Therefore, the loan interest of 4,500n recorded under
 Income Statement (Finance Expenses) - bank loan amount for the period
 Balance Sheet (Current Liability) - Bank Loan Interest Payable

5. Depreciation on reducing balance method:

1. Building 20%

As per the reducing balance method, depreciated amount for the year of 1.1.2018- 31.12.2018 is
calculated as follows.

Assets Value = 200,000


Provision for depreciation as at 01.01.2018 = (20,000)
Current Year Depreciation = 180,000 * 20% = 36,000
Building Depreciation for the current year (01.01.2018 – 31.12.2018)
(200,000 -20,000) * (20/100) = 36,000 Recorded as an administration expense in the
Income Statement
Net Book Value = 200,000 – (20,000+36,000)
= 144,000

Provision for depreciation as at 01.01.2018 Current Year Depreciation

2. Motor vehicle 10%

Motor Vehicle Depreciation for the current year (01.01.2018 – 31.12.2018)


(150,0000-30,000) * (10/100) = 12,000 Recorded as a selling and distribution
expense in the Income Statement

3. Furniture 5%

Furniture Depreciation for the current year (01.01.2018-031.12.2018)

(75,000 – 15,000) * (5/100) = 3,000 Recorded as an administration expense


in the income statements

End

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