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Accountancy and Auditing KP PMS Paper I 2010

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KHYBER PAKHTOON KHWA, PUBLIC SERVICE COMMISSION, PESHAWAR

COMPETITIVE EXAMINATION FOR THE POSTS OF PROVINCIAL MANAGEMENT SERVICES (BPS-17) 2010

Accountancy and Auditing Paper-I

Time Allowed: 03 Hours Max. Marks: 100
Note: Attempt any FIVE questions.
1. The accountant of M/s Kasturi Agencies extracted the following Trial Balance as on March 31, 2010.
Particulars Dr. (Rs.) Cr. (Rs.)
Capital 1,00,000
Drawings 18,000
Building 15,000
Furniture and fittings 7,500
Motor van 25,000
Loan from Hari @ 12% interest 15,000
Interest paid on above 450
Sales 1,00,000
Purchases 75,000
Stock as at 1.4.2009 25,000
Stock as at 31.3.2010 32,000
Establishment expenses 15,000
Freight inwards 2,000
Freight outwards 1,000
Commission received 7,500
Sundry debtors 28,100
Bank balance 20,500
Sundry creditors 10,000
TOTAL 2,28,550 2,68,500
The accountant located the following errors but is unable to proceed any further.

  • Totaling errors in bank column of payment side of Cash Book whereby the column was under totaled by Rs.500.
  • Interest on loan paid for the quarter ending December 31, 2009 Rs.450, was omitted to be posted in the ledger. There was no further payment of interest.
Required:

You are required to set right the Trial Balance and to prepare Trading Account and Profit & Loss Account for the year ended 31st March, 2010 and the Balance Sheet as on that date after carrying the following:
Depreciation to be provided on: Building @ 2.5% p.a.; Furniture and fittings @ 10% p.a.; Motor van @ 25% p.a.

(20 marks)

2. G and K enter into an accommodation arrangement whereunder the proceeds are to be shared as 2/3 and 1/3 respectively. G draws a bill for Rs.45,000 on 3rd April, 1996 at 3 months. G gets it discounted for Rs.44,600 and on 5th April, remits K’s share to him. On due date, K pays the bill, though G fails to remit his share. On 18th July, G accepts a bill for Rs.63,000 drawn on him by K at 3 months, which K discounts on 19th July for Rs.61,650 and remits Rs.11,100 to G. Before the maturity of the second bill, G becomes insolvent and only 40% was realized from his estate on 20th October, 1996.

Required:

Pass necessary Journal Entries in the books of G and K.

(20 marks)

3. A informed you of the following particulars of his transactions relating to goods consigned to B for the year ended 31.12.1997. Goods sent (10,000 kgs) – Rs.1,00,000; A’s expenses – Rs.10,000; B’s expenses – freight and insurance – Rs.2,000; selling – Rs.5,000; Sold (8,000 kgs) – Rs.1,12,000; Loss due to natural wastage – 100 kgs; Commission @ 5% on gross sales.

Required:

You are required to prepare the Consignment Account only with the detailed calculation of unsold stock in the books of A.

(20 marks)

4. The following shows the financial position of The Peshawar Library as at 1.1.1997
Liabilities Rs. Assets Rs.
Capital fund 1,50,000 Building 50,000
Outstanding expenses 5,000 Furniture 5,000
Library 25,000
Investments 50,000
Outstanding subscriptions 20,000
Cash 5,000
1,55,000 1,55,000
An analysis of the Cash Book during the year gives the following particulars:
Receipts Rs. Payments Rs.
Subscriptions 75,000 Salaries 3,600
Donations 50,000 Purchase of books 40,000
Interest on investments 600 Rent and taxes 3,600
Sales of old furniture 500 Outstanding expenses 5,000
Proceeds of lectures 8,000 Insurance premium 1,500
Printing and stationary 450
Purchase of furniture 7,500
Investments 75,000
Sundry expenses 450
Balance 2,000

4. The following shows the financial position of The Peshawar Library as at 1.1.1997

Liabilities Rs. Assets Rs.
Capital fund 1,50,000 Building 50,000
Outstanding expenses 5,000 Furniture 5,000
Library 25,000
Investments 50,000
Outstanding subscriptions 20,000
Cash 5,000
1,55,000 1,55,000

An analysis of the Cash Book during the year gives the following particulars:

Receipts Rs. Payments Rs.
Subscriptions 75,000 Salaries 3,600
Donations 50,000 Purchase of books 40,000
Interest on investments 600 Rent and taxes 3,600
Sales of old furniture 500 Outstanding expenses 5,000
Proceeds of lectures 8,000 Insurance premium 1,500
Printing and stationary 450
Purchase of furniture 7,500
Investments 75,000
Sundry expenses 450
Balance 2,000
Particulars Dr. (Rs.) Cr. (Rs.)
Current and Capital Account
A 6,000 32,000
B 4,800 20,000
C’s Suspense Account 17,000
Stock on 31.12.1997 24,000
Furniture 6,000
Machinery (Rs.10,000 purchased on 1.10.97) 30,000
Rent, rates and taxes 10,000
Salaries (inclusive of manager’s Rs.6,000) 14,000
Postage and telephone charges 2,000
Printing and stationary 1,500
Travelling and conveyance 3,200
Debtors and creditors 20,000 16,500
Bank 18,000
Gross profit 54,000
Total 1,39,550 1,39,550
Depreciation @ 10% p.a. on written down value basis is to be provided on furniture and machinery.
Required:

Prepare Profit and Loss Account, Profit and Loss Appropriation Account, and Partners’ Capital Account and also prepare the Balance Sheet as on that date.

(20 marks)

7. The books of account of A Co. Ltd. for the year ending 31st December, 1996 were closed with a difference in books carried forward. The following errors were detected in 1997:

  • Return Outward Book was undercast by Rs.150.
  • Rs.1,500 being the total of the discount column on the credit side of the Cash Book was not posted in General Ledger.
  • Rs.6,000 being the cost of purchase of office furniture was entered in the Purchase Account.
  • A credit sale of Rs.760 was wrongly posted as Rs.670 to the Customer’s Account in the Sales Ledger.
  • Closing stock was overstated by Rs.9,000, being casting error in the schedule of inventory.
Required:

Pass rectification entries, prepare Suspense Account and find out the effect of correction on 1996 profit.

(20 marks)

7. The books of account of A Co. Ltd. for the year ending 31st December, 1996 were closed with a difference in books carried forward. The following errors were detected in 1997:

  • Return Outward Book was undercast by Rs.150.
  • Rs.1,500 being the total of the discount column on the credit side of the Cash Book was not posted in General Ledger.
  • Rs.6,000 being the cost of purchase of office furniture was entered in the Purchase Account.
  • A credit sale of Rs.760 was wrongly posted as Rs.670 to the Customer’s Account in the Sales Ledger.
  • Closing stock was overstated by Rs.9,000, being casting error in the schedule of inventory.
Required:

Pass rectification entries, prepare Suspense Account and find out the effect of correction on 1996 profit.

(20 marks)

8. The Statement of Affairs of Mr. Naveed as on 1st April, 1997 is given below:

Liabilities Rs. Assets Rs.
Sundry creditors 16,500 Cash 7,450
Accrued expenses 3,500 Sundry debtors 25,350
Capital 50,000 Stock 30,300
Furniture 6,900
70,000 70,000

During the year ended 31st March, 1998 his drawings amounted to Rs.15,000. He also withdrew goods worth Rs.600 for his personal use. On 1st July, 1997 Mr. Naveed transferred some of his household furniture to the business at a value of Rs.2,100. His assets and liabilities as on 31st March, 1998 were:

Liabilities Rs. Assets Rs.
Sundry creditors 18,600 Cash 6,850
Accrued expenses 4,300 Sundry debtors 36,900
Stock 40,320
Furniture 9,000
Prepaid rent 400

Furniture is to be depreciated @ 10% p.a. and a provision is to be created on debtors @ 5%, interest 5% to be allowed on capital as at the beginning of the year.

Required:

Ascertain the profit or loss for the year ended 31st March, 1998 and prepare the Statement of Affairs as on that date.

(20 marks)

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