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Accountancy and Auditing KP PMS Paper I 2008

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NWFP PUBLIC SERVICE COMMISSION, PESHAWAR

COMPETITIVE EXAMINATION FOR PROVINCIAL MANAGEMENT SERVICES, 2008

Accountancy and Auditing Paper-I

Time Allowed: 03 Hours
Max. Marks: 100

Note: Attempt any FIVE questions.

1. The following is the trial balance of ABC manufacturing limited as at 31st March 2008:

Particulars Dr. Cr.
Stock 1st April, 2007 7,50,000
Sales 35,00,000
Purchases 24,50,000
Production Wages 5,00,000
Discounts 70,000 30,000
Salaries 75,000
Rent 49,500
General Expenses 1,70,500
Profit & Loss Account, 1st April, 2007 1,50,300
Dividend Paid 90,000
Capital – 1,00,000 shares of Rs.10 each 10,00,000
Sundry Debtors and Creditors 3,75,000 1,75,000
Plant and Machinery 2,90,000
Cash in hand 1,62,000
General Reserve 1,55,000
Bad Debts 48,300

You are also to make provision in respect of following:

  1. Stock on 31st March 2008 was Rs.8,20,000
  2. Depreciate Machinery @ 15% per annum
  3. Provide 5% discount on debtors
  4. Allow 2.5% discount on creditors

Provide Managing Director’s commission @ 5% on the net profit before deducting his commission.

Required:
You are required to prepare Trading Account and Profit & Loss Account for the year ended 31st March, 2008 and the Balance Sheet at that date. (20 marks)

2. A purchased goods from B for Rs.10,000 on 1st June, 1990, and accepted a bill of exchange for 2 months drawn on him by B on the same date for the amount. B got the bill discounted at his bank at 18%. At the maturity the bill was dishonored. The noting charges amounting to Rs.10. B agreed to receive from A the sum of Rs.2,370 in cash and a promissory note for Rs.8,000 (in full settlement) at 3 months. On the due date, A met the note.

Required:
Ledger accounts in the books of both A and B. (20 marks)

3. On 1st September, 2007, Nawaz of Karachi dispatches on consignment to Khalid of Mardan 50 cases of woolen goods invoiced proforma at Rs.1,500 per case to be sold by the latter on the consignor’s account. A commission of 3% is payable to Khalid upon sales and all charges are borne by Nawaz.
Nawaz pays freight and insurance at Karachi amounting to Rs.5,100 and draws upon Khalid a bill for Rs.45,000 against dispatch.
Khalid sells for cash 10 cases at Rs.1,800 a case on 1st October 2007; 25 cases at Rs.2,025 on 10th October, and the balance on 30th October, 2007 at Rs.1,950 a case. He forwards an Account Sales to Nawaz on 2nd November, 2007 deducting the commission due and charges incurred, such charges amounting to Rs.4,050 for unloading, cartage, storage etc. and remits a draft for the balance.

Required:
Prepare Account Sales and show how the transactions would appear in the consignor’s books. (20 marks)

4. The following is the Receipts and Payments Account of the Peshawar Sports Club for the year ending 31st March, 2000:

Receipts Amount (Rs.) Payments Amount (Rs.)
To Balance, 1st April 1999 300 By Rent 5,200
To Entrance Fees 550 By Stationery 3,068
To Subscription, 1998-99 200 By Wages 5,330
To Subscription, 1999-2000 16,900 By Billiards Table 3,900
To Subscription, 2000-01 300 By Repairs 806
To Locker Rents 500 By Interest 1,500
To Special Subscription for Governor’s Party 3,450 By Balance, 31st March, 2000 2,396
22,200 22,200
To Balance B/d 2,396

Locker rents, Rs. 60 referred to 1998-99 and Rs.90 is still owing; Rent, Rs.1,300, pertained to 1998-99 and Rs.1,300 is still due; Stationery expenses etc. Rs.312, related to 1998-99, still owing Rs.364; Subscription unpaid for 1999-2000, Rs.468; Special subscriptions for Governor’s party outstanding Rs.550.

Required:
From the above information you are required to make out an Income and Expense Account of the club for the year ending 31st March 2000. (20 marks)

5. On 1st April, 2005, a firm purchases machinery worth Rs.1,50,000. On 1st October, 2007, it buys additional machinery worth Rs.30,000 and spends Rs.3,000 on its erection. The accounts are closed each year on 31st March. The firm uses an annual depreciation rate of 10%.

Required:
Show the machinery account for 5 years (starting from 1st April, 2005) under: (i) Straight Line Method, and (ii) Written Down Value Method. (20 marks)

6. The following Trial Balance was extracted from books of the Pakistan Life Insurance Co. Ltd. As on 31st March, 2008:

Particulars Dr. Cr.
Paid up Share Capital – 10,000 shares of Rs.10 each 1,00,000
Life Assurance Fund as on 1st April, 2007 20,72,300
Dividends paid 15,000
Bonus to Policyholders 31,500
Premium Received 1,61,500
Claims paid 1,97,000
Commission paid 9,300
Management expenses 32,300
Mortgages 4,92,200
Interest and Dividends received 1,12,700
Agents’ Balances 9,300
Freehold premises 40,000
Investments 23,05,000
Loan on Company’s policies 1,73,600
Cash on Deposit 27,000
Cash in hand 7,300
Surrenders 7,000
Total 33,46,500 33,46,500

Adjustments:

  1. Claims admitted but not paid: Rs. 9,300
  2. Management expenses due: Rs. 200
  3. Interest accrued: Rs. 19,300
  4. Premium outstanding: Rs. 12,000

Required:
Prepare Company’s Revenue Account for the year ended 31st March, 2008 (20 marks)

7. Black and White are partners, and on 31st March, 2007, the capital of the partnership was Rs.2,10,000 of which Rs.1,40,000 stood to the credit of Black and Rs.70,000 to the credit of White. Profits and losses were to be divided as to 2/3 and 1/3 respectively, drawings on account of profits being made in the same proportion.
On 31st March 2008, the following information was given to you as to the position of affairs:

  1. The total combined capital was Rs.2,91,000
  2. White had drawn Rs.3,000 in excess of the arranged proportion of drawings.
  3. White had to be credited with Rs.15,000 as special salary earned during 2007-08, as agreed by the partners.
  4. The partners were to be credited with 10% interest on capital.

Required:
Prepare a statement showing how the capital of Rs.2,91,000 is to be divided between Black and White. (20 marks)

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