MGT101 Financial Accounting Spring 2014 Past Final Papers August 2014

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Write down the five advantages of Limited Company.
Answer
1. It is legal entities created by law and hence has its own credit, good will and make equity etc.
2. It is a wide form of business and hence a formal approach for various partners/investors to
come and work for the same objectives in an organized form.
3. Liability limited to company assets only. Investors/partners do not personally liable for any loss
or in state of bankruptcy.
4. Being a legal entity, easy to get loans or gather funds from public (for public limited companies
only) or financial institutes.
5. Being a legal entity, it can enjoy more opportunities for mega projects and trade/operations
opportunities in international markets on its on behalf.

Question No:
ABC Company purchased goods of Rs.150,000 on credit from which goods of Rs.20,000 were defected
and returned. Company received 2% discount at the time of payment from the supplier.
Required:
What will be the amount of discount received by the company?
Also show the journal entries
Solution:
(A)
Discount Received= (150,000-20,000) x (2/100) = 2600
(B)
Particulars Dr. Cr.
Entry for Purchase
Goods 150,000
A/P 150,000

Entry for Return
A/P 20,000
Goods
Question No
If the capitals of the partners are fixed, Pass Journal Entries for the following:
 Drawings made by partner
 Excess drawn amount is returned by partner
 Profit distribution among partner

Partner’s Current A/c Dr.
Cash/Bank A/c Cr.

Cash/Bank Dr.
Partner’s Current A/c Cr.

Profit & Loss A/c Dr.
Partner’s Current A/c Cr.
Question No
ABC Company purchased goods of Rs.150,000 on credit from which goods of Rs.20,000 were defected
and returned. Company received 2% discount at the time of payment from the supplier.

Required:
• What will be the amount of discount
received by the company?
• Also show the journal entries

Purchases A/c 150,000
Creditor A/c 150,000

Goods are being purchased
Creditor A/c 20,000
Purchases A/c 20,000
Goods returned to supplier
Creditor A/c 130,000
Discount Received A/c 2600
Cash/Bank A/c 127400
Payment is being made to creditor and 2% discount is received.
Question
On 01-01-2007, the provision for doubtful debts a/c stood at Rs. 12,000 (credit balance). In 2007, the
bad debts are amounted to Rs. 10,000. The debtors on 31-12-2007 are amounted to Rs. 3, 20,000 and a
provision for doubtful debt to be maintained @ 5%.
Required:
Show Journal entries and also show how the items will appear in Profit and Loss account and Balance
sheet. (Show complete working where it is necessary)
Question
The accounting staff of ABC, Inc., has assembled the following information for the year ended December
31, 2007:
Cash and cash equivalents, Jan. 1 Rs.35,800
Cash and cash equivalents, Dec. 31 74,800
Cash paid to acquire plant assets 21,000
Proceeds from short-term borrowings 10,000
Loan made to borrowers 5,000
Collection on loans (excluding interest) 4,000
Interest and dividends received 27,000


Cash received from customers 795,000
Proceeds from sale of plant assets 9,000
Dividends paid 55,000
Cash paid to suppliers and employees 635,000
Interest paid 19,000
Income taxes paid 71,000
Using this information, prepare a statement of cash flows. Include a proper heading for the financial
statement, and classify the given information into the categories of operating, investing and financing
activities.

Question
Mr. Hassan is a partner in a partnership firm. His capital on July 1, 2001 was Rs. 400,000. He invested
further capital of Rs. 150,000 on March 01, 2002. Markup rate is @6%p.a. The financial year of such a
stth
business is from 1 July to 30 June.
th
Required: You are required to calculate his markup on Capital at the end of 30 June 2002.

a) Capital invested on july 1 2001 = 400,000
Markup rate on 400,000 = 6% of 40,000 = 24,000

b) Further capital introduced / invested = 150000 on March 1, 2002
Markup rate = 6% of 150000 = 9000 x 4/12 = 3000

Total mark up rate = a + b = 24000 + 3000 = 27000