EDUTRAIN COLLEGE DIPLOMA IN ACCOUNTING

FINANCIAL REPORTING
(CODE: FIN523) FINAL-TERM EXAMINATION SEMESTER AUG - DEC12 DURATION: 2 HOURS Read the instructions carefully before answering Do not open the question paper until you are told so ATTENTION 1. 2. 3. 4. Answer ALL questions in Section A. Answer ALL question from Section B Answer TWO (2) question from Section C Write down: NAME, IC NO./PASSPORT NO., STUDENT ID AND LECTURERS NAME IN THE SECTION PROVIDED. 5. Write your answer on the paper provided. 6. Use only BLACK or BLUE pen to write. 7. Attach this FRONT COVER together with the answer sheet. NAME IC NO./PASSPORT NO. STUDENT ID LECTURER SECTION A B C TOTAL : : : : MOHD AKRAM KHAN QUESTION 10 3 2 FULL MARKS 20 30 50 100 MARKS

This examination sheets contain_4_ pages including its front page.

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Section A Answer all questions. 1. The cost principle states that a. asset should be initially recorded at cost and adjusted when the market value changes. b. activities of an entity are to be kept separate and distinct from its owner. c. assets should be recorded at their cost. d. only transaction data capable of being expressed in terms of money included in the accounting records. 2. The time period assumption states that a. revenue should be recognized in the accounting period in which it is earned. b. expense should be matched with revenue. c. the economic life of business can be divided into artificial time periods. d. The fiscal year should corresponds with the calendar year. 3. The principle or assumption dictating that efforts (expenses) be matched with accomplishments (revenues) is the a. matching principle. b. cost assumption. c. periodicity principle. d. revenue recognition principle. 4. One of the following statements about the accruals basis of accounting is false. That statement is a. events that change a company financial statement are recorded in the periods in which the events occur. b. revenue is recognized in the period in which it is earned. c. this basis is in accord with generally accepted accounting principles. d. Revenue is recorded only when the cash is received and expense is recorded only when cash is paid. 5. Working Capital is calculated as a. current assets minus current liabilities. b. total assets minus total liabilities. c. long term liabilities minus current liabilities. d. both (b) and (c). 6. The department that should pay the payroll is the a. time keeping department. b. human resources department. c. payroll department. d. Treasurers department. 7. Generally Accepted Accounting Principles are a. a set of standard and rules that are recognized as a general guide for financial reporting. b. usually established by the Inland Revenue Service. c. the guidelines used to resolve ethical dilemmas.

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d. fundamental truths that can be derived from the laws of nature. 8. The full disclosure principle dictates that a. financial statements should disclose all assets at their cost. b. financial statements should disclose only those events that can be measured in dollars. c. financial statements should disclose all events and circumstances that would matter to users of financial statement. d. financial statement should not relied on unless an auditor has expressed an unqualified opinion on them. The accounting constraint that means that when in doubt the accountant should choose the method that will be least likely to overstate assets and income is called a. the matching principle b. materiality c. conservatism d. the monetary unit assumption

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10. The organization that issues International Accounting Standards is the a. Financial Accounting Standards Board (FASB). b. International Accounting Standards Board (IASB). c. International Auditing Standards Committee. d. None of the above. (20 marks) Section B Answer all questions 1. Explain the term Historical cost? (6 marks) 2. What is the definition of accounting cycle and names all the cycle? (12 marks) 3. Name and explain briefly 4 qualitative characteristics that financial information should have in order to be included in general-purpose financial reports? (12 marks)

Section C Answer TWO of the following questions 1. A machine is bought on 1 January 2005 for $1,000 and another one on 1 October 2006 for $1,200. The first machine is sold on 30 June 2007 for $720. The businesss financial year ends on 31 December. The machinery is to be depreciated at 10 per cent, using the straight line method. Machinery in existence at the end of each year is

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to be depreciated for a full year. No depreciation is to be charged on any machinery disposed of during the year. a. Prepare the machinery account, machinery disposal account, accumulated provision for depreciation account, profit and loss account (extracts) and balance sheet (extracts) for the year 2005, 2006 and 2007. b. Define the meaning of property, plant and equipment (PPE) under FRS 116 c. What is the purpose of depreciation and 5 methods that can be used to calculate depreciation? (25 marks)
2. Prepare a manufacturing account and income statement from the following balances of W. Miller for the year ending 31 Dec 2003. $ Inventory, 1 January 2003: Raw materials 25,400 Work-in-progress 31,100 Finished goods 23,260 Purchases: Raw materials 91,535 Carriage on raw materials 1,960 Direct labour 84,208 Office salaries 33,419 Rent 5,200 Office lighting and heating 4,420 Depreciation: Works machinery 10,200 Office equipment 2,300 Sales 318,622 Factory fuel and power 8,120 Rent is to be apportioned factory , Office , Inventory at 31 Dec 2003 was: Raw materials $28,900, Work-in-progress $24,600, Finished goods $28,840.

(25 marks)

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