Excel Pharmaceutical

Simulation of Accounting Cycle

By

Muhammad Naveed Zafar

Muhammad Ali Jinnah University Islamabad

1
 Preface

“Accounting Cycle” by the name of the report it can be understand that it is

all about the basic accounting concepts. Throughout the whole report we tried
to mention different important parts of Accounting Cycle which is a part of our
Project.

2
 Acknowledgement

At the first moment thanks to Almighty Allah for special blessings in completing the
report. We are indebted to a number of persons for their advises, suggestions, directions
and cooperation that has enabled us to prepare this project. Then we like to thank from
the core of our heart to MR. SALMAN SHEHZAD who helped us in every step about
our project by giving proper guidance, advice and inspiration.
Our last thank goes to our friends for endless help in collecting the information regarding
this project. Thanks all of you for providing help in developing the term paper.

3
 Dedication

This project is dedicated to our honorable course instructor Mr. Salman Shehzad for
providing us the opportunity for work on such project and it has been done successfully
because of his valuable and effective advises whenever needed. Moreover, our parents’
inspirations help us to complete this project in a successful and effective way.

4
 Table of contents

By.....................................................................................................................................1
Muhammad Ali Jinnah University Islamabad.....................................................................1
DATE TRANSACTIONS..............................................................................8
DATE.................................................................................................................................10
PARTICULARS................................................................................................................10
FOL....................................................................................................................................10
AMOUNT......................................................................................................................10
AMOUNT......................................................................................................................10
Rs...................................................................................................................................10
DATE.................................................................................................................................11
PARTICULARS................................................................................................................11
FOL....................................................................................................................................11
AMOUNT......................................................................................................................11
AMOUNT......................................................................................................................11
Rs...................................................................................................................................11
DATE.................................................................................................................................12
PARTICULARS................................................................................................................12
FOL....................................................................................................................................12
AMOUNT......................................................................................................................12
AMOUNT......................................................................................................................12
Rs...................................................................................................................................12
DATE.................................................................................................................................13
PARTICULARS................................................................................................................13
FOL....................................................................................................................................13
AMOUNT......................................................................................................................13
AMOUNT......................................................................................................................13
Rs...................................................................................................................................13
CASH BOOK.....................................................................................................................12
BALANCE C/F..................................................................................................................13
Rs...............................................................................................................................14
PURCHASE BOOK..........................................................................................................14
Rs...................................................................................................................................14
SALES RETURN BOOK..................................................................................................14
DATE.........................................................................................................................15
Rs...............................................................................................................................15
PURCHASE RETURN BOOK.........................................................................................15
Rs...................................................................................................................................15
PETTY CASH BOOK.......................................................................................................15
STAFF TEA...................................................................................................................15
GENERAL JOURNAL......................................................................................................16
CAPITAL ACCOUNT L (1).............................................................................................16
PARTICULARS................................................................................................................16

5
 LAND & BUILDING ACCOUNT L (2)......................................................................17
FURNITURE ACCOUNT L (3)....................................................................................17
STORAGE PLANT ACCOUNT L (4).........................................................................17
KOHINOOR FURNITURES L (5)...............................................................................18
UBL BANK ACCOUNT L (6)......................................................................................18
PURCHASES ACCOUNT L (7)...................................................................................18
CARRIAGE INWARD ACCOUNT L (8)....................................................................19
STATIONARY ACCOUNT L (9).................................................................................19
TRUCK ACCOUNT L (10)...........................................................................................19
COMPUTERS ACCOUNT L (11)................................................................................20
CASH ACCOUNT L (13).............................................................................................20
SALARIES ACCOUNT L (14).....................................................................................21
DECORATION EXPENSE ACCOUNT L (15)............................................................21
ADVERTISEMENT EXP ACCOUNT L (16)..............................................................21
RECTIFICATION.........................................................................................................34
RECTIFYING ENTRIES..............................................................................................34
ADJUSTMENTS...........................................................................................................38
ADJUSTING ENTRIES....................................................................................................38
Excel Pharmaceutical.........................................................................................................40
PARTICULARS................................................................................................................40
Rs...................................................................................................................................40
Rs.......................................................................................................................................42
Rs.......................................................................................................................................44
WORK SHEET..................................................................................................................50
ADJ T.BALANCE.............................................................................................................50
Closing Entries...................................................................................................................53
CRITICAL SUCCESS FACTOR......................................................................................57
Transactions...............................................................................................................57
Journal........................................................................................................................57

6
 Executive Summary

This project is on accounting cycle where we have included all about the
accounting matters of Excel Pharmaceutical. Our project consists of accounting
matters of a trading business which is related with the purchasing and selling of
medicine .This course helped us to implement our theoretical knowledge in our
project. We tried our level best to incorporate all the information and data that we
have learned throughout this semester. In this particular accounting period of two
month 1 Nov, 2006 to 31Dec, 2006, we followed all the steps of accounting cycle
including transactions, entries, subsidiary books that include three column cash
book, purchase book, sales book, return inwards book, return outwards book,
petty cash book and general journal. Moreover, we have also included ledgers,
trial balance, income, expenses, depreciation, income statement, and balance
sheet, rectification of errors, adjustments and finally worksheet.
Lastly, we have provided critical success factor at the end of this project to make our
Project more effective and successful one.

7
DATE TRANSACTIONS

Nov 1 Introduced capital of Rs.15 00,000 in the form of cash

Nov 1 Land & Building purchased for Rs210, 000
Nov 2 Furniture purchase from Kohinoor furniture of Rs. 35,000
Nov 4 Storage plant purchased for Rs. 180,000.
Nov 6 Cash deposited with bank for Rs. 150,000.
Nov 7 Loan taken from UBL bank of Rs. 400,000 at interest rate of 10%.
Nov 10 Medicine purchased for RS. 400,000 in cash.
Nov 10 Carriage inward paid of Rs. 5,000.
Nov 10 Stationary purchased of Rs. 3,000.
Nov 12 Bought a truck of Rs. 90,000 for providing delivery
Nov 12 Computers purchased from HP computers of Rs.25, 000
Rs 15,000 paid in cash and received 2% cash discount.
Nov 13 Goods purchased for Rs.6, 00,000 paying half amount in cash
receiving Rs. 10,000 discount and remaining in cheque
Nov 14 Insurance paid Rs. 2400
Nov 15 Paid Rs. 7,500 as white washing expenses.
Nov 20 Purchases made for Rs. 10,00, 000 out of which Rs. 600,000
paid through cheque and Rs. 200,000 through cash and received
2% cash and 3% trade discount from Pearl Pharmaceutical.
Nov 21 Paid decoration expenses of RS. 2,000.
Nov 23 Advertisement expenses of Rs. 25,000 paid
Nov 23 Sales made of Rs. 800,000 through cash.
Nov 24 Wages paid of Rs. 50,000.
Nov 25 Defective Medicine of Rs. 10,000 returned to PEARL.
Nov 27 Sales made to D. Watson for Rs. 700,000 and allowed 3% cash
discount.
Nov 27 Paid Rs. 2,000 for entertainment expenses.
Nov 28 Sales made for Rs. 750,000 to Zia Chemist traders on account.
Nov 29 Paid Rs. 2,000 as carriage inward.
Nov 30 Sales made of Rs. 150,000 to D. Watson on credit.
Nov 31 Paid Rs. 50,000 as salaries in cash

8
Dec 1 10% interest received on cash deposited with bank.
Dec 2 Repairs of Rs. 6800 made on storage plant in cash.
Dec 2 With drew cash from bank for office use of Rs. 80,000.
Dec 4 Purchases made of Rs. 300,000 from Abott medicines.
Dec 4 Carriage paid of Rs. 3,000 to deliver goods.
Dec 6 Sales made of Rs. 700,000 and received a cheque of Rs.
700,000 after deduction of 2% cash discount.
Dec 7 Paid 10% interest on loan of Rs. 40,000 taken from bank.
Dec 12 Paid Rs. 20,000 as training expenses of employees.
Dec 12 With drew cash of Rs. 35,000 for personal use.
Dec 14 Paid Rs. 2,000 as medical expenses to employees.
Dec 16 Sales made of Rs. 4, 50,000 through cheque.
Dec18 Sales made to Hassan Medicos of Rs. 800,000.
Dec 20 Commission paid to agent of Rs. 15,000.
Dec 21 Charity paid to Shaukat Khanum Trust of Rs. 8,000.
Dec 23 Sales made of Rs. 100,000 in cash and allowed discount 2%.
Dec 24 Purchased medicine of Rs.150, 000 from Prix Pharmaceutical.
Dec 24 Rent received from renting out godowns of Rs. 30,000.
Dec 25 Electricity bill of Rs 3,000 paid in cash.
Dec 26 Telephone bills paid of Rs.3, 000.
Dec 26 Gas bills paid of Rs. 2,000 through cheque.
Dec 27 Bank charges paid of Rs. 8, 00 through cheque.
Dec 28 Goods returned by Hassan Medicos of Rs. 15,000.
Dec 28 Goods returned to Prix Pharmaceutical Rs. 5,000
Dec 28 Paid salaries of Rs. 50,000 through cheque.
Dec 28 Goods returned by D. Watson of Rs. 15,000.
Dec 28 Cash Received from Hassan Medicos of Rs. 450,000.
Dec 28 Cash paid to Prix Pharmaceutical of Rs. 50,000.

9
 JOURNAL
DATE AMOUNT AMOUNT
PARTICULARS FOL Rs Rs
Cash a\c 1500,000
Nov To capital a\c 1500,000
1 (Capital introduced)

Nov Land and Building a\c 210,000

1 To cash a\c 210,000
(Land purchased by cash)
Nov Furniture a\c 35,000
2 To Kohinoor furniture a\c 35,000
(Credit purchase of furniture)
Nov Bank a\c 150,000
6 To cash a\c 150,000
(Cash deposited into bank)
Nov Cash a\c 400,000
7 To UBL Bank a\c 400,000
(Loan taken from bank)
Nov Purchases a\c 200,000
10 To cash a\c 200,000
(Cash purchases made)
Nov Carriage inwards a\c 5,000
10 To cash a\c 5,000
(Carriage inward paid)
Nov Stationery a\c 3,000
10 To cash a\c 3,000
(Stationary purchased)
Nov Truck a\c 90,000
12 To cash a\c 90,000

(truck purchased against cash and

Discount received)
Computers a\c 25,000
To cash a\c 15,000
Nov To HP computers a\c 10,000
12
(Computers purchased partial on cash and
partial on credit from Hp computers)

10
 AMOUNT AMOUNT
DATE PARTICULARS FOL Rs Rs

Purchases a\c 600,000

Nov To cash a\c 290,000
13 To discount allowed a\c 10,000
To bank a\c 300,000
(Purchases maid partial on cash and partial
on credit)
Nov Insurances a\c 2400
14 To cash a\c 2400
(Insurance purchased against cash)
Nov Purchases a\c 970,000
20 To bank a\c 588,000
To cash a\c 196,000
To pearl pharmaceutical a\c 170,000
To discount a\c 16,000
(Purchases made partially against cash & bank and
partially on credit from Mr. Ali)
Nov Advertisement a\c 25,000
23 To cash a\c 25,000
(Advertisement expenses paid)
Nov Cash a\c 800,000
23 To sales a\c 800,000
(Cash sales made)
Nov Wages a\c 50,000
24 To cash a\c 50,000
(Wages paid)
Pearl Pharmaceutical a\c
Nov To purchase return a\c 100,000
25 (Defective Medicine returned to Pearl 100,000
Pharmaceutical)
Nov Cash a\c 679,000
27 Discount allowed a\c 21,000
To sales a\c 700,000
(Cash sales made and discount allowed)

11
DAT AMOUNT AMOUNT
E PARTICULARS FOL Rs Rs
Dec Bank a\c 450,000
16 To sales a\c 450,000
(Sales made against cheque)
Dec Hassan Medicos a\c 800,000
18 To sales a\c 800,000
(Credit sales made to Hassan Medicos)
Dec Commission a\c 15,000
20 To cash a\c 15,000
(Commission paid)
Dec Charity a\c 8,000
21 To cash a\c 8,000
(Cash given as charity)
Cash a\c 98,000
Dec Discount allowed a/c 2000
23 To sales a\c 100,000
(Cash sales made)
Dec Purchases a\c 150,000
24 To Paramount pharmaceuticals a\c 150,000
(Credit purchases made)
Dec Gas bills a\c 2,000
26 To bank a\c 2,000
(Gas bill paid)
Dec Bank a\c 800
27 To bank charges a\c 800
(Bank charges paid)
Dec Sales return a\c 15,000
28 To Hassan Medicos a\c 15,000
(Goods return by Hassan Medicos)
Dec Prix Pharmaceutical a\c 5,000
28 To Purchase Return a\c 5,000
(goods return to Prix Pharmaceutical)
Dec Disposal a\c 90,000
28 To Truck a\c 90,000
(Disposal of van)
Dec Cash a\c 65,000
28 To disposal a\c 65,000
(Cash received from disposal of truck)

12
DATE PARTICULARS FOL AMOUNT AMOUNT
Rs Rs
Dec Salaries a\c 50,000
28 To Bank a\c 50,000
(salaries paid )
Dec Sales return a\c 15000
28 To D. Watson a\c 15000
(Credit sales made to D. Watson)
Dec Cash a\c 450,000
28 To Hassan Medicos a\c 450,000
(Cash received from Hassan Medicos)
Dec Prix Pharmaceutical a\c
28 To cash a\c 50,000
(Cash paid to Prix Pharmaceutical) 50,000

Dec 28 Petty Cash Exp 2000

To Cash a\c 2000
(Cash paid to petty cashier)

13
 CASH BOOK

DATE FOL PARTICULARS AMOUNT Rs. DATE FOL PARTICULAR AMOUNT Rs.
CASH BANK DIS CASH BANK DIS
2006 2006

Nov 1 L01 Capital a/c 1,500,000 Nov 1 L02 Land building a/c 210,000
Nov 6 C Cash a/c 150,000 Nov 4 L04 Storage plant a/c 180,000
Nov 7 L06 UBL bank a/c 400,000 Nov 6 C Bank a/c 150,000
Nov 23 L17 Sales a/c 800,000 Nov 10 L07 Purchases a/c 400,000
Nov 27 L17 Sales a/c 679,000 21,000 Nov 10 L08 Carriage inward a/c 5,000
Dec 1 L24 Interest a/c 15,000 Nov 10 L09 Stationary 3,000
Dec 2 C Bank a/c 80,000 Nov 12 L10 Truck a/c 90,000
Dec 6 L17 Sales a/c 686,000 14,000 Nov 13 L07 Purchases /c 300,000 290,000 10,000
Dec 16 L17 Sales a/c 450,000 Nov 14 L38 Insurance a/c 2,400
Dec 23 L17 Sales a/c 98,000 2,000 Nov 14 L43 White Washing a/c 7,500
Dec 24 L34 Rent a/c 30,000 Nov 15 L07 Purchases a/c 196,000 588,000 16,000
Dec 27 L37 Bank charges a/c 800 Nov 20 L15 Decoration Exp a/c 2,000
Dec 28 L30 Hassan Medicos a/c 450,000 Nov 21 L16 Advertisement a/c 25,000
Nov 23 L18 Wages a/c 50,000
Nov 24 L20 Entertainment a/c 2,000
Nov 27 L08 Carriage inward 2,000
Nov 29 L25 Repairs a/c 6,800
Dec 2 C Cash a/c 80,000
Dec 2 L22 Carriage outward 3,000
Dec 7 L24 Interest a/c 40,000
Dec 12 L27 Training a/c 20,000
Dec 12 L28 Drawings a/c 35,000

12
 Dec 14 L29 Medical exp a/c 2,000
Dec 20 L31 Commission a/c 15,000
Dec 21 L32 Charity a/c 8,000
Dec 25 L35 Electricity bill a/c 3,000
Dec 26 L36 Telephone bill a/c 3,000
Dec 26 L42 Gas bill a/c 2,000
Dec 28 L14 Salaries a/c 50,000
Dec 28 L26 Prix Pharmaceutical a/c 50,000
Dec 28 L41 Petty cash a/c 1,000

BALANCE C/F 2,240,300 276,800

4,052,000 1,286,80037,000 4,052,000 1,286,800 26,000

13
 SALES BOOK

DATE INV NO DEBTOR (BUYER OR CUSTOMER) FOL AMOUNT

2006 Rs
Nov 28 Zia chemists a/c L 21 750,000
Dec 18 Hassan Medicos a/c L 30 800,000
Dec 28 D. Watson/c L 23 150,000

Total credit sales 1,700,000

PURCHASE BOOK

THEIR INV
DATE NO OUR REF NO SUPPLIERS NAME FOLIO AMOUNT
2006 Rs

Nov 20 Pearl Pharmaceutical a/c L 19 170,000

Dec 4 Abott Medicine a/c L 33 300,000
Dec 24 Prix Pharmaceutical a/c L 26 150,000

Total credit purchases 620,000

SALES RETURN BOOK

14
DATE CR.NOTE DEBTOR (BUYER OR CUSTOMER) FOL Rs
AMOUNT
2006

Dec 28 D. Watson L23 15,000

Dec 28 Hassan Medicos L30 15,000

Total sales returns 30,000

PURCHASE RETURN BOOK

THEIR CR OUR CREDIT

DATE NOTE NO NOTE NO SUPPLIERS NAME FOLIO AMOUNT
2006 Rs

Nov 25 Pearl Pharmaceutical L 19 10,000

Dec 28 Prix Pharmaceutical L26 5,000

Total purchase returns 15,000

PETTY CASH BOOK

DATE PARTICULARS PCV NO RECEIPTS PAYMENT ANALYSIS OF PAYMENT

STAFF TEA STATIONARY
2006 Rs Rs

1,000

15
 Mr. Ali 300 300
Mr. Naveed 300 300
Miss. Khalida 400 400

Totals 1,000 1,000 300 700

1,000 1,000

GENERAL JOURNAL

DATE PARTICULARS FOL AMOUNT AMOUNT

Rs Rs

Nov 2 Furniture a\c 35,000

Kohinoor furniture a\c 35,000
(credit purchase of furniture)

Nov 12 Computer a\c 25,000

Cash a\c 15,000
HP computer a\c 10,000
(computer purchase partial on cash and partial on credit)

CAPITAL ACCOUNT L (1)

DATE PARTICULARS FOL AMOUNT DATE PARTICULARS FOL AMOUNT

Rs Rs
2006 2006
Dec 28 Balance c/d 1,500,000 Nov 1 Cash a/c 1,500,000
Nov 2

16
 1,500,000 1,500,000

LAND & BUILDING ACCOUNT L (2)

DATE PARTICULARS FOL AMOUNT DATE PARTICULARS FOL AMOUNT

Rs Rs
2006 2006
Nov 1 Cash a/c 210,000 Dec 28 Balance c/d 210,000

210,000 210,000

FURNITURE ACCOUNT L (3)

DATE PARTICULARS FOL AMOUNT DATE PARTICULARS FOL AMOUNT

Rs Rs
2006 2006
Nov 2 Kohinoor furniture’s a/c 35,000 Dec 28 Balance c/d 35,000

35,000 35,000

STORAGE PLANT ACCOUNT L (4)

DATE PARTICULARS FOL AMOUNT DATE PARTICULARS FOL AMOUNT

Rs Rs
2006 2006
Dec 28 Balance c/d 180,000
Nov 4 Cash a/c 180,000

180,000 180,000

17
 KOHINOOR FURNITURES L (5)

DATE PARTICULARS FOL AMOUNT DATE PARTICULARS FOL AMOUNT

Rs Rs
2006 2006
Dec 28 Balance c/d 35,000 Nov 3 Furniture a/c 35,000

35,000 35,000

UBL BANK ACCOUNT L (6)

DATE PARTICULARS FOL AMOUNT DATE PARTICULARS FOL AMOUNT

Rs Rs
2006 2006
Dec 28 Balance c/d 4,00,000 Nov 7 Cash a/c 4,00,000

400,000 400,000

PURCHASES ACCOUNT L (7)

DATE PARTICULARS FOL AMOUNT DATE PARTICULARS FOL AMOUNT

2006 Rs. Rs
Balance b/f P.B 635,000 2006
Nov 10 Cash a/c 400,000
Nov 13 Cash a/c 290,000
Bank a/c 300,000 Balance c/d 2,435,000
Discount allowed 10,000
Nov 20 Bank a/c 588,000
Cash a/c 196,000
Discount received a/c 16,000
2,435,000 2,435,000
Dec 28 Balance b/f 2,435,000 Dec 28 Suspense a/c 15,000
Dec 28 Balance c/d 2,420,000
2,435,000 2,435,000

18
 CARRIAGE INWARD ACCOUNT L (8)

DATE PARTICULARS FOL AMOUNT DATE PARTICULARS FOL AMOUNT

Rs Rs
2006 2006
Nov 10 Cash a/c 5,000 Dec 28 Balance c/d 7,000
Nov 29 Cash a/c 2,000

7,000 7,000
Balance b\d 7,000 Balance c/d 9,000
Cash a\c 2,000
9,000 9,000

STATIONARY ACCOUNT L (9)

DATE PARTICULARS FOL AMOUNT DATE PARTICULARS FOL AMOUNT

Rs Rs
2006 2006
Dec 28 Cash a/c 3,000 Dec 28 Balance c/d 3,000

3,000 3,000

TRUCK ACCOUNT L (10)

DATE PARTICULARS FOL AMOUNT DATE PARTICULARS FOL AMOUNT

19
 Rs Rs
2006 2006
Nov 12 Cash a/c 90,000 Dec 28 Balance c/d 90,000

90,000 90,000

COMPUTERS ACCOUNT L (11)

DATE PARTICULARS FOL AMOUNT DATE PARTICULARS FOL AMOUNT

Rs Rs
2006 2006
Nov 12 Cash a/c 15,000 Dec 28 Balance c/d 25,000
HP computers a/c 10,000

25,000 25,000

HP COMPUTERS ACCOUNT L (12)

DATE PARTICULARS FOL AMOUNT DATE PARTICULARS FOL AMOUNT

Rs Rs
2006 2006
Dec 28 Balance c/d 10,000 Nov 12 Computers a/c 10,000

10,000 10,000

CASH ACCOUNT L (13)

DATE PARTICULARS FOL AMOUNT DATE PARTICULARS FOL AMOUNT

Rs Rs
2006 2006
Balance b/f 2,240,300 Nov 12 Computers a/c 15,000
Dec 28 Balance c/d 2,225,300

20
 2,240,300 2,240,300

Balance b\d 2,225,300 Carriage inward 2,000

Balance c/d 2,223,300

2,225,300 2,225,300

SALARIES ACCOUNT L (14)

DATE PARTICULARS FOL AMOUNT DATE PARTICULARS FOL AMOUNT

Rs Rs
2006 2006
Dec 28 Balance c/d 50,000
Dec 28 Bank a/c 50,000

50,000 50,000

DECORATION EXPENSE ACCOUNT L (15)

DATE PARTICULARS FOL AMOUNT DATE PARTICULARS FOL AMOUNT

Rs Rs
2006 2006
Nov 21 Cash a/c 2,000 Dec 28 Balance c/d 2,000

2,000 2,000

ADVERTISEMENT EXP ACCOUNT L (16)

DATE PARTICULARS FOL AMOUNT DATE PARTICULARS FOL AMOUNT

Rs Rs
2006 2006
Nov23 Cash a/c 25,000 Dec 28 Balance c/d 25,000

21
 25,000 25,000

SALES ACCOUNT L (17)

DATE PARTICULARS FOL AMOUNT DATE PARTICULARS FOL AMOUNT

Rs Rs
2006 2006
Balance c/d 4,440,000 Balance b/f 1,690,000
Nov 23 Cash a/c 800,000
Nov 27 Cash a/c 679,000
Discount allowed a/c 21,000
Dec 6 Bank a/c 686,000
Discount allowed a/c 14,000
Dec 16 Bank a/c 450,000
Dec 23 Cash a/c 98,000
Discount 2,000
4,440,000 4,440,000
Dec 28 Balance b/f 4,440,000
Dec 28 Balance c/d 4,450,000 Dec 28 Suspense a/c 10,000

4,450,000 4,450,000

WAGES ACCOUNT L (18)

DATE PARTICULARS FOL AMOUNT DATE PARTICULARS FOL AMOUNT

22
 Rs Rs
2006 2006
Nov 24 Cash a/c 50,000 Dec 28 Balance a/c 50,000

50,000 50,000

PEARL PHARMACEUTICAL ACCOUNT L (19)

DATE PARTICULARS FOL AMOUNT DATE PARTICULARS FOL AMOUNT

Rs Rs
2006 2006
Nov 25 Purchase return a/c 10,000 Nov 20 Purchases a/c 170,000
Dec 28 Balance c/d 160,000

170,000 170,000

ENTERTAINMENT EXP ACCOUNT L (20)

DATE PARTICULARS FOL AMOUNT DATE PARTICULARS FOL AMOUNT

Rs Rs
2006 2006
Nov 27 Cash a/c 2,000 Dec 28 Balance c/d 2,000

2,000 2,000

ZIA CHEMISTS ACCOUNT L (21)

23
DATE PARTICULARS FOL AMOUNT DATE PARTICULARS FOL AMOUNT
Rs Rs
2006 2006
Nov 28 Sales a/c 752,000 Dec 28 Balance c/d 752,000

752,000 752,000

Dec 28 Balance b/d 752,000 Dec 28 Suspense a/c 2,000

Dec 28 Balance c/d 750,000

752,000 752,000

CARRIAGE OUTWARD ACCOUNT L (22)

DATE PARTICULARS FOL AMOUNT DATE PARTICULARS FOL AMOUNT

Rs Rs
2006 2006
Dec 4 Suspense a/c 3,000 Dec 28 Balance c/d 3,000

3,000 3,000

D WATSON ACCOUNT L (23)

DATE PARTICULARS FOL AMOUNT DATE PARTICULARS FOL AMOUNT

Rs Rs
2006 2006
Dec28 Sales a/c 150,000 Nov30 Sales return a/c 15,000
Balance c/d 135,000
150,000 150,000
Dec 28 Balance b/f Dec 28 Suspense a/c
Dec 28 Balance c/d

INTEREST ACCOUNT L (24)

24
DATE PARTICULARS FOL AMOUNT DATE PARTICULARS FOL AMOUNT
Rs Rs
2006 2006
Dec 7 Cash a/c 40,000 Dec1 Cash a/c 15,000
Dec 28 Balance c/d 25,000

40,000 40,000

REPAIRS ACCOUNT L (25)

DATE PARTICULARS FOL AMOUNT DATE PARTICULARS FOL AMOUNT

Rs Rs
2006 2006
Dec 2 Cash a/c 6,800 Dec 28 Balance c/d 6,800

6,800 6,800

PRIX PHARMACEUTICAL ACCOUNT L (26)

DATE PARTICULARS FOL AMOUNT DATE PARTICULARS FOL AMOUNT

Rs Rs
2006 2006
Dec 28 Cash 50,000 Dec 24 Purchases a/c 150.,000
Purchase return a/c 5,000
Balance c/d 95,000

150,000 150,000

TRAINING EXP ACCOUNT L (27)

DATE PARTICULARS FOL AMOUNT DATE PARTICULARS FOL AMOUNT

Rs Rs
2006 2006

25
Dec 12 Cash a/c 20,000 Dec 28 Balance c/d 20,000

20,000 20,000

DRAWINGS ACCOUNT L (28)

DATE PARTICULARS FOL AMOUNT DATE PARTICULARS FOL AMOUNT

Rs Rs
2006 2006
Dec 12 Cash a/c 35,000 Dec 28 Balance c/d 35,000

35,000 35,000

MEDICAL EXP ACCOUNT L (29)

DATE PARTICULARS FOL AMOUNT DATE PARTICULARS FOL AMOUNT

Rs Rs
2006 2006
Dec 14 Cash a/c 2,000 Dec 28 Balance c/d 2,000

2,000 2,000

HASSAN MEDICOSES L (30)

DATE PARTICULARS FOL AMOUNT DATE PARTICULARS FOL AMOUNT

Rs Rs
2006 2006
Dec 18 Sales a/c 800,000 Dec 28 Sales Return 15,000
Cash a/c 450,000
Balance c/d 335,000

26
 800,000 800,000

COMMISSION EXP ACCOUNT L (31)

DATE PARTICULARS FOL AMOUNT DATE PARTICULARS FOL AMOUNT

Rs Rs
2006 2006
Dec 20 Cash a/c 15,000 Dec 28 Balance c/d 15,000

15,000 15,000

CHARITY ACCOUNT L (32)

DATE PARTICULARS FOL AMOUNT DATE PARTICULARS FOL AMOUNT

Rs Rs
2006 2006
Dec 21 Cash a/c 800 Dec 28 Balance c/d 800

800 800
Dec 28 Balance b/d 800
Dec 28 Suspense a/c 7,200 Dec 28 Balance c/d 8,000

8000 8,000

ABOTT MEDICINE ACCOUNT L (33)

DATE PARTICULARS FOL AMOUNT DATE PARTICULARS FOL AMOUNT

Rs Rs
2006 2006
Dec 28 Balance c/d 300,000 Dec 4 Purchases a/c 300,000

300,000 300,000

27
 RENT ACCOUNT L (34)

DATE PARTICULARS FOL AMOUNT DATE PARTICULARS FOL AMOUNT

Rs Rs
2006 2006
Dec 28 Balance c/d 30,000 Dec 24 Cash a/c 30,000

30,000 30,000

ELECTRICITY BILL ACCOUNT L (35)

DATE PARTICULARS FOL AMOUNT DATE PARTICULARS FOL AMOUNT

Rs Rs
2006 2006
Dec 25 Cash a/c 3,000 Dec 28 Balance a/c 3,000

3,000 3,000

TELEPHONE BILL ACCOUNT L (36)

DATE PARTICULARS FOL AMOUNT DATE PARTICULARS FOL AMOUNT

Rs Rs
2006
Dec 26 Cash a/c 3,000 Dec 28 Balance a/c 3,000

3,000 3,000

28
 BANK CHARGES L (37)

DATE PARTICULARS FOL AMOUNT DATE PARTICULARS FOL AMOUNT

Rs Rs
2006 2006
Dec 28 Balance c/d 800 Dec 27 Bank a/c 800

800 800

Dec 27 Bank a/c 1,600 Balance b/d 800

Balance c/d 800

1,600 1,600

INSURANCE PREMIUM ACCOUNT L (38)

DATE PARTICULARS FOL AMOUNT DATE PARTICULARS FOL AMOUNT

Rs Rs
2006 2006
Dec 28 Cash a/c 2,400 Dec 28 Balance c/d 2,400

2,400 2,400

PURCHASE RETURN ACCOUNT L (39)

DATE PARTICULARS FOL AMOUNT DATE PARTICULARS FOL AMOUNT

Rs Rs
2006 2006
Dec 28 Balance c/d 15,000 Dec 28 Balance b/f 15,000

15,000 15,000

SALES RETURN L (40)

29
DATE PARTICULARS FOL AMOUNT DATE PARTICULARS FOL AMOUNT
Rs Rs
2006 2006
Dec28 Balance b/f 30,500 Dec 28 Balance c/d 30,000

30,500 30,500
Dec 28 Balance c/d 30,500 Dec 28 Suspense a/c 500
Dec 28 Balance c/d 30,000

30,500 30,500

PETTY EXPENSE ACCOUNT L (41)

DATE PARTICULARS FOL AMOUNT DATE PARTICULARS FOL AMOUNT

Rs Rs
2006 2006
Dec 28 Cash a/c 1,000
Dec 28 Balance c/d 1,000

1,000 1,000

GASS BILLS ACCOUNT L (42)

AMOUN
DATE PARTICULARS FOL T DATE PARTICULARS FOL AMOUNT
Rs Rs
2006 2006
Dec 26 Cash a/c 2,000 Dec 28 Balance c/d 2,000

2,000 2,000
WHITE WASHING EXPENSES L (43)

30
 AMOUN
DATE PARTICULARS FOL T DATE PARTICULARS FOL AMOUNT
Rs Rs
2006 2006
Nov 28 cash a/c 7,500 Dec 28 Balance c/d 7,500

7,500 7,500

DISCOUNT ALLOWED L (44)

AMOUN
DATE PARTICULARS FOL T DATE PARTICULARS FOL AMOUNT
Rs Rs
2006 2006

Dec 28 Balance b/f C.B 37,000 Balance c/d 37,000

37,000 37,000

DISCOUNT RECEIVED L (45)

AMOUN
DATE PARTICULARS FOL T DATE PARTICULARS FOL AMOUNT
Rs Rs
2006 2006

Dec 28 Balance b/f C.B 26,000 Balance c/d 26,000

26,000 26,000
BANK L (46)

DATE PARTICULARS FOL AMOUNT DATE PARTICULARS FOL AMOUNT

Rs Rs

31
2006 2006
Dec 28 Balance b/d 276,8 00 Dec 28 Bank a/c 1,600
Balance c/d 275,200

276,8 00 276,8 00

SUSPENCE L (47)

DATE PARTICULARS FOL AMOUNT DATE PARTICULARS FOL AMOUNT

Rs Rs
2006 2006
Dec 28 Sales a/c 10,000 Dec 28 Balance c\d 17,300
Purchases a\c 15,000 Dec 28 Charity a\c 7,200
Sales return a\c 500 Carriage a\c 3,000
Zia Chemist a\c 2,000

27,500 27,500

32
 Trial Balance
Particulars Folio Debit (Rs.) Credit (Rs.)
Cash L13 2,225,300
Bank L46 276,000
Capitals L01 1,500,000
Land & building L02 210,000
Furniture L03 35,000
Storage plant L04 180,000
Kohinoor furniture L05 35,000
UBL bank L06 400,000
Purchases L07 2,435,000
Carriage inward L08 7,000
Stationary L09 3,000
Truck L10 90,000
Computers L11 25,000
HP computers L12 10,000
Salaries L14 50,000
Decoration Exp L15 2,000
Advertising Exp L16 25,000
Sales L17 4,440,000
Wages L18 50,000
Pearl Pharmaceutical L19 160,000
Entertainment L20 2,000
Zia Chemists L21 752,000
Carriage outward L22
D Watson L23 135,000
Interest L24 25,000
Repairs L25 6,800
Prix Pharmaceutical L26 95,000
Training L27 20,000
Drawing L28 35,000
Medical Exp L29 2,000
Hassan Medicos L30 335,000
Commission Exp L31 15,000
Charity L32 800
Abott medicine L33 300,000
Rent L34 30,000
Electricity bill L35 3,000
Bank charges L37 800
Insurance L38 2,400
Purchases return L39 15,000
Sales return L40 30,500
Gas bill L42 2,000
White wash L43 7,500
Discount allowed L44 37,000
Discount received L45 26,000
Telephone L36 3,000
Suspense L47 17,300
Petty cash exp. L41 1,000
Totals 7,028,300 7,028,300

33
 RECTIFICATION

Charity paid Rs.8, 000 in cash but recorded as 800 in charity account but correctly
recorded in cash book.
Carriage outward Rs. 3,000 not recorded in book but correctly recorded in cash book.
sales book is under cost by Rs. 10,000
Purchase book is over cost by Rs. 15,000.
return inward book is over cost by Rs. 500
Goods sold to Zia Chemist Rs. 750,000 but recorded as 752,000 in Zia account but
correctly recorded in sales book.
Entry of bank charges expense was completely reversed.
Carriage inward Rs. 2,000 is not recorded in books.

RECTIFYING ENTRIES

PARTICULARS Rs. Rs.

Charity a\c 7,200
Suspense a\c 7,200
(charity expense not recorded in account now rectified)

Carriage outward a\c 3,000

Suspense a\c 3,000
(carriage outward not recorded in book now rectified)

Suspense a\c 10,000

Sales 10,000
(sales book under costed now rectified)

Suspense a\c 15,000

Purchases a\c 15,000
(purchase book was over costed now rectified)

Suspense a\c 500

Sales inward a\c 500
(return inward book was over cost now rectified)

PARTICULARS Rs. Rs.

34
Suspense a\c 2,000
Zia Chemist a\c 2,000
(goods sold to Zia Chemist Rs.750,000 but recorded
752,000 in his account)

Bank charges a\c 1,600

Bank a\c 1,600
(bank charges paid but entry was completely reversed
now rectified)

Carriage inward a\c 2,000

Cash a\c 2,000
(carriage inward paid but not recorded in the books)

35
36
 Adjusted Trial Balance

Particulars Folio Debit (Rs.) Credit (Rs.)

Cash L13 2,223,300
Bank L46 275,200
Capitals L01 1,500,000
Land & building L02 210,000
Furniture L03 35,000
Storage plant L04 180,000
Kohinoor furniture L05 35,000
UBL bank L06 400,000
Purchases L07 2,420,000
Carriage inward L08 9,000
Stationary L09 3,000
Truck L10 90,000
Computers L11 25,000
HP computers L12 10,000
Salaries L14 50,000
Decoration Exp L15 2,000
Advertising Exp L16 25,000
Sales L17 4,450,000
Wages L18 50,000
Pearl Pharmaceutical L19 160,000
Entertainment L20 2,000
Zia Chemists L21 750,000
Carriage outward L22 3,000
D Watson L23 135,000
Interest L24 25,000
Repairs L25 6,800
Prix Pharmaceutical L26 95,000
Training L27 20,000
Drawing L28 35,000
Medical Exp L29 2,000
Hassan Medicos L30 335,000
Commission Exp L31 15,000
Charity L32 8,000
Abott medicine L33 300,000
Rent L34 30,000
Electricity bill L35 3,000
Bank charges L37 800
Insurance L38 2,400
Purchases return L39 15,000
Sales return L40 30,000
Gas bill L42 2,000
White wash L43 7,500
Discount allowed L44 37,000
Discount received L45 26,000
Telephone L36 3,000
Petty cash exp. L41 1,000
Totals 7,021,000 7,021,000
37
 ADJUSTMENTS
Depreciation provided on storage plant 10% P.a on straight line method
15%depreciation provided on computers on straight-line method.
Value of building at the end of accounting period is 190,000.
10 % Dep on furniture on reducing balance method.
Prepaid insurance of Rs. 600.
Provision for doubtful debts 2.5%
Rent received in advance Rs.5, 000.
Salaries outstanding Rs.8, 000.
Provide depreciation on truck on sum of the year’s digits methods
(Truck is expected to be used for 5 years and its scrap value is Rs. 10,000 )
Closing stock at the end is valued Rs. 4,50,000

ADJUSTING ENTRIES

DATE PARTICULARS AMOUNT AMOUNT

Rs Rs
2006
Nov 31 Depreciation on Storage Plant a/c 1,500
To provisions for depreciation/c 1,500
(10% dep provided on Storage Plant at straight
line)

Dec 28 Depreciation on Storage Plant a/c 1,500

To provisions for depreciation/c 1,500
(10% dep provided on Storage Plant at
straight line)

Nov 12 Depreciation on computers a/c 312.5

To provisions on depreciation/c 312.5
(15% depreciation provided on computers at
straight line )

Dec 28 Depreciation on computers a/c 312.5

To provisions on depreciation/c 312.5
(15% depreciation provided on computers)

38
DATE PARTICULARS AMOUNT AMOUNT
2006 Rs Rs
Dec 28 Depreciation on land & Building a/c 20,000
To provision on depreciation a/c 20,000
(Depreciation provided on land &
Building on revaluation balance method)

Dec 28 Depreciation on furniture a/c 291

To provision on depreciation a/c 291
10% dep on furniture on reducing balance
method)

Dec 28 Depreciation on furniture a/c 289

To provision on depreciation a/c 289
10% dep on furniture on reducing balance

Dec 28 Prepaid insurance a/c 600

To insurance a/c 600
(Insurance paid in advance)

Dec 28 Rent a/c 5,000

To rent received in advance a/c 5,000
(Rent was received in advance)

Dec 28 Salaries a/c 8,000

To salaries outstanding a/c 8,000
(Salaries due at the end)

Dec 28 Provision for doubtful debts a/c 30,500

To debtors a/c 30,500
(2.5%provisions provided on debtors)

2006
Nov 31 Depreciation on truck a/c 2,222
To provision on depreciation a/c 2,222
10% dep on truck on sum of the year digit balance method

Dec 28 Depreciation on truck a/c 2,222

To provision on depreciation a/c 2,222
10% dep on truck on sum of the year digit balance method

39
 - 40 -

EXCEL PHARMACEUTICAL
TRADING PRFIT & LOSS A/C
FOR THE PERIOD ENDED 29 DEC 2006
PARTICULARS Rs. Rs. PARTICULARS Rs. Rs.

Purchases 2,420,000 Sales 4,450,327

Less: Purchase return (15,000) 2,405,000Less: Sales Return (30,000) 4,420,000

Carriage inwards 9,000Closing Stock 450,000

Wages 50,000
Gross Profit c/f 2,406,000

4,870,000 4,870,000
Stationary 3,000
Salaries 50,000 Gross Profit b/f 2,406,000
Add: out standing 8,000 58,000Rent 30,000
Decoration Exp 2,000Rent Paid in advance 5,000 25,000
Advertising Exp 25,000
Entertainment 2,000Discount Received 26,000
Insurance 2,400
Less: prepaid 600 1,800
Carriage outward 3,000
Interest 25,000
Repairs 6,800
Training Exp 20,000
Medical Exp 2,000
Commission 15,000

-
 - 41 -

Charity Exp 8,000

Electricity Bill 3,000
Bank Charges 800
Gas bill 2,000
White washing Exp 7,500
Discount Allowed 37,000
Telephone Bill 3,000
Provision for doubtful debts 30,500
Petty cash exp. 1,000
DEPRICIATION
On S Plant 1st Month 1,500
On S Plant 2nd Month 1,500 3,000

On Furniture 1st Month 291

On Furniture 2nd Month 289 580

On Truck 1st Month 2,222

On Truck 2nd Month 2,222 4,444
On Building 20,000 20,000

On Computer 1st Month 312.5

On Computer 2nd Month 312.5 625

Net Profit Trans To B/Sheet 2,171,951

2,459,000 2,459,000

-
 - 42 -

EXCEL PHARMACEUTICAL
BALANCE SHEET
AS AT 28 DEC 2006

ASSETS Rs. Rs. Rs. LIABILITIES Rs. Rs.

Capital:
FIXED ASSETS: Capital invested 1,500,000
Add Net Profit 2,171,951
Storage Plant 180,000 3,674,951
Less pro for dep Less Drawings (35,000)
For 1st Month 1,500 3,639,951
For 2nd Month 1,500 (3,000) 177,000FIXED LIABILITIES:

Land & Building 210,000 Bank Loan 400,000

Less pro for dep (20,000) 190,000
CURRENT LIABILITIES:
Furniture 35,000
Less pro for dep Rent in Advance 5,000
For 1st Month 291 Out Standing salaries 8,000
For 2nd Month 289 (580) 34,420
Creditors :
Computers 25,000 Pearl Pharmaceutical 160,000
Less pro for dep Prix Pharmaceutical 95,000

For 1st Month 312.5 Abott Medicine 300,000 555,000

For 2nd Month 312.5 (625) 24,375
Kohinoor furniture 35,000
Truck 90,000 HP Computers 10,000

-
 - 43 -

Less pro for dep

For 1st Month 2,222
For 2nd Month 2,222 (4,444) 85,556

CURRENT ASSETS:
Cash in Hand 2,223,300
Cash at Bank 275,200
Prepaid Insurance 600
Closing Stock 450,000

DEBTORS
Hassan Medicos 335,000
D Watson 135,000
Zia Chemists 750,000
Total Dr. 1,220,000
Less Pro For B.Debts (30,500) 1,189,500

4,649,951 4,649,951

-
 - 44 -

EXCEL PHARMACEUTICAL
INCOME STATEMENT
For the period ended 2006

Rs. Rs. Rs.

Sales 4,450,327
Less Return Inwards (30,000)
Net Sales 4,420,000
Purchases 2,420,000
Add Carriage inwards 9,000
Add Wages 50,000
2,479,000
Less: returns Outwards 15,000
Net Purchases 2,464,000
Less Closing Stock 450,000
Cost Of Goods Sold 2,014,000
Gross Profit 2,406,000
Add Other Incomes
Rent 30,000
Less Received in Advance 5,000 25,000
Discount Received 26,000

Total Other Income 51,000

Operating Profit 2,457,000
Less Other Expenses
Stationary 3,000

-
 - 45 -

Salaries 50,000
Add: out standing 8,000 58,000
Decoration Exp 2,000
Advertising Exp 25,000
Entertainment 2,000
Insurance 2,400
Less: prepaid 600 1,800
Carriage outward 3,000
Interest 25,000
Repairs 6,800
Training Exp 20,000
Medical Exp 2,000
Commission 15,000
Charity Exp 8,000
Electricity Bill 3,000
Bank Charges 800
Gas bill 2,000
White washing Exp 7,500
Discount Allowed 37,000
Petty cash exp. 1,000
Telephone Bill 3,000
Provision for doubtful debts 30,500
DEPRICIATION
On S Plant 1st Month 1,500
On S Plant 2nd Month 1,500 3,000

On Furniture 1st Month 291

On Furniture 2nd Month 289 580

-
 - 46 -

On Truck 1st Month 2,222

On Truck 2nd Month 2,222 4,444

On Building 20,000 20,000

On Computer 1st Month 312.5

On Computer 2nd Month 312.5 625

Total Other Expenses 285,049

Net Profit 2,171,951

-
 - 47 -

EXCEL PHARMACEUTICAL
BALANCE SHEET
AS ON 28 DEC 2006

Rs. Rs.
CAPITAL:
Capital invested 1,500,000
Add Net Profit 2,171,951
3,671,951
Less Drawings (35,000)
3,636,951
FIXED LIABILITIES

Bank Loan 400,000

CURRENT LIABILITIES
Rent in Advance 5,000
Out Standing salaries 8,000
Kohinoor furniture 35,000
HP Computers 10,000

Creditors
Pearl Pharmaceutical 160,000
Prix Pharmaceutical 95,000
Abott Medicine 300,000 555,000 613,000

Total Liabilities 4,649,951

-
 - 48 -

FIXED ASSETS

Storage Plant 180,000

Less pro for dep
For 1st Month 1500
For 2nd Month 1500 (3,000) 177,000

Land & Building 210,000

Less pro for dep (20,000) 190,000

Furniture 35,000
Less pro for dep
For 1st Month 291
For 2nd Month 289 (580) 34,420

Computers 25,000
Less pro for dep
For 1st Month 312.5
For 2nd Month 312.5 (625) 24,375

Truck 90,000
Less pro for dep
For 1st Month 2222
For 2nd Month 2222 (4,444) 85,556
Total fixed assets 511,351
CURRENT ASSETS

-
 - 49 -

Cash in Hand 2,223,300

Cash at Bank 275,200
Prepaid Insurance 600
Closing Stock 450,000
2,952,100

DEBTORS
Hassan Medicos 335,000
D Watson 135,000
Zia Chemists 750,000
Total Dr. 1,220,000
Less Pro For B.Debts (30,500) 1,189,500
Total current assets 4,138,600

Total Assets 4,649,951

-
 - 50 -

WORK SHEET

TRIAL BALANCE ADJ. ENTERIES ADJ T.BALANCE P & LOSS BALANCE SHEET
Particulars Rs Rs Rs Rs Rs Rs Rs Rs Assets Cap/Liability
Cash 2,223,300 2,223,300 2,223,300
Bank 275,200 275,200 275,200
Capitals 1,500,000 1,500,000 1,500,000
Land & building 210,000 20,000 190,000 190,000
Furniture 35,000 580 34,420 34,420
Storage plant 180,000 3,000 177,000 177,000
Lahore furniture 35,000 35,000 35,000
UBL bank 400,000 400,000 400,000
Purchases 2,420,000 2,420,000 2,420,000
Carriage inward 9,000 9,000 9,000
Stationary 3,000 3,000 3,000
Truck 90,000 4,444 85,556 85,556
ComputeRs 25,000 625 24,375 24,375
HP computeRs 10,000 10,000 10,000
Salaries 50,000 8,000 58,000 58,000
Decoration Exp 2,000 2,000 2,000
Advertising Exp 25,000 25,000 25,000
Sales 4,450,000 4,450,000 4,450,000
Wages 50,000 50,000 50,000
Pearl Pharmaeeutical 160,000 160,000 160,000
Entertainment 2,000 2,000 2,000
Debtors 1,220,000 30,500 1,189,500 1,189,500

-
 - 51 -

Carriage outward 3,000 3,000 3,000

Interest 25,000 25,000 25,000
Repairs 6,800 6,800 6,800
Prix Pharmaceutical 95,000 95,000 95,000
Training 20,000 20,000 20,000
Drawing 35,000 35,000 35,000
Medical Exp 2,000 2,000 2,000
Commission Exp 15,000 15,000 15,000
Charity 8,000 8,000 8,000
Abott Medicine 300,000 300,000 300,000
Rent 30,000 5,000 25,000 25,000
Electricity bill 3,000 3,000 3,000
Bank charges 800 800 800
Insurance 2,400 600 1,800 1,800
Purchases return 15,000 15,000 15,000
Sales return 30,000 30,000 30,000
Gas bill 2,000 2,000 2,000
White wash 7,500 7,500 7,500
Discount allowed 37,000 37,000 37,000
Discount received 26,000 26,000 26,000
Telephone 3,000 3,000 3,000
Petty cash exp. 1,000 1,000 1,000

7,021,000 7,021,000

Out standing salaries 8,000 8,000 8,000

Rent Rec in Adv 5,000 5,000 5,000

-
 - 52 -

Prepaid insurance 600 600 600

Pro for D. fuldebts 30,500 30,500 30,500
Depreciation 28,659 28,659 28,659

72,749 72,749 7,029,000 7,029,000

Closing stock 450,000
Income Summary 450,000
Net Profit 2,171,951 2,171,951
4,966,000 4,966,000 4,684,951 4,684,951

-
 - 53 -

Closing Entries
PARTICULARS Rs. Rs.
Profit & loss A/C 37,000
Discount Allowed A/C 37,000
(Expense is closed to Profit& Loss A/C)

Profit & loss A/C 20,000

Training expenses A/C 20,000
(Training Expense is closed to Profit& Loss A/C)

Profit & loss A/C 2,420,000

Purchases A/C 2,420,000
(Expense is closed to Profit& Loss A/C)

Profit & loss A/C 7,000

Carriage Inwards A/C 7,000
(Expense is closed to Profit& Loss A/C)

Profit & loss A/C 3000

Stationary A/C 3,000
(Expense is closed to Profit& Loss A/C)

Profit & loss A/C 58,000

Salaries A/C 58,000
(Expense is closed to Profit& Loss A/C)

Profit & loss A/C 1,800

Insurance A/C 1,800
(Expense is closed to Profit& Loss A/C)

Profit & loss A/C 7,500

White Washing Exp A/C
(white wash expense is closed to profit & loss A\C) 7,500

-
 - 54 -

Profit & loss A/C 2,000

Decoration Exp A/C 2,000
(Expense is closed to Profit& Loss A/C)
Profit & loss A/C 25,000
Advertisement Expenses A/C 25,000
(Expense is closed to Profit& Loss A/C)

Profit & loss A/C 50,000

Wages A/C 50,000
(Expense is closed to Profit& Loss A/C)

Profit & loss A/C 2,000

Entertainment Exp A/C 2,000
(Expense is closed to Profit& Loss A/C)

Profit & loss A/C 3,000

Carriage Out Wards A/C 3,000
(Expense is closed to Profit& Loss A/C)

Profit & loss A/C 25,000

Interest Exp A/C 25,000
(Expense is closed to Profit& Loss A/C)

Profit & loss A/C 6,800

Repairs Exp A/C 6,800
(Expense is closed to Profit& Loss A/C)

Profit & loss A/C 2,000

Medical Exp A/C 2,000
(Expense is closed to Profit& Loss A/C)

Profit & loss A/C 15,000

Commission Exp A/C 15,000
(Expense is closed to Profit& Loss A/C)

-
 - 55 -

Profit & loss A/C 8,000

Charity Exp A/C 8,000
(Expense is closed to Profit& Loss A/C)

Profit & loss A/C 3,000

Electricity Bill A/C 3,000
(Expense is closed to Profit& Loss A/C)

Profit & loss A/C 3,000

Telephone Bill A/C 3,000
(Expense is closed to Profit& Loss A/C)

Profit & loss A/C 2,000

Gas Bill A/C 2,000
(Expense is closed to Profit& Loss A/C)

Profit & loss A/C 800

Bank Charges A/C 800
(Expense is closed to Profit& Loss A/C)

Profit & loss A/C 20,000

Depreciation on building A/C 20,000
(Depreciation Expense is closed to Profit& Loss A/C)

Profit & loss A/C 3,000

Depreciation on Storage plant A/C 3,000
(Depreciation Expense is closed to Profit& Loss A/C)

Profit & loss A/C 4,444

Depreciation on Truck A/C 4,444
(Expense is closed to Profit& Loss A/C)

Profit & loss A/C 30,000

Returns In Wards A/C 30,000
-
 - 56 -

(Expense is closed to Profit& Loss A/C)

Profit & loss A/C 625

Depreciation on computer A/C 625
(Depreciation Expense is closed to Profit& Loss A/C)

Profit & loss A/C 30,500

Provision for Doubtful Debts A/C 30,500
(Expense is closed to Profit &Loss A/C)

Profit & loss A/C 580

Depreciation on furniture 580
(Depreciation is closed to P&L)

Discount Received A/C 26,000

Profit and Loss A/C 26,000
(Income is closed to Profit &Loss A/C)

Sales A/C 4,450,000

Profit and Loss A/C 4,450,000
(Sales A/C is closed to P&L A/C)

Profit and Loss A/C 25,000

Rent A/C 25,000
(Revenue is closed to P& Loss A/C)

Returns Outwards A/C 15,000

Profit and Loss A/C 15,000
(Return Outwards is recorded in P&L A/C)

-
 - 57 -

CRITICAL SUCCESS FACTOR

We had started new business name “Excel Pharmaceutical”, which deals in

Transactions
medicine.

An agreement between a buyer and a seller to exchange an asset for payment. Or

in accounting, any event or condition recorded in the books of account.(page 6-7)
Journal

Journal shows the nature of the transaction, it is the original entry book. We are
following the double entry system so each entry has two effects one is debit and
the other is credited.(page 8-11)

General journal

Any transaction that cannot be recorded in any other subsidiary book is recorded
in the General Journal.(page 16)

Subsidiaries books

In our project we made the following subsidiaries books

• Purchase book.(page 14)
• Sale book.(page 14)
• Purchase return book.(page 15)
• Sale return book.(page 15)
• Three column cash book.(page12-13)
• Petty cash book.(page 16)

-
 - 58 -

Ledgers

After recording the transaction in journal the debit and credit account are posted
to the ledgers. Ledger is also known as T. Account. We had made the following
ledger accounts in our project.(page 17-33)

Trial balance

When an account is balanced an equal amount is removed from each side and
only the difference is shown as a balance, which is then carried forward to the
next period. Trial balance is the fifth stage of the accounting cycle. Trial balance
shows the arithmetical accuracy of accounts. (page 34)

Rectification

The error in accounts were found and rectified, following are the errors occurred
while balancing the trial balance. (page 35-36)

1. Charity paid Rs.8, 000 in cash but recorded as 800 in charity

account but correctly recorded in cash book.
2. Carriage outward Rs. 3,000 not recorded in book but correctly
recorded in cash book.
3. Sales book is under cost by Rs. 10,000
4. Purchase book is over cost by Rs. 15,000.
5. Return inward book is over cost by Rs. 500
6. Goods sold to Zia Chemist Rs. 750,000 but recorded as 752,000
in Zia account but correctly recorded in sales book.
7. Entry of bank charges expense was completely reversed.
8. Carriage inward Rs. 2,000 is not recorded in books.

Adjusted trial balance

We made the adjusted trial balance after rectifying the errors in which the
suspense account was closed.(page 37)

Adjustments

-
 - 59 -

There are generally ten adjustments commonly known as year end

adjustments, that need to be made at the end of the financial year after preparation
of trial balance.(page 38-39)

Accrued expense

Salaries outstanding Rs.8, 000.

Prepaid expenses

Prepaid insurance of Rs. 600.

Depreciation

All assets purchased by the business are to be depreciated because of prudence

principle.

 Depreciation provided on storage plant 10% P.a on straight line method

 15%depreciation provided on computers on straight-line method.
 Value of building at the end of accounting period is 190,000.
 10 % Dep on furniture on reducing balance method.

Balance Sheet

All assets and liabilities along with capital are recorded in the balance sheet. (page
42-43 & 47-49)

Assets

All those things on which the business has ownership is asset. Following are the
fixed asset in our business:
 Storage plant
 Land and building
 Furniture
 Computer
 Truck
Following are the current assets of our business:
 Cash in hand.

-
 - 60 -

 Cash at bank.
 Prepaid insurance.
 Closing stock.
 Debtors:
• Hassan medicos.
• D Watson.
• Zia Chemist.

Liabilities

Amount awed by a business to outsiders are called liabilities

Following are the long-term liabilities of the business:
 Loan from UBL Bank

Following are the current liabilities:

 Rent in advance.
 Outstanding salaries.

 Creditors:
• Pearl Pharmaceutical.
• Prix Pharmaceutical.
• Abott medicine

PROFIT AND LOSS ACCOUNT

All expenses and income are recorded in profit and loss account.(page 40-41)

STANDARD FOLLOWED

IAS 1 Presentation of financial statements.

IAS 1.52 Current Assets and Liabilities should be separated from Fixed Assets
and Liabilities.

IAS 5 Information to be disclosed in financial statements.

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IAS 1.78 All income and expenses should be recorded in profit & loss A/C.

IAS 16 Property, plant and equipment.

IAS 16.48 Depreciation on assets should be charged to profit & Loss A/C.

IAS 27 Non current liabilities (long term liabilities)