APEX COLLEGE

(Pre-University Exam)
Paper: Advance Financial Accounting
Time allowed: 3 Hours Max. Marks: 100

Attempt any five questions. All question carry equal marks.

1. The following balances were extracted from the books of Ahmad Salman &
Company Ltd. for the year ending 31st December 2000.

Particulars Rs. Particulars Rs.

Building (cost 400000) 300000 Share capital
Furniture (cost 10000) 5000 5000 equity share 500000
Motor vehicles 130000 5% mortgage debenture 200000
Investment 230000 sundry creditors 82000
Inventory 200000 profit & Loss Account (Cr.) 33000
Sundry debtors 140000 Gross profit 430000
Cash at bank 86000 Dividend received 7000
Cash in hand 12000 Provision for taxation 36000
Discount on issue of shares 4000
Salaries 105000
Postage 2000
Auditors fee 6000
Repairs 3000
Interest on debentures 5000
Advance against building 50000
Trade exp. 10000

Adjustments:
(i) Provide 10% Depreciation on all Fixed Assets on straight line method.
(ii) The company had a contract for the construction of building of Rs. 50000
which is still incomplete.
(iii) Increase provision for taxation up to Rs. 100000
(iv) Transfer Rs. 20000 to General Reserve
(v) Due to change in the basis of valuation of inventory, value comes down to
Rs.180000 but this has not been considered yet.
(vi) Dividend is proposed @ 15%
Required:
Prepare the Profit & Loss Account and appropriation account for the year ending 31st
December 2000 and Balance sheet as on that date.

2. The extracts are given from the draft balance sheet of XYZ Company as on 31st
December 2001:
Authorized Capital: 50000 Shares of Rs. 100 each Rs. 50, 00,000
Issued, Subscribed and paid up Capital:
20000 Ordinary shares of Rs. 100 each 20, 00,000
Share Premium 100,000
General Reserve 16, 00,000
Profit & Loss Account 400,000

The boards of directors pass a resolution to capitalize a part of existing reserves and
profit by issuing bonus shares. Four bonus shares are being issued for every ten
shares of Rs. 100 each already held in the company. For the purpose of bonus issue,
to utilize the share premium account, Rs. 300,000 out of profit & loss account and
balance out of general reserve.
Company also offers to its shareholders the right to buy 3 shares of Rs. 100 each at
Rs. 125 each for every 5 shares held. All the rights were taken up:
You are required to pass necessary Journal Entries and also redraft the balance
sheet after the above arrangements.

3. A company has 10% outstanding debentures of Rs. 250000 on 1st January, 2001. It
purchases its own debentures, as investment of Rs. 25000 at 97 ex-interests on 1st
April, 2001. On 31st December, 2001 the company decides to cancel the own
debentures purchased by it earlier.
You are required to pass the necessary journal entries in the books of the
company.
4. K.W. who carried on a retail business, opened a Z Branch on 1-1-2002 where all sales
were on credit basis. All goods required by the branch were supplied from the head
office and were invoiced to the branch at 10% above cost. The following were the
transactions.

Jan. 2002 Feb. 2002 Mar. 2002

Goods sent to branch
(Purchase price) 40,000 50,000 60,000
Sales as shown by the branch
monthly report 38,000 42,000 55,000
Cash received from debtors and
remitted to head office 20,000 51,000 35,000
Returns to head
office (invoice price to branch) 1,200 600 2,400

5. The following were the expenditure on a contract for Rs. 600,000 commenced on
1-1-2000:

Material Rs. 120,000

Wages 164,400
Plant 20,000
Business charges 8,600

Cash received on account to 31st December amounted to Rs. 240,000 being 80% of
work certified; the value of materials o hand at 31st December was Rs. 10,000.
Prepare an account showing the position at the end of the year and the proportion of
the profit which might reasonably be taken to Profit and Loss Account after 10%
depreciation on plant.

6. On 1st January 1994 Zubair & Co. of Karachi consigned 100 cases of dry milk to
Tariq Agencies of Lahore. The goods were charged at a Performa Invoice value of Rs.
10000 including a profit of 25% on invoice price. On the same date the consignor
paid Rs. 600 for freight and insurance. On 1st July, the consignees paid clearing
charges Rs. 1000 carriage Rs. 200. On 1st August, they sold 80 cases for Rs. 10500
and sent a remittance for the balance due to the consignor after deducting commission
at the rate of 5% on gross sale proceeds. Show the consignment Account and Tariq
Agencies Account in Zubair & Co.’s Books.

7. German Tailors has two departments- first one is “Cloth” and the second is
“Tailoring”. Tailoring department gets all its requirements of cloth from the cloth
department at the usual selling price. From the following particulars prepare
Departmental Trading and Profit and loss Account for the year ended 31st March,
1999:

Particulars Cloth Tailoring

Deptt. Deptt.
Rs. Rs.
Manufacturing expenses - 108000
Selling Expenses 45000 18000
Stock on 1-4-98 540000 72000
Sales 3600000 720000
Transfer of Cloth t tailoring Deptt. 450000 -
Purchases 3060000 45000
Stock on 31-2-99 900000 135000

The stock in Tailoring Department may be assumed to consist 80% cloth and 20%
other expenses. General expenses of the business for the year came to Rs. 207000.
In 1997-98 the Cloth Department earned a gross profit of 30% on sales.

8. What is installment purchase system? Discuss the journal entries to be passed in the
books of purchaser and vendor.