Course title: Fundamentals of Accounting B.

Com (Term System) Term-I Paper-II

Course Objectives:

1. To introduce accounting concepts which enable students to recognize, understand and maintain
different accounts of business according to the Accounting Standards, with a clear understanding
of how transactions are recorded in different types of business?

2. Understand the basic elements of double-entry accounting systems, accounting cycle, entering
transactions in journals, posting to ledgers, compiling end-of-period worksheets with adjusting
entries and preparation of financial reports.

Course Contents:

Topic Source Section

Introduction to Business, Commerce, Trading, Finance and Financial Ch.1, book 1 Section A
Institutions. Concept of account, assets, liabilities, revenues, expenses,
capital etc.
Introduction to accounting and accounting equation Ch.2, book 1 Section A
The IASB, and financial reporting IFRS-1 Ch.1, book 1 Section A
Accounting concepts and conventions: IAS-1
Recording the business transaction: sources , records and books of Ch.2, book 1 Section A
original entry journal, ledger accounting & trial balance Ch.3, book 2
Adjusting entries: contra Accounts, accruals and prepayments, adjusting Ch.3, book 1 Section A
trial balance, financial statements Ch.3, book 2
Completing the accounting cycle, Closing entries: temporary and Ch.4, book 1 Section A
permanent accounts, post close trial balance, reversing entries and
Worksheet
Special journals for repetitive transaction, their types and formats Ch.4, book 2 Section A
Subsidiary ledgers and Control accounts. for sales, purchases,
transactions etc.
Accounting for merchandising concerns: purchase, sales, discounts, Ch.5, book 1 Section A
returns and allowances, FOB destination and shipping point , cost of
goods sold, completing the accounting cycle, financial statement formats
IAS-2 Inventories, types and its evaluation Ch.2, book 3 Section A
Inventories and its types, inventory costing under perpetual and periodic Ch.6, book 1 Section A
systems , financial statement effects of costing methods, inventory errors
and decision analysis
Internal control, its types, purpose and limitations, control of cash, Ch.8, book 1 Section B
banking activities as controls, bank statement, bank reconciliation, Cash
book.
Accounting for accounts receivables, notes Receivables, its recognition Ch.9, book 1 Section B
and disposition. , Bad debts, direct and allowance approach, provision
and reserve
Accounting for fixed assets; property plant and equipment, cost Ch.10 book 1 Section B
determination of fixed assets, Accounts for assets acquired in non Ch. 9 book 2
monetary exchanges, Disposal of fixed Assets.
Depreciation, Describe the purpose, process and calculation of
depreciation, depletion and amortization, impairment of assets and
revision of depreciation. Natural resources & intangibles
Current liabilities and payroll accounting Ch.11, book 1 Section B
Partnership accounts with reference to Partnership Act-1932 Formation, Ch.12, book 1 Section B
admission, retirement, death, profit distribution and dissolution. book 4
Recommended Text (Latest Editions):

1. Larson, K. D., Wild, J. J., & Chiappetta, B. (2005), “Fundamentals of Financial Accounting”, 17th
edition, McGraw Hill Irwin.
2. Meigs, B. Walter., Johnson, E. Charles. & Meigs, F. Robert (2003), “Accounting: the basis of
Business decisions”, 11th edition McGraw Hill,.
3. International Accounting Standards Committee Foundation (IASCF) 2005, International Financial
Reporting Standards (IFRSs) , London United Kingdom.

Suggested Readings

4. Partnership Act-1932
5. Fees Reeve Warren (2005), “Accounting”, 21st editions, Thomson South-Western,
6. Kieso, Weygandt, and Warfield (2008) Financial Accounting, 6th Edition Wiley higher education.
7. ICMAP (2006), “Fundamentals of Financial Accounting and Taxation”, Stage-1 2nd edition. PBP
professional education,
 MODEL PAPER FOR B.COM Term-I
Fundamentals of Accounting
SECTION II & III
Time Allowed = 100 minutes (1hour and 40 Minutes)
Section II SAQ- (Attempt all questions) No. of Questions =11
Marks=22
Q. 1 Answer Following Short Questions. (11×2) = 22 Marks

I. All revenue and expense accounts have been closed at the end of the calendar year for Renfro Company. The Income Summary
account has credit balance of $200,000. As of the same date, Don Renfro, Capital has a balance of $115,000, and Don Renfro,
Drawing has a balance of $48,000. Journalize the entries required to complete the closing of the accounts.
II. According to IAS-2, what must a financial statement disclose in inventory?
III. Bran and John decide to organize a partnership. Bran invests $25,000 cash, and Johns contributes $5,000 and equipment having
a book value of $3,500 and a fair market value of $10,000.Prepare the entry to record each partner’s investment.
IV. Elton Company gathered the following condensed data for the year ended December 31, 2008: Cost of goods sold $ 660,000
Net sales 1,200,000 Administrative expenses 234,000 Interest expense 58,000 Dividend revenue 38,000 Loss from employee
strike 233,000 Selling expenses 45,000.Prepare a single-step income statement for the year ended December 31, 2008.
V. The following information is available for Gumbel Company: Beginning inventory 600 units at $4, First purchase 900 units at
$5, and Second purchase 500 units at $6. Assume that Gumbel uses a periodic inventory system and that there are 700 units left
at the end of the month. Compute the cost of the ending inventory under the FIFO method.
VI. Prepare journal entries to record the transactions entered into by Elway Company for 2007. June 1: received a $25,000, 12%, 1-
year note from Ann Holt as full payment on her account. Nov. 1 Sold merchandise on account to Orson, Inc. for $10,000, terms
2/10, n/30. Nov. 5 Orson, Inc. returned merchandise worth $500.
VII. On January 1, 2006, Ecker Company purchased a computer system for $20,500. The system had an estimated useful life of 5
years and no salvage value. At January 1, 2008, the company revised the remaining useful life to two years. What amount of
depreciation will be recorded for 2008 and 2009?
VIII. On December 1, Destin Corporation borrowed $5,000 on a 90-day, 6% note. Prepare the entries to record the issuance of the
note, the accrual of interest at year end.
IX. A plant asset cost $144,000 and is estimated to have an $18,000 salvage value at the end of its 8-year useful life. What would be
the annual depreciation expense recorded for the third year using the double-declining-balance method .
X. What are the various techniques of inventory costing according to IAS-2
XI. Bob and Kathy are partners who share profits 60% and 40%. Their capital balances were both $90,000 before Betty was
admitted to the partnership. Betty contributed $120,000 in cash to the Partnership for a 30% interest. Compute the capital
balances of Bob and Kathy after Betty is admitted to the partnership.

SECTION-III (Essay Type Questions) Marks=30

Note: Attempt ONE question from each Part.

PART-A
Q. 2 (a) Marks= 3× 4=12
A review of the ledger of Oklahoma Company at December 31, 2007,poduces the following data pertaining to
the preparation of annual adjusting entries.
1. Salaries payable $0. There are eight salaried employees. Salaries are paid every Friday for the current
week. Five employees receive a salary of $700 each per week, and three employees earn $500 each per week.
December 31is a Tuesday. Employees do not work weekends. All employees worked the last 2 days of
December.
2. Unearned Rent Revenue $369,000. The company began subleasing office space in its new building on
November 1. Each tenant is required to make a$5,000 security deposit that is not refundable until occupancy
is terminated. At December 31, the company had the following rental contracts that are paid in full for the
entire term of the lease.
Date Term in month Monthly rent Number of Leases
Nov.1 6 $4,000 5
Dec.1 6 $8,500 4.
3. Prepaid Advertising $13,200. This balance consists of payments on two advertising contracts. The contracts
provide for monthly advertising in two trade magazines.
Contract Date Amount Number of Magazine issues
A650 May.1 $6,000 12
B974 Oct.1 7,200 24
The first advertisement runs in the month in which the contract is signed.
4. Notes payable $80,000.This balance consists of a note for one year at an annual interest rate of 12%, dated June1.
Q. 2 (b) Marks= 3
Presented are transactions related to Wheeler Company who is a merchandiser.
1. On December 3, Wheeler Company sold $500,000 of merchandise to Hashmi Co., terms 2/10, n/30, and FOB shipping point.
The cost of the merchandise sold was $350,000.
2. On December 8, Hashmi Co. was granted an allowance of $27,000 for merchandise purchased on December 3.
3. On December 13, Wheeler Company received the balance due from Hashmi Co.
Instructions: Prepare the journal entries to record these transactions on the books of Wheeler Company using a perpetual
inventory system.

Q. 3 (a) Marks= 8
Romano Company uses the perpetual inventory system and had the following purchases and sales during March.
Purchases Sales
Units Unit Cost Units Selling Price
3/1 Beginning inventory 100 $40
3/3 Purchase 60 $50 3/4 Sales 70 $80
3/10 Purchase 200 $55 3/16 Sales 80 $90
3/19 Purchase 40 $60 3/25 Sales 150 $90
Instructions: Using the inventory and sales data above, calculate the value assigned to cost of goods sold in March and to the
ending inventory at March 31 using (a) FIFO (a) LIFO
Q. 3 (b) Marks= 7
The income statement of Miller, Inc. includes the items listed below:
Net sales $900,000
Gross profit 350,000
Beginning inventory 100,000
Purchase discounts 15,000
Purchase returns and allowances 8,000
Freight-in 10,000
Operating expenses 300,000
Purchases 540,000
Ending Inventory ?
Instructions: Use the appropriate items listed above as a basis for determining:
(a) Cost of goods sold.
(b) Cost of goods available for sale.
(c) Ending inventory.

PART-B

Q. 4 Lloyd Products is undecided about which base to use in estimating uncollectible accounts. On December 31, 2008, the
balance in Accounts Receivable was $680,000 and net credit sales amounted to $3,900,000 during 2008. An aging
analysis of the accounts receivable indicated that $38,000 in accounts are expected to be uncollectible. Past experience
has shown that about 1% of net credit sales eventually are uncollectible.
Instructions: Prepare the adjusting entries to record estimated bad debts expense using the (1) Percentage of sales basis and
(2) The percentage of receivables basis under each of the following independent assumptions:
(a) Allowance for Doubtful Accounts has a credit balance of $3,200 before adjustment.
(b) Allowance for Doubtful Accounts has a debit balance of $730 before adjustment. 15 Marks
Q. 5 Wheelers Food Store developed the following information in recording its bank statement for the month of
March. Balance per books March 31 $ 1,905 Balance per bank xccx statement March 31 $11,400
(1) Checks written in March but still outstanding $8,000.
(2) Checks written in February but still outstanding $2,800.
(3) Deposits of March 30 and 31 not yet recorded by bank $5,200.
(4) NSF check of customer returned by bank $700.
(5) Check No. 210 for $594 was correctly issued and paid by bank but incorrectly entered in the cash payments journal as
payment on account for $549.
(6) Bank service charge for March was $50.
(7) A payment on account was incorrectly entered in the cash payments journal and posted to the accounts payable
subsidiary ledger for $824 when Check No. 318 was correctly prepared for $284. The check cleared the bank in March.
(8) The bank collected a note receivable for the company for $4,000 plus $150 interest revenue.
Instructions: Prepare bank reconciliation at March 31. 15 Marks
 MODEL PAPER FOR B.COM Term-I
Fundamentals of Accounting
SECTION-I (MCQ- All questions are to be attempted) Time Allowed = 23 Minutes
No. of Questions =23
Marks=23
INSTRUCTIONS TO CANDIDATES:
 Encircle the correct option only.
 Cutting, overwriting and use of ink remover is not allowed.
Q 1) The first part of the accounting process is d. Wages Expense
a. communicating. Q 10) A debit is not the normal balance for which of the
b. identifying. following?
c. processing. a. Asset account
d. recording. b. Drawing account
Q 2) Which one of the following is not a part of an account? c. Expense account
a. Credit side d. Capital account
b. Trial balance Q 11) Including private costs incurred in running a car as
c. Debit side business costs would violate the concept of:
d. Title a. Dual aspect
Q 3) If total liabilities decreased by $25,000 and owner’s b. Business entity
equity increased by $5,000 during a period of time, then total c. Going concern
assets must change by what amount and direction during that d. Consistency
same period? Q 12) The chart of accounts is a
a. $20,000 decrease a. list of accounts and their balances at a given time.
b. $20,000 increase b. device used to prove the mathematical accuracy of
c. $25,000 increase the ledger.
d. $30,000 increase c. listing of the accounts and the account numbers
Q 4) Collection of a $500 Accounts Receivable which identify their location in the ledger.
a. increases an asset $500; decreases an asset $500. d. required step in the recording process.
b. increases an asset $500; decreases a liability $500. Q 13) Adjusting entries are required
c. decreases a liability $500; increases owner's equity $500. a. because some costs expire with the passage of time
d. decreases an asset $500; decreases a liability $500. and have not yet been journalized.
Q 5) Performing services on account will have following b. when the company's profits are below the budget.
effects on the components of the basic accounting equation: c. when expenses are recorded in the period in which
a. increase assets and decrease owners' equity. they are incurred.
b. increase assets and increase owners' equity. d. when revenues are recorded in the period in which
c. increase assets and increase liabilities. they are earned.
d. increase liabilities and increase owners' equity. Q 14) As prepaid expenses expire with the passage of time, the
Q 6) Purchasing supplies for cash will have what effect on the correct adjusting entry will be a
components of the accounting equation? a. debit to an asset account and a credit to an expense
a. Increase in cash and a decrease in equity account.
b. Increase in cash and an increase in supplies b. debit to an expense account and a credit to an asset
c. Increase in supplies and a decrease in cash account.
d. Increase in equipment and an increase in equity c. debit to an asset account and a credit to an asset
Q 7) In a service-type business, revenue is considered earned account.
a. at the end of the month. d. debit to an expense account and a credit to an
b. at the end of the year. expense account.
c. when the service is performed.
d. when cash is received. Q 15) Atlantis Company's ending inventory is understated
Q 8) The time period assumption states that $4,000. The effects of this error on the current year's cost of
a. a transaction can only affect one period of time. goods sold and net income, respectively, are:
b. estimates should not be made if a transaction affects a. understated, overstated.
more than one time period. b. overstated, understated.
c. adjustments to the enterprise's accounts can only be c. overstated, overstated.
made in the time period when the business understated, understated
terminates its operations.
d. the economic life of a business can be divided into
artificial time periods.
Q 9) When wages are incurred in one period and paid in the
next period, this often leads to which account appearing on
the balance sheet at the end of the time period? NOTE: Only 15 MCQs are provided for specimen purposes.
a. Due from Employees Actual paper will comprise 23 MCQs (About half of the
b. Due to Employer MCQs from each section of syllabus)
c. Wages Payable