Certificate in Accounting and Finance Stage Examination

7 September, 2020
Total marks: 100
Time Allowed: 3 Hours and 15 minutes

Introduction to Accounting
Mock Exam
INSTRUCTIONS
⮚ Each new question shall be started from a new page. Otherwise marks will be deducted.
⮚ Using any pen other than black shall result in cancellation of paper.
⮚ Use of Mobile Phone during paper shall also result in cancellation of paper
⮚ Writing name and roll No. is compulsory. Otherwise marks will be deducted.

Section A

Q.1 Select the most appropriate answer from the options available for each of the following
Multiple Choice Questions (MCQs).
(xii)

(xiii)
(xiv)

(xv)

(xvi)

(xvii)

(xviii)

(xix)
(xx)

Q.2 Omikron Traders (OT) deals in one product. Following information for the month of June 2019 has
been collected for preparation of trading account:
Description Units Rupees Remarks
Opening Inventory 4,000 745,000 At cost
Purchases 11,000 2,340,000 Inclusive of sales tax
Sales 12,000 4,800,000 Exclusive of sales tax

Additional information:
(i) Sales tax @ 17% on purchases is adjustable against sales tax payable by OT.
(ii) Handling and transportation costs to OT's premises are Rs. 20 per unit.
(iii) Units purchased are polished at a cost of Rs. 10 per unit prior to transferring to the warehouse.
(iv) Units are stored in a warehouse which is acquired at a monthly rent of Rs. 380,000.
(v) 350 units were withdrawn for personal use during the month.
(vi) During the month-end physical inventory verification, it was observed that:
● 20 units were found short.
● 150 units were damaged during handling and are saleable at 40% of its selling price
after incurring an additional cost of Rs. 15 per unit. Shortages/damages up to
200 units in a month are treated as normal loss.
(vii) OT uses periodic inventory method and cost is determined using weighted average cost
method.
Required:
Prepare ‘Trading account’ for the month of June 2019. (07)

Q.3

(05)
Q.4

(08)
Section B
Q.5 Badshah Limited (“BL”) is engaged in the trading business and it has following balances as on 1 July 2016:
Fixed Assets – At Cost 50,500,000
Fixed Assets – Accumulated Depreciation 11,773,200
Written Down Value 38,726,800

The following transactions took place during the year ending 30th June 2017
(i) On 10th August 2016, machinery costing Rs.1,250,000 was bought in cash and an installation cost of
Rs.250,000 was also paid on the same date in cash
(ii) On 13th September 2016, motor vehicle which was bought on 1st of April 2012 for Rs.130,000 was
exchanged for a new asset with Big Traders (“BT”). The purchase price of new motor vehicle is
Rs.400,000 and trade in allowance of Rs.55,000 for old motor vehicle was allowed. Cash of Rs.300,000
was paid to BT and remaining will be adjusted against advance already paid to BT for goods to be
supplied to BL.
(iii) On 16th December 2016, Furniture which was bought on 1 June 2014 and having book value of Rs.80,000
on 1 July 2016 is taken over by the owner in his personal capacity at the agreed price of Rs.95,000
(iv) On 28th March 2017, Computer equipment costing Rs.150,000 which was bought on 1 October 2015 was
given to sales manager as Bonus on his outstanding performance
(v) The balances as on 1st July 2016 include Fixed assets costing Rs.500,000 having accumulated
depreciation of Rs.390,000 which have been fully depreciated since 2015.
(vi) Depreciation is charged on a reducing balance method at 14.05% per annum.
(vii) Depreciation on fixed assets is charged from the month of addition to the month prior to disposal.

Required:
Prepare necessary closing entries and the following ledgers for the year ended 30th June 2017
a) Fixed Assets- At cost
b) Accumulated depreciation - Fixed Assets
c) Disposal (10)
Q.6 Alpha, Beta and Zeta have been sharing profits & losses in the ratio of 1:2:2 respectively. In the following
information pertains to the year ended December 31, 2017:
Partner Capital account Current account Total capital Drawings
opening balance opening balance opening balance (Year ended
December 2017)
Alpha 1,250,000 154,150 1,404,150 192,500
Beta 975,000 198,190 1,173,190 121,400
Zeta 750,000 112,050 373,050 105,500
Retained losses (39,390)
up to Jan 1, 2017
3,400,000
● Each partner is allowed interest on capital at 10 % p.a
● Alpha & Beta are entitled to salary of Rs.5,000 per month
● Alpha is also entitled to minimum guaranteed profit share of Rs. 350,000 for the full year

On 1" September, 2017, the partnership agreement was amended with the following changes
(i) Profit & loss sharing ratio among Alpha, Beta and Zeta was amended to 2:3:3 respectively
(ii) Goodwill was assessed at Rs.1,920,000 and will not be retained in the books.
(iii) Each partner is allowed interest on capital at 8 % p.a
(iv) All partners are entitled to salary of Rs.4,000 per month.
(v) Zeta will also cntitled to a commission equal to 3 % of net profit after charging such commission.
(vi) On the date of revision of agreement, It was agreed that one of the Laptop of Partnership business
having carrying value of Rs.58,000 has been taken over by Beta @ agreed price of Rs.42,000. This is
to be adjusted against his current account.

The draft profit for the year ended December 31, 2017 amounted to Rs. 1,800,250 . After review of
statement of comprehensive income, the following matters are identified.
● Electricity expense pertaining to the month of December 2017 amounting to Rs.50,000 was not
recorded.
● Bad debts of Rs.5,000 are recorded in the month of August 2017 which relates to customer to
whom credit sales were made in April 2017
● No accounting treatment is accounted for related to Laptop taken over by the Beta.

All partners have withdrawn the salary which was entitled to them after the amendment of
agreement. This amount is not included in Drawings as mentioned above.

Required:
(a) Partners' capital accounts and partners current account (Columnar Form) for the year ended
December 31, 2017.
(b) Record entries related to goodwill (10)

Q.7 Sitara Limited (SL) deals in the trading business of office machinery. It has following trial
balance for the year ended June 30, 2017.

Accounting Head Debit Credit

Rupees in “000”
Cash and bank 4,500
Fixed Assets-At cost 925,750
Purchase returns 1,300
Opening Stock-Office Machinery 22,200
Purchase 470,500
Sales 789,774
Opening stock -Office supplies 1,110
Trade Debtors 154,020
 Provision for obsolete stock-1st July 2016 300
Provision for doubtful debts-1st July 2016 700
5% Long term loan 50,000
Other income 1,730
Capital -1st July 2015 935,000
Drawings 44,450
Fixed Assets-Acc. Depreciation 1st July 2016 224,856
Trade creditors 15,520
Other payables 3,750
Accumulated losses- 1st July 2016 129,050
Financial charges 5,900
Selling and admin expenses 191,900
Other receivables 2,955
Long term investments 75,000
Trade discount 4,400

Additional Information (Rs. “000”)

(i) Office machinery stock as on June 30, 2017 costing Rs. 42,240.This included goods having sales value
of Rs. 1,200 returned by a customer on 30 June 2017 but not yet accounted for. SL earns mark up of
20%. Provision for obsolete stock is to be created at Rs.720.

(ii) Office supplies bought are charged to selling & admin expense and unused office supplies at end of year
amounting to Rs.895.

(iii) Long term Loan was obtained on 1st November 2016 and interest is payable in arrear half yearly and
interest is recorded as expense when paid. Principal portion of Loan amounting to Rs. 10,000 was repaid
on 1st June 2017 and appropriately recorded. Remaining Long term Loan will be paid in five equal
annual installment commencing from 1st October 2017.

(iv) Office machinery having sales value of Rs. 445 were distributed among potential customers and office
machinery costing Rs.136 were given to a trade payable to discharge his liability of Rs.140. These
transactions are yet to be accounted for.

(v) Rs. 250 were recovered from an outstanding balance of Rs. 310 which had been written-off last year.
The amount recovered was credited to trade debtors account Bad debts to be written off Rs.3 and
provision for doubtful debts is to be increased by 2%

(vi) Fixed Assets purchased on 1st august 2016 were Rs. 25,000 and recorded appropriately. On 7th February
2017 a fixed asset which was bought on 12th May 2014 for Rs. 33,200 was sold for cheque of Rs. 22,500.
The disposal proceeds were debited in bank a credited to Fixed assets at cost. No other entries were
recorded.

(vii) Depreciation on fixed assets is to be charged at 15% per annum from the month of addition to the month
prior to disposal using reducing balance method.

(viii) Other income includes annual commission income of Rs.120 for the year ending 30th November 2017.

(ix) Selling & admin expenses included half yearly insurance of Rs.90 for the period ending 31 October 2017.
Personal credit card bills of owner amounting to Rs.86 are charged to selling & admin expense.

(x) While preparing Bank reconciliation as on 30th June 2017 an amount of Rs.10 wrongly credited by the
bank in the SL account and bank charges to be recorded Rs.5

Required:

a) Statement of comprehensive income for the year ended 30th June 2017.
b) Statement of financial position as at 30 June 2017. (15)
Q.8 Following information pertains to Omega Limited (OL) for the month of July 2019:
(i) Opening balances:
Rupees
Cash in hand 85,000
Cash at bank - as per cash book 650,000
- as per bank statement 780,000

OL maintains two columns cash book.

(ii) Transactions for the month:
Date Transaction
Goods purchased on credit from Danish Stores for Rs. 475,000 (net of
02-Jul
5% trade discount).
Goods sold on credit to XYZ & Co. for Rs. 500,000 after a trade
04-Jul discount of 10%. In this respect, transportation charges of Rs. 15,000
were paid in cash by OL.
Goods sold on credit to Zaid Brothers for Rs. 640,000 and offered a
05-Jul
discount of 5% on payment within 30 days.
Cheques issued to Zee & Co. for Rs. 400,000 in full and final settlement
07-Jul of one of its old invoice of Rs. 425,000 and ABC Stores for Rs. 190,000
(net of 5% payment discount).
09-Jul Goods sold to Qavi & Sons and received a cheque of Rs. 58,000.
Cash payment of utility bills amounted to Rs. 45,000. This included a
10-Jul
bill of Rs. 5,000 belonged to the owner’s residence.
12-Jul Goods returned by Zaid Brothers amounted to Rs. 135,000.

12-Jul Goods returned to Danish Stores amounted to Rs. 50,000.

Goods purchased on credit for Rs. 700,000 from Chenab Stores subject
13-Jul
to 10% discount on payment within 30 days.
15-Jul A cheque of Rs. 100,000 was encashed for day to day cash requirements.

20-Jul Fully depreciated laptops costing Rs. 134,000 were scrapped.

New laptops were purchased for Rs. 245,000 from Shifa Electronics and
21-Jul
issued a cheque of Rs. 100,000 in part payment.
40% of the goods sold to Qavi & Sons on 9 July were returned and the
23-Jul
amount was refunded in cash. These goods were sold at cost plus 25%
Goods purchased for cash from Ravi Brothers having list price of
26-Jul
Rs. 68,000 and availed discount of 5%.
Cheques received from Zamil Store of Rs. 285,000 (net of 5% payment
30-Jul discount) and Zaid Brothers of Rs. 500,000 in settlement of an old
invoice of Rs. 550,000.

Required:
Enter the above transactions in the books of prime entry in a proper format. (Narrations are
not required) (13)
Q.9 Shandaar & Co. (“SD”) maintains bank account with Apna Bank Limited. Following information pertains to
bank account for the month of July 2017:

Balance as per bank statement as on 31st July 2017 Rs. 1,547,500 (Credit)
Balance as per bank ledger as on 31st July 2017 Rs. 1,189,200 (Debit)

Further information
(i) Cheques outstanding for more than six months are not honored by the bank
(ii) Following debit / credit advices dated 31st July 2017 were received by SD on 5th August 2017.Bank
charges amounting to Rs.12,200 . It was observed that bank had over charged SD by Rs.2,200.
Payment of annual membership fee of business of Rs. 25,000 against standing order
(iii) List of un-presented cheques totaling Rs. 1,222,000 include the following:
● Cheque dated 15th January 2017 amounting to Rs.13,000
● Cheque amounting to Rs. 18,000 issued to supplier bearing incorrect paying name. The return was
recorded on 4th August 2017
● Cheque amounting to Rs. 23,000 issued to supplier where amount in words and amount figure does not
match .The cheque was appropriately reversed in bank ledger
● Cheque of Rs.29,000 dated 4th June 2017 was misplaced by the supplier. The new cheque of same amount
was issued in last week of july 2017 and cleared on the next day. Both cheque are included in the list of
un presented cheques and new cheque issued was appropriately recorded in bank ledger but reversal of
old cheque was not made in bank ledger
● A cheque of Rs.20,000 dated September 6 ,2017 issued to Haseeb for payment of supplies
(iv) An unidentified difference appearing in the Bank Reconciliation Statement of June 2017. It represents a
cheque of Rs.50,000 credited in bank statement which was received from a customer in settlement of
invoice availing discount of 20%. SD recorded the gross amount in bank ledger.
(v) In June 2017, Bank erroneously credited the bank account of SD by Rs.5,000. This amount was identified
by the accountant of SD while preparing June 2017 bank reconciliation statement and was appearing in
it. This error has not yet been rectified by the bank.
(vi) Un-credited cheques amounting to Rs.787,500 include the following:
● Cheque of Rs.12,000 received from customer and on 3rd August 2017 ,it was returned by bank notifying
that signatures are not valid. The cheque was returned to customer but the return was not reversed in bank
ledger On 28th July 2017
● Cheque of Rs.14,000 received from customer and deposited on the same date. It is notified the bank that
funds are not cleared as this cheque number is marked as stop payment by the customer.
(vii) Cheques of Rs.95,000 were issued in June 2017 and appropriately recorded in bank ledger and then
reversed in bank ledgers in June 2017 but no instructions were made to banker. No amount was debited
in bank statement of June 2017 but a cheque amounting to Rs.5,500 from those cheques was presented in
July 2017 and cleared in the month
Required:
Compute corrected Bank book balance and Prepare a BRS for the month of July 2017. (12)