AIOU Solved Assignment Code 1340 Business Accounting Autumn 2023 Assignment 1.pdf

ALLAMA IQBAL OPEN UNIVERSITY, ISLAMABAD
(Department of Commerce)
Course: Business of Accounting (1340)
Semester: Autumn, 2023
Level: FA/I. Com
ASSIGNMENT No. 1
Q. 1 The Accountant of Multan Club summarizes the following
information of cash received and paid by the club from the date of
commencement 1st January to 31st December 2020:
0314-4646739 0332-4646739 03364646739
Skilling.pk Diya.pk Stamflay.com

Subscription
received
230,500
Electricity
Charges
9,600
Receipts
from sales of
refreshment
169,660
Repaid to
Mr.
Imran on
Dec, 2013
300,000
Loan from
Mr. Imran
300,000
Rent
expenses
1,600
Loan from
Bank
260,000
Telephone
Expenses
640
Land and
Building
500,000
Printing
&
Stationery
3,200
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Purchase of
refreshment
73,700
Bank
Interest
5,920
Purchase of
Furniture
36,000
General
expenses
4,340
Wages Paid 10,000
Adjustments:
a.There was a bill for Rs. 5,120 owing for refreshments on 31 December
2013
b.The stock of refreshments on hand on 31" December 2013, was valued
at Rs. 3,800
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c.The rent paid up to 31st December 2013 included Rs. 160 paid in
advance.
d. Interest accrued but not paid to Mr. Imran amounted to Rs. 13,000
e. Subscription in arrears amounted to Rs. 9,500.
Required: The income and expenditure account for the year ended on 31'
December 2020.
To prepare the income and expenditure account for Multan Club for the
year ended on December 31, 2020, we need to follow these steps:
Step 1: Calculate Total Income
Subscription received: 230,500
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Receipts from sales of refreshment: 169,660
Total Income = 230,500 + 169,660 = 400,160
Step 2: Calculate Total Expenditure
Purchase of refreshment: 73,700
Wages Paid: 10,000
Electricity Charges: 9,600
Rent expenses: 1,600
Telephone Expenses: 640
Printing & Stationery: 3,200
Bank Interest: 5,920
General expenses: 4,340
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Interest accrued but not paid to Mr. Imran: 13,000
Subscription in arrears: 9,500
Bill for refreshment at 31st December 2019: 5,120
Rent paid in advance: 160
Stock of refreshment on hand at 31st December 2019: 3,800
Repaid to Mr. Imran: 300,000
Total Expenditure = 73,700 + 10,000 + 9,600 + 1,600 + 640 + 3,200 + 5,920
+ 4,340 + 13,000 + 9,500 + 5,120 + 160 + 3,800 + 300,000 Total Expenditure
= 434,960
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Step 3: Calculate Surplus or Deficit (Income - Expenditure) Surplus or Deficit
= Total Income - Total Expenditure Surplus or Deficit = 400,160 - 434,960
Surplus or Deficit = -34,800 (Deficit)
Step 4: Prepare the Income and Expenditure Account
Multan Club Income and Expenditure Account for the year ended 31st
December 2020
Particulars Amount (Rs.)
Income
Subscription received 230,500
Sales of refreshment 169,660
Total Income 400,160
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Expenditure
Purchase of refreshment 73,700
Wages Paid 10,000
Electricity Charges 9,600
Rent expenses 1,600
Telephone Expenses 640
Printing & Stationery 3,200
Bank Interest 5,920
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General expenses 4,340
Interest accrued (Mr. Imran) 13,000
Subscription in arrears 9,500
Bill for refreshment (2019) 5,120
Rent paid in advance 160
Stock of refreshment (2019) 3,800
Repaid to Mr. Imran 300,000
Total Expenditure 434,960
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Surplus/Deficit (Loss) -34,800
In this case, the club incurred a deficit (loss) of Rs. 34,800 for the year ended
December 31, 2020. This means the club's expenses exceeded its income
during that period.
Q. 2 Khan & Sons established a business on July 01, 2020, with a capital
of Rs. 300,000. He introduced Rs. 125,000 as an additional investment and
withdrew Rs. 50,000 during the year. On 30 June 2014 he has assets of Rs.
400,000 and liabilities of Rs. 40,000. Calculate the profit or loss of Khan
& Sons for the year ended on 30th June 2020 using a single entry system.
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In a single-entry accounting system, it can be a bit more challenging to
calculate profit or loss because you don't maintain detailed records of every
financial transaction like you would in a double-entry system. However, you
can still determine the profit or loss by analyzing the changes in the capital
account.
Let's break down the information provided step by step:
Initial Capital: On July 1, 2020, Khan & Sons started the business with a
capital of Rs. 300,000.
Additional Investment: Khan introduced Rs. 125,000 as an additional
investment during the year. This increases the capital.
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Withdrawals: Khan withdrew Rs. 50,000 during the year. This decreases the
capital.
Assets and Liabilities on June 30, 2024: On June 30, 2024, the business had
assets worth Rs. 400,000 and liabilities worth Rs. 40,000.
To calculate the profit or loss, we need to determine the capital at the
beginning and at the end of the year, and then find the change in capital.
Capital at the Beginning (July 1, 2020):
Rs. 300,000 (Initial Capital)
Additional Investment:
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Rs. 125,000
Subtract Withdrawals:
Rs. 50,000
Capital at the Beginning (July 1, 2020):
= Rs. 300,000 + Rs. 125,000 - Rs. 50,000
= Rs. 375,000
Capital at the End (June 30, 2024):
This is calculated using the assets and liabilities on June 30, 2024:
Assets: Rs. 400,000
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Liabilities: -Rs. 40,000 (Note: Liabilities decrease the capital)
Capital at the End (June 30, 2024):
= Assets - Liabilities
= Rs. 400,000 - (-Rs. 40,000)
= Rs. 400,000 + Rs. 40,000
= Rs. 440,000
Now, we can calculate the profit or loss by finding the change in capital:
Change in Capital = Capital at the End - Capital at the Beginning
= Rs. 440,000 - Rs. 375,000
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= Rs. 65,000
Since the change in capital is positive (Rs. 65,000), it represents the profit for
the year ended on June 30, 2024. Khan & Sons made a profit of Rs. 65,000
during that year.
Q.3 On 15 April 2018 Mr. Muhammad of Karachi sent a consignment of
1,000 calculators to Mr. Ali Islamabad for sale in a college Book fiesta at
a cost of Rs. 100 each on a commission basis @ 10% of gross sales
proceeds. She paid Rs. 5000 as carrying cost. Mr. Ali sold 500 calculators
for Rs. 150 each and 300 calculators for Rs. 200. She incurred Rs. 1,000
as freight charges and Rs. 2,000 in miscellaneous expenses. 50 calculators
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were theft from the whole house of the consignee. On 31 May 2018
Consignee sent the account sales along with as bank for the amount due
to the consigner.
Required: Prepare the Consignment account and consignee account IBN
the books of the consigner.
To prepare the Consignment Account and Consignee Account in the books of
the consignor, we will go through a step-by-step process and create tables for
clarity. Let's start:
Consignment Account:
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Date Particulars
Debit
(Rs.)
Credit
(Rs.)
2018 April 15 100,000
To Consignment
sent to Mr. Ali
100,000
(1,000 calculators
at Rs. 100 each)
April 15 5,000
To Carrying Cost
paid by Consignor
5,000
May 31 1,000
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Date Particulars
Debit
(Rs.)
Credit
(Rs.)
By Freight Charges
paid by Consignee
1,000
May 31 2,000
By Miscellaneous
Expenses paid by
Consignee
2,000
May 31 5,000
By Loss due to
theft
5,000
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Date Particulars
Debit
(Rs.)
Credit
(Rs.)
May 31 150,000
By Gross Sales
Proceeds (500 x
150 + 300 x 200)
150,000
May 31 15,000
By Commission to
Mr. Ali (10% of
150,000)
15,000
May 31 27,000
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Date Particulars
Debit
(Rs.)
Credit
(Rs.)
To Closing
Balance (Profit)
27,000
(Balancing Figure)
Total 40,000 40,000
The closing balance (profit) of Rs. 27,000 in the Consignment Account
represents the profit earned by the consignor.
Consignee Account:
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Date Particulars
Debit
(Rs.)
Credit
(Rs.)
2018 April 15 100,000
To Consignment
received from Mr.
Muhammad
100,000
(1,000 calculators
at Rs. 100 each)
May 31 1,000
To Freight Charges
paid
1,000
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Date Particulars
Debit
(Rs.)
Credit
(Rs.)
May 31 2,000
To Miscellaneous
Expenses paid
2,000
May 31 15,000
To Commission to
Mr. Muhammad
(10% of Sales)
15,000
May 31 150,000
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Date Particulars
Debit
(Rs.)
Credit
(Rs.)
By Sales (500 x
150 + 300 x 200)
150,000
May 31 33,000
To Balance
(Amount Due to
Consignor)
33,000
(Balancing Figure)
Total 51,000 51,000
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The closing balance (Amount Due to Consignor) of Rs. 33,000 in the
Consignee Account represents the amount due to the consignor (Mr.
Muhammad). This is the amount that the consignee, Mr. Ali, needs to pay to
the consignor.
Mr. Muhammad's Consignment Account shows a profit of Rs. 27,000, and Mr.
Ali's Consignee Account shows an amount due to Mr. Muhammad of Rs.
33,000.
Q.4 Mr. Ahmad Industries purchased a computer on January 1, 2015.
The acquisition cost of the asset is Rs. 100,000, the useful life of the asset
in 5 years, residual value (or salvage value) at the end of useful life is Rs.
10,000.
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What is the amount of depreciation expense for the year ended December
31, 2019, using the sum of years digits method?
To calculate the depreciation expense for the year ended December 31,
2019, using the Sum of Years Digits (SYD) method, you'll need to follow
these steps:
Step 1: Calculate the total number of years of the asset's useful life. In this
case, the asset has a useful life of 5 years.
Step 2: Calculate the sum of the digits of the useful life. To do this, you'll add
up the numbers from 5 down to 1:
Sum of Digits = 5 + 4 + 3 + 2 + 1 = 15
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Step 3: Determine the proportion of depreciation for each year. For each year,
you'll use the following formula:
Depreciation Expense for a Specific Year = (Remaining Useful Life / Sum of
Digits) x (Cost of the Asset - Residual Value)
Now, calculate the depreciation expense for each year:
Year 2015 (First Year): Remaining Useful Life = 5 years Depreciation
Expense = (5 / 15) x (100,000 - 10,000) = (1/3) x 90,000 = Rs. 30,000
Year 2016 (Second Year): Remaining Useful Life = 4 years Depreciation
Expense = (4 / 15) x (100,000 - 10,000) = (4/15) x 90,000 = Rs. 24,000
Year 2017 (Third Year): Remaining Useful Life = 3 years Depreciation
Expense = (3 / 15) x (100,000 - 10,000) = (1/5) x 90,000 = Rs. 18,000
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Year 2018 (Fourth Year): Remaining Useful Life = 2 years Depreciation
Expense = (2 / 15) x (100,000 - 10,000) = (2/15) x 90,000 = Rs. 12,000
Year 2019 (Fifth Year): Remaining Useful Life = 1 year Depreciation Expense
= (1 / 15) x (100,000 - 10,000) = (1/15) x 90,000 = Rs. 6,000
So, the amount of depreciation expense for the year ended December 31,
2019, using the Sum of Years Digits method is Rs. 6,000. You can summarize
this information in a table as follows:
Year
Remaining Useful
Life
Depreciation
Expense
2015 5 years Rs. 30,000
2016 4 years Rs. 24,000
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Year
Remaining Useful
Life
Depreciation
Expense
2017 3 years Rs. 18,000
2018 2 years Rs. 12,000
2019 1 year Rs. 6,000
Q.5 Tufail, Jamal, and Kamal were running a business under the name
Globe General Store. They shared profit and loss as 3:2:1 respectively.
They close their books on 31st December each year. Jamal retired from
the business. On the date of his retirement, the Balance sheet of the firm
was under:
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Capitals
&Liabilities
Amount Assets Amount
Sundry
Creditors
10200
Cash in
hand
10000
Loan of
Jamal
3600
Sundry
debtors
10000
Less
Allowance
500
9500
Tufail-
Capital
22700
Stock 16000
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Jamal-
Capital
16000
Office
equipment’s
12000
Kamal-
Capital
7000
45700
Less
deprecation
2000
10000
Plant &
machinery
17000
Less
deprecation
3000
14000
59500 59500
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The following adjustments are to be made before ascertaining the amount
due to Jamal:
i.Goodwill is to be valued at Rs. 18000/- which is to be remained in the
books.
ii. Allowance for un-collectible is to be increased to Rs. 1000/-
iii. Stock valued at Rs. 15000/-
iv.Office equipment and plant machinery are to be depreciated at 10%
of the net value.
v.The amount due to Jamal is to be transferred to his loan account, at the
rate of 15% interest, but the loan in the balance sheet is to be paid
immediately.
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Required: Pass necessary journal entries, and prepare the balance sheet
of the new firm.
To address Jamal's retirement and the adjustments required, let's go through
the necessary journal entries step by step and then prepare the balance sheet
of the new firm.
Step 1: Goodwill Valuation and Adjustment
We need to increase the goodwill valuation to Rs. 18,000:
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Date Particulars
Debit
(Rs.)
Credit
(Rs.)
Goodwill
Adjustment
Account
8,000
To Jamal's Capital
Account
8,000
Step 2: Increase Allowance for Uncollectible Accounts
Increase the allowance for uncollectible accounts to Rs. 1,000:
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Date Particulars
Debit
(Rs.)
Credit
(Rs.)
Allowance for
Uncollectible
Adjustment Account
500
To Sundry Debtors
Account
500
Step 3: Stock Valuation
Value the stock at Rs. 15,000:
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Date Particulars
Debit
(Rs.)
Credit
(Rs.)
Stock Valuation
Adjustment Account
1,000
To Stock Account 1,000
Step 4: Depreciation on Office Equipment and Plant & Machinery
Depreciate office equipment and plant & machinery at 10% of the net
value. First, calculate the net values:
Office Equipment Net Value: Rs. 10,000 (Original Value) - Rs. 2,000
(Accumulated Depreciation) = Rs. 8,000
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Plant & Machinery Net Value: Rs. 14,000 (Original Value) - Rs. 3,000
(Accumulated Depreciation) = Rs. 11,000
Now, calculate the depreciation:
Office Equipment Depreciation: 10% of Rs. 8,000 = Rs. 800
Plant & Machinery Depreciation: 10% of Rs. 11,000 = Rs. 1,100
Date Particulars
Debit
(Rs.)
Credit
(Rs.)
Office Equipment
Depreciation Account
800
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Date Particulars
Debit
(Rs.)
Credit
(Rs.)
To Office Equipment
Account
800
Plant & Machinery
Depreciation Account
1,100
To Plant &
Machinery Account
1,100
Step 5: Jamal's Loan and Interest
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Transfer the amount due to Jamal's Loan Account and calculate the interest at
15% on the loan balance in the balance sheet.
Transfer Amount Due to Jamal's Loan Account:
Date Particulars
Debit
(Rs.)
Credit
(Rs.)
Jamal's Loan
Account
16,000
To Jamal's Capital
Account
16,000
Interest Calculation on Loan (15% for the whole year):
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The loan is paid immediately; therefore, the interest is calculated for one
year:
Interest = Loan Amount x Interest Rate Interest = Rs. 16,000 x 15% = Rs.
2,400
Date Particulars
Debit
(Rs.)
Credit
(Rs.)
Interest on Jamal's
Loan Account
2,400
To Cash Account 2,400
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Now, let's prepare the balance sheet of the new firm after these
adjustments:
Balance Sheet of the New Firm as of Jamal's Retirement:
Capitals
&
Liabilities
Amount
(Rs.) Assets
Amount
(Rs.)
Sundry
Creditors
10,200 Cash in Hand 10,000
Jamal's
Loan
16,000
Sundry
Debtors
9,500
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Capitals
&
Liabilities
Amount
(Rs.) Assets
Amount
(Rs.)
Tufail's
Capital
22,700 Stock 15,000
Kamal's
Capital
7,000
Office
Equipment
8,000
Plant &
Machinery
11,000
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Capitals
&
Liabilities
Amount
(Rs.) Assets
Amount
(Rs.)
56,900
Less:
Accumulated
Depreciation
3,000
Total
Liabilities
56,900 Total Assets 50,500
In the balance sheet, Jamal's Capital Account has been adjusted for the
increase in goodwill valuation, the allowance for uncollectible accounts, and
the stock valuation. Jamal's loan has been paid, including interest. The balance
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sheet reflects the financial position of the new firm after Jamal's retirement
and the necessary adjustments.
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AIOU Solved Assignment Code 1340 Business Accounting Autumn 2023 Assignment 1.pdf

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