MGT101 SOLVED FINAL TERM PAPER

Current Final term Paper 2010

Question No: 7    ( Marks: 1 )    - Please choose one

 Which of the following business publishes the Financial Statements?

       ► Sole-Proprietorship

       ► Partnership

       ► Trust

       ► Public Limited Company

Question No: 17    ( Marks: 1 )    - Please choose one

 Which financial statement show what a business owes at a particular point in time?

       ► A cash flow statement

       ► The bank statement for the business

       ► A balance sheet

       ► A statement of retained earnings

Question No: 19    ( Marks: 1 )    - Please choose one

 The Balance Sheet item that represents the resources invested by the owner is known as:

       ► Accounts Receivable

       ► Cash

       ► Note Payable

       ► Owner's Equity

Question No: 25    ( Marks: 1 )    - Please choose one

 Which of the following rectifying entry will be recorded, if sales to Mr. “A” of Rs.336 have been debited to Mr. “B” account?

       ►  A’s account (Dr.) and B’s account (Cr.)

       ► B’s account (Dr.) and A’s account (Cr.)

       ► Sales account (Dr.) and B’s account (cr.)

       ► B’s account (Dr.) and Sales account (Cr.)

Question No: 28    ( Marks: 1 )    - Please choose one

 If provision is created for doubtful debts, which of the following entry will be passed to record bad debts in control account?

       ► Bade debts (Dr) and Debtors Control A/c (Cr)

       ► Provision for doubtful debts (Dr) and Debtors Control A/c (Cr)

       ► Provision for doubtful debts (Dr) and Debtors A/c (Cr)

       ► Debtors Control A/c (Dr) and Provision for doubtful debts (Cr)

Question No: 34    ( Marks: 1 )    - Please choose one

 The following balance and discrepancies were found on 31 March 2008:

Particulars	Rs.
Cash book balance (Dr)	5 000
Unpresented cheques	1 000
Uncredited cheques	500

The Bank Statement balance on 31 March 2008 should be:

       ► Rs. 5 500 (Dr)

       ► Rs. 5 500 (Cr)

       ► Rs. 4 500 (Dr)

       ► Rs. 4 500 (Cr)

   

Question No: 42    ( Marks: 1 )    - Please choose one

Cost of asset	Rs. 1,00,000
Life of asset	5 years
Depreciation for each year	Rs. 15,000
Sale price after 5 years	Rs.50,000
Book value of Asset after 5 years	?

       ► Rs.25, 000

       ► Rs. 75,000

       ► Rs. 15,000

       ► Rs. 1, 00,000

Question No: 44    ( Marks: 1 )    - Please choose one

 Which of the following shows summary of a company's financial position at a specific date?

       ► Profit & Loss Account

       ► Cash Flow Statement

       ► Balance Sheet

       ► Income & Expenditure Account

Question No: 1    ( Marks: 1 )    - Please choose one

 Debenture is also named as:

       ► Share

       ► Bond

       ► Equity

       ► Reserve

Question No: 2    ( Marks: 1 )    - Please choose one

 A company declares a cash dividend to be paid to its stockholders next month. The effect of the transaction is to:

       ► Decrease assets and liabilities.

       ► Increase assets and stockholders' equity.

       ► Decrease assets and stockholders' equity.

       ► Increase liabilities and decrease stockholders' equity.

Question No: 4    ( Marks: 1 )    - Please choose one

 The net income calculated in the income statement for the accounting period is reported on:

       ► Bank Statement

       ► Statement of retained earnings

       ► Statement of cash flows

       ► None of the given options

Question No: 9    ( Marks: 1 )    - Please choose one

 Which of the following is the most important document of the company?

       ► Memorandum of Association

       ► Articles of Association

       ► Prospectus

       ► Annual Report

Question No: 12    ( Marks: 1 )    - Please choose one

 Authorized share capital is also known as:

       ► Registered capital

       ► Issued capital

       ► Paid up capital

       ► Called up capital

Question No: 20    ( Marks: 1 )    - Please choose one

 Consider the following table:

	Financial statement item	Classification
A.	Inventory	Current asset
B.	Tangible assets	Non-current asset
C.	Accrued expenses	Current asset
D.	Bonds payable	Long-term liabilities

Identify the row above, showing an INCORRECT financial-statement classification?

       ► Row A

       ► Row B

       ► Row C

       ► Row D

Question No: 27    ( Marks: 1 )    - Please choose one

 Goods purchased from “Mr. A” for Rs. 2,000 passed through the sales book. The rectification of error will result in:

       ► Increase of gross profit

       ► Decrease of gross profit

       ► Remains constant and no effect on net profit

       ► There is no relation between goods purchased and gross profit

Question No: 31    ( Marks: 1 )    - Please choose one

 Which of the following entry will be recorded when the Bad Debts are recovered?

       ► Cash account (Dr.) & Bad Debts recovered account (Cr.)

       ► Accounts Receivable account (Dr.) & Bad Debts recovered account (Cr.)

       ► Bad debts recovered  account (Dr.) and Profit & Loss account (Cr.)

       ► Provision for doubtful debts account (Dr.) & Cash account (Cr.)

Question No: 33    ( Marks: 1 )    - Please choose one

 Which of the following would be deducted from Sundry Debtors in Balance Sheet?

       ► Bad debts (Trial balance item)

       ► Old provision for doubtful debts

       ► New provision for doubtful debts

       ► Both Bad debts (given in adjustment) and new provision for doubtful debts

Question No: 12    ( Marks: 1 )    - Please choose one

 The amount received; in excess of the face value of the shares is transferred to which of the following?

       ► Share premium account

       ► Share holder account

       ► Share capital account

       ► Right share

   

Question No: 13    ( Marks: 1 )    - Please choose one

 The maximum amount with which the company is registered is called:

       ► Authorized Share Capital

       ► Issued Share Capital

       ► Paid up capital

       ► Called up capital  

Question No: 31    ( Marks: 1 )    - Please choose one

 Following information are extracted from books of Mr. XYZ

Particulars		Rs.
Bad Debts (Given in trial balance)		500
Old provisions (Given in trial balance)		800
Sundry Debtors (Given in trial balance)		44,500
Provision for doubtful debts @ 5%
What will be the amount of new provision		?

       ► Rs. 2,225

       ► Rs. 2,525

       ► Rs. 1,925

       ► Rs. 3,025

Question No: 32    ( Marks: 1 )    - Please choose one

 Following information are extracted from books of Mr. XYZ

Particulars	Rs.
Closing value of stock	40,000
Write off Bad debts (given in adjustments)	2,400
Sundry Debtors (given in trial balance)	33,200
Provision is created on Debtors at 5%

Requirement:  Identify the Total amount which will deduct from Sundry debtors.

       ► Rs. 460

       ► Rs. 2,400

       ► Rs. 1,540

       ► Rs. 3,940

   

Question No: 37    ( Marks: 1 )    - Please choose one

 Depreciable value of an asset is equal to:

       ► Cost + scrap value

       ► Cost + market price

       ► Cost – scrap value

       ► None of the given options

Question No: 39    ( Marks: 1 )    - Please choose one

 Which of the following asset is NOT depreciated?

       ► Factory Buildings

       ► Office Equipment

       ► Plant & Machinery

       ► Land

Question No: 40    ( Marks: 1 )    - Please choose one

 Which one of the following is NOT true about revenue expenditure?

       ► These are the running expenses of the business

       ► They improve the financial position of the business

       ► They reduce the profit of the concern

       ► They do not appear in the balance sheet

Question No: 47    ( Marks: 1 )    - Please choose one

 Accounts Receivable & Inventory are the examples of:

       ► Liquid assets

       ► Current assets

       ► Fixed assets

       ► Capital assets

   

Question No: 11    ( Marks: 1 )    - Please choose one

 The Joint Stock Company is formed under the Companies Ordinance:

       ► 1984

       ► I884

       ► 1948

       ► 1965

Question No: 42    ( Marks: 1 )    - Please choose one

 Which one of the following statement is CORRECT about Long term liabilities?

       ► These are due within one year

       ► These are consist of all debts, payable after 12 months

       ► In working capital, these are deducted from current assets

       ► All of the given options

Question No: 16    ( Marks: 1 )    - Please choose one

 Which of the following can offer its share to general public at large?

       ► A private limited company

       ► A listed company

       ► A partnership firm

       ► A trust

Question No: 43    ( Marks: 1 )    - Please choose one

 What would be the value of total factory cost, if the cost of material consumed during the month is Rs. 6,000, labor cost incurred is Rs. 2,000 and the factory over head cost is Rs. 2,500? 

       ► Rs. 6,000

       ► Rs. 8,000

       ► Rs. 4,500

       ► Rs. 10,500

Question No: 44    ( Marks: 1 )    - Please choose one

 Which of the following is CORRECT?

       ► A cash inflow means increase total cash only

       ► A cash inflow means increase in cash equivalent only

       ► A cash inflow means increase in cash and decrease in cash equivalent

       ► A cash inflow means increase in both cash and cash equivalent

Long Questions including my and my Friends…

Question: Marks=3

What the difference between Debtors turnover Ratio and Creditor turnover ratio?

Question: Marks = 5

If A and B are two partners and their profit ratio is 3:1 and their capitals are 30000 and 100 respectively. The net profit is 160000 and B get salary Rs. 200 p.m. Prepare Profit distribution account of A and B Partnership.

Question: marks = 5

Pass the Rectify entries.

1: Purchases on credit rs. 10000 to Rizwan have passed through the Sales book.

2: The casting of sales book 151594 but wrongly pass in sales Rs. 115594.

Question No: 54    ( Marks: 10 )

 Write a note on legal documents required for the formation of company.

ANSWER:

 LEGAL DOCUMENTS REQUIRED FOR FORMATION OF COMPANY:

MEMORENDUM OF ASSOCIATION: It contains the following information

         1. Name of company.

         2. Place of registered office

         3. Objective

         4. Amount of share capital with which company registers.

         

ARTICLES OF ASSOCIATION: It contains the following information

      A document that contains all the policies and other matters necessary to run the business of the company. It is signed by all the members of the company.

Question No: 52    ( Marks: 10 )

 Briefly explain the financial statements prepared by the organization. Why these are important for manufacturing concern?

ANSWER: The financial statements prepared by any organization are as follows:

1. Profit and loss account: It shows the performance of the business in a given period. It shows the profitability of business which shows the success or failure of the business. 
2. Balance sheet: Balance sheet shows the position of business at a given point. It shows the resources available by the business and the resources invested by the owner and other loans. 
3. Cash flow statements: Cash flow statements show the generation of cash and its usage over a given period.

   IMPORTANCE OF FINANCIAL STATEMENTS FOR MANUFACTURING CONCERN:  These financial statements are important for manufacturing concern organization as they provide information related to financial affairs of the organization. The profitability and liquidity, the resources available to the company and the generation of cash and its usage over a given period which provides reasonable information to the management to take decisions.

     

Question No: 54    ( Marks: 10 )

 Pass the rectifying entries to correct the following errors:

•         Mr. “Ali” purchased goods of Rs. 1,500 on cash, but omitted to enter in the books of accounts.

•         An amount of Rs. 5,000 received  from Mr. Amir, was credited to the account of Mr. Ameer.

•         Goods returned worth Rs. 500 to Mr. “B” wrongly debited to sales Account.

•         A purchase of goods from Mr. “B” of Rs. 400 has been wrongly debited to Furniture Account.

•         Furniture purchased on cash Rs. 8,000 posted as purchases.

Rectification of Errors

Error 1.

A purchase of goods of Rs. 1,500 on cash was omitted by mistake

Rectification Entry on the date of discovery:

            Debit:                          Purchase Account                             1,500

            Credit:                                    Cash Account                                                1,500

Error 2

            Debit:                          Mr. Ameer                                         5,000

            Credit:                                    Mr. Amir                                            5,000

•         Error 3 Goods returned worth Rs. 500 to Mr. “B” wrongly debited to sales Account.

            Debit:                          Goods Return                        Rs. 500

            Credit:                                    Sales Account                        Rs. 500

            Error 4 A purchase of goods from Mr. “B” of Rs. 400 has been wrongly debited to Furniture Account.

            Debit:              Purchases                               Rs. 400

            Credit                          Furniture Account                   Rs. 400

Error 5 Furniture purchased on cash Rs. 8,000 posted as purchases.

            Debit               Furniture Account                Rs. 8,000

            Credit                         Purchase Post Account                     Rs. 8,000

Question No: 52    ( Marks: 10 )

 Write down the at least ten distinguishing features of a limited company which differentiate it from Partnership business

The basic difference between a partnership and a limited company is the concept of limited liability.

1. If a partnership business runs into losses and is unable to pay it’s liabilities, its partners will have to pay the liabilities from their own wealth.
2. In case of limited company the shareholders don’t lose anything more than the amount of capital they have contributed in the company. It points that personal wealth is not at stake and their liability is limited to the amount of share capital they have contributed.
3. The concept of limited company is to mobilize the resources of a large number of people for a project, which they would not be able to afford independently and then get it managed by experts.
4. Listed Company have more than twenty partners, so problem of extra capital is reduced to minimum.
5. The liabilities of the members of a company is limited to the extent of capital invested by them in the company
6. There are certain tax benefits to the company, which a partnership firm can not enjoy
7. In Pakistan, affairs of limited companies are controlled by “Companies Ordinance” issued in 1984
8. The formation of a company and other matters related to companies are governed by “Securities and Exchange Commission of Pakistan (SECP)

Question No: 54    ( Marks: 10 )

 The following discrepancies were noted on comparing Cash Book with Pass Book.

(1)   The following cheques were deposited into bank on 28^th March but were not collected by the bank by 31^st March, (i) Rs. 500, (ii) Rs. 300, (iii) Rs. 200.

(2)   The following cheques were issued but were not presented for the payment by 31^st March. (i) Rs. 200, (ii) Rs. 450 (iii) Rs. 525 (iv) Rs. 375.

(3)   The bank credited a dividend of Rs. 2,000 on 31^st march but intimation was received by the trader on 5^th April, 2008.

(4)   The bank credited interest of Rs. 50 on 31^st March but not debited in Cash Book.

(5)   The Bank charged (debited) a commission of Rs. 100 on 31^st March.

(6)   A cheque of Rs. 500 was received from customer and was entered in the bank column of Cash Book on 25^th March, but was paid into the bank on 1^st April.

Required: Prepare a Bank Reconciliation Statement, if the Bank balance as per Cash Book (Dr.) was Rs. 15,000 on 31^st March, 2008.

Answer:

Balance as per Cash book.                                          Dr                    15000

Less not collected Cheques. (500+300+200)             Cr                    1000

                                                                                    Dr                    14000

Add UN Presented Cheques (200+450+525+375)    Dr                    1550

                                                                                    Dr                    15550

Add dividend Credit by bank                                                Dr                    2000

                                                                                    Dr                    17550

Add interest credit by bank                                        Dr                    50

                                                                                    Dr                    17600

Less bank charges                                                       Cr                    100

                                                                                    Dr                    17500

Less Cheque received                                                 Cr                    500

Balance as per Bank Book                                          Cr                    17000

Question No: 52    ( Marks: 10 )

 Income Statement of XYZ Ltd for the year ended on 30^th June, 2007:

Particulars	Rs.	Rs.
Sales		500,000
Less: Cost of Goods Sold		250,000
Gross Profit		250,000
Less: Operating expenses
Administrative expenses	110,000
Interest expenses	20,000	130,000
Net profit before Tax		120,000
Less: Taxes		36,000
Net profit after tax		84,000

Opening Stock for the year was Rs. 60,000.

Balance Sheet of XYZ Ltd on 30^th June, 2007:

Assets	Rs.
Fixed Assets	400,000
Stock	60,000
Debtors	230,000
Bills Receivable	40,000
Cash at bank	150,000
Prepaid expenses	20,000
Total	900,000
Liabilities
Share capital	200,000
Reserves and surplus	250,000
10% Debentures	200,000
Creditors	180,000
Bills payable	70,000
Total	900,000

Calculate following ratios from the financial statement of XYZ Ltd.

1.      Current Ratio

2.      Acid Test Ratio

3.      Stock turn over Ratio

4.      Debt equity Ratio

5.      Gross profit Ratio

Solution:

1: Current Ratio:

            Total Assets/Total Liabilities

= 900000/900000

= 1

2: Acid Test Ratio

                        Total Assets-Stock/Total Liabilities

= 900000-60000/900000

= 840000/900000

= 0.933333

3: Stock turn over Ratio

                        (Average Stock / Cost of goods sold) x 365

Average Stock = opening stock + Closing Stock/2

                        = 60000+60000/2

                        = 60000

= (Average Stock / Cost of goods sold) x 365

= (60000/250000) x 365

= 0.24 x 365

= 87.4

4: Debt equity Ratio

                        Long term Liabilities / Equity

= 200000/200000

= 1

5: Gross profit Ratio

                        (Gross Profit / Sales) x 100

= 250000/500000 x 100

= 0.5 x 100

= 50

Question No: 51    ( Marks: 5 )

 10 % Debentures of Rs. 80,000 are shown in trial balance. How it will be shown in financial statements? Also mention why a company issues debentures.

Answer:

10% Debentures of Rs. 80000 is shown the Owners Equity pr liability Side of Balance sheet.

Debentures are issued under the common seal of the company and debentures are an instrument for obtaining the loan from the general public. Company also paid mark up on debentures which generally equal to the market rate.