FOA Past Year Jan 2011

1 PAST YEARS PAPERS FOR STUDENTS’ PRACTISE Question 2 (January 2010/2011) (A) AB Sdn. Bhd. received the monthly bank statement for the month ended 31 October 2010 and the balance was RM6,203 at 31 October 2010. The balance of the cash account as at 31 October 2010 was RM6,138. Upon checking the bank statement with the cash book, the following differences were revealed: 1. Bank service charges for October amounted to RM67. 2. A cheque for RM650 given to AB Sdn. Bhd. by a customer was dishonoured. 3. The bank had incorrectly credited AB Sdn. Bhd.’s account with a deposit of RM100 which should have been credited to AA Sdn Bhd’s account. 4. A cheque deposit of RM160 was made on 30 October and this deposit did not appear in the bank statement. 5. The following three cheques issued by AB Sdn. Bhd. were not presented for payment as at 31 October 2010: Cheque Number: RM 408 130 410 375 411 355 6. Cheque Number 412 issued to a creditor for RM86 was wrongly recorded as RM68 in the cash account. Required: (a) Based on the above information, prepare the following: (i) Revised bank account; and (ii) Bank reconciliation statement as at 31 October 2010. (b) Explain the purpose of preparing the bank reconciliation statement.

(6 marks) (7 marks) (2 marks)

Proposed solution: (a) (i) Bank Account Bal b/d

Bal b/d

6,138

____________ 6,138 =========== 5,403

6 marks

Posted into CEL since 21 November 2011

Bank charges Accounts receivables Accounts payables Bal c/d

67 650 18 5,403 __________ 6,138 =========

2 ABFA1023 FUNDAMENTALS OF ACCOUNTING

(a)(ii) AB Sdn Bhd Bank Reconciliation Statement As at 31 October 2010 RM Bal per the bank statement Add: Outstanding lodgment Less: Error by the bank Less: Outstanding cheques

408 410 411

Balance in the Cash Book( bank account) 7 marks

100 130 375 355 ____

RM 6,203 160 6,363

960 5,403 =====

(b) Reasons for preparing bank reconciliation statement:  

To detect errors made by either party. To identify items like bank charges to be included in the accounts.

(B) At the end of its financial year, an imbalance in the list of account balances was revealed in HL Sdn. Bhd.’s trial balance. The total credits was less then the total debits by RM1,040. A suspense account was temporarily created while the accounts were being investigated. The following errors were discovered: 1. A sale of goods on credit for RM1,000 was omitted from the sales account. 2. Inventory of RM240 has been ignored. 3. A purchase of raw material of RM350 had been recorded in the purchases account as RM850. 4. The purchase return day book includes a sales credit note of RM230 for goods returned by a customer. This was only recorded in his personal account. The gross profit, before the correction of errors was RM35,750.

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Required: (a) Prepare the suspense account and show the correction of the errors. (4 marks) (b) Calculate the revised gross profit after the correction of the errors. (6 marks) [TOTAL: 25 MARKS]


Proposed solution: (a)

Suspense A/c Sales 1,000 Purchases(850-350) 500

Difference

1,040

Purchase return Sales return

230 230 _____ 1,500 =====

_______ 1,500 ====== (b)

Calculation of revised gross profit RM Gross profit Add: sales omitted Cost wrongly charged Purchase overstated

RM 35,750

1,000 240 500 1,740

Less: Purchase return Sales return

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Revised gross profit

230 230 ( 460) 37,030 =====


Question 3 (January 2010/2011) Synergy Plus Sdn. Bhd. maintains separate sales ledger and purchase ledger for recording its individual trade receivables’ and trade payables’ accounts. The following information relates to the year ended 31 December 2010: Debit balances on the trade receivables control account as at 1 Jan 2010 Credit balances on trade payables control account as at 1 Jan 2010 Sundry credit balances on trade receivables control account as at 1 Jan 2010 Goods purchased on credit Goods sold on credit Cash received from trade receivables Cash paid to trade payables Discounts received Discounts allowed Cash purchases Cash sales Bad debts written off Interest charged on overdue trade receivables accounts Returns outwards Returns inwards Amount settled by contra between the trade receivables and trade payables accounts Sundry credit balances on trade receivables control accounts as at 31 Dec 2010 Sundry debit balances on trade payables control accounts as at 31 Dec 2010

RM 66,300 50,600 724 257,919 323,614 299,149 210,522 2,663 2,930 3,627 5,922 3,651 277 2,926 2,805 1,106 815 698

Required: (a) Prepare the trade receivables control account and the trade payables control account for the year ended at 31 December 2010. (23 marks) (b) Describe TWO (2) advantages for maintaining control accounts. (2 marks) [TOTAL: 25 MARKS] Proposed solution: (a)

Trade Receivables Control Account Bal b/d 66,300 Goods sold on credit 323,614 Interest charged o/due

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Bal c/d

277 815 _______ 391,006 =======

Bal b/d 724 Cash 299,149 Discount allowed 2,930 Bad debts 3,651 eturns inwards 2,805 Trade payables –contra 1,106/ Bal c/d 80,641 ________ 391,006 =======


Trade Payables Control Account Cash Discounts received

210,522 2,663

Bal b/d Purchase

Returns outwards Trade receivables A/c Bal c/d

2,926 1,106 92,000 _______ 309,217 ======

Bal c/d

50,600 257,919 698 ________ 309,217 ========

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(b) Advantages for preparing control accounts  Easy to locate errors in the accounts  Reduce the number of entries in the control accounts  an independent check on the accuracy of the sales ledger and purchase ledger


Question 4 (January 2010/2011) The following purchases and sales are made by Trader Sdn. Bhd. during the first two weeks in January 2010. There was no opening inventory.

Purchases Sales Month Units Cost per Units Price per unit January unit RM RM 1 100 7 10 9 2 20 9 5 50 9 7 75 8 10 20 9 12 50 10 Total units 175 Total units 150 purchased sold At the end of January, there were 25 units in the closing inventory. Required: (a) Prepare the inventory card for Trader Sdn. Bhd. according to the following valuation method: (i) First-in, first-out (FIFO); and (9 marks) (ii) Weighted Average Cost (WAC) (10 marks) (b) Explain THREE (3) advantages of the FIFO method. (6 marks) [TOTAL: 25 MARKS] Proposed solution: (a)(i) FIFO basis Date Jan, 1 Jan, 2 Jan, 5 Jan, 7

Receipts Units Price RM 100 7 700 - - 75 8 600

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Jan, 10 Jan, 12 _____ 175

-

_____ 1,300

Issues Units Price RM 10 7 70 20 7 140 50 7 350 - 20 7 140 50 8 400 ____ ____ 150 1,100

Balance Units Price RM 90 7 630 70 7 490 20 7 140 20 7 140 75 8 600 75 8 600 25 8 200 25

200


(ii)

WAC basis Date

Receipts Units Price RM Jan, 1 100 7 700 Jan, 2 - Jan, 5 - Jan, 7 75 8 600 Jan, 10 - Jan, 12 - _____ ______ 175 1,300 (b)

Issues Units Price 10 7 20 7 50 7 20 7.8 50 7.8 ____ 150

Balance Units Price 90 7 70 7 20 7 95 7.8/ 75 7.8 25 7.8

RM 70 140 350 156 390 ____ 1,106 25

RM 630 490 140 741 585 195 195

Advantages

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 Inventory values are easy to calculate and based on actual price paid.  Closing inventories is based on the most recent purchase price that reflects the current market value.  Acceptable by the Inland Revenue Board, Malaysia for tax purpose.  Acceptable by the international financial reporting standards.


Question 2 (April 2010/2011) Encik Ahmad, a small business owner, does not keep a full set of accounts. The following is a summary of Ahmad’s bank account for the year ended 31 December 2010:

Balance 1 Jan 2010 Receipts from customers Cash sales

Balance b/d

Summary of Bank Account RM 4,000 Payments to suppliers 45,000 Cash purchases 650

Rent Insurance Other expenses Personal use Balance c/d

RM 36,000 700 1,000 500 275 10,450 ?

?

Ahmad had received a cash discount of RM230 for prompt payment from a supplier. Debts of RM450 had been written off and a discount of RM300 allowed during the year. Additional information available: As at 31 December 2009 As at 31 December 2010 RM RM Inventory 12,000 14,000 Trade payables 5,400 6,500 Trade receivables 10,000 9,650 Rent prepaid 150 200 Insurance owing 50 100 Machinery at valuation 3,500 3,250 Required: (a) Calculate total sales for the year ended 31 December 2010. (4 marks) (b) Calculate total purchases for the year ended 31 December 2010. (4 marks) (c) Prepare the Statement of Comprehensive Income for the year ended 31 December 2010. (9 marks) (d) Prepare the Statement of Financial Position as at 31 December 2010. (8 marks) [Total: 25 marks]

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Proposed solution:


Question 3 (April 2010/2011) The following Trial Balance is extracted from the books of General Making Sdn Bhd as at 31 December 2010: Trial Balance as at 31 December 2010 Cr

Dr RM

10% Preference share capital of RM1 each Ordinary share capital of RM1 each 10% debentures (repayable 2015) Building at cost Equipment at cost Motor vehicles at cost Provision for depreciation : equipment 1.1.2009 Provision for depreciation : motors 1.1.2009 Inventories Purchases and Sales Carriage inwards Salaries Directors’ remuneration Motor expenses Rates & Insurance Stationeries Debenture interest Trade Receivables and Trade Payables Cash at Bank General reserve Share premium account Interim ordinary dividend paid Retained profits: 31.12.2009

RM 150,000 70,000 30,000

340,500 8,000 17,200 2,400 5,160 22,690 63,910 298,200 2,620 10,240 10,300 6,120 3,930 660 1,500 158,509 66,270 8,390 5,000 14,000 3,500 17,039 658,069 658,069

The following adjustments are needed: (i) The directors proposed the following: a. Final ordinary dividend of 10% b. The preference share dividend is to be paid in full c. Transfer RM5,000 to general reserve (ii) Inventories at 31.12.2010 were RM27,220. (iii) Depreciation of motor vehicles RM3,000 and equipment RM1,200. (iv) Accrued debenture interest RM1,500. (i) Authorised share capital is RM400,000 in preference shares and RM300,000 in ordinary shares. (ii) Provision for income tax RM5,000.

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Required: Prepare the Statement of Comprehensive Income and Working Notes on the Appropriation of Profits for the financial year ended 31 December 2010 and the Statement of Financial Position as at that date. [Total: 25 marks] Proposed solution:


Question 4 (April 2010/2011) (A) PA Sdn Bhd’s cash book showed a debit balance of RM4,880 at the end of October 2010 but its bank statement showed a credit balance of RM4,580. The following items were the cause of the difference between the cash book and bank statement: 1. Cheques amounting to RM1,800 received by PA Sdn Bhd had not been credited by the bank. 2. Cheques amounting to RM1,360 issued by PA Sdn Bhd had not been presented for payment. 3. Bank charges of RM20 were not recorded in the cash book. 4. A cheque for RM400 marked “ refer to drawer” had been returned by the bank but it had not been recorded in the cash book. 5. A credit transfer of RM600 was not recorded in the cash book. 6. A cheque of RM40 drawn by PA Sdn Bhd was omitted from the cash book but appeared on the bank statement. Required: (a) Prepare a revised cash book as at 31 October 2010. marks)

(6

(b)

(5

Prepare a bank reconciliation statement as at 31 October 2010. marks)

Proposed solution:

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(B) At the end of GK Sdn. Bhd.’s financial year, 30 November 2010, the following information extracted from the company’s books: RM Sales 400,000 Cost of Sales 300,000 Other income 80,000 Operating expenses 120,000 Closing inventory 30,000 Trade receivables 50,000 Bank overdraft 40,000 Trade payables 20,000 Required: (a) Calculate the following ratios for GK Sdn. Bhd. and briefly comment on each of the ratios: (i) Gross profit as a percentage of sales; (2 marks) (ii) Net profit as a percentage of sales; (2 marks) (iii) Current ratio; and (2 marks)


(b)

(iv) Quick ratio. marks) Explain the purpose of the following ratios: (i) Inventory turnover ratio; marks) (ii) Trade receivable turnover; and marks) (iii) Trade payable turnover. marks)

(2 (2 (2 (2 [Total: 25 marks]

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Proposed solution:


Question 2 (August 2011/2012) AA Sdn. Bhd. drawn up its trial balance for the year ended 31 December 2010. However, the debit exceeds the credit balance by RM2,000. You are required to open a suspense account for the difference in amount. During 2011 the following errors made in 2010 were located: (i) Disposal of an old laptop for RM400 was recorded as AA’s sales. (ii) Purchases day book was overcast by RM1,850. (iii)The owner did a private purchase that was wrongly included as business purchases that amount to RM690. (iv) A debit advice of RM30 for bank charges was found only in the cash book. (v) A sale of goods to Hermoine amounting to RM790 was correctly entered in the sales day book however; it was recorded in her personal account as RM970 instead. Required: (a) Indicate the required journal entries to correct the errors (narratives with working where appropriate is necessary). (8 marks) (b) Write up the suspense account showing the corrections of appropriate errors. (4 marks) (c) The original net profit before adjusting for errors was RM12,000. Show your calculation of the revised net profit for the period ended 31 December 2010. (7 marks) (d) Describe THREE (3) types of errors where the trial balance will still balance. (6 marks) [Total: 25 marks] Proposed solution: (a) Correcting journal entries: (i)

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(ii)

Dr Sales Cr Disposal of computer (Correction of error – proceeds from disposal of computer wrongly entered into Sales account) Dr Suspense Cr Purchases (Correction of error – Purchases Day Book overcast)

(iii) Dr Drawings Cr Purchases (Correction of error – private purchase wrongly entered into Purchases account) (iv) Dr Bank charges Cr Suspense

RM 400

RM 400

1,850 1,850

690 690

30 30


(Correction of error – bank charges not posted) (v)

Dr Suspense Cr Trade Receivable: Hermoine (Correction of error – sales amount wrongly posted to the personal account) [970 – 790]

180 180

(b) Suspense Account RM Purchases 1,850 Balance b/d T. Rec’ble: Hermoine 180 Bank charges (970 – 790) 2,030

RM 2,000 30 2,030

Statement of Adjusted Net Profit for the year ended 31 December 2010 RM RM Net profit (with errors) 12,000 Add: (i) Disposal of laptop 400 (ii) Purchases overcast 1,850 (iii) Private purchase 690 2,940 14,940 Less: (i) Sales overstated 400 (iv) Bank charges 30 (430) Adjusted net profit 14,540 (d) Any 3 types of errors where trial balance will still balance: 1. Errors of omission A transaction is completely omitted from the books i.e. there is no debit and credit entry for the transaction. We must correct this error by making a double-entry to record the transaction. 2. Errors of commission/posting

An entry is posted to the correct side of the ledger but to the wrong account within the same class/category. We must correct this error by cancelling out the wrong account and entering into the correct account. 3. Errors of principle

An item is posted to the wrong class/category of account. We must correct this error by cancelling out the wrong account and entering into the correct account.

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4. Compensating errors

Error on one side of the ledger is compensated by the error of the same amount on the other side i.e. the errors cancel out each other. 5. Errors of original entry


A wrong amount is recorded or omitted in the books of prime entry or the source document, and subsequently posted to the ledger accounts. The correct double-entry principle has been observed using the incorrect figure. 6. Complete reversal of entries

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The correct accounts are used but each item is shown on the wrong side of the account i.e. a debit as a credit and vice versa. The correction of this error requires an amount double the amount of its original error in order to set the accounts right.


Question 3 (August 2011/2012) You are to study the following financial statements for two furniture stores and then answer the questions which follow: Statement of comprehensive income for the period ended Trade All RM RM Sales 473,800 Less: Cost of goods sold: Opening inventories 11,950 Purchases 401,200 413,150 Less: Closing inventories (25,000) (388,150) Gross profit 85,650 Less: Expenses: Depreciation 5,000 Wages & salaries 36,000 Other expenses 3,700 (44,700) Net profit 40,950 Statement of financial position as at Non-current assets Equipment Current assets Inventories Trade receivables Bank Less: Current liabilities Trade payables

Financed by: Opening capital Add: Net profit

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Less: Drawings

25,000 36,000 19,700 80,700 (76,500)

Find All RM RM 617,800 21,950 502,200 524,150 (35,000) (489,150) 128,650 10,000 65,000 1,150

(76,150) 52,500

80,000

220,000

35,000 116,000 31,000 182,000 4,200 (186,500) 84,200

(4,500) 215,500

57,250 40,950 98,200 (14,000) 84,200

177,000 52,500 229,500 (14,000) 215,500

Required: (a) Write the formulae and calculate the following ratios for each of the above businesses: (i) Gross profit as a percentage of sales; (ii) Net profit as a percentage of sales; (iii) Current ratio; (iv) Quick ratio; (v) Inventories turnover (times); (vi) Trade receivables turnover (days); and (vii) Trade payables turnover (days). (21 marks) (b) Explain any TWO (2) categories of ratios, you may use your tabulated results from (a) to illustrate the selected ratios explained. (4 marks)


[Total: 25 marks] Proposed solution:

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(a) (i)

Gross profit as a percentage of sales GP/Sales

Trade All 85,650 x 100% 473,800 = 18%

Find All 128,650 x 100% 617,800 = 21%

(ii)

Net profit as a percentage of sales NP/Sales

40,950 x 100% 473,800 = 9%

52,500 x 100% 617,800 = 8%

(iii)

Current ratio CA/CL

80,700 76,500 = 1.1 times

182,000 186,500 = 0.98 times

(iv)

Quick ratio CA-Inv/CL

55,700 76,500 = 0.7 times

147,000 186,500 = 0.8 times

(v)

Inventories turnover times Cost of goods sold Average inventories

338,150

489,150

18,475 = 18.3 times

28,475 = 17.2 times

(vi)

Trade receivables turnover days TR/Sales x 365

36,000 x 365 473,800 = 28 days

116,000 x 365 617,800 = 69 days

(vii)

Trade payables turnover days TP/Pur x 365

76,500 x 365 401,200 = 70 days

186,500 x 365 502,200 = 136 days

(b) 1. Profitability ratios measure the financial performance of the business. Find All seems to indicate better GP margin than Trade All. However, Trade All seems to have better expenses control than Find All. 2. Liquidity ratios tell us whether the business will be able to pay its creditors, expenses, loans falling due, etc. at the correct times. Failure to ensure that these payments are covered could mean that the business would have to be closed down. Both Trade All & Find All seems to indicate similar ability to manage their assets and liabilities. 3. Efficiency ratios measure how well the business is able to utilise its assets to generate sales and profits. Both indicate almost similar inventories turnover rate however, Trade All display better ability to collect money from its customers. An over utilisation of credit period with suppliers may cause suppliers not wanting to deal with them. Unless, of course, it is an industry norm to give such credit period.


Question 4 (August 2011/2012) The following is the trial balance of Triad Bhd. as at 31 December 2010:

Inventory as at 1 January 2010 Debenture interest Office Equipment at cost Furniture & Fittings at cost Bank Cash Returns inwards Carriage inwards Wages and salaries Rent, business rates and insurance Discounts allowed Directors’ remuneration Purchases & Sales Trade receivable & trade payable Share capital: authorised and issued 8% debentures General reserve Retained profits as at 1 January 2010 Accumulated depreciation at 1 January 2010 Office Equipment Furniture & Fittings

Dr RM 102,994 1,600 225,000 57,200 4,973 62 18,400 1,452 123,289 16,240 3,415 82,400 419,211 227,219

1,283,455

Cr RM

880,426 54,818 200,000 40,000 45,000 12,411 32,600 18,200 1,283,455

Additional information: (i) Inventories as at 31 December 2010 RM111,317. (ii) The share capital consists of 300,000 ordinary shares of RM0.50 each and 50,000 12% preference shares of RM1 each. The dividend on the preference shares was proposed to be paid as well as a dividend of 18% on the ordinary shares. (iii) Accrued: rent RM802; Directors’ remuneration RM6,000. (iv) Debenture: ½ year’s interest owing. (v) Depreciation on cost: Office equipment 20%; Furniture & Fittings 25%. (vi) Transfers to general reserves was RM15,000 Required Prepare the following for Triad Bhd.: a. Statement of comprehensive income for the year ended 31 December 2010

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(10 marks) b. Working notes on the appropriation of profits for the year ended 31 December 2010 (4 marks) c. Statement of financial position as at 31 December 2010. (11 marks) [Total: 25 marks]


Proposed solution: Triad Ltd Statement of comprehensive income for the year ended 31 December 2010 RM RM RM Sales 880,426 Less: Returns inwards (18,400) 862,026 Less: Cost of goods sold Opening inventories Purchases Add: Carriage inwards Less: Closing inventories Gross profit Less: Expenditure Loan note interest (1,600 + 1600) Wages and salaries Rent, rates & insurance (16,240 + 802) Discounts allowed Directors’ remuneration (82,400 + 6,000) Depn: Equipment (225,000 x 20%) Depn: Motor vehicles (57,200 x 25%) Profit for the year

102,994 419,211 1,452

420,663 523,657 (111,317) (412,340) 449,686 3,200 123,289 17,042 3,415 88,400 45,000 14,300 (294,646) 155,040

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Triad Ltd Working notes on the appropriation of profits for the year ended 31 December 2010 RM RM RM Profit for the year 155,040 Less: Appropriation Proposed final dividends: - Ordinary shares (300,000 x RM0.50 x 27,000 18%) - Preference shares (50,000 x RM1 x 6,000 33,000 12%) Transfer to general reserve 15,000 (48,000) 107,040 Retained profits b/d 12,411 Retained profits c/d 119,451


Triad Ltd Statement of financial position as at 31 December 2010 RM RM RM Non-current assets Office Equipment at cost Less: Accum. Depreciation (32,600+45,000) Furniture & Fittings at cost Less: Accum. Depreciation (18,200+14,300)

225,000 (77,600)

147,400

57,200 (32,500)

24,700

Current assets Inventory Trade receivables Bank Cash Less: Current liabilities Trade payables Dividends payable Accrued expenses (802 + 6,000 + 1,600) Net current assets

172,100

111,317 227,219 4,973 62 343,571 54,818 33,000 8,402

(96,220) 247,351 419,451

Financed by: Issued capital 300,000 Ordinary shares of RM0.50 each 50,000 12% Preference shares of RM1 each

150,000 50,000 200,000

Reserves General reserve (45,000 + 15,000) Retained profits

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Non-current liabilities 8% Debentures

60,000 119,451

179,451 40,000 419,451

FOA Past Year Jan 2011

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