Financial Accounting I

This is the question set along with answers Financial Accounting I Fall 2015, which was taken by the Pokhara University.

Pokhara University – Financial Accounting I Fall 2015

Level:  Bachelor	Semester –Fall	Year: 2015
Program:BCIS		Full Marks: 100
Course: Financial Accounting I		Pass Marks: 45
		Time:  3hrs.

Section “A”

Very Short Answer Questions

Attempt all the questions.

1. What are the Primary objectives of financial statements?
2. Briefly explain about the Sources of documents
3. Explain the business entity concept?
4. Describe shortly, “Hybrid basis of accounting”
5. What do you mean by operating activities?
6. Define the terms petty cash fund?
7. What is cash and cash equivalent?
8. The company pays sales commission of 2% on sales on the fifth day of the following month. From April 2011 to March 2012 the company paid sales commission of Rs. 17,000. Sales for the year were Rs. 875,000.
Required: adjustment entries.
9. Give an example for each of the following types of transactions:
a. Decrease in assets, decrease in owner’s equity
b. Increase in assets, increase in liabilities
c. Increase in liabilities, decrease in owner’s capital
d. Decrease in liabilities, increase in owner’s capital
10. Given the following information at the end of the year, how much was net income for the year?
Beginning retain earnings Rs. 25,000
Ending retain earnings Rs. 45,000
Dividend Rs. 13,000

Section “B”
Descriptive Answer Questions

Attempt any six questions

11.Suvam started his own consulting firm, Boston Consulting, on May 1, 2015. The trial balance at May 31, 2015 is as follows.

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Other data

1. Supplies consumed during the period Rs. 800.
2. The insurance policy is for a year.
3. 3,900 of unearned service revenue has been earned at the end of the month.
4. The office equipment has a 5 years life with no salvage value.
5. Invoice representing Rs. 3,500 of service performed during the month have not been recorded as of May 31.
6. Salary of Rs1250 is accrual at May 31.
   Required: Work sheet with adjustment entries.

12. Sunflower Architects incorporated as licensed architects on April 1, 2015. During the first month of the operation of the business, these events and transactions occurred:
April 1 Stockholders invested Rs. 20,000 cash from each of the four principal owners of the New business in exchange for share of stock
April 2 Hired a secretary – receptionist at a salary of Rs. 2,000 per week, payable monthly.
April 3 Purchase architectural supplies on account from Spring Green Company Rs. 10,000
April 7 Completed blueprints on a carport and billed client Rs. 15,000 for services.
April 14 Received Rs. 5,000 cash from client to design a new home.Design will be completed after one week.
April 18 Signed a one year promissory note of NCC Bank Ltd. andreceived cash of Rs. 25,000.
April 21 Design of new home completed and delivered to the c lientwhich was receivedon April 14.
April 27 Paid Rs. 3,000 to Spring Green Company for accounts payable due
April 30 Paid office rent for the month Rs. 5,000 still payable Rs. 3,000.
April 30 paid secretary receptionist for the month Rs.8,000
April 30 Received and paid utilities bill Rs, 1,000
Required: Journal entries, T account and Trial balance

13.The following income statement items are taken from the records of Ramailo Enterprise, a software sales
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14.Consider the following Trial Balance:
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15. What is annual report? Discuss its major components in detail.
16. In December 31st, BikashCo.’s bank statement showed a balance of Rs.
7,000. On this date the cash account in the company’s ledger disclosed a balance of Rs. 7,090. The review related as;
a) In accordance with the company’s standing instruction on Dec 31, the bank paid insurance premium of Rs. 300 for company’s car. This does not appear in the company’s book.
b) Cheques under collection on Dec 31, Rs. 500
c) A cheque for Rs. 2,100 issued to supplier was recorded by bank as Rs. 2010
d) Outstanding cheques for Rs. 200
e) A bill receivable of Rs. 500 and interest of Rs. 30 collected by the bank have not been recorded in company’s account.
f) A cheque for Rs. 100 received from customer was returned by bank due to NSF reason.
g) Service charge charged by bank Rs. 10.
Required:
i. Prepare a bank reconciliation statement.
ii. Prepare the necessary journal entries on the books of BikashCo.
iii. What amount is reported in balance sheet?
17. What are the various qualitative characteristics of accounting information? Describe in detail.

Section “C”

Comprehensive Answer  Questions

18.Following is the income statement and balance sheet of Bravo Co. Ltd. For the year ended December 31, 2014

Bravo Co. Ltd.

             Comparative Balance Sheet, As on December 31, 2014

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Income Statement

For the year ended December 31, 2014

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1. Long term investments were purchased for Rs. 60,000.
2. Land was purchased by issuing note payable of Rs. 100,000.
3. An equipment with and original cost of Rs. 70,000 and accumulated deptn of Rs. 30,000 was sold for cash.
4. Bonds with face value of Rs. 120,000 were retired by paying on cash.
5. Dividends of Rs. 134,000 were distributed.

Required:

1. Cash flow statement using direct method
2. The president of Bravo Co. Ltd has asked you some questions about the year’s result. He is a bit impressed with the profit. He is bothered, however, by the decline in the cash balance during the year. In this regard, write a paragraph to the president to explain why cash decreased in such a profitable year