Course Outline

Course Title: Fundamentals of Accounting

Class: BS (A &F), BS (Commerce),
B.Com (Annual system):

Course No: BS (A&F): ACC 103

Course No: BS (Commerce): ACC 103
B.Com (Annual system): Part I, Paper II

Course Objectives:
1.

To introduce accounting concepts which enable students to recognize, understand and maintain different
accounts of business according to the Accounting Standards, with a clear understanding of how transactions
are recorded in different types of business?

2.

Understand the basic elements of double-entry accounting systems, accounting cycle, entering transactions in
journals, posting to ledgers, compiling end-of-period worksheets with adjusting entries and preparation of
financial reports.

Course Contents:
Topic

Source

Introduction to Business, Commerce, Trading, Finance and Financial

Institutions. Concept of account, assets, liabilities, revenues, expenses,
capital etc.

Ch.1, book 1

Section A

Introduction to accounting and accounting equation

Ch.2, book 1

Section A

The IASB, and financial reporting IFRS-1

Accounting concepts and conventions: IAS-1

Ch.1, book 1

Section A

Recording the business transaction: sources , records and books of

original entry journal, ledger accounting & trial balance

Ch.2, book 1
Ch.3, book 2

Section A

Adjusting entries: contra Accounts, accruals and prepayments,

adjusting trial balance, financial statements

Ch.3, book 1
Ch.3, book 2

Section A

Completing the accounting cycle, Closing entries: temporary and

permanent accounts, post close trial balance, reversing entries and
Worksheet

Ch.4, book 1

Section A

Special journals for repetitive transaction, their types and formats

Subsidiary ledgers and Control accounts. for sales, purchases,
transactions etc.

Ch.4, book 2

Section B

Accounting for merchandising concerns: purchase, sales, discounts,

returns and allowances, FOB destination and shipping point , cost of
goods sold, completing the accounting cycle, financial statement
formats

Ch.5, book 1

Section B

IAS-2 Inventories, types and its evaluation

Ch.2, book 3

Section B

Inventories and its types, inventory costing under perpetual and

periodic systems , financial statement effects of costing methods,
inventory errors and decision analysis

Ch.6, book 1

Section B

Internal control, its types, purpose and limitations, control of cash,

banking activities as controls, bank statement, bank reconciliation,
Cash book.

Ch.8, book 1

Section B

Accounting for accounts receivables, notes Receivables, its recognition

and disposition. , Bad debts, direct and allowance approach, provision
and reserve

Ch.9, book 1

Section C

Accounting for fixed assets; property plant and equipment, cost

determination of fixed assets, Accounts for assets acquired in non
monetary exchanges, Disposal of fixed Assets.
Depreciation, Describe the purpose, process and calculation of
depreciation, depletion and amortization, impairment of assets and
revision of depreciation. Natural resources & intangibles

Ch.10 book 1
Ch. 9 book 2

Section C

Current liabilities and payroll accounting

Ch.11, book 1

Section C

Partnership accounts with reference to Partnership Act-1932 Formation,

admission, retirement, death, profit distribution and dissolution.

Ch.12, book 1
book 4

Section C

Recommended Text (Latest Editions):

1. Larson, K. D., Wild, J. J., & Chiappetta, B. (2005), Fundamentals of Financial Accounting, 17th edition,
McGraw Hill Irwin.
2. Meigs, B. Walter., Johnson, E. Charles. & Meigs, F. Robert (2003), Accounting: the basis of Business
decisions, 11th edition McGraw Hill,.
3. International Accounting Standards Committee Foundation (IASCF) 2005, International Financial Reporting
Standards (IFRSs) , London United Kingdom.
Suggested Readings
4.
5.
6.
7.

Partnership Act-1932
Fees Reeve Warren (2005), Accounting, 21st editions, Thomson South-Western,
ICAP (2004), Introduction to Financial Accounting, Module-B, 17 editions, .PBP professional education,
ICMAP (2006), Fundamentals of Financial Accounting and Taxation, Stage-1 2nd edition. PBP professional
education,

MODEL PAPER FOR B.COM PART 1

ANNUAL EXAMINATION SYSTEM 2009 & ONWARDS
FUNDAMENTALS OF ACCOUNTING

OBJECTIVE PART

TIME ALLOWED = 30 MINUTES

MAX MARKS = 30

INSTRUCTIONS TO CANDIDATES:

This paper comprises 30 MCQs.

Each MCQ carries 1 mark.
Please encircle the correct option only.
Cutting, overwriting and use of ink remover is not allowed.

1.
A.
B.
C.
D.

Internal users of accounting information include which of the following:

Company officers.
Investors.
Financial Institutions
Competitors

2. Which of the following is not an accounting convention?

A. Substance over form
B. Consistency
C. Depreciation
D. Matching
3.
A.
B.
C.
D.

If during the accounting period the assets increased by Rs. 10,000, and equity increased by Rs. 2,000, then how did
liabilities change?
Increased by Rs. 8,000
Increased by Rs. 12,000
Decreased by Rs. 8,000
Decreased by Rs. 12,000

4.
A.
B.
C.
D.

Profit and loss account would not include?

Salaries
Drawings.
Rent received.
Carriage outwards.

5.
A.
B.
C.
D.

Accrued expenses affects:

assets and expenses.
liabilities and revenues.
assets and revenues.
expenses and liabilities.

6.
A.
B.
C.
D.

Which of the following items would not appear in a debtors control account?
Cash received
Returns inwards
Discount received
Interest charged on overdue accounts.

7.
A.
B.
C.
D.

In a bank reconciliation, deposits in transit are:

deducted from the cash book balance.
added to the cash book balance.
added to the bank statement balance.
deducted from the bank statement balance.

8.
A.
B.
C.

Overstating ending inventory will understate:

assets.
cost of goods sold.
net income.

D. owner's equity.
9.
A.
B.
C.
D.

Which of the following records is not a book of prime entry?

Bank statements
Petty cash book
Journal
Sales returns day book.

10. IAS-2, does not recommend the following method of stock valuation for incorporating its value in financial
statements.
A.
B.
C.
D.

FIFO method
The weighted average method
LIFO method
None of the Above

11.
A.
B.
C.
D.

The method that ignores scrap value in determining the amount of depreciation is the:
straight-line method.
units-of-activity method.
declining-balance method.
None of these options.

12. In normal trading circumstances, which of the following would not be found in a partners current account?
A. Drawings
B. Goodwill
C. Interest on drawings
D. Salaries
13. The correct entry to record increase in the provision for doubtful debts is:
Debit
Credit
A. Profit & Loss
Provision for doubtful debts
B. Bad debts
Provision for doubtful debts
C. Provision for doubtful debts
Profit & Loss
D. Provision for doubtful debts
Bad debts
14.
A.
B.
C.
D.

Wages and salaries payable are classified as a:

Current liability.
Long-term liability.
Non-current liability.
Intangible liability.

15. In the absence of any agreement to the contrary, the Partnership Act 1932 prescribes interest on drawings should be
paid:
A. To none of the partners
B. To all the partners in equal amounts.
C. Only to partners active in the business
D. Only to partners with limited liability

NOTE: Only 15 MCQs (5 MCQs from each section) are provided for specimen purposes. Actual paper will comprise 30
MCQs (10 MCQs from each section)

MODEL PAPER FOR B.COM PART 1

ANNUAL EXAMINATION SYSTEM 2009 & ONWARDS
FUNDAMENTALS OF ACCOUNTING

SUBJECTIVE PART TIME ALLOWED = 90 MINUTES

MAX MARKS = 45

INSTRUCTIONS TO CANDIDATES:

This paper comprises of 3 Sections

Attempt only one question from each section.
Each question carries 15 marks.

SECTION A (Attempt any one of two)

Question No 1: Dawood extracted a trial balance at 31st December 2008 from his books after he had prepared his trading account
for the year ended on that date. It was as follows:
Trial Balance of Dawood
Fixed Assets
Stock at 31st December 2008
Trade Debtors
Trade Creditors
Bank
Long tem loan
Gross profit
Rent
Electricity
Stationary
Motor expenses
Interest on loan
Drawings
Capital
Grand Total

Rs.
(000s)
40,000
7,000
1,600
2,524

Rs.
(000s)

1,400
10,000
30,000

2,600
926
405
725
500
5120
61,400

20,000
61,400

Further Information:
1. At 31 December 2008, rent had been prepaid in the sum of Rs.300,000
2. The following amounts were owing at 31st December 2008: electricity Rs.242,000; stationary Rs.84,000; motor expenses
Rs.160,000.
3. Debts amounting to Rs.100,000 were to be written off and company decided to create a provision for doubtful debts equal to
5% of the remaining debtors.
4. The stock of unused stationary on hand at 31st December 2003 was valued at cost Rs.100, 000.
Required: Prepare Income Statement for the year ended 31st December 2008 & Balance Sheet as on 31st December 2008

Question No 2: Prepare adjusting journal entries for the year ended December 31, 2008, for each of these separate situations.
Assume that prepaid expenses are initially recorded in asset accounts. Also assume that fees collected in advance of work are initially
recorded as liabilities.
a.
b.
c.
d.
e.

Depreciation on the companys equipment is computed to be Rs.16,000.

The prepaid Insurance account had a Rs.9,000 debit balance at December 31, 2008, before adjusting for the costs of any
expired coverage. An analysis of the companys insurance policies showed that Rs.3,000 of unexpired insurance coverage
remains.
The office supplies account had a Rs.600 debit balance on December 31, 2004; and Rs.2,680 of the office supplies was
purchased during the year. The December 31, 2008, physical count showed Rs.400 of the supplies available.
One half of the work related to Rs.15,000 received in advance was performed during the period.
Wages expenses of Rs.4,000 have been incurred but are not paid as of December 31, 2008

SECTION B (Attempt any one of two)

Question No 2: The cash account for Pak Store at April 30, 2008, indicated a balance of Rs. 13,290.95. The bank statement indicated
a balance of Rs. 18,016.30 on April 30, 2008. Comparing with the bank statement and the accompanying canceled checks and
memorandums with the records revealed the following reconciling items:
a.
b.
c.
d.
e.
f.

Checks outstanding totaled Rs.7,169.75

A deposit of Rs.5189.40, representing receipts of April 30, had been made too late to appear on the bank statement.
The bank had collected Rs.3,240 on a note left for collection. The face of the note was Rs.3,000.
A check for Rs. 1960 returned with the statement had been incorrectly recorded by Pak Store as Rs. 1,690. The check was for
the payment of an obligation to Javaid for the purchase of office equipment on account.
A check drawn for Rs.1,680 had been erroneously charged by the bank as Rs.1,860.
Bank service charges for April amounted to Rs.45.

Required: Prepare a bank reconciliation statement.

Question No 3: Wireless Company uses a perpetual inventory system. It entered into the following calendar year 2008 purchases
and sales transactions.

Date
1-Jan
10-Jan
13-Feb
15-Feb
21-Jul
5-Aug
10-Aug

Activities
Beginning Inventory
Purchase
Purchase
Sales
Purchase
Purchase
Sales
Total

Units acquired at cost

600 units @ Rs.55 / unit
450 units @ Rs.58 / unit
200 units @ Rs.59 / unit

Units sold at retail

430 units @ Rs. 100/unit

230 units @ Rs.60/unit
345 units @ Rs.65/unit
1,825 units

335 units @ Rs. 100/unit

765 units

Required:
1.
2.
3.
4.

Compute the cost of goods available for sale.

Compute the number of units in ending inventory
Compute the cost assigned to ending inventory using (a) LIFO and (b) Weighted Average
Compute gross profit earned by the company for each of the two methods in part 3.

SECTION C (Attempt any one of two)

Question No 5: On January 2, 2008, Ahmad & Co disposes of a machine costing Rs.84,000 with accumulated depreciation of
Rs.45,250. Prepare the entries to record the disposal under each of the following separate assumptions:
1.
2.
3.

Machine is sold for Rs.32,500 cash.

Machine is traded in on similar but newer machine having a Rs.117,000 cash price. A Rs.40,000 trade in allowance is
received, and the balance is paid in cash.
Machine is traded in on similar but newer machine having a Rs.117,000 cash price. A Rs.30,000 trade in allowance is
received, and the balance is paid in cash.

Question No 6: Ali and Ahmad began a partnership by investing Rs.60,000 and Rs. 80,000, respectively. During its first year, the
partnership earned Rs.160,000. During the year partners withdraws Rs.5,000 each. Prepare Profit and Loss appropriation account and
Partners capital accounts under each of the following three separate cases:
1.
2.
3.

No agreement was in place between the partners.

Partners agreed to share profits and losses in proportion of their initial investments.
Partners agreed on the following terms. (a) Rs.50,000 salary is to be paid to Ali and Rs.40,000 to Ahmad, (b) 10% interest on
initial capital investments (c) profits and losses to be shared in the ratio of 3:2.

(End of Question paper)