BT11003

PART A, ANSWER

Question 1 (5 marks) State and explain briefly three (3) accounting concepts and three (3) accounting principles

Page 1 of 33

BT11003

Answer-1 Entity Concept a. Each and every economic entity stands apart from other organizations and individuals as a separate economic unit. b. For the purpose of accounting, the preparation of financial statements for each business entity must be made so as not to include those transactions that do not belong to the entity. Going Concern Concept a. Based upon the notion that businesses today are formed without deciding as to the particular time it will cease. b. The accounting records are prepared with the assumption that there are no signs or indication that the entity will cease operation in the foreseeable future. c. This concept gives priority to the use of historical cost in the preparation of financial statements. The Stable-Monetary-Unit Concept a. In accounting, the unit of measure commonly used the currency and in Malaysia, the currency used is ringgit and sen. b. By using ringgit as a medium of exchange the users of financial statements are able to determine the performance and financial position of a company. Unfortunately, the use of ringgit as a measure is not as stable as those measurement units such as kilograms or meters. c. Financial statements are still prepared basing upon the concept that the value of ringgit is stable and any changes in the value of ringgit is assumed insignificant. The Accounting Period Concept a. In accounting the assumption is that an entity has a life span that cannot be determined unless thare are clear indications that the entity will not be operating in the foreseeable future. b. In the interest of producing accounting information, which is timely and in order to measure an entitys performance it is thus necessary for the measurement to be done within fairly rigid specified periods of time, usually a year. Disclosure principle a. This principle requires all material information to be disclosed or published. Materiality principle a. Places importance on that information which will affect ones ability in making decisions. b. Information, which will affect ones ability in making decision, is known as material information. c. The materiality level really depends on judgment and not on any fixed rules.
Page 2 of 33

BT11003

d. The general guideline on materiality is that if an item is important enough in terms of decision-making then it is to be considered material. Objectivity principle a. This principle places importance in disclosing objective information in the financial statements. Objective information means information, which is true and can be verified by another party. Cost principle a. According to this principle, assets, which are acquired by a business, must be recorded at the price paid in the transaction. Even though the market value or the economic value of the asset, which is in a business, fluctuates but the value that is recorded remains unchanged. b. The value reflected in the balance sheet is not current value. c. The cost principle can be related to the objectivity principle and to the going concern concept discussed earlier in this chapter. Consistency principle a. This principle requires each entity to use the same accounting methods over consecutive time periods i.e. with no changes from year to year. Conservatism principle a. In valuing assets such as debts and inventory the lower cost must be opted for. b. This principle also prevents over zealousness in recognizing profits or overstating assets. Matching principle a. In this principle expenses of a business must be recognized when the revenue related to the said expense is recognized.

Page 3 of 33

BT11003

Question 2 (15 marks) The following are business transactions for Taman Cantik Company for the month of March 2008. For every transaction, state using appropriate words Increase, decrease, or no effect under the column for Assets, Liabilities and Owners Equity a. b. c. d. e. f. g. h. i. j. k. Purchase of inventory by cash Additional capital by cash Purchase of furniture, paid 10% by cash Sales on credit Purchase of inventory by credit Borrowed from bank Withdrawal of cash for personal use Deposit of cash in bank Paid debts Received invoice from supplier Sent invoice to customers

Page 4 of 33

BT11003

Answer-2 Liabilities Owners Equity no effect no effect no effect Increase no effect Increase Increase Increase no effect Increase no effect Increase Increase Increase no effect Increase Increase no effect decrease no effect decrease no effect no effect no effect decrease decrease no effect no effect no effect no effect Increase no effect Increase Assets a. b. c. d. e. f. g. h. i. j. k. Purchase of inventory by cash Additional capital by cash Purchase of furniture, paid 10% by cash Sales on credit Purchase of inventory by credit Borrowed from bank Withdrawal of cash for personal use Deposit of cash in bank Paid debts Received invoice from supplier Sent invoice to customers

Page 5 of 33

BT11003

Question 3 (20 marks) Syarikat Soraya Syed commenced the business of repairing and servicing airconditioners on 1 January 2009. The following is items of the business on 30 November 2008 Cash Accounts Receivable Equipment Gas Supplies Accounts Payable Capital Withdrawal Service Revenue Rent Expense Utility Expense Gas Expense RM 10,000 2,000 20,000 800 1,000 31,000 2,000 5,000 1,500 500 200

The following are the transaction for the month of December 2008; a. b. c. d. e. f. g. h. i. j. k. l. m. Dec 1, Received RM 500 from customers for partial settlement of debt Dec 3, Provided services for RM 500 cash Dec 6, Paid rental for the month of December RM 1,000 Dec 9, settled half of amount owed as per accounts payable Dec 11, Provided services for credit RM 800 Dec 12, Provided services for cash RM 600 Dec 15, Received utility bill RM 600 for the month of November 2008 Dec 17, Purchases of furniture office on cash RM 1,000 Dec 19, Provided services for credit RM 700 and cash RM 500 Dec 20, Paid utility bill Dec 25, Purchased additional equipment on credit for RM 500 Dec 29, Gas expense is the same as in previous month. Dec 30, Withdrew RM 1,100 for personal use

Required a. Show the general journal entries for the above transactions b. Prepare the trial balance c. Prepare balance sheet as at 31 December 2008

Page 6 of 33

BT11003

Answer-3 a. Show the general journal entries for the above transactions Syarikat Soraya Syed General Journal December, 2008 Ref Debit (RM) 500 500

Date Dec 1

Description Cash

Credit (RM)

Dec 3

Dec 6

Dec 9

Dec 11

Dec 12

Dec 15

Dec 17

Dec 19

Account Receivable Received RM 500 from customers for partial settlement of debt Cash Service Revenue Provided services for RM 500 cash Rent Expense Cash Paid rental for the month of December RM 1,000 Account Payable Cash settled half of amount owed as per accounts payable Account Receivable Service Revenue Provided services for credit RM 800 Cash Service Revenue Provided services for cash RM 600 Utility Expense Utility Payable Received utility bill RM 600 for the month of November 2008 Furniture Office Cash Purchases of furniture office on cash RM 1,000 Cash
Page 7 of 33

500 500

1,000 1,000

500 500

800 800

600 600

600 600

1,000 1,000

500

BT11003

Dec 20

Dec 25

Dec 29

Dec 30

Account Receivable Service Revenue Provided services for credit RM 700 and cash RM 500 Utility Payable Cash Paid utility bill Equipment Account Payable Purchased additional equipment on credit for RM 500 Gas Expense Gas Supplies Gas expense is the same as in previous month. Withdrawal Cash Withdrew RM 1,100 for personal use

700 1,200

600 600 500 500

200 200

1,100 1,100

b. Prepare the trial balance Syarikat Soraya Syed Trial Balance 31 December, 2008 Acc.No. Account Name Cash Accounts Receivable Gas Supplies Furniture Office Equipment Accounts Payable Capital Withdrawal Service Revenue Rent Expense Utility Expense Gas Expense Debit Credit (RM) (RM) 7,900 3,000 600 1,000 20,500 1,000 31,000 3,100 8,100 2,500 1,100 400 40,100 40,100

c. Prepare balance sheet as at 31 December 2008

Page 8 of 33

BT11003

Assets Cash Account Receivable Gas Supplies Furniture Office Equipment Total Assets

Syarikat Soraya Syed Balance Sheet At 31 December, 2008 Liabilities 7,900 Account Payable 3,000 600 Equity 1,000 Capital 20,500 33,000 Total Liabilities and Equity

1,000

32,000

33,000

Page 9 of 33

BT11003

Question 4 (15 marks) On 1 March 2000, Bismi Sdn Bhd established a petty cash fund of RM125. On 31 March 2000, the petty cash fund balance was RM18 and five vouchers in the cash bills were as follows: Voucher 101 102 103 104 105 Required: a. Show journal entries to record the establishment of petty cash fund b. Show journal entries to replenish the petty cash fund on March 31 Amount 25.00 15.00 14.50 35.00 17.50 Purpose of expenses To repair office lightning Stamps Office supplies Taxi fare Computer diskette

Page 10 of 33

BT11003

Answer-4 a. Show journal entries to record the establishment of petty cash fund Bismi Sdn Bhd General Journal March, 2008 Ref Debit (RM) 125 125

Date

Description

Credit (RM)

March 1 Petty Cash Cash to record the establishment of petty cash fund

b. Show journal entries to replenish the petty cash fund on March 31 Bismi Sdn Bhd General Journal March, 2008 Description Ref Debit Credit (RM) (RM) Administration Expense 57,50 Office Supplies Expense 14,50 Transportation Expense 35,00 Cash 107 to record the replacement of petty cash fund

Date March 31

Page 11 of 33

BT11003

Question 5 (20 marks) The following details relate to Imaging Picture Trading Bhd a. 1 January 2008, the credit balance of provision for doubtful debt amounted to RM2,600 b. The total sales for 2008 amounted to RM 95,000, consisting of 20% cash sales. c. In 2008, Imaging Picture Trading wrote off bad debt amounting to RM900 Required: Based on above, calculate the doubtful debt expense if: a. The direct write off method is used b. The percentage of sales method is used based on the estimate that 3% of the credit sales are not recoverable c. The percentage of accounts receivable method is used based on the aging profile as at 31 December 2008 showing an estimate of debts not recoverable of RM 2,500

Page 12 of 33

BT11003

Answer-5 a. The direct write off method is used The doubtful debt expense = RM900 b. The percentage of sales method is used based on the estimate that 3% of the credit sales are not recoverable The credit sales is Rm76,000 RM95,000 x 80% (100%-20%) The doubtful debt expense = RM2,280 (3% x RM76,000) c. The percentage of accounts receivable method is used based on the aging profile as at 31 December 2008 showing an estimate of debts not recoverable of RM 2,500 the estimate of debts not recoverable at 31 December 2008 the credit balance of provision for doubtful debt at 1 January 2008 The doubtful debt expense = RM2,500 = RM2,600 ---------------=(RM 100)

Page 13 of 33

BT11003

Question 6 (25 marks) The following are the purchases and sales particulars of Syarikat Johari Bhd for the month of July 2008 Date Dec 1 Dec 5 Dec 10 Dec 15 Dec 20 Dec 30 Description Balance Sales Purchases Sales Purchases Sales Unit 50 30 40 50 20 10 Cost per unit (RM) 20 25 30

Required: Assuming Syarikat Johari used the perpetual inventory system show: a. The details such as the balance, purchases and sales in the columnar inventory record card based on the FIFO method b. Show the journal entries to record the purchases made on 10 December and 20 December c. Show the journal entries to record the sales on 5 December, 15 December and 30 December, assuming that the sales price was RM50 per unit, based on the FIFO method.

Page 14 of 33

BT11003

Answer-6 a. The details such as the balance, purchases and sales in the columnar inventory record card based on the FIFO method
FIFO Method Date 1-Dec 5-Dec 10-Dec 15-Dec 20-Dec 30-Dec 20 30 600 10 25 250 40 25 1000 20 30 20 25 400 750 10 10 20 20 25 25 30 30 250 250 600 600 30 20 600 Purchases Sales Unit Cost Total Unit Cost Total Balance Unit Cost 50 20 20 40 20 20 20 25 Total 1000 400 400 1000

b. Show the journal entries to record the purchases made on 10 December and 20 December

Date Dec 10

Dec 20

Syarikat Johari Bhd General Journal December, 2008 Description Ref Debit Credit (RM) (RM) Inventory 1,000 Cash/Account Payable 1,000 to record goods purchased Inventory 600 Cash/Account Payable 600 to record goods purchased

c. Show the journal entries to record the sales on 5 December, 15 December and 30 December, assuming that the sales price was RM50 per unit, based on the FIFO method.

Page 15 of 33

BT11003

Date Dec 15

Syarikat Johari Bhd General Journal December, 2008 Description Ref Debit Credit (RM) (RM) Cash/Account Receivable 2,500 Sales 2,500 To record cash or credit sales Cost of Goods Sold Inventory to record cost of goods sold Cash/Account Receivable Sales To record cash or credit sales Cost of Goods Sold Inventory to record the sales of inventory 1,150 1,150 500 500

Dec 30

250 250

Good Luck

Page 16 of 33

BT11003

PART B, ANSWER

Question 1 (5 marks) State and explain the element of financial statements of limited company.

Page 17 of 33

BT11003

Answer-1

Assets Assets are economic resources that are under control of a business entity and are expected to generate benefit from future operations Assets can be categorised into the following: Current assets: Cash and other assets which can be converted into cash or fully utilised in a short term, normally within a year Long Term or Non-Current assets: Assets that are expected to last longer than a year. Also known as Fixed assets

Assets can also be classified into: Monetary assets: Cash and amounts due from customers or accounts receivable Non-monetary or physical assets: Land, building, equipment, vehicles and inventories which are physical in nature Non-Physical assets: Patents, trademarks and copyrights, which are not physical assets but meet the requirement of an asset to generate benefits

Liabilities Amounts due to other parties or a business entitys obligations to other parties Liabilities represent creditors claim to an entitys assets Liabilities consist of: Notes payable: Owings/amounts due to bank and lenders Accounts payable: Owings/amounts due to suppliers for purchases

Other liabilities: Accrued salaries, accrued taxation Liabilities can also be classified into: Current liabilities: Those payable within a year
Page 18 of 33

BT11003

Long Term liabilities: Those payable beyond a year

Liabilities are enforceable by law and thus, creditors have claim over an entitys assets in order to recover the entitys debt

Equity Owners equity comprises: Owners contribution to a business entity Profit and loss from business operations

Owners equity changes as business operates Owners equity can also be seen as residual value when Liabilities are deducted from Assets Assets Liabilities: Owners equity

Four factors affecting owners equity: Decreases owners equity 3. Withdrawal of cash or transfer of other assets by owners 4. Loss

Increases owners equity 1. Investment of cash or other assets by owners

2. Income

Revenue Revenue represents inflows of cash and other assets in the process of the sale of goods or services Revenue can be generated through cash sales or on credit

Expenses
Page 19 of 33

BT11003

Expenses are outflows of cash and other assets in the process of earning revenue Expenses can be in cash or settled later, or known as accrued expenses Expenditure, on the other hand, are for broader and longer usage (usually more than one year)

Income Income or profit is generated by a business entity when revenue or sales exceed expenses On the other hand, loss is generated by a business entity when expenses exceed revenue or sales Gain, similar to income, is obtained from sources which are not the main activity of the business entity operations, such as sale of old equipments

Page 20 of 33

BT11003

Question 2 (15 marks) The following items which are disorganized are extracted from a balance sheet of Gaparsing Enterprise as 29 January 2009. Note Payable Account Receivable 33,000 Office Equipment 16,000 Accounts Payable 7,500 Building 32,500 Cash 27,000 Vehicles 25,500 The following transactions occur for two days from the date; a. b. c. d. Vehicle is sold for of RM 30,000 Another vehicle is bought for RM 35,000 by cash Half of the note payable are paid One third of accounts receivable are received from customers RM 21,000

Using this information, prepare a balance sheet for Gaparsing Enterprise as at 29 January and 31 January 2009

Page 21 of 33

BT11003

Answer-2

Assets Cash Account Receivable Office Equipment Vehicles Building Total Assets

Gaparsing Enterprise Balance Sheet At 29 January, 2009 Liabilities 27,000 Account Payable 33,000 Note Payable 16,000 25,500 Equity 32,500 Capital 134,000 Total Liabilities and Equity Gaparsing Enterprise Balance Sheet At 31 January, 2009 Liabilities 22,500 Account Payable 22,000 Note Payable 16,000 35,000 Equity 32,500 Capital 128,000 Total Liabilities and Equity

7,500 21,000

105,500 134,000

Assets Cash Account Receivable Office Equipment Vehicles Building Total Assets

7,500 10,500

110,000 128,000

Page 22 of 33

BT11003

Question 3 (20 marks) Below is a list of transactions. For each transaction, state the journal that would be used for recording. a. b. c. d. e. f. g. h. i. j. k. l. m. n. o. p. q. r. s. Cash sales Purchase of goods on cash Return of purchased goods, which has not yet been paid Credit sales Payment for accounts payable Purchase of insurance policy Adjustment entry for depreciation of fixed asset Cash receipts for accounts receivable Purchase of goods on credit Sale of old equipment on credit Transferred a building owned by the owner to the business. The building is to be used as a business premise Owner made an additional investment cash Return to supplier , damaged equipments Paid salary Purchase of office supplies on credit Purchase of goods on credit Cash withdrawal Credit sales to owner Received money from Bank and issued a note payable

Page 23 of 33

BT11003

Answer-3 a. Cash sales b. Purchase of goods on cash c. Return of purchased goods, which has not yet been paid d. Credit sales e. Payment for accounts payable f. Purchase of insurance policy g. Adjustment entry for depreciation of fixed asset h. Cash receipts for accounts receivable i. Purchase of goods on credit j. Sale of old equipment on credit k. Transferred a building owned by the owner to the business. The building is to be used as a business premise l. Owner made an additional investment cash m. Return to supplier , damaged equipments n. Paid salary o. Purchase of office supplies on credit p. Purchase of goods on credit q. Cash withdrawal r. Credit sales to owner s. Received money from Bank and issued a note payable Cash Receipts Journal Cash Payment Journal General Journal Sales Journal Cash Payment Journal Cash Payment Journal General Journal Cash Receipts Journal Purchases Journal General Journal General Journal

Cash Receipts Journal General Journal Cash Payment Journal General Journal Purchases Journal Cash Payment Journal Sales Journal Cash Receipts Journal

Page 24 of 33

BT11003

Question 4 (15 marks) On 1 March 2002, Yami Bhd invested RM 400,000 cash which not to be used immediately. The company invested in a current investment in 100,000 shares of Simen Bhd at the price of RM4.00 per unit. Brokers commission was RM 10,000. On 3 July 2002, interim dividend amounting to RM 25,000 was received. On 1 November 2002, cash was urgently needed and Yami Bhd sold 50,000 units of the shares at the price of RM5.00 per unit. The brokers commission amounted to RM 5,000 Required: a. Show journal entries to record the purchase of shares b. Show journal entries to record the dividends received c. Show journal entries to record the sale of shares

Page 25 of 33

BT11003

Answer-4

a. Show journal entries to record the purchase of shares

Yami Bhd General Journal March, 2002 Date Description Ref Debit Credit (RM) (RM) March 2 Current Investment 410,000 Cash 410,000 To record the purchase of share b. Show journal entries to record the dividends received

Date July 3

Yami Bhd General Journal July, 2002 Description Ref Debit Credit (RM) (RM) Cash 25,000 Dividend Income 25,000 To record the dividends received

c. Show journal entries to record the sale of shares

Date Nov 1

Yami Bhd General Journal November, 2002 Description Ref Debit Credit (RM) (RM) Cash 245,000 Current Investment 205,000 Gain on sale of investment 40,000 To record the sale of share
Page 26 of 33

BT11003

Page 27 of 33

BT11003

Question 5 (20 marks) Tenom Coffee Company Bhd received following notes in 2008; Notes 6%, 60 days 9%,90 days 12%,120 days Required; a. Show general journal entry to record the receipt of the above notes b. Calculate the interest income accrual for each note at 31 December 2008 c. Show journal entry to record the interest at 31 December 2008 Date 20 Nov 15 Oct 25 Oct Amount (RM) 12,000 24,000 36,000

Page 28 of 33

BT11003

Answer-5

a. Show general journal entry to record the receipt of the above notes

Date Oct 15

Oct 25

Nov 20

Tenon Coffee Company Bhd General Journal October and November, 2008 Description Ref Debit Credit (RM) (RM) Note Receivable 24,000 Sales 24,000 To record the receipt of note 9%, 90 days Note Receivable 36,000 Sales 36,000 To record the receipt of note 12%, 120 days Note Receivable 12,000 Sales 12,000 To record the receipt of note 6%, 60 days

b. Calculate the interest income accrual for each note at 31 December 2008

Interest income Accrual for Note Receivable 9%, 90 days = 24,000 x 9/100 x 77/365 = 456 Oct (16 days) + Nov (30 days) + Dec (31) = 77 days Interest income Accrual for Note Receivable 12%, 120 days = 36,000 x 12/100 x 67/365 = 793 Oct (6 days) + Nov (30 days) + Dec (31) = 67 days Interest income Accrual for Note Receivable 6%,90 days = 12,000 x 6/100 x 41/365 = 81
Page 29 of 33

BT11003

Nov (10 days) + Dec (31) = 41 days

c. Show journal entry to record the interest at 31 December 2008

Date Dec 31

Description

Tenon Coffee Company Bhd General Journal December, 2008 Ref Debit (RM) 456

Credit (RM) 456

Dec 31

Dec 31

Interest Receivable Interest Income To record the interest for note 9%, 90 days Interest Receivable Interest Income To record the interest for note 12%, 120 days Interest Receivable Interest Income To record the interest for note 6%, 60 days

793 793

81 81

Page 30 of 33

BT11003

Question 6 (25 marks) The following information relates to inventory extracted from the records of Syarikat Barisan on 31 January 2008 Goods available for sale Beginning Inventory Purchase January 3 Purchase January 10 Purchase January 21 Purchase January 25 Purchase January 30 Unit 10 30 150 75 120 100 Cost per unit (RM) 1.00 1.00 1.50 2.00 2.10 2.50

Ending inventory based on physical count was 90 units. Required: Using the above information, calculate (1) cost of goods sold and (2) ending inventory based on; a. FIFO method b. LIFO method c. Weighted average method

Page 31 of 33

BT11003

Answer-6

a. FIFO method
Goods available for sale Beginning Inventory Purchase January 3 Purchase January 10 Purchase January 21 Purchase January 25 Purchase January 30 Unit 10 30 150 75 120 10 395 Cost/unit (RM) Total (RM) 1 1 1.5 2 2.1 2.5 10 30 225 150 252 25 692

1. Cost of goods sold = RM692 2. Ending Inventory = 90 unit x RM2.50 = RM225

b. LIFO method
Goods available for sale Purchase January 10 Purchase January 21 Purchase January 25 Purchase January 30 Unit 100 75 120 100 395 Cost/unit (RM) Total (RM) 1.5 2 2.1 2.5 150 150 252 250 802

1. Cost of goods sold = RM802 2. Ending Inventory = RM10 + RM30 + RM75 = RM115 10 unit x RM1.00 = RM10 30 unit x RM1.00 = RM30 50 unit x RM1.50 = RM75 ----------Total = RM115 c. Weighted average method

Page 32 of 33

BT11003
Goods available for sale Beginning Inventory Purchase January 3 Purchase January 10 Purchase January 21 Purchase January 25 Purchase January 30 Unit 10 30 150 75 120 100 485 Cost/unit (RM) Total (RM) 1 1 1.5 2 2.1 2.5 1.89 10 30 225 150 252 250 917

1. Cost of goods sold = 395 unit x RM1.89 = RM746.84 2. Ending Inventory = 90 unit x RM1.89 = RM170.16

Good luck

Page 33 of 33