COMSATS University Islamabad
Sahiwal Campus
(Department of Computer Sciences)
Course Title:
Financial Accounting
Course Code: MGT131
Credit Hours: 3
Course
Abida perveen
Programme
BSSE
Semester:
5th,
Batch:
Section: A
Date:
30-06-2021
Time Allowed:
3Hours.
Maximum Marks:
50
Student’s Name:
Reg.
CUI/
/SWL
Important Instructions / Guidelines:
Read the question paper carefully and answer the questions according to their statements.
Terminal Examination Spring-2021
Instructions regarding Paper:
Please read carefully all the instructions
‘
1. The Paper is comprised of Eight questions and you have to attempt all question
fully.
2. Paper must be submitted in hand written format; computerized, typed, or printed paper would not
be accepted.
3. There must be sufficient materials in answer to the question. Evaluation will be made on two
things; quality of the material as well as quantity of the information. So maximum details and
information should be used in completion of question. Short answers or very few contents would not
be acceptable.
4. Paper should be neat and well presented on assignment papers. Papers torn from
registers/copies/notebooks/diaries will not be used for completion of questions.
5. After completing the paper, take the pictures in good resolution and brightness or scan it from
scanner or with smartphone app (such as camscanner), then upload it on portal in a single PDF file
and also email at (abida,saima@cuisahiwal.edu.pk).
6. Late submission will not be accepted. No excuse would be accepted for late submission or
otherwise.
Submit it before due time at any cost.
7. “Self-learning” (while maintaining social distance and being safe) would be highly appreciated at
this time of situation.
8. In case of any guidance you are requested to send your queries to your CR/GR, who will
coordinate with the course instructor after compiling up all the relevant queries.
Question # 1.
(Marks 12)
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Prepare Trading Account and Profit and Loss Account for the period ending on 31 st December 2006
and a Balance Sheet as at that date from the following Trial Balance of Asian Trading Company.
Opening Stock
Cash in hand.
Cash at bank.
Purchases.
Sales
Capital.
Drawings.
Furniture.
Salaries outstanding.
Sundry debtors.
Sundry creditors.
Income Tax.
Machinery.
Building.
Interest on investment.
Wages.
Salaries.
General expenses.
Total.
Debit (Rs)
30,000
4,000
6,000
47,000
Credit (Rs)
1,31,400
1,83,200
8,400
24,000
26,00
33,600
25,000
1,200
36,000
80,000
1,600
24,000
26,000
6,000
3,30,400
3,30,400
The following additional information is supplied.
1. Stock in hand on 31st December,2006 is Rs. 32,000
2. Machinery and Building are to be depreciated at the rate of 5 and 2percent p.a and Furniture
at the rate of 10 percent p.a.
3. Provide for doubtful debts@5% and for discount @5% on debtors.
4. Create reserve for discount on creditors@ 3%.
5. Wages payable Rs. 3,000.
Question # 2.
(Marks 04)
In February 2010, Paula King invested an additional $10,000 in her business, King’s Pharmacy,
which is organized as a proprietorship. King’s accountant, Lance Jones, recorded this receipt as an
increase in cash and revenues. Is this treatment appropriate? Why or why not?
Question # 3.
(Marks 04)
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“A company’s net income appears directly on the income statement and the owner’s equity
statement, and it is included indirectly in the company’s balance sheet.” Do you agree? Explain with
the reference of example.
Question # 4.
(Marks 05)
Jim Benes is confused about how accounting information flows through the accounting system. He
believes the flow of information is as follows.
a. Debits and credits posted to the ledger.
b. Business transaction occurs.
c. Information entered in the journal.
d. Financial statements are prepared.
e. Trial balance is prepared.
Is Jim correct? If not, indicate to Jim the proper flow of the information with the help of the logical
evidence.
Question # 5.
(Marks 10)
Kayla Stevens owns a small craft shop in Oxford, MS and faces the issue of potential fraud occurring
in her business. Below are some of the potential sources of fraud for her business, you are required to
explain some internal control recommendations against each source of fraud that could be
implemented to improve the security of her business finances.
1. Lucy is responsible for recording sales and preparing bank deposits. Given her autonomy
with this process, Lucy could be underreporting sales and failing to deposit all of the money.
2. The store that Kayla owns may have a petty cash fund that was established for smaller and
miscellaneous expenses. If they do have a petty cash fund, employees may be incorrectly
being reimbursed from the fund.
3. Kayla’s store just implemented a new coupon discount program. Employees could be
scanning coupons but charging the customers full price and then pocketing the difference.
4. There is no evidence of a system to track the hours that each employee works.
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5. Kayla is responsible for the oversight of inventory, orders for new inventory, and payments of
inventory. She could commit an act of fraud by falsifying orders, paying them to an external
account, and expensing more inventory than actual to make up for the difference. This would
reduce the income tax expense of the business by underreporting income while funnelling
cash out of the business.
6. Kayla has full custody of assets, and she also does the record keeping.
7. Kayla and Lucy both have access to the accounting system, with Kayla handling all
accounting functions and Lucy recording sales data and preparing bank deposits.
8. There is only one credit card machine for both cash registers.
9. There is no mention of a security system.
10. Each employee has full authority to enter each type of transaction, meaning that they could
change previous transactions.
Question # 6.
(Marks 04)
At the corner grocery store, all sales clerks make change out of one cash register drawer. Is this a
violation of internal control? Why?
Question # 7.
(Marks 05)
Permitting only designated personnel to handle cash receipts is an application of the principle of
establishment of Responsibility. Defend the statement with proper example.
Question # 8.
(Marks 06)
The control features of a bank account do not include, having bank auditors verify the correctness of
the bank balance per books. Give your opinion about the feature of internal control.
The End
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