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AGA KHAN UNIVERSITY EXAMINATION BOARD

HIGHER SECONDARY SCHOOL CERTIFICATE

CLASS XII EXAMINATION

MAY 2015

Principles of Accounting Paper II

Time: 2 hours 20 minutes Marks: 70

INSTRUCTIONS

Please read the following instructions carefully.

1. Check your name and school information. Sign if it is accurate.

I agree that this is my name and school.

Candidate's signature

2. RUBRIC. There are NINE questions. Answer ALL questions. Choices are specified inside the
paper.

3. When answering the questions:

Read each question carefully.

Use a black pencil for diagrams. DO NOT use coloured pencils.
DO NOT use staples, paper clips, glue, correcting fluid or ink erasers.
Complete your answer in the allocated space only. DO NOT write outside the answer box.

4. The marks for the questions are shown in brackets ( ).

5. You may use a scientific calculator if you wish.

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Q.1. (Total 5 Marks)

a. The following information is taken from the books of Arif Traders

Rent payable 1st January, 2014 Rs 12,500

Rent payable 31st December, 2014 Rs 9,500
Rent paid during the period Rs 137,500

Calculate the rent expense for the year 2014. (2 Marks)

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b. The following information is taken from the books of Amna Traders.

Capital at 1st January, 2014 Rs 250,000

Capital at 31st December, 2014 Rs 525,000
Additional investment Rs 60,000
Drawing Rs 20,000

Compute the net income of the firm. (3 Marks)

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Q.2. (Total 8 Marks)

a. Redlines Company was registered with the authorized capital of Rs 50,000,000 divided into
ordinary shares of Rs 10 each.

• The company offered 150,000 shares applications to general public through the bank.
The bank has received 200,000 shares applications. The company finalized the allotment
and refunded the money to unsuccessful applicants.

• The company allotted 10,000 shares to the promoters of the company in consideration for
their services.

• The company allotted 50,000 shares to Allied Traders for the purchase of the following
items.

Items Cost (Rs)

Desktop computers (5 @ Rs 15,000 each) 75,000
2 laptops 150,000
2 printers and 1 scanner 150,000
Data server 225,000

Record the above transactions in the General Journal format given below. (4 Marks)

Date Particulars P/R Debit Credit

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Date Particulars P/R Debit Credit

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b. Give General Journal entries for the following transactions as they would appear at the time of
issue and at the time of redemptions of debentures of Mustaqeem Private Limited Company.
(4 Marks)
Transaction 1: Issued 500 debentures of 15% at Rs 110 having par value of Rs 100. The
debentures will be repayable at par.
Date Particulars P/R Debit Credit

Transaction 2: Issued 500 debentures of 15% at Rs 90 having par value of Rs 100. The
debentures will be repayable at par.
Date Particulars P/R Debit Credit

Transaction 3: The debentures issued in transaction 1 were redeemed by Mustaqeem

Limited Company.
Date Particulars P/R Debit Credit

Transaction 4: Issued 500 debentures of 15% at par value of Rs 100. The debentures will
be repayable at par.
Date Particular P/R Debit Credit

PLEASE TURN OVER THE PAGE

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Q.3. (Total 6 Marks)

a. Differentiate between provision and reserve. (3 Marks)

Provision Reserve
1. 1.

2. 2.

3. 3.

b. What is a sinking fund? Mention any TWO purposes it serves. (3 Marks)

Sinking Fund ______________________________________________________________________

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Purposes

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ii. _________________________________________________________________________________

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Q.4. (Total 6 Marks)

ABC Company purchased a printing machine costing Rs 250,000 on 1st January, 2012. The estimated
life of the machine is 10 years with scrap value of Rs 30,000.

On 1st September, 2014, the company exchanges the machine with a new one which has a market value
of Rs 360,000, an estimated machine life of 10 years and the salvage value of Rs 100,000. The
company has also received a trade in allowance of Rs 160,000 for the old machine equipment and the
rest of the amount is paid in cash.

The company uses ‘sum of the year digit’ method for computation of the depreciation. The company’s
financial year ends on 31st December.

Required

i. Compute the depreciation for the years 2012, 2013 and 2014.

ii. Compute the loss or gain in the exchange of machine.

iii. Record the General Journal entry for the exchange of machine.

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Q.5. (Total 15 Marks)

a. Tabassum and Tahir are partners. They share profit and loss in the ratio of 1:3. The following is
their statement of financial position on 31st December, 2014. (5 Marks)

Assets Equities
Cash 95,000 Account Payable 25,000
Account Receivable 60,000
Supplies 20,000
Inventory 60,000
235,000 25,000
Land 500,000 Capital Tahir 250,000
Fixture and Furniture 100,000 Capital Tabassum 500,000
Allowance for 40,000
Depreciation
540,000 750,000

Total Assets 775,000 Total Equity 775,000

They have decided to revalue the following items:

• The value of land (business property) increased by 10%.

• The value of fixture and furniture will be reduced by Rs 10,000.
• Inventory will be reduced by 10%.
• Allowance for bad debts will be created by 10% of accounts receivable.

Required: Post all necessary General Journal entries of the above revaluation and close the
revaluation account by distributing the profit and loss among the partners on their profit and loss
sharing ratio.

Date Particulars P/R Debit Credit

PLEASE TURN OVER THE PAGE

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Date Particulars P/R Debit Credit

b. Ms Afia, Ms Sana and Ms Kiran are partners in Ideal Confectionaries Store. Their partnership is
based on equal profit and loss sharing ratio. The following is the statement of financial position.

Assets Equities
Current assets 450,000 Account payable 100,000
Non-current assets 550,000
Afia’s capital 300,000
Sana’s capital 300,000
Kiran’s capital 300,000
1,000,000 1,000,000

When Ms Kiran retires from the partnership firm, below are the given scenarios which are
possible.

Required: Give General Journal entries for the following scenarios.

Scenario 1: Ms Kiran is paid Rs 150,000 from the firm and for the balance amount a 6-months
10% notes payable is issued. (1 Marks)

Date Particular P/R Debit Credit

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Scenario 2: Ms Kiran’s 50% share is purchased by Ms Afia and the rest of the amount is paid
from the firm’s resources (2 Marks)

Date Particulars P/R Debit Credit

Scenario 3: Ms Kiran’s 40% shares are purchased by Ms Afia for Rs 130,000 and 60% shares
are purchased by Ms Sana for Rs 200,000. The payments are made by their private sources.
(2 Marks)

Date Particular P/R Debit Credit

PLEASE TURN OVER THE PAGE

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c. Ms Amna and Mr Babar, are sole traders on 31st December, 2012. Their statement of financial
position is shown below. (5 Marks)

Ms Amna Mr Babar
Cash 25,000 15,000
Account Receivable 53,000 25,000
Merchandise Inventory 45,000 75,000
Supplies 35,000 5,000
Store Equipment 20,000 25,000
Vehicle 250,000 300,000
Shop 168,000 111,000
Fixture and Furniture 15,000 25,000
Account Payable 40,000 10,000

On 1st January 2013, they decided to form a partnership by merging their stores together as one
business unit. The following valuations were agreed upon:

• Ms Amna’s account receivable was estimated to realize up to 80% of its book value; her
merchandise inventory value was reduced by 15% and value of supplies are reduced by
10%. The rest of the accounts were taken as per book value.
• Mr Babar’s account receivable was estimated to realize up to 70% of its book value. The rest
of accounts were taken as per the book value.
• Ms Amna and Mr Babar decided that their capital in the new business will be Rs 600,000
each. They will contribute towards the deficiency, if any, from the private fund.

Required: Post General Journal entries of the new partnership firm to record the investments of
Ms Amna and Mr Babar.

Date Particulars P/R Debit Credit

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Date Particulars P/R Debit Credit

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Q.6. (Total 5 Marks)

The following particulars are extracted from the records of a charity eye clinic for the year ended 31st
December, 2014.

Receipts Payments
Balance 12,500 Medicines purchased 220,000
Subscriptions 25,000 Doctor’s honorarium 75,000
Donations 125,000 Nursing staff salaries 45,000
Grants 50,000 Admin staff salaries 15,000
Proceeds from health gala 110,000 Expenses on organizing health gala 35,000
Contribution received from NGOs 45,000 Petty cash expense 1200
Printing and stationary expense 4500
367,500 395,700
Bal b/d 28,200
395,700 395,700
Bal c/d 28,200

Additional Information 01.01.2014 31.12.2014

Subscription receivable 1,200 2,500
Subscription received in advance 1,500 7,500
Stock of medicines 15,000 25,000
Equipment (cost less depreciation) 70,000 65,000
Building (cost less depreciation ) 475,000 450,000
Investment 200,000 200,000

Required: Compute opening balance of accumulated fund.

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Q.7. (Total 5 Marks)

The following are the figures taken from Al-Rahim Associates:

Net earnings Rs 190,000

Depreciation Rs 25,000
Decrease in account receivable Rs 20,000
Purchase of motor vehicle Rs 10,000
Increase in inventory Rs 15,000
Purchase of Equipment Rs 10,000
Purchase of fixture Rs 15,000

Compute the amount of cash flow from the operating activities.

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Q.8. (Total 10 Marks)

The following information is taken from the books of Al-Habib Brothers:

Particulars 01st Jan 2014 31st Dec 2014

Total trade payable (creditors) 26,400 28,400
Total trade receivable (debtors) 57,200 55,600
Bills receivable 4,000 1,000
Bills payable 2,500 12,000

Receipt Payments
Cash paid to creditors 70,250 Payment made against 7,000
bills payable
Cash received from 135,400 Cash purchases 70,250
customer’s
Cash received against 14,200
bills receivable
Cash sales 15,800

EITHER

a. Compute the figures for the total sales during the year 2014.

OR

b. Compute the figures for the total purchases during the year 2014.

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Q.9. (Total 10 Marks)

EITHER

a. Amna, Afia, and Areej established a business firm by contributing Rs 200,000, 400,000 and
600,000 respectively. Their profit and loss ratio is 1:2:3. Amna withdraws Rs 50,000 for personal
use and Afia withdraws merchandises of Rs.15,000. The partnership deed indicates the following
agreement.

• Amna and Areej are to be paid a monthly salary of Rs 8,500 and Rs 8,000 respectively.
• Afia and Areej is given a commission of Rs 15,000 each.
• Interest on capital to be allowed at 10% per anum.
• Interest at drawing 15% per anum.
• The net income is Rs 518,250.

Prepare the income distribution summary.

Particulars Amna Afia Areej Total

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OR
b.

Balance sheet
Asset Equities
Cash 105,000 Account payable 165,000
Other Assets 350,000 Saleem’s Capital 145,000
Kareem’s Capital 145,000
Assets 455,000 Equities 455,000

The above balance sheet was taken from the books of Saleem and Kareem partnership firm. They
share profit and loss in equal ratio. They agree to admit Ameen as a new partner for 1/3 interest
in the firm under following circumstances.

Case A: Ameen invests Rs 145,000 in the business.

Case B: Ameen invests Rs 180,000 in the business.

Case C: Ameen invests Rs 120,000 in the business.

i. Compute the amount of capital in each of the circumstances separately using only the
Goodwill Method.

ii. Post the General Journal entry for each case respectively.

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Date Particulars P/R Debit Credit

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