ALLAMA IQBAL OPEN UNIVERSITY, ISLAMABAD

(Department of Commerce)

PRINCIPLES OF ACCOUNTING (5401)

CHECKLIST

SEMESTER: SPRING, 2022

This packet comprises the following material:

1. Textbook (One)
2. Assignment No. 1 & 2
3. Assignment Forms (2 sets)

In this packet, if you find anything missing out of the above mentioned material,
please contact at the address given below:

The Mailing Officer

Allama Iqbal Open University
H-8, Islamabad
Ph: 051-9057611-12

ASIA BATOOL
(Course Coordinator)

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 ALLAMA IQBAL OPEN UNIVERSITY, ISLAMABAD
(Department of Commerce)
WARNING
1. PLAGIARISM OR HIRING OF GHOST WRITER(S) FOR SOLVING
THE ASSIGNMENT(S) WILL DEBAR THE STUDENT FROM AWARD
OF DEGREE/CERTIFICATE, IF FOUND AT ANY STAGE.
2. SUBMITTING ASSIGNMENT(S) BORROWED OR STOLEN FROM
OTHER(S) AS ONE’S OWN WILL BE PENALIZED AS DEFINED IN
“AIOU PLAGIARISM POLICY”.

Course: Principles of Accounting (5401) Semester: Spring, 2022

Level: ADC/BS (Accounting & Finance)/ADB

Please read the following instructions for writing your assignments.

(AD, BS, BEd, MA/MSc, MEd) (ODL Mode)
1. All questions are compulsory and carry equal marks but within a question,
the marks are distributed according to its requirements.
2. Read the question carefully and then answer it according to the
requirements of the question.
3. Avoid irrelevant discussion/information and reproducing from books,
study guide or allied material.
4. Hand written scanned assignments are not acceptable. However, the
students who attempt their assignments in Urdu/Arabic may upload a
scanned copy of their hand written assignments (in PDF format) on
University LMS. The size of the file should not exceed 5 MB.
5. Upload your typed (in Word or PDF format) assignments on or before the due date.
6. Your own analysis and synthesis will be appreciated.
7. Late assignments can’t be uploaded at LMS.
Total Marks: 100 Pass Marks: 50
ASSIGNMENT No. 1
(Units: 1–4)

Note: You are required to solve all questions if you are unable to understand any
question of assignment, do seek help from your concerned tutor. But keep in
mind that tutors are not supposed to solve the assignment questions for you.

Q. 1 (a) Define the term “Accounting” and its objectives. (10+10)

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 (b) Demonstrate how certain business transection affect the elements of
the accounting equation: assets=liabilities + Owner’s Equity.

Q. 2 What is single entry system of book keeping? Also describe the

characteristics and limitation of single entry system. (20)

Q. 3 Mr. Bilal started a sole proprietorship business. The business is newly

established and Mr. Bilal hired an Accountant for keeping the journal
updated. Suppose you are the Accountant of Mr. Bilal’s business, prepare
the journal book for the month of October, 2018. You are also required to
post journal entries into the ledger and prepare the trial balance. Detail of
the transactions during October, 2018 are given as follows: (20)

October 1. Invested cash Rs.2000,000 & Equipment Rs. 300,000 in the

business.
October 3. Purchased supplies for cash Rs. 70,000.
October 8. Purchased a truck for Rs. 2, 200,000 paying cash Rs.
1,000,000 and a note payable for the balance.
October 15. Purchased office equipment on account Rs. 150,000.
October 18. Paid rent for October Rs. 75,000.
October 19. Received cash for job completed Rs. 150.000.
October 22. Purchased supplies on account Rs. 260,000.
October 23. Wages paid to employees Rs. 410,000.
October 25. Paid premium on property insurance Rs. 29,6000.
October 26. Paid cash to the creditors Rs. 240,000.
October 28. Received cash Rs. 140,000 for job completed.
October29. Received an invoice for truck expenses, to be paid in
November, Rs. 41,000 .
October 29. Paid miscellaneous expenses Rs. 33,000.
October 30. Paid Wages to employees Rs. 430,000.
October 31. Withdraw cash for personal use Rs. 300,000.

Q. 4 The following Trial Balance has been extracted from general ledger of Mr.
Ahmed. on 31st January, 2019. From the given information you are required
to prepare a work sheet for the year ended on 31st December, 2019. (20)

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 Trial Balance
December 31, 2018
Title of Accounts Dr.(Rs.) Cr.(Rs.)
Cash 500,000
Account Receivable (Debater) 1,000,000
Inventory (January 1, 2018) 700,000
Office Equipment 460,000
Account Payable ( Creditors) 800,000
Notes Payable (Bills Payable) 300,000
Insurance 80,000
Office Supplies 40,000
Rent expenses 60,000
Office salary expenses 120,000
Ahmed’s Capital 1,250,000
Ahmed’s Drawing 90,000
Delivery Expenses 50,000
Purchases 1,500,000
Sales 23,00,000
Freight In 20,000
Purchase Returns 50,000
Sales Returns 60,000
4,700,000 4,700,000
Additional Information:
1) Merchandize Inventory on December 31, 2018 is valued at Rs. 850,000/-
2) Raise an Allowance for Depreciation on Office Equipment Rs. 60,000/-
3) Insurance Unexpired is Rs. 20,00/-
4) Office supplies consumed Rs. 30,000/-
5) A bill of Rs. 10,000/- in respect of advertising is outstanding.

Q. 5 On 1st January, 2011 Mr. Noman purchased Machinery for Rs. 39,000. The machine has
an estimated salvage value of Rs. 3,000 and an estimated useful life of 5 years. The
depreciable cost of the asset is Rs. 36,000 (39,000-3,000). The machine will produce
720,000 units during its useful life. The units produced first through fifth year are
180,000 units, 156,000 units, 138,000 units, 126,000 units and 120,000 respectively.
(20)
You are required to prepare the Deprecation schedule using the units of producing
method:

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Total Marks: 100 Pass Marks: 50
ASSIGNMENT No. 2
(Units: 5–9)

Q. 1 Ruhi Traders keeps his record of business under single entry system and wants
to know the operating result of his business. He provides the following data as
on 31st December, 2017 and 31st December, 2018 of his business:
As on 31st December, 2017: Cash in hand Rs. 25,000; Cash at bank Rs.
40,000; Account Receivables Rs. 70,000; Stock Rs. 65,000; Land & Buildings
Rs. 3000,000 Office Furniture Rs. 150,000, Office Equipment Rs. 80,000;
Account Payables Rs. 95,000; Bills Payables Rs. 30,000.
As on 31st December, 2018: Cash in hand Rs. 40,000: Cash at bank Rs.
60,000; Account Receivables Rs. 110,000; Stock Rs. 85,000; Account Payables
Rs. 75,000; Bills Payables Rs.45,000 Depreciation @ 5% on Land & Building;
@ 15% on office Furniture; @ 10% an office Equipment is charged annually
on original cost.
During the year Ruhi trader withdraw Rs. 158,000 and invested Rs. 112,000
into business.
You are required to:
i. Prepare the statement of affairs as on 31-12-2017 and as on 31-12-
2018 to calculate the amounts of capital.
ii. Prepare statement of Profit & Loss account for the period ended on 31-
12-2018.
(20)

Q. 2 Mr Naeem has trading business of computer accessories. The business has been
successfully run from last 10 years and is considering as one of the leading
trading store of the city. Recently, due to to the increase in volume of the
transaction, Mr. Naeem is unable to identify the difference in the balances of
Cash Bool and the pass book. Details of th transections are given in the
preceding paragraphs.
On 31st March, 2018 the pass book showed a credited balance of
Rs. 500,000 nd as per cash book is Rs. 408,750 of Mr. Naeem trader.
These are following discrepancy items between pass book and cash book: -
1. Cheque for Rs. 100,000 was paid in March, 5 th, 2018, but out of which
Rs. 80,000 credited by the bank on 25th March, 2018 and reaming balance
on 5th April, 2018.
2. Interest on investments collected by abank Rs. 1,750.
3. Bank charges for the above period also debited in the pass book of Rs.
500.
4. Cheque for Rs. 85,000 were issued to creditors but not presented into
bank for payment till 31th March, 2018.
5. On 29th March, 2018 a cheque of Rs. 25,000 received was deposited into
the bank but was omitted to the entered into cash book. (20)
Required: Prepare the Bank Reconciliation Statement under double balance method.

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Q. 3 X and Y are carrying on business as general merchants, sharing profit and
losses in the ratio2:3. Their balance sheet as on 31st December, 2018 as
under.
(20)
Equities & Labilities Amount Assets Amount
Sundry creditors 320,000 Cash at bank 20,000
Bills payable 60,000 Bills receivables 30,000
General reserve 40,000 Stock 80,000
Capital X 80,000 Investment 40,000
Capital Y 60,000 Machinery 190,000
Building 200,000

Total 560,000 Total 560,000

It is decided to admit Z into the partnership on the condition that he would pay
Rs. 40,000/- as capital on 1st January. Good will is to be valued at 3 years purchased of
4 years’ average profit, the profit or loss for there 4 years are:
1st year profit 22,000 2nd year profit 16,000
3rd year loss 8,000 4th year profit 18,000

The new profit sharing ratio is 5:6:7:

Required: Give journal entire and show the balance sheet under the following
methods of treatment, of goodwill:
i. Goodwill paid privately
ii. Goodwill paid in cash and retained

Q. 4 Short questions: (4x5=20)

a. What is meant by dissolution of partnership?
b. What is realization accounts?
c. What are the implication of the Garner Vs Murry decision?
d. In which situation the Garner Vs Murry is applicable?

Q. 5 i. How would you rectify the following errors: (20)

a. Monthly total of Rs. 180 of discount allowed column of the
cash book was posted to the credit of discount received account.
b. An amount of Rs. 3,000 paid for erection of machinery was
wrongly debited to wages A/c.

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 ii. Write down the formula for determine the net profit under net worth
method.
iii. What will be capital of the proprietor, if his assets are of Rs. 10,500,000
and liabilities are of Rs. 5,070,500?
iv. State with reasons weather the following items of expenditure are
capital or revenue.
a. Telephone expenses
b. Offices salaries
c. Purchase second hand truck
d. Paid for advertising

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