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PART A, ANSWER

Question 1 (5 marks)

State and explain briefly three (3) accounting concepts and three (3) accountingprinciples


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Answer-1

Entity Concepta. Each and every economic entity stands apart from other organizations andindividuals as a separate economic unit.

b. For the purpose of accounting, the preparation of financial statements for eachbusiness entity must be made so as not to include those transactions that do not belongto the entity.

Going Concern Concepta. Based upon the notion that businesses today are formed without deciding as to theparticular time it will cease.b. The accounting records are prepared with the assumption that there are no signs orindication 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 financialstatements.

The Stable-Monetary-Unit Concepta. In accounting, the unit of measure commonly used the currency and in Malaysia, thecurrency used is ringgit and sen.b. By using ringgit as a medium of exchange the users of financial statements are ableto determine the performance and financial position of a company. Unfortunately, theuse of ringgit as a measure is not as stable as those measurement units such askilograms or meters.c. Financial statements are still prepared basing upon the concept that the value ofringgit is stable and any changes in the value of ringgit is assumed insignificant.

The Accounting Period Concepta. In accounting the assumption is that an entity has a life span that cannot bedetermined unless thare are clear indications that the entity will not be operating in theforeseeable future.b. In the interest of producing accounting information, which is timely and in order tomeasure an entitys performance it is thus necessary for the measurement to be donewithin fairly rigid specified periods of time, usually a year.

Disclosure principlea. This principle requires all material information to be disclosed or published.

Materiality principlea. Places importance on that information which will affect ones ability in makingdecisions.b. Information, which will affect ones ability in making decision, is known as materialinformation.c. The materiality level really depends on judgment and not on any fixed rules.


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d. The general guideline on materiality is that if an item is important enough in terms ofdecision-making then it is to be considered material.

Objectivity principlea. This principle places importance in disclosing objective information in the financial

statements. Objective information means information, which is true and can be verifiedby another party.

Cost principlea. According to this principle, assets, which are acquired by a business, must berecorded at the price paid in the transaction. Even though the market value or theeconomic value of the asset, which is in a business, fluctuates but the value that isrecorded 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 concernconcept discussed earlier in this chapter.

Consistency principlea. This principle requires each entity to use the same accounting methods overconsecutive time periods i.e. with no changes from year to year.

Conservatism principlea. 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 overstatingassets.

Matching principlea. In this principle expenses of a business must be recognized when the revenuerelated to the said expense is recognized.


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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. Purchase of inventory by cash

b. Additional capital by cash

c. Purchase of furniture, paid 10% by cash

d. Sales on credit

e. Purchase of inventory by credit

f. Borrowed from bank

g. Withdrawal of cash for personal use

h. Deposit of cash in bank

i. Paid debts

j. Received invoice from supplierk. Sent invoice to customers


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Answer-2

Assets Liabilities OwnersEquity

a. Purchase of inventory by cash no effect no effect no effectb. Additional capital by cash Increase no effect Increasec. Purchase of furniture, paid 10% by cash Increase Increase no effectd. Sales on credit Increase no effect Increasee. Purchase of inventory by credit Increase Increase no effectf. Borrowed from bank Increase Increase no effectg. Withdrawal of cash for personal use decrease no effect decreaseh. Deposit of cash in bank no effect no effect no effecti. Paid debts decrease decrease no effect

j. Received invoice from supplier no effect no effect no effect

k. Sent invoice to customers Increase no effect Increase


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Syarikat Soraya Syed commenced the business of repairing and servicing air-

conditioners on 1 January 2009. The following is items of the business on 30 November

2008

Cash RM 10,000Accounts Receivable 2,000Equipment 20,000Gas Supplies 800Accounts Payable 1,000Capital 31,000Withdrawal 2,000Service Revenue 5,000Rent Expense 1,500Utility Expense 500

Gas Expense 200

The following are the transaction for the month of December 2008;

a. Dec 1, Received RM 500 from customers for partial settlement of debt

b. Dec 3, Provided services for RM 500 cash

c. Dec 6, Paid rental for the month of December RM 1,000

d. Dec 9, settled half of amount owed as per accounts payable

e. Dec 11, Provided services for credit RM 800

f. Dec 12, Provided services for cash RM 600

g. Dec 15, Received utility bill RM 600 for the month of November 2008

h. Dec 17, Purchases of furniture office on cash RM 1,000

i. Dec 19, Provided services for credit RM 700 and cash RM 500

j. Dec 20, Paid utility bill

k. Dec 25, Purchased additional equipment on credit for RM 500

l. Dec 29, Gas expense is the same as in previous month.

m. Dec 30, Withdrew RM 1,100 for personal use

Required

a. Show the general journal entries for the above transactionsb. Prepare the trial balance

c. Prepare balance sheet as at 31 December 2008


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Answer-3

a. Show the general journal entries for the above transactions

Syarikat Soraya SyedGeneral JournalDecember, 2008

Date Description Ref Debit(RM)

Credit(RM)

Dec 1 CashAccount Receivable

Received RM 500 fromcustomers for partial settlementof debt

500500

Dec 3 CashService Revenue

Provided services for RM 500cash

500500

Dec 6 Rent ExpenseCash

Paid rental for the month ofDecember RM 1,000

1,0001,000

Dec 9 Account PayableCash

settled half of amount owed asper accounts payable

500500

Dec 11 Account ReceivableService Revenue

Provided services for credit RM800

800800

Dec 12 CashService Revenue

Provided services for cash RM600

600600

Dec 15 Utility ExpenseUtility Payable

Received utility bill RM 600 forthe month of November 2008

600600

Dec 17 Furniture OfficeCash

Purchases of furniture office oncash RM 1,000

1,0001,000

Dec 19 Cash 500


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Account ReceivableService Revenue

Provided services for credit RM700 and cash RM 500

7001,200

Dec 20 Utility Payable

CashPaid utility bill

600

600

Dec 25 EquipmentAccount Payable

Purchased additional equipmenton credit for RM 500

500500

Dec 29 Gas ExpenseGas Supplies

Gas expense is the same as inprevious month.

200200

Dec 30 Withdrawal

CashWithdrew RM 1,100 for personaluse

1,100

1,100

b. Prepare the trial balance

Syarikat Soraya SyedTrial Balance

31 December, 2008Acc.No. Account Name Debit

(RM)Credit (RM)

Cash 7,900Accounts Receivable 3,000Gas Supplies 600Furniture Office 1,000Equipment 20,500Accounts Payable 1,000Capital 31,000Withdrawal 3,100Service Revenue 8,100Rent Expense 2,500

Utility Expense 1,100Gas Expense 400

40,100 40,100

c. Prepare balance sheet as at 31 December 2008


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Syarikat Soraya SyedBalance Sheet

At 31 December, 2008AssetsCash

Account ReceivableGas SuppliesFurniture OfficeEquipment

7,900

3,0006001,000

20,500

LiabilitiesAccount Payable

EquityCapital

1,000

32,000

Total Assets 33,000 Total Liabilities and Equity 33,000


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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 Amount Purpose of expenses101 25.00 To repair office lightning102 15.00 Stamps103 14.50 Office supplies104 35.00 Taxi fare105 17.50 Computer diskette

Required:

a. Show journal entries to record the establishment of petty cash fundb. Show journal entries to replenish the petty cash fund on March 31


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Answer-4

a. Show journal entries to record the establishment of petty cash fund

Bismi Sdn BhdGeneral Journal

March, 2008Date Description Ref Debit

(RM)Credit(RM)

March 1 Petty CashCash

to record the establishment ofpetty cash fund

125125

b. Show journal entries to replenish the petty cash fund on March 31

Bismi Sdn BhdGeneral Journal


(RM)Credit(RM)

March31

Administration ExpenseOffice Supplies ExpenseTransportation Expense

Cash

to record the replacement ofpetty cash fund

57,5014,5035,00

107


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The following details relate to Imaging Picture Trading Bhd

a. 1 January 2008, the credit balance of provision for doubtful debt amounted to

RM2,600b. 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


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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 = RM2,500the credit balance of provision for doubtful debt at 1 January 2008 = RM2,600

----------------The doubtful debt expense =(RM 100)


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The following are the purchases and sales particulars of Syarikat Johari Bhd for the

month of July 2008

Date Description Unit Cost per unit(RM)Dec 1 Balance 50 20Dec 5 Sales 30Dec 10 Purchases 40 25Dec 15 Sales 50Dec 20 Purchases 20 30Dec 30 Sales 10

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.


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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

Purchases Sales Balance

Da te Uni t Cos t Tota l Uni t Cos t Tota l Uni t Cos t Tota l

1-Dec 50 20 1000

5-Dec 30 20 600 20 20 400

10-Dec 40 25 1000 20 20 400

40 25 1000

15-Dec 20 20 400

30 25 750 10 25 250

20-Dec 20 30 600 10 25 250

20 30 600

30-Dec 10 25 250 20 30 600

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

December

Syarikat Johari Bhd

General JournalDecember, 2008


Credit(RM)

Dec 10 InventoryCash/Account Payable

to record goods purchased

1,0001,000

Dec 20 InventoryCash/Account Payable

to record goods purchased

600600

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.


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Syarikat Johari BhdGeneral JournalDecember, 2008


Credit(RM)

Dec 15 Cash/Account ReceivableSalesTo record cash or credit sales

Cost of Goods SoldInventory

to record cost of goods sold

2,500

1,150

2,500

1,150

Dec 30 Cash/Account ReceivableSales

To record cash or credit sales

Cost of Goods SoldInventoryto record the sales of inventory

500

250

500

250

Good Luck


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PART B, ANSWER


State and explain the element of financial statements of limited company.


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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


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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 deductedfrom Assets

Assets Liabilities: Owners equity

Four factors affecting owners equity:

Increases owners equity Decreases owners equity

1. Investment of cash or

other assets by owners

3. Withdrawal of cash or

transfer of other assets byowners

2. Income 4. Loss

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


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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 morethan 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


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The following items which are disorganized are extracted from a balance sheet of

Gaparsing Enterprise as 29 January 2009.

Note Payable RM21,000

Account Receivable33,000

Office Equipment16,000

Accounts Payable7,500

Building

32,500Cash27,000

Vehicles25,500

The following transactions occur for two days from the date;

a. Vehicle is sold for of RM 30,000

b. Another vehicle is bought for RM 35,000 by cash

c. Half of the note payable are paidd. One third of accounts receivable are received from customers

Using this information, prepare a balance sheet for Gaparsing Enterprise as at 29

January and 31 January 2009


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Answer-2

Gaparsing EnterpriseBalance Sheet

At 29 January, 2009AssetsCashAccount ReceivableOffice Equipment

VehiclesBuilding

27,00033,00016,00025,50032,500

LiabilitiesAccount PayableNote Payable

EquityCapital

7,50021,000

105,500Total Assets 134,000 Total Liabilities and Equity 134,00

Gaparsing EnterpriseBalance Sheet

At 31 January, 2009AssetsCashAccount ReceivableOffice Equipment

VehiclesBuilding

22,50022,00016,00035,00032,500

LiabilitiesAccount PayableNote Payable

EquityCapital

7,50010,500

110,000Total Assets 128,000 Total Liabilities and Equity 128,000


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Below is a list of transactions. For each transaction, state the journal that would be used

for recording.

a. Cash salesb. 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 beused 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


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Answer-3

a. Cash salesb. Purchase of goods on cashc. Return of purchased goods, which has not yet been

paidd. Credit salese. Payment for accounts payablef. Purchase of insurance policyg. Adjustment entry for depreciation of fixed asseth. Cash receipts for accounts receivablei. Purchase of goods on credit

j. Sale of old equipment on creditk. Transferred a building owned by the owner to the

business. The building is to be used as a businesspremise

l. Owner made an additional investment cashm. Return to supplier , damaged equipmentsn. Paid salaryo. Purchase of office supplies on creditp. Purchase of goods on creditq. Cash withdrawalr. Credit sales to owners. Received money from Bank and issued a note payable

Cash Receipts JournalCash Payment JournalGeneral Journal

Sales JournalCash Payment JournalCash Payment JournalGeneral JournalCash Receipts JournalPurchases JournalGeneral JournalGeneral Journal

Cash Receipts JournalGeneral JournalCash Payment JournalGeneral JournalPurchases JournalCash Payment JournalSales JournalCash Receipts Journal


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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


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Answer-4

a. Show journal entries to record the purchase of shares

Yami BhdGeneral Journal


(RM)Credit(RM)

March 2 Current InvestmentCash

To record the purchase of share

410,000410,000

b. Show journal entries to record the dividends received

Yami BhdGeneral Journal

July, 2002Date Description Ref Debit

(RM)Credit(RM)

July 3 Cash

Dividend IncomeTo record the dividends received

25,000

25,000

c. Show journal entries to record the sale of shares

Yami BhdGeneral JournalNovember, 2002


Credit(RM)

Nov 1 CashCurrent InvestmentGain on sale of investment

To record the sale of share

245,000205,00040,000


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Tenom Coffee Company Bhd received following notes in 2008;

Notes Date Amount (RM)6%, 60 days 20 Nov 12,0009%,90 days 15 Oct 24,00012%,120days

25 Oct 36,000

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


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Answer-5

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

Tenon Coffee Company BhdGeneral Journal

October and November, 2008Date Description Ref Debit

(RM)Credit(RM)

Oct 15 Note ReceivableSales

To record the receipt of note 9%,90 days

24,00024,000

Oct 25 Note ReceivableSales

To record the receipt of note12%, 120 days

36,00036,000

Nov 20 Note ReceivableSales

To record the receipt of note 6%,60 days

12,00012,000

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


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

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

Tenon Coffee Company BhdGeneral JournalDecember, 2008


Credit(RM)

Dec 31 Interest ReceivableInterest Income

To record the interest for note9%, 90 days

456456



793793



8181


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The following information relates to inventory extracted from the records of Syarikat

Barisan on 31 January 2008

Goods available forsale Unit Cost per unit(RM)Beginning Inventory 10 1.00Purchase January 3 30 1.00Purchase January 10 150 1.50Purchase January 21 75 2.00Purchase January 25 120 2.10Purchase January 30 100 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


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Answer-6

a. FIFO method

Goods available for sale Unit Cost/unit (RM) Total (RM)

Beginning Inventory 10 1 10

Purchase January 3 30 1 30

Purchase January 10 150 1.5 225




395 692

1. Cost of goods sold = RM692

2. Ending Inventory = 90 unit x RM2.50 = RM225

b. LIFO method






395 802

1. Cost of goods sold = RM802

2. Ending Inventory = RM10 + RM30 + RM75 = RM11510 unit x RM1.00 = RM1030 unit x RM1.00 = RM3050 unit x RM1.50 = RM75

-----------Total = RM115

c. Weighted average method


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Beginning Inventory 10 1 10




Purchase January 25 120 2.1 252Purchase January 30 100 2.5 250

485 1.89 917

1. Cost of goods sold = 395 unit x RM1.89 = RM746.84

2. Ending Inventory = 90 unit x RM1.89 = RM170.16

Good luck

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