Accounting Assignment PDF
Accounting Assignment PDF
Accounting Assignment PDF
Prepared By
Mohamed Safwat Mostafa
Part 1:
1. Which of the following do not considered as a GAAP principles:
a) Conservatism.
b) Matching.
c) Segregation of duties.
d) Objective.
The business entity concept: accounting is separate from personal affairs from its owner
Consistency: apply same principle and accounting policies from period to period
Capital gain is a profit come from disposition of asset and this profit considered as
revenue which is credit in nature so capital gain is credit nature
Accrued interest income is interest which is not collected yet so it considered as asset
which is debit nature.
Justification:
Current asset is asset that expected to convert into cash, sell, or consume in operation within a
single operating cycle which generally considered 12 month
4. When company purchases an asset on credit, the accounts that will be affected on the journal
entry are:
a) Cash & Assets.
b) Assets & Capital.
c) Assets & Payables.
d) Investments & Payables.
Correct answer is:
Justification:
When buy asset on credit asset account will increase and also payable will increase and
it will reported as Debit asset credit payable
So answer a) Cash & Assets is not correct as company purchase asset on credit so cash
account will not be affected
b) Assets & Capital is not correct as capital account will not be affected as nature of
asset is not mentioned its nature
d) Investments & Payables is not correct as type of asset not mentioned for invest or
other thing .
Justification:
For example : if opening balance of inventory is 100,000 USD and we buy goods with
50,000 USD and the inventory ending balance is 90,000 USD
The cost of goods sold will be 60,000 USD
6. Entity A purchased a machine with USD 100,000. The companys technician expects the
machine to be used for 5 years only. Five years depreciation period means . % each year.
a) 20%.
b) 5 %.
c) 15%.
d) 25%.
Correct answer is:
a) 20%.
Justification:
When machine expected to be used over 5 years only, its value after 5 years should be zero so
it depreciation by year will equal 100%/5 years = 20% each year
7. Following the previous information, in year TWO the Fixed Assets Net line item in balance
sheet will equal to:
a) USD 80,000.
b) USD 20,000.
c) USD 60,000.
d) USD 40,000.
Correct answer is:
c) USD 60,000.
Justification:
Depreciation is 20% per year so in 2 years machine will be depreciated by 40% so the remaining
will be 60% (fixed assets net)
8. The depreciation expense journal entry will affects the two accounts:
a) Depreciation expenses and provision.
b) Depreciation expenses and accumulated depreciation.
c) Depreciation expenses and allowance for doubtful debts.
d) Depreciation expenses and accrued expenses.
Correct answer is:
Justification:
Accumulated depreciation is total depreciation of fixed assets and it will be charged as expense
since the asset was made available for use and this account is credit nature so it will appear in
balance sheet as reduction of asset amount
So Journal entry for depreciation expense will be:
Debit
Allowance for doubtful debts is reduction of amount of account receivables and it represent
amount of receivables that will not be paid by customer so answer C is not correct
Accrued expenses is expense which has been incurred but not yet paid so answer D is not
correct
9. Company A has the following balances at the yearend; Non-current assets equal 30,000,
current assets equal USD 15,000 and Equity with USD 25,000. The total liability balance will
be:
a) USD 70,000.
b) USD 20,000.
c) USD 40,000.
d) USD 45,000.
Correct answer is:
b) USD 20,000.
Justification:
Equity= Total asset (non-current + current) liabilities (current +long term liabilities)
10. Method of recording that recognizes Costs when deserved, rather than when paid is:
a) Conservatism.
b) Matching.
c) Materiality.
d) Accrual Base.
d) Accrual Base.
Justification:
Accrual base is method of recording that recognize economic events regardless of when cash
transaction is paid so it give more accurate picture about company situation as it allow
combination of current cash inflow/ outflow with future expected cash inflow / outflow
Conservatism, Matching and Materiality are GAAP
Part 2
1. What do we mean by Accounting Cycle?
Accounting Cycle: is a series of steps which are repeated every reporting period. This
process starts with making accounting entries for each transaction and goes through closing
the book
It consist of 8 steps:
1. Transaction
8. Closing the
books
2. Journal entries
Accounting
Cycle
7. Financial
statement
6. Adjusting
journal entries
3. Posting
4. Trial balance
5. Worksheet
2. Medical Company established on July 1, 2014 with USD 50 000 share capital. Also, it had
issued a bond for 5 years converted to share capital at par value any time with USD 15 000
at 8% interest per annum.
At the year end the company converted 50% of the bonds payable to shares and paid the
rest of the payable amount. You are required to prepare the journal entries on first of
July & at the end of December?
Journal entries
July 1, 2014
Dr Cash
65,000
Cr Capital
50,000
Cr Bonds payable
15,000
Cr Capital
7,500
Cr Cash
8,100
15,000
Dr Interest expense
600
Calculations:
After 6 month from July 1, 2014 to December 31, 2014 50 % of the bond payable converted
to shares so capital increase by 7,500 USD (15,000 / 2)
Rest of the bonds paid (7,500)
Interest expense will be (6 months) =15,000 X (6/12) X 8%= 600
So cash will decrease by 7,500+600 = 8,100
3. ABC Company has the following balances in USD and the end of its first financial year:
Net loss
(400,000).
Depreciation Expenses
30,000.
Interest expenses
50,000.
Loan
270,000
Receivables
100,000.
Payables
90,000.
Tax paid
50,000
Cash & Cash equivalents
60,000.
Assets
160,000
How much is the Cash generated or used from/in operating activities?
ABC Company
Statement of cash flow for the year ended
(Amount in USD)
Cash flow from operating activities
Net loss before taxation
(400,000)
Adjusted for;
Depreciation expenses
30,000
Interest expenses
50,000
_____
Loss before changes in working capital (320,000)
Receivables
(100,000)
Payables
90,000
_____
Cash used in operation
Tax paid
(330,000)
50,000
____
Current assets
(ex.: inventory)
5. ABC Company made the following transactions during September 2015; you are required to
prepare the entry or entries for each transaction along with the description needed,
T accounts & the trail balance for September.
- The company sold goods on credit with USD 35 000, in which USD 19 000 were collected in cash.
- The company incurred expenses with USD 19 000 in which USD 11 000 were paid in cash.
- The companys total purchases from its sole supplier RED ROSE is 12,000 units with $ 0.8 per
unit. The company paid USD 5 000 to this supplier.
- The overdraft opening balance were USD 5 000.
- The cash opening balance were USD 5 000.
Cost of goods purchased from RED ROSE = 12000 * 0.8 = 9600 USD
Journal entries
1Dr Receivables
35000
Cr Revenue
35000
19000
Cr receivables
19000
19000
Cr accrued expense
19000
11000
Cr Cash
11000
9600
Cr RED ROSE payables 9600
5000
Cr cash
5000
DR
BF
Revenue
CR
35000
Opening
5000
35000
35000
Receivables
5000
19000
35000CF
35000
Total
5000
CF
DR
Expenses
TB Bal.
19000
Total
5000
CF
19000
8000
DR
Cash pay
19000
BF
Total
5000
Cash
DR
Paid cash
19000
BF
Total
5000
Purchasing
goods
Total
5000
CF
CR
DR
24000
8000
CR
Expenses 11000
5000
Payables 5000
5000
BF
8000
Total
5000
Receivables
24000
CR
Receivables
5000
35000
Collected 19000
35000
5000
BF
16000
19000
Total
5000
CF
35000
Total
5000
CR
DR
11000
8000
9600
9600
4600
16000
Inventory
Purchasing 9600
goods
Total
5000
9600
35000
CR
BF
9600
Total
5000
CF
9600
9600
Liabilities
Assets
AM.
35000
Revenue
Cash
8000
4600
Inventory
9600
5000
Over draft
Receivables
16000
8000
Accrued expenses
Expenses
19000
52600
Total
Total
52600
Part 3
1
Dr Cash
25000
Cr Revenue
25000
Dr COGS
17000
Cr Inventory
17000
Dr Payables
10000
Cr Cash 10000
Dr Accrued expenses
4000
Cr Admin expenses
4000
Dr Cash
50000
Cr Capital
50000
Dr Inventory
22000
Dr Revenue
28000
Cr Trade receivables
28000
5000
22000
Balance
130,000
82,000
93,000
110,000
69,000
129,000
(37,000)
5000
(42,000)
(77,000)
(86,000)
(13,000)
(200,000)
(70,000)
(102,000)
(317,000)
264,000
(46,000)
(52,000)
83,000
97,000
(64,000)
44,000
ABC Company income statement for the year ended December 31, 2X06
(Amount in USD)
Revenue
Cost of Goods sold
Gross profit
317,000
264,000
____
53,000
Admin Expenses
Other operating expense
Other operating revenue
(97,000)
(83,000)
116,000
____
(11,000)
46,000
(5,000)
____
30,000
44,000
____
(14,000)
130
93
____
223
110
69
82
129
___
390
37
42
13
77
86
___
255
___
135
___
358
200
70
88
___
358
ABC Company
Notes of the Financial Statement for the year ended as of December 31, 2X06.
(Amounts in USD)
1- Debtors & Other debit balances
Prepaid Expense
82,000
Total Debtors
82,000
2- Creditors
Accrued Expenses
13,000
Total Creditors
13,000
3- Working capital
Total current assets
390,000
(255,000)
Working capital
135,000
4- Total Investment
Total non-current assets
223,000
135,000
Total Investment
358,000
5- Retained Earnings
Retained Earnings from trial balance
102,000
(14,000)
Retained Earnings
88,000
52,000
64,000
116,000
46,000
46,000