ACC 206 - Accounting for Manufacturing and alternatives entities

TEST 2
Time: 2 hours 2th May 2023
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All [ 3] Three questions are compulsory. Total Marks: 40

Question 1. [15 Marks]

A. Answer the following Multiple-choice questions on the answer sheet. [10]

1.1 In the Income and Expenditure Account, all revenue receipts are entered on the ______.
a) Left-hand side.
b) Right-hand side.
c) Liability side.
d) Asset side.
1.2 The task of preparing an Income and Expenditure Account and Balance Sheet begins
after the preparation of _____.
a) Profit and Loss Account.
b) Trading Account.
c) Cash Account.
d) Trial balance
1.3 Sale of the old newspaper is ______.
a) Revenue Receipt.
b) Asset.
c) Profit.
d) Capital gain.
1.4 Which of the following is an example of a Non-Profit organisation?
a) Corporations.
b) Audit Firms.
c) Insurance Companies.
d) Public Hospitals.
1.5 Surplus or profits of Non-Profit Organisations are _______.
a) It is not distributed among members.
b) Maybe or may not be distributed among members.
c) It is debited to the general fund.
d) Distributed among members.
1.6 An Income and Expenditure Account is based on _______.
a) Accrual Basis of Accounting.
b) Mixed Basis of Accounting.
c) Management Accounting.
d) Cash Basis of Accounting.

1.7 Share of goodwill brought in by new partner in cash is shared by old partners:
a) Old profit sharing ratio.
b) New profit sharing ratio.
c) Sacrificing ratio.
d) None of above.
1.8 In the absence of partnership deed, interest of capital and drawings to be..
a) Paid.
b) Not paid.
c) As per capital ratio.
d) None of above.
1.9 A and B are partners sharing profits and losses as 2:1. C is admitted, and profit-sharing
ratio becomes 4:3: 2. C brings premium of goodwill in cash and valued at P 94,500. How
much goodwill amount will be credited to old partners:
a) A- P 12,000 and B -P 9,000
b) A – P 42,000 and B- P 31,500
c) A – P 21,000
d) A – P 63,000 and B- P 31,500

1.10 X and Y are sharing profits and losses in the ratio of 3:2. They admit Z as a new
partner and given him 2/10th share in the profits. The new profits sharing ratio will be.
a) 3 :2: 2
b) 3: 2: 5
c) 6: 4: 4
d) 12: 8: 5
B. Answer following as True/ False [5 ]
1. Advance rent paid by a non- profit- making organisation is an asset.
2. “The surplus of non-profit-making organisation are sometimes distributed among
members”.
3. If the new partner brings his share of goodwill in cash; it will be shared in sacrifice
ratio by old partners.
4. Share of goodwill brought in by a new partner in cash called “premium”.
5.

Question 2. [15 Marks]

Following is the Receipt and Payment account of Sunshine Foundation for the year ending
31st March 2021:

Cash Receipt & Payment Account

Receipts {P} Payments {P}

Balance b/d 9,800 Salaries 40,200

Subscription [ including P 800 for Travelling expenses 17,200
the year ending March 2023] 104,200 Printing and stationery 3,440
Donation 12,000 Rent 33,200
Received from charity 32,400 Repairs 900
Sale of furniture [book value P Building purchased. 60,000
8,000] 3,200 Government bonds 10,000
Life Membership fee 18,000
Interest on Investments [cost P
80,000] 9,600 Balanced c/d 64,260
Sale of old car 40,000

229,200 229,200

On 1st April 2020, the club owned land and building worth P 80,000 and Furniture worth P
21,000. There were 300 members on that date and annual subscription fee was P 100 per
person. The value of capital on 1st April 2020 was valued at P 219,200. The Book Value of
the car was P 50,000. Subscriptions due on 31.3.2020 and on 31.3.2021 were P6,800 and
₹4,000 respectively. Interest on Investment accrued at the beginning and at the end of the
year was P1,600 and P 2,000 respectively.
Required: Prepare Income and Expenditure Account and Balance Sheet for the year
ending 31st March 2021.

Question 3. [10 Marks ]

Popo, Queen and Ramatu are in partnership to run a business clinic. The following
information has been taken from the partnership records for the year ended 31 December
2022.
 Net profit of the year ended was P 111,100.
 Interest to be charged on capitals: Popo P 3,000; queen P 2,000; Ramatu P 1,500.
 Interest to be charged on drawings: Popo P 400; Queen P 300; Ramatu P 200.
 Salaries to be credited: Queen P 20,000 Ramatu P 25,000.
 Profits to be shared in a ratio of 7: 2: 1 among Popo; Queen and Ramatu.
 Current accounts: balances b/d Popo P 18,600; Queen P 9,460; Ramatu P 8,200.
 Capital accounts: balances b/d Popo P 100,000; Queen P 50,000; Ramatu P 25,000.
 Drawings: Popo P 39,000; Queen P 27,100; Ramatu P 16,800.

Required:
Draw up a profit and loss appropriation account for the year ending 31 December 2022 [6]
and a balance sheet extract at that date for their business. [4]

END OF TEST
 ACC 206 Test 2 marking key May 2023
Question 1
1.1 – right-hand side [ ]
1.2 – cash account [C]
1.3 – revenue receipt [a]
1.4 - public hospital [d]
1.5 - not distributed among members [a]
1.6 - Accrual basis accounting [a]
1.7 Sacrificing ratio [c]
1.8 - not paid [b]
1.9 P 21,000 [c]
1.10 – 12:8:5 [d]
B- Ture / False
1- True, 2- false 3. – True ; 4- True; 5- False

Question 2 ; solution
 [ ½ mark for each amount] = 8 marks

[1/2 mark for each amount, total = 7 marks ]

Question 3. Popo, Queen and Ramatu

Profit and loss Appropriation Account for the year ending 31 december 2022

[P] [P]
Net profit of year 111,100 √
Add: interest on drawings: Popo 400 √
Queen 300 √
Ramatu 200 √ 900
112,000
Less: interest on capitals: Popo 3,000 √
 Queen 2,000 √
Ramatu 1,500 √
Salaries: Queen 20,000 √
Ramatu 25,000 √ (51,500)
Balance of profits 60,500
Shared: Popo 70% 42,350 √
Queen 20% 12,100 √
Ramatu 10% 6,050 √

60,500

[ each tick has 1/4 marks = 3 marks

Capital Account for partners.

Details Popo Queen Ramatu Details Popo Queen Ramatu

Balance c/d 100,000 √ 50,000 √ 25,000
Balance b/d 100,000 50,000 25,000 √

Current Account

Details Popo Queen Ramatu Details Popo Queen Ramatu

Opening balance 18,600 9,460 8,200

Add: interest on 3,000 2,000 1,500
Less: interest capital 20,000 25,000
On drawings 400 300 200 Salaries -
Drawings 39,000 27,100 16,800 Share of profits 42,350 12,100 6,050
Balance b/d 24,550 16,160 23,750
63,950 43,560 40,750 63,950 43,560 40,750

¼ mark for each figure… = 7 marks

Special test

Suggested questions

2. In the Income and Expenditure Account, all revenues expenses are entered on the
______.
a) Left-hand side.
b) Liability side.
c) Right-hand side.
d) Asset side.
Answer a) Left-hand side.
4. In Receipts and Payments Account, cash in hand or at the bank is shown on the _____.
a) Left-hand side.
b) Right-hand side.
c) Credit side.
d) None of the options are correct.
Answer a) Left-hand side.
5. Income and Expenditure Account, generally indicates _____.
a) Cash Balance.
b) Capital Fund.
c) Net Profit / Loss.
d) Surplus / Deficit.
Answer d.
3. Donation received for a special purpose:
a) Should be credited to a separate account and shown in the Balance Sheet.
b) Should be shown on the Assets side of the Balance Sheet.
c) Should be credited to Income and Expenditure A/c.
d) None of the options are correct.
Answer a) Should be credited to a separate account and shown in the Balance Sheet.
11. Donation received for a construction a building is:
a) Capital receipt
b) Revenue receipt
c) Capital expenditure
d) Revenue expenditure

12. Outstanding subscriptions are …..for a non-profit making organisation.

a) an income
b) an asset
c) An expense
d) a liability