ACC101 FINANCIAL ACCOUNTING 1

MID SEMESTER EXAM REVISION

MID-SEMESTER EXAMINATION NOTIFICATION

1. The format for the Mid-Semester Examination will be as follows:

• This examination consists of One (1) section only.
• It consists of FOUR (4) questions.
• Answer ALL questions

This is a CLOSED BOOK exam.

2. Examination Topics:
The Mid-Semester Examination is based on Chapter 1 to 6 of the recommended textbook,
Financial Accounting, 10th Edition, by Hoggett, Edwards, Medlin and Tilling.

The Mid-Term Examination covers the following topics:

• Introduction to accounting
• Financial Statements and decision making
• Effects of transactions on accounting equations
• Recording transactions (both periodic).
• Adjusting entries and final accounts ( accruals & prepayments)
• Completing accounting cycles

3. References:
Students must know:
• To explain what is accounting
• To explain the concepts related to accounting
• To classify transactions and determine the effects on the accounting equation
• To record transaction based on periodic inventory system
• To prepare financial statements
• To make adjusting entries (accruals and prepayments; exclude bad debts, doubtful debts and
depreciation)

4. Duration of Examination:
▪ 2 hours of writing time

5. Assessment Contribution:
▪ The Mid-Semester Examination accounts for 30% of the overall marks for this subject

6. Assessment Breakdown:
▪ Double-entry ledger & trial balance (30 marks)
▪ Income statement, statement of owner’s equity and balance sheet (statement of financial
position) with adjustments of accrual and prepayments (income & expenses) (30 marks)
▪ Effect of errors on accounting equation (20 marks)
▪ Theory (20 marks)
Question 1

Indicate the immediate effect of the following errors on each of the accounting elements described
in the column heading below, using the following code:

O = overstated
U = understated
NE = no effect

Error Profit Total Total Owner’s

Assets Liability equity

a) PLN has not paid the electricity charges for this

month. No entry has been made with regards to
this expense.

b) Bought an insurance policy of $800 cash to

cover the business building against fire for two
years. It was recorded as DR Insurance Expense
$800, CR Cash $800.

c) PLN did a job for its client and invoiced for

$4,200. It was wrongly recorded as Dr. Accounts
Receivable $2,400 and Cr. Service Revenue
$2,40

d) The owner of PLN paid $1,000 cash from the

business for his wife’s slimming classes. It was
recorded as DR Sundry Expense $1,000, CR
Cash $1,000

e) Did not record the premises rental expense

incurred and paid for the month, $3400. No
accounting entry has been made.

f) Bought a photocopy machine for office use,

$1200. It was paid in full immediately upon
purchase. No entry has been made.

g) Provided consultancy service to a client for

$9,200, giving 30 days credit basis. It was
wrongly recorded as $2,900.

h) Bought a computer for $7,800. The terms of the

purchase was 2/10, n/45. No entry has been
made for this purchase.
i) Office equipment worth $4,500 have been
purchased on credit but no entry has been made
yet.

j) Payment of salaries expense for the month

$1,000 made have not been recorded yet.

k) Payment received from accounts receivable of

$9,000 have not been recorded yet.

l) Collected $10,000 cash from a client for

consultancy service to be provided next year. It
was wrongly recorded as Debit Cash $10,000
and Credit Consulting Fee Revenue $10,000.

m) Additional capital of $6,000 received into

business’s bank was recorded twice.

n) The Utilities expense for the month was $9,000

but it was wrongly recorded as $6,000. The
amount owing to the Utilities Company has not
been paid yet.

o) Bought a vacuum cleaner for office use and paid

$450 cash. It was recorded as DR Office
Equipment $450 and CR Accounts Payable
$450.

p) Provided consultancy service to a plantation

owner and received the full amount $2,500 cash.
It was wrongly recorded as DR Cash $25,000
CR Service Revenue $25,000.

q) The owner of the firm withdrew $7,000 to pay

for a family’s birthday party. It was recorded as
DR Birthday Party Expense $7,000 CR Cash
$7,000.

r) Received $28,000 cash as a loan from a bank.

This receipt was wrongly recorded as DR Cash
at Bank $28,000 and CR Sundry Revenue
$28,000.
For Double Entry Question:
Question 2

PUN is a trading business. It uses the periodic inventory system. All its receipts and payments are
made through the bank account. An extract of its ledger balances as at 31 May 2024 is shown
below. PUN updates its ledger accounts daily.

PUN : Ledger balances as at 31 May 2011.

Ledger account Amount ($)

Bank 250,000
Accounts receivable 220,000
Accounts payable 280,000
Capital 680,000
Land & building 380,000
Motor vehicle 60,000
Office equipment 50,000

In the month of June, following transactions took place:

June Events / Transactions

02 PUN collected $50,000 from its customers for the sales in April 2011.
06 PUN issued a cheque $90,000 to its suppliers for the purchases of inventory made in
the month of May 2011.
11 Bought a motor vehicle for $20,000 and it was paid immediately. It was meant for its
salesman’s use.
14 Bought and used office supplies for $3,000. The amount was paid on the spot of
purchase.
16 Bought $70,000 inventory. The terms of the purchase were 2/10, n/30.
PUN paid $4,000 by cheque to transport the inventory to its warehouse.
20 PUN sold some inventory for $200,000. The terms of the sale were 1/10, n/60.

24 The owner of PUN withdrew $9,000 from the business’ bank account to pay for her
son’s violin lessons.
29 The customer paid PUN for the 20 June 2011 transaction.

Required:

a. Show ALL the ledger accounts (T-account) and post the June 2024 transactions. (No journal
entry is required)
b. Prepare a trial balance as at 30 June 2024.
Question 3

XYZ uses the periodic inventory system. The balance of assets and liabilities as of 1 July 2024
were as follows:

Ledger account title Amount ($)

Cash at Bank 70,000
Accounts receivable 30,000
Equipment 80,000
Inventory 20,000
Fittings 35,000
Accounts payable 55,000
Capital 180,000

The following transactions took place during the month of July 2024:

July 3 Received cheque of $5,000 from customers for sales made in June.
6 Purchased an additional equipment worth $2,000 paying by cheque.
11 Purchased inventory (goods) worth $15,000 on terms 3/10, n/30.
13 Paid suppliers $20,000 by cheque for purchases made in the previous
months.
16 Paid $1,500 transportation charges to supplier by cheque
19 Sold inventory for $45,000 on term 8/10, n/14.
21 Returned damaged inventory (goods) worth $800 to supplier.
24 Collected cash from customer for sales made on 19 July sales.
29 Salaries for the month was paid by cheque amounting to $7,000.
(IGNORE GOODS & SERVICES TAX)

REQUIRED:
a) Show ALL the ledger accounts (T-account).
b) Prepare a trial balance as at 31 July 2024.
Question 4

Ao Nang is a sole proprietorship business. Its financial year end is 30 June each year. An
extract of the trial balance of Ao Nang as at 30 June 2019 is shown below.

No. Ledger Accounts DR$'000 CR $'000

1 Accounts receivable 136
2 Advisory expense 6
3 Cash at bank 73
4 Discount allowed 30
5 Electricity and Telephone expense 35
6 Freight outwards expense 13
7 Interest expense 11
8 Inventory, at 1 July 2018 71
9 Land and building, at cost 400
10 Miscellaneous operating expense 8
11 Office equipment, at cost 60
12 Office supplies expense 28
13 Prepaid insurance 48
14 Purchases 400
15 Rental of motor vehicle expense 12
16 Salaries and wages expense 99
17 Sales return 10
18 Transport inwards expense 20
19 Accounts payable 98
20 Accumulated depreciation : building 60
21 Capital 240
22 Discount received 10
23 Rental received 22
24 Interest income 29
25 Notes payable, due 11.11.2021 200
26 Purchase return 28
27 Sales 773
Total 1460 1460
 Additional data provided:-

i. The prepaid insurance is valid for the period 01 July 2008 to 30 June 2020.
ii. Ao Nang conducted an inventory count on 30 June 2019. It was valued at $61,000.
iii. An employee did not collect his June 2019 salary of $8,000. Ao Nang had not paid
and had not provided.
iv. The owner of business made a withdrawal from business’s bank for personal use amounting
to $10,000. No entry has been made.
v. Interest income of $1,000 have not been received yet
vi. Rental received above includes $1,000 for July 2019.

REQUIRED:
a. Prepare a detailed Income Statement for the year ended 30 June 2019.
b. A Statement of Owner’s Equity for the financial year and
c. a Balance Sheet Statement as at 30 June 2019.
Question 5

West Lak is a trading business. It uses the periodic inventory system. Its financial year end is 31 July
2018. An extract of its trial balance as at 31 July 2018 is shown below:

West Lak: Trial Balance as at 31 July 2018

Debit ($’000) Credit ($’000)

Accounts payable 430
Accounts receivable 1038
Accumulated depreciation as at 01 August, 2017:
• Building 320
• Motor vehicles 360
Beginning inventory, 01 August, 2017 640
Building, at cost 400
Capital, at 01 August 2017 2000
Cash at bank 80
Discount allowed 32
Discount received 5
Interest received 7
Commission receievd 12
Drawings 192
Interest expense 28
Land, at cost 1200
Loans payable, due on 10 Oct 2020 680
Motor vehicles, at cost 840
Prepaid insurance 180
Purchases 1800
Salary and wage expense 320
Sales 4120
Sales return 64
Sundry operating expense 120
Transport – inwards expense 80
Transport – outwards expense 400
Utilities expense 520
Total 7,934 7,934
Additional Information provided:

i. A physical stocktake was carried out on 31 July 2018. The inventory was valued at
$600,000.
ii. The prepaid insurance is valid from 01 August 2017 to 31 July 2018.
iii. A salary, $7,000, of an employee for the month of July 2008 has not yet been
provided and not yet been paid.
iv. Commission received above includes $900 for August 2018.
v. Interest for July 2018 of $1,200 has not been received yet.
vi. A withdrawal by owner amounting to $4,000 have not been recorded yet.

REQUIRED:
a. Prepare a detailed Income Statement for the year ended 31 July 2018.
b. A Statement of Owner’s Equity for the year and
c. detailed Balance Sheet as at 31 July 2018.
For theory questions, please read the following:
• assets
• liabilities
• income
• expenses
• equity
• cash discount
• trade discount
• periodic inventory system
• perpetual inventory system
• money measurement concept
• accounting period concept
• going concern concept