Hussain & Co. is a partnership business dealing with the supply of surgical items. Business is facing difficulty in recording its business transactions as there is no person on the payroll with accounting literacy. Hussain & Co. has decided to hire an accountant with sufficient accountancy literacy. Management of Hussain & Co., after interviewing several candidates hired Mr. Asif as an accountant. First assignment of Mr. Asif is to prepare the three column cash book for the month of January, 2017. During the month of January 2017, following transactions were recorded:
|2017 Jan.1 3. 5. 8. 10. 12. 13. 15. 19. 23. 26. 27. 28. 29. 30. 31.||Cash balance 500,000 from which deposited into Bank Rs. 300,000. Cash purchases Rs. 35000 less 2.5% trade discount. Received cheque Rs.85, 000 for sale of old Furniture and deposited into bank same day. Cash drew from bank Rs. 17,500 and paid to salaries Rs. 7,500 and rent Rs. 10,000. Bank charges Rs. 1,800 Purchased furniture paid by cheque. Rs. 25,300. Paid salary Rs. 14,000. Cash deposited into Bank Rs. 21,000. Goods sold to Mr. Ali on credit Rs. 28,000. Paid telephone charges Rs. 2000. Received a cheque from Mr. Ali Rs. 27,500 but full settlement of his account Rs. 28,000. Mr. Ali‘s cheque deposited into Bank. Withdrew from the bank for business use Rs. 45,000. Cash drew from business for his personal use. Rs. 5,000. Stationery purchased for cash Rs. 1,500. Received cash from Mr. Faqi-ul-Hasan Rs. 19,500 and discount allowed Rs. 500.|
Cash purchases Rs. 35000 less 2.5% trade discount.
Purchases =Rs. 35000
Discount rate @ 2.5%
Discount price = Rs.35, 000 × 2.5 ÷ 100 = Rs. 875
Net purchases after less trade discount = Rs.35, 000 – Rs.875 = Rs. 34,125
- Net price of the purchases is Rs. 34,125 is recorded but rs.875 is not recorded due to trade discount.
19 January 2017 Goods sold to Mr. Ali on credit Rs. 28,500.
Entry is not passed because it will be treated as credited basis.
Q. 2 (a) Define partnership and discuss the rights and duties of partners.
Q 3 The following is the Receipt and Payment account of Friends Recreation Club, you are required to prepare an Income& Expenditure Account of the Club for the year ending 31st August, 2017.
Q 4 Mr. Naeem has a trading business of computer accessories. The business has been successfully run for the last 10 years and is considered as one of the leading trading store of the city. Recently, due to the increase in volume of the transactions, Mr. Naeem is unable to identify the difference in the balances of Cash book and the pass book. Details of the transactions are given in the preceding paragraph. On 31st March, 2017 the pass book showed a credited balance of Rs. 500,000 and as per cash book is Rs. 408,750 of Mr. Naeem Trader. These are following discrepancy items between pass book and cash book: –
- Cheque for Rs. 100,000 was paid in 5 March, 2017, but out of which
Rs. 80,000 credited by the bank on 25 March, 2017 and remaining balance on 5 April, 2017.
- Interest on investments collected by bank Rs. 1,750.
- Bank charges for the above period also debited in the pass book of Rs.500.
- Cheque for Rs.85, 000 were issued to creditor but not presented into bank for payment till 31st March, 2017.
- On 29 March, 2017 a cheque of Rs. 25,000 received was deposited into the bank but was omitted to the entered into cash book.
Required: Prepare bank reconciliation statement under double balance method.
Q. 5 A and B entered into partnership on 1st January, 2020 contributing Rs. 150,000/- and Rs. 100,000. During the year A invested Rs. 60,000 as additional capital on1st May, 2020 whereas B brought additional capital of Rs. 40,000/- on 1st October, 2020. They earned a profit of Rs. 66,000/- during the year. Profits are to be shared in their capital ratio. Calculate partners share of profit and pass the necessary journal entry.