MBA Executive

Financial Accounting
Final Term

Name: ____________________ Time: 120 Minutes

Marks: 35 Marks

Objective Part
Question No. 1: (05 Marks)
Pick The Right One Option:
1. A statement of cash flows would be least useful in answering which of the following
questions?
a. What was the average balance in the Cash account during the period?
b. Did operating activities result in a positive or negative net cash flow?
c. How much cash was provided or used by financing activities during the period?
d. Were cash dividends paid by the company more or less than the net cash flow
from operations?
2. For purposes of preparing a cash flow statement, which of the following is not
considered a "cash equivalent"?
a. A Money Market Fund c. Treasury Bills
b. An Investment in IBM Bonds d. Commercial Papers
3. Which of the following transactions would increase the net cash flow from operating
activities?
a. The collection of an account receivable from a customer
b. The issuance of capital stock for cash at a price above par.
c. The purchase of a delivery truck by issuing a note payable.
d. The sale of equipment for cash at a gain.
4. In a statement of cash flows, the acquisition of land by issuing capital stock
a. Is not shown at all, since no cash was received or disbursed.
b. Is shown as an investing activity
c. Is shown as a financing activity
d. Is shown in a supplementary schedule as a noncash investing and financing
transaction.
5. Bank Reconciliation Statement is prepared to
a. Rectify the mistakes in pass book
MBA Executive
Financial Accounting
Final Term

Name: ____________________ Time: 120 Minutes

Marks: 35 Marks

b. Rectify the mistakes in cash book

c. To arrive at balance as per bank statement
d. To find the reasons of the differences in balance as per cash book and bank
statement
6. Which of the following is not disclosed in bank reconciliation?
a. Error made by the depositor in recording the amount of a check received from a
customer.
b. Error made by the bank in recording the amount of cash disbursement.
c. Check received from a customer which proved to be uncollectible.
d. Amount stolen by a salesclerk who did not ring up several cash sales.
7. During preparation of a bank reconciliation, interest earned on the average bank balance
during the month should be:
a. Deducted from the cash balance per accounting records.
b. Added to the cash balance per accounting records
c. Deducted from the balance per bank statement.
d. Added to the balance per bank statement.
8. The journal entry to record the sale or disposition of a depreciable plant asset always
includes:
a. Recognition of a gain
b. A debit to the Accumulated Depreciation account for the related accumulated
depreciation
c. Recognition of a loss
d. A debit to the asset account for the book value of the asset
9. The basic purpose in preparing classified financial statements is to:
a. Aid management in controlling expenses.
b. Develop useful subtotals which will assist users of the statements in their analysis
of the company's financial position, profitability, and future prospects.
c. Create a balance sheet which measures the profitability of the business as well as
its financial position.
MBA Executive
Financial Accounting
Final Term

Name: ____________________ Time: 120 Minutes

Marks: 35 Marks

d. Determine that the amounts shown in the financial statements are in agreement
with the company's subsidiary ledgers.
10. Financial Statements are prepared:
a. Only for publicly owned business organization.
b. For corporations, but not for sole proprietorships.
c. Primarily for the benefits of persons outside the business organization.
d. In either monetary or nonmonetary terms, depending upon the need of the
decision maker
11. Depreciation is a process of:
a. Apportionment c. Allocation
b. Valuation d. Appropriation
12. Which of the following is revenue expenditure?
a. Construction of factory shed
b. Sales tax paid in connection with purchase of office equipment
c. Legal expense in connection with defending a title of firm’s property.
d. License Fee.

13. The balance sheet item that represents the resources invested by the owner is
a. Account Receivables c. Assets
b. Cash d. Equity
14. The amount of owner's equity in a business is not affected by:
a. The percentage of total assets held in cash.
b. Investments made in the business by the owner.
c. The profitability of the business.
d. The amount of dividends paid to stockholders
15. The financial statement which shows cash activity (receipts and disbursements) during
the accounting period is called a(n):
a. Bank Statement c. Statement of Cash Flow
b. Income Statement d. Bank Reconciliation
16. Which item among the following is not an intangible asset?
MBA Executive
Financial Accounting
Final Term

Name: ____________________ Time: 120 Minutes

Marks: 35 Marks

a. A Trademark c. A Patent
b. An Account Receivable d. Goodwill
17. Which of the following amounts appears in both the Income Statement debit column and
the Balance Sheet credit column of a worksheet?
a. Net Income c. Dividends
b. Net Loss d. Retained Earnings
18. An amount of Rs. 200 received from Mr. "P" but credited to Mr. "Q" would affect:
a. Accounts of P & Q c. Only P’s account
b. Only Cash Account d. Only Q’s account

19. Which of the following account balance will be shown on debit side of Trial Balance? (It
is assumed that all account balances are shown on normal balance)
a. Cash account c. Vehicle account
b. Furniture account d. All of the given options
20. Which of the following journal entry will be recorded, if cash is drawn by a Proprietor?
a. Proprietor’s drawings a/c (Dr.) and Cash a/c (Cr.)
b. Cash a/c (Dr.) and Proprietor’s drawings a/c (Cr.)
c. Proprietor’s Capital (Dr.) and Proprietor’s drawings a/c (Cr.)
d. Proprietor’s drawings (Dr.) and Proprietor’s Capital a/c (Cr.)
MBA Executive
Financial Accounting (Subjective)
Final Term

Name: ____________________ Time: 120 Minutes

Marks: 35 Marks

Subjective Part

Question No. 2: (05 Marks)

1. The bank statement for August 2017 shows an ending balance of PKR 568,870/-.
2. On August 31 the bank statement shows charges of PKR 5,705/- for the service charge
for maintaining the checking account.
3. On August 28 the bank statement shows a return item of PKR 16,300/- plus a related
bank fee of PKR 1,630/-. The return item is a customer's check that was returned because
of insufficient funds. The check was also marked "do not redeposit."
4. The bank statement shows a charge of PKR 13,040/- for check printing on August 20.
5. The bank statement shows that PKR 1,304/- was added to the checking account on
August 31 for interest earned by the company during the month of August.
6. The bank statement shows that a note receivable of PKR 163,000 was collected by the
bank on August 29 and was deposited into the company's account. On the same day, the
bank withdrew PKR 6,520 from the company's account as a fee for collecting the note
receivable.
7. The Company’s Cash account at the end of August shows a balance of PKR 157,621/-.
8. During the month of August the company wrote checks totaling more than PKR
8,150,000. As of August 31 PKR 492,423/- of the checks written in August had not yet
cleared the bank and PKR 32,600 of checks written in June had not yet cleared the bank.
9. The PKR 236,350/- of cash received by the company on August 31 was recorded on the
company's books as of August 31. However, the PKR 236,350/- of cash receipts was
deposited at the bank on the morning of September 1.

10. On August 29 the company's Cash account shows cash sales of PKR 23,635/-. The bank
statement shows the amount deposited was actually $25,102. The company reviewed the
transactions and found that PKR 25,102/- was the correct amount.
You are required to draw up the Bank Reconciliation Statement

Question No. 3:
The balance sheet items of The Candy Shop (arranged in alphabetical order) were as follows at
the close of the business on September 30, 2018.
Account Payable 1,326,000 Furniture and Fixture 3,120,000
Account Receivables 195,000 Land 8,580,000
Building 7,098,000 Notes Payable ?
Capital Stock 7,800,000 Retained Earnings 624,000
Cash 1,154,400 Supplies 536,640

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MBA Executive
Financial Accounting (Subjective)
Final Term

Name: ____________________ Time: 120 Minutes

Marks: 35 Marks

The transactions occurring during the first week of October were:

Oct. 3: Sold additional Stock of PKR 4,680,000 cash in the business. The accounts payable were
paid in full (no payment was made on the notes payable)
Oct. 6: more furniture was purchased on account at a cost of PKR. 2,808,000, to be paid within
30 days. Supplies were purchased for Rs. 156,000 cash from a restaurant supply center that was
going out of business.
Oct 1-6: Revenues of PKR 858,000 were earned and received in cash. Expenses required to earn
the revenues of PKR 624,000 were incurred and paid in cash. Complete Profit is considered as
retained earnings.
Required:
a. Prepare a Balance Sheet at September 30, 2018. (You will need to compute the missing
figures for notes payable.
b. Prepare a Balance Sheet at October 6, 2018. Also prepare an income statement and a
statement of cash flows for the period October 1-6, 2018. In your statement of cash flows,
treat the purchase of supplies and the payment of accounts payable as operating expenses.

Question No. 4:

The accounting staff of Welter Company has assembled the following information for the year
ended December 31, 2016:
Cash sales............................................................................................................. $ 450,000
Credit sales........................................................................................................... 3,100,000
Collections on accounts receivable...................................................................... 3,100,000
Cash transferred from the money market fund to the general bank account....... 170,000
Interest and dividends received............................................................................ 80,000
Purchases (all on Credit)...................................................................................... 1,650,000
Payments on accounts payable to merchandise suppliers.................................... 1,400,000
Cash payments for operating expenses................................................................ 1,130,000
Interest paid.......................................................................................................... 160,000
Income taxes paid................................................................................................ 72,000
Loans made to borrowers..................................................................................... 750,000
Collections on loans (excluding receipts of interest)........................................... 250,000
Cash paid to acquire plant assets......................................................................... 2,000,000
Book value of plant assets sold............................................................................ 540,000

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MBA Executive
Financial Accounting (Subjective)
Final Term

Name: ____________________ Time: 120 Minutes

Marks: 35 Marks

Loss on sales of plant assets................................................................................. 60,000

Proceeds from issuing bonds payable.................................................................. 3,000,000
Dividends paid..................................................................................................... 260,000
Cash and cash equivalents, Jan. 1........................................................................ 700,000
Instructions
Prepare a statement of cash flows in the format. Place brackets around amounts representing cash
outflows. Use the direct method of reporting cash flows from operating activities. Some of the
items above will be listed in your statement without change. However, you will have to combine
certain given information to compute the amounts of (1) collections from customers, (2) cash
paid to suppliers and employees, and (3) proceeds from sales of plant assets.
(Hint: Not every item listed above is used in preparing a statement of cash flows.)

Best of Luck

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