FINANCIAL ACCOUNTING II ASSINMENT

*Note: Only the quantity under the sales column is relevant for inventory valuation. The Sales prices of

$140, $145 and $160 are relevant for determining Total Sales
 *Note: 5Only 5the 5quantity 5under 5the 5sales 5column 5is 5relevant for
5inventory 5valuation. 5The 5Sales

Using all three methods we observe that the quantity of closing inventory remains the same. However, the
value will differ based on the method being used. We can compare all three methods using a Trading
Account as illustrated on the next page
2. Basic problem – Journal entries, P/L Appropriation A/c and Partners’ Capital A/c Partners A
and B decided to appropriate profits of the firm on the following terms:

(a) Interest is payable on Capital at 5% p.a.

(b) Both A and B will get remuneration at `2,000 and `1,000 per month respectively.

(c) Interest is payable on loan contributed by A at 6% p.a. (A contributed loan of `20,000 to the
firm on July 1, 2017).

(d) Interest on Drawings of partners is 4% p.a. (Drawings of A and B during 2017 were `6,000
and `4,000 respectively).

(e) Profit sharing ratio between A and B is 3:2.

For the year ending on Dec. 31, 2017 the total net profit of the firm is shown at `70,000. On Jan.
1, 2017, the Capital balances of A and B were `50,000 and `40,000 respectively. In the firm’s
books show the Journal entries, P/L Appropriation A/c and Capital A/c.
 Books of.... (the firm)
Journal Dr. Cr.
Date Particulars ` `
2017 Interest on A’s Loan A/c Dr. 600
Dec. 31 To A’s Loan A/c 600
(Being interest on loan payable to the partners provided for)
Dec. 31 P/L A/c [`70,000 – `600] Dr. 600
To Interest on A’s Loan A/c [`20,000 × 6% × 6/12] 600
(Being interest on partners’ loan transferred to P/L A/c)
Dec. 31 P/L A/c Dr. 69,400
To P/L Appropriation A/c 69,400
(Being the net profit transferred)
ug
Dec. 31 Interest on Capital A/c Dr. 4,500
To A’s Capital A/c [`50,000 × 5%] 2,500
To B’s Capital A/c [`40,000 × 5%] 2,000
(Being interest on capital of the partners’ credited to Partners’ Capital A/c)
Dec. 31 P/L Appropriation A/c Dr. 4,500
To Interest on Capital A/c [`90,000 × 5%] 4,500
(Being interest on capital of the partners provided)
Dec. 31 Partners’ Salary A/c Dr. 36,000
To A’s Capital A/c 24,000
To B’s Capital A/c 12,000
(Being remuneration payable to the partners credited to Partners’ Capital A/c)
Dec. 31 P/L Appropriation A/c Dr. 36,000
To Partners’ Salary A/c [`24,000 + `12,000] 36,000
(Being remuneration payable to the partners provided for)
Dec. 31 A’s Capital A/c [`6,000 × 4% × 6/12] Dr. 120
B’s Capital A/c [`4,000 × 4% × 6/12] Dr. 80
To Interest on Drawings A/c 200
(Being interest on drawings charged to partners)
Dec. 31 Interest on Drawings A/c [`10,000 × 4% × 6/12] Dr. 200
To P/L Appropriation A/c 200
(Being interest on drawings provided for)
Dec. 31 A’s Capital A/c Dr. 6,000
B’s Capital A/c Dr. 4,000
To A’s Drawings A/c 6,000
To B’s Drawings A/c 4,000
(Being drawings of partners transferred to capital A/c)
Dec. 31 P/L Appropriation A/c Dr. 29,100
To A’s Capital A/c 17,460
To B’s Capital A/c 11,640
(Being divisible profit transferred to Partners’ Capital A/c)
Dr. P/L Appropriation A/c for the year ended Dec. 31, 2017 Cr.
Particulars ` ` Particulars ` `
To Interest on Capital By P/L A/c [Net Profit] 70,000
A [50,000 × 5%] 2,500 Less: Int. on loan of A [20,000 × 6% × 6/12] 600 69,400
B [40,000 × 5%] 2,000 4,500 By Interest on Drawings
To Partners’ Salary A [6,000 × 4% × 6/12] 120
A [2,000 × 12] 24,000 B [4,000 × 4% × 6/12] 80 200
B [1,000 × 12] 12,000 36,000
To Partners’ Capital A/c [Divisible Profit]
A (3/5) 17,460
B (2/5) 11,640 29,100
69,600 69,600

Dr. Partners’ Capital A/c Cr.

Particulars A (`) B (`) Particulars A (`) B (`)
To Drawings A/c 6,000 4,000 By Balance b/f 50,000 40,000
To Interest on Drawings A/c 120 80 By Interest on Capital A/c 2,500 2,000
To Balance c/f 87,840 61,560 By Partners’ Salary A/c 24,000 12,000
By P/L Appro. A/c [Share of profit] 17,460 11,640
93,960 65,640 93,960 65,640
3. The received side of the Stores Ledger Account shows the following particulars:

Jan. 1 Opening Balance: 500 units @ Br.4

Jan. 5 Received from vendor: 200 units @ Br. 4.25

Jan.12 Received from vendor 150 units @ Br.4.10

Jan.20 Received from vendor 300 units @ Br.4.50

Jan.25 Received from vendor: 400 units @ Br. 4

Issues of material were as follows:

Jan. 4- 200 units;

Jan.10- 400 units;

Jan. 15- 100 units;

Jan 19- 100 units;

Jan.26- 200 units;

Jan.30- 250 units.

Issues are to be priced on the principle of “first in first out”. Write the Stores Ledger Account in
respect of the materials for the month of January

Required A. Prepare Stores Account on Last in First Out method assuming the same particulars
Solution

Store ledger account

date particulars receipt issues balance

quantity total unit quantit unit tota quantity amo per

(units) cost cost y cost l (units) unt unit
(units) cost s
1- balance b/d 500.00 2000 4.00
Jan .00
4- requsition slip 200.00 800. 4.0 300.00 1200 4.00
Jan no 00 0 .00
5- goods received 800.00 450.0 4.25 300.00 1200 4.00
Jan note no 0 .00
200.00 850. 4.25
00
10- requsition slip 300.00 1200 4.0
Jan no .00 0
100.00 425. 4.2 100.00 425. 4.25
00 5 00
12- goods received 150.00 615.0 4.10 100.00 425. 4.25
Jan note no 0 00
150.00 615. 4.10
00
15- requsition slip 100.00 425. 4.2 150.00 615. 4.10
Jan no 00 5 00
19- requsition slip 100.00 410. 4.1 50.00 205. 4.10
Jan no 00 0 00
20- goods received 300.00 1350. 4.50 50.00 205. 4.10
Jan note no 00 00
300.00 1350 4.50
.00

25- goods received 400.00 1600. 4.00 50.00 205. 4.10

Jan note no 00 00
300.00 1350 4.50
.00
400.00 1600 4.00
.00
26- requsition slip 50.00 205. 4.1 150.00 675. 4.50
Jan no 00 0 00
150.00 675. 4.5 400.00 1600 4.00
00 0 .00
30- requsition slip 150.00 675. 4.5 300.00 1200 4.00
Jan no 00 0 .00
100.00 400. 4.0
00 0