vu acc501 Mid Term Subjective Solved Past Paper No.3

A business needs to have accounts created for individual creditors and debtors in its general ledger. Creditors are people/entity to whom company owes money and debtors are entities/people who owe money to the business. But when a business grows then the number of creditors and debtors also grows. We know that trial balance can give us the mathematical accuracy of accounts and if there is any difference in trial balance we can know it from the general ledger by actually checking each and every transaction for the year. But it is a very time consuming job to check each and every transaction if the business of the company is huge because it will have many many transaction to check. So in this control accounts are maintained in general one for total creditors and one for total debtors. Debtor's account is called debtor's control account and creditor's account is called creditor's control account. These accounts will not get hit by individual purchase, purchase returns, payments to creditor in case of creditor's control account and by sales, sales return, receipts in case of debtor's control account. Periodically this summarized data will be posted from individual ledgers which will be created for each type of transaction e.g a sales subsidiary ledger, purchase subsidiary ledger etc which will contain actual details of transactions with invoice number and periodically the amounts will be summarized from these subsidiary ledgers and posted to the control accounts at a single time. This way the transactions in general ledger will decrease and will become easy to manage and can be easily checked against creditor's or debtor's details in total creditor's ledger and total debtor's ledger for accuracy.

Date	Detail	Debit	Credit	Balance
01/01/08	CAPITAL A/C	50000	0	50000 DR
02/01/08	FURNITURE A/C	0	10000	40000 DR
03/01/08	PURCHASES A/C	0	30000	10000 DR
05/01/08	SALES A/C	40000 0	50000	DR
06/01/08	SALARIES A/C	0	5000	45000 DR
TOTAL		90000	45000	45000	DR

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In Pakistan when someone wants to form a company. He will contact with SECP, its abbreviation for Securities and Exchange Commission of Pakistan. it came in 1984 in law of Pakistan which is called companies ordinance. It controls all affairs of limited companies. For making of private limited company 2 members can submit their names in memorandum and articles of association along with other requirements of company ordinance 1984. while for public limited company seven members will sent their names. By this way they can apply and make registration of the company.

The basic difference between a partnership and a limited company is the concept of limited liability.

If a partnership business runs into losses and is unable to pay it's liabilities, its partners will have to pay the liabilities from their own wealth.

In case of limited company the shareholders don't lose anything more than the amount of capital they have contributed in the company. It points that personal wealth is not at stake and their liability is limited to the amount of share capital they have contributed.

The concept of limited company is to mobilize the resources of a large number of people for a project, which they would not be able to afford independently and then get it managed by experts.

Listed Company have more than twenty partners, so problem of extra capital is reduced to minimum.

The liabilities of the members of a company is limited to the extent of capital invested by them in the company. There are certain tax benefits to the company, which a partnership firm can not enjoy. In Pakistan, affairs of limited companies are controlled by "Companies Ordinance" issued in 1984. The formation of a company and other matters related to companies are governed by "Securities and Exchange Commission of Pakistan (SECP)

It is a legal entity created by law and hence has its own recognition, good will and brand equity etc. It is a wide form of business and hence a formal approach for various partners/investors to come and work for the same objectives in an organized form. Liability limited to company assets only. Investors/partners do not personally liable for any loss or in state of bankrupty. Being a legal entity, easy to get loans or gather funds from public (for public limited companies only) or financial institutes. Being a legal entity, it can enjoy more opportunities for mega projects and trade/operations opportunities in international markets on its on behalf.

X AND Y ARE SHARED WITH the ratio 3:1

X capital = 30000
Y capital = 10000
Net profit = 160,000
Mr. Y salary is = 200 p.m entitled
Total investment = X + Y capital = 30000 +10000 = 40000
Cash and cash equivalents, Jan. 1 Rs.35,800
Cash and cash equivalents, Dec. 31 74,800
Cash paid to acquire plant assets 21,000
Proceeds from short-term borrowings 10,000
Loan made to borrowers 5,000
Collection on loans (excluding interest) 4,000
Interest and dividends received 27,000
Cash received from customers 795,000
Proceeds from sale of plant assets 9,000
Dividends paid 55,000
Cash paid to suppliers and employees 635,000
Interest paid 19,000
Income taxes paid 71,000

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Be the first to post an answer to earn 100 credits.

Be the first to post an answer to earn 100 credits.

Be the first to post an answer to earn 100 credits.