Part –I Say True or False (5%)

1. The whole purpose of the worksheet is to proof the equality of debit and credit
in the general ledger.
2. Withdrawal of non-cash asset by the owner for personal use does not have any
effect on the balance of drawing account.
3. As long as a business reports net income, the owner’s equity (capital) statement
always shows net increase in capital for a given period.
4. The unexpired insurance for the fiscal period represents the asset that has
become an expense.
5. Income statement shows the operational performance of the business.
6. Accrual basis of accounting records revenue when cash is received and
expense are recognized when cash is paid.
7. Cost of merchandise represents the total sum of costs incurred to make the
commodities (merchandise) ready for sale.
8. Periodic inventory system keeps a continuous record of the amount of
inventory on hand.
9. A petty cash fund is an amount of money kept in the office for making
relatively high expense or expenditures.
10. Deposit in transit represents deposit made and not recorded by the depositor but
recorded in the bank statement.

PART II.Discussion questions (7.5%)

1. Distinguish between service and merchandising business?
2. Distinguish between bookkeeping and accounting company?
3. Explain accounting and its basic activity?
4. Explain the users of accounting information?
5. Which of the above fields of the accounting profession of study attracts you?
Why?
6. Explain the term accounting equation?
7. Describe how debits and credits rules are related with the accounting equation?
8. Discuss the basic issues behind adjusting accounts?
 9. Explain the reasons for adjusting accounts?
10. Identify the major types of adjusting entries?
11. Explain the basic difference between periodic and perpetual inventory systems?
12. Explain the terminologies of FOB Shipping and FOB Destination agreements?
13. Discusses the deference between manual and computerized accounting?
14. Discusses the difference between general and subsidy ledger?
15. Discuss the interrelationship between an accounting system and internal control?

PART III. WORK OUT (17.5%)

1. SimretAbera, MD. has been practicing as a pediatrician for three years. During June,
she has completed the following transaction.

June 1, Paid office rent for June Br. 6,000

2, Purchased equipment on account Br. 20,000

5, Received Cash on account from patients Br. 10,000

8, Purchased X-Ray film and other supplies on account Br. 450

9, One of the items of equipment purchased on june2 was defective. it was returned with the
permission of the supplier, who agreed to reduce the account fot the amount charged for the
item, br. 200

12, paid cash to creditors on account, 7,600

16, Sold X-Ray film to another doctor at coat, as an accommodation, receiving cash, Br. 500

17, Paid cash for renewal of a 2-year property insurance policy, Br, 1,800

20, Discovered that the balance of cash, and accounts payable as of june1 were overstated by
br 160. A payment of that amount to a creditor in May had not been recorded. Journalize the
Br. 160 payments as of June 20.

23, Paid cash for laboratory analysis Br. 2,450

27, Paid cash from the business’s bank account for personal and family expenses br. 3,200

30, Recorded the cash received in payments of service to patients during June Br.13,700
30, Paid salaries of receptionists and nurses Br. 8,000

30, Paid water and electric expense Br,1,200

30, Recorded fees charged to patients on account for services performed Br, 3, 800

30, Paid telephone expense Br. 800

30, Paid miscellaneous expense br. 600

Samrwit’s Account titles, numbers, and balances as of June 1 are listed as follows: Cash, 11,
Br, 3,123, Accounts receivables, 12, Br, 6,725, Supplies, 13 Br. 290, Prepaid Insurance, 14,
Br. 365, equipment, 15, Br. 19, 745, Accounts Payable, 21, BR. 765, Samrawit’s capital,
31,Br.29,483, Samrawit’s drawing, 32,, Professional Fee, 41, Salary Expense, 51, rent
expense, 53, Libratory Expenses, 55 utility Expense, 56 Miscellaneous Expense, 59

Instructions

A. Open a ledger of four-column accounts for Dr. Samrawit as of june1 of the current
year. Enter the balances in the appropriate balance column and place a check mark (-)
in the post reference column.(Please check the equality of the debits and credits
before proceeding to the next instruction.
B. Record each transactions using general journal
C. Post the journal to the ledger, extending the month end balances to the appropriate
balance columns after all posting is completed.
D. Prepare a trial balance of june30.

2. The following unadjusted trial balance belongs to Liyou Consulting Firm for the fiscal
year ended December 31, 2016.

Liyou Consulting Firm

Trial Balance

December 31,2016

Account Titles Debit Credit

Cash 12,500
Accounts Receivable 4,380

Supplies 1,330

Prepaid Insurance 3,600

Equipment 50,000

Notes Payable 20,650

Accounts Payable 17,400

Owner’s Capital 26,460

Owner’s Drawings 1500

Service Revenue 19,620

Salaries and Wages Expense 6,120

Rent Expense 4,200

Miscellaneous Expense 500

Total 84,13084,130

Additional Data for Adjustment

1. Supplies on hand total Br. 500.

2. Depreciation is br. 5000 per quarter.

3. Interest accrued on 6-month note payable, issued September Br. 120.

4. Insurance expired during the period Br. 2,000

5. Services provided but unbilled at December 31 total br.2, 500

6. Salary Accrued but not yet paid br. 1,500.

Instructions

a. Enter the trial balance on a worksheet and complete the worksheet.

 b. Prepare an income statement and owner’s equity statement for December 31 and
financial position statement as of December 31.
c. Journalize the adjusting entries from the adjustments columns of the worksheet.
d. Journalize the closing entries from the financial statement columns of the worksheet.
e. Prepare post closing Trial Balance?

3. Discount supermarket entered in to the following selected transactions during August of

the current year.

August 1 purchased merchandise on account, terms 2/10, n/30, FOB shipping point, Br.
28,500.

1, paid rent for August, Br. 4,500

2, Paid transportation charges on purchase of August 1,Br. 1,180.

5, Purchases office supplies for cash Br. 600

7, Sold merchandise on account, terms 1/10, n/30, FOB destination, Br. 12,400

8, Paid transportation charges on August 7, Br. 550

11, Paid for merchandise purchased on August 1, less discount

12, Received merchandise returned from sales of August 7, Br. 3,200.

14, Purchased merchandise n account, terms 4/14, n/30, FOB shipping point Br.18,300
with prepaid transportation costs of Br.750 added to the invoice.

16, returned merchandise purchased on augest14, Br. 5,200.

17, Received cash on account from sale of August 7, less returns and discount.

18, Sold merchandise on account, terms, 1/10, n/20 FOB shipping point Br.8,800. prepaid
transportation costs as an accommodation for the customer Br. 250.

26, Sold merchandise on bank credit card, Br. 3,700

 29, Paid for merchandise purchased on august 14, less returns and discount.

31, Received cash on account from sale of August 18, Br. 9,050.

Instructions

1. Record the above transactions using general journal

4. The merchandise inventory on hand at September 1, 2016, the beginning of the

current fiscal year, was Br. 250, 000, the physical count taken on august 1, 2016 ,
determined that merchandise on hand was Br, 274,600. Prepare the adjusting entries
for merchandise inventory for the current fiscal year ended August 31, 2017.
1. The bank statement of Dunlap company for April 30, indicated a balance of
Br.10,443.11, the company employees a voucher system in controlling expenditure.
All cash receipts are deposited each evening in the night depository, after the banking
hour. The accounting records indicate the following summary data for cash receipts
and disbursements.
 Cash in bank as of April 1 , Br. 5,143.50
 Cash receipt journal’s total cash receipt Br. 28,971.60
 Total amount of check issued in April Br. 26,060.85

Comparison of the bank statement and the accompanying cancelled check and memorandum
with the records revealed the following items

a. The bank had collected for Dunlop Co. Br. 912 on a note left for collection. the face
value of the note is Br. 900
b. A deposit of Br. 1,852.21 representing a receipt of April 30 had been made too late to
appear on the bank statement
c. Check outstanding totaled Br. 3,265.27
d. A check drown for Br, 79 had been erroneously charged by the bank as Br.97
e. a check of Br. 10 returned with the statement had been recorded in the check register
as br.100. the check was for the payment of an obligation to Davis co. for purchase of
office supplies.
f. Bank service charge for April amounted to Br. 8.20
Instructions
i. prepare statements of bank reconciliation fro April
ii. Journalize the necessary entries