Financial Accounting and Regulatory Framework Exam Answers and Solutions

BA (HONS) BUSINESS FINANCE PATHWAY
SEMESTER 2 EXAMINATIONS 2021/22
FINANCIAL ACCOUNTING AND THE
REGULATORY FRAMEWORK
ANSWER BOOKLET
INSTRUCTIONS TO CANDIDATES:
There are four compulsory questions on
this paper.
Answer all four questions.
All questions carry equal marks.
Calculators may be used but full workings
must be shown. You can copy and paste
any calculation from Excel to MS Word
answer Booklet.
Please submit your Answer Booklet
through Turnitin Link in Moodle.

Institute of Management
Business Finance Pathway
Semester 2 Examination 2021/22
Financial Accounting and the Regulatory Framework
Module No BMP6018
Answer to the Question 1 (a)
1. A)
Profit and loss account for the year ended 31st December 2020.
Particulars Amount Particulars Amount
To opening balance
To purchases
To Wages and salaries
To Heat and light
To gas and electricity
To G/P
8560
123000
32000
12000
250
29965
By sales
By closing balance
196375
9400
205775 205775
To depreciation
Fixtures (1945)
Vehicles (625)
To rent
To motor expenses
To insurance
To bad debts
To interest on loan
To G/P
2570
6000
12350
5600
729
500
2216
By Gross profit 29965
29965 29965
Answer to the Question 1 (b)
1. B)
Statement of Financial position
As on 31st December 2020
Liabilities Amoun
t
Assets Amount
2

Institute of Management
Business Finance Pathway
Semester 2 Examination 2021/22
Financial Accounting and the Regulatory Framework
Module No BMP6018
Equity 110000
Less: Drawings 45600
Add: Profit 2216
Loan
Account payable
Provision for depreciation on
furniture and fixtures
Provision for depreciation on motor
vehicle
Insurance
66616
10000
5460
6927
6620
5600
Inventory
Furniture and fixtures. 38900
Less: Depreciation. 1523
Motor vehicle 12500
Less: Depreciation 980
Prepaid rent
Bank
Cash
Account receivable.
36450
729
9400
37377
11520
2000
4780
225
35729
101223 101223
Answer to the Question 1 (c)
A trial balance is defined as a summary of ledgers balance which are compiled in the debit
and credit column in order to test the arithmetical calculation accuracy of the books. A trial
balance is prepared for developing the financial statements of the company for smooth
functioning of business operations. It is necessary for the company to check the arithmetical
accuracy and correctness of the books of accounts before preparing the final accounts related
to the finance of the company. Trial balance is considered as an important part of the process
related to accounting and is prepared only in one time in a whole financial year. If the balance
of both the debit and credit column matches than it is correct but there can still be errors
which creates problem for the company in making the final accounts for calculating the profit
and loss of the company. There could be error related to error of omission which means that
any entry is missed and is not recorded while preparing trial balance. This creates a problem
in calculating the balances of final accounts as the primary account is not prepared carefully
and properly. Second type of error which can occur is error of commission which means
recording wrong figures in journal and posting the same wrong amount in the right side of
ledger account. Third type of error which, might occur while preparing trail balance of the
company is error of miss-posting which means posting entry from the journal to ledger
accounts unintentionally in the right side of wrong financial account is defined as miss-
posting of entries. This miss-posting of entries do not create problems while calculating the
balance o trial balance. Fourth type of error which might occur in the preparation of trial
balance is compensating errors which is defined as the short or excess amount is posted at
one of the columns of trail balance and if the equal amount of excess or short amount is
posted on the other side of the trial balance column. This is known as this because the wrong
posting of amount in one account is compensated by another wrong posting of amount in
another account and it do not hamper the equal total of trail balance debit and credit amount.
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