CONFIDENTIAL 1 AC/JULY 2020/FAR110

UNIVERSITI TEKNOLOGI MARA

FINAL ASSESSMENT

COURSE : FINANCIAL STATEMENT ANALYSIS

COURSE CODE : FAR110
EXAMINATION : JULY 2020
TIME : 3 HOURS

INSTRUCTIONS TO CANDIDATES

1. This question paper consists of TWO (2) parts: PART A (10 Questions)
PART B (5 Questions)

2. Answer ALL questions from all TWO parts:

i) Answer PART A in the Objective Answer Sheet.

ii) Answer PART B in the Answer Booklet. Start each answer on a new page.

3. Do not bring any material into the examination room unless permission is given by the
invigilator.

4. Please check to make sure that this examination pack consists of :

i) the Question Paper

ii) an Answer Booklet – provided by the Faculty
iii) an Objective Answer Sheet – provided by the Faculty

5. Answer ALL questions in English.

DO NOT TURN THIS PAGE UNTIL YOU ARE TOLD TO DO SO

This examination paper consists of 10 printed pages

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PART A

This section consists of 10 multiple-choice questions. Choose the most suitable answer and
shade the corresponding alphabet representing the answer in the multiple-choice answer
sheet provided.

1. Bookkeeping is different from accounting. The main difference between bookkeeping

and accounting is _________________ .

A. recording of business transactions.

B. classifying of business transactions.
C. interpretation of financial results.
D. summarizing of business transactions.

2. Which of the following statements is CORRECT about the users of accounting

information?

A. Customers and public are considered as internal users.

B. The business owner and management are considered as the internal users.
C. Employees is considered as external users.
D. Tax authorities and regulators are considered as internal users.

3. An accounting concept that requires an entity to give the same accounting treatment
to similar events in successive accounting period. Which accounting concept best
explains the above statement?

A. Consistency concept
B. Materiality concept
C. Periodicity concept
D. Economic entity concept

4. The following transactions relate to the expenses of the business EXCEPT:-

A. Purchase goods worth RM1,500 by cheque from SANTUARY Enterprise.

B. Purchase office equipment RM 2,800 by cash.
C. Paid salaries to employees RM2,000 by cheque.
D. Return defective goods worth RM350 to a supplier that was previously
purchase on credit.

5. Identify the CORRECT double entry for sold goods to Ara Trading on credit.

A. Debit Purchase a/c and Credit Account payable Ara Trading a/c
B. Debit Bank a/c and Credit Sales a/c
C. Debit sales a/c and Credit Account receivable Ara Trading a/c
D. Debit Account receivable Ara Trading a/c and Credit Sales a/c

6. A credit note received from a supplier to a business should be recorded in the

____________ of the business book.

A. Purchase journal
B. General journal
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C. Return outward journal

D. Return inward journal

7. A cash payment of RM540 for insurances expense was wrongly recorded as RM450
in the insurance account. This is an ______________.

A. Error of reversal entries

B. Errors of principle
C. Error in addition
D. Error of transposition

8. The following items are considered as accrued expenses, EXCEPT for:-

A. Dividend received in advance

B. Unpaid wages
C. Interest owed on a loan
D. Rent due but not yet paid

9. A business has an inventory turnover of four times. Identify the best explanation on
business efficiency based on the statement above.

A. On the average, the business collected its debt four times in that accounting
period.
B. On the average, the business replaced its inventory four times in that
accounting period.
C. On the average, the business increased its inventory four times more than in
the last accounting period.
D. On the average, the business reduced its inventory four times more than in
the last accounting period.

10. A business has drawn a cheque for payment, but the amount does not appear on
the bank statement since the payment has yet to be processed by the bank.
However, it has been recorded by the business. This is known as _____________ .

A. Unpresented cheque
B. Uncredited cheque
C. Credit transfer
D. Direct debit

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PART B

QUESTION 1

a. Miss Maream and Miss Marissa are two sisters who opened a business called
Reassa Enterprise located at the Kuala Kangsar, Perak. The business started
operation on 1 July 2019. They are going to close the account of the business on 30
June 2020. They are interested to know more details about the following information:

i. Identify the types of business organisations from the above statement and
state TWO (2) characteristics of the business organization.
(3 marks)

ii. Define non-current asset and current asset with TWO (2) examples each.
(4 marks)

b.
i. Encik Azam owns an electrical shop which close its account on 30 June every
year. Recently, Encik Azam experienced financial problems which is his shop
incurred losses for 3 years. However, it has recorded all the accounts as
though it is still in a good financial position. He believes his business is able to
expand in the future but in fact his business in the stages of bankruptcy.

Required:
Decide the accounting concept being violated by Encik Azam with
explanation.
(3 marks)

ii. Puan Azira started a laundry business in January 2019. she prepares
accounts for her own business. She opened the business account at the local
bank so that she can keep records of the business operation and personal
transaction separately. Then, she also recorded the services at the time
services are made and the expenses are recorded when they incurred.

Required:
Decide two (2) accounting concepts applied by Puan Azira in the above
situation with explanation.
(5 marks)

c. Sarah Boutique Enterprise is using a periodic inventory system in recording its

inventory. The following transactions occurred during the month of March 2019:-

January Transactions
The owner, Miss Sarah invested cash of RM25,000 and brought in her
1 personal used motor van for the business use valued at RM42,000.
3 Received an invoice from Kain Batik Sdn Bhd with an amount of
RM1,500 for purchasing 2 bulk of Kain Batik Terenggangu. The term
agreed is 5/7, net 14.
5 Issued an invoice to Sahara Enterprise with an amount of RM500 with
credit term 5/7, net 14.
10 Issued a debit note to Kain Batik Sdn Bhd for goods returned worth
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RM120.
14 The owner took RM100 of cash for personal use.
19 Issued a credit note to Sahara Enterprise of RM110
25 Issued a cheque to Kain Batik Sdn Bhd for settlement of the total amount
owed

Required:

Journalise all the above transactions in appropriate journals. (Narration is not required)
(8 marks)
(Total: 23 marks)

QUESTION 2

a. Abraham set up a business name Ezzy Comp Enterprise on 1 July 2018. His
business dealing with buying and selling computers, laptops and its accessories. On
2 July 2018, the business bought laptops from kota Data Sdn Bhd amounting to
RM12,500 on credit. The following days, the business bought more laptops
accessories like a wallpaper laptops, cooler pad, and screen laptops protector from
Alam Mega Techology Sdn Bhd amounting to RM8,500 on credit and received 2%
trade discount.

On 9 July 2019, the business sold laptop to Suraya amounting to RM2,250 by

cheque. The following days, Technology.com Trading purchased 2 units of laptops, 1
unit of keyboard and 1 unit of mouse amounting RM5,500 on credit and credit term of
7/15, net 30.

On 17 July 2019, the owner Abraham withdrew 1 unit of keyboard worth RM50 for his
son. On the same day, the business sold 2 units of screen laptops protectors and 1
unit of keyboard to Aisyah worth RM155 by cash.

On 23 July 2019, monthly salary was paid to his staff amounting RM1,100 by
cheque. The following days, the business received a cheque for full settlement from
Technology.com. On 31 July 2019, the business paid water and electricity bills
amounting to RM180 by cash. On the same day, the business also paid insurances
worth RM480 by cheque.

The business uses the periodic inventory system to record the inventory.

Required:
Analyse each of the transactions above on the accounting equation using the
following format:

Example:
1 July The owner brought in Motor Van worth RM55,000 for the business’s use.

Date Asset = Liability + Owner’s Equity

Capital - Drawings + Revenue - Expense
July +55,000 +55,000
1

(10 marks)
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b. Coconut shake Enterprise recorded its business transactions for the first time and the
following transactions were wrongly recorded:

1. A cheque payment of RM545 for a utility bill was wrongly recorded as RM454 in
the Utility bill account.
2. A cash sale amounting to RM1,330 was only recorded in the cash account but
not in the sales account.
3. A cash purchase of office equipment worth RM 2,550 was wrongly debited to the
purchase account.

Required:

i. For each of the above scenario, identify the types of error made by the
Coconut Shake Enterprise.
(3 marks)

ii. Give the necessary corrections to be made for the above errors either in the
general journal (for errors not affecting the trial balance) OR in the general
ledger (for errors affecting the trial balance)
(5 marks)
QUESTION 3

The following is the trial balance of Kenyalang Enterprise as at 31 December 2019.

Kenyalang Enterpise
Trial Balance as at 31 December 2019
Items Debit (RM) Credit (RM)
Delivery van 25,800
Office equipment 17,500
Accumulated Depreciation:
Delivery Van 10% straight line 5,160
Office equipment 10% straight line 3,500
Purchases and Sales 98,400 164,600
Capital 75,000
Drawings 5,500
Account receivable and Account payable 35,400 24,400
Cash at bank 64,500
Cash in hand 7,800
Inventory as at 1 January 2019 12,500
Returns 1,850 980
Discounts 600 1,200
6% Loan from RHB Bank 35,000
Interest on loan: RHB Bank 1,750
Rental 8,800
Carriage inwards 1,340
Salaries 27,500
Utilities 2,800
Commission 2,200
312,040 312,040
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The following adjustment are to be considered before the financial statement are prepared
on 31 December 2019:-

1. Inventory as at 31 December 2019 was RM19,800 and the business use periodic
inventory system.

2. Current year depreciation for delivery van and office equipment were RM2,580 and
RM1,750 respectively.

3. Two-month interest on 6% loan from RHB Bank has yet to be paid by the business.

4. The business paid in advance utilities of RM800.

5. The commission income includes RM550 of commission for January 2020.

6. The owner of the business withdrew goods worth RM450 for his personal use.

Required:
a. Prepare the Statement of Profit or Loss for the year ended 31 December 2019 and
Statement of Financial Position as at 31 December 2019.
(2
0 marks)

b. Define accrued expenses and state two (2) examples.

(2 marks)

QUESTION 4

The following information was extracted from the financial statement of Ravina Beauty
Enterprise for the year ended 31 December 2019.
Ravina Beauty Enterprise
Statement of Profit or Loss for year ended 31 December 2019
RM RM
Sales 185,000
Less: Return inwards (600)
Net sales 184,400
Less: Cost of goods sold
Opening inventory 22,800
Purchases 98,000
Less: Return outwards (1,150)
Cost goods available for sales 119,650
Closing inventory (15,400)
Cost of goods sold
(104,250)
Gross Profit 80,150
Less: Expenses
Total expenses (48,520)
Net Profit 31,430

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Ravina Beauty Enterprise

Statement of Financial Position as at 31 December 2019

RM RM
Non-Current Asset
Delivery Van 90,000
Furniture and Fitting 41,400 131,400

Current Asset
Cash at bank 47,900
Cash in hand 4,030
Account receivable 15,500
Prepaid salaries 1,500
Closing inventory 15,400 84,330
215,730
Financed by
Owner equity
Capital 102,300
Add: Net profit 31,430
Less: Drawing (1,800) 131,930

Non-current Liabilities
5% loan from Maybank 60,000

Current Liabilities
Account Payable 21,500
Accrued expense 2,300 23,800
215,730

Required:

a. Compute the following ratios for Ravina Beauty Enterprise for the year ended 31
December 2019.

i. Gross profit ratio

ii .Net profit ratio
iii Inventory turnover ratio
iv. Current ratio
v. Quick ratio
(10 marks)

b. Based on your answer in (a) above, explain on the business profitability.

(4 marks)

QUESTION 5

a. State THREE (3) items that can cause the difference between the bank balance as
per business book and the bank balance as per bank statement.
(3 marks)

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b. On 15 June 2019, Shazarna Techno Enterprise received the monthly bank statement
for the month of May 2019. The bank statement showed the following information:

Agro Bank
Bank Statement as at 31 May 2019

Cheque Debit Credit Balance

Date Particulars No. (RM) (RM) (RM)
May 1 Beginning balance 14,550
3 Cheque cleared 100111 5,420 9,130
7 Cheque deposit 3,350 12,480
12 Cheque cleared 100112 4,800 7,680
17 Cheque deposit 2,240 9,920
21 Credit transfer 1,300 11,220
22 Commission 1,550 12,770
24 Standing order 1,400 11,370
20 Cheque cleared 100113 4,450 6,920
25 Cheque deposit 2,500 9,420
28 Cheque cleared 12314 550 8,870
31 Direct debit 1,100 9,970
31 Bank charges 120 9,850

Bank Account

Cheque Debit Credit Balance

Date Particulars No. (RM) (RM) (RM)
May 1 Beginning balance 14,550
3 Purchases 100111 5,420 9,130
7 Sales 3,350 12,480
12 Office equipment 100112 4,800 7,680
17 Sales 2,240 9,920
20 Purchases 100113 4,450 5,470
25 Sales 2,500 7,970
28 Sales 1,180 9,150
31 Insurances 100114 2,850 6,300

Additional information:-
i. The bank had wrongly recorded the transaction of direct debit.

ii. Cheque number 12314 in the bank statement belongs to Shazarnee Techno
Enterprise but was wrongly debited to Shazarna Techno Enterprise’s bank
account.

iii. Cheque number 100114 was wrongly recorded in the bank account as
RM2,850 instead of RM2,580.

Required:-
Prepare a Bank Reconciliation Statement for Shazarna Techno Enterprise as at 31
May 2019.
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(10 marks)

END OF QUESTION PAPER

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