Business Accounting

BBM205/05 Business Accounting 1

Question 1

Lion Sdn Bhd is a manufacturer of garden furniture. The company has consistently used weightage average cost in valuing inventory, but it is interested to know the effect on   its inventory valuation of using First-In First-Out method (FIFO).

At 28 February 2019 the company had inventory of 4,000 standard p lastic tables, and has computed its value on each side of the two bases as:

Basis Unit Cost (RM) Total Value (RM)
FIFO 16 64,000
Weighted average 13 52,000

During March 2019 the movements on the inventory of tables were as follows:

Date Number of unit Production Cost per unit
8 March 3,800 15
22 March 6,000 18
Revenue: Sellin price perunit
12 March 5,000 15.40
18 March 2,000 13.00
24 March 3,000 16.50
28 March 2,000 18.00


  • Using FIFO,  compute  cost   of   closing   inventory,   sales   and   gross profit/ loss as at 31 March 2019.
  • Using Weight age Average Cost method, compute cost of closing inventory, sales and gross profit/ loss as at 31 March 2019.

Show relevant workings. In arriving at the total inventory values you should make calculations to t wo decimal places (where necessary) and deal with each inventory movement in date order.

[20 marks]

Question 2

From the following particulars, you are required to find out the errors in cash book and bank statement by using missing method and prepare Bank Reconciliation Statement as on 31 December 2019, for Selena Enterprise:

No. Transactions Amount (RM)
1. Bank Overdraft as per Bank Statement 17,000
2. Cheque issued but not encashed during the December 2,200
3. Dividends on shares collected by banker 2,300
4. Interest charged by the bank recorded twice in the Cash Book 500
5. Cheque deposited as per Bank Statement not entered in Cash Book 3,400
6. Credit side of the Bank column in Cash Book cast short 1,000
7. Interest dues paid by bank as per standing instruction not recorded in Cash Book 1,200
8. Uncredited cheque due to outstation 3,900

Question 3

Below is the information extracted from the book of ABC Sdn Bhd:

Accounts Amount (RM)
Land 500,000
Building 200,000
Motor vehicles 120,000
Plant and machinery 70,000
Retained profit as at 01.01.2019 312,150
8% debenture 150,000
Ordinary share 200,000
Accumulated depreciation as at 31.12.2019: Building 60,000
Motor vehicles 69,250
Plant & machinery 40,000
Sales returns 3,600
Purchase returns 4,100
Sales 700,000
Purchases 400,000
Sales discounts 5,000
Purchase discounts 3,500
Opening inventory 52,000
7% Preference shares 50,000
Provision for bad debts 2,000
Trade receivables 26,700
Trade payable 43,200
Administrative expenses 18,000
Staff training cost 4,000
Bad debts 12,500
Motor expenses 27,000
Rental 90,000
Bank overdraft 15,400
Wages and salaries 115,000
Debenture interest 6,000
Suspense account 200


Prepare the trial balance as at 31 December 2019.

[15 marks]

Question 4

After you have prepared the trial balance for Question 3, you notice the trial balance cannot be balance due to following errors:

  1. Cash payment of RM500 for stationery was completely omitted from the books.
  2. Discount received of RM2,000 was debited to discount allowed account.
  3. Sales of RM3,800 to Molly was not recorded in her account.
  4. RM1,000 for upkeep of motor vehicle was debited to motor vehicle account. No depreciation has yet to be provided.


  • Prepare the Suspense Account.                                    [5 marks]
  • Prepare the adjusted Trial Balance.                            [5 marks]

Question 5

Using the trial balance prepared in Question 4, prepare the Statement of Comprehensive Income as at 31 December 2019 for ABC Sdn Bhd.

The following information is relevant:

The closing inventory was RM47,000.                                                                            [20 marks]

Question 6

Using the trial balance prepared in Question 4 and Statement of Comprehensive Income prepared in Question 5, prepare the Statement of Financial Position as at 31 December 2019 for ABC Sdn Bhd.

[20 marks]

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