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Who are the users of accounting information and what do they look into the financial
2. How does accounting information help in decision making?
3. Discuss GAA rinciples.
!. Hari manufacturing "ompany produces cement and cement products. #n $une 1%
the company su(mitted its financial statements to the e)ternal auditor for auditing. *he
following o(ser+ations were made,
a. All sales receipts are credited to the personal account of the owner at the end of
e+ery month to the "ompany Account.
(. *he company ac-uired a crushing e-uipment for .s.!%/&&/&&& and it was
recorded in the (ooks at .s.0&/&&/&&&/ its market +alue/ as per the chief
accountant of the company.
c. *he (uilding purchased for .s.03/&&/&&& in the pre+ious year was recorded in the
current year at .s.%&/&&/&&& to reduce wealth ta).
d. *he company has pro+ided for anticipated profits for .s.1&/&&/&&& in the current
year statements.
*he auditor reports +iolations of accounting principles and standards. What are the
principles and standards +iolated? 1riefly e)plain.
%. 2)plain the concept of accounting e-uation. 3ind the missing num(ers from the
following using accounting e-uation,
4ear 1 4ear 2 4ear 3 4ear !
"urrent assets 113/02! ? 5%/12! ?
6on "urrent assets ? 175/&1! 102/&11 1%1/&21
Total Assets 524,600 ? ? 220,111
"urrent lia(ilities %0/1!2 !&/22& ? ?
"apital 21!/1%% 1'3/27% 1'&/&&& 1'&/&&&
2arnings 13/'5% 8oss3/0!! 1/!%2 2/3%&
6on currents lia(ilities ? ? 0&/1&& 3&/222
Total Liabilities 524,600 288,456 ? 220,111
0. 9eg "runch and 9eg :uickie are the two su(sidiaries of a 3ast 3ood "ompany. *he
details a+aila(le for the year 2&&7 for the two su(sidiaries are as follows,
articulars 9eg "runch 9eg :uickie
6et Working "apital ;3&&/&&& ;3%&/&&&
"urrent .atio 2.% 2.!
8i-uid .atio 1.% 2
"ost of <ales="losing <tock
><tock *urno+er .atio?
5 times 5.% times
<ales ;2/&&&/&&& ;2/%&&/&&&
A+erage .ecei+a(les ;1/&&&/&&& ;1/'&&/&&&

"alculate the following for (oth the su(sidiaries,
a? "urrent Assets and "urrent 8ia(ilities (? <tock c? "ost of <ales d? A+erage
"ollection period e? Where do you o(ser+e a possi(le li-uidity pro(lem?
'. During the month of @ay 2&1&/ 1on 9oyage recorded the following transactions,
1. #wner in+ested ;2%/&&& in cash to start a (usiness. *hey recei+ed
common stock.
2. *he monthAs rent was prepaid in cash to an amount of ;%&&.
3. 2-uipment costing ;1&/&&& was purchased from @r.< on credit.
!. 2arned tra+el commission ;2&/&&& of which ;%/&&& was recei+ed
in cash.
2)plain how the transactions affected the accounting e-uation for the company and show
the changes in cash took place. "alculate net profit and e)plain why cash and net profit
are not the same?
5. "lassify the following items as they appear in the 1alance <heet under the heads current
asset/ in+estment/ fi)ed asset/ intangi(le asset/ current lia(ility/ long term lia(ility/
shareholders e-uity or does not appear in the (alance sheet.
i. Deli+ery *rucks
ii. Accounts aya(le
iii. Deli+ery 2)pense
i+. "ommon <tock
+. repaid Bnsurance
+i. Wages outstanding
+ii. *rade @ark
+iii. 6ote aya(le >7& Days?