Question No.4

During the absence of a regular accountant in Students Consulting Co., a new employee Mr. Usman Ali who had very little understanding of accounting, prepared following closing entries from the ledger accounts for the year 2015: -

Entry 1 Debit (Rs) Credit (Rs)

Professional Fees Earned 273, 600

Accumulated Depreciation-Building 25,600

Accounts payable 86,400

Salaries payable 9,200

Income summary 394, 800

To close the accounts with credit balance

Entry 2 Debit Credit

Income summary 160,800

Salaries Expense 96,400

Dividend 36,000

Advertising expense 12,800

Depreciation Expense 6,400

Insurance expense 9,200

To close the accounts with debit balance

Entry 3 Debit Credit

Retained Earnings 234,000

Income summary 234,000

To transfer the net income to retained earnings.

Required:

1. Prepare four correct closing entries

   1. . (05 marks)

2. Using the information presented above, compute the net income or the net loss of Students Consulting for the year 2015. (2.5 marks)

During the absence of a regular accountant in Students Consulting Co., a new employee Mr. Usman Ali who had very little understanding of accounting, prepared following closing entries from the ledger accounts for the year 2015: - Entry 1 Debit (Rs) Credit (Rs) Professional Fees Earned 273, 600 Accumulated Depreciation-Building 25,600 Accounts payable 86,400 Salaries payable 9,200 Income summary 394, 800 To close the accounts with credit balance Entry 2 Debit Credit Income summary 160,800 Salaries Expense 96,400 Dividend 36,000 Advertising expense 12,800 Depreciation Expense 6,400 Insurance expense 9,200 To close the accounts with debit balance Entry 3 Debit Credit Retained Earnings 234,000 Income summary 234,000 To transfer the net income to retained earnings. Required: a) Prepare four correct closing entries 1. (05 marks) b) Using the information presented above, compute the net income or the net loss of Students Consulting for the year 2015 (2.5 marks)