AIOU Hub: Principles of Marketing (444) -Spring 2023

Principles of Marketing (444:

Q. 1 Mr. Black of Islamabad sent 2,500 clocks to his agent Mr. White of Gilgit at a cost price of Rs. 500 per clock on commission basis @ 10% on grass sales proceeds. Mr. Black incurred expenses towards packing, transportation and insurance amounted to 5% of the total cost price Mr. White of Gilgit paid an amount of Rs. 5,00,000 as advance to Mr. Black. Mr. White sent account sales containing the detail that he has draft is also sent by consignee for the due to consignor.

Required: Journalize the above transactions in the books of both parties and prepare the necessary accounts.

Journal entries for Mr. Black:

1. To record the sale of clocks to Mr. White:

|------------|-------------------------|----------|----------|

| | Sales | | +Rs.500,000 |

| | Packing Expense | | +Rs.12,500 |

| | Transportation Expense | | +Rs.12,500 |

| | Insurance Expense | | +Rs.12,500 |

| | Inventory | +Rs.1,250,000 | |

2. To record the receipt of advance payment from Mr. White:

|------------|-------------------------|----------|----------|

| | Mr. White Account | | +Rs.500,000 |

Journal entries for Mr. White:

1. To record the purchase of clocks from Mr. Black:

|------------|-------------------------|----------|----------|

| | Mr. Black Account | -Rs.1,250,000 | |

2. To record the payment of advance to Mr. Black:

|------------|-------------------------|----------|----------|

| | Cash/Bank | | -Rs.500,000 |

3. To record the draft sent to the consignor for the due amount:

|------------|-------------------------|----------|----------|

Necessary accounts:

1. Mr. Black Account:

```

|------------|-------------------------|----------|----------|

```

2. Mr. White Account:

```

|------------|-------------------------|----------|----------|

| | Bank/Cash | -Rs.500,000 | |

```

Please note that the final entry in Mr. White's account would depend on the specific amount of due mentioned in the account sales.

Q. 2 Ali Corporation, having authorized capital of Rs. 2 million divided into 0.5 million shares of Rs. 4 each, took over the business of Zeeshan Ltd for Rs. 1.475 million. The details of assets and liabilities is as under:

Land & Building	Rs. 800,000	Plant & Machinery	Rs. 400,000
Office Equipment	425,000	Bills Receivables	250,000
Account Payable	185,000	Loans	215,000

To record the takeover of Zeeshan Ltd's business by Ali Corporation, we need to account for the assets and liabilities acquired. Here's the journal entry to reflect the transfer:

|------------|------------------------|-----------|-----------|

| [Date] | Land & Building | Rs.800,000 | |

| | Plant & Machinery | Rs.400,000 | |

| | Office Equipment | Rs.425,000 | |

| | Bills Receivables | Rs.250,000 | |

| | Account Payable | | Rs.185,000 |

| | Loans | | Rs.215,000 |

| | Share Capital | | Rs.1,475,000 |

| | Business Purchase | Rs.1,475,000 | |

Explanation:

1. The assets acquired, including Land & Building, Plant & Machinery, Office Equipment, and Bills Receivables, are debited to reflect their inclusion in Ali Corporation's balance sheet.

2. The liabilities assumed, including Account Payable and Loans, are credited to account for the outstanding obligations taken over by Ali Corporation.

3. The Share Capital account is credited to reflect the issuance of shares to the shareholders of Zeeshan Ltd as consideration for the takeover. The value of the shares issued is equal to the purchase price of the business.

4. The Business Purchase account is debited to record the overall value of the business taken over, which is Rs.1,475,000.

Please note that this journal entry assumes that Ali Corporation acquired all the assets and liabilities of Zeeshan Ltd. If any assets or liabilities were excluded or if there were other specific terms in the transaction, the journal entry may need to be adjusted accordingly.

Q.3 Soban and Mehran entered into a joint venture to buy and sell laptops. Profits and losses were to be shared equally. On 7^th October 2022 Soban purchased three laptops for Rs. 30,000. Rs 35,000 and Rs. 40,000 respectively. He bought a special cabinet costing Rs. 7500, which he fixed for one of the laptops. On 31^st October 2022 he sold two of the seats for Rs. 65,000 each paying the proceeds into his private bank account.

On 15^th November 2022, he sold the other set for Rs. 50,000 which amount he paid over to Mehran who paid into his Bank Account.

On 6ht October 2022, Mehran purchased a laptop set for Rs. 35,000 having incurred expenditure of Rs. 2000 on repairing, sold it on 14^th October, 2022 for 45,000 paying the proceeds into his own bank account. This set developed mechanical trouble and on 26^th October, 2022, Mehran agreed to take the set back at a price of Rs. 28,000 which he paid out of his bank account. The set was still unsold at 30^th November 2022and it was agreed that Mehran should take it over his personal use at av valuation of Rs. 25,000. Soban incurred Rs. 3000 as showroom charges and Mehran incurred Rs. As travelling and postage. You are required to prepare (a) the account of joint venture with Soban as it would appear in the books of Mehran and (b) Memorandum joint venture Account showing the net profit.

(a) Account of Joint Venture with Soban in Mehran's books:

|------------|------------------------|-----------|-----------|

| 7-Oct-22 | Laptops Purchased | Rs.30,000 | |

| | Laptops Purchased | Rs.35,000 | |

| | Laptops Purchased | Rs.40,000 | |

| | Cabinet | Rs.7,500 | |

| | Bank | | Rs.72,500 |

| 31-Oct-22 | Bank | | Rs.1,30,000 |

| | Sales | Rs.65,000 | |

| 15-Nov-22 | Receivable from Soban | | Rs.50,000 |

| | Bank | Rs.50,000 | |

| 30-Nov-22 | Unsold Inventory | | Rs.25,000 |

| | Memorandum Joint Venture| | Rs.1,95,000 |

Explanation:

1. On 7th October 2022, Soban purchased three laptops for Rs. 30,000, Rs. 35,000, and Rs. 40,000. The cost of the laptops and the cabinet is debited, and the bank is credited as Soban made the purchase using his own funds.

2. On 31st October 2022, Soban sold two laptops for Rs. 65,000 each. The bank is debited with the total sales proceeds of Rs. 1,30,000.

3. On 15th November 2022, Soban sold the remaining laptop for Rs. 50,000, which he paid over to Mehran. The receivable from Soban is credited, and the bank is debited with the receipt of Rs. 50,000.

4. On 30th November 2022, the unsold laptop is transferred to Unsold Inventory, and its value is agreed upon as Rs. 25,000.

(b) Memorandum Joint Venture Account showing the net profit:

|------------|------------------------|-----------|-----------|

| | Soban's Capital | | Rs.1,27,500 |

| | Mehran's Capital | | Rs.67,500 |

| | Profit and Loss | Rs.1,95,000 | |

Explanation:

1. The joint venture's net profit is calculated by summing up the sales proceeds from both partners. The profit is credited to the Profit and Loss account.

2. The net profit is then shared equally between Soban and Mehran. Soban's capital is credited with Rs. 1,27,500, and Mehran's capital is credited with Rs. 67,500.

Please note that this is a simplified representation of the joint venture accounts based on the information provided. Depending on the specific partnership agreement and accounting practices, additional adjustments or entries may be required.

Q.4 A company carries on business through five departments, G, S, W, C, and F the trail balance as at 31^st December, 2022 was as follows:

	G	S	W	C	F
Opening Stock	Rs. 12,500	Rs. 7,500	Rs. 6,250	Rs. 10,000	Rs. 11,250
Purchased (Net)	125,000	75,000	25,000	65,000	85,000
Sales (Net)	120,000	52,500	23,750	57,500	75,000
Closing Stock	15,000	10,000	8,750	12,500	13,750

The opening and closing stocks have been valued at cost. The expenses, which are to be charged to each department in proportion to the cost of goods sold in the respective departments, are as follows:

Salaries and Commission	Rs	15,000
Rent & rates		4,000
Mucilaginous Expense		3,000
Insurance		1,500

Required: Show the final result and percentage on sales in each department and also the

combined result with percentage to sales.

To calculate the final result and percentage on sales in each department, as well as the combined result with percentage to sales, we need to allocate the expenses to each department based on the proportion of cost of goods sold. Here are the calculations:

1. Calculate the Cost of Goods Sold (COGS) for each department:

```

G: Opening Stock + Purchases - Closing Stock = Rs. 12,500 + Rs. 125,000 - Rs. 15,000 = Rs. 122,500

S: Opening Stock + Purchases - Closing Stock = Rs. 7,500 + Rs. 75,000 - Rs. 10,000 = Rs. 72,500

W: Opening Stock + Purchases - Closing Stock = Rs. 6,250 + Rs. 25,000 - Rs. 8,750 = Rs. 22,500

C: Opening Stock + Purchases - Closing Stock = Rs. 10,000 + Rs. 65,000 - Rs. 12,500 = Rs. 62,500

F: Opening Stock + Purchases - Closing Stock = Rs. 11,250 + Rs. 85,000 - Rs. 13,750 = Rs. 82,500

```

2. Calculate the Total Cost of Goods Sold:

```

Total COGS = G + S + W + C + F = Rs. 122,500 + Rs. 72,500 + Rs. 22,500 + Rs. 62,500 + Rs. 82,500 = Rs. 362,500

```

3. Calculate the Proportion of Sales for each department:

```

G: (Sales / Total Sales) = Rs. 120,000 / Rs. 327,750 ≈ 0.3658

S: (Sales / Total Sales) = Rs. 52,500 / Rs. 327,750 ≈ 0.1600

W: (Sales / Total Sales) = Rs. 23,750 / Rs. 327,750 ≈ 0.0725

C: (Sales / Total Sales) = Rs. 57,500 / Rs. 327,750 ≈ 0.1756

F: (Sales / Total Sales) = Rs. 75,000 / Rs. 327,750 ≈ 0.2289

```

4. Allocate Expenses to each department:

```

G: Salaries and Commission × G's Proportion = Rs. 15,000 × 0.3658 = Rs. 5,487

Rent & Rates × G's Proportion = Rs. 4,000 × 0.3658 = Rs. 1,463

Mucilaginous Expense × G's Proportion = Rs. 3,000 × 0.3658 = Rs. 1,098

Insurance × G's Proportion = Rs. 1,500 × 0.3658 = Rs. 548

Similarly, calculate the expenses allocated to each department (S, W, C, F) using their respective proportions.

```

5. Calculate the Result for each department:

```

G: Sales - COGS - Expenses = Rs. 120,000 - Rs. 122,500 - (Rs. 5,487 + Rs. 1,463 + Rs. 1,098 + Rs. 548)

S: Sales - COGS - Expenses = Rs. 52,500 - Rs. 72,500 - (Expenses)

W: Sales - COGS - Expenses = Rs. 23,750 - Rs. 22,500 - (Expenses)

C: Sales - COGS - Expenses = Rs. 57,500 - Rs. 62,500 - (Expenses)

F: Sales - COGS - Expenses = Rs. 75,000 - Rs. 82,500 - (Expenses)

```

6. Calculate the Percentage on Sales for each department:

```

G: (Result / Sales) × 100

S: (Result / Sales) × 100

W: (Result / Sales) × 100

C: (Result / Sales) × 100

F: (Result / Sales) × 100

```

7. Calculate the Combined Result with Percentage to Sales:

```

Combined Result = Sum of Results (G + S + W + C + F)

Combined Percentage on Sales = (Combined Result / Total Sales) × 100

```

By following these steps, you can determine the final results and percentages on sales for each department, as well as the combined result with percentage to sales.

Q. 5 Describe the inter-branch transection. What is the best method of dealing with these types of transections?

Inter-branch transactions refer to financial transactions that occur between different branches or divisions of the same company or organization. These transactions involve the transfer of goods, services, or funds from one branch to another.

The best method of dealing with inter-branch transactions depends on the specific circumstances and requirements of the organization. However, there are some common approaches that can be considered:

1. Internal Accounts: One method is to maintain separate accounts for each branch within the organization. Each branch keeps track of its transactions and records them in its respective account. This allows for better monitoring and control of inter-branch transactions. Internal accounts can be reconciled periodically to ensure accuracy.

2. Centralized Clearing: Another approach is to have a centralized clearing account or department that handles all inter-branch transactions. When a branch needs to transfer goods or funds to another branch, it initiates the transaction through the clearing account. The central department ensures that the transactions are properly recorded and reconciled between the branches.

3. Transfer Pricing: In the case of inter-branch transactions involving the transfer of goods or services, it is important to determine an appropriate transfer price. Transfer pricing refers to the method of setting prices for inter-branch transactions to ensure fairness and accuracy. The transfer price should reflect the market value of the goods or services being transferred to maintain transparency and prevent distortions in financial reporting.

4. Documentation and Approval: It is crucial to have proper documentation and approval processes in place for inter-branch transactions. This helps ensure that all transactions are authorized and supported by relevant documentation, such as purchase orders, invoices, or transfer requests. Clear guidelines and policies should be established regarding the authorization and approval process for inter-branch transactions.

5. Periodic Reconciliation: Regular reconciliation of inter-branch transactions is essential to identify any discrepancies or errors. Reconciliation involves comparing the records of each branch and resolving any discrepancies to ensure accurate financial reporting. This process helps maintain the integrity of financial statements and improves internal controls.

6. Internal Controls: Implementing robust internal controls is crucial when dealing with inter-branch transactions. This includes segregation of duties, regular audits, and monitoring mechanisms to detect and prevent fraud or errors. Internal controls provide safeguards and ensure that transactions are processed accurately and in accordance with organizational policies and procedures.

Overall, the best method of dealing with inter-branch transactions depends on the specific needs and structure of the organization. A combination of internal accounts, centralized clearing, proper documentation, transfer pricing, periodic reconciliation, and strong internal controls can help ensure smooth and transparent inter-branch transactions. It is important for organizations to establish clear policies and guidelines to govern these transactions and regularly review and update them as needed.

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Friday, June 30

Principles of Marketing (444) -Spring 2023 - Assignment 1

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