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Introduction To Accounting Ii Question Paper

Introduction To Accounting Ii

Course:Diploma In Business Management

Institution: Kca University question papers

Exam Year:2009

UNIVERSITY EXAMINATIONS: 2009/2010
STAGE III EXAMINATION FOR DIPLOMA IN BUSINESS MANAGEMENT
DAA 101: INTRODUCTION TO ACCOUNTING II
DATE: DECEMBER 2009 TIME: 1½Hours
INSTRUCTIONS: Answer Any THREE Questions
QUESTION ONE (20 MARKS)
L Mann started business with Kshs.50,000 in the bank on 1 April. The business transactions during the
month were as follows:
i). Took Kshs.3,000 out of the bank for petty cash.
ii). Bought a second-hand van and paid by cheque Kshs.35,000.
iii). Bought goods on credit from A Supplier for Kshs.25,000
iv). Sold goods for cash for Kshs.3000.
v). Sold goods on credit for Kshs.10,000 to B safe.
vi). Returned faulty goods to A supplier Kshs.5,000.
vii). Paid sundry expenses of Kshs.500 in cash.
viii). Paid the rent of Kshs.5000 by cheque.
ix). Withdrew cash drawings of Kshs.500
Inventory at cost at 30 April was Kshs.12,500.
Required
a) Prepare the ledger accounts recording the transactions (4 Marks).
b) Prepare the trial balance at 30 April (4 Marks).
c) Prepare an income statement for the month ending 30 April (3 Marks).
2
d) Prepare a balance sheet as at 30 April (3 Marks).
e) Calculate the percentages of:
i) Gross profit to sales
ii) Net profit to opening capital (4 Marks)
f) Comment on:
i) The relationship between drawings and net profit and why it is important that Mann
keeps an eye on it.
ii) Working capital (4 Marks)
QUESTION TWO (20 MARKS)
On 1 January 2008, The Animal Lovers Club had the following assets:
Kshs.
Cash at bank 2000
Snack bar inventory 8000
Club house buildings 125,000
During the year to 31 December 2008 the club received and paid the following amounts;
Receipts Kshs. Payments Kshs.
Subscriptions 2008 35,000 Rent and rates 15,000
Subscriptions 2009 3,800 Extension to club house 80,000
Snack bar income 60,000 Snack bar purchases 37,500
Visitor’s fees 6,500 Secretarial expenses 2,400
Loan from bank 55,000 Interest on loan 2,600
Competition fees 8,200 Snack bar expenses 6,000
Games equipment 200,000
Notes:
The snack bar inventory on 31 December 2008 was Kshs.9000.
The games equipment should be depreciated by 20%.
a) Prepare an income and expenditure account for the year ending 31 December 2008. Show
either in this account or separately, the snack bar profit or loss. (12 Marks).
b) Prepare a balance sheet as at 31 December 2008 (8 Marks)
3
QUESTION THREE (20 MARKS)
The financial year end of Mendez Limited is 30 June. At 30 June 2008, the following balances are
available;
Kshs.
Freehold land and buildings at cost 143,000
Plant and machinery at cost 105,000
Accumulated depreciation on plant and machinery 23,000
Purchase of raw materials 130,000
Sales 317,000
Factory rates 3,000
Factory heat and light 6,500
Accounts receivable 37,200
Accounts payable 30,900
Wages (including Kshs.15,700 for supervision) 63,000
Direct factory expenses 9,100
Selling expenses 11,000
Office salaries and general expenses 43,000
Bank 24,500
General reserve 30,000
Retained profits 18,000
Inventory 1 July 2007: Raw materials 20,000
Finished goods 38,000
Dividends paid: preference shares 840
Ordinary shares 20,000
i) The inventory at 30 June 2008 was: raw materials Kshs.22,000; finished goods Kshs.35,600.
ii) Salaries include Kshs.6,700 for directors’ fees.
iii) Depreciation is to be charged at 10% on cost of plant and machinery.
Required
Prepare a manufacturing account and income statement for the year ending 30 June 2008 (20 Marks).
4
QUESTION FOUR (20 MARKS)
A and B are in partnership sharing profits and losses 3:2. Under the terms of the partnership
agreement, the partners are entitled to interest on capital at 5 per cent per annum and B is entitled to a
salary of Kshs.45,000. Interest is charged on drawings at 5 per cent per annum and the amounts of
interest are given below. No interest is charged or allowed on current accounts.
The partners’ capitals at 1 July 2008 were: A Kshs.300,000 and B Kshs.100,000.
The net trading profit of the firm before dealing with partners’ interest or B’s salary for the year ended
30 June 2009 was Kshs.258,000. Interest on drawings for the year amounted to A Kshs.4,000, B
Kshs.3,000.
At 1 July 2008, there was a credit balance of Kshs.12,800 on B’s current account; while A’s current
account balance was a debit of Kshs.5,000. Drawings for the year to 30 June 2009 amounted to
Kshs.120,000 for A and Kshs.150,000 for B.
Required
Prepare, for the year to 30 June 2009.
a) The profit and loss appropriation account (10 Marks)
b) The partners’ current accounts. (5 Marks)
c) What are the provisions of the Partnership Act, 1890, where a partnership agreement does not
exist? (5 Marks)
QUESTION FIVE (20 MARKS)
The following is the trial balance of Finlay Ltd as on 31 December 2008.
Dr Cr
Kshs. Kshs.
Share capital issued: ordinary shares 20 p 375,000
Accounts receivable and accounts payable 169,600 74,900
Inventory 31 December 2007 81,300
Bank 17,900
Premises at cost 265,000
Machinery at cost 109,100
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Motor vehicles at cost 34,700
Depreciation provision at 31.12.2007:
Premises 60,000
Machinery 41,400
Motor vehicles 18,200
Sales 975,600
Purchases 623,800
Motor expenses 4,300
Repairs to machinery 3,600
Sundry expenses 2,900
Wages and salaries 241,500
Directors’ remuneration 82,600
Retained profits as at 31.12.2007 31,200
General reserve ------------ 60,000
1,636,300
=======
1,636,300
=======
Given the following information, you are to draw up an income statement for the year ending 31
December 2008, and a balance sheet as at that date:
i) Authorized share capital: Kshs.500,000 in ordinary shares of 20p.
ii) Inventory at 31 December 2008 Kshs.102,400.
iii) Motor expenses owing Kshs.280.
iv) Ordinary dividend proposed of 5 per cent.
v) Transfer Kshs.7,500 to general reserve.
vi) Provide for depreciation: motor vehicles and machinery 20% on cost; premises 5% on cost.

Introduction To Accounting Ii Question Paper

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