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Caa 100 Introduction To Accounting I (Saturday Class) Question Paper
Caa 100 Introduction To Accounting I (Saturday Class)
Course:Bachelor Of Commerce
Institution: Kca University question papers
Exam Year:2011
UNIVERSITY EXAMINATIONS: 2010/2011
EXAMINATION FOR THE BACHELOR OF COMMERCE
CAA 100 INTRODUCTION TO ACCOUNTING I (SATURDAY CLASS)
DATE: DECEMBER 2011 TIME: 2 HOURS
INSTRUCTIONS: ANSWER ALL QUESTIONS
QUESTION 1
Amah Retto’s ledger accounts for the year ended 30 April 2011 showed the following
balances:
Shs
Property at cost 250 000
Machinery at cost 52 000
Provision for depreciation on machinery at 1 May 2010 15 600
Provision for doubtful debts at 1 May 2010 500
Revenue 243 000
Ordinary goods purchased 184 000
Sales returns 2 040
Purchases returns 1 980
Carriage on purchases 350
Carriage on sales 800
Rent received 2 420
Discount allowed 1 800
Discount received 1 300
Electricity expense 2 100
General expenses 9 340
Inventory at 1 May 2010 13 500
Trade receivables 9 000
Trade payables 11 460
Bank (Credit) 8 260
Cash 990
Drawings 18 600
Non-current liability loan at 11% per annum 60 000
Capital ?
Additional information at 30 April 2011.
1 Inventory was valued at Shs15 100.
2 No interest had been paid or provided for on the loan, which had been taken out
on 1 November 2010.
3 Amah Retto’s tenant had paid only eleven months’ rent; one month’s rent was due
and unpaid.
4 Electricity expense prepaid amounted to Shs 40.
5 General expenses accrued amounted to Shs 50.
6 Debts of Shs 200 were to be written off.
Depreciation was to be provided on machinery at 40% using the reducing (diminishing)
balance method.
Doubtful debts provision was to be 3% of trade receivables at the end of the year.
REQUIRED
(a) Prepare Amah Retto’s income statement for the year ended 30 April 2011. (12 Marks)
(b) Prepare Amah Retto’s balance sheet at 30 April 2011. (8 Marks)
QUESTION 2
Sara has a wholesale clothing business. She provides you with the following figures.
Balance at Balance at
31 May 2010 31 May 2011
Shs Shs
Trade Payables 12 000 14 000
Trade Receivables 13 300 13 600
Inventory (cost price) 21 500 18 500
During the year ended 31 May 2009 the following transactions took place:
Shs
Cash paid to suppliers for goods 45 000
Takings banked 58 000
Cash discount received 1 000
Cash discount allowed 1 200
Bad debts written off 1 100
The takings banked during the year ended 31 May 2011 included Shs 250 for 31 May 2010.
Takings of Shs 400 for 31 May 2011 were banked on 2 June 2011.
REQUIRED
(a) (i) Calculate total purchases for the year ended 31 May 2011. (8 Marks)
(ii) Calculate total sales for the year ended 31 May 2011. (8 Marks)
(b) Calculate the cost of sales for the year ended 31 May 2011. (4 Marks)
QUESTION 3
Wilson is preparing his bank reconciliation at 31 May 2011. His bank statement shows a balance
of Shs 228 000 cash at the bank. The balance on the bank account in his general ledger is Shs
113 000 (credit).
He has noted the following reasons for the difference:
(i) Cheque number 958602 was incorrectly recorded in Wilson’s cash book as Shs
760,000. The cheque was correctly debited on the bank statement on 2 May as Shs
670,000.
(ii) Bank charges of Shs 428,000 were debited by the bank on 4 May.
(iii) A customer’s cheque for Shs 320,000 was returned by Wilson’s bank in May as the
customer had insufficient funds in his account. Wilson has not recorded the return of
the cheque in his records.
(iv) The bank has incorrectly credited Wilson’s account with interest of Shs 220,000.
This is interest on a deposit account held by Wilson personally. The bank had not
corrected the error by 31 May.
(v) A lodgement of Shs 850,000 entered in Wilson’s cash book on 31 May was credited
on the bank statement on 3 June.
(vi) Five cheques have not yet been presented at the bank. These are:
Cheque No. Shs
956784 625 see note (vii)
956892 326
958452 469
958541 122
958668 187
–––––
1,629
–––––––
(vii) Cheque number 956784 was lost in the post and was cancelled. Wilson has not
recorded the cancellation of the cheque.
Required:
(a) Show Wilson’s general ledger bank account including the necessary correcting
entries.
(NB You MUST present your answer in a format which clearly indicates whether each entry is a
debit or a credit)
(6 Marks)
(b) Prepare a reconciliation of the bank statement balance to the corrected general
ledger balance. (7 Marks)
(c) Indicate how the bank balance will be reported in Wilson’s final accounts. (2 Marks)
(15 marks)
QUESTION 4
i) A new trainee in your firm is having difficulty understanding basic accounting, in particular
the distinction between assets and liabilities.
Required:
Define ‘asset’ and ‘liability’ and give one example of each. (3 Marks)
ii) The final accounts for your company include a note which states: ‘these accounts have been
prepared on the going concern basis’
Required:
Briefly explain what is meant by the ‘going concern basis’. (3 Marks)
iii) Your neighbour recently started his own business. He wishes to keep costs as low as possible,
and intends to prepare his own year end accounts. He read that accounts should be prepared
using the accruals principle, but he does not know what this means.
Required:
Briefly explain the accruals principle and how it is applied when preparing year end
accounts. (4 Marks)
iv) Financial statements are intended to provide information to a wide range of users.
Required:
Identify two different users of financial statements, and their respective needs.
(3 Marks)
v) A member of your company’s marketing department is concerned about the amount of
information she is asked to provide each time accounts are being prepared. When you spoke to
her about this, you mentioned the importance of International Accounting Standards /
International Financial Reporting Standards and she asked you what purpose these serve.
Required:
State the basic purpose of International Accounting Standards / International Financial
Reporting Standards.
(2 Marks)
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