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Acct/Buss 117: Principles Of Accounting 11 Question Paper
Acct/Buss 117: Principles Of Accounting 11
Course:Bachelor Of Education Science
Institution: Kenya Methodist University question papers
Exam Year:2012
KENYA METHODIST UNIVERSITY
END OF 3RD TRIMESTER 2012(SCHOOL BASED) EXAMINATIONS
FACULTY: EDUCATION AND SOCIAL SCIENCES
DEPARTMENT: EDUCATION
UNIT CODE: ACCT/BUSS 117
UNIT TITLE: PRINCIPLES OF ACCOUNTING 11
TIME: 2 HOURS
INSTRUCTIONS: Answer ANY questions from the choices given. All questions carry equal marks.
QUESTION ONE:
(a) Explain how the following parties benefit from the financial statements and their analysis.
i. The internal management.
ii. Employees
iii. Creditors
iv. The government
(b) Kilonzo does not keep proper books of accounts. You ascertain that his bank payments and receipts during the year to 31/12/02 were as follow.
Receipts payments
KShs
Balance I st Jan 2002 572
Cheques for sales 13179
Cash banked 14005
Balance 31/12/02 3751
31,507
KShs
Purchases 10,007
Expenses 2,950
Drawings 11,250
Delivery van 7,300
31,507
From a cash notebook you ascertain KShs
Cash in hand 1 January 2002 62
Cash takings 16,300
Purchases paid in cash 1,850
Expenses paid in cash 375
Cash in hand 31/12/02 65
Drawings by proprietor in cash unknown
You discover that assets and liabilities were as follows:
Ist January 2002 31/12/02
Debtors 1,850 2,070
Trade creditors 1,250 1,420
Stock in hand 2,650 2,990
Depreciation on van is to be provided at the rate of 20% per annum.
Required:
i. Prepare Kilonzo’s trading, profit and loss account for the year ending 31/12/02
ii. Balance sheet as at the date.
[10 marks]
QUESTION TWO
(a) Kalendile is a proprietor of a wholesale shop that sells the following items: Newspaper, books, periodicals and kids games and toys. He decides to divide his business into two departments for easier management and accountability.
Department S- Games, toys and other fancy items.
Department T- Books, periodicals and newspapers.
The following balances have been extracted from his nominal ledger at.
Sales department S Dr Cr
10,000
Sales department T 15,000
Stock dept S (1/07/10) 200
Stock dept T (1/07/10) 250
Purchases dept S 8200
Purchases dept T 11800
Wages of sales
Assistant dept S 750
Wages of sales dept
Dept T 1000
News paper delivery wages 150
General office salaries 750
Rates 130
Fire, insurance building 50
Lighting and air conditioning 120
Repairs to premises 25
Internal telephone 25
Cleaning 30
Accounting and auditing charges 120
General office expenses 60
25,000 25, 000
Stocks at 30/6/11 were valued at:
Department S 150
Department T 300
The proportion of the total floor area occupied by each department was,
Department S 4/5
Department T 1/5
The apportionment should be made by using the following methods.
1. Area-Rates, fire insurance, lighting and air conditioning, repairs telephone, cleaning.
2. Turnover in general office salaries, accountancy, general office expenses.
Required:
(a) Prepare Kalendine’s trading, profit and loss account for the year ended 30/6/11, and appropriation the overhead expenses, where necessary, to show the department profit and loss.
[14 marks]
(b) Analysis of financial statements is a very important device. However the person using this device must keep in mind its limitations. Discuss three limitations. (5 marks)
QUESTION THREE
(a) Explain five features of limited liability companies. (5 marks)
(b) Barracks owns and manages a small manufacturing business. The following balances have been extracted from his books of accounts at 31st January 2010. (15 marks)
Dr Cr
Capital at 1/2/09 171,120
Accounts payable 86,000
Bank and cash balance 5,400
Accounts receivable 92,000
Drawings 60,000
Administration expenses 150,360
Advertising expenses 12,000
Factory direct wages 60,000
Factory indirect wages 24,000
Factory power 36,000
Furniture and fittings (all offices) 18,400
Heat and light 16,000
Plant and equipment 276,800
Motor vehicle (used by salesmen) 144,000
Plant hire 4,000
Provision for bad debts
Provision for depreciation 1st February 2009 3,200
Furniture and fittings 9,200
Plant and equipment 138,400
Motor vehicle 24,000
Raw materials purchases 228,000
Rent rates 20,000
Sales 829,440
Selling and distribution expenses 66,400
Inventories at cost (1/2/09)
Raw materials 8,000
Work in progress 16,000
24,000
1,261,360 1,261,360
The following information (additional) is provided;
i. Accruals at 3/1/10 were factory power- KShs 1600, Rent and rates- KShs 4000.
ii. There was also prepayment for KShs 800 for salesmen’s motor vehicle insurance.
iii. Inventories at 31/1/10 were valued at cost as follows. Raw materials-KShs 15200, work in progress-KShs 30400, finished goods- KShs 45600.
iv. Depreciation is to be charged on plant and equipment, motor vehicle furniture and fittings at rates of 20%, 25% and 10% per annum respectively on cost.
v. Expenditure on heat and light and rent and rates is to be apportioning between the factory and office in the ratio of 9 to 1 and 3 to 2 respectively.
vi. The provision for bad debts is to be made equal to 5% of accounts receivable at 31/1/2010
Required:
Using the vertical method prepare Barrack’s manufacturing trading and profit and loss account for the year ended 31/1/2010 and a balance sheet as at that date.
QUESTION FOUR
(a) Discuss the classification of partners giving examples in each case. [6 marks]
(b) The following information relates to Meru sports club. As the newly appointed treasurer prepare the club members the following: (12 marks)
i. Balance sheet as at 1st January 2009.
ii. Bar trading account for the year ended 31/12/09
iii. Income and expenditure account for the year ending 31/12/09
iv. Balance sheet as at 31/12/09
1/1/2009 31/12/2009
Premises 100,000 80,000
Club furniture 15,000 13,500
Sports equipment 10,000 12,800
Barman wages
Outstanding 600 750
Subscriptions paid in advance 400 240
Repairs to sports 1,200 860
Equipment, bill due 3,000 1,950
Insurance prepaid 160 80
Cash in hand 3,400 4,800
Bank overdraft 5,680 5,340
Refreshment creditors 4,320 1,920
Bar debtors 2,000 2,500
RECEIPTS AND PAYMENTS ACCOUNT FOR YEAR
Dr Cr
Cash in hand b/f 3,400 Bank balance b/f 5,680
Subscription 50,000 Stationery and printing 17,250
Bar and restaurant Electricity 2,310
Receipts 39,400 wages 23,480
Bank balance C/F 5,340 Insurance 4,000
Sports Equipment 6,000
Repairs to sport 7,500
Equipment
Telephone & postage 1,660
Refreshment 20,000
General expense 3,500
Advertising C/F 1,960
Cash in hand 4,800
98,140 98, 140
QUESTION FIVE
Pamsam Ltd is reviewing the financial statements of two companies Pam Ltd and Sam Ltd. The companies trade as wholesales, selling electrical goods to retailers on credit. Their most recent financial statement appears below.
Profit and loss account for the year ended 31st March 2003.
Pam Ltd Sam Ltd
KShs KShs KShs KShs
‘000’ ‘000’ ‘000’ ‘000’
Sales 4,000 6,000
Cost of sales
Opening stock 200 800 -
Purchases 3,200 4,800 -
3,400 - 5,600 -
Less closing stock 400 3000 800 4,800
Gross profit 1000 1,200
Expenses
Distribution costs 200 150 -
Administration expenses 290 250 -
Interest paid 10 400 -
Profit before tax 500 800
Taxation 500 400
Net profit for 120 90
The period 380 310
Balance sheet as at 31st March 2003
Pam Ltd Sam Ltd
000’ 000’ 0 000’
Fixed Assets
Tangible assets
Warehouse & 1,200 5,000
Office buildings
Equipment & vehicles 600 1,000
1,800 6,000
Current Assets
Stock 400 800
Grade debtors 800 900
Sundry debtors 150 80
1350 1,880
Current liabilities
Grade creditors (800) (800)
Sundry creditors (80) (100)
Overdraft (200) -
Taxation (120) (90)
150 890
1,950 6,890
Long term 1 ban - (4000)
(Interest 10% pa) 1,950 2,890
Share capital 1,000 1,600
Revaluation reserve - 500
Profit & loss account 950 790
1,950 2,890
Required:
(a) Calculate for each company a total of eight rations which will assist in measuring the three aspects of profitability, liquidity and management of the elements of working capital show all workings. (8 marks)
(b) Based on the rations you have calculated in (a) compare the two companies as regards their profitability liquidity and working capital management. (2 marks)
(c) Sam Ltd is much more highly geared than Pam Ltd. What is the implication of this for the two companies? (2 marks)
(d) Explain briefly the methods used in the calculation of depreciation. (8 marks)
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