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Caa 101 Introduction To Accounting Ii Question Paper
Caa 101 Introduction To Accounting Ii
Course:Bachelor Of Commerce
Institution: Kca University question papers
Exam Year:2012
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UNIVERSITY EXAMINATIONS: 2011/2012
YEAR III EXAMINATION FOR THE BACHELOR OF COMMERCE
CAA 101 INTRODUCTION TO ACCOUNTING II (D+E)
DATE: APRIL 2012 TIME: 2 HOURS
INSTRUCTIONS: Answer ALL Questions
QUESTION ONE
Write brief notes on the following:
(a) Quoted and unquoted companies. (4 Marks)
(b) Bonus shares and rights issue. (4 Marks)
(c) Scrip issue and ordinary dividend. (4 Marks)
(d) Uses of the share premium account. (4 Marks)
(e) Issue of shares at a premium and discount. (4 Marks)
(Total: 20 Marks)
QUESTION TWO
Alex, Bob and Charles have been trading in partnership sharing profits/losses in the ratio of 5:3:2
respectively. On 1 April 2010 they admitted their manager, David as a partner and the profit sharing
ratio was changed-to 4:3:2: 1 for Alex, Bob and Charles and David respectively
The partners valued the goodwill at Kshs.510, 000. David paid in Kshs.200.000 as capital and his share
of goodwill, which should he based on capital contributions.
The partners do not wish to retain the goodwill account after admission of David. The admission of
David has not been fully recorded other than the cash receipt of Kshs. 376,000.
The following is the trial balance of the partnership as at 31 March 2011:
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Kshs. Kshs.
Capital accounts Alex 700,000
Bob 600,000
Charles 400,000
Current accounts Alex 350,000
Bob 325,000
Charles 195,000
Drawings Alex 250,000
Bob 260,000
Charles 250,000
David 175,000
Land and buildings at cost 2,000,000
Furniture and fittings at cost 500,000
Provision for depreciation on furniture and fillings 150,000
Motor vehicles 860,000
Provision for depreciation on motor vehicles 480,000
Trade debtors and creditors 365,000 823,000
David account 376,500
Purchases and sales 3,380,000 5,975,000
Stock April 1 2010 465,000
Salaries and wages 295,000
Rates 137,000
Telephone and postage 116,000
Vehicles running expenses 396,000
Insurances and subscriptions 162,000
General expenses 72,000
Bank charges and interest 124,000
Bad debts 68,000
Returns inwards and outwards 61,000 75,000
Cash in hand 24,000
Cash at bank 490,000
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10,450,000 10,450,000
Notes
1. Depreciation on furniture and fittings and motor vehicles is at 10% and 20'% on reducing balance
respectively.
2. The closing stocks were valued at Ks 560,000.
3. Accrued salaries and wages and telephone bills amounted to Kshs.24,000 and Kshs. 14,000
respectively.
4. Prepaid subscriptions and rates amounted to Kshs.5,000 and Kshs.25,000 respectively .
5. The partners decided that David should be given a monthly salary of Kshs.20,000 for the whole
year from 1 April 2010 to 31 March 2011.
6. David took goods for own use at cost amounting to Kshs. 185,000. No entry has been made in the
books.
7. The old partners shared the cash paid by David for part of his goodwill.
Required:
(a) Trading, profit and loss account for the year ended 31 March 2011. (10 Marks)
(b) Partners capital accounts. (2 Marks)
(c) Partners current accounts. (3 Marks)
(d) Balance sheet as at 31 March 2001. (5 Marks)
(Total: 20 Marks)
QUESTION THREE
(a) State and briefly explain any three distinguishing features between (i) a receipts and payments
account and (ii) an income and expenditure account. (3 Marks)
(b) The accountant of Sigona Sports Club has extracted the following information from the books
of account for the year ended 31 March 2011:
Receipts Kshs. Payments Kshs.
Balance brought forward 288,000 Salaries and wages 254,000
Subscriptions: New equipment 565,000
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Year 2009/2010 249,000 Receipts and maintenance 124,000
2010/2011 2,050,000 Office expenses 415,000
2011/2012 194,000 Printing and stationery 168,000
Dinner dance 723,000 Purchase of beverages 497,000
Beverage sales 657,000 Dinner dance expenses 315,000
Investments income 400,000 Refund of subscriptions 45,000
Sports prizes 25,000
Transport 248,000
Investments 1,500,000
________ Balance carried forward 405,000
4,561,000 4,561,000
Balances as at 31 March 2010
Kshs.
31 March 2011
Kshs.
Furniture and fittings (net) 240,000 -
Equipment (net) 690,000 -
Investments at cost 3,500,000 -
Subscriptions in arrears 300,000 375,000
Salaries accrued 68,000 72,000
Stock of beverages 162,000 184,000
Subscriptions in advance 85,000 -
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Additional information
1. Subscriptions in arrears are written-off after twelve months.
2. Depreciation is provided for on reducing balance method at 10% and 20% per annum
on furniture and fittings and equipment respectively.
3. Investments which had cost Ksh.500,000 were sold on 30 March 2011 for Ksh.625,000.
No entries have been made in the books in this respect.
Required:
(a) Income and expenditure account for the year ended 31 March 2011. (6 Marks)
(b) Balance sheet as at 31 March 2011. (6 Marks)
(Total: 15 Marks)
QUESTION FOUR
Mr. Mwadime Joseph is a sole trader who prepares his financial statements annually to 30th April. His
summarized balance sheets for the last two years are shown below:
Balance Sheets as at 30 April
2010 2011
Kshs. Kshs. Kshs. Kshs.
Non-current assets 15,500 18,500
Less: provision for depreciation (1,500) (1,700)
14,000 16,800
Current assets
Inventory 3,100 5,900
Trade accounts receivable 3,900 3,400
Bank 1,500 8,500 - 9,300
Total assets 22,500 26,100
Current liabilities
Trade accounts payable 2,000 2,200
Bank overdraft - 900
Total liabilities (2,000) (3,100)
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Net assets 20,500 23,000
Capital account:
Balance at 1 May 20,000 20,500
Add: Net profit for the year 7,000 8,500
Additional capital introduced - 2,000
27,000 31,000
Less: Drawings (6,500) (8,000)
Total capital 20,500 23,000
Mr. Mwadime Joseph is surprised to see that he now has an overdraft, in spite of making a profit and
bringing in additional capital during the year.
Required:
(a) Draw up a suitable statement which will explain to Mr. Mwadime Joseph how his overdraft has arisen.
(11 Marks)
(b) The following further information relates to the year ended 30 April 2011.
Kshs.
Sales (all on credit) 30,000
Cost of sales 22,500
Calculate Mr. Mwadime Joseph’s
(i) Gross profit margin (2 Marks)
(ii) Rate of inventory turnover (2 Marks)
(Total: 15 Marks)
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