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Introduction To Accounting I Question Paper
Introduction To Accounting I
Course:Diploma In Business Management
Institution: Kca University question papers
Exam Year:2010
UNIVERSITY EXAMINATIONS: 2009/2010
STAGE II EXAMINATION FOR DIPLOMA IN BUSINESS MANAGEMENT
DAA 100: INTRODUCTION TO ACCOUNTING I
DATE: APRIL 2010 TIME: 1½ HOURS
INSTRUCTIONS: Answer any THREE questions
Question One
a) (i) What is accounting? (2 Marks)
(ii) What are the main reasons for keeping accounts? (8 Marks)
b) Why might the following stakeholders be interested in financial information about a
company?
i. Managers of the company
ii. Shareholders of the company
iii. Trade creditors
iv. Employees
v. Government departments and government agencies (10 Marks)
(TOTAL 20 Marks)
Question Two
The following list of balances has been extracted from the accounts of Peter Ole Kajairo, a sole trader,
as at 31December 2009.
DR CR
Sh000 Sh000
Freehold premises – cost 270,000
Equipment – cost 172,500
Motor vehicles – cost 28,000
Provision for depreciation
2
• premises 37,500
• equipment 97,500
• motor vehicles 14,000
Stock (1/1/2009) 82,200
Purchases 778,800
Sales 1,215,000
Wages and salaries 177,500
Motor expenses 87,400
Admin expenses 17,650
Heating and lighting 4,950
Advertising expenses 13,280
Debtors 106,960
Creditors 76,910
Cash at bank 2,440
Bank (overdraft) 11,290
Drawings 42,640
Capital 332,120
––––––––– –––––––––
1,784,320 1,784,320
The following additional information is also available:
1. Stock at 31st December 2009 is Sh101,640,000
2. Depreciation for the year is to be provided as follows:
• Premises – 2% on cost
• Equipment – 10% on cost
• Motor vehicles – 20% on net book value (NBV)
3. At 31st December 2009, wages and salaries outstanding were Sh1,220,000
4. At 31st December 2009, advertising expenses prepaid were Sh8,470,000
Required:
a) Prepare the statement of financial performance for the period ended 31 December 2009.
(10 Marks)
b) Prepare the statement of financial position as at 31 December 2009. (10 Marks)
3
(TOTAL 20 Marks)
Question Two
a) Your organisation has provided the following information:
– Debtors at year end (31st December) Sh262,500
– Bad debts to be written off Sh2,500
– Bad debt provision to be created of 2%
Required:
i. Bad debt written off account. (2 Marks)
ii. Provisions for doubtful debts account. (2 Marks)
iii. The statement of financial performance extract. (2 Marks)
iv. The statement of financial position extract for 31st December. (2 Marks)
b) In the following year, debtors increased to Sh284,000, bad debts written off were Sh4,000
and the bad debt provision increased to 3%. Show:
(i) The charges to the statement of financial performance for the year ended 31st
December; (4 Marks)
(ii) The statement of financial position extract as at 31st December. (4 Marks)
c) Give four reasons why a debt might have to be written off as bad. (4 Marks)
(TOTAL 20 Marks)
Question Four
(a) State and explain any two methods of depreciation. (6 Marks)
(b) Your business has just bought a lorry for Sh.85,000 and it has decided to depreciate this asset at a
rate of 15% per annum using the reducing balance method of depreciation.
Calculate the depreciation and show the asset’s net book value at each year end, for the first
five years. (14 Marks)
(TOTAL 20 Marks)
Question Five
The following transactions relate to Mr Kogi, a sole trader for the month of March 2010.
March 1: Started a business by depositing sh 650,000 into bank account.
4
March 2: Bought a small building worth sh 250,000 and paid by a cheque.
March 6: Bought stock on credit from the following; Jane sh 10,000, James sh 5,000, Jacob
sh.3,500.
March 12: Sold stock worth sh.6,000 cash to Jacob.
March 15: Paid salaries sh. 7,000 by a cheque.
March 20: Bought stock worth sh. 45,000 on credit from James.
March 23: Sold stock on credit to; Mary sh.4,000, Janet sh.6,000, Joseph sh.3,400.
March 25: Returned goods to; James sh.3,000, Jacob 1,000.
March 28: The following paid by cash; Mary sh.2,500, Joseph sh.3,100.
Required:
a) Necessary books of original entry. (8 Marks)
b) Ledger accounts. (6 Marks)
c) Trial balance as at 31 March 2010. ( 6 Marks)
(TOTAL 20 Marks)
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