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Introduction To Accounting I Question Paper
Introduction To Accounting I
Course:Bachelor Of Commerce
Institution: Kca University question papers
Exam Year:2009
UNIVERSITY EXAMINATIONS: 2008/2009
FIRST YEAR STAGE I EXAMINATION FOR THE DEGREE OF
BACHELOR OF COMMERCE
CAA 100: INTRODUCTION TO ACCOUNTING I (SUNDAY CLASS)
DATE: AUGUST 2009 TIME: 2 HOURS
INSTRUCTIONS: Answer all the questions
QUESTION ONE
The following trail balance was extracted from the books of A. Mwangi at the close of business on 31
July 2008
Dr Cr
Shs Shs
Purchases and sales 112,800 197,400
Cash at bank 11,400
Cash at hand 2,100
Capital (1 August 2007) 99,000
Drawings 28,500
Office furniture 14,400
Rent 10,200
Wages and salaries 25,800
Discounts 6,900 3,600
Debtors and creditors 49,200 24,900
Stock (1 August 2007) 29,700
2
Provision for doubtful debts (1 Agust2007) 2,700
Delivery van 24,000
Van running costs 4,500
Bad debts written off 8,100 __
327,600 327,600
Additional information:
i.) Stock at 31 July 2008 was valued at Shs. 35,100
ii.) Wages and salaries accrued at 31 July 2008 was Shs. 900
iii.) Rent prepaid at 31 July 2008 was Shs. 1400.
iv.) Van running costs owing at 31 July 2008 was Shs. 600.
v.) Increase the provision for bad and doubtful debts by Shs. 600
vi.) Provide for depreciation as follows:
Office furniture Shs. 1,800
Delivery van Shs. 4,800
Required:
a) The trading and profit and loss account for the year ended 31 July 2008.
[15 Marks]
b) Balance sheet as at 31 July 2008 [10 Marks]
QUESTION TWO
In March 2009, Sally Singer organized a corporation to provide septic cleaning services. The
company, called Singing Septics, ltd., began operations immediately. Transactions during the month
of March were as follows:
Mar. 2 The corporation issued 50,000 shares of capital stock to Wendy Winger in exchange for
Shs50,000 cash.
Mar. 4 Purchased a truck for Shs60,000. Made a Shs10,000 cash down payment and issued a note
payable for the remaining balance.
Mar. 5 Paid Unek Properties Shs2,000 to rent office space for the month.
Mar. 9 Billed customers Shs9,500 for services for the first half of March.
Mar. 10 Paid Shs6,700 in salaries earned by employees during the first half of March.
Mar. 19 Paid Joe’s Auto Shs800 for maintenance and repair services on the company truck.
Mar. 20 Collected Shs4,200 of the amounts billed to customers on March 9.
3
Mar. 28 Billed customers Shs12,200 for services performed during the second half of the month.
Mar. 30 Paid Shs7,200 in salaries earned by employees during the second half of the month.
Mar. 30 Received a Shs720 bill from XL Petroleum for fuel purchased in March. The entire
amount is due by April 15.
Mar. 30 Declared a Shs1,000 dividend payable on April 20.
The account titles used by Singing Septics are:
Cash Retained Earnings
Accounts Receivable Dividends
Truck Service Revenue
Notes Payable Maintenance Expense
Accounts Payable Fuel Expense
Dividends Payable Salaries Expense
Capital Stock Rent Expense
Instructions:
a) Post each transaction to the appropriate ledger accounts.
b) Prepared a trial balance dated March 31, 2009.
[25 Marks]
QUESTION THREE
a) Within financial accounting there is a general agreement that there are twelve traditional
accounting concepts. Four of these concepts are:
i) Matching (accruals)
ii) Going concern
iii) Business entity
iv) Prudence
Required:
Using suitable examples, explain in details each of the four concepts above.
[10 Marks]
4
b) The trial balance of square Ltd. Revealed a difference in the books. In order that errors could be
located it was decided to prepare control accounts. The following balances were provided:
2009
May 1 Purchases ledger balances 11,874
Sales ledger balances 19,744
Totals for the month:
Purchases journal 154,562
Sales journal 199,662
Returns outwards journal 2,648
Returns inwards journal 4,556
Cheques paid to suppliers 146,100
Petty cash paid to suppliers 78
Cheques and cash received from customers 185,960
Discounts allowed 5,830
Discount received 2,134
Balances on the sales ledger set off against
Balances in the purchases ledger 1,036
May 31 The list of balances from the purchases ledger shows a total of Shs. 14,530 and that
from the sales ledger a total of Shs.22,024
Required:
Prepare the debtors and creditors ledger control accounts and show where an error may have been
made. [15 Marks]
5
QUESTION FOUR
The following is a trial balance, which has been incorrectly drawn up:
Trial Balance as on 31 May 2009
Shs. ‘000 Shs. ‘000
Capital 1 June 2008 5,500
Drawings 2,800
Stock 1 June 2008 2,597
Trade debtors 2,130
Furniture and fittings 1,750
Cash in hand 1,020
Trade creditors 2,735
Sales 7,430
Returns inwards 85
Discount received 46
Business expenses 950
Purchases 4,380 _____
16,446 14,977
In addition to the mistakes evident above, the following errors were also discovered:
i.) A payment of Shs. 75,000 made to a creditor had not been posted from the cash book into the
purchases ledger.
ii.) A cheque for Shs. 56,000 received from a customer had been correctly entered in the cash book
but posted to the customer’s account as Shs. 50,000
iii.) A purchase of fitting Shs. 120,000 had been included in the purchases account.
iv.) The total of the discounts allowed column in the cash book of Shs. 38,000 had not been posted
into the general ledger.
v.) A page of the sales journals was correctly totaled as Shs. 564,000 but carried forward as Shs.
456,000
Required:
a) Journal entries to correct the errors (i) – (v) above [10 Marks]
b) Trial balance after all the errors have been corrected. [15 Marks]
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