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Introduction To Accounting Ii Question Paper
Introduction To Accounting Ii
Course:Bachelor Of Commerce
Institution: Kca University question papers
Exam Year:2009
UNIVERSITY EXAMINATIONS: 2008/2009
FIRST YEAR STAGE II EXAMINATION FOR THE DEGREE OF
BACHELOR OF COMMERCE
CAA 101: INTRODUCTION TO ACCOUNTING II - WEEKEND
DATE: AUGUST 2009 TIME: 2 HOURS
INSTRUCTIONS: Answer All Questions
QUESTION ONE
You are to study the following financial statements for two departmental stores and then answer the
questions which follow.
Financial Statements
A B
Shs Shs Shs Shs
Profit and loss accounts
Sales 555,000 750,000
Less Cost of goods sold
Opening Stock 100,000 80,000
Add Purchases 200,000 320,000
300,000 400,000
Less Closing Stock (60,000) (240,000) (70,000) 330,000
Gross profit 315,000 420,000
Less Depreciation 5,000 15,000
Wages, Salaries, Commission 165,000 220,000
Other expenses 45,000 (215,000) 35,000 (270,000)
Net profit 100,000 150,000
2
Balance Sheets
Fixed assets
Equipment at cost 50,000 100,000
Less depreciation (40,000) 10,000 (30,000) 70,000
Current assets
Stock 60,000 70,000
Debtors 125,000 100,000
Bank 25,000 12,000
210,000 182,500
Less Current liabilities
Creditors (104,000) 106,000 (100,500) 82,000
116,000 152,000
Financed by:
Capitals
Balance at start of year 76,000 72,000
Add Net profit 100,000 150,000
176,000 222,000
Less Drawings (60,000) (70,000)
116,000 152,000
Required.
a) Calculate the following ratios for each department: (21 Marks)
i.) Gross profit margin;
ii.) Stock turnover;
iii.) Rate of return of net profit on capital employed
iv.) Current ratio;
v.) Acid test ratio;
vi.) Debtor/sale ratio;
vii.) Creditor/purchases ratio.
b) Drawing upon all your knowledge of accounting, comment upon the differences and
similarities of the accounting ratios for A and B.Which business seems to be the most
efficient ?Give possible reasons. (4 Marks).
3
QUESTION TWO
On may 2008 Kevin Kariuki, who is a retailer, had the following balances in his books premises
Shs70, 000; Equipment Shs8,200;Vehicle shs 5,100;Stock shs 9,500;Trade debtors Shs 150.Kevin
does not keep proper books of accounts, but bank statements covering the 12 months from 1May
2008 to 30 April 2008 were obtained from the bank and summarized as follows.
Shs.
Money paid into bank
Extra capital 8,000
Shop takings 96,500
Received from debtors 1,400
Payments made by cheque
Paid for stock purchased 70,000
Purchase of delivery van 6,500
Vehicle running expenses 1,020
Lighting and heating 940
Sales assistants’ wages 5,260
Miscellaneous expenses 962
It has been discovered that, in the year ending 30 April 2009, the owner had paid into the bank all
shop takings apart from cash used to pay(i)Shs 408 miscellaneous expenses, and (ii) shs500 per
month drawing
At 30 April 2009
Shs 7,600 was owing to suppliers for stock bought on credit.
The amount owed by trade debtors is to be treated as a bad debt. Assume that there had been
no sales on credit during the year.
Stock was valued at Shs13, 620.
Depreciation for the year was calculated at Shs 720(equipment) and Shs 1,000 (vehicle)
a) You are asked to prepare trading and profit and loss accounts for the year ended 30 April
2009
(Show all necessary workings separately.) (19 Marks)
b) State three uses of cash flow statements (6 Marks)
4
QUESTION THREE
a) Musyoka is a manufacturer. His trial balance at 31 December 2002 is as follows:
Shs Shs
Repairs of Administration Offices 16,142
Delivery van expenses 1,760
Lighting and heating: Factory 7,220
Office 1,490
Manufacturing wages 72,100
General expenses: Factory 8,100
Office 1,940
Sales reps: commission 11,730
Purchase of raw materials 57,210
Rent :Factory 6,100
Office 2,700
Machinery (cost Shs 40,000) 28,000
Office equipment(cost Shs 9,000) 17,740
Office salaries 34,200
Debtors 9,400
Creditors 16,142
Sales 194,800
Bank 6,200
Van 15,500
Stocks at 31 December 2001:
Raw materials 13,260
Finished goods 41,300
Drawings 24,200
Capital 155,950
360,150 360,150
Prepare the manufacturing, trading and profit and loss accounts for the year ended 31 December 2002
and a balance sheet as at that date. Give effect to the following adjustments:
(1) Stocks at 31December 2002: raw materials Shs14,510;’finished goods Shs 44,490.there is no
progress.
(2) Depreciate machinery Shs 3,000; office equipment Shs 600; van Shs 1,200.
(3) Manufacturing wages due but unpaid at 31 December 2002 Shs 550; office rent prepaid Shs
140. (13 Marks)
5
b) On 1 January 2008the Happy Angling Club had the following assets
Shs
Cash at bank 200
Snack bar stocks 800
Club house buildings 12,500
During the year to 31 December 2008the club received and paid the following amounts:
Receipts shs Payments Shs
Subscriptions 2008 3,500 Rent and rates 1,500
Subscriptions 2009 380 Extension to club house 8,000
Snack bar income 6,000 Snack bar purchases 3,750
Visitors’ fees 650 Secretarial expenses 240
Loan from bank 5,500 Interest on loan 260
Competition fees 820 Snack bar expenses 600
Games equipment 2,000
Notes: The snack bar stock on 31 December 2008 was Shs. 900
The games equipment should be depreciated by 20%.
i.) Prepare an income and expenditure account for the year ended 31 December
2008.Show either in this account or separately, the snack bar profit or loss.
ii.) Prepare a balance sheet as at 31 December 2008. (12 Marks)
QUESTION FOUR
(a) Mumbi and Maina sell toys. Their individual investments in the business on 1 January 2004
were: Mumbi Shs 80, 000, Maina Shs 40,000.
For the year 31 December 2004 the net profit was Shs 130,000 and the partners drawings
were; Mumbi Shs .8,000 and Maina Shs. 9,000. For 2004 (their first year).The partners agreed
to share profit and losses equally.
The partners are entitled to annual salaries: Mumbi Shs 10,000; Maina 14,000.
i.) Interest should be allowed on capital at 7% per annum.
ii.) The profit or Loss should be shared equally
6
Required:
Prepare the profit and loss appropriation accounts and the partners’ current accounts for the year 2004.
(10 Marks)
(b) Megalex Ltd has an authorized capital of 500, 000, 10% preference shares of Shs10 each and
2,000,000 ordinary shares of Shs 5 each, After preparation of the profit and loss account for
2004,the following balances remained in the ledger
Share capital: fully paid-up ‘000’
Ordinary 800
Preference 300
Debentures 200
Share premium account 40
General reserve 70
unappropriated profit 2003 30
Net profit for 2004 2700
Fixed assets 1400
Current assets 500
Creditors 190
The directors recommend:
(1) That Shs 100,000 be transferred to general reserve.
(2) Payment of the preference divided,
(3) An ordinary divided of 15%.
Required:
(a) Prepare the appropriation account for 2004 and a balance sheet as at 31 December
2004. (10 Marks)
(b) State five users of accounting information, identifying their information need
(5 Marks).
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