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Financial Accounting And Management Question Paper

Financial Accounting And Management

Course:Bachelor Of Science In Information Technology

Institution: Kca University question papers

Exam Year:2011

UNIVERSITY EXAMINATIONS: 2010/2011
FIRST YEAR EXAMINATION FOR THE DEGREE OF BACHELOR OF
SCIENCE IN INFORMATION TECHNOLOGY
BIT 1208: FINANCIAL ACCOUNTING AND MANAGEMENT
DATE: APRIL 2011 TIME: 2 HOURS
INSTRUCTIONS: Answer question ONE and any other TWO questions
QUESTION ONE
i) G Milton is a manufacturer dealing in the processing of raw polythene into usable containers. A trial
balance was extracted from his books of accounts as at 31 December 2010 as follows:
Ksh Ksh
Delivery van expenses 17,600
Lighting and heating:
?? Factory 72,200
?? Office 14,900
Manufacturing wages 721,000
General expenses:
?? Factory 81,000
?? Office 19,400
Sales representative commission 116,880
Purchase of raw materials 572,100
Rent:
?? Factory 61,000
?? Office 27,000
Machinery (cost ksh 400,000) 286,000
Office equipment (cost ksh 90,000) 82,000
Office salaries 177,400
Debtors 342,000
Creditors 94,000
2
Bank 161,420
Sales 1,948,000
Van (cost ksh 68,000) 62,000
Stocks as at 31 December 2010:
?? Raw materials 132,600
?? Finished goods 413,000
Drawings 242,000
Capital 1,559,500
3,601,500 3,601,500
Additional information:
Stocks at 31 December 2010 was as follows:
?? Raw materials ksh 145,100
?? Finished goods ksh 444,900
There is no work in progress
Depreciate machinery ksh 30,000; office equipment ksh 6,000 and Van ksh 12,000
Manufacturing wages due but not paid at 31 December 2010 was ksh 5,500; office rent prepaid ksh
1,400.
Required:
a) Prepare the manufacturing, trading and profit and loss account for the year to 31 December 2010
(12 Marks)
b)Extract a balance sheet as at that date (10 Marks)
ii) Using appropriate examples explain the following qualitative aspects of accounting information:
i. Understandability (2 Marks)
ii. Comparability (2 Marks)
iii. Relevance (2 Marks)
iv. Faithful presentation (2 Marks)
(Total: 20 Marks)
QUESTION TWO
The following balances were extracted from the books of Broadways Enterprises as at 31 December
2010.
Ksh
Trade creditors 546,000
Sundry expenses 134,400
Land and buildings 960,000
3
Capital 1,182,000
Water and lighting 9,600
Bad debts recovered 8,400
Stock(31 December 2010) 292,800
Rent receivable 283,200
Investments 408,000
Salaries and wages 484,200
Trade debtors 318,000
Provision for depreciation – Office equipment 62,100
Motor vehicle 24,000
Discounts – received 55,200
Allowed 48,000
Cash at bank 13,200
Personal expenses 414,600
Provision for bad and doubtful debts 27,900
Motor vehicle (at cost) 84,000
Rates and insurance 97,200
Gross profit 1,272,000
Bad debts written off 6,600
Office equipment (at cost) 180,000
Petty cash imprest in hand 10,200
Required:
(a) Profit and loss account for the year ended 31 December 2010. (12 Marks)
(b) Balance Sheet as at 31 December 2010. (8 Marks)
(Total: 20 Marks)
QUESTION THREE
(a) George Ngethe is in business as a management consultant. The following are some of the items
he deals with in his transactions. Rearrange the transactions under the four appropriate headings
i.e. capital expenditure, revenue expenditure, capital receipts and revenue receipts.
• Professional fees paid
• Insurance premium payable
• Sale of furniture
• Commission received
• Rent receivable
• Purchase of office computers
• Receipts from an insurance company arising from a claim over a stolen car (14 Marks)
4
(b) Bernard Yegon is setting up a new business. Before actually selling anything, he bought a van
for ksh 4,500,000, a market stall for ksh 2,000,000 and a stock of goods for ksh 1,500,000. He
didn’t pay in full for his stock of goods and still owes ksh 1,000,000 in respect of them. He
borrowed ksh 5,000,000 from Family Bank. After the events just described, and before trading
starts he has ksh 400,000 cash in hand and the ksh 1,100,000 cash at bank
Required:
Calculate the amount of his capital (6 Marks)
(Total: 20 Marks)
QUESTION FOUR
a) Write briefly explaining and bringing out the differences between the following:
(i) Entries in the debtors control account and creditors control account. (4 Marks)
(ii) Capital expenditure and revenue expenditure. (4 Marks)
b) Wakenya Enterprises ltd commenced business on 1 January 2008 making its accounts to 31
December every year. For the year ended 31 December 2008, bad debts written off amounted to Sh.
180,000. It was also found necessary to create a provision for doubtful debt of 3% of debtors. The
debtors balance before any of the above adjustments was sh. 8,180,000.
In 2009, one of the debtors was declared bankrupt and an amount of ksh 260,000 originally due
from him was consequently unrecoverable. The management decided to write this off as bad debts.
As at 31 December 2009, total debtors outstanding before adjustments were ksh. 9,760,000. It was
decided to bring the provision up to 5% of debtors outstanding.
In 2010, Sh. 335,000 was written off during the year. As at 31 December 2010, total debtors
outstanding were ksh. 7,335,000. The provision for doubtful debts was to be maintained at 5% of
the net debtors.
Required:
Prepare for years 2008, 2009 and 2010 the;
a) Bad debts account (5 Marks)
b) Provision for doubtful debts account (5 Marks)
c) Extract from the profit and loss account (2 Marks)
(Total: 20 Marks)
5
QUESTION FIVE
a) The following details have been assembled from the records of a given business for 6 years:
Year Purchases sales Returns
outwards
Opening
stock
Closing
stock
Returns
inwards
Gross
profit
2006 235,000 280,000 5,000 25,000 60,000 2,500
2007 340,000 465,000 7,500 30,000 40,000 8,000
2008 450,000 680,000 15,000 25,000 15,000 3,000
2009 225,000 440,000 2,500 7,500 10,000 1,500
2010 195,500 275,000 2,000 12,500 5,000 1,000
Required:
Calculate the gross profit/loss for each year based on the above information (5 Marks)
b) The accounting profession has for a long time relied on certain accounting conventions to guide
accounting practice. Yet the application of the same conventions has been the source of criticism of
the quality and relevance of information contained in financial reports.
For each of the principles listed below, explain its meaning , justify its use and explain the
weaknesses associated with its use:
i. The duality principle (3 Marks)
ii. The realization principle (3 Marks)
iii. The money measurement principle (3 Marks)
iv. The substance over form principle (3 Marks)
v. The conservatism principle (3 Marks)
(Total: 20 Marks)

Financial Accounting And Management Question Paper

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