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Hbc 2124: Introduction To Accounting I Question Paper
Hbc 2124: Introduction To Accounting I
Course:Bachelor Of Commerce
Institution: Dedan Kimathi University Of Technology question papers
Exam Year:2012
KIMATHI UNIVERSITY COLLEGE OF TECHNOLOGY
UNIVERSITY EXAMINATIONS 2011/2011
FIRST YEAR SPECIAL/SUPPLEMENTARY EXAMINATIONS FOR THE DEGREE OF
BACHELOR OF COMMERCE & BACHELOR OF PURCHASING AND SUPPLIES MANAGEMENT
HBC 2103: INTRODUCTION TO ACCOUNTING I /HPS 2103 FINANCIAL ACCOUNTING I
DATE: 1st MARCH 2012 TIME: 8.30 AM – 10.30 AM
INSTRUCTIONS: Answer question ONE and any other TWO questions
Question one:
a) Distinguish between Accounting and Book keeping (2 Marks)
b) Highlight the users of accounting information and their specific needs. (8 marks)
c) The following trial balance was extracted from the books of Nicholas Mwangi, a sole trader
31 Dec 2010
Shs. Shs.
Capital 1-1-10 3,165,620
Purchases 923,600
Sales 1,968,160
Purchases Return 5,600
Sales Return 16,160
Discount allowed 18,200
Discount received 14,080
Wages and Salaries 622,000
Rates 49,000
Insurance 35,600
General Expenses 81,200
Trade Debtors 368,000
Trade Creditors 322,400
Bank Overdraft 80,400
Stock in trade 1-1-10 122,000
Land and Buildings at cost 1,700,000
Plant and Machinery at cost 1,230,000
Motor vehicles Cost 562,000
Drawings 208,200
Cash in hand 40,200
Provision for depreciation: Motor vehicle 112,400
Plant & Machinery
307,500
5,976,160 5,976,160
Additional information
Page 1 of 4
(i) Stock in trade on 31 Dec 2010 amounted to Shs. 148,400
(ii) Rates paid in advance as at 31 Dec 2010 amounted to Shs. 7,000
(iii) Outstanding electricity bill as at 31 Dec 2010 (included in General expenses) Kshs 3,580
(iv)Debtors include an irrecoverable amount of Shs. 5,600
(v) A five percent provision for doubtful debtors is to be made on the recoverable debtors
(vi)Depreciation is to be provided on the motor vehicle and machinery at the rates of 20% and 25
% respectively on the reducing balance method.
(vii)
Included in the wages and salaries is an amount of Shs. 62,000 paid to domestic workers
of Nicholas Mwangi
(viii) Outstanding wages and salaries as at 31 Dec 2010 amounted to Shs. 24,800.
Required:
a) Income Statement for the Year ended 31 Dec 2010 (8 Marks)
b) A statement of Financial Position as at 31 Dec 2010 (12 Marks)
Question Two:
1.
The statement of financial position of Nyakinyua Enterprises for the year ended 30th June
2010 is as follows:
Ksh. ‘000’ Ksh. ‘000’ Ksh. ‘000’
Non Current Assets Accumulated Net Book
Cost Depreciation Value
Buildings 400,000 400,000
Plant 220,000 110,000 110,000
Vehicles 90,000 60,000 30,000
540,000
Current Assets
Stock 230,000
Debtors 190,000
Cash 90,000 510,000
Total Assets 1,050,000
Current Liabilities
Creditors 275,000
Tax Payable 60,000 335,000
Long-term Loans and Equity
Long-term loan at 12% p.a 200,000
Share Capital 485,000
Retained Earnings 30,000 715,000
Total Liabilities and Equity 1,050,000
After investigation of the accounts the following information is discovered:
a)
The company’s workmen were used to construct a foundation for a new machine and no
entry was made in the books for the total labour cost of Ksh. 29,300,000. The foundation
is to be depreciated at 10% using the straight-line method
b)
Interest on the loan for the half year to 30th June 2010 is outstanding and has not yet been
recorded in the books
c)
A four-year old vehicle has been sold at its net book value but no entry has been made in
the books to record this transaction. The vehicle had been bought at Ksh. 16,000,000.
Depreciation on vehicles is at 20% using the straight-line method
Page 2 of 4
d)
A debtor who owes Ksh. 8,000,000 has gone bankrupt. Reliable evidence confirms that
his estate will only pay 50 cents for every shilling owed.
Required:
a)
Journal entries to adjust for each of the items above (7 marks)
b)
Recalculate the retained earnings after the above adjustments (6 marks)
c)
Prepare a corrected statement of financial position for Nyakinyua Enterprises as at 30th
June 2010
(7 marks)
Question Three:
a) Explain the importance of preparing bank reconciliation statement for an organization
(5 marks)
b)
Sangare Traders received their bank statement for the month ending 31st Dec 2011 which
had a credit balance of shs.10,025. On the same date the cash book showed a debit balance of
shs.18,390. A further examination of the two records disclosed the following discrepancies
1.
Cash amounting to shs.3,070 though entered in the cash book as having been banked had
been embezzled by the business banking clerk and it is not recoverable.
2.
The bank had erroneously credited the firm with an amount of shs. 5,120
3.
The bank had received direct banking amounting to shs.4,265 but it had not advised the firm
until 3rd January 2001.A forged cheque amounting to shs.6,962 had been paid into the bank
but had not been entered in the cash book as a loss to the firm.
4.
Cheque amounting to shs 6,624 banked on 31st Dec 2011 was recorded by the bank on 3rd
January 2012
5.
A standing order of shs. 5,003 paid by the bank had been accounted for in the cash book.
6.
A cheque of shs. 6,084 drawn on 28th Dec 2000 was presented for payment on 4th January
2012 A dishonoured cheque of shs.2,115 had been entered on the bank statement but not in
the cash book.
7. Ledger and bank charges not entered in the cash book shs.60.
Required:
(a) Prepare the adjusted or updated cash book balance as at 31st Dec 2011 (8 marks)
(b) Prepare a bank reconciliation statement as at 31/12/2011
(7 marks)
Question Four
Mark Kamau commenced business on 1 January 2009 and his financial year ends on 31
December.
For the year ended 31 December 2009, bad debts written off amounted to Sh.168,000 and the
provision for doubtful debts was Shs. 280,000
In the year ended 31 December 2010:
· Bad debts written off amounted to Sh.244,000
· Miss Mwangi, whose debt amounting to Sh.49,000 was among those written off in the year
2009 settled her debt on 30 November 2010
· Total debts outstanding as at 31 December 2010 stood at Sh7,840,000
· It was decided to provide for doubtful debts at 5% of the outstanding total debts
In the year ended 31 December 2011:
· Bad debts amounting Sh.329000 were written off
· A recovery of Sh.21,000 was made in respect of bad debts written off in the year 2009
· As at 31 December 2011,total debts outstanding stood at Sh.5,880,000
· The provisions for doubtful debts was maintained at 5% of the outstanding total debts
Required:
For each of the years ended 31 December 2009, 2010 and 2011 prepare:
Page 3 of 4
a.
Bad debts written off (6 marks)
b.
Bad debts recovered account (2 marks)
c.
Provision for doubtful debts account (4 marks)
d.
Statement of income extracts (8 marks)
Question Five
a)
Explain the purpose of control accounts (5 marks)
b)
The following balances have been included in a Receivables ledger control account for the
year ended 31 January 2010.
Shs.
Balance at 1 February 2009 12,087
117,63
Sales (Note1)
5
Receipts from Customers (Note 2) 90,019
Discount allowed (Note 3) 3,000
Goods returned by customers 4,200
Bad debts written off (Note 4) 1,550
Balances extracted from the sales ledger at 31 January 2010 were
Debit
35,588
Credit (Note 5)
185
Notes:
1. It was discovered that a batch of invoices totaling Shs.3,400 had been omitted from the
accounting records
2. Cash sales of Shs.600 had been included in this total
3. Discounts allowed of shs.350 included in this total, had been omitted from the personal ledger
4.
The personal ledger accounts of the ‘bad debts’ had been debited with Sh.1,550 while the
correct entry had been made into the control account
5.
Credit balances in the sales ledger of Shs.400 had been transferred during the year into the
payables ledger. No record of this transfer has been made in the control account although the
personal accounts had been correctly adjusted.
Required:
a.
Prepare the Receivables ledger account for the year ended 31 January 2010 (10 marks)
b.
Prepare a statement reconciling the receivables ledger balances with the control account
balance (5 marks)
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