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Agbm 310: Financial Accounting Question Paper
Agbm 310: Financial Accounting
Course:Bachelor Of Science (Agricultural Education & Extension)
Institution: Chuka University question papers
Exam Year:2012
CHUKA UNIVERSITY
COLLEGE
UNIVERSITY EXAMINATIONS
THIRD YEAR EXAMINATION FOR THE AWARD OF DEGREE OF
BACHELOR OF SCIENCE (AGRICULTURAL EDUCATION & EXTENSION)
AGBM 310: FINANCIAL ACCOUNTING
STREAM: B.SC (AGED) TIME: 2 HOURS
DAY/DATE: WEDNESDAY 13/12/2012 11.30 A.M – 1.30 P.M.
INSTRUCTIONS:
(i) Answer all questions.
(ii) Do not write on the question paper.
1. (a) Explain how the following persons use accounting information in decision
making:
(i) Government [3 marks]
(ii) Investors [3 marks]
(iii) Creditors [3 marks]
(b) Describe the various fundamentals of accounting concepts and how they are applied in financial reporting. [9 marks]
(c) On 1st January 2009 Chuka Farmers Company Ltd purchased 2 tractors for use in their farms at a cost of Sh.1,200,000 each. The policy of the company is to charge 10% p.a depreciation on straight line method. The machines are being used to date. The company has never provided the information for the two farm machinery to date.
Required: Prepare the following accounts upto to 31st December 2011.
(i) Tractor account [2 marks]
(ii) Extract of profit and loss account [2 marks]
(iii) Provision for depreciation [5 marks]
(iv) Extract of balance sheet. [3 marks]
2. (a) The bookkeeper of Mumias-Butere enterprise extracted a trial balance on 30th
November 2012 which failed to agree by Sh.330,000 shortage on credit side. The suspense account was opened for that purpose.
In December 2012 the following errors were found:
(i) Sales book has been undercast by Sh.100,000.
(ii) Sales of Sh.250,000 J. Carino had been wrongly debited to J. Corare account.
(iii) Rent account has been understated by Sh.70,000.
(iv) Discounts received account has been undercast by Sh.300,000.
(v) Sales of motor vehicle at book value has been credited in error to sales account Sh.360,000.
Required:
(i) Show the journal entries necessary to correct the errors. [6 marks]
(ii) Draw up the suspense account after the errors described above
have been corrected. [3 marks]
(b) The following information was provided from the books of Nkubu Farmers
Cooperative Society for the year ended 30th September 2012.
Shs.
Sales for the year 600,000
Stock on 30th September 2012 200,000
Stock on 1st October 2012 100,000
Annual purchases 550,000
Operational expenses 50,000
Debtors for the year 140,000
Pre-paid expenses 40,000
Bank balance 235,000
Cash at hand 25,000
Trade creditors 160,000
Bills payable 40,000
Required to compute the following:
(i) Net profit ratio [3 marks]
(ii) Current ratio [2 marks]
(iii) Quick ratio [2 marks]
(c) Using the ratios computed in (b) above comment on the liquidity status of
the farmers society. [4 marks]
3. (a) Accounting standards and procedures must be strictly followed in preparing and
reporting financial information. Explain the advantages of complying with accounting standards. [4 marks]
(b) The following information was extracted from the accounts records of
Mwanyumba’s business a sole trader at Kongoea market Mombassa
on 31st December 2011.
Trial Balance
Details Dr (Sh) Cr (Sh)
Capital 1,200,000
Drawings 500,000
Leasehold premises 700,000
Creditors 1,500,000
Rent (9 months to 30th Sept.) 45,000
Salaries 240,000
General expenses 65,000
Insurance 56,000
Stock 1,725,000
Fixtures and fittings 120,000
Debtors 1,808,000
Bad debts written off 12,000
Provisions for bad debts 75,000
Delivery van at cost 80,000
Purchases and Sales 3,160,000 6,090,000
Cash at hand 5,000
Cash at bank 349,000 __________
8,865,000
======= 8,865,000
=========
Additional information:
(i) Depreciate leasehold premises by Sh.50,000, fixtures and fittings at 10% on cost and delivery van at 30% on cost.
(ii) Rent is due for 3 months.
(iii) Insurance paid for January to March 2012 was Sh.12,000.
(iv) Create provisions for bad debts at 5% debtors.
(v) Closing stock is valued at Sh.1,600,000.
Required:
(a) A summarized statement showing the trading activities of Mr. Mwanyumba’s business for the year ended 31 December 2011. [9 marks]
(b) Statement of financial status of Mwanyumba’s business as at 31st December 2011.
[7 marks]
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