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Daa100 Introduction To Accounting I Question Paper
Daa100 Introduction To Accounting I
Course:Diploma In Business Management
Institution: Kca University question papers
Exam Year:2014
UNIVERSITY EXAMINATIONS: 2013/2014
STAGE II ORDINARY EXAMINATION FOR THE DIPLOMA IN BUSINESS
MANAGEMENT
DAA100 INTRODUCTION TO ACCOUNTING I
DATE: APRIL 2014
TIME: 1 1/2 Hours
INSTRUCTION: Answer any THREE questions
QUESTION ONE: (20 MARKS)
a) Explain the term “bank reconciliation” and state the reasons for its preparation.
(6 Marks)
b) Mugai, a sole trader received his bank statement for the month of June 2001. At that date the
bank balance was Ksh.706,500 whereas his cash book balance was Ksh.2,366,500. His
accountant investigated the matter and discovered the following discrepancies:
1. Bank charges of Ksh.3,000 had not been entered in the cash book.
2 Cheques drawn by Mugai totaling Ksh.22,500 had not yet been presented to the bank.
3. He had not entered receipts of Ksh.26,500 in his cash book.
4. The bank had not credited Mr. Mugai with receipts of Ksh.98,500 paid into the bank
on 30 June 2001.
5.
Standing order payments amounting to Ksh. 62,000 had not been entered into the cash
book.
6. In the cash book Mugai had entered a payment of Ksh.74,900 as Ksh.79,400.
7. A cheque for Ksh.15,000 from a debtor had been returned by the bank marked “refer
to drawer” but had not been written back into the cash book.
8.
Mugai had bought forward the opening cash balance of Ksh.329,250 as a debit
balance instead of a credit balance.
1
9.
An old cheque payment amounting to Ksh.44,000 had been written back in the cash
book but the bank had already honoured it.
10.
Some of Mugai’s customers had agreed to settle their debts by paying directly into his
bank account. Unfortunately, the bank had credited some deposits amounting to
Ksh.832,500 to another customer’s account. However, acting on information from his
customers, Mugai had actually entered the expected receipts from the debtors in his
cash book.
Required:
i.
A statement showing Mugai’s adjusted cash book balance as at 30 June 2001.
(9 Marks)
ii.
A bank reconciliation statement as at 30 June 2001.
(5 Marks)
QUESTION TWO: (20 MARKS)
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.
Some of these conventions include:
(a) The business entity principle
(b) The historical cost principle
(c) The monetary principle
(d) The matching principle
(e) The conservation principle
Required:
For each of the principles listed above:
i. Explain its meaning (7 Marks)
ii. Justify its use. (7 Marks)
iii. Explain any weaknesses associated with its use. (6 Marks)
2
QUESTION THREE: (20 MARKS)
The following trial balance was extracted from the books of Charles Kazungu, a sole trader as at 31
August 2009.
Kshs. ‘000’
Plant and machinery at cost
Kshs. ‘000’
11,350
Provision for depreciation on plant and machinery
Motor vehicles
4,150
13,290
Provision for depreciation on motor vehicles
2,790
Goodwill 5,000
Quoted investments 6,470
Freehold premises at cost
32,000
Mortgage on premises
10,000
Interest paid/received 1,000
Inventory 4,670
Bank and cash 2,850
Capital
460
60,000
Drawings
5,600
Purchases/sales
34,260 3,260
Returns inwards/outwards
58,640
2,140
Carriage inwards 730
Carriage outwards 420
Discount allowed/received 1,480
Wages 7,180
Rent and rates 4,300
Allowance for bad and doubtful debts
1,970
530
Trade receivables/payables 8,070
Electricity 2,640
Stationery 450
145,020
Additional information
1. Inventory as at 31 August 2009 was valued at Kshs. 3,690,000
3
4,340
145,020
2. Allowance for bad debts is to be adjusted to 10% of debtors
3. Bad debts of Kshs. 370,000 have not been posted to the ledger.
4. Goods which cost Kshs. 300,000 had erroneously been invoiced to a customer for Kshs.
400,000 and had been accounted for as sales.
5. Electricity accrued as at 31 August 2009 was Kshs. 130,000 and prepaid rates amounted to
Kshs. 210,000.
6. Stock of stationery as at 31 August 2009 was Kshs. 230,000
Required:
i. Income statement for the year ended 31 August 2009 (12 Marks)
ii. Statement of financial position as at 31 August 2009 (8 Marks)
QUESTION FOUR: (20 MARKS)
(a) Briefly explain the purpose of a suspense account
(2 Marks)
(b) Peter Kaindo is an accountant at Zahiri Ltd. During the year ended 30 June 2009, he prepared a
trial balance which did not balance. He posted the difference to the suspense account. He then
prepared the financial statements for the year ended 30 June 2009. The net profit for the
company was Kshs. 483,840. Upon investigation, the following errors were later discovered:
1. The total of purchases day book had been undercast by Kshs. 11,200,000
2. The total of the discount column, on the debit side of the cashbook amounting to Kshs.
2,240,000 had been posted to the credit of discount received account.
3. Motor vehicles repairs amounting to Kshs. 8,512,000 had been posted to the motor vehicle
account.
4. A cheque for Kshs. 4,368,000 received from Barnabas Bundi, a debtor, had been debited in
the cashbook but no other entry had been made.
5. The returns outward book had been overcast by Kshs. 5,600,000.
Required:
i. Journal entries to correct the errors (12 marks)
ii. Suspense account (4 marks)
iii. Statement of corrected net profit (4 marks)
QUESTION FIVE: (20 MARKS)
The following is a summary of the petty cash transactions of Maxtax Ltd for May 2012.
4
May
Kshs.
1 Received from cashier Kshs. 30,000 as petty cash float 2 Postage 1,800
3 Travelling 1,200
4 Cleaning 1,500
7 Petrol for delivery van 2,200
8 Travelling 2,500
9 Stationery 1,700
11 Cleaning 1,800
14 Postage 500
15 Travelling 800
18 Stationery 900
18 Cleaning 2,300
20 Postage 1,300
24 Delivery van 5,000 mile service 4,300
26 Petrol 1,800
27 Cleaning 2,100
29 Postage 30 Petrol
500
1,400
Required:
i.
Rule up a suitable petty cash book analysis columns for expenditure on cleaning, motor
expenses, postage, stationery, travelling.
ii. Enter the month’s transactions.
iii. Enter the receipt of the amount necessary to restore the imprest and carry down the balance for
the commencement of the following month.
iv.
State how the double entry for the expenditure is completed.
(20 Marks)
5
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