Fundamentals Of Accounting Ii Question Paper

Fundamentals Of Accounting Ii

Course:Bachelor Of Commerce

Institution: Kenyatta University question papers

Exam Year:2010

KENYATTA UNIVERSITY
UNIVERSITY EXAMINATIONS 2009/2010
INSTITUTIONAL SCHOOL BASED PROGRAMME (IBP)
EXAMINATION FOR THE DEGREE OF BACHELOR OF COMMERCE

BAC 101: FUNDAMENTALS OF ACCOUNTING II

DATE: Wednesday 28th April 2010
TIME: 8.00 a.m – 10.00 a.m

INSTRUCTIONS:
• Answer ALL questions.
• Answers should be logical as complete as possible
• Marks allocated to each Question are indicated at the end of every Question.

Question 1

(i)
Write short-notes on
(a)
Authorized share capital
(b)
Issued share capital
(c)
Paid-up share capital
(d)
Forfeited
shares

[2
marks
each]
(ii)
Differentiate between
a)
Debt financing and equity financing

[3
marks]
b)
Ordinary and preferential shares

[3
marks]
c)
Capital Reserves and retained earnings

[1 marks]
d)
Memorandum of association and articles of association
[3 marks]
iii)
Discuss the importance of prospectus in the equity financing
[2 marks]

Page 1 of 6

Question 2
Star, Stripe and Kooka agree to wind up their business on 30 April 2007. The partners
share profits in proportion to their fixed capital. Their ledger contained the following
balances.

$
Capital:
Star
20,000

Stripe

20,000

Kooka
40,000
Current

Star

10,000

Stripe

5,000

Kooka

5,000
Mortgage 30,000
Accounts
payable 20,000
Bills
payable

5,000
Inventory
15,000
Accounts
receivable

25,000
Bills
receivable

6,000
Bank
(debit)

5,000
Land
and
building
s
90,000
Plants

30,000
Accumulated
depreciation
–plant 12,000
Profit and loss-profit to 30 April
2007

4,000
The assets realized the following amounts

$
Inventory
12,000
Accounts
receivable

24,000
Bills
receivable

6,000
Land and building (net after repayments of mortgage)

70,000
Plant

12,000

Page 2 of 6

The remaining liabilities were paid out at book values except that some creditors
allowed discounts amounting to $ 500. The expenses of the realization were $
1,500.
Required: Prepare
(a)
Partner’s
capital
accounts

(6mrks)
(b)
Realisation
account
and
(5marks)
(c)
Bank account to record the dissolution

(4marks)

Question 3

The following is the receipts and payments account of the Yatch Darts club for the year
ended 30th September 2007.
Receipts
Sh.
Payments
Sh.
000
000
Opening balance

Honoraria, salaries and wages
4,800
- Cash in hand
150
Rate and taxes
1,260
- Cash at bank
8,230
Printing and stationery
470
Subscriptions
10,710
Transport and miscellaneous
1,530
Receipts from fetes
2,400
expense
840
Net proceeds of entertainment
4,270
Ground man’s wages
2,390
Bank interest
230 Expenditure on fetes
5,770
Bar takings
7,450
Bar purchases
320

Repairs

New bus (less sale proceeds of old 12,600

bus, sh. 3 million)
3,460

Closing balance at bank

33,440
33,440

Page 3 of 6

The following additional information is provided:
(1)

Balance
1-10-2006
30-9-2007
Sh.
000 sh.
000

Subscription due

1,200

980

Owing on printing
90

30

Bar stock

710

870

Owing for bar purchases
590

430
(2)
Club premises and the old bus were acquired three years ago at a cost of sh. 29
million and sh. 12,190,000 respectively. The provision for depreciation accounts
on 30-9-2007 showed balance of 18.8 million premises and Sh. 10,290,000 for the
bus
(3)
Depreciation is to be provided at 5% per annum as the written down value of the
club premises and at 15% per annum on the bus for the whole year.
Required
(a)
Incomes and expenditure account of the club for the year ended 30th September
2007
[8mks]

(b)
Balance sheet as at 30th
September
2007
[7mks]
Questions 4 (a)
State and explain the advantage of issuing cash flow statement by users of accounting
information

(5marks)

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