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Introduction To Accounting 1 Question Paper
Introduction To Accounting 1
Course:Bachelor Of Business Administration
Institution: Maseno University question papers
Exam Year:2018
MASENO UNIVERSITY
ABA 103: Introduction To
Accounting 1
(Answer all questions)
Question One
a)The bank statement and cashbook balances should agree, but sometimes these balances may not agree.
Required:
Discuss the statement and explain why it is important to prepare a bank reconciliation statement (2 marks)
b)On 31 October 2004, the cashbook of Mwea Enterprises Ltd showed a debit balance of sh 1,710,000. This did not agree with the balance shown in the bank statement.
Upon investigation, the accountant discovered the following errors:
1.A cheque paid to kindaruma for sh 306000 had been entered in the cashbook as sh 387000
2.Cash paid into the bank by a customer for sh 90000 had been entered in the Cash book as sh 81000.
3.A transfer of sh 1,110,000 to Central savings bank had not been posted to the cash book.
4.A receipt of sh 9000 shown in the bank statement had not been posted in the cash book.
5.Cheques drawn amounting to sh 36000 had not been paid into the bank.
6.The Cashbook balance had been incorrectly brought down at 1 November 2003 as a debit balance of sh 1,080,000 instead of a debit balance of sh 990000.
7.Bank charges of sh 18000 do not appear in the Cash book.
8.A receipt of sh 810,000 paid into the bank on 31 October 2004 appeared in the bank statement on 1 November 2004.
9.A standing order of sh 27000 had not been recorded in the Cash book.
10.A cheque for sh 45000 previously received and paid into the bank had been returned by the customers bank marked account closed.
11.The bank received a direct debit of sh 90,000 from an anonymous customer.
12.Cheques banked had been totalled at sh 135000 instead of sh 153000.
13.A cheque drawn in favor of Nyaga for sh 120,000 had been entered on the debit side of the cash book.
Required:
I) Adjusted Cash book at 31 October 2004 (4 marks)
II) A bank reconciliation statement as at 31 October 2004
(4 marks)
Question Two
Ben Wasonga prepared the following debit balance sheet for BW Enterprises as at 31 December 2005
Non Cost Accumulated Net
Current Depreciation Book
Assets
Equipment 450000 220000 230000
Furniture 300000 150000 300000
Motor V. 600000 300000 300000
Current
Assets
Inventory 122800
Accounts
Receivable 19600
Deposit
Account 50000
Suspense a/c 9000 201400
881400
Financed by:
Capital 652000
Net profit 153200
Drawings 132200 792000
Current
Liabilities:
Accounts
Payable 81400
Bank
Overdraft 8000 87400
881400
Additional information:
On further investigation, the suspense account was discovered to have resulted from the following errors:
1.The sale of goods on credit to Alex Otis amounting to sh 19000 had been recorded in the sales journal as sh 9000
2.A receipt of sh 20,000 from sale of an item of equipment had been credited to sales account. The equipment was shown in the books of a/c at cost of a/c of sh 90,000 and Accumulated Depreciation of sh 72000.
3.A credit note from a supplier, Simon masound for sh 15000 had been omitted from the books
4.A bank Overdraft of sh 7000 reflected in th cash book as at 31 December 2005 was omitted in the trial balance.
5 Payment of sh 9,700 to Tom wambugu a creditor was correctly entered in the cash book but posted to his personal account as sh 7900.
6.The debit side of rent expense account had been under cast by sh 1000.
7.A provision of sh 2000 for sundry expenses outstanding as at 31 December 2004 and debited to sundry expenses at that dated had not been brought forward to the credit of the account in the following period, no credit entry had been made in any other account in respect to this account in respect to this item
8.Discount received from the supplier of sh 8200 had been entered on the wrong side of purchases ledger control account.
9.On 31 December, goods valued at sh 9600(sp)were returned by Jane kerubo (a debtor). No entry had been made in the books to reflect this transaction. These goods were not included in the closing stock.
10.Discounts allowed were overcast by sh 1200.
Required:
a)Journal entries to correct the above errors(Narration not required) (4 marks)
b)Suspense account (2 marks)
c)statement of corrected net profit for the year ended 31 December 2005 (2 marks)
d)Corrected balance sheet as at 31 December 2005 (2 marks)
Question Three:
Otter a limited company operates a computerized accounting system for its account receivable and accounts payable ledgers. The control account for the month of September 1999 are in the balance and incorporate the following totals:
Accounts receivable ledger sh
Balance at 1/9/1999 Debit 386430
Credit 190
Sales revenue 163194
Cash received 158288
Discounts allowed 2160
Sales returns inwards 590
Credit balances 30/9/1999 370
Accounts payable ledger:
Balance 1/9/1999:Credit 184740
Debit 520
Purchases 98192
Cash payments 103040
Discounts received 990
Purchases returns outwards 1370
Debit balances 30/9/1999 520
although the control accounts agree with the underlying ledgers a number of errors have been found and there are also several adjustments to be made. These errors and adjustments are detailed below:
1.Four sales invoices totalling sh 1386 have been omitted from the records
2.A cash refund of sh 350 paid to a customer, A Smith was mistakenly treated as a payment to a supplier with the same name
3.A contra settlement offsetting a balance of sh 870 due to a supplier against the account receivable ledger account for the same company is to be made.
4.Bad debts totalling sh 1360 are to be written off
5.During the month, settlement were reached with a supplier over a disputed account. As a result the supplier issued a credit note for sh 2000 on September 26.No entry has yet been made for this.
6.A purchases invoice for sh 1395 was keyed in as sh 1359.
7.A payment of sh 2130 to a supplier B Jones was mistakenly entered to the account of Rjones
8.A debit balance of sh 420 existed in the account payable at the end of August 1999. The supplier concerned cannot now be traced and it has been decided to write off this balance.
Required:
Prepare the account receivable and account payable ledger control accounts as they should appear after allowing where necessary for the errors and adjustments (10 marks)
Question Four:
The following trial balance was extracted from the books of Charles Morata a sole trader as at 31 October 2015.
Sh Sh
Capital 1216260
Drawings 128880
Sales 4904520
Purchases 3726060
Debtors and
Creditors 476160 327720
Rent and
Rates 52800
Electricity 14760
Salaries and
Wages 496080
Provision
For doubtful
Debt 1/11/014 19560
Stock(1/11/014) 556440
Insurance 10320
General
Expenses 55980
Bank balance 90000
Cash in hand 4920
Motor vehicle
At cost 580000
Provision for
Depreciation
On motor
Vehicle 1/9/014 216000
Motor vehicle
Expenses 51660
Premises
At cost 600000
Rent received 45000
Additional information
1.stock in trade as at 31 October 2015 was valued at sh 593040.
2.Rates and insurance were prepaid to the extent of sh 2400 and sh 2820 respectively as at 31 October 2015.
3.Electricity due as at 31 October 2015 amounted to sh 60000
4.The provision for doubtful debt is to be adjusted to 5% of the Debtors remaining after taking into account that sh 20160 of the Debtors were to be regarded as bad
5.Rent received as at 31 October 2015 was sh 15000
6.Depreciation has been and is to be charged on motor vehicles at the rate of 20% per annum on the straight line basis. No depreciation is to be charged on premises
7.In November 2014 a motor vehicle which had been purchased for sh 160000 on November 2012 was sold for sh 115000. The only record of this disposal is the entry in the proceeds from sales of motor vehicle account.
Required:
a)Income statement for the year ended 31 October 2015 (5 marks)
b)Statement of Financial position for the year ended 31 October 2015 (5 marks)
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