Questions and answers: ATD Financial Accounting

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  • The following information was extracted from the books of the Ministry of Nairobi Metropolitan for the year ended 30 June 2009: Approved estimates ...(Solved)

    The following information was extracted from the books of the Ministry of Nairobi Metropolitan for the year ended 30 June 2009: Approved estimates Sh. Gross estimate 390,000,000 Appropriation-in-Aid 20,000,000 The transactions of the Ministry during the year ended 30 June 2009 were as follows Sh. Drawings from the exchequer 320,000,000 Actual gross expenditure 280,000,000 Appropriation-in-aid collected 60,000,000 Advanced made during the year 12,000,000 Advanced recovered during the year 10,500,000 Required; (i) General account of vote (ii) Exchequer account (iii) Paymaster general account (iv) Statement of Assets and Liabilities

    Date posted: October 4, 2022.  

  • Explain five components of a set of published financial statements(Solved)

    Explain five components of a set of published financial statements

    Date posted: October 4, 2022.  

  • The following financial statements were extracted from the books of Salama Ltd. Income Statement For year ended 30 June 2009 ...(Solved)

    The following financial statements were extracted from the books of Salama Ltd. Income Statement For year ended 30 June 2009 Sh. "million" Revenue 5,800 Cost of sales (3,468) Gross profits 2,332 Administrative expenses (684) Distribution expenses (1,040) Profit from Operations 608 Income from investment 10 Finance cost (38) Profit before tax 580 Income tax expense (208) Net profit for the year 372 Statement of financial position as at 30 June Assets: 2009 2008 Sh. "million" Sh. "million" Non-Current Assets 1,268 1,020 Current Assets Inventory 840 920 Trade receivables 780 640 Interest receivable 8 18 Investment 100 - Cash at Bank 150 - Cash in Hand 14 10 1,892 1,588 Total assets 3,160 2,608 Equity and Liabilities Capital and Reserves Ordinary Share capital of sh. 0.50 each 726 600 Share premium 178 184 Revaluation reserve 100 - Retained profits 126 (140) 1,130 644 Non-Current Liabilities 10% Loan - 80 5% Loan 658 698 658 778 Current Liabilities Bank overdraft - 140 Trade payables 1,100 800 Current tax 200 180 Other payables 72 66 1,372 1,186 Total capital and Liabilities 3,160 2,608 Additional information 1. On 1 July 2008, Salama Ltd issued 120 million ordinary shares of sh. 0.50 par value each at sh. 1.00 each. The proceeds from the issue were used to liquidate the 10% loan and some of the 5% loan, both at par. On 1 August 2008, Salama ltd. made a bonus issue of one share for every ten held. All the shares in issue qualified for the bonus shares. 2. Non-current tangible assets include properties which were revalued during the year ended 30 June 2009. An item of equipment and machinery with a total net book value of sh. 150 million was disposed of during the year for sh.196 million. 3. The total depreciation charged on property, plant and equipment during the year ended 30 June 2009 was sh. 174 million. 4. Salama Ltd. paid an interim dividend of sh.106 million during the year 5. Other payables include interest payable amounting to sh.66 million and sh.12million as at 30 June 2008 and 2009 respectively. Required: Statement of cash flows for the year ended 30 June 2009 in conformity with the requirements if International Accounting Standard (IAS) 7, “Statement of Cash flows”.

    Date posted: October 4, 2022.  

  • Ephraim started a business as a sole trader on 1 January 2007. He did not maintain a double entry system of accounting. The business transactions...(Solved)

    Ephraim started a business as a sole trader on 1 January 2007. He did not maintain a double entry system of accounting. The business transactions were made by cheque although occasionally some daily expenses were paid from cash sales or money withdrawn from the bank. The receipts and payments of the sole proprietorship for the year ended 31 December 2008 are summarized below: Receipts Sh. "000" Payments Sh. "000" From trade receivables 2,350,000 Salaries and wages 220,000 capital introduced 60,000 Rent and insurance 110,000 Motor vehicle expenses 135,000 Trade payables 2,120,000 Travelling expenses 20,000 Drawings 164,000 Printing and stationary 8,200 Electricity 15,300 Telephone 15,500 The balances of assets and liabilities as at 31 December 2007 and 2008 were as follows: 2007 2008 Sh. Sh. Cash at bank 300,000 180,000 Cash in hand 40,000 12,000 Trade receivables ? 1,800,000 Inventories 500,000 620,000 other receivables - 12,000 Motor vehicles (Cost) 450,000 450,000 Furniture and fittings ( Cost) 115,000 115,000 Trade payables 1,840,000 1,850,000 Other Payables - 27,500 Additional information 1. Sales were made at a uniform gross profit margin of 25% 2. Discount allowed and discount received during the year ended 31 December 2008 amounted to sh. 140,000 and sh. 120,000 respectively. 3. As at 31 December 2008, other receivables and other payables included the following accruals and prepayments: Accruals: Sh. Telephone 3,500 Salaries and wages 24,000 Prepayments: Sh. Rent 10,000 Electricity 2,000 4. Depreciation is to be provided on motor vehicles using the sum-of-digits method. The useful life of the motor vehicle is 5 years. Depreciation is to be provided on furniture and fittings at the rate of 10% using straight-line method. 5. A specific allowance for bad debts of sh.90,000 is to be made on 31 December 2008. Required: (a) Income statement for the year ended 31 December 2008. (b) Statement of financial position as at 31 December 2008. (c) Outline four benefits that Ephraim would derive from using a computerized accounting system.

    Date posted: October 4, 2022.  

  • ABK Ltd. was incorporated on 1 January 2002. The authorized share capital of ABK Ltd. is sh. 50million divided into 5million ordinary shares of sh. 10...(Solved)

    ABK Ltd. was incorporated on 1 January 2002. The authorized share capital of ABK Ltd. is sh. 50million divided into 5million ordinary shares of sh. 10 each. On 10 January 2009, the directors of the company offered for sale to the public 2 million shares at a premium of sh.2 per share. The issued share capital of ABK Ltd. before this offer to the public was sh.30million. The 2million shares issued to the public were to be paid as follows; Date Sh On application 30 January 2009 3 On allotment 12 February 2009 4 On first call 12 March 2009 3 On Second and final call 10 April 2009 2 (premium) Applications for 2,100,000 shares were received and allotment done on a pro-rata basis on 2 February 2009. Excess money on application was utilized to meet part of the monies due on allotment. The balance of the monies due on allotment, first call and second and final calls were received on the due dates. However, one allottee for 30,000 shares failed to pay for the two calls while another allottee for 20,000 shares did not pay for the second and final call. The 50,000 shares were subsequently forfeited and re-issued at sh. 7 per share, money being on 30 April 2009. Required: Ledger accounts, except bank account, to record the above transaction

    Date posted: October 4, 2022.  

  • Differentiate between the following (i) Rights issue and bonus issue (ii) Preference shares and share premium(Solved)

    Differentiate between the following (i) Rights issue and bonus issue (ii) Preference shares and share premium

    Date posted: October 4, 2022.  

  • Briefly explain two benefits and two limitations of an accounting standard(Solved)

    Briefly explain two benefits and two limitations of an accounting standard

    Date posted: October 4, 2022.  

  • Maxwel and Ken are partners trading as Makena Brick Manufacturers. The following balances were extracted from the books of Makena Brick manufacturers as at 31...(Solved)

    Maxwel and Ken are partners trading as Makena Brick Manufacturers. The following balances were extracted from the books of Makena Brick manufacturers as at 31 July 2009. Sh. "000" Plant and Machinery at cost (1 August 2008) 72,000 Loose tools at cost (1 August 2008) 21,000 Sales 182,000 Raw materials purchased 55,000 Motor vehicles at cost (1 August 2008) 42,000 Direct factory wages 51,000 Electricity 17,000 Indirect factory wages 20,000 Machinery repairs 13,600 Motor vehicle expenses 24,000 Rent and insurance 23,600 Administrative staff salaries 43,000 Administrative expenses 21,000 sales and distribution staff salaries 25,000 Capital (1 August 2008) Maxwell 150,000 Ken 140,000 Accounts receivables 28,500 Accounts payables 23,200 Balance at bank 20,500 Drawings Maxwell 10,000 Ken 8,000 Additional information 1. The estimated useful life of plant and machinery is 10 years while that of motor vehicles is 4 years. The company uses the straight-line method to provide for depreciation on property, plant and equipment 2. Inventories as at 31 July 2009 were as follows Sh. Raw materials 19,000,000 Finished goods 10,000,000 Work-in-progress 24,300,000 3. As at 31 July 2009, accrued electricity amounted to sh. 13,000,000 while prepaid rent and insurance amounted to sh. 9,800,000 4. The following expenses are to be apportioned between the factory and the administration in the ratios indicated below Factory Administration Electricity 2/3 1/3 Rent and insurance ¾ ¼ Motor vehicle running expenses ½ ½ Depreciation on motor vehicles ½ ½ 5. Loose tools as at 31 July 2009 were valued at sh. 17,000,000 6. Goods were transferred from the factory to the warehouse at sh. 107,000,000 7. Provision for doubtful debts is to be made at 5% of the accounts receivable 8. The partners share profits and losses equally Required: (i) Manufacturing and income statement for the year ended 31 July 2009 (ii) Statement of financial position as at 31 July 2009

    Date posted: October 4, 2022.  

  • Explain three roles of International Accounting Standards Board (IASB). (Solved)

    Explain three roles of International Accounting Standards Board (IASB).

    Date posted: October 3, 2022.  

  • Alloys Ltd. is a small enterprise with a turnover of sh.10million. The firm sells tyres and related products to various customers both on credit and...(Solved)

    Alloys Ltd. is a small enterprise with a turnover of sh.10million. The firm sells tyres and related products to various customers both on credit and cash terms. Currently, the firms accounting systems are manual. The management of Alloys Ltd. is considering computerizing its accounting systems Required: (i) Advise Alloys Ltd. of six essential accounting information systems that could be implemented in the computerized project. (ii) Explain the benefits that would accrue to Alloys ltd. as a result of computerizing its accounting system. (iii) Highlight the challenges Alloys Ltd. is likely to face in the computerization project

    Date posted: October 3, 2022.  

  • The approved estimates and actual expenditure of the Ministry of Youth and Sports for the financial year ended 30 June 2009 were as follows; Item ...(Solved)

    The approved estimates and actual expenditure of the Ministry of Youth and Sports for the financial year ended 30 June 2009 were as follows; Item Details Estimates Actual Sh. Sh 2110100 Basic salaries 61,000,000 59,500,000 2110300 Other personal allowances 23,200,000 21,900,000 2210100 Utilities, supplies and services 73,100,000 66,450,000 2210300 Domestic travel and Subsistence 5,000,000 4,950,000 2210500 Printing and Stationary 4,500,000 4,050,000 2210700 Training expenses 6,400,000 6,390,000 2220200 Maintenance of Equipment 1,000,000 900,000 2230100 Grants to youth clubs 5,000,000 5,000,000 Gross expenditure 179,200,000 169,140,000 Appropriation-In-Aid Receipts not classified 1450100 elsewhere 12,000,000 10,500,000 Net expenditure 167,200,000 158,640,000 Drawings from the exchequer during the financial year ended 30 June 2009 amounted to sh. 160,000,000 Required: (a) Exchequer account (b) General account of vote (c) Paymaster general (PMG) account (d) Appropriation account for the year ended 30 June 2009 (e) Statement of assets and liabilities as at 30 June 2009

    Date posted: October 3, 2022.  

  • The following is the receipts and payments account of “The Professional club” for the year ended 30 September 2009: Additional information 1. The professional club premises...(Solved)

    The following is the receipts and payments account of “The Professional club” for the year ended 30 September 2009: question 8 3.png Additional information 1. The professional club premises was acquired for sh.29,000,000. The provision for depreciation on the premises as at 30 September 2008 amounted to sh.18,800,000. The old bus disposed of during the year cost sh.12,190,000 and the accumulated depreciation as at 30 September 2008 was sh.10,290,000 2. Depreciation is to be provided as follows Asset rate per annum Club premises 5% on reducing balance basis Bus 15% based on cost 3. The following balances as at 30 September 2008 and 2009 have been provided by the club 2008 2009 Sh. "000" Sh. "000" Subscriptions due 1200 980 Accruals on printing 90 30 Bar inventory 710 870 Accruals on bar purchases 590 430 Required: (a) Income statement for the year ended 30 September 2009 (b) Statement of financial position as at 30 September 2009

    Date posted: October 3, 2022.  

  • The following information relates to Pambazuka ltd. for the month of August 2009: ...(Solved)

    The following information relates to Pambazuka ltd. for the month of August 2009: Sh. Credit sales 3,800,000 Discount received 75,600 Return outwards 90,100 Interest charged to credit customers 200,500 Discount allowed 100,900 Receipts from credit customers 3,306,400 Payments to credit suppliers 3,800,000 Bad debts written off 80,700 Customers' cheques dishonoured (including cheque over the counter by customers - sh. 380,000 965,000 Credit Purchases 3,950,000 Allowance for doubtful debts (established at the end of the month) 640,000 Trade payables ledger (credits transferred to trade receivables ledger 214,600 Trade receivables balances as at 1 August 2009 2,100,000 Trade payables balances as at 1 August 2009 800,000 Additional information 1. Estimated price adjustments and other allowances on outstanding trade receivables amounted to sh.180,000 2. Claims by Pambazuka Ltd. for price reductions on defective goods as agreed with suppliers was sh. 107,800 while the return inwards was sh.120,000 3. Ninety (90) percent of customers with outstanding accounts on 31 August 2009 took discounts in the first week of September 2009. The company offers a cash discount of 2% on sales 4. Amounts totaling sh.28,600 written off in the month of June 2009 were collected in the month of August 2009 and credited to suspense account 5. On 31 August 2009 customers’ accounts with credit balances amounted to sh.450,000 and suppliers’ accounts with debit balances amounted to sh.213,400 6. One invoice of sh.75,000 was posted to the trade receivables ledger as sh.57,000 7. A reconciliation of the trade receivables control account with the trade receivables ledger balances on 31 July 2009 revealed a difference of sh.60,000. In August 2009, this difference was discovered to have been caused by failure to add one invoice of the same amount to the July 2009 sales invoice total that was posted to the trade receivables control account. The invoice had been correctly posted to the trade receivables ledger. 8. The financial year end of pambazuka Ltd. is 31 August Required: (i) Trade receivables ledger control account (ii) Trade payables ledger control account (iii) A schedule showing how trade receivables would appear in the statement of financial position as at 31 August 2009

    Date posted: October 3, 2022.  

  • Distinguish between bad debts and allowance for doubtful debts(Solved)

    Distinguish between bad debts and allowance for doubtful debts

    Date posted: October 3, 2022.  

  • Martin Stanley is a sole proprietor. He does not maintain a double entry system of accounting. The following information was extracted from the books of the...(Solved)

    Martin Stanley is a sole proprietor. He does not maintain a double entry system of accounting. The following information was extracted from the books of the business as at 31 March 2008: Sh. Freehold property 900,000 Motor Vehicles 1,125,000 Inventory 585,000 Trade payables 570,000 Trade receivables 750,000 10% Bank Loan 600,000 Bank Overdraft 90,000 Other payables (electricity) 22,500 Prepayments (wages) 60,000 Allowance for doubtful debts 37,500 Additional information 1. Inventory as at 31 March 2009 was valued at sh. 645,000 2. The following transactions were carried out through the bank account during the year ended 31 March 2009: Sh. Receipts from trade receivables 2,835,000 Cash sales 1,080,000 Payments to trade payables 2,910,000 Cash purchases 360,000 Proceeds from sale of motor vehicle 180,000 Salaries and wages 240,000 General expenses 90,000 Electricity 60,000 Interest on loan 30,000 Drawings 105,000 3. Sales and purchases on credit amounted to sh. 3,120,000 and sh. 2,850,000 respectively 4. Interest on loan was paid on 30 September 2008 5. The discount received and discount allowed during the year amounted to sh.60,000 and sh.105,000 respectively. 6. Bad debts written off during the year amounted to sh.30,000. Allowance for doubtful debts is to be made at 5% of the trade receivables as at 31 March 2009 7. Accrued electricity was sh.28,000 while prepaid salaries amounted to sh.42,000 as at 31 March 2009 8. Motor vehicles are to be depreciated using reducing balance method at the rate of 20% per annum. A full year’s depreciation is provided in the year of purchase and non in the year of disposal. The Motor vehicle sold during the year had been purchases at sh.400,000 on 1 January 2006 Required: (a) Income statement for the year ended 31 March 2009 (b) Statement of financial position as at 31 March 2009

    Date posted: October 3, 2022.  

  • The following revenue information was obtained from the books of account of the Ministry of Local Government for the year ended 30 June 2009 ...(Solved)

    The following revenue information was obtained from the books of account of the Ministry of Local Government for the year ended 30 June 2009 Estimated revenue Actual receipts Sh. "000" Sh. "000" Rent from buildings and Equipment 850,000 870,000 Fees from trading licenses 430,000 400,000 Fees from import and export licenses 470,000 480,000 Other receipts 235,000 210,000 Additional information 1. The balances at hand on 30 June 2008 amounted to sh. 247,000,000 2. The balances at hand on 30 June 2009 amounted to sh. 160,000,000 Required: Revenue account for the ended 30 June 2009

    Date posted: October 3, 2022.  

  • In the context of public sector accounting, explain the following terms (i) Budgetary accounting (ii) Cash accounting (iii) Accruals accounting (iv) Commitment accounting (v) Fund accounting(Solved)

    In the context of public sector accounting, explain the following terms (i) Budgetary accounting (ii) Cash accounting (iii) Accruals accounting (iv) Commitment accounting (v) Fund accounting

    Date posted: October 3, 2022.  

  • The financial statements of Savannah Ltd. for the year ended 30 April 2009 and 30 April 2010 are given below: Income Statement for the years ended...(Solved)

    The financial statements of Savannah Ltd. for the year ended 30 April 2009 and 30 April 2010 are given below: Income Statement for the years ended 30 April 2010 2009 Sh. "000" Sh. "000" Revenue 396,900 378,000 Cost of sales (217,140) (219,240) Gross profits 179,760 158,760 Administrative expenses (31,563) (29,589) Distribution expenses (35,070) (32,865) Profit from Operations 113,127 96,306 Finance cost (17,115) (14,784) Profit before tax 96,012 81,522 Income tax expense (42,000) (28,980) Net profit for the year 54,012 52,542 Extract of the statement of changes in equity (retained earnings) for the year ended 30 April: 2010 2009 Sh. "000" Sh. "000' Opening balance 135,114 116,172 Net profit for the year 54,012 52,542 Ordinary dividends paid (35,553) (33,600) Balance as at 30 April 153,573 135,114 Statement of financial position as at 30 April Assets: 2010 2009 Non-Current Assets Sh. "000" Sh. "000" Property, Plant and Equipment 443,961 427,476 Current Assets Inventory 55,923 37,275 Trade receivables 47,460 30,240 Bank balances 1,113 1,050 104,496 68,565 Total assets 548,457 496,041 Equity and Liabilities Equity and Reserves Called up share capital 168,000 168,000 Retained profits 153,573 135,114 321,573 303,114 Non-Current Liabilities 12% Loan notes 105,000 105,000 Current Liabilities Trade payables 8,148 8,190 Bank overdraft 48,800 27,300 Tax payable 64,936 52,437 121,884 87,927 Equity and Liabilities 548,457 496,041 Required: (a) For each year, compute the following ratios (i) Gross profit margin (ii) Profit margin (iii) Return on capital employed (iv) Current ratio (v) Acid test ratio (vi) Inventory turnover (vii) Trade receivables collections period (b) Citing relevant ratios computed in (a) above, briefly comment on the performance of savannah Ltd. using the following criteria (i) Profitability (ii) Liquidity (iii) Efficiency

    Date posted: October 3, 2022.  

  • Explain four benefits that would accrue to a country from adopting International Financial Reporting Standards (IFRSs)(Solved)

    Explain four benefits that would accrue to a country from adopting International Financial Reporting Standards (IFRSs)

    Date posted: October 3, 2022.  

  • Abdi and Barasa were partners in a Wholesale business sharing profits and losses in the ratio of 3:2 respectively after allowing for interest on capital...(Solved)

    Abdi and Barasa were partners in a Wholesale business sharing profits and losses in the ratio of 3:2 respectively after allowing for interest on capital at the rate of 10% per annum. On 1 October 2009, they admitted Chale into the partnership. Chale paid his capital and goodwill contributions of sh. 400,000 and sh. 200,000 respectively in cash. The partners agreed to allow interest on capital at the rate of 10% per annum and to write off the goodwill paid on admission of Chale. Chale was to share ¼ of the profit and losses of the partnership. Abdi and Barasa were to share the balance of the profits and losses in the ratio 3:2 respectively. For purposes of admission of Chale into the partnership, Land and Buildings were valued as sh. 2,000,000 on 1 October 2009. The trial balance extracted from the books of the partnership as at 31 March 2010 was as follows: Sh. "000' Sh. "000" Capital accounts Abdi 900 Barasa 600 Capital introduced by Chale 400 Cash premium paid by Chale 200 Current accounts Abdi 300 Barasa 200 Drawings Abdi 100 Barasa 80 Chale 60 Inventory (1 April 2009) 200 Purchase/Sales 5,000 9,000 Administrative expenses 1,600 Selling and distribution costs 1,050 Allowance for doubtful debts 100 Trade receivables /payables 600 500 Land and Buildings 1,400 Equipment at cost 2,000 Provision for depreciation 800 Bank balance 910 13,000 13,000 Additional information 1. Inventory as at 31 March 2010 was valued at sh. 400,000 2. As at 31 March 2010, accrued administrative expenses amounted to sh. 150,000 while prepaid selling and distribution costs amounted to sh. 50,000 3. Depreciation is to be provided on equipment at the rate of 20% per annum based on cost 4. Allowance for doubtful debts is to be increased to sh. 150,000 of which sh. 30,000 relates to the period 1 April 2009 to 30 September 2009 5. Assume sales , gross profit and expenses accrue evenly throughout the year Required: (a) Income statement for the year ended 31 March 2010 (b) Statement of financial position as at 31 March 2010

    Date posted: October 3, 2022.  

  • Sabuni Ltd is a medium-sized factory producing a soap branded “malaika”. The following trial balance was extracted from the books of the company as at 31...(Solved)

    Sabuni Ltd is a medium-sized factory producing a soap branded “malaika”. The following trial balance was extracted from the books of the company as at 31 December 2009. Sh. “000” Sh. “000” Ordinary share capital 100,000 10% preference share capital 40,000 15% debentures 20,000 Share premium 2,000 General reserves 6,000 Retained profits 900 Sales 116,400 Purchases of raw materials 24,800 Inventory (1 January 2009) Raw materials 1,300 Work-in-progress 4,770 Finished goods (90,000units) 8,100 Land 100,000 Buildings (cost) 60,000 Provision for depreciation 6,000 Plant and Machinery at Net book value 4,600 Interest on debentures 1,500 Direct labour 10,800 Carriage inwards 100 Purchase returns 200 General factory costs 1,600 General administrative expenses 20,000 Electricity and water expenses 2,000 Insurance 1,800 Royalty expenses 2,300 Selling and distribution costs 8,200 provision for unrealized profits 1,350 Bank balance 24,000 Motor vehicles at cost (for sales men) 8,000 Provision for depreciation 2,000 Interim dividends paid to preference shareholders 2,000 Trade payables 5,150 Trade receivables 14,130 300,000 300,000 Additional information 1. Inventories as at 31 December 2009 were valued as follows Sh. "000' Raw materials 1,500 Work-in-progress 3,100 2. Depreciation is to be provided annually as follows Buildings at 10% based on cost Motor Vehicles at 25% based on cost Plant and Machinery at 30% using reducing method 3. The company apportions expenses between factory and administration in the following ratios; Factory Administration Depreciation on buildings 80% 20% Electricity and water 60% 40% Insurance 75% 25% 4. Sabuni Ltd. produced 600,000 units and sold 582,000 units during the year. Assume finished goods were sold on a first-in-first-out basis 5. Finished goods are transferred to the warehouse at cost plus a mark-up of 20% 6. As at 31 December 2009, six month’s interest on the 15% debentures was outstanding while accrued labour costs amounted to sh. 400,000 7. The directors propose to pay the preference shareholders a final dividend. In addition, the directors propose to pay the ordinary shareholders a dividend of 15% per share after the transfer of sh. 4,000,000 to the general reserve. 8. Corporation tax is estimated at sh. 9,900,000 Required: (a) Manufacturing account and Income statement for the year ended 31 December 2009. (b) Explain four benefits that would accrue to a country from adopting International Financial Reporting Standards (IFRSs)

    Date posted: October 3, 2022.  

  • Nguvumali, a Sole Trader who operates a small business in Mombasa, does not keep proper books of account. He had instructed his shop assistant, who...(Solved)

    Nguvumali, a Sole Trader who operates a small business in Mombasa, does not keep proper books of account. He had instructed his shop assistant, who absconded duty on 30 March 2010 with an unknown amount of cash, to collect trade receivables and to bank the cash intact. Given below are the balances extracted from the records of the firm as at 31 March 2009 2010 Sh. "000" Sh. "000' Buildings 20,000 20,000 Equipment at cost 8,000 8,000 Accumulated depreciation 800 ? Motor vehicles at cost 8,000 8,000 Accumulated depreciation 2,000 ? Inventory 7,000 ? Trade receivables 5,000 4,000 Bank overdraft 4,200 ? Cash in hand 100 100 Prepaid electricity 100 60 Accrued salaries and wages 600 400 Trade payables 2,000 3,000 Additional information 1. The following transactions were made during the year ended 31 March 2010 Sh. "000" Cheques paid to trade creditors 41,000 Cash banked during the year 59,940 Cash paid for electricity and water expenses 160 salaries and wages paid through the bank 5,700 Cash withdrawn from the bank for office use 5,000 Cheques paid for selling and distribution costs 1,600 Cash drawings for personal use 3,000 Cash paid for general expenses 1,400 Returns inwards 9,000 Discount allowed 600 Bad debts written off 400 Cash from trade debtors 60,000 Discount received 1,000 2. The firm applied a uniform mark-up of ¾ 3. Depreciation on motor vehicles and equipment is to be provided based on cost and annual rates of 25% and 10% respectively. Ignore depreciation on buildings 4. Nguvumali did not have an insurance policy to cover theft by servants Required: (a) Determine the amount of cash stolen by the shop assistant (b) Income statement for the year ended 31 March 2010 (c) Statement of financial position as at 31 March 2010

    Date posted: October 3, 2022.  

  • With reference to the International Public Sector Accounting Standard (IPSASs), explain the following bases of accounting; (i) Cash basis (ii) Accrual basis(Solved)

    With reference to the International Public Sector Accounting Standard (IPSASs), explain the following bases of accounting; (i) Cash basis (ii) Accrual basis

    Date posted: October 3, 2022.  

  • Explain the role of the “Paymaster General”(Solved)

    Explain the role of the “Paymaster General”

    Date posted: October 3, 2022.  

  • The following balances of the non-current assets were extracted from the books of Charaka Ltd. as at 1 May 2009 ...(Solved)

    The following balances of the non-current assets were extracted from the books of Charaka Ltd. as at 1 May 2009 Cost Accumulated depreciation Sh. "000" Sh. "000" Land 4,162,500 - Buildings 4,387,500 438,750 Furniture and fittings 1,350,000 450,000 Plant and Machinery 11,081,250 6,693,750 Motor Vehicles 5,287,500 2,205,000 The following relates to the year ended 30 April 2010 1. The depreciation policy of Charaka Ltd is as follows Non-current Asset Basis of depreciation Rate per annum (%) Land - - Buildings Straight-line method 2.50 Plant and machinery Straight-line method 10.0 Motor vehicles Straight-line method 25.0 Furniture and fittings Reducing balance method 12.5 A full year’s depreciation is provided in the year of acquisition. No depreciation is provided in the year of disposal 2. An item of plant acquired on 1 November 2004 for sh. 2,562,500 was disposed of during the year for sh. 1,250,000 3. New machinery was acquired during the year. The following were the cost of acquisition; Sh. Invoice price paid 5,215,000 Import duty 724,500 Freight charges 126,740 Annual insurance premium 146,000 Installation cost 178,500 Value added tax 810,500 Input VAT is recoverable from output VAT 4. A delivery Van which was purchased in April 2009 for sh. 2,145,000 was stolen during the year. The insurers agreed to compensate the company by paying 85% of the cost 5. Land and Buildings were revalued by JLC valuers on 2 May 2009 at sh. 5,675,000 and sh. 4,860,000 respectively. Required: Property, Plant and Equipment movement schedule for the year ended 30 April 2010

    Date posted: October 3, 2022.  

  • Briefly explain two types of accounting packages that may be used by an organization and the main features of these packages.(Solved)

    Briefly explain two types of accounting packages that may be used by an organization and the main features of these packages.

    Date posted: October 3, 2022.  

  • Explain any four roles of the Institute of Certified Public Accountants of Kenya (ICPAK) or the equivalent body in your country (Solved)

    Explain any four roles of the Institute of Certified Public Accountants of Kenya (ICPAK) or the equivalent body in your country

    Date posted: October 3, 2022.  

  • Salama Ltd. offered 5 million ordinary shares of sh.20 par each payable as follows: ...(Solved)

    Salama Ltd. offered 5 million ordinary shares of sh.20 par each payable as follows: Sh. • On application 3 • On allotment 8 (including premium) • On 1st Call 7 • On 2nd and final call 4 The following is a sequence of transactions relating to the issue Date May 2010 5: Applications were received for 7,200,000 ordinary shares 18: Applications for 1,200,000 ordinary shares were rejected and the application monies refunded to the applicants 20: Allotment letters were issued to 6,000,000 applicants. 5 shares were allotted for every 6 shares applied for. Excess application monies were to be transferred to the allotment account 28: All allotment monies due were received in cash June 2010 4: First call was made 10: Monies due on first call were received except for 5 shareholders who had been allotted a total of 200,000 shares. July 2010 20: Second call was made. 28: Monies due on second and final call were received except for sh. 300,000 shares (including 200,000 shares on which first call monies were also not received. August 2010 6: Shares were forfeited for applicants who had failed to pay monies due on both the first call and second and final call. Those who had not paid the monies due on the second and final call only were issued with notices. 13: The forfeited shares were re-issued at sh.14 per share, the money due being received on the same date. The following information as at 4th May 2010 is provided 1. The authorized share capital of Salama Ltd is 20 million ordinary shares of sh.20 par value of which 10million ordinary shares had been issued and fully paid 2. The share premium account amounted to sh.12million while cash at bank was sh. 52million Required: (a) Journal entries to record the above transactions (b) Extract from the statement of financial position of Salama Ltd. immediately after the issue

    Date posted: October 3, 2022.  

  • The financial statements of Tumaini Ltd. for the financial year ended 31 October 2010 were as follows: Income Statement for the year ended 31 October 2010 ...(Solved)

    The financial statements of Tumaini Ltd. for the financial year ended 31 October 2010 were as follows: Income Statement for the year ended 31 October 2010 Sh. "000" Revenue 84,600 Cost of sales (40,350) Gross profits 44,250 Investment income 1,500 45,750 Distribution costs (5,640) Administrative expenses (18,360) Operating profit 21,750 Finance cost (1,650) Profit before tax 20,100 Income tax expense (7,300) Profit after tax 12,800 Statement of financial position as at 31 October Assets: 2010 2009 Non-Current Assets Sh. "000" Sh. "000" Premises 34,500 28,300 Plant and Machinery 19,650 16,710 Motor Vehicles 18,010 21,350 72,160 66,360 Intangible Assets Goodwill 2,500 2,750 Patents 3,550 3,870 6,050 6,620 Current Assets Inventory 12,030 8,270 Accounts receivables 14,490 14,660 other receivables 3,200 2,000 Cash 2,000 1,000 31,720 25,930 Total assets 109,930 98,910 Equity and Liabilities Capital and Reserves Ordinary Share Capital (sh. 10 par value) 14,000 10,000 Share premium 2,500 500 Revaluation reserve 8,540 6,390 Retained profits 52,870 47,000 77,910 63,890 Non-Current Liabilities Bank Loan 9,860 12,360 Current Liabilities Trade payables 8,460 7,990 Current Tax 7,080 6,690 Bank overdraft 4,370 6,120 Other payables 2,250 1,860 22,160 22,660 Total capital and Liabilities 109,930 98,910 Additional information 1. The revaluation reserve relates to revaluation of premises 2. The expenses on depreciation, impairment of goodwill and amortization are included in administrative expenses. 3. During the year, machinery and a motor vehicle were acquired at a cost of sh. 3,500,00 and sh. 1,500,000 respectively. A motor vehicle whose net book value was sh. 2,500,000 was disposed of at a loss of sh. 200,000 Required: Statement of cash flows for the year ended 31 October 2010 in conformity with the requirements of International Accounting standards (IAS) 7, “Statement of Cash flows”.

    Date posted: October 3, 2022.  

  • The following balances were extracted from the books of futures Limited as at 30 September 2010; ...(Solved)

    The following balances were extracted from the books of futures Limited as at 30 September 2010; Sh. "000" Land and Building s (Net Book Value) 25,000 Plant and Machinery (Net Book Value) 8,000 Motor Vehicles (Net Book Value) 2,000 Inventory 6,000 Ordinary Share Capital (sh. 50 par value) 10,000 10% preference share Capital (sh. 100 par value) 9,000 10% Debentures 8,000 Corporation tax 500 Interim Ordinary dividend paid 2,000 Other operating expenses 1,550 Distribution costs 6,000 Administrative expenses 13,000 Accounts payable 19,000 Other operating income 4,000 Gross profit 25,000 Debenture interest paid 400 Preference dividend paid 450 Accounts receivable 20,000 Cash at bank 4,100 Capital redemption reserve 6,000 Share premium 4,000 Revenue reserves(1 October 2009) 3,000 Additional information 1. The balance on the corporation tax account represents and overprovision of tax for the previous year. Tax expense for the current year is estimated at sh. 3million 2. On 15 September 2010, the directors of the company proposed to pay the dividends due to the preference shareholders and to also pay the final dividend of sh. 2million to the ordinary shareholders. 3. A building whose Net Book Value is sh. 5million is to be revalued to sh. 9million. Required: (a) Income statement for the year ended 30 September 2010 (b) Statement of financial position as at 30 September 2010

    Date posted: October 3, 2022.