Get premium membership and access revision papers, questions with answers as well as video lessons.
Fundamentals Of Accounting I(Bbm-114) Question Paper
Fundamentals Of Accounting I(Bbm-114)
Course:Bachelor Of Business Management
Institution: Mount Kenya University question papers
Exam Year:2013
MT. KENYA UNIVERSITY
VIRTUAL LEARNING CAMPUS
MARKING SCHEME
FUNDAMENTALS OF ACCOUNTING I(BBM-114)
JANUARY-APRIL SEMESTER.
UNIT LECTURER: MR TITUS MUSYIMI
QUESTION ONE
A) TYPES OF ERRORS
An error can be defined as an unintentional mistake or misrepresentation in the books of accounts or records either by way of:
i) Clerical or mathematical mistake in record or data
ii) Oversight or misrepresentation of facts
iii) Misapplication of accounting policies
Errors can be broadly classified as:
i) ERRORS OF PRINCIPLE
ii) ERRORS OF OMMISSION
iii) ERRORS OF COMMISSION.
iv) ERRORS OF DUPLICATION
v) COMPENSATING ERRORS
B) DISTINCTION BETWEEN INCOME AND EXPENDITUREAND PROFIT&LOSS A/C
INCOME AND EXPENDITURE ACCOUNT PROFIT &LOSS ACCOUNT
? It is prepared by charitable organizations e.g church which are run not for profit
? Its credit balance is known as surplus or excess of income over expenditure
? Its debit balance is known as deficit
? Surplus or deficit revealed by it is transferred to capital fund.
? It is prepared by concerns run for earning a profit
? Its credit balance is known as net profit
? Its debit balance is known as net loss
? Net profit or loss disclosed by it is transferred to capital account in the case of sole proprietorship.
C) DISTINCTION BETWEEN TRADE AND CASH DISCOUNTS
TRADE DISCOUNT CASH DISCOUNT
? Its allowed to encourage buyers to buy goods in large quantities
? It’s a reduction in the list price granted by the supplier either because of a trade practice or for purchases exceeding a certain quantity
? Its allowed at the time of purchase
? Its shown as a deduction in the invoice
? In the ledger, there is no trade discount account. ? It is allowed to encourage the buyers of goods to make payments at an early date
? It is a reduction in the amount payable for payment within a certain period.
? It is allowed at the time of payment of the purchase
? It doesn’t appear in the invoice
? Cash discount account is maintained in the ledger.
D) BANK RECONCILLIATION STATEMENT
Balance as per cash book 12,300
Add: cheques issued and not collected 2,500
Direct deposits 1500 4000
16,300
Deduct: cheques not credited 4,300
Bank charges 500
Standing orders 2,000 6,800
Balance as per bank statement 9,500
QUESTION TWO
PREPARATION OF A CASH
BOOKXYZ’S CASH BOOK FOR THE MONTH OF MAY.
DATE&PARTICULARS DISCOUNT CASH BANK DATE&PARTICULARS DISCOUNT CASH BANK
May1 balance
“ 2 B. king
May 11. Bank
May 16. N. campell
May 28. D shand
3
7
2 29
100
38 654
117
273 May8 R.long
May 11. Cash
May 25. Office expenses
May29. U Barrow
May 30. A. Allen
May 31. balances c/d
5
3
11
92
75 95
100
57
429
363
12 167 1044 19 167 1044
B.KING A/C
DATE PARTICULARS AMOUNT DATE PARTICULARS AMOUNT
MAY 1 BALANCE B.F 120 MAY 2
MAY 31 BANK A/C
BALANCE C/D 117
3
N.CAMPEL A/C
DATE PARTICULARS AMOUNT DATE PARTICULARS AMOUNT
MAY 1 BALANCE B/F 280 MAY 16
MAY 31 BANK A/C
BALANCE C/D 273
7
D.SHAND A/C
DATE PARTICULARS AMOUNT DATE PARTICULARS AMOUNT
MAY 1 BALANCE B/F 40 MAY 28
MAY 31 CASH A/C
BALANCE C/D 38
2
U. BARROW A/C
DATE PARTICULARS AMOUNT DATE PARTICULARS AMOUNT
MAY 29
MAY 31 BANK A/C
BALANCE C/D 57
3 MAY 1 BALANCE B/F 60
A.ALLEN
DATE PARTICULARS AMOUNT DATE PARTICULARS AMOUNT
MAY30
MAY 31 BANK A/C
BALANCE C/D 429
11 MAY 1 BANK B/F 440
R.LONG
DATE PARTICULARS AMOUNT DATE PARTICULARS AMOUNT
MAY 8
MAY 31 BANK/AC
BALANCE C/D 95
5 MAY 1 BALANCE B/F 100
QUESTION THREE
ACCOUNTING PRINCIPLES
Accounting principles are the rules that guide in the accounting profession.
They can be classified into conventions and concepts.
I) ACCOUNTING CONVENTIONS
A convention is a practice based on general consent. They include.
1. CONVENTION OF DISCLOSURE
The convention dictates that every activity of the organization should be adequately disclosed in the financial statements.
2. CONVENTION OF MATERIALITY
To make financial information more meaningful , the accountant should report any and only the information that is material.
3. CONVENTION OF CONSISTENCY
It implies that, the same accounting policies should be used for similar items over the year.
4. CONVENTION OF CONSERVATISM
It is a quality judgement to be exercised in evaluating risks and uncertainties present in the business to ensure that reasonable provisions are made for the anticipated losses.
II) ACCOUNTING CONCEPTS
They include:
1. THE ENTITY CONCEPT
Every business concern is taken as an accounting unit different from its owners. Business entity is considered to own the assets and liable for liabilities to the outsiders.
2. MONEY MEASUREMENT CONCEPT
In accounting, only those facts, events and transactions are recorded and reported that can be expressed in terms of money since money is a common measuring unit.
3. THE GOING CONCERN CONCEPT
The concept assumes that, the business entity will continue to exist indefinitely and will not be dissolved in the near future.
4. THE COST CONCEPT
Cost is the monetary price paid for acquisition of assets for the business. The concept implies that an asset is recorded in the accounts books at the price paid to acquire it.
5. THE DUAL ASPECT CONCEPT
Its base don the double entry accounting system which means that a record of each transaction is made in two separate accounts. i.e one on the debit side of an account and second on the credit side of another account.
6. THE ACCRUAL CONCEPT
It is concerned with the period in which the revenues and expenses are to be related.
7. REALISATION CONCEPT
It determines the point of time at which revenue is to be recognized and this is referred to as timing of revenue recognition.
8. ACCOUNTING PERIOD CONCEPT
It implies that the accounting period is generally of one year which is known as accounting year or financial year of the business. Revenues for this year are matched and profits for the year is prepared.
9. MATCHING CONCEPT
Its based on the understanding that expenses for a certain year, should matched with the revenues for the same year
10. BALANCE SHEET EQUATION CONCEPT.
It implies that in each transaction, the amount to be debited equals the amount to be credited.
QUESTION FOUR
TRADING ACCOUNT OF MODERN MANUFACTURING CO. LTD
FOR THE YEAR ENDING 31 ST MARCH 2000.
Sales 35,000
Less: cost of goods sold:
Opening stock 7,500
Purchases 24,500
Wages 5,000
37,000
Less: closing stock 8,200 28,800
Gross profit 6,200
Add: Discount received 500
6,700
Less: operating expenses
Discount allowed 700
Salaries 750
Rent 495
Add: outstanding 45 540
General expenses 1705
Less: unexpired insurance 38 1667
Bad debts 158
Depreciation on machinery 290
Provision for debts 188
Managing director’s commission 120 4413
Net profit 2287
BALANCE SHEET FOR MODERN MANUFACTURING CO. LTD
AS AT 31 ST MARCH 2000.
USES OF FUNDS
FIXED ASSETS
Plant & machinery 2900
Less: depreciation 290 2610
CURRENT ASSETS
Stock 8,200
Debtors 3750
Less: provision for debts 188 3562
Insurance prepaid 38
Cash in hand and bank 1620
Loans to managing director 325 13745
16,355
FINANCED BY:
Share Capital 10,000
General reserve 1,550
Profit &loss a/c 2,890
Creditors 1,750
Outstanding rent 45
MD’s commission 120 16,355
QUESTION FIVE
LEDGER ACCOUNTS:
CAPITAL A/C
DATE PARTICULARS AMOUNT DATE PARTICULARS AMOUNT
MAY 1 MR.KAMAU 150,000
CASH A/C
DATE PARTICULARS AMOUNT DATE PARTICULARS AMOUNT
MAY 1
MAY 4
CAPITAL A/C
SALES A/C 115,000
5,000 MAY 2
MAY 3
MAY 5
MAY21
MAY 31 PURCHASES A/C
FURNITURE A/C
PURCHASES A/C
MOTOR CAR A/C
BALANCE C/D
20,000
15,000
13,000
30,000
42,000
BANK A/C
DATE PARTICULARS AMOUNT DATE PARTICULARS AMOUNT
MAY1
MAY 15
MAY 10
MAY 31
CAPITAL A/C
SALES
SALES
BALANCE C/D 35,000
17,100
7,300
2,100 MAY 27
MAY 28
PURCHASES A/C
RENT A/C
45,000
16,500
PURCHASES A/C
DATE PARTICULARS AMOUNT DATE PARTICULARS AMOUNT
MAY 2
MAY 5
MAY 12
MAY 27 CASH A/C
CASH A/C
XYZ A/C
BANK A/C 20,000
13,000
16,900
45,000 MAY 31 BALANCE C/D 94,900
SALES A/C
DATE PARTICULARS AMOUNT DATE PARTICULARS AMOUNT
MAY 31 BALANCE C/D 45,400 MAY 10
MAY 11
MAY 15 BANK A/C
MIKE A/C
BANK 7,300
21,000
17,100
FURNITURE A/C
DATE PARTICULARS AMOUNT DATE PARTICULARS AMOUNT
MAY 3 CASH A/C 15,000 MAY 31 BALANCE C/D 15,000
MIKE A/C
DATE PARTICULARS AMOUNT DATE PARTICULARS AMOUNT
MAY 11 SALES A/C 21,000 MAY 31 BALANCE C/D 21,000
XYZ A/C
DATE PARTICULARS AMOUNT DATE PARTICULARS AMOUNT
MAY 31 BALANCE C/D 16,900 MAY 12 PURCHASES A/C 16,900
RENT A/C
DATE PARTICULARS AMOUNT DATE PARTICULARS AMOUNT
MAY 28 BANK A/C 16,500 MAY 31 BALANCE C/D 16,500
MOTOR CAR A/C
DATE PARTICULARS AMOUNT DATE PARTICULARS AMOUNT
MAY 21 CASH 30,000 MAY 31 BALANCE C/D 30,000
DEBTORS A/C
DATE PARTICULARS AMOUNT DATE PARTICULARS AMOUNT
MAY 23 SALES 12,900 MAY 31 BALANCE C/D 12,900
More Question Papers