Get premium membership and access revision papers, questions with answers as well as video lessons.
Fundamentals Of Accounting I Question Paper
Fundamentals Of Accounting I
Course:Bachelor Of Commerce
Institution: Kenyatta University question papers
Exam Year:2008
KENYATTA UNIVERSITY
UNIVERSITY EXAMINATIONS 2007/2008
INSTITUTE OF OPEN LEARNING
SPECIAL/SUPPLEMENTARY EXAMINATION FOR THE DEGREE OF
BACHELOR OF COMMERCE AND BACHELOR OF EDUCATION
BAC 100:
FUNDAMENTALS OF ACCOUNTING I
DATE:
Tuesday 7th October, 2008
TIME: 10.00am-12.00Noon
INSTRUCTIONS:
Answer all questions
1.
(a)
The objectives of the financial statements is to provide information about
financial positions, performance and change in financial position of an
entity that is useful to a wide range of users in making economic
decisions.
Required:
State five potential users of company published financial statements, briefly explaining
for each one their likely information needs from those statements.
(10marks)
(b)
Your company follows a practice of expensing the premiums on its fire
insurance policy when it is paid. The company charged to expense sh
86,400 premium paid on a three year policy covering the premium period
on July 1, 2000 to June 30, 2003. In 1997 a premium of sh 79,200 was
charged to expense on the same policy for the period July 1, 1997 to June
30, 2000
Required:
(i)
State the principle of accounting that was violated.
(2marks)
(ii)
Compare the effects of this violation on the financial statements for the
calendar
year
2000.
(4marks)
--------------------------------------------------------------------------------
(iii)
State the basis on which the company’s policy might be justified.
(2marks)
2.
The following trial balance was extracted from the books of Matata Advocates, a
legal practice owned and operated by Joy Matata, for the year ended 30
November 2003.
Matata Advocates
Trial Balance as at 30 November 2003
Sh
Sh
Capital
600,000
Drawings
240,000
Motor vehicle at cost
900,000
Provision for depreciation-M/V
225,000
Fixtures and fittings at cost
450,000
Provision for depreciation-F+F
90,000
Cash
105.000
Owned by clients
180,000
Owing
to
suppliers
50,250
Loan
150,000
Legal fees earned
1,440,000
Salaries
and
wages
667,500
Office
supplies 112,500
Interest
22,500
Rent
43,500
Insurance
60,000
Miscellaneous expenses
19,500
Electricity and water
24,750
Motor vehicle running expenses
90,000
Advance legal fees
_______
360,000
2,915,250 2,915,250
Additional information:
(i)
Advance legal fees represent an amount received on 30 June 2003 from a
major client who paid for legal services to be rendered evenly in the
following six months. The practice in rendering services as agreed.
(ii)
A few clients have not yet been billed for services rendered during the last
half of November 2003. The value of services to the firm is estimated at
sh 135,000 and the fee note will be raised soon.
2
--------------------------------------------------------------------------------
(iii) Rent includes sh 27,000 paid for occupation of office space up to 31
December 2003. The rent agreement revised on 30 June 2003, requires
semi-annual payments of rent in advance with effect from 1 July 2003.
(iv)
Provision should be made for depreciation at the rate of 25% p.a on cost of
motor vehicle and at 20% p.a on cost of fixture and fittings.
(v)
The Loan was taken from a shylock on 1 February 2003 at annual interest
of 30% payable semi-annually. The first half year interest was paid on 31
July 2003 and the last will be paid with the principal on January 2004.
(vi)
Employees salaries amounting to sh 52,500 have not yet been paid.
(vii) An electricity bill of sh 3,000 will be paid on 31 December 2003.
(viii) A physical count of office supplies on 30 November 2003 showed sh
37,500 on hand.
(ix)
A premium of sh 30,000 has been paid on 1 march 2003 for a one year fire
insurance policy.
Required:
(a)
A profit and loss account of Matata Advocates for the year ended 30
November 2003.
(b)
Balance Sheet as at 30 November 2003.
(20 marks)
3.
The accounts of Pata Enterprises show gross and net profit of sh 1,095,000 and Sh
438,600 respectively. But further scrutiny of accounts reveal the following errors.
(i)
A payment for sh 9,600 in respect of carriage outwards has been debited to
sales returns account.
(ii)
A credit purchase of an office equipment worth sh 180,000 had been
wrongly entered in the sales return day book.
(iii) The personal account of a debtor had been debited with sh 1,500 for a
sales invoice of Sh 15,000 which had also been erroneously recorded in
the sales day book.
(iv)
The totals of the purchases book had been entered as sh 206,000 instead of
sh 266,000
(v)
Discount received of sh 26,880 had been entered in the cashbook column
but not posted to the ledger accounts.
3
--------------------------------------------------------------------------------
(vi)
A cheque of sh 16,680 received for interest on investments had been
correctly recorded in the cashbook, but the amount had been debited in the
rent receivables account.
(vii) A cheque for sh 21,540 paid to creditor had been entered in the cashbook
as sh 21,450 and had subsequently been posted to the ledger account as Sh
21,450.
(viii) A credit note for sh 11,160 issued to a debtor was appropriately recorded
in the sales returns day book but was posted a sh 11,610 in the customers
account.
Required:
(a)
Journal entries to correct the errors.
(b)
A statement of the corrected (i) gross profit (ii) Net profit
(20marks)
4.
Ash is a wholesaler of fancy goods. On 30 November 1999 a fire accrued
at his warehouse and the greater portion of his stock was destroyed. The
value of the stock salvaged was agreed at Sh 5,500.
His books were saved and the following is an extract from his last
accounts for the year ended 31 March 1999.
Trading account
Sh
Sh
Sh
Opening stock
342,400
Sales
980,000
Purchases
784,700
1,127,100
Less closing stock
294,100
833,000
Gross
profit
147,000
980,000 980,000
The stock was fully insured against fire risks
Trade creditors on March 31 1999 amounted to sh 123,040. Sales for the period to 30
September 1999 were sh 546,000 and amounts paid for purchases sh 440,080. On 30
September 1999 trade creditors amounted to sh 110,560.
Required:
Prepare statement showing the amount Ash should claim from the insurance Company
for
loss
of
stock.
(12marks)
4
--------------------------------------------------------------------------------
More Question Papers
Popular Exams
Return to Question Papers