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Foundation Of Accounting 1 Question Paper
Foundation Of Accounting 1
Course:Bachelor Of Commerce
Institution: University Of Nairobi question papers
Exam Year:2012
UNIVERSITY OF NAIROBI
SCHOOL OF BUSINESS
DAC 101: FOUNDATIONS OF ACCOUNTING
-------------------------------------------------------------------------------------------------------Attempt both questions.
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Question One (Choose the correct answer)
Section A
1. During the life-time of the entity, accountants produce financial statements at arbitrary points in time in accordance with which basic accounting concept?
a) Cost – benefit
b) Periodicity
c) Conservation
d) Matching
e) None of the above.
2. The accounting concept that justifies the tendency of accountants to resolve uncertainty and doubt in favour of understating assets and revenues and overstating liabilities and expenses, is know as:
a) Conservatism
b) Materiality
c) Industry practice
d) Consistency
e) None of the above
3. Revenue is generally recognized at the point of sale. Which concept is applied herein?
a) Consistency
b) Matching
c) Realization
d) Cost principle
4. When information about two different enterprises has been prepared and presented in a similar manner, the information exhibits the characteristics of:
a) Relevance
b) Reliability
c) Consistency
d) Verifiability
e) None of the above
5.The assumption that a business enterprise will not be sold or liquidated in the near future is known as the:
a) Economic entity
b) Monetary unit
c) Periodicity
d) none of the above
6. The primary content qualities that make accounting information useful for decision-making are:
a) Comparability and consistency
b) Materiality and timeliness
c) Relevance and freedom from bias
d) Reliability and comparability
e) None of the above
7. Debit means:
a) An increase in asset
b) An increase in liability
c) A decrease in asset
d) An increase in owner’s equity
8. Credit means:
a) An increase in asset
b) An increase in liability
c) A decrease in liability
d) A decrease in owner’s equity
9. Journal is a book of:
a) Original entry
b) Second entry
c) All cash transactions
d) All non-cash transactions
10. Ledger is a book of:
a) Original entry
b) Secondary entry
c) All cash transactions
d) All non-cash transactions
11. The process of recording a transaction in the journal is called:
a) Posting
b) Journalizing
c) Tallying
d) None of the above
Section B
State whether each of the following statements is true or false:
12. Principles which have substantial authoritative support become a part of the generally accepted accounting principles.
13.Personal transactions are distinguished from business transactions in accordance with the accounting entity assumption.
14. Monetary facts or attributes and the changes in the purchasing power of the monetary unit are ignored in accordance with the monetary unit assumption.
15. The economic life of an enterprise is artificially split into periodic intervals in accordance with the going concern assumption.
16. The asset are classified as current assets and fixed assets in accordance with the accounting period assumption.
17. Revenues are matched with expenses in accordance with the matching principle.
18. The financial statements must disclose all the relevant and the reliable information in accordance with the objective principle.
19. The accounting data should be definite, verifiable and free from personal bias in accordance with the full disclosure principle.
20. The materiality principle is an exception to the full disclosure principle.
21. Accounting practices should be followed on a horizontal basis from one accounting period to another period in accordance with the consistency principle.
22. When stock is valued at cost in one accounting period and at lower of net realizable value in another accounting period, the conservatism principle conflicts with the consistency principle.
Section C
23. State two business goals
24. state three business activities
(25 marks)
Question Two
3Com commenced business (as a sole proprietor) on 1st May 2012. During the first month in operation, the following transactions and event occurred:
May 1 invested sh320, 000 cash and equipment valued at sh.140, 000 in the business.
2 Hired a secretary at a salary of sh.2,900 per week payable monthly
3 Purchased supplies on account worth sh.7,000 (debit an asset account)
7 Paid office rent for the month worth sh.6,000 (debit an expense account)
11 Completed a tax consultancy and billed the client sh.11, 000 (use service revenue account.
12 Received sh.32000 advance on a management consultancy engagement
17 Received cash of 23000 for the services completed on credit earlier
21 Paid insurance expense sh.11000
30 Paid the secretary sh11,600 for the month
30 A count of supplies indicated that sh.1, 200 of supplies had been used.
30 Purchased a new computer for sh.61, 000 with personal funds (the computer will be exclusively used for business purposes)
Required
a. Journal entries to record the above transactions
b. Post the ledger accounts
c. Extract a trial balance as at 30th May 2012
(Total 25 marks)
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