- Mali Mingi is the sole distribution agent of roofing sheets in Mombasa. Under an agreement
with the manufacturers, Mabati Ltd., Mali Mingi purchases roofing sheets from...(Solved)
Mali Mingi is the sole distribution agent of roofing sheets in Mombasa. Under an agreement
with the manufacturers, Mabati Ltd., Mali Mingi purchases roofing sheets from Mabati Ltd. at a
trade discount of 20% of the list price. Every year in the month of May, Mali Mingi receives an
agency commission of 1% of his purchases for previous year ended 31 March.
Mali Mingi has been making a gross profit of 40% on all sales. In a burglary that occurred in
January 2004, Mali Mingi lost stock costing Sh.480,000 as well as the bulk of his accounting
records.
After thorough investigation, the accountant has obtained the following information relating to
the year ended 31 March 2004:
Motor vehicle expenses 806,400
Drawings 516,000
Trade expenses 883,200
8. All receipts pass through the bank and Mali Mingi is not insured against burglary.
9. The agency commission due as at 31 March 2003, was received during the year through
the bank.
10. All purchases and sales are on credit.
Required:
(a) Trading and profit and loss accounts for the year ended 31 March 2004.
(b) Balance sheet as at 31 March 2004.
Date posted: November 17, 2018. Answers (1)
- Briefly explain whether revenue may be recognized in the following circumstances in
respect of sales made by a business entity:
(i) Goods have acquired by the business...(Solved)
Briefly explain whether revenue may be recognized in the following circumstances in
respect of sales made by a business entity:
(i) Goods have acquired by the business entity which it confidently expects to resell
very quickly
(ii) A customer places a firm order for goods
(iii) Goods are delivered to the customer‟s premises
(iv) The customer's cheque in payment for the goods has been cleared by the bank.
Date posted: November 17, 2018. Answers (1)
- Briefly explain the meaning of each of the following accounting concepts, giving in each case, an example of the application of each:
(i) Materiality
(ii) Substance over...(Solved)
Briefly explain the meaning of each of the following accounting concepts, giving in each case, an example of the application of each:
(i) Materiality
(ii) Substance over form
(iii) Money measurement
Date posted: November 17, 2018. Answers (1)
- Meza Ltd has an authorized share capital of Sh.20,000,000 divided into 1,500,000 ordinary shares of Sh.10 each and 250,000 8% preference shares of Sh.20 each.
An...(Solved)
Meza Ltd has an authorized share capital of Sh.20,000,000 divided into 1,500,000 ordinary shares of Sh.10 each and 250,000 8% preference shares of Sh.20 each.
An extract of the balance sheet as at 30 June 2003 was as follows:
On 1 July 2003, the company offered 500,000 ordinary shares for sale to the public at Sh.15 each
payable as follows:
- On application Sh.7 including the premium
- On allotment Sh.5
- On first and final call, Sh.3
Applications were received on 15 July 2003 and allotment made on 31 July 2003. The allotment
money was received on 15 August 2003.
The first and final call was made on 15 September 2003 and the money received on 30
September 2003.
The company received applications for 650,000 shares. Applications for 25,000 shares were
rejected and the application money was refunded. The shares were then allocated to the
remaining applicants on a pro rata basis, the excess of the application money being carried
forward in part satisfaction of the amounts due on allotment.
An allotee of 3,000 shares failed to pay both the allotment and first and final call money and the
shares were forfeited on 13 October 2003.
The forfeited shares were then re-issued at Sh.12 each on 21 October 2003.
Required:
(a) Ledger accounts to record the above transactions
(b) Balance sheet as at 21 October 2003
Date posted: November 17, 2018. Answers (1)
- The following version of the receipts and payments account has been provided by the treasurer of Maendeleo Social club for the year ended 31 October...(Solved)
The following version of the receipts and payments account has been provided by the treasurer of Maendeleo Social club for the year ended 31 October 2003:
4. Maendeleo Social Club had a Bank Account, which had a balance of Shs. 2,500,000 on
1 Nov 2002. This Bank account was not used during the year to 31 Oct 2003and the
only entry made in this account was for the interest of shs. 200,000 which was credited
yo the bank on 31 Oct 2003.
5. Depreciation on Furniture and fittings is at the rate of 10% per annum on cost. A full
years depreciation is provided for any furniture bought during the year.
6. Bar stock was valued at shs. 7,000,000 0n 1 Nov 2002 and at Shs. 1,500,000 on 31
Oct 2003.
7. No Apportionment of costs is made between bar activities and other club activities.
Required:
i. Income and Expenditure Account for the year 31 Oct 2003.
ii. Balance Sheet
Date posted: November 17, 2018. Answers (1)
- The following are the summarized financial statements of Deweto limited(Solved)
The following are the summarized financial statements of Deweto limited:
2. The stock as at 31 October 2001 was valued at Sh.13,000,000
Required:
(a) Calculate two ratios for each classification identified below for the financial years ended
31 October 2002 and 2003:
(i) Profitability ratios
(ii) Liquidity ratios
(iii) Gearing ratios
(iv) Activity ratios
(b) Comment on Deweto Ltd‟s profitability and liquidity positions.
Date posted: November 17, 2018. Answers (1)
- Muthusi is a businessman operating a retail business in a small town. Due to the size of his
business, he is not able to employ a...(Solved)
Muthusi is a businessman operating a retail business in a small town. Due to the size of his
business, he is not able to employ a qualified accountant on a permanent basis.
The following information was extracted from the books of the business as at 31 October 2002:
The following transactions took place during the financial year ended 31 October 2003:
1. Sales and purchases on credit amounted to Sh.2,080,000 and Sh.1,900,000 respectively.
2. The following transactions were carried out through the bank account:
3. The business depreciates motor vehicles at 20% per annum on a reducing balance basis. A full
year‟s depreciation is provided on a motor vehicle acquired in the course of the year
and no depreciation is provided on a motor vehicle disposed of in the course of the year.
The motor vehicle sold in the year had been purchased at Sh.250,000 and an
accumulated depreciation of Sh.122,000 had been provided on it at the time of disposal.
4. Furniture is depreciated at 10% per annum on cost and in proportion to the period used in
the year. The additional furniture was purchased on 1 May 20903 while the cost of furniture
held on 31 October 2002 was Sh.400,000
5. Loan interest paid was for one-half year up to 30 April 2003
6. The business received discounts of Sh.40,000 and allowed discounts of Sh.70,000 during the
year.
7. Bad debts of Sh.20,000 were written off. Provision for doubtful debts is to be maintained at
5% of the debtor‟s balance at the end of the year.
8. Accruals are in respect of lighting and on 31 October 2003, the amount accrued was
Sh.19,000
9. Muthusi‟s business obtains a normal gross profit rate of 25% on selling price.
Required:
(a) Trading and profit and loss account for the year ended 31 October 2003
(b) Balance sheet as at 31 October 2003.
Date posted: November 17, 2018. Answers (1)
- The following categories of people are recognized as users of the information
contained in financial statements:
- Owners.
- Financial analysts.
- Lenders.
For each of the above users of...(Solved)
The following categories of people are recognized as users of the information
contained in financial statements:
- Owners.
- Financial analysts.
- Lenders.
For each of the above users of financial statements, identify the kind of information they
may require, why they require it and the decisions they make from that information.
Date posted: November 17, 2018. Answers (1)
- Briefly explain three circumstances under which “goodwill” can be recorded in a business firm's books of account(Solved)
Briefly explain three circumstances under which “goodwill” can be recorded in a business firm's books of account.
Date posted: November 17, 2018. Answers (1)
- What is an “accounting policy”?(Solved)
What is an “accounting policy”?
Date posted: November 17, 2018. Answers (1)
- Munyaka and Opiyo commenced trading on 1 May 2002 as wholesalers, sharing profits and losses in the ration 2:1, after allowing interest on the capital...(Solved)
Munyaka and Opiyo commenced trading on 1 May 2002 as wholesalers, sharing profits and losses in the ration 2:1, after allowing interest on the capital introduced by the partners at the rate of 10% per annum. Opiyo was to receive a salary of Sh. 440,000 per annum. Munyaka and
Opiyo do not operate a complete set of accounting records.
The following summary of the bank statements for the year ended 30 April 2003 has been provided:
Receipts: Cash introduced as capital on 1 May 2002: Munyaka Sh. 3,500,000 and Opiyo
Sh. 2,000,000. Balance of receipts from customers amounted to Sh. 12,700,000.
Payments: Equipment Sh. 2,500,000: Pick-up Sh. 1,000,000: furniture and fittings Sh.
375,000: go-down rental Sh. 375,000, wages Sh. 1,772,000; salary of Sales
Manager Sh. 1,200,000; purchases for resale Sh. 9,900,000; rates Sh. 200,000;
repairs Sh. 62,500; insurance Sh. 55,000; motor expenses Sh. 186,500.
The following cash payments were made before banking the balance of the takings; Motor
expenses Sh. 129,000, wages Sh. 148,000; Sundry expenses Sh. 25,000; Drawings – Munyaka
Sh. 7,500 per week and Opiyo Sh. 6,000 per week.
Additional information:
1. The partners had taken goods for their domestic use as follows:
Munyaka Sh. 50,000; Opiyo Sh. 75,000 (both at selling price).
2. During the year to 30 April 2003, discounts allowed to customers amounted to Sh.
122,500 while discounts received from suppliers amounted to Sh. 55,000.
3. At 30 April 2003,l the amounts owing to suppliers amounted to Sh. 750,000 and the
amount owing by customers was Sh. 1,550,000. An amount of Sh. 200,000 owing by a
customer proved irrecoverable and was treated as a bad debt.
4. As at 30 April 2003, rates and insurance were prepaid to the extent of Sh. 25,000 and
Sh. 5,000 respectively. Stock on hand at cost amounted to Sh. 1,205,000.
5. The go-down had been occupied since 1 May 2002 at an annual rental of Sh. 500,000.
6. Depreciation is to be provided on a straight-line basis as follows: Motor vehicles 20%
per amount: Equipment, furniture and fittings at the rate of 10% per annum.
Required:
(a) Trading, profit and loss and appropriation accounts for the year ended 30 April 2003.
(b) Balance sheet as at 30 April 2003.
(Assume a 52 – week year)
Date posted: November 17, 2018. Answers (1)
- The following balances remained in the books of Ahadi Ltd. as at 30 April 2003 after the preparation of the trading account:(Solved)
The following balances remained in the books of Ahadi Ltd. as at 30 April 2003 after the preparation of the trading account:
Additional information:
1. A bill for Sh. 219,200 in respect of electricity for the period up to 30 April 2003 has
not been accrued.
2. The amount for insurance includes a premium of Sh. 120,000 paid in January 2003
to cover the company for six months, February to July, 2003.
3. Office fittings and equipment are to be depreciated at 15% per annum on cost
and motor vehicles at 20% per annum on cost.
4. Provision is to be made for:
Directors‟ fees - Sh. 2,000,000
Audit fee - Sh. 480,000
The outstanding debenture interest.
5. The directors have recommended that:
- A sum of Sh. 4,800,000 be transferred to general reserve.
- The preference dividend be paid.
- A 10% ordinary dividend be paid.
Required:
(a) Profit and loss and appropriation accounts for the year ended 30 April 2003.
(b) Balance sheet as at 30 April 2003.
Date posted: November 17, 2018. Answers (1)
- You have recently been employed in a medium size company and deployed in the accounts department. Your head of section has given you the following...(Solved)
You have recently been employed in a medium size company and deployed in the accounts department. Your head of section has given you the following extract from the cashbook for the month of April 2003.
The head of section further informs you that all receipts are banked intact and all payments are
made by cheque. On investigation, you discover the following:
1. Bank charges and commissions amounting to Sh. 272,000 entered on the bank
statement had not been entered in the cashbook.
2. Cheques drawn amounting to Sh. 534,000 had not been presented to the bank for
payment.
3. Cheques received totaling Sh. 1,524,000 had been entered in the cashbook and paid into
the bank, but had not been credited by the bank until May 2003.
4. A cheque for Sh. 44,000 had been entered as a receipt in the cashbook instead of a
payment.
5. A cheque for Sh. 50,000 had been debited by the bank by mistake.
6. A cheque received for Sh. 160,000 had been returned unpaid. No adjustment had been
made in the cashbook.
7. All dividends receivable are credited direct to the bank account. During the month of
April 2003. Dividends totaling Sh. 124,000 were credited by the bank and no entries had
been made in the cashbook.
8. A cheque drawn for Sh. 12,000 had been incorrectly entered in the cash book as Sh.
132,000.
9. The balance brought forward should have been Sh. 1,422,000.
10. The bank statement as at 30 April 2003 showed on overdraft of Sh. 2,324,000.
Required:
(i) The adjusted cashbook as at 30 April 2003.
(ii) Bank reconciliation statement as at 30 April 2003.
Date posted: November 17, 2018. Answers (1)
- Briefly explain why it is important for a business entity to prepare a bank reconciliation statement(Solved)
Briefly explain why it is important for a business entity to prepare a bank reconciliation statement
Date posted: November 17, 2018. Answers (1)
- Differentiate between a petty cashbook and a three-column cashbook(Solved)
Differentiate between a petty cashbook and a three-column cashbook.
Date posted: November 17, 2018. Answers (1)
- The following balances have been extracted from the books of Limuru Manufacturers, a small scale manufacturing enterprise, as at 31 December 2002:(Solved)
The following balances have been extracted from the books of Limuru Manufacturers, a small scale manufacturing enterprise, as at 31 December 2002:
2. The factory output is transferred to the trading account at factory cost plus 25%
of factory profit.
3. Depreciation is provided at the rates shown below on the original cost of fixed
assets held at the end of each financial year.
Plant and machinery - 10% per annum
Motor vehicles - 25% per annum
4. Amounts accrued at 31 December 2002 for direct labour amounted to Sh. 3,000,000
and rent and rates prepaid at 31 December 2002 amounted to Sh. 2,000,000.
Required:
(a) Manufacturing, trading and profit and loss account for the year ended 31 December
2002.
(b) Balance sheet as at 31 December 2002.
Date posted: November 17, 2018. Answers (1)
- Write short notes to distinguish the following:
(a) Purchased goodwill and non-purchased goodwill.
(b) Amortisation and depreciation of fixed assets.
(c) Provisions and reserves.
(d) Compensating errors and errors...(Solved)
Write short notes to distinguish the following:
(a) Purchased goodwill and non-purchased goodwill.
(b) Amortisation and depreciation of fixed assets.
(c) Provisions and reserves.
(d) Compensating errors and errors of principle
Date posted: November 17, 2018. Answers (1)
- Denticare Limited makes its accounts on 30 June every year. On 1 July 2001, the company's balance sheet included the following figures for non -current...(Solved)
Denticare Limited makes its accounts on 30 June every year. On 1 July 2001, the company's balance sheet included the following figures for non-current assets:
The company's policy is to charge depreciation at the following rates:
A proportionate charge is made in the year of purchase, sale or revaluation of an asset.
During the year ended 30 June 2002, the following transactions took place:
1. On 1 January 2002 the company decided to adopt a policy of revaluing its buildings. A
professional valuer engaged for this purpose revalued the buildings at Sh.34
million.
2. On 1 Janua ry a plant that had cost Sh.3 million was sold for Sh.500, 000. Accumulated
depreciation on this plant on 30 June2001 amounted to Sh.2.3 million. A new plant was
then purchased at a cost of Sh.4 million.
3. On 1 April 2002 a new motor vehicle was purchased for Sh.300, 000 Part of the
purchase price was settled by exchanging another motor vehicle at an agreed value of
sh.120, 000 The balance of Sh.180,000 was paid in cash. The vehicle which was given in
part exchange had cost Sh.200, 000 and had a net book value of Sh.100, 000 as at 30
June 2001
Required:
(a) The following ledger accounts to record the above transactions:
(i) Buildings account.
(ii) Provision for depreciation: Buildings.
(iii) Plant and machinery account.
(iv) Provision for depreciation: Plant and Machinery.
(v) Motor vehicles account.
(vi) Provision for depreciation: Motor vehicles.
(b) Property, plant and equipment movement schedule for the year ended 30 June 2002.
Date posted: November 17, 2018. Answers (1)
- Masaba Company Ltd. is a retail provider with an authorised share capital of 800,000 Sh.20 ordinary shares and 250,000 8% Sh.20 redeemable preference shares.
The following...(Solved)
Masaba Company Ltd. is a retail provider with an authorised share capital of 800,000 Sh.20 ordinary shares and 250,000 8% Sh.20 redeemable preference shares.
The following financial information reflects the position of the company as at 31 December
2001 after preparing the Trading, profit and loss account:
The following resolutions relating to year ended 31 December 2001 have been passed by the
board of directors of the company
1. Transfer Sh.500,000 to General Reserve.
2. Provide for 5% final dividend and final preference dividend on shares issued
and outstanding on 31 December 2001.
3. Make a bonus issue of 100,000 fully paid ordinary shares from the retained profits
account.
Required:
(i) The appropriations account of Masaba Company Ltd. for the year ended 31 December
2001.
(ii) The balance sheet of Masaba Company Ltd. as at 31 December 2001.
Date posted: November 17, 2018. Answers (1)
- Explain the legal provisions regarding the establishment and subsequent use of the following reserves: (i) Share premium account. (ii) Capital redemption reserve fund.(Solved)
Explain the legal provisions regarding the establishment and subsequent use of the following reserves: (i) Share premium account. (ii) Capital redemption reserve fund.
Date posted: November 17, 2018. Answers (1)