- What is a balance sheet?(Solved)
What is a balance sheet?
Date posted: January 28, 2019. Answers (1)
- The trial balance of S. Juma, a sole trader, did not balance on 30 April 1995. The
difference was put in the suspense account. The final...(Solved)
The trial balance of S. Juma, a sole trader, did not balance on 30 April 1995. The
difference was put in the suspense account. The final accounts, which were then
prepared, showed a net profit of Sh.64, 000.
During audit, the following errors were noted:
(1) A loan from ABD Bank of Sh. 10,000 was entered correctly in cashbook but was not
posted to the ledger.
(2) A cheque of Sh.4,000 for rent received was not entered in the books.
(3) Closing stock was overvalued by Sh.1, 500.
(4) Discount allowed of Sh.500 was entered in the discount received account.
(5) The opening stock was understated by Sh.3,200.
(6) Prepaid insurance of Sh.220 had been included in the profit and loss account.
(7) Goods destroyed by fire amounting to Sh. 12,000 were written off in the profit and loss
account.
However the insurance company has agreed to compensate the full amount.
Required:
(a) Journal entries to correct the errors.
(b) Statement of corrected profit.
(c) Suspense account.
Date posted: November 26, 2018. Answers (1)
- The draft final account for the year ended 30 June 1994 of central limited, car dealers, show a
gross profit of Sh 90,000 and a net...(Solved)
The draft final account for the year ended 30 June 1994 of central limited, car dealers, show a
gross profit of Sh 90,000 and a net profit of Sh 2,250,000. After subsequent investigations
the following discoveries were made:
1. A debt of Sh. 75,000 due from J. Mema to the company was written off as
irrecoverable in the company‟s books in January 1994. Since preparing the
draft accounts, J.Mema has settled the debt in full.
2. The company‟s main warehouse was burgled in February 1994, when goods costing Sh.
5,000,000 were stolen. This amount has been shown in the draft account as an overhead
item “Loss due to burglary”. Although the insurance company denied liability
originally, in the past days or two that decision it has changed and central limited have
advised that Sh. 3,500,000 will be paid in settlement.
3. Discounts received in March 1994 of Sh. 52,500 have been credited, in error,
to purchases.
4. On 2 January 1994, a car, which had cost the company Sh. 450,000, was taken from the
showroom for the use of one of the company‟s sale representatives whilst
on company business. In the showroom, the is car had a Sh. 600,000 price label.
Effect has not been given to this transfer in the books of the company, although the
car was not included in the trading stock valuation at 30 June 1994.the company
provides for depreciation on motor vehicles at the rate of 25% of the cost of vehicles
held at the end of each financial year.
5. Goods bought and received from P.Nene on 29 June 1994 at a cost of Sh 300,000
were not recorded in the company‟s books of account until early July 1994.
Although they were unsold on 30june 1994, the goods in question were not included
in the stock valuation at that date.
6. The company is hoping to market a new car accessory product in January 1995. The
venture is to be launched with an advertising campaign commencing in July 1994. The
cost of this campaign is Sh. 1,250,000 and this has been debited in the
company‟s profit and loss account for the year ended 30 June 1994, and is included
in current liabilities as a provision, notwithstanding the confident expectations that the
new product will be a success.
7. On June 30 1994, the company paid an insurance premium of Sh. 150,000, the renewal
being for the year commencing 1 July 994. This premium was included n the
insurances of Sh. 275,000 debited in the draft profit and loss account.
Required:
(a) The journal entries necessary to effect corrections of all the above errors.
(b) A computations of the corrected gross profit and net profit for the year ended 30 June
1994
Date posted: November 26, 2018. Answers (1)
- Jackson Ndambuki, a businessman in Kangundo, does not maintain a double entry
bookkeeping system.
On 1 July 1994 his capital was Sh. 172,500. An analysis of his...(Solved)
Jackson Ndambuki, a businessman in Kangundo, does not maintain a double entry
bookkeeping system.
On 1 July 1994 his capital was Sh. 172,500. An analysis of his cashbook for the year to 30
June 1995 gives the following particulars:
Discounts allowed and received amounted to Sh. 15,000 and Sh.7,500 respectively.
Interest of 5 per cent per annum is to be provided on capital at the beginning of the year.
(Ignore payments in and drawings)
Depreciate plant and machinery at 10 per cent and furniture at 5 per cent on the book value. A
provision for doubtful debts of 5 per cent is to be made on sundry debtors.
Required:
(a) Trading, Profit and Loss Account for the year ended 30 June 1995.
(b) Balance Sheet as at that date.
Date posted: November 26, 2018. Answers (1)
- Indicate, giving reasons, the correct treatment of each of the following transactions in the
books of a company:
i) Closing stock for the current year has a...(Solved)
Indicate, giving reasons, the correct treatment of each of the following transactions in the
books of a company:
i) Closing stock for the current year has a cost of Sh.890,000 and a replacement cost of
Sh.850,000. The stock has not been reduced to its replacement cost because the
company's accountant believes that the purchase price of similar stock items would
probably rise during next year.
ii) A new machine was purchased at an auction for cash at Sh.1. 6 million: Since the cash
price of the machine would have been Sh.1. 9 million if it was purchased from the normal
supplier, the machinery account been debited with Sh.1. 9 million as shown below:
Date posted: November 26, 2018. Answers (1)
- Indicate and give reasons the amount of revenue that should be recognized in the year ended 31
May 1996 in each of the following independent cases:
i)...(Solved)
Indicate and give reasons the amount of revenue that should be recognized in the year ended 31
May 1996 in each of the following independent cases:
i) Net credit sales for 1995 amounted to Sh.l.5 million, three-fourths of which were
collected in 1995. Past experience indicates that about 97% of all credit sales are
eventually collected.
ii) Cash of Sh.350,000 is received from a customer during 1996 in payment for equipment
that is to be manufactured and shipped to the customer during 1997.
Date posted: November 26, 2018. Answers (1)
- Explain the meaning and significance of the revenue realization principle.(Solved)
Explain the meaning and significance of the revenue realization principle.
Date posted: November 26, 2018. Answers (1)
- Define the term accounting standard and give four reasons why a professional accounting body issues accounting standards.(Solved)
Define the term accounting standard and give four reasons why a professional accounting body issues accounting standards.
Date posted: November 26, 2018. Answers (1)
- List the principal distinctions between partnerships and limited companies(Solved)
List the principal distinctions between partnerships and limited companies
Date posted: November 26, 2018. Answers (1)
- The trial balance of Bidii Retailers, which was extracted on 30 September 1996, included
the following items:
Sh.
Sales ledger control account 550,885
Purchases ledger control account 391,330
Suspense account...(Solved)
The trial balance of Bidii Retailers, which was extracted on 30 September 1996, included
the following items:
Sh.
Sales ledger control account 550,885
Purchases ledger control account 391,330
Suspense account in trial balance (debit balance) 11,550
The following additional information is available:
1. The balances from sales ledger were: Debit balances Sh.555, 555 Credit
balances Sh.6, 170
2. The balances from purchases ledger were: Credit balances Sh.388.88:
Debit balances Sh.5, 555.
3. The sales ledger includes a debit balance of Sh.3, 500 for Moco Fishing Ltd., and the
purchase ledger includes a credit balance of Sh.4, 000 relating to the same firm. The debit
balance will be offset against the credit balance and the difference will be settled in cash.
4 . Included in the credit balance on the sales ledger is a balance of Sh.3, 000 in the name of
John Oloo. This arose because a sales invoice of Sh.3, 000 had earlier been posted in error
from the sales daybook to the debit of the account of Peter Oloo in the purchases ledger.
5. An allowance of Sh.1,500 against some damaged goods had been omitted from the appropriate
account in the sales ledger. This allowance had been included in the control account.
6. An invoice for Sh.2.280 had been entered in the purchase daybook as Sh.3,270.
7. A cash receipt from a credit customer for Sh.1,725 had been entered in the cash book as
Sh.1,225.
8. The purchase day book had been overcast by Sh.5,000.
9. The bank balance of Sh.6,000 had been included in the trial balance, in error, as an overdraft.
10. The book-keeper had been instructed to write off Sh.2,500 from c ustomer XYZ's account as a
bad debt, and to reduce the provision for bad and doubtful debts by Sh.3,500. He
however wrote off Sh.3,500 from the customers' account. He then increased the
provision for bad and doubtful debts by Sh.2,500.
11. The debit balance on the insurance account in the nominal ledger of Sh. 17,050 had
been included in the Trial balance as Sh.17,500.
Required:
(a) Corrected sales ledger control, purchase ledger control, and suspense accounts balances.
(b)Reconcile the sales ledger balances with the corrected sales ledger control account balance,
and also the purchases Ledger balances with the corrected purchase ledger control
balance.
Date posted: November 26, 2018. Answers (1)
- Sabuni Ltd manufactures and sells soaps and Lotions. The two products pass through two manufacturing departments 1 and 2. You are supplied with the following...(Solved)
Sabuni Ltd manufactures and sells soaps and Lotions. The two products pass through two manufacturing departments 1 and 2. You are supplied with the following trial balance as at 30 June 2002.
c) Depreciation is to be provided on Non current assets at the rate of 10 per cent per annum
on cost. additional non current assets were purchased on 1 January 2002 at a cost of
Sh.80,000.The annual depreciation charge is to be divided among manufacturing
,administration and distribution in the ratio of 8:1:1.
d) Prepaid and accrued administration amount to Shs.1,800 and Shs.3,000 respectively.
e) Bad debts of Sh.3,200 are to be written off and a provision for doubtful debts to be
increased to Sh.16,000.This should be taken as a distribution cost.
f) The following allocations are to be made.
- Manufacturing expenses (between dept 1 and dept 2) in proportion to manufacturing
wages
- Administration expenses (between soaps and Lotions) in proportion to number of
units sold
- Distribution expenses (between soaps and Lotions) in the proportion of sales value.
- Cost of goods manufactured in dept 1 (between soaps and Lotions) in the ration of
5:4.
- Cost of goods manufactured in dept 2 (between soaps and Lotions) in the ration of
1:5
g) Corporation tax payable for the year is Sh.160,000.
h) The directors propose a final dividend of sh.100,000.
Required:
a) i) A manufacturing account showing the results of department 1 and 2 ,
ii) Trading, Profit and Loss account showing the results of soaps and
Lotions, for the year ending 30 June 2002.
b) A balance sheet as at 30 June 2002.
Date posted: November 26, 2018. Answers (1)
- Rono Ltd. manufactures electric toys called Densta on small scale basis. On 1 January 1997, 6000 units of Densta were in stock. During 1997, the...(Solved)
Rono Ltd. manufactures electric toys called Densta on small scale basis. On 1 January 1997, 6000 units of Densta were in stock. During 1997, the company manufactured 200,000 units and sold 190,000 units at a price of Sh.6 each. The following balances were extracted from the books of account on 31 December 1997.
The following additional information was available:
1. Stocks of work-in-progress on 1 January and 31 December 1997 were of
insignificant value and are to be ignored.
2. Plant and machinery are to be depreciated using reducing balance method at 10 %.
3. Finished units of Densta are valued at factory cost.
4. Factory cost per unit of Densta was the same in 1996 and 1997.
Required:
(i) The manufacturing account for the year ended 31 December 1997, showing
clearly the prime cost and factory costs of producing Densta.
(ii) The trading account for the year ended 31 December 1997.
Date posted: November 26, 2018. Answers (1)
- The following trial balance was extracted from the books of Mapema Traders Ltd. as at 31 March 1998:(Solved)
The following trial balance was extracted from the books of Mapema Traders Ltd. as at 31 March 1998:
Additional information:
1. The debtors balance includes Sh.600,000 due from Otieno who has now been
declared bankrupt and it has been decided to write-off this debt as a bad debt.
2. The provision for doubtful debts is to be adjusted to 5 % of trade debtors at
31 March 1998.
3. Establishment expenses prepaid at 31 March 1998 amount to Sh.
120,000. The difference is to be written off during the year.
4. Administration expenses accrued due at 31 March 1998 amounted to Sh.210,000.
5. The company paid the interest on the loan stock for the year ended 31
March 1998 on 28 May 1998.
6. Gross profit is at the rate of 20% of sales.
7. Depreciation is provided annually on the cost of fixed assets held at the end of
the year at the following rates:
Freehold buildings 2 %
Fixtures and fittings 10%
8. The company's directors propose that the preference share dividend be paid, a
dividend of 10% on the ordinary shares to be paid and to transfer an amount of
Sh.7,500,000 to General Reserve.
Required:
The trading and profit and loss account for the year ended 31 March 1998 of Mapema Traders
Ltd. and a balance sheet as at that date.
Date posted: November 26, 2018. Answers (1)
- Write explanatory notes on the following accounting concepts:
(a) Materiality;
(b) Prudence;
(c) Consistency.(Solved)
Write explanatory notes on the following accounting concepts:
(a) Materiality;
(b) Prudence;
(c) Consistency.
Date posted: November 26, 2018. Answers (1)
- Wananchi Transporters Company Ltd. was incorporated on 1 June 1994 and on the same day
bought its first lorry, registration number KA 620, for Sh.4, 536,000.
On...(Solved)
Wananchi Transporters Company Ltd. was incorporated on 1 June 1994 and on the same day
bought its first lorry, registration number KA 620, for Sh.4, 536,000.
On 3 April 1995, the company bought its second lorry, KA 735 for Sh.2, 740,000.
On 3 June 1997, the first lorry, KA 620 was involved in an accident and was completely written
off. The insurance company paid the transport company Sh.1, 350,000 for the loss. On 5
January 1998, the company bought its third lorry, KB 327 for Sh.3, 780,000. Depreciation on
the lorries was provided at 10 per cent on straight -line basis. The policy of the company is to
provide depreciation for the full year for all acquisitions made at any time during the year and to
ignore depreciation on any lorry sold or disposed of during the year. All the lorries are insured.
The company makes its accounts annually to 31 December.
In 1998, the company decided to change its depreciation rate from 10 to 15 per cent on straight
line basis for all its lorries still in use retroactively, that is from year of purchase. An adjusting
entry will be made in the accounts for the year 1998.
Required:
1. The motor lorries account for years 1994 to 1998.
2. A schedule of additional depreciation arising from change of depreciation rate, for years
1994 to 1997.
3. Provision for depreciation account for the same period.
4. Disposal of motor lorries account.
Date posted: November 26, 2018. Answers (1)
- The cashbook column of Tatua Traders Company Ltd. had an overdraft of Sh.532, 400 as at 31
October 1998, which did not agree with balance as...(Solved)
The cashbook column of Tatua Traders Company Ltd. had an overdraft of Sh.532, 400 as at 31
October 1998, which did not agree with balance as per bank statement of the same date.
On checking through the relevant records and documents, some details were established as
shown below:
1. Bank charges and interest on overdraft as per the bank statement amounted to Sh. 12,450
and Sh. 135,480 respectively.
2. A debtor deposited Sh.254, 500 to the bank direct.
3. Insurance premium of the mortgaged property amounting to Sh.35, 485 was paid direct
by the bank.
4. Standing orders of Sh. 138,000 have been effected by the bank.
5. Cheques for Sh.354, 890 which were banked on 29 October 1998 were credited by the
bank on 5 November 1998.
6. Cheques drawn by the company amounting to Sh.745, 964 had not been presented for
payment as at 31 October 1998.
7. A cheque for Sh.74, 500 was debited by the bank as Sh.47, 500.
8. The payments side of the cashbook was undercast by Sh.32, 000.
9. The bank had debited the account with another customer's cheque of Sh.27, 500 but had
not yet corrected the mistake on 31 October 1998.
Required:
(a) Make adjustments in the cash book and show the adjusted cash book balance.
(b) A bank reconciliation statement as at 31 October 1998.
Date posted: November 26, 2018. Answers (1)
- XML Ltd. maintains control accounts in its business records. The balances and transactions relating to the company's control accounts for the month of December 1994...(Solved)
XML Ltd. maintains control accounts in its business records. The balances and transactions relating to the company's control accounts for the month of December 1994 are listed below:
Required:
Post the sales ledger and the purchases ledger control accounts for the month of December
1994 and derive the respective debit and credit closing balances on 31 December 1994.
Date posted: November 26, 2018. Answers (1)
- Explain the purposes for which control accounts are prepared in a business organisation(Solved)
Explain the purposes for which control accounts are prepared in a business organisation.
Date posted: November 26, 2018. Answers (1)
- Jim Mukora commenced business as the proprietor of 'stop-shop' on 1 April 1993, paying
Sh.480,000 into business bank account. The Sh.480,000 was made up of Sh.320,000...(Solved)
Jim Mukora commenced business as the proprietor of 'stop-shop' on 1 April 1993, paying
Sh.480,000 into business bank account. The Sh.480,000 was made up of Sh.320,000 from his
own funds, and further Sh. 160,000 borrowed from his friend, Bob Meme, who was to be paid
interest at 20% per annum on prorata basis. On 1 January 1994, Meme joined Mukora as a
partner and it was agreed that:
1. Mukora and Meme should bring their cars into the partnership at values of Sh. 144,000
and Sh.96, 000 respectively. .
2. Meme's loan should be converted to capital on 1 January 1994 and he should
introduce further capital of Sh.160, 000.
3. From 1 January 1994, Mukora should receive a salary of Sh.128, 000 per annum.
4. The balance of the profits and losses to be shared equally between the partners. The
partnership did not keep full records, but the following information was obtainable:
(i) The bank statement showed:
(ii) From various notes it was discovered that the following expenses were paid out of
the takings from cash sales before they were banked:
Sh.
Wages of shop assistants 320,000
Motor expenses 9 months to 31 December 1993 52,000
3 months to 31 March 1994 22,400
Purchases 59,200
Sundry expenses 12,000
A cash float of Sh.2, 400 was retained at the end of each day.
(iii) The cars are to be depreciated on the straight line basis at a rate of 25 % per annum.
(iv) It was established that the following items were to be taken into account on 31
March 1994:
Sh.
Trade creditors 108,000
Unexpired sundry expenses 4,000
Trade debtors 824,000
(v) Stocks on 31 March 1994 were valued at 776,000
Required:
(a) A Trading Account for the year ended 31 March 1994. (5 marks)
(b) Profit and Loss and Appropriation Accounts for the nine months ended 31 December,
1993 and for the three months ended 31 March 1994 and the year to 31 March 1994.
(Unless otherwise stated, you may assume that all expenses and sales accrued
evenly over the year). (15 marks)
(c) A balance Sheet at 31 March 1994.
Date posted: November 25, 2018. Answers (1)
- Jaguar Traders Ltd. was incorporated on 4 May 1998 with a nominal capital of Sh.
1,000,000 divided into 50,000 ordinary shares of Sh.20 each.
On 5 May...(Solved)
Jaguar Traders Ltd. was incorporated on 4 May 1998 with a nominal capital of Sh.
1,000,000 divided into 50,000 ordinary shares of Sh.20 each.
On 5 May 1998, the directors invited interested members of the public to apply for purchase of
shares at par. The closing date for application was 15 May 1998. Applications were received for
60,000 ordinary shares and paid in full. The allotment was made on 20 May 1998 and the excess
application money refunded.
On 26 May 1998, the directors bought: furniture Sh. 150,000, equipment Sh.250,000
and goods Sh.500,000. All these were delivered and paid for on the same date.
Required:
(a) Journal entries, including bank to record the above transactions
(b) Ledger accounts
(c) Balance sheet as at 26 May 1998
Date posted: November 25, 2018. Answers (1)