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1. Completed contract method
The Completed Contract Method (CCM) is where no profit is recognised when the contract is in progress; profit is only recognised when the contract is completed or substantially completed; i.e. only minor work (other than warranty work) is outstanding. Cost and progress payments are accumulated during the period of contract but revenue is not recognised up to contract completion. This is in compliance with the prudence concept whereby no profit is recognised unless there is certainty on its realisation.
2. Percentage of completion method
The PCM method allows for recognition of revenue as the contract progresses. This is in compliance with the matching concept. It allows the contractor to report profits in financial years during which the contract is incomplete but activity has been undertaken. The risk associated with this method relates to enormous estimation of future costs
Wilfykil answered the question on February 11, 2019 at 07:21
- Prepare the following in the books of Witu ltd
i) Consignment account
ii) Goods sent on consignment account
iii) Goods damaged in transit account(Solved)
Witu ltd, operates in Mombasa and deals in electronic goods, Most of these goods are sold through consignee of these consignees Mbaka Ltd,operates in Kitui town.
Witu ltd received the following account sales from Mbaki Ltd.
The account sales of 240 television sets received from the sold on account of Witu ltd of
Mombasa
Date posted: February 11, 2019. Answers (1)
- For each of the years ended 31 December 2006, 2007 and 2008, prepare extracts of financial statements using the percentage of completion approach in line...(Solved)
Date posted: February 11, 2019. Answers (1)
- Juhudi Contractors carried out work on four construction contracts during the financial year ended 30 September 2009.(Solved)
Juhudi Contractors carried out work on four construction contracts during the financial year ended 30 September 2009.
Date posted: February 11, 2019. Answers (1)
- Wonderful Bikes Ltd. is a retail outlet which sells motorbikes both on cash and hire purchase terms.
The following information was extracted from the books of...(Solved)
Wonderful Bikes Ltd. is a retail outlet which sells motorbikes both on cash and hire purchase terms.
The following information was extracted from the books of account of Wonderful Bikes Ltd. as at 31 August 2011:
Date posted: February 11, 2019. Answers (1)
- Differentiate between defined benefit and defined contribution plans(Solved)
Differentiate between defined benefit and defined contribution plans
Date posted: February 11, 2019. Answers (1)
(Solved)
Date posted: February 11, 2019. Answers (1)
- Explain the disclosure requirements for contracts in progress at the end of the reporting period in accordance with International Accounting Standard (IAS) 11, Construction Contracts.(Solved)
Explain the disclosure requirements for contracts in progress at the end of the reporting period in accordance with International Accounting Standard (IAS) 11, Construction Contracts.
Date posted: February 11, 2019. Answers (1)
- Explain two methods of accounting for construction contracts.(Solved)
Explain two methods of accounting for construction contracts.
Date posted: February 11, 2019. Answers (1)
(Solved)
Date posted: February 11, 2019. Answers (1)
- Three firms of accounts decided to amalgamate into a new firm Cheloti Gusera Kandie & Co. with effect from 1 April 1999. Until 31 March...(Solved)
Three firms of accounts decided to amalgamate into a new firm Cheloti Gusera Kandie & Co. with effect from 1 April 1999. Until 31 March 1999 Apopo. Cheloti and Chuma were partners in Apopo Cheloti & Co. sharing capital and profits equally. Guserwa. Kurgat and
Ochieng were partners in Guserwa & Co. sharing capital and profits in the ratio 4:4:1. Kandie was a sole practitioner.
The balance sheets of the firms as at 31 March 1999 were as follows:
Date posted: February 11, 2019. Answers (1)
- Maina and Ojara have been in partnership for a number of years sharing profits in the ratio 3:2. Because of the present difficult economic situation...(Solved)
Maina and Ojara have been in partnership for a number of years sharing profits in the ratio 3:2. Because of the present difficult economic situation in the country, it has been agreed that in the period ended 30 April 2000, no salaries will be paid to the partners and no drawings will be made either. Interest has been credited to the partners in respect of their capital accounts. They decided to turn the partnership into a company on 30 April 2000, with its accounts being made up to 30 April each year. They decided that they would not open a separate set of accounts on 30 April 2000, but would continue to record the transactions of the business in the partnership books.
The trial balance extracted by the accountant, after he had computed the profit for the period ended 30 April 2000 and the year ended 30 April 20001, was as follows:
Required:
(a). Prepare the Realisation and Capital Accounts of Maina and Ojaro to record the dissolution of the partnership.
(b). Prepare for Maoja Limited the income statement for the year ended 30 April 2001 and the balance sheet at that date in conformity with Kenya Companies Act and the International Accounting Standards. Do not prepare the statement of changes in equity – deal with dividends proposed and paid in the income statement. Ignore deferred tax.
Date posted: February 11, 2019. Answers (1)
- Emojong, Barmoi and Kimani have been partners sharing profits and losses in the ratios 2:2:1. Accounts have been prepared on an annual basis to 31...(Solved)
Emojong, Barmoi and Kimani have been partners sharing profits and losses in the ratios 2:2:1. Accounts have been prepared on an annual basis to 31 December of each year Emojong the only active partner, died on 31 May 2002 and the remaining partners decided to cease business from that date. The assets are to be realized, outstanding debts paid and the remainder to be shared by the partners (including the executors of Emojong’s estate) in an equitable manner, distributions of cash being made as soon as possible.
A balance sheet prepared as at 31 May 2002 revealed the following position
Date posted: February 11, 2019. Answers (1)
- Ali and Bali are in partnership trading as A and B Retailers. Similarly, Cheche and Dunga are in partnership trading as C and D Traders....(Solved)
Ali and Bali are in partnership trading as A and B Retailers. Similarly, Cheche and Dunga are in partnership trading as C and D Traders. It was mutually agreed that as at 1 January 2004, the partnership businesses be amalgamated into one firm, ABC and D Enterprises. The profit and loss sharing ratios of the partners both in the old and new partnership were as follows:
Date posted: February 11, 2019. Answers (1)
- Jembe and Panga were sole traders manufacturing farm implements. On 31 March 2004, they amalgamated and traded as partners sharing profits and losses in the...(Solved)
Jembe and Panga were sole traders manufacturing farm implements. On 31 March 2004, they amalgamated and traded as partners sharing profits and losses in the ratio of 3:2. One year later on 31 March 2005, they converted the partnership into a limited liability company called Shamba Ltd.
No. adjustments have been made to record the amalgamation and conversion but the balance sheets for the sole traders as at 31 March 2004 and the partnership as at 31 March 2005 were as follows:
Date posted: February 8, 2019. Answers (1)
- Kuni and Moto were partners in a business of logging and saw milling sharing profits and
losses equally. The partnership balance sheet as at 31 December...(Solved)
Date posted: February 8, 2019. Answers (1)
- A and B Advocates and M and N Advocates were practicing firms of advocates. On 1 January 2006, they agreed to amalgamate the partnerships into...(Solved)
A and B Advocates and M and N Advocates were practicing firms of advocates. On 1 January 2006, they agreed to amalgamate the partnerships into one firm Able and Mine Advocates. The accounts of the separate partnerships have been prepared annually to 31
December.
The agreed profit and loss sharing ratios in the old and new firms were as follows
Date posted: February 8, 2019. Answers (1)
- List and briefly explain five attributes of reliable financial statements as promulgated in the IFRSs(International Financial Reporting Standards) framework.(Solved)
List and briefly explain five attributes of reliable financial statements as promulgated in the IFRSs(International Financial Reporting Standards) framework.
Date posted: February 8, 2019. Answers (1)
- Distinguish between relevance and reliability in the context of IFRSs(International Financial Reporting Standards) Framework.
(Solved)
Distinguish between relevance and reliability in the context of IFRSs(International Financial Reporting Standards) Framework.
Date posted: February 8, 2019. Answers (1)
- Ali, Baba and Cheche were in partnership sharing profits and losses in the ratio 2:2:1 respectively. Following serious disagreement, the partners decided to dissolve the...(Solved)
Ali, Baba and Cheche were in partnership sharing profits and losses in the ratio 2:2:1 respectively. Following serious disagreement, the partners decided to dissolve the partnership. The proceeds from sale of assets were to be paid to the individual partners after all expenses and liabilities had been paid.
The balance sheet as at 30 September 2007 when the partners made the decision to dissolve the partnership was as follows:
Required:
a) Briefly explain the rule in Garner Vs Murray.
b) A statement showing how cash realized would be distributed to the partners.
c) Realization account, cash at bank account and capital accounts to close off the books of the
partnership.
Date posted: February 8, 2019. Answers (1)
- Meme, Noni and Zenah are partners sharing profits and losses in the ratio 3:2:1 respectively, after allowing for interest on fixed capitals t the rate...(Solved)
Meme, Noni and Zenah are partners sharing profits and losses in the ratio 3:2:1 respectively, after allowing for interest on fixed capitals t the rate of 5% per annum. The partners prepare their partnership accounts annually to 30 September.
The balance sheet of the partnership as at 31 March 2008 was as follows:
Date posted: February 8, 2019. Answers (1)