- The estimates and expenditure details relating to the ministry of Youth and social services for the year
2010/2012 were as follows
Code Details
...(Solved)
The estimates and expenditure details relating to the ministry of Youth and social services for the year
2010/2012 were as follows
Code Details
Original estimates Actual expenditure
Sh. "millions" Sh. "millions"
010 Personal emoluments 288 324
050 House allowances 54 46.8
080 Passage and leave 18 16.2
115 Travelling expenses 79.2 82.8
140 Electricity and water 21.6 23.4
221 Purchase of Equipment 180 144
640 Appropriation-in-Aid 54 43.2
Supplementary estimates authorized during the year were as follows
010 Personal emoluments Sh. 28.8 million (increased)
115 Travelling expenses Sh. 7.2 million (reduced)
Required:
Appropriation account for the year ended 30June 2011, showing the net surplus to be surrendered to the exchequer
Date posted: October 3, 2022. Answers (1)
- In the context of public sector accounting, explain the following terms:
(i) Vote book
(ii) Trust fund
(iii)Capital project fund(Solved)
In the context of public sector accounting, explain the following terms:
(i) Vote book
(ii) Trust fund
(iii)Capital project fund
Date posted: October 3, 2022. Answers (1)
- Outline five components of a computerized accounting system.(Solved)
Outline five components of a computerized accounting system.
Date posted: October 3, 2022. Answers (1)
- The financial statements of Wendani Limited for the year ended 31st January 2011 and 31st January 2012 are given below
Statement of financial position as at...(Solved)
The financial statements of Wendani Limited for the year ended 31st January 2011 and 31st January 2012 are given below
Statement of financial position as at 31st January
2011 2012
Sh. '000' Sh. '000'
Assets
Non-Current Assets (Net Book Value) 11,000 14,000
Current Assets
Inventory 2,000 3,000
Trade receivables 2,500 2,800
Bank balance - 500
4,500 6,300
Total Assets 15,500 20,300
Equity and Liabilities
Capital and Reserves
1,000,000 ordinary shares of sh. 10 each 10,000 10,000
Revenue Reserves 3,000 4,100
13,000 14,100
Non-Current Liabilities
8% debentures - 5,000
Current Liabilities
Trade payables 1,500 1,200
Bank Overdraft 1,000 -
2,500 1,200
Total Capital and Liabilities 15,500 15,300
Income Statement for the year ended
2011 2012
Sh. '000' Sh. '000'
Sales 20,000 28,000
Cost of sales (15,000) (21,000)
Gross profits 5,000 7,000
Administrative expenses (3,800) (4,600)
Finance costs - (400)
Net profit 1,200 2,000
Inventory as at 1st February 2010 was sh. 5,000,000
Required:
For each year, compute the following
(i) Gross profit margin
(ii) Inventory turnover
(iii) Return on Equity
(iv) Return on assets
(v) Acid test ratio
(vi) Current ratio
(vii) Financial leverage
(b) Comment on the liquidity of the company
Date posted: October 3, 2022. Answers (1)
- Explain three reasons why the amount of cash flows of a business entity might differ from the profits
generated by the business entity during the same...(Solved)
Explain three reasons why the amount of cash flows of a business entity might differ from the profits
generated by the business entity during the same period
Date posted: October 3, 2022. Answers (1)
- The following assets and liabilities were extracted from the books of Sparrows Sports Club as at 31st March:
...(Solved)
The following assets and liabilities were extracted from the books of Sparrows Sports Club as at 31st March:
2011 2012
Sh. '000' Sh. '000'
Equipment 18000 16000
Furniture and fittings 1200 1000
Subscription in arrears 130 100
Subscription in advance 600 500
Inventory of stationary 15 5
Bar inventory 3500 ?
Cash at Bank 1000 ?
Petty cash 25 15
Bar payables 700 1000
Accrued electricity 30 40
The summary of receipts and payments for year ended 31st March 2012 was as follows:
Receipts Payments
Sh. 000 Sh. 000
Subscriptions 4,400
Bar takings 20,000
Entry fees 390
Bar payables 13,700
petty cash 180
New equipment 2,000
Cash refund to members 200
Electricity and water 400
Barman's wages 1,600
Bar glasses 100
Repairs and maintenance 300
Rates and insurance 160
Honoraria to treasurer 290
Additional information
1. The club maintains a uniform gross profit margin of 25% on bar sales
2. The bar glasses are considered as revenue expense
3. The bar man is entitled to an annual bonus of 10% of bar net profit after charging the bonus
4. The petty cash was used to buy stationary only
5. Subscriptions received during the year included sh. 400,000 being arrears of previous year. It’s the policy of the club to write off arrear of more than one year
Required:
(a) Bar income statement for the year ended 31st March 2012
(b) Subscriptions account
(c) Income and expenditure account
(d) Statement of financial position as at 31st March 2012
Date posted: October 3, 2022. Answers (1)
- Ababu and Babu are partners in a bookshop business sharing profits and losses in proportion of 2/5 and 3/5 respectively. The trial balance extracted from...(Solved)
Ababu and Babu are partners in a bookshop business sharing profits and losses in proportion of 2/5 and 3/5 respectively. The trial balance extracted from the books of the partnership as at 30th April 2012 was as follows:
Sh. Sh.
Capital accounts
Ababu 4,225,000
Babu 2,600,000
Drawings
Ababu 585,000
Babu 520,000
Trade payables 832,000
Office furniture (Net Book Value) 325,000
Accounts receivables 2,632,500
Rent 243,750
Postage and telephone 276,250
Gross profit 4,628,000
Bank 910,000
Salaries and wages 1,706,250
Printing and stationary 80,600
Commission paid 325,000
Insurance 130,000
Motor Vehicles (Net Book Value) 1,680,900
Plant and machinery (net Book Value) 2,275,000
Capital (Chango) 585,000
Current Accounts
Ababu 130,000
Babu 104,000
Cost of sales 5,674,500
Cash 341,250
Inventories (30th April 2012) 812,500
5,674,500
18,648,500 18,648,500
Additional information
1. The partners agreed to admit Chango as a partner on 1 February 2012. Prior to admission, Chango was a
manager in the firm earning a salary of sh. 228,930 per annum which has been accounted for proportionately
2. Chango brought in capital of sh. 585,000 in cash and was thereafter entitled to 1/5th of the firm’s profits. The balance to be shared in the old profit sharing ratio. Chango was to stop receiving salary but was granted a minimum share of profit equal to his salary
3. Chango was also to bring his personal vehicle valued at sh. 325,000 for use in the business
4. Insurance paid in advance and rent outstanding as at 30th April 2012 were sh. 32,500 and sh. 24,050
respectively
5. Bad debts of sh. 32,500 arising before Chango’s admission was to be written off
6. A provision of 1% of outstanding debtors was to be maintained from the date of changes admission
7. Depreciation was to be provided as follows
Asset Rate
Office Equipment 15% on reducing balance
Motor vehicles 20% on book value
Plant and machinery 10% on Book value
8. Partner’s goodwill on admission of Chango’s admission was agreed at sh. 650,000 and is not to be retained in the books
9. No interest was to be allowed on capital or charged on drawings
Required:
(i) Income statement for the year ended 30th April 2012
(ii) Partner’s current accounts
(iii) Partner’s capital accounts
Date posted: October 3, 2022. Answers (1)
- “Contemporary organizations are striving to adopt professional ethics in their operations.” Identify the
common barriers to the successful adoption of ethical standards in business practice.(Solved)
“Contemporary organizations are striving to adopt professional ethics in their operations.” Identify the
common barriers to the successful adoption of ethical standards in business practice.
Date posted: October 3, 2022. Answers (1)
- Jitahidi limited was incorporated in the year 2010 and specializes in the manufacturing of electric cables branded “Nyaya”. The following trial balance was extracted from...(Solved)
Jitahidi limited was incorporated in the year 2010 and specializes in the manufacturing of electric cables branded “Nyaya”. The following trial balance was extracted from the books of the company as at 30th April 2012.
Sh. '000' sh. '000'
Inventories (1st May 2011)
Raw materials 6,000
Work in progress 7,000
Finished Goods 8,000
Purchases of raw materials 82,000
Sales 184,700
Trade receivables and payables 9,000 6,000
Bank balance 5,200
Carriage inwards 3,000
Direct Labor 16,000
Provision for unrealized profits 1,600
Electricity and water 9,600
Rates and insurance 5,200
Distribution costs 2,000
Administrative expenses 1,880
Land (cost) 45,000
Buildings (cost) 125,000
Plant and machinery (cost) 20,000
Motor vehicles (cost) 16,000
Equipment (cost) 10,000
Accumulated depreciation (1 May 2011)
Buildings 5,000
Plant and machinery 8,000
Motor vehicles 4,000
Equipment 6,000
15% debentures 8,000
Interest on debentures paid 1,200
Ordinary shares of sh. 20 each 100,000
Share premium 10,000
Retained earnings 38,780
372,080 372,080
Additional information
1. Inventories as at 30th April 2012 were as follows:
Sh.
‘000’
Raw materials 7,200
Work in progress 2,000
Finished goods 9,500
Raw materials included damaged items costing sh. 600,000 which could realize sh. 500,000 after incurring an additional cost of sh. 100,000
2. Sales included goods worth sh. 500,000 sent on sales or return basis to a customer. The customer has not confirmed. The cost price was sh. 300,000 and no record has been made.
3. It’s the policy of Jitahidi limited to transfer the finished goods to trading at cost plus a mark-up of 25%
4. Accrued electricity as at 30th April 2012 amounted to sh. 400,000 while prepaid insurance was sh. 200,000
5. Depreciation is charged on a straight-line basis as follows
Asset Rate per annum
Buildings 2%
Plant and machinery 20%
Motor vehicles 25%
Equipment 20%
6. Costs are allocated as follows
Factory (%) Distribution Costs (%) Administration expenses (%)
• Depreciation
Buildings 80 10 10
Plant and machinery 100 - -
Equipment - 50 50
Motor vehicles - 60 50
• Rates and insurance 60 20 20
• Electricity and water 60 20 20
7. A provision for corporation tax amounting to sh. 14,350,000 is to be made
Required:
Manufacturing account and income statement for the year ended 30th April 2012
Date posted: October 3, 2022. Answers (1)
- (a) In relation to public sector accounting, explain the following concepts:
(i) Fund accounting.
(ii) Commitment accounting.
(iii) Cash accounting.
(b) The following balances were extracted from the records...(Solved)
(a) In relation to public sector accounting, explain the following concepts:
(i) Fund accounting.
(ii) Commitment accounting.
(iii) Cash accounting.
(b) The following balances were extracted from the records of Ben Juma, a sole trader as at 31 March:
2011 2012
Sh. “000” Sh. “000”
Land and Buildings 2,000 2,000
Equipment 800 640
Furniture and Fittings 400 320
Motor Vehicles 1,000 750
Inventory 600 ?
Trade receivables 900 1,200
Prepaid rates 30 40
Bank 270 2,605
15% bank loan 2,000 1,000
Trade payables 450 500
Accrued electricity 50 80
Additional information
1. Total sales amounted to sh.60,000,000, while purchases amounted to sh.42,200,000. There were no cash
sales nor cash purchases.
2. Total discount allowed and discount received amounted to sh.160,000 and sh.150,000 respectively. Bad
debts written-off during the year amounted to sh.40,000
3. During the year, Ben Juma purchased a new equipment costing sh.100,000.
4. The following expenses were paid by cheque during the year:
Sh. “000”
• Staff salaries 6,035
• Rates, insurance and electricity 3,880
• Interest on loan 150
5. On 30 September 2011, Ben Juma repaid part of the loan by cheque of sh.1,000,000.
6. Ben Juma did not maintain records on cash withdrawn from the bank for personal use, so the deficit in bank is due to personal drawings.
7. Ben Juma makes a uniform gross profit to cost of sales of 3/7 every year.
Required:
(i) Income statement for the year ended 31 March 2012.
(ii) Statement of financial position as at 31 March 2012.
Date posted: September 30, 2022. Answers (1)
- (a) Outline four reasons for developing accounting standards.
(b) The following balances were included in the statement of financial position of Big Movers Limited as at...(Solved)
(a) Outline four reasons for developing accounting standards.
(b) The following balances were included in the statement of financial position of Big Movers Limited as at 1st July 2011:
Cost Accumulated depreciation Net book value
Sh. “000” Sh. “000” Sh. “000”
Land 40,000 - 40,000
Buildings 22,000 8,000 14,000
Plant and Machinery 16,000 6,000 10,000
Motor Vehicles 6,000 2,000 4,000
During the year ended 30 June 2012, the following transactions took place:
1. On 1 January 2012, a plant that had cost sh.3,000,000 and had a cumulative depreciation of sh.
2,300,000 as at 30 June 2011 was sold for sh.500,000. A new plant was then purchased at a cost of
sh.4,000,000.
2. On 1 January 2012, a professional valuer was engaged and the buildings were revalued at
sh.34,000,000.
3. On 1 April 2012, a motor vehicle was purchased at sh.300,000. Part of the purchase price was settled
by exchanging another motor vehicle at an agreed value of sh.120,000 and the balance paid for in cash.
The trade-in-vehicle had cost sh.200,000 and had a book value of sh.100,000 as at 30 June 2011.
The company charges depreciation at the following rates
Asset Rate per annum
Land -
Buildings 2% on cost
Plant and machinery 15% on cost
Motor vehicles 20% on cost
A proportionate charge is made in the year of purchase, sale or revaluation of an asset.
Required:
(i) Building account.
(ii) Provision for depreciation on building account.
(iii) Plant and machinery account.
(iv) Provision for depreciation on plant and machinery account.
(v) Motor vehicle account.
(vi) Provision for depreciation on motor vehicle account.
(vii) Property, plant and equipment movement schedule for the year ended 30 June 2012.
Date posted: September 30, 2022. Answers (1)
- (a) Summarize three advantages and three disadvantages of computerized accounting system.
(b) Alpha Limited offered 200,000 ordinary shares for subscription at sh.10 par value. The shares...(Solved)
(a) Summarize three advantages and three disadvantages of computerized accounting system.
(b) Alpha Limited offered 200,000 ordinary shares for subscription at sh.10 par value. The shares were payable as follows:
• On application - sh.2.00
• On allotment - sh.3.00
• First call - sh.2.50
• Second and final call - sh.2.50
Applications were received for 280,000 shares
The directors allotted the 200,000 shares as follows
160,000 shares - full allotment
80,000 shares - allotted 40,000 shares
40,000 shares - rejected
The money paid on application by unsuccessful applicants were refunded. However, it is the company’s
policy to retain excess application money for the partially successful applicants. The excess application money is used to reduce the allotment money due.
All the monies on both calls were received except for 5000 shares. These shares were forfeited and later reissued as fully paid at sh.9 each.
Required:
Ledger accounts to record the above transactions.
Date posted: September 30, 2022. Answers (1)
- The financial statements of Platinum Limited for the year ended 31 October 2012 were as follows:
Platinum Limited
Income Statement for the year ended 31 October, 2012
...(Solved)
The financial statements of Platinum Limited for the year ended 31 October 2012 were as follows:
Platinum Limited
Income Statement for the year ended 31 October, 2012
Sh. "000"
Sales 22,977
Cost of sales (16,326)
Gross profit 6,651
Distribution cost (1,125)
Administration expenses (2,376)
Operating profit 3,150
Interest received 225
Interest paid (675)
Profit before tax 2,700
Income tax expense (1,260)
Profit for the period 1,440
Platinum Limited
Statement of Financial Position as at 31 October
2012 2011
Assets Sh. "000" Sh. "000" Sh. "000" Sh. "000"
Non-current assets
Property, plant and Equipment: Cost 6,480 5,355
Depreciation (3,060) 3,420 (2,610) 2,745
Intangible assets 2,250 1,800
Investments - 225
5,670 4,770
Current Assets
Inventory 1,350 918
Trade receivables 3,510 2,835
Short term investments 450 -
Bank balance 18 5,328 9 3,762
Total Assets 10,998 8,532
Equity and Liabilities
Equity
Share capital (sh.100 ordinary shares) 1,800 1,350
Share premium account 1,440 1,350
Revaluation reserve 900 819
Retained earnings 2,340 6,480 1,620 5,139
Non-Current liabilities
Long-term loan 1,530 450
Current Liabilities
Trade payables 1,143 1,071
Bank overdraft 765 882
Tax payable 1,080 2,988 990 2,943
Total Equity and liabilities 10,998 8,532
Additional information:
1. The proceeds from the sale of non-current assets investment amounted to sh. 270,000
2. Equipment with an original cost of sh.765,000 and a net book value of sh.405,000, were sold for sh.288,000 during the year
3. 4,500 ordinary shares of sh.100 each were issued during the year at a premium of sh.20 per share.
4. Dividends totaling sh.720,000 were paid during the year.
Required:
Statement of cash flows for the year ended 31 October 2012, in accordance with the requirements of International Accounting Standard (IAS) 7, “statement of cash flows”.
Date posted: September 30, 2022. Answers (1)
- (a) Briefly explain why goodwill should be paid under the following circumstances:
(i) By a partner on admission to a partnership.
(ii) To a partner on retirement...(Solved)
(a) Briefly explain why goodwill should be paid under the following circumstances:
(i) By a partner on admission to a partnership.
(ii) To a partner on retirement from a partnership.
(b) Abdi, Bob and Caleb are in partnership sharing profits and losses equally after allowing for interest on capital at 5% per annum to the partners and a salary to Bob of sh.30,000 per month.
The trial balance of the partnership as ta 31 September 2012 was as follows:
Sh. "000" Sh. "000"
Capital accounts: Abdi 3,500
Bob 3,000
Caleb 2,000
Current accounts: Abdi 300
Bob 400
Caleb 300
Drawings: Abdi 400
Bob 500
Caleb 300
Sales 30,000
Inventory (1 October 2011) 4,000
Purchases 20,300
Operating expenses 7,400
Loan: Bob (interest at 10% per annum) 2,000
Caleb (interest at 10% per annum) 3,000
Land 2,000
Buildings 6,000
Plant and Machinery (cost) 8,000
Accumulated depreciation (30 September 2012) 5,000
Accounts receivable/accounts payable 5,000 4,300
Cash at bank 100
53,900 53,900
Additional information:
1. Closing inventory as at 30th September 2012 was valued at sh.3,400,000
2. Interest on partner’s loan had not been paid.
3. Sales included credit sales of sh.700,000 in respect of two items sold on the basis of confirmation by the customer. The items had cost sh.200,000 each.
4. On 1 April 2012, the terms of the partnership agreement were changed. The new terms provided for:
• Profit sharing ratio of 5:3:2 for Abdi, Bob and Caleb respectively.
• Interest on capital at 5% per annum
• Salaries of sh.15,000 per month for Bob and Caleb.
5. For the purpose of the change, goodwill was valued at sh.1,200,000 and was to be written off
immediately while the land and buildings were valued at sh.3,000,000 and sh.7,400,000 respectively.
Required:
(i) Income statement and appropriation account for the year ended 30 September 2012.
(ii) Partner’s current accounts.
(iii) Statement of financial position as at 30 September 2012.
Date posted: September 30, 2022. Answers (1)
- (a) Explain the following terms as used in the context of public sector accounting:
(i) Public accounts committee (PAC).
(ii) Appropriation-In-Aid (AIA).
(iii) Public Investment committee (PIC).
(b) The...(Solved)
(a) Explain the following terms as used in the context of public sector accounting:
(i) Public accounts committee (PAC).
(ii) Appropriation-In-Aid (AIA).
(iii) Public Investment committee (PIC).
(b) The approved estimates and actual expenditure details for the ministry of Gender and Culture for the
financial year ended 30 June 2012 were as follows:
Vote no. Details Approved estimates Actual expenditure
Sh. "000" Sh. "000"
S001 Travelling and accommodation 32,100 31,200
S004 Commuter allowances 8,400 7,200
S010 Passage and leave expenses 80,120 75,600
S120 Communication expenses 6,110 5,880
S121 Staff development 10,120 8,440
S124 Vision 2030 flagship 7,150 7,850
S144 Purchase of computers 12,140 10,940
S300 Appropriation-In-Aid 6,000 14,500
S184 Personnel emoluments 241,800 212,300
S200 Miscellaneous expenses 34,480 32,150
S210 Transport expenses 8,300 7,900
S215 Housing allowance 41,300 37,200
The ministry made four equal withdrawals from the Exchequer of sh.110,000,000 each.
Required:
(i) Paymaster general account.
(ii) The Exchequer account.
(iii) General account of Vote
(iv) Statement of Assets and liabilities as at 30 June 2012
Date posted: September 30, 2022. Answers (1)
- The following is a receipt and payment account as reported by the treasurer of Mambula Sports Club for the year ended 31 December 2012.
Receipts ...(Solved)
The following is a receipt and payment account as reported by the treasurer of Mambula Sports Club for the year ended 31 December 2012.
Receipts Sh. "000"
Balance at 1 January 2012: Bank 3,000
Cash in hand 400
Subscription received 9,600
Canteen sales 2,700
Donation (for purchase of bus) 2,000
Dinner dance ticket sales 1,800
Bank interest 360
Investment income 600
20,460
Payments
Canteen purchases 2,010
Water and electricity 270
Sports Equipment 2,000
Canteen attendant wages 300
Canteen expenses 150
Secretary's honoraria 4,500
Training fee 1,500
Grounds man (field) wages 1,200
Field maintenance and repairs 540
Dinner dance expenses 900
Transport and travelling expenses 1,260
Closing balance (31 December 2012):
Bank 3,000
Cash in hand 2,830
20,460
The balances of assets and liabilities as at 31 December 2011 and 2012 were as follows:
2011 2012
Sh. "000" Sh. "000"
Sports equipment 2,400 ?
Club house at cost 9,200 9,200
Furniture and Fittings at cost 1,800 1,800
Canteen stock 600 750
Subscription in arrears 720 840
Subscription in advance 540 1,380
Water bills outstanding 90 220
Canteen creditors 270 360
Accumulated depreciation:
Sports equipment 840 ?
Furniture and Fittings 540 ?
Investment 2,400 2,400
Additional information:
1. Subscriptions money received related to the following periods:
Year Sh. "000"
2011 600
2012 7,620
2013 1,380
It is the policy of the club to write-off subscription in arrears after 12 months
2. Depreciation is to be charged on the cost of assets in existence at the end of the financial year as follows:
• Furniture and Fittings at 10% per annum
• Sports Equipment at 20% per annum
3. During the year, sports equipment was sold for sh.600,000 to club members on credit. These equipment had cost sh.1,200,000 and had been used for two years.
4. Cash sales for the canteen on the last day of the year amounting to sh.300,000 were omitted in the records as well as on the cash reported.
Required:
(a) Canteen income statement for the year ended 31 December 2012.
(b) The club’s income and expenditure account for the year ended 31 December 2012.
(c) Statement of financial position as at 31 December 2012.
Date posted: September 30, 2022. Answers (1)
- (a) Explain four ways in which the accounting profession is regulated. (8 marks)
(b) The authorized share capital of Mid-View Ltd. consists of 800,000 shares of...(Solved)
(a) Explain four ways in which the accounting profession is regulated. (8 marks)
(b) The authorized share capital of Mid-View Ltd. consists of 800,000 shares of sh.20 each and 250,000 8% redeemable preference shares of sh.20 each.
The following information was extracted from the books of the company as at 31 December 2012 after
preparing the income statement for the year:
Sh. "000"
Issued share capital
600,000 ordinary shares sh.20 each 12,000
250,000 redeemable preference shares sh.20 each 5,000
Share premium 400
Goodwill 1,200
Bank overdraft 540
Revaluation reserve 1,000
Net profit for the year 1,440
Retained earnings (1 January 2012) 4,460
General reserves 1,100
Allowance for doubtful debts 48
Interim dividends paid: Ordinary 600
Preference 200
Trade receivables 1,708
Land and Buildings at valuation (cost sh.4,400,000) 18,400
Capital redemption reserve fund 3,000
Fixtures and fittings at cost 3,000
Motor vehicles at cost 7,940
10% debentures 1,600
Accumulated depreciation: Motor vehicles 3,740
Fixtures and fittings 1,500
Trade payables and accruals 960
Short-term investments (market value sh.860,000) 780
Inventory (31 December 2012) 2,960
Additional information
The directors have approved the following:
1. Transfer of sh.500,000 to the general reserve.
2. A 5% final ordinary dividend and final preference dividend on shares issued and outstanding as at 31
December 2012.
3. A bonus issue of 100,000 fully paid ordinary shares from the retained earnings.
Required:
(i) Statement of changes in equity for the year ended 31 December 2012.
(ii) Statement of financial position as at 31 December 2012.
Date posted: September 30, 2022. Answers (1)
- QUESTION TWO
Kate and John formed a partnership business to sell Chinese motorbikes in Mombasa city sharing profits and losses in the ration of 3:1 respectively....(Solved)
QUESTION TWO
Kate and John formed a partnership business to sell Chinese motorbikes in Mombasa city sharing profits and losses in the ration of 3:1 respectively. On 1 April 2012, Kate contributed sh.15,000,000 and John sh.5,000,000 which was immediately deposited in a newly opened bank account of the partnership.
Additional information:
1. Sales proceeds banked during the year amounted to sh.109 million.
2. The cashier had paid the following expenses from sales proceeds before banking the balance:
• Rent of go downs and offices at sh.100,000 per month.
• Office running expenses at sh.10,000 per week.
• Casual wages at sh.4,000 per week.
• Local transport at sh.7,000 per week.
• Partners were allowed to draw salaries per month as follows: Kate sh.30,000 per month.
John sh.36,000 per month.
The partners made all their drawings for the year.
Assume there are 52 weeks in the financial year ended 31 March 2013.
3. The partnership paid the following amounts through the bank:
In Shillings:
Purchase of furniture and fittings 128,000
Purchase of computers 900,000
Staff salaries and wages per month 100,000
Purchases 96,000,000
Drawings (per month):
Kate 100,000
John 80,000
Licenses and clearing charges 1,920,000
Bank charges (per month) 3,000
Telephone per month 8,000
Freight charges 576,000
Electricity bill 10,000
4. Analysis of transactions revealed that:
• Accounts receivable amounting to sh.900,000 were outstanding at the year end.
• Inventory of motorbikes at the year end at cost was sh.8,700,000.
• Included in the inventory of motorbikes above are motorbikes which cost sh.1,100,000 but which can
now be sold for sh.800,000 only, because of impairment in value in the go down.
• The telephone and electricity bills for the month of March 2012 were paid on 3 May 2012.
• Accounts payable for purchases amounting to sh.600,000 were unpaid at the year end.
5. The partners are entitled to 10% interest on their fixed capitals per annum.
6. Depreciation is to be provided on furniture and fittings and computers at the rate of 12.5% and 20% per annum on cost respectively.
Required:
(a) Income statement and profit and loss appropriation account for the year ending 31 March 2013.
(b) Statement of financial position as at 31 March 2013.
Date posted: September 30, 2022. Answers (1)
- Mary Atieno, a sole proprietor, operates a business but does not observe the double entry rule of book-keeping.
The following balances were extracted from her books...(Solved)
Mary Atieno, a sole proprietor, operates a business but does not observe the double entry rule of book-keeping.
The following balances were extracted from her books as at 31 October 2011.
Sh. "000"
10% loan 6,000
Freehold property at cost 6,000
Motor Vehicles (net book value) 7,500
Furniture and Fittings (net book value) 2,400
Trade receivables 5,000
Allowance for doubtful debts 250
Accruals 150
Trade payables 3,800
Bank overdraft 600
Inventory 3,900
The following transactions relate to the financial year ended 31 October 2012
1. Discounts received and discount allowed amounted to sh.400,000 and sh.700,000 respectively.
2. Bad debts of sh.200,000 were written off. The allowance for doubtful debts is to be maintained at 5% of the trade receivables at the end of the financial year.
3. The following transactions were processed through the bank account.
Sh. "000"
• Cash sales 7,200
• Cash purchases 2,400
• Proceeds from the sale of a motor vehicle 1,200
• Collection from trade receivables 18,900
• Payment to suppliers 19,400
• Loan repayments (30 April 2012) 1,000
• Purchase of furniture 2,000
• Drawings 600
• Interest on loan 300
• General expenses 350
• Electricity expenses 650
• Salaries and wages 1,600
4. The business makes a normal gross profit margin of 25% on selling price.
5. Motor vehicles are depreciated at the rate of 20% per annum on a reducing balance basis. A full year’s
depreciation was provided on a motor vehicle which was disposed of in the course of the year. The motor
vehicle had been bought at sh.2,500,000 and had am accumulated depreciation of sh.1,220,000 at the time of
disposal.
6. Furniture is depreciated at the rate of 10% per annum on cost effective from the date of purchase. The
additional furniture was purchased on 1 May 2012 while the cost of the furniture at the beginning of the year
was sh.4,000,000.
7. Sales and purchases were all on credit and amounted to sh.20,800,000 and sh.19,000,000 respectively.
8. Accrued electricity expenses as at 31 October 2012 amounted to sh.190,000
Required:
(a) Income statement for the year ended 31 October 2012.
(b) Statement of financial position as at 31 October 2012.
Date posted: September 30, 2022. Answers (1)
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