- Explain three roles of International Accounting Standards Board (IASB). (Solved)
Explain three roles of International Accounting Standards Board (IASB).
Date posted: October 3, 2022. Answers (1)
- Alloys Ltd. is a small enterprise with a turnover of sh.10million. The firm sells tyres and related products to various customers both on credit and...(Solved)
Alloys Ltd. is a small enterprise with a turnover of sh.10million. The firm sells tyres and related products to various customers both on credit and cash terms. Currently, the firms accounting systems are manual. The management of Alloys Ltd. is considering computerizing its accounting systems
Required:
(i) Advise Alloys Ltd. of six essential accounting information systems that could be implemented in the
computerized project.
(ii) Explain the benefits that would accrue to Alloys ltd. as a result of computerizing its accounting system.
(iii) Highlight the challenges Alloys Ltd. is likely to face in the computerization project
Date posted: October 3, 2022. Answers (1)
- The approved estimates and actual expenditure of the Ministry of Youth and Sports for the financial year ended 30 June 2009 were as follows;
Item ...(Solved)
The approved estimates and actual expenditure of the Ministry of Youth and Sports for the financial year ended 30 June 2009 were as follows;
Item Details Estimates Actual
Sh. Sh
2110100 Basic salaries 61,000,000 59,500,000
2110300 Other personal allowances 23,200,000 21,900,000
2210100 Utilities, supplies and services 73,100,000 66,450,000
2210300 Domestic travel and Subsistence 5,000,000 4,950,000
2210500 Printing and Stationary 4,500,000 4,050,000
2210700 Training expenses 6,400,000 6,390,000
2220200 Maintenance of Equipment 1,000,000 900,000
2230100 Grants to youth clubs 5,000,000 5,000,000
Gross expenditure 179,200,000 169,140,000
Appropriation-In-Aid
Receipts not classified
1450100 elsewhere 12,000,000 10,500,000
Net expenditure 167,200,000 158,640,000
Drawings from the exchequer during the financial year ended 30 June 2009 amounted to sh. 160,000,000
Required:
(a) Exchequer account
(b) General account of vote
(c) Paymaster general (PMG) account
(d) Appropriation account for the year ended 30 June 2009
(e) Statement of assets and liabilities as at 30 June 2009
Date posted: October 3, 2022. Answers (1)
- The following is the receipts and payments account of “The Professional club” for the year ended 30 September 2009:
Additional information
1. The professional club premises...(Solved)
The following is the receipts and payments account of “The Professional club” for the year ended 30 September 2009:
Additional information
1. The professional club premises was acquired for sh.29,000,000. The provision for depreciation on the
premises as at 30 September 2008 amounted to sh.18,800,000. The old bus disposed of during the year cost
sh.12,190,000 and the accumulated depreciation as at 30 September 2008 was sh.10,290,000
2. Depreciation is to be provided as follows
Asset rate per annum
Club premises 5% on reducing balance basis
Bus 15% based on cost
3. The following balances as at 30 September 2008 and 2009 have been provided by the club
2008 2009
Sh. "000" Sh. "000"
Subscriptions due 1200 980
Accruals on printing 90 30
Bar inventory 710 870
Accruals on bar purchases 590 430
Required:
(a) Income statement for the year ended 30 September 2009
(b) Statement of financial position as at 30 September 2009
Date posted: October 3, 2022. Answers (1)
- The following information relates to Pambazuka ltd. for the month of August 2009:
...(Solved)
The following information relates to Pambazuka ltd. for the month of August 2009:
Sh.
Credit sales 3,800,000
Discount received 75,600
Return outwards 90,100
Interest charged to credit customers 200,500
Discount allowed 100,900
Receipts from credit customers 3,306,400
Payments to credit suppliers 3,800,000
Bad debts written off 80,700
Customers' cheques dishonoured (including
cheque over the counter by customers - sh.
380,000 965,000
Credit Purchases 3,950,000
Allowance for doubtful debts (established at the
end of the month) 640,000
Trade payables ledger (credits transferred to trade
receivables ledger 214,600
Trade receivables balances as at 1 August 2009 2,100,000
Trade payables balances as at 1 August 2009 800,000
Additional information
1. Estimated price adjustments and other allowances on outstanding trade receivables amounted to sh.180,000
2. Claims by Pambazuka Ltd. for price reductions on defective goods as agreed with suppliers was sh. 107,800 while the return inwards was sh.120,000
3. Ninety (90) percent of customers with outstanding accounts on 31 August 2009 took discounts in the first week of September 2009. The company offers a cash discount of 2% on sales
4. Amounts totaling sh.28,600 written off in the month of June 2009 were collected in the month of August 2009 and credited to suspense account
5. On 31 August 2009 customers’ accounts with credit balances amounted to sh.450,000 and suppliers’
accounts with debit balances amounted to sh.213,400
6. One invoice of sh.75,000 was posted to the trade receivables ledger as sh.57,000
7. A reconciliation of the trade receivables control account with the trade receivables ledger balances on 31 July 2009 revealed a difference of sh.60,000. In August 2009, this difference was discovered to have been caused by failure to add one invoice of the same amount to the July 2009 sales invoice total that was posted to the trade receivables control account. The invoice had been correctly posted to the trade receivables ledger.
8. The financial year end of pambazuka Ltd. is 31 August
Required:
(i) Trade receivables ledger control account
(ii) Trade payables ledger control account
(iii) A schedule showing how trade receivables would appear in the statement of financial position as at 31 August 2009
Date posted: October 3, 2022. Answers (1)
- Distinguish between bad debts and allowance for doubtful debts(Solved)
Distinguish between bad debts and allowance for doubtful debts
Date posted: October 3, 2022. Answers (1)
- Martin Stanley is a sole proprietor. He does not maintain a double entry system of accounting.
The following information was extracted from the books of the...(Solved)
Martin Stanley is a sole proprietor. He does not maintain a double entry system of accounting.
The following information was extracted from the books of the business as at 31 March 2008:
Sh.
Freehold property 900,000
Motor Vehicles 1,125,000
Inventory 585,000
Trade payables 570,000
Trade receivables 750,000
10% Bank Loan 600,000
Bank Overdraft 90,000
Other payables (electricity) 22,500
Prepayments (wages) 60,000
Allowance for doubtful debts 37,500
Additional information
1. Inventory as at 31 March 2009 was valued at sh. 645,000
2. The following transactions were carried out through the bank account during the year ended 31 March 2009:
Sh.
Receipts from trade receivables 2,835,000
Cash sales 1,080,000
Payments to trade payables 2,910,000
Cash purchases 360,000
Proceeds from sale of motor vehicle 180,000
Salaries and wages 240,000
General expenses 90,000
Electricity 60,000
Interest on loan 30,000
Drawings 105,000
3. Sales and purchases on credit amounted to sh. 3,120,000 and sh. 2,850,000 respectively
4. Interest on loan was paid on 30 September 2008
5. The discount received and discount allowed during the year amounted to sh.60,000 and sh.105,000
respectively.
6. Bad debts written off during the year amounted to sh.30,000. Allowance for doubtful debts is to be made at 5% of the trade receivables as at 31 March 2009
7. Accrued electricity was sh.28,000 while prepaid salaries amounted to sh.42,000 as at 31 March 2009
8. Motor vehicles are to be depreciated using reducing balance method at the rate of 20% per annum. A full year’s depreciation is provided in the year of purchase and non in the year of disposal. The Motor vehicle sold during the year had been purchases at sh.400,000 on 1 January 2006
Required:
(a) Income statement for the year ended 31 March 2009
(b) Statement of financial position as at 31 March 2009
Date posted: October 3, 2022. Answers (1)
- The following revenue information was obtained from the books of account of the Ministry of Local
Government for the year ended 30 June 2009
...(Solved)
The following revenue information was obtained from the books of account of the Ministry of Local
Government for the year ended 30 June 2009
Estimated revenue Actual receipts
Sh. "000" Sh. "000"
Rent from buildings and Equipment 850,000 870,000
Fees from trading licenses 430,000 400,000
Fees from import and export licenses 470,000 480,000
Other receipts 235,000 210,000
Additional information
1. The balances at hand on 30 June 2008 amounted to sh. 247,000,000
2. The balances at hand on 30 June 2009 amounted to sh. 160,000,000
Required:
Revenue account for the ended 30 June 2009
Date posted: October 3, 2022. Answers (1)
- In the context of public sector accounting, explain the following terms
(i) Budgetary accounting
(ii) Cash accounting
(iii) Accruals accounting
(iv) Commitment accounting
(v) Fund accounting(Solved)
In the context of public sector accounting, explain the following terms
(i) Budgetary accounting
(ii) Cash accounting
(iii) Accruals accounting
(iv) Commitment accounting
(v) Fund accounting
Date posted: October 3, 2022. Answers (1)
- The financial statements of Savannah Ltd. for the year ended 30 April 2009 and 30 April 2010 are given below:
Income Statement for the years ended...(Solved)
The financial statements of Savannah Ltd. for the year ended 30 April 2009 and 30 April 2010 are given below:
Income Statement for the years ended 30 April
2010 2009
Sh. "000" Sh. "000"
Revenue 396,900 378,000
Cost of sales (217,140) (219,240)
Gross profits 179,760 158,760
Administrative expenses (31,563) (29,589)
Distribution expenses (35,070) (32,865)
Profit from Operations 113,127 96,306
Finance cost (17,115) (14,784)
Profit before tax 96,012 81,522
Income tax expense (42,000) (28,980)
Net profit for the year 54,012 52,542
Extract of the statement of changes in equity (retained earnings) for the year ended 30 April:
2010 2009
Sh. "000" Sh. "000'
Opening balance 135,114 116,172
Net profit for the year 54,012 52,542
Ordinary dividends paid (35,553) (33,600)
Balance as at 30 April 153,573 135,114
Statement of financial position as at 30 April
Assets: 2010 2009
Non-Current Assets Sh. "000" Sh. "000"
Property, Plant and Equipment 443,961 427,476
Current Assets
Inventory 55,923 37,275
Trade receivables 47,460 30,240
Bank balances 1,113 1,050
104,496 68,565
Total assets 548,457 496,041
Equity and Liabilities
Equity and Reserves
Called up share capital 168,000 168,000
Retained profits 153,573 135,114
321,573 303,114
Non-Current Liabilities
12% Loan notes 105,000 105,000
Current Liabilities
Trade payables 8,148 8,190
Bank overdraft 48,800 27,300
Tax payable 64,936 52,437
121,884 87,927
Equity and Liabilities 548,457 496,041
Required:
(a) For each year, compute the following ratios
(i) Gross profit margin
(ii) Profit margin
(iii) Return on capital employed
(iv) Current ratio
(v) Acid test ratio
(vi) Inventory turnover
(vii) Trade receivables collections period
(b) Citing relevant ratios computed in (a) above, briefly comment on the performance of savannah Ltd. using the following criteria
(i) Profitability
(ii) Liquidity
(iii) Efficiency
Date posted: October 3, 2022. Answers (1)
- Explain four benefits that would accrue to a country from adopting International Financial Reporting
Standards (IFRSs)(Solved)
Explain four benefits that would accrue to a country from adopting International Financial Reporting
Standards (IFRSs)
Date posted: October 3, 2022. Answers (1)
- Abdi and Barasa were partners in a Wholesale business sharing profits and losses in the ratio of 3:2 respectively after allowing for interest on capital...(Solved)
Abdi and Barasa were partners in a Wholesale business sharing profits and losses in the ratio of 3:2 respectively after allowing for interest on capital at the rate of 10% per annum. On 1 October 2009, they admitted Chale into the partnership. Chale paid his capital and goodwill contributions of sh. 400,000 and sh. 200,000 respectively in cash.
The partners agreed to allow interest on capital at the rate of 10% per annum and to write off the goodwill paid on admission of Chale. Chale was to share ¼ of the profit and losses of the partnership.
Abdi and Barasa were to share the balance of the profits and losses in the ratio 3:2 respectively. For purposes of admission of Chale into the partnership, Land and Buildings were valued as sh. 2,000,000 on 1 October 2009.
The trial balance extracted from the books of the partnership as at 31 March 2010 was as follows:
Sh. "000' Sh. "000"
Capital accounts
Abdi 900
Barasa 600
Capital introduced by Chale 400
Cash premium paid by Chale 200
Current accounts
Abdi 300
Barasa 200
Drawings
Abdi 100
Barasa 80
Chale 60
Inventory (1 April 2009) 200
Purchase/Sales 5,000 9,000
Administrative expenses 1,600
Selling and distribution costs 1,050
Allowance for doubtful debts 100
Trade receivables /payables 600 500
Land and Buildings 1,400
Equipment at cost 2,000
Provision for depreciation 800
Bank balance 910
13,000 13,000
Additional information
1. Inventory as at 31 March 2010 was valued at sh. 400,000
2. As at 31 March 2010, accrued administrative expenses amounted to sh. 150,000 while prepaid selling and distribution costs amounted to sh. 50,000
3. Depreciation is to be provided on equipment at the rate of 20% per annum based on cost
4. Allowance for doubtful debts is to be increased to sh. 150,000 of which sh. 30,000 relates to the period 1 April 2009 to 30 September 2009
5. Assume sales , gross profit and expenses accrue evenly throughout the year
Required:
(a) Income statement for the year ended 31 March 2010
(b) Statement of financial position as at 31 March 2010
Date posted: October 3, 2022. Answers (1)
- Sabuni Ltd is a medium-sized factory producing a soap branded “malaika”. The following trial balance was
extracted from the books of the company as at 31...(Solved)
Sabuni Ltd is a medium-sized factory producing a soap branded “malaika”. The following trial balance was
extracted from the books of the company as at 31 December 2009.
Sh. “000” Sh. “000”
Ordinary share capital 100,000
10% preference share capital 40,000
15% debentures 20,000
Share premium 2,000
General reserves 6,000
Retained profits 900
Sales 116,400
Purchases of raw materials 24,800
Inventory (1 January 2009)
Raw materials 1,300
Work-in-progress 4,770
Finished goods (90,000units) 8,100
Land 100,000
Buildings (cost) 60,000
Provision for depreciation 6,000
Plant and Machinery at Net book value 4,600
Interest on debentures 1,500
Direct labour 10,800
Carriage inwards 100
Purchase returns 200
General factory costs 1,600
General administrative expenses 20,000
Electricity and water expenses 2,000
Insurance 1,800
Royalty expenses 2,300
Selling and distribution costs 8,200
provision for unrealized profits 1,350
Bank balance 24,000
Motor vehicles at cost (for sales men) 8,000
Provision for depreciation 2,000
Interim dividends paid to preference shareholders 2,000
Trade payables 5,150
Trade receivables 14,130
300,000 300,000
Additional information
1. Inventories as at 31 December 2009 were valued as follows
Sh. "000'
Raw materials 1,500
Work-in-progress 3,100
2. Depreciation is to be provided annually as follows
Buildings at 10% based on cost
Motor Vehicles at 25% based on cost
Plant and Machinery at 30% using reducing method
3. The company apportions expenses between factory and administration in the following ratios;
Factory Administration
Depreciation on buildings 80% 20%
Electricity and water 60% 40%
Insurance 75% 25%
4. Sabuni Ltd. produced 600,000 units and sold 582,000 units during the year. Assume finished goods were
sold on a first-in-first-out basis
5. Finished goods are transferred to the warehouse at cost plus a mark-up of 20%
6. As at 31 December 2009, six month’s interest on the 15% debentures was outstanding while accrued labour costs amounted to sh. 400,000
7. The directors propose to pay the preference shareholders a final dividend. In addition, the directors propose to pay the ordinary shareholders a dividend of 15% per share after the transfer of sh. 4,000,000 to the general reserve.
8. Corporation tax is estimated at sh. 9,900,000
Required:
(a) Manufacturing account and Income statement for the year ended 31 December 2009.
(b) Explain four benefits that would accrue to a country from adopting International Financial Reporting
Standards (IFRSs)
Date posted: October 3, 2022. Answers (1)
- Nguvumali, a Sole Trader who operates a small business in Mombasa, does not keep proper books of account. He had instructed his shop assistant, who...(Solved)
Nguvumali, a Sole Trader who operates a small business in Mombasa, does not keep proper books of account. He had instructed his shop assistant, who absconded duty on 30 March 2010 with an unknown amount of cash, to collect trade receivables and to bank the cash intact.
Given below are the balances extracted from the records of the firm as at 31 March
2009 2010
Sh. "000" Sh. "000'
Buildings 20,000 20,000
Equipment at cost 8,000 8,000
Accumulated depreciation 800 ?
Motor vehicles at cost 8,000 8,000
Accumulated depreciation 2,000 ?
Inventory 7,000 ?
Trade receivables 5,000 4,000
Bank overdraft 4,200 ?
Cash in hand 100 100
Prepaid electricity 100 60
Accrued salaries and wages 600 400
Trade payables 2,000 3,000
Additional information
1. The following transactions were made during the year ended 31 March 2010
Sh. "000"
Cheques paid to trade creditors 41,000
Cash banked during the year 59,940
Cash paid for electricity and water expenses 160
salaries and wages paid through the bank 5,700
Cash withdrawn from the bank for office use 5,000
Cheques paid for selling and distribution costs 1,600
Cash drawings for personal use 3,000
Cash paid for general expenses 1,400
Returns inwards 9,000
Discount allowed 600
Bad debts written off 400
Cash from trade debtors 60,000
Discount received 1,000
2. The firm applied a uniform mark-up of ¾
3. Depreciation on motor vehicles and equipment is to be provided based on cost and annual rates of 25% and 10% respectively. Ignore depreciation on buildings
4. Nguvumali did not have an insurance policy to cover theft by servants
Required:
(a) Determine the amount of cash stolen by the shop assistant
(b) Income statement for the year ended 31 March 2010
(c) Statement of financial position as at 31 March 2010
Date posted: October 3, 2022. Answers (1)
- With reference to the International Public Sector Accounting Standard (IPSASs), explain the following
bases of accounting;
(i) Cash basis
(ii) Accrual basis(Solved)
With reference to the International Public Sector Accounting Standard (IPSASs), explain the following
bases of accounting;
(i) Cash basis
(ii) Accrual basis
Date posted: October 3, 2022. Answers (1)
- Explain the role of the “Paymaster General”(Solved)
Explain the role of the “Paymaster General”
Date posted: October 3, 2022. Answers (1)
- The following balances of the non-current assets were extracted from the books of Charaka Ltd. as at 1 May
2009
...(Solved)
The following balances of the non-current assets were extracted from the books of Charaka Ltd. as at 1 May
2009
Cost Accumulated depreciation
Sh. "000" Sh. "000"
Land 4,162,500 -
Buildings 4,387,500 438,750
Furniture and fittings 1,350,000 450,000
Plant and Machinery 11,081,250 6,693,750
Motor Vehicles 5,287,500 2,205,000
The following relates to the year ended 30 April 2010
1. The depreciation policy of Charaka Ltd is as follows
Non-current Asset Basis of depreciation Rate per annum (%)
Land - -
Buildings Straight-line method 2.50
Plant and machinery Straight-line method 10.0
Motor vehicles Straight-line method 25.0
Furniture and fittings Reducing balance method 12.5
A full year’s depreciation is provided in the year of acquisition. No depreciation is provided in the year of disposal
2. An item of plant acquired on 1 November 2004 for sh. 2,562,500 was disposed of during the year for sh. 1,250,000
3. New machinery was acquired during the year. The following were the cost of acquisition;
Sh.
Invoice price paid 5,215,000
Import duty 724,500
Freight charges 126,740
Annual insurance premium 146,000
Installation cost 178,500
Value added tax 810,500
Input VAT is recoverable from output VAT
4. A delivery Van which was purchased in April 2009 for sh. 2,145,000 was stolen during the year. The
insurers agreed to compensate the company by paying 85% of the cost
5. Land and Buildings were revalued by JLC valuers on 2 May 2009 at sh. 5,675,000 and sh. 4,860,000
respectively.
Required:
Property, Plant and Equipment movement schedule for the year ended 30 April 2010
Date posted: October 3, 2022. Answers (1)
- Briefly explain two types of accounting packages that may be used by an organization and the main features
of these packages.(Solved)
Briefly explain two types of accounting packages that may be used by an organization and the main features
of these packages.
Date posted: October 3, 2022. Answers (1)
- Explain any four roles of the Institute of Certified Public Accountants of Kenya (ICPAK) or the equivalent
body in your country (Solved)
Explain any four roles of the Institute of Certified Public Accountants of Kenya (ICPAK) or the equivalent
body in your country
Date posted: October 3, 2022. Answers (1)
- Salama Ltd. offered 5 million ordinary shares of sh.20 par each payable as follows:
...(Solved)
Salama Ltd. offered 5 million ordinary shares of sh.20 par each payable as follows:
Sh.
• On application 3
• On allotment 8 (including premium)
• On 1st Call 7
• On 2nd and final call 4
The following is a sequence of transactions relating to the issue
Date
May 2010
5: Applications were received for 7,200,000 ordinary shares
18: Applications for 1,200,000 ordinary shares were rejected and the application monies refunded to the
applicants
20: Allotment letters were issued to 6,000,000 applicants. 5 shares were allotted for every 6 shares applied
for. Excess application monies were to be transferred to the allotment account
28: All allotment monies due were received in cash
June 2010
4: First call was made
10: Monies due on first call were received except for 5 shareholders who had been allotted a total of
200,000 shares.
July 2010
20: Second call was made.
28: Monies due on second and final call were received except for sh. 300,000 shares (including 200,000
shares on which first call monies were also not received.
August 2010
6: Shares were forfeited for applicants who had failed to pay monies due on both the first call and second and final call. Those who had not paid the monies due on the second and final call only were issued with notices.
13: The forfeited shares were re-issued at sh.14 per share, the money due being received on the same date.
The following information as at 4th May 2010 is provided
1. The authorized share capital of Salama Ltd is 20 million ordinary shares of sh.20 par value of which
10million ordinary shares had been issued and fully paid
2. The share premium account amounted to sh.12million while cash at bank was sh. 52million
Required:
(a) Journal entries to record the above transactions
(b) Extract from the statement of financial position of Salama Ltd. immediately after the issue
Date posted: October 3, 2022. Answers (1)