Fundamentals of Healthcare Accounting (Hsmu 211) 2nd Trimester 2014

KENYA METHODIST UNIVERSITY
END OF 2ND TRIMESTER 2014 (PT) EXAMINATION
SCHOOL
MEDICINE & HEALTH SCIENCES
DEPARTMENT
UNIT CODE
:
:
HEALTH SYSTEMS AND MANAGEMENT

HSMU 211
UNIT TITLE
FUNDAMENTALS OF HEALTHCARE ACCOUNTING
TIME
2 HOURS
INSTRUCTIONS
Answer ALL Questions in Section A and any Other
TWO from Section B
SECTION A
Question One
Describe FIVE factors that need to be taken into account when pricing and how
they affect pricing.
(10marks)
Question Two
Outline the differences between:
a) Capital and revenue accounts
b) Financial and management accounting.
(10marks)
Question Three
a) Distinguish between books of accounts and financial statements.
b) List the components that comprise each of them.
(10marks)
Page 1 of 10
Question Four
a) Explain FIVE different types of budgets
b) What are the:
i)
Functions/advantages of budgeting
ii)
Limitations in budgeting.
(10marks)
SECTION B
Question Five
Delta chemists Ltd started trading on 1st January 2013. Trial balance as at
31st January 2013 is as follows:
Kshs.
Kshs.
Dr.
Cr.
Ordinary share capital

Bank balance
80,000
12,500
Bank loan
30,000
Stocks
25,500
Fixtures & fittings
55,000
Provision for bad debts
5,000
Accumulated depreciation
Debtors:
Creditors:
11,000
Mercy Hospital
43,000
Patel & Sons
20,000
Dawa Ltd
18,000
Regal Ltd
12,000
156,000
156,000
The following transactions took place in the month of February 2013. All
transactions were paid through the bank.
Page 2 of 10
Date
Particulars
Kshs.
1st
Sold goods to Mercy hospital on credit
17,000
4th
Bought goods from Dawa Ltd on credit
22,000
8th
Paid Patel his account
20,000
12th
Paid Regal Ltd
10,000
15th
Sales collections banked
14,500
18th
Paid wages
16,400
20th
Purchase of stocks
10,600
24th
Received payment from Mercy Hospital
60,000
26th
Paid Dawa Ltd
40,000
28th
Paid Bank loan
10,000
Required:
a) Ledger entries to record transactions for the month February 2013.
b) Trial balance for Delta Chemists Ltd as at 28th February 2013.
(30marks)
Question Six
As an expert in health financing, Mac Donald has sought your financial advise
on how to price his merchandise.
He imported the following medicines and non-pharmaceuticals:
10,000 quantities of Amoxicillin at Kshs. 200 each.
20,000 quantities of coartem at Kshs. 50 each.
40,000 quantities of cough syrup at kshs 25 each
20,000 quantities of gloves at kshs. 150 each
50,000 quantities of bandages at kshs 40 each.
He paid the following import costs:

Cost
Page 3 of 10
Basis of Apportionment
Discount
Insurance & freight
10% on cost on all items

810,000
Net price of each item
1,400,000
Quantity of each item
Cargo handling
700,000
Quantity of each item
Import duty
900,000
Gross price of each item
Packaging
Dumping fees:
Amoxicillin
20,000
Coartem
10,000
Cough syrup
30,000
Gloves
30,000
Bandages
70,000
Required:
Advise Mac Donald on the price to retail his merchandise.
(30marks)
Question Seven
Below is the trial balance of ABC Ltd as at 30th June 2013.
Freehold land (cost)
Kshs.
Kshs.
Dr.
Cr.
20,000
Leasehold land (cost)
8,000
Motor vehicles (cost)
5,000
Drawings
500
Proprietors capital
20,000
Accruals
1,200
Cash
1,150
Page 4 of 10
Bank overdraft
1,000
Trade debtors
3,500
Staff remuneration
1,500
Prepayments & deposits
2,000
Electricity & water
600
Office expenses
720
Insurance costs
800
Trade creditors
2,400
Bad debts
240
Sundry debtors
3,000
Carriage outwards
590
Stocks (1st July 2012)
13,000
Purchases
59,300
Sales
87,050
Discount received
3,100
Returns Inwards
2,050
Accumulated depreciation:
-
Motor vehicles
Leasehold land
4,000
3,200
121,950
121,950
Additional information:
1. Provide for the following before preparing final accounts:
- Electricity and water for June 2013 Kshs. 100 has not been paid.
- Insurance costs include Kshs. 200 for the period after June 2013.
2. Provide depreciation/amortization on cost as follows:
- Leasehold land 50 years
- Motor vehicles 20% pa.
3. Stocks as at 30th June 2013 is Kshs. 10,000
Page 5 of 10
Required:
a) ABC Ltd Trading, Profit and loss Account for the period ending 30 th June
2013.
b) ABC Ltd Balance Sheet as at 30th June 2013.
(30marks)
Fundamentals of Healthcare Accounting (HSMU 211) 3rd

trimester 2014
KENYA METHODIST UNIVERSITY
END OF 3'RD 'TRIMESTER 2014 (PT) EXAMINATION
SCHOOL
: MEDICINE & HEALTH SCIENCES
DEPARTMENT
UNIT CODE
: HEALTH SYSTEMS MANAGEMENT

: HSMU 211
UNIT TITLE
: FUNDAMENTALS OF HEALTHCARE ACCOUNTING
TIME
: 2 HOURS
SECTION A:
Answer all the questions
Question One
Write briefly notes on the following accounting terminologies.
Direct costs
Indirect costs
Variable costs
Batch costing
Process costing
(10 marks)
Question Two
Explain the following methods of depreciation stating their advantages and appropriate circumstances under
which it applies.
Straight line method
Page 6 of 10
Reducing balance method
Revaluation method
(10 marks)
Question Three
State four users of financial statement and reasons for their interest in the financial statements.
(10 marks)
Question Four
Explain the following budget preparation methods.
Zero based budget
Incremental budget
(10 marks)
SECTION B:
Answer any two questions.
Question Five
An extract if trial balance of Bridge View Hospital as at 31 st December 2013 is as follows:
Ksh "000"
Ksh. "000"
Dr.
Cr.
Capital Account
Purchases
20,500
46,500
Sales
60,900
Repair & Maintenance
848
Motor Vehicle (cost)
1,000
Provision for depreciation
250
Motor vehicle expenses
318
Land & Buildings (cost)
10,000
Bank Balance
540
Fixtures & Fittings (cost)
1,400
Provision for depreciation
560
Salary & Wages
8,606
Discount Allowed
1,061
Page 7 of 10
Discount Received
804
Personal Drawings
2,400
Rent & Rates
248
Bad debts
359
Provision for bad debts
140
Trade debtors
5,213
Trade creditors
4,035
General expenses
1,586
Stocks (1st Jan 2013)
6,300
Bank Charges
810
87,189
87,189
Additional Information
1. Stocks as at 31st December 2013 is Kshs.8,800,000.
2. Depreciation is charged on cost as follows:
Motor vehicles 25% pa
Fixtures & fittings 20% pa
Required:
Trading, profit & loss account for Bridge View Hospital for the period ended 31 st December, 2013.
Balance sheet for Bridge View Hospital as at date.
(30 marks)
Question Six
Movement in Non-Current (Fixed)Assets of Agro Machinery Ltd are as follows:
Date
Particulars
Cost(Kshs)
Jan 2012
Bought M/vehicle
2,000,000
July 2012
Bought Equipment
4,000,000
Jan 2013
Installed machine
6,000,000
July 2013
Disposed m/vehicle
1,000,000
Additional Information
1. Depreciation of assets is on straight line basis at the following rates:
-Motor vehicle -25% pa
Page 8 of 10
-Equipment -20% pa
-Machinery -25% pa
2. Full depreciation is charged in the year of purchase and no depreciation in the year of disposal.
Required:
Prepare extracts of the following ledger accounts for the period to 31 st December 2013.
Non-current (fixed) asset account
Depreciation account
Cumulative Depreciation Account
Disposal Account
Profit & Loss Account
Bank Account.
(30 marks)
Question Seven
The budgeted monthly costs of running a Hospital are as follows:
Kshs.
Administration Department
4,000,000
In-patient Department
2,900,000
Out-patient Department
2,400,000
Laboratory
2,000,000
Theatre
1,800,000
Absorption of administration costs and monthly profit margins are estimated as follows:
Absorption
Monthly
Of Admin. Costs
Profit margin
In-patient
30%
700,000
Out-patient
25%
800,000
Laboratory
20%
325,000
Theatre
25%
800,000
Expected level of activity is as follows:

1. In-patient has both general and private wards.
2. Cost of private ward bed is three times the cost of general ward bed.
3. Daily average bed occupancy for general ward is 40 beds while that for private ward is 20 beds.
4. Outpatient has daily average attendance of 400 patients.
Page 9 of 10
5. Laboratory carries out an average of 250 tests daily

6. Theatre carries out both minor and major operations
7. Cost of major operation is four times the cost of minor operations
8. Daily average number of operations are minor -36, major -9.
9. Theatre and lab do not open on Sundays hence they only operate for 25 days in a month. All other
departments remain open for 30 days in a month.
Required:w
Determine the cost of each service offered by the hospital. (30 marks)
Page 10 of 10

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What are the differences between capital and revenue accounts as well as financial and management accounting?

What are the differences between capital and revenue accounts as well as financial and management accounting?

What is the difference between books of accounts and financial statements and what are the components of each?

What is the difference between books of accounts and financial statements and what are the components of each?

KENYA METHODIST UNIVERSITY

END OF 2ND TRIMESTER 2014 (PT) EXAMINATION

MEDICINE & HEALTH SCIENCES

HEALTH SYSTEMS AND MANAGEMENT

FUNDAMENTALS OF HEALTHCARE ACCOUNTING

Answer ALL Questions in Section A and any Other

TWO from Section B

Ordinary share capital

Fixtures & fittings

Provision for bad debts

Patel & Sons

Sold goods to Mercy hospital on credit

Bought goods from Dawa Ltd on credit

Paid Patel his account

Paid Regal Ltd

Sales collections banked

Received payment from Mercy Hospital

Paid Dawa Ltd

Paid Bank loan

He paid the following import costs:

10% on cost on all items

Net price of each item

Quantity of each item

Quantity of each item

Gross price of each item

Freehold land (cost)

Leasehold land (cost)

Motor vehicles (cost)

Prepayments & deposits

Electricity & water

Stocks (1st July 2012)

Fundamentals of Healthcare Accounting (HSMU 211) 3rd

: MEDICINE & HEALTH SCIENCES

: HEALTH SYSTEMS MANAGEMENT

: FUNDAMENTALS OF HEALTHCARE ACCOUNTING

Answer all the questions

Straight line method

Reducing balance method

Zero based budget

Answer any two questions.

Repair & Maintenance

Motor Vehicle (cost)

Provision for depreciation

Motor vehicle expenses

Land & Buildings (cost)

Fixtures & Fittings (cost)

Provision for depreciation

Salary & Wages

Rent & Rates

Provision for bad debts

Stocks (1st Jan 2013)

Balance sheet for Bridge View Hospital as at date.

Non-current (fixed) asset account

Cumulative Depreciation Account