UNIVERSITY EXAMINATION 2017/2018

SCHOOL OF BUSINESS AND ECONOMICS

DEPARTMENT OF ACCOUNTING AND FINANCE

MBA/ MAPA
EVENING

UNIT CODE: MAF 5101 UNIT TITLE: FINANCIAL ACCOUNTING I

DATE: AUGUST 2018 SPECIAL/SUPPLIMENTARY TIME: 3 HOURS

INSTRUCTIONS: ANSWER QUESTIONS ONE AND ANY OTHER TWO QUESTIONS

Question one
Viatu Ltd, which manufactures footwear, makes up its accounts to 31 March each year.
The company has an authorized share capital of Sh. 600,000,000 divided into
15,000,000 6.5% preference shares of Sh. 20 each and 30,000,000 ordinary shares of
Sh. 10 each. The following trial balance was extracted as at 31 March 2002.

Trial balance as at March 2002

Sh000 Sh000
Cost of Sales 699,992
Motor vehicle expenses 59,684
Selling and distribution costs 78,840
Depreciation of motor vehicles – for the 12,580
year 95,834
Wages and salaries 11,492
Administration expenses 1,400 1,191,864
Audit fees 812
Sales 1,072
Discounts received 1,608
Investment income – trade investments
- others 13,000

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 Preference dividends paid 1,600
Debenture interest 8,615
Corporation tax paid – instalment 8,500
Compensation to director for loss of office 1,040 20,000
Depreciation of fixtures for the year)
8% debentures 3,000 200,000
Cash in hand
Ordinary share capital issued and paid- 11,745 200,000
up)
Bank balance 204,132 102,000
Preference share capital issued and paid- 336,440 3,000
up)
Inventory 31 March 2002) 24,800 14,400
Debtors/creditors
Deferred tax 11,300 110,848
Motor vehicles net book value) 60,000
Provision for doubtful debts 40,000
Fixtures and fittings net book value)
Profit and loss account 1 April 2001) 270,000
General reserves 30,000
Share premium 61,610 _______
Freehold land and building cost) _______ 1,945,604
Investments – trade market value 1,945,604
Sh.35,000,000)
Others market value
Sh.62,000,000)

Additional information:
i) Wages and salaries include salary paid to Managing Director of Sh. 30,000,000 and
salary paid to Sales Director of Sh. 25,000,000.
ii) Provision is due to be made for directors’ fees Sh. 150,000,000.
iii) Provision for doubtful debts is to be adjusted to Sh. 16,822,000.
iv) Timing differences of Sh. 4,000,000 are expected to reverse in the near future.
v) The directors recommended an ordinary dividend of Sh.1.35 per share.
vi) Corporation tax for the year is Sh.11; 820,000.The corporation tax rate is 30%on
adjusted profit.
vii) Land and buildings were professionally valued at Sh.300,000,000 at the year end.
The directors wish to incorporate the valued amount in the financial statements.

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viii) Information about other fixed asset is as follows:
Motor Fixtures &
vehicles fittings
Sh
Sh

Cost (including additions during the year) 51,200,000 20,800,000

Additions during the year 2,240,000 1,600,000

Cost of assets disposed of during the year (No entry 2,800,000 1,455,000
made yet)

Accumulated depreciation of asset disposed of 2,150,000 905,000

during the year

Proceeds of asset disposed of (including in sales in 715,000 500,000

the trial balance)

Required
a) Income statement for the year ended 31 March 2002. (13 Marks)
b) Balance sheet as at 31 March 2002 (12 Marks)
c) Comment on the financial status of the Viatu Limited (5 Marks)

QUESTION TWO
(a). The balance in the business bank account of Mr. Ouma as at 1.1.03 stood at sh
4,00. The cash at hand as at that day was sh. 1000. During the month of January
2003, the following transactions took place
January 1: Paid rent by cheque sh. 1000
January 3: cash sales of sh 1000
January 4: paid for electricity cash sh.500
January 8: received from credit customers payment by cheque as follows:
 Musau sh. 2000
 Onyango sh 4000
 Juma sh, 3000
January 12: paid telephone bill by cheque sh 3000
January 15: cash sales sh. 15000
January 16: deposited sh 12000 to the bank account

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January 20: paid suppliers by cheque as follows:
 Njoroge sh 1000
 Kamau sh 3000
 Otieno sh 2000
January 25: drew sh 2000 from bank for office use
January 25: cash purchases sh 1500 cash
January 28: drew for personal use sh 500 cash

Required;
Draw a two – column cashbook (7 Marks)

(b). The salaries account of Musundi Enterprises showed a balance of sh. 10,000 as at
30th June, 2013. You have been informed that salaries amounting to sh 3500 were due
but not paid to the workers at the date. Show the entries at year end and balance on
31.06.2013 of the following accounts
(i) Salaries account (2 Marks)
(ii) Salaries outstanding account (2 Marks)
(iii) Profit and loss a/c (extract) (2 Marks)
(iv) Balance sheet (Extract) (2 Marks)

QUESTION THREE

Musa Yubo’s run.s a business in Mombasa. The trial balance for the period 31.12.07 is
as follows:
Dr Cr
sh sh
Land building 3000
Motor vehicle 6000
Furniture and fittings 2000
Stock (1.1.07) 2000
Purchases 7000
Sales 15000
Return inwards 1000
Return outwards 500
Carriage in 500
Carriage out 500
Bad debts 1000
Provision for bad and doubtful debts 200
Rent 1000

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Electricity 700
Salaries and wages 500
Drawings 500
Capital 7000
22,700 22,700

Additional information
(i) Stock as at 31.12.07 was sh 3000
(ii) Provision for bad and doubtful debts is to be set as 10% of debts

Required;
a) Draw the trading, profit and loss account for the year ended 31.12/07. (9 Marks)

b) Draw the balance sheet as at 31.12/07 (6 Marks)

QUESTION FOUR
Semakula a sole trader received his bank statement for the month of June 2001. At that
date the bank balance was sh.706500 whereas his cashbook was sh.2, 366,500. His
accountant investigated the matter and discovered the following discrepancies
i) Bank charges of sh. 3000 had not been entered in the cashbook
ii) Cheque drawn by Semakula totaling sh 22,500 had not yet been presented to
the bank
iii) He had not entered receipts of sh. 26,500 in his cashbook
iv) The bank had not credited Mr. Semakula with receipts of sh 98,500 paid into the
bank on 30 June 2001.
v) Standing order payments amounting to sh 62,000 had not been entered into the
cashbook
vi) In the cashbook Semakula had entered a payment of sh. 74,900 and sh.79, 400.
vii) A cheque for sh 15,000 from a debtor had been returned by the bank marked
refer to drawer, but had not been written bank into the cash-book.
viii) Semakula had brought forward the opening cash balance sh 329,250 as a
debit balance instead of a credit balance
ix) An old cheque payment amounting to sh 44,000 had been written back in the
cashbook but the bank had already honored it
x) Some of Semakula’s customer had agreed to settle their debts by paying
directly into his bank account.
Unfortunately, the bank had credited some deposits amounting to sh.832, 500 to
another customer’s account. However, acting on information from his customers,
Semakula had actually entered the expected receipts from the debts in his cashbook.

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Required:
a) A statement showing Semakul’s adjusted cashbook balance as at 30 th June
2019. (9 Marks)

b) A bank reconciliation statement as at 30 June 2001. (6 Marks)

QUESTION FIVE
a) ABC Ltd credit sales records are as follows 2004
January 1: sold to Kidiwa amount sh.1000 invoice No. 009
January 2: sold to Musa goods worth sh.1500 invoice No. 010
January 3: sold to Mutua goods worth sh. 2000 invoice No. 011
January 3: sold to Kichiwa goods worth sh.1500 invoice No. 012
January 5: sold to Musa goods worth sh. 1000 invoice No. 14
January 6: sold to Otieno goods worth sh.1500 invoice No.15

Required;
Draw the sales daybook and summarize it as on 6/1/2004. (7 Marks)

c) Explain the different accounting concepts and conventions. (8 Marks)

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