QUESTION ONE Kasongo Limited operates a computerized accounting system for its sales and purchases ledgers. The control accounts for the month of September 2023 are in balance and incorporate the following totals: Ksh Sales ledger: Balances at 1 September 2023: Debit 386,430 Credit 190 Sales 163,194 Cash received 158,288 Discounts allowed 2,160 Sales returns inwards 590 Credit balances at 30 September 370 2023 Purchases ledger: Balances at 1 September 2023: 184,740 Credit Debit 520 Purchases 98,192 Cash payments 103,040 Discounts received 990 Purchases returns outwards 1,370 Debit balances at 30 September 2023 520
Although the control accounts agree with the underlying ledgers, a number of errors have been found, and there are also several adjustments to be made. These errors and adjustments are detailed below: 1. Four sales invoices totaling Ksh 1,386 have been omitted from the records. 2. A cash refund of Ksh 350 paid to a customer, A Smith, was mistakenly treated as a payment to a supplier, A Smith Limited. 3. A contra settlement offsetting a balance of Ksh 870 due to a supplier against the sales ledger account for the same company is to be made. 4. Bad debts totaling Ksh 1,360 are to be written off. 5. During the month, settlement was reached with a supplier over a disputed account. As a result, the supplier issued a credit note for Ksh 2,000 on 26 September. No entry has yet been made for this. 6. A purchases invoice for Ksh 1,395 was keyed in as Ksh 1,359. 7. A payment of Ksh 2,130 to a supplier, B Jones, was mistakenly entered to the account of R Jones. 8. A debit balance of Ksh 420 existed in the purchases ledger at the end of August 2023.The supplier concerned cannot now be traced and it has been decided to write off this balance. Required: Prepare the sales ledger and purchases ledger control accounts as they should appear after allowing, where necessary, for the errors and adjustments listed. (20 marks) QUESTION TWO (20 MARKS) On 31 December 2022, an inexperienced bookkeeper working for Wanjohi, a sole trader extracted a trial balance. Due to errors committed by the bookkeeper, the trial balance failed to balance by Ksh 369,400. He placed the difference in a suspense account as shown below: Wanjohi trial balance as at 31 December 2022 Ksh Ksh Fixed assets – cost 832,000 Stocks: 1 January 2022 148,000 31 December 2022 98,800 Trade debtors 76,000 Prepayments 10,000 Trade creditors 34,600 Bank overdraft 15,200 Accruals 16,000 Drawings 359,600 Capital 1,054,000 Sales 1,043,200 Provision for depreciation 166,400 Purchases 733,000 Operating expenses 126,000 Provision for doubtful debts 3,800 Discounts received 5,000 Discounts allowed 5,800 Suspense account ________ 369,400 2,548,400 2,548,400 Investigations carried out after preparing the above trial balance detected the following errors: 1. The total of the sales daybook for December 2022 was overcast by Ksh 25,700. 2. On July 2022, the business purchased office equipment for Ksh 40,000. These were debited to purchases account. Depreciation on the equipment is at the rate of 10% per annum on cost and based on the period of usage in the year. 3. A payment to a creditor by cheque of Ksh. 8,500 was erroneously credited to the creditor’s account. 4. A payment of Ksh. 4,500 for telephone expenses was debited to telephone account as Ksh 5,400. 5. An amount of Ksh 15,000 received from a debtor was not posted to the debtor’s account from the cashbook. 6. Purchases daybook for October 2022 was under cast by Ksh 28,000. Assume the business had reported a net profit of Ksh 85,800 before adjusting for the above errors. Required: (a) The adjusted trial balance and the correct balance of the suspense account. (6 marks) (b) Journal entries to correct the errors (Narrations not required) (6 marks) (c) Suspense account starting with the balance determined in the adjusted trial balance in (a) above. (4 marks) (d) The adjusted net profit for the year. (4 marks) QUESTION THREE (20 MARKS) The following trial balance was extracted from the books of Rydone, a sole trader, at 31st December 2021: Ksh Ksh. Drawings/Capital 2,148 20,271 Debtors/Creditors 7,689 5,462 Purchases/Sales 62,101 81,742 Rent and Rates 880 Light and heat 246 Salaries and wages 8,268 Bad debts 247 Provision for bad debts 326 Stock in trade 31st Dec 2020 9,274 Insurance 172 General Expenses 933 Bank balances 1,582 Motor van at cost/Provision for depreciation 8,000 3,6000 Proceeds on sale of van 250 Motor expenses 861 Freehold premises at cost 15,000 Rent received 750 Provision for depreciation on buildings 5,000 117,401 117,401 The following matters are to be taken in to account: 1. Stock in trade at 31st December 2021 was Ksh.9,884 2. Rates paid in advance at 31st December 2021, Ksh.40 3. Rent receivable due at 31st December 2021, Ksh.250 4. Lighting and heating due at 31st December 2021, sh.85 5. Provision for doubtful debts to be increased to Ksh.388 6. Included in the amount for insurance Ksh.172, is an item for Ksh82 for motor insurance and this amount should be transferred to motor expenses. 7. Depreciation has been and is to be charged on vans at an annual rate of 20% on cost. 8. Depreciate buildings Ksh.500 9. On 1st January 2021 a van which had been purchased for Ksh.1,000 on 1st January 2018 was sold for Ksh250. The only record of matter is the credit of Ksh.250 to “Proceeds of sale on van” account. Required: A Statement of Profit and Loss for the year ended 31st December 2021 and a Statement of Financial Position as at date using vertical format.
