Fundamentals of Accounting Final exam

Attempt any 4 questions from this paper

Question 1
(a) Citing examples, distinguish between a debtors’ general ledger and a
debtors’ subsidiary ledger.
(4 marks)
(b) The following information was extracted from the books of Peter for
themonth of January 2022:
1 Account balances as at 1 January 2022
Shs ‘000’
Capital 35,000
Trade receivables 31,700
Trade payables 8,700
Cash 1,900
Bank 15,000
Mary Apio 2,800
Okello 400
Bank loan 5,000
2 Transactions carried out during the
monthDate Description
2 Paid rent for the business Shs 300,000 cash from his savings.
3 Sold goods worth Shs 3,000,000 to Mary Apio. Mary paid
Shs1,000,000 cash and the balance is payable.
4 Mary Apio returned goods worth Shs 100,000 because they
didnot conform to specifications.
5 Purchased goods worth Shs 200,000 on credit from Kibuye
Suppliers.
8 Mary Apio paid Shs 500,000 cash.
9 Paid for KCCA operational license Shs 300,000 through the
bank.
12 Sold goods to Okello for Shs 1,500,000. Okello paid Shs
500,000 cash.
13 Purchased goods worth Shs 400,000 on credit from Matugga
Suppliers Limited.
15 Paid Kibuye Suppliers Shs 100,000 cash.
18 Mary Apio paid Shs 600,000 cash.
19 Obtained a loan from Save Together Micro-finance Shs
10,000,000. This was deposited into the business bank

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 account.

Required:
(i) Prepare Peter’s ledger accounts (16 marks)
(ii) Extract Peter’s trial balance for the period (5 marks)
(Total 25 marks)
Question 2
(a) At the end of a specific period, businesses receive bank statements which
normally report a different balance from that recorded in their respective
cashbooks. This necessitates analysis of the transactions with an aim of
reconciling both balances.
Required:
(i) Explain the importance of bank reconciliation in bookkeeping.
(4 marks)

(b) Nana Academy (Nana) maintains a petty cashbook with analysis columns.
The cash float is Shs 1,000,000 per month and the amount spent is
reimbursed on the last day of the month. The following are the transactions
of Nana during the month of February 2023:
Date Transaction
1 Paid for fuel costs Shs 100,000.
1 Paid for vehicle repairs Shs 80,000.
2 Paid for pens Shs 50,000.
3 Paid for pencils Shs 10,000.
4 Paid for liquid soap Shs 10,000.
4 Purchased brooms Shs 5,000.
5 Paid for transport fares for staff Shs 20,000.
5 Paid for safe boda to deliver letters to the district Shs 10,000.
7 Purchased manila papers for nursery section Shs 20,000.
9 Purchased adhesive tape Shs 6,000.
10 Purchased scrubbing brushes Shs 15,000.
12 Purchased mopping rugs Shs 20,000.
13 Paid road toll fee for using Entebbe Express Highway Shs 10,000.
14 Paid for safe boda to pick foodstuffs from the market Shs 20,000.
15 Purchased two reams of paper Shs 40,000.
16 Purchased rubbers and paper clips Shs 20,000.
18 Purchased powdered soap Shs 20,000.
19 Purchased a dustbin Shs 20,000.
21 Purchased books Shs 10,000.
22 Purchased chalk Shs 10,000.
23 Purchased whiteboard markers Shs 15,000.

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 28 Purchased reams of paper Shs 40,000.
28 The director reimbursed the petty cashier the amount spent in
themonth.
Required:
Prepare Nana’s petty cashbook for the month of February 2023 under the
following subheadings: Transport expenses, stationery and cleaning
expenses. (19 marks)

Question 3
(a) Explain, with examples, the following concepts used in accounting:
(i) Accruals concept. (2 mark)
(b) The following transactions were extracted from the books of Kafeero & Sons
wholesale traders for the month of January 2022.
Date: Details:
1 Started business with Shs 54 million cash in the bank and Shs 2.4
million cash at hand. He also surrendered his personal refrigerator
worth Shs 800,000 to the business.
1 Paid rent equivalent to 4 months Shs 3.2 million by cheque. The
rent agreement with the landlord requires rent to be paid at the
start of the month.
2 Purchased furniture and fittings worth Shs 4.6 million by cheque.
4 Withdrew Shs 25 million from business’ bank account and put in
the business’ cash box. Purchased inventory Shs 24 million by
cash.
6 Purchased additional inventory from Hajji and sons Ltd Shs 8.4
million on terms that the business would receive a cash discount of
4% if payment was made within 10 days.
8 Sold inventory to Maseruka Retail Enterprises for Shs 4.5 million on
terms that Maseruka retail enterprises would be allowed a discount
of 3% if payment is made within 2 weeks.
9 Made cash sales worth Shs 3,560,000.
11 Settled the amount owed to Hajji and Sons Ltd in full. Maseruka
Retail Enterprises also settled their obligations in full. All
transactions were through the bank.
14 Purchased a laptop Shs 4.2 million for his son who was at the
University. This amount was charged to the business’ bank
account.
20 Picked his personal cash Shs 250,000 and contributed towards his
brother’s traditional marriage ceremony.

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 25 Kafeero paid wages to the shop keepers Shs 500,000 cash and paid
himself salary Shs 1.2 million through the bank.
Required:
(i) Record the transaction in the month of January above in the
respective general ledger accounts and balance them off.(18 marks)
(ii) Prepare a trial balance from the ledgers prepared in (i) above.
(5 marks)

Question 4
Akello runs a wholesale business in Lira City, buying and selling agricultural produce.
The following transactions were extracted from her records for the month of February
2022.
1. 1 February: Balances brought forward; cash Shs 2.1 million, bank
Shs 23.6 million. Paid the following farmers for stock deliveries;
Okello Shs 2.1 million by cheque, Otim Shs 0.5 million in cash.
2. 2 February: Received Shs 300,000 cash in refunds resulting from
over payment. On the same date, Akello, paid for 50 bags of
maize grains by cheque as full settlement. These bags were
supplied to Akello on 30 January, 2022 on the following terms:
Price per bag Shs 40,000 and a discount of Shs 1,500 per bag
would be allowed by the farmer if full payment was made within
1 week.
3. 5 February: Paid for transport Shs 2.2 million through the bank
and wages for loading and off- loading of bags Shs 650,000 in
cash. These expenses had accrued as at 31 January, 2022.
4. 5 February: Withdrew Shs 10 million from the business’ bank
account and kept it in the business’s money safe. Sold 20 bags
of maize grain at Shs 50,000 per bag to Gaffe Quality Millers on
credit. Additional terms for payment indicated that a 2% discount
would be allowed if payment was made within 1 week.
5. 7 February: Paid Shs 200,000 for trading license through the
bank.
6. 8 February: Settled in full by cheque an amount owed to Mr.
Okullo, a farmer in Otuke. Mr. Okullo had supplied 30 bags of
beans in December 2020 at Shs 180,000 per bag. The payment
terms at time of supply included a 5% discount allowed if full
settlement was made within one month.

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 7. 9 February: Withdrew Shs 1.4 million from the business’ bank
account to contribute towards her son’s wedding.
8. 10 February: Received a cheque for Shs 50 million from Quality
Cereals Exporters Ltd. On the same date, Akello, advanced Shs
7 million cash to her agent in Kwania district for purchase of soya
beans and simsim to be delivered in first week of March 2022.
9. 15 February: Received a cheque from Gaffe Quality Millers in full
settlement of their account. Sold 20 bags of maize grains to ABC
Secondary school worth Shs 1.2 million on credit on terms that a
5% discount would be allowed if the school paid within 1 month.

10. 17 February: Received cash from ABC Secondary School

in full settlement
of their obligation. Sold 60 bags of beans at Shs 360,000 per
bag to Kampala Produce dealers Ltd after allowing a trade
discount of Shs 2,500 per bag. She was paid by cheque.
11. 18 February: Deposited business cash worth Shs 3.6
million into the business bank account.
12. 27 February: Akello was informed about availability of
soya beans and withdrew Shs 13 million from the business bank
account and kept it in the business money safe. Bought soya
beans worth Shs 12.6 million by cash, after earning a trade
discount of Shs 120,000.
13. 27 February: Paid rent Shs 340,000 cash, store keeper’s
wages Shs 250,000 cash and paid herself a monthly salary of Shs
400,000 cash.
Required:
Prepare a cashbook for Akello’s business for the month of February 2022. (25 marks)

Question 5

The following data is extracted from the records of Juma a trader in Busia
i. Balance as per cash book on 30th November, 2018 was shs 20,783,520
ii. Balance as per bank statement was shs 25,533,960.
iii. Bounced cheques of shs 223,200 from mugulusi was returned.
iv. Received a debit memo of shs 53,760 in respect of an error in the
standing order.
v. Mungoma a debtor paid directly to the bank the
equivalent of shs 3,555,600 and the bank charges of
shs 70,800 were deducted for this transaction.

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 vi. A cheque of shs 2,410,200 from okoth had not yet been captured by
the bank.
vii. The sum of shs 192,000 received from a customer was
entered I the cashbook as shs 19,200.
viii. Ledger fees for the month on the bank statement were shs 36,360.
ix. Three cheques were outstanding as at 30th November, 2018
a) Cheque No. 001 for shs 2,109,200.
b) Cheque No. 002 for shs 1,487,600.
c) Cheque No. 003 for shs 219,560.

Required;
Prepare;
a) An adjusted cashbook. (10 marks)
th
b) Bank reconciliation statement as at 30 November, 2018. (9 marks)
c) Explain the possible causes of differences between the cashbook
balance and bank statement balance. (6 marks)

Question 6
(a) The International Accounting Standard (IAS) 1—Presentation of Financial
Statements sets out the overall requirements for presentation of financial
statements, including how they should be structured and the minimum
requirements for their content. The Standard requires an entity to present
a complete set of financial statements at least annually, with comparative
amounts for the preceding year.
Required:
Explain, in accordance with the Standard:
(i) The components of a complete set of financial statements
(10 marks)
(ii) Explain the qualitative characteristics of financial statements.
(5 marks)
(b) Accounting concepts and principles are a set of broad conventions
thathave been devised to provide a basic framework for financial reporting.
As financial reporting involves significant professional judgments by
accountants, these concepts and principles ensure that the users of
financial information are not misled by the adoption of accounting policies
and practices that go against the spirit of the accountancy profession. Accountants
must, therefore, actively consider whether the accountingtreatments adopted are

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 consistent with the accounting concepts and principles.
Required:
Explain the applicability of the following accounting concepts:
(i) Prudence (2 marks)
(ii) Consistency (2 marks)
(iii) Materiality (2 marks)
(iv) Realisation (2 marks)
(v) Substance over form (2 marks)
(Total 20 marks)

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