PRINCIPLES OF ACCOUNTS

FORM 4 EXERCISES
P.S GWARI
LOAD G, has been in business for some time now, as a timber merchant. The information below has been
extracted from his books as at 30 June 20X4, the end of the accounting period.
Capital at start 1 July 20X3 121,900

Trade payables 19,000

Sales 280,000

Returns outwards 13,000

Discounts allowed 2,000

Discounts received 1,500

Fixtures and fittings @ cost 120,000

Depreciation fixtures & fittings 12,000

Trade receivables 24,000

Inventory 1 July 20X3 50,000

Purchases 135,000

Returns inwards 5,000

Carriage outwards 4,000

Drawings 18,000

Carriage inwards 11,000

Rent 7,000

Rates 8,000

Insurance 10,000

Heating & lighting 12,000

Postage 500

Stationery 700

Telephone 400

Advertising 5,000

Salaries & wages 35,000

Bad debts 1,500

Cash in bank 6,000

Cash in hand 300

5 year loan from Banda 20,000

Inventory at 30 June 20X4 17,000

Required:
a. Prepare income statement for the year end 30 June 2013
b. The statement of financial position ( Balance Sheet )as at that date.
QUESTION 2
BENZI, is a sole trader operating as a retailer. The following information is extracted from his accounting books as at
31 December 20X7.
$’000 $’000
Distribution expenses 1460
10% Loan 1000
Trade payables 820
Cash at bank 140
Allowance for doubtful debts 18
Trade receivables 810
Motor vehicles at cost 1680
Accumulated depreciation motor vehicles 620
Warehouse at cost 1800
Accumulated depreciation warehouse 290
Buildings at cost 8300
Accumulated depreciation buildings 1020
Land at cost 1510
Interest on loan paid 50
Salaries and wages 1590
Discounts allowed and received 80 100
Returns inwards 400
Returns outwards 150
Carriage inwards 700
Carriage outwards 250
Inventory 1 January 2017 1530
Purchases 8100
Sales 13600
Capital 1 January 2017 10782

28400 28400
The following additional information is available:
(a) Closing inventory is $1,660,000
(b) Trade balances totaling $6,000 are to be written off and the allowance for doubtful debts increased to 30,000.
(c) Salaries and wages owing 190,000 with 70,000 paid in advance.
(d) Distribution expenses of 60,000 were prepaid and 120,000 not paid as at 31 December 2017.
(e) Interest of 50,000 is owing
(h) Depreciation should be provided as follows:
 - Buildings 2% on cost per annum
- Warehouse 15% on cost per annum
- Motor vehicles 25% on cost per annum
Required:
(a) Prepare income statement for the year ended 31 December 2017
(b) Balance sheet as at 31 December 20X7.
QUESTION
CYNTHIA has been in business for some time trading in motor spares. The list below has been taken from his books
for the financial year ended 30 September 20X8.

Fixtures and fittings 910,000

Accumulated depreciation 136,500

Discounts received 15,400

Trade receivables 400,000

Carriage inwards 95,000

Postage and stationery 15,210

Telephone expenses 10,625

Bad debts 55,000

Returns inwards 110,300

Carriage outwards 5,266

Drawings 315,000

Rent & rates 88,000

Insurance 11,000

Heating and lighting 50,781

Advertising 16,000

Cash in hand 4,242

Cash at bank 112,000

Inventory 1 October 20X7 156,000

Purchases 1,200,400

Discounts allowed 14,000

Allowance for doubtful debts 40,000

Returns outwards 2,745

Trade payables 271,000

Capital 1 October 20X7 1,103,179

Sales 2,000,000

Additional Information at 30 September 20X8.

(i) Inventory is valued at 127,666.

(ii) Depreciation charge for the year is 10% on reducing balance method.

(iii) Rates prepaid 910

(iv) Telephone owing 1,000

(v) Heating & Lighting owing 4,616

(vi) Allowance for Bad debts to be adjusted so that it is 5% of trade receivables.

Required:

Prepare income statement for bENZI for the year ended 30 September 20X8 and a balance sheet as at that date.

DEPARTMENTAL ACCOUNTS

The business of MHIKE has two departments, hardware and electrical. The information below was taken from his
books as at 31 December 20x7, the end of the financial year.

Hardware Electrical Unspecified

$ $

Sales 198,000 264,700

Purchases 75,000 137,000

Opening inventory 25,000 43,600

Wages 35,000 34,000

Other expenses 24,700 20,100

Building at cost 146,000

Motor vehicles at cost 145,000

Rates 15,000

Accumulated depreciation:

Buildings 37,000

Motor vehicles 60,300

Electricity 20,000

Notes:

(a) Depreciation policy is 20% straight line on buildings and 40% on motor vehivles using
reducing balance method.

(b) Buildings are used 4/5 hardware and 1/5 electrical

(c) Motor vehicles are used equally between the two departments.

(d) Electricity and Rates are apportioned on floor area occupied 2/3 hardware and 1/3 electrical.

(e) Closing inventory is K15,000 and K17,000 respectively for hardware and electrical.
 Required:

(a) Prepare income statement for the year ended 31.12.20x7

(b) Assess the impact of closing down either department.

EXERCISES

1. Yugo owns a super market which is divided into three departments namely butchery, grocery and beverages.

For the year ended 30 June 20x5, the following details were taken from his books.

Butchery Grocery Beverages

Sales 854,000 605,000 936,500

Purchases 600,000 350,000 740,000 -

Sales Returns - 20,000 -

Opening inventory 36,000 50,000 44,000 -

Additional information:

(i) Closing inventory is valued as follows:

- Butchery 25,000 - Grocery 33,200 - Beverages 41,750

Required:

(i) Prepare departmental TRADING ACCOUNTS for the year ended 30 June 2015.

2.

PARTNERSHIP ACCOUNTS

5. A and B are in partnership sharing profits and losses in the ratio 3:2.

Under the terms of the partnership agreement, the partners are entitled to interest on capital at 5% per
annum.

B is entitled to a salary of K4,500. Interest is charged on drawings at 5 percent per annum and the amounts
of interest are A K400 and B K300.

The net profit of the firm, before interests and salary for the year ended 30 June 20X7 was K25,800.

The partners capital at 1 July 20X6 were A K30,000 and B K10,000.

At 1 July 20X6, there was a credit balance of K1,280 on B’s current account while A’s current account balance
was K500 debit.

Drawings for the year to 30 June 20X7 amounted to K12,000 and K15,000 for A and B respectively.

Required:

Prepare, for the year to 30 June 20X7:

(a) The partnership appropriation account

(b) The partners current account.
6. X, Y and Z are in partnership business sharing profits and losses 4:1:3 respectively. The firms trial balance as
at 31 December 20X1, was as follows:

Dr. Cr.

K K

Sales 334,618

Returns Inwards 10,200

Purchases 196,239

Carriage Inwards 3,100

Inventory 1 Jan. 20X1 68,127

Discounts allowed 190

Salaries and wages 54,117

Bad debts 1,620

Provision for doubtful debts

1 January 20X1 950

General expenses 1,017

Business rates 2,900

Postage 845

Computers at cost 8,400

Office equipment at cost 5,700

Provision for depreciation at

1 January 20X1:

Computers 3,600

Office equipment 2,900

Payables 36,480

Receivables 51,320

Cash at bank 5,214

Drawings: X 39,000

Y 16,000

Z 28,000
Current accounts: X 5,940

Y 2,117

Z 9,618

Capital accounts: X 60,000

Y 10,000

Z 30,000

_______ _______

494,106 494,106

Additional information

(i) Inventory 31 December 20X1 K74,223

(ii) Business rates paid in advance K200
(iii) Stock of postage stamps K68
(iv) Increase provision for doubtful debts to K1,400
(v) Partners salaries: Y K18,000, Z K14,000
(vi) Interest on drawings: X K300, Y K200, Z K240
(vii) Interest on capital is at 8 percent per annum.
(viii) Depreciate computers by K2,800 and office equipment by K1,100.

Required:

Draw up a set of financial statements for the year ended 31 December 20X1.