MERU UNIVERSITY OF SCIENCE AND TECHNOLOGY

P.O. Box 972-60200 – Meru-Kenya

Tel: +254(0) 799 529 958, +254(0) 799 529 959, + 254 (0) 712 524 293,
Website: info@must.ac.ke Email: info@must.ac.ke

UNIVERSITY EXAMINATIONS 2019/2020

SUPPLEMENTARY/SPECIAL EXAMINATION FOR THE DEGREE OF BACHELOR OF

ECONOMICS

BFC 3175: FINANCIAL ACCOUNTING II

DATE: JANUARY 2021 TIME: 2 HOURS

INSTRUCTIONS: Answer question one and any other two questions

QUESTION ONE (30 MARKS)

a) Explain the following terms

i. Share premium (2 marks)
ii. Share capital (3 marks)
iii. Explain the contents of a partnership deed (10 marks)
b) The wide trading company limited has an authorized capital of sh. 500,000 divided
into 5,000 ordinary shares of sh.100 each
On 1 January 2020, the Board of directors decided to issue 4,000 shares at sh.125 each
payable as sh.50 on application. Sh.50 on allotment (including the sh.25 premium) and
sh.25 on first and final call. The applications were receivable on 20 January 2020 when
allotment was made. The allotment money was receivable by 15 February 2020. The
first and final call was made on 15 March 2020 and the call money receivable by 31
March 2020. Applications were received for 6,000 shares. The directors decided to
refund money for 2,000 shares. The allotment money was received on the due date.
The first and final call was made and the call money received on the due date
Required:
i. Show entries necessary to record the above matters in the company’s books
(12 marks)
ii. Balance sheet as at 12 April 2020 (3 marks)

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QUESTION TWO (20 MARKS)

Ateno, Babu and Chesire have been trading in partnership sharing profits/losses in the
ration of 5:3:2 respectively. The partners valued the goodwill at sh.510,000

The following is the trial balance of the partnership as at 31 March 2019:

Sh. Sh.

Capital accounts-Atieno 700,000

-Babu 600,000

-Chesire 400,000

Current accounts –Atieno 350,000

-Babu 325,000

-Chesire 195,000

Drawings – Atieno 250,000

- Babu 260,000

-Chesire 250,000

Land and bulding at cost 2,000,000

Furniture and fittings at cost 500,000

Provision for depreciation of furniture and 150,000

fittings 860,000
Motor vehicles 480,000
Provision for depreciation on motor vehicles 823,500
Trade debtors and creditors 365,000 5,975,000
Purchases and sales 3,380,000
Stock 1 April 2018 465,000
Salaries and wages 295,000
Rates 137,000
Telephone and postage
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Vehicles running expenses 116,000

Insurance and subscription 396,000

General expenses 162,000

Bank charges and interest 72,000

Bad debts 124,000

Returns inwards and outwards 48,000

Cash in hand 61,000 75,000

Cash in bank 24,000

490,000

10,450,000 10,450,000

1. Depreciation on furniture and fittings and motor vehicles is at 10% and 20% on
straight line respectively
2. The closing stocks were valued at sh.560,000
3. Accrued salaries and wages and telephone bills amounted to sh.24,000 and sh.14,000
respectively
4. Prepaid subscription and rates amounted to sh.5,000 and sh.25,000 respectively
Required:
a) Trading, profit and loss account for the year ended 31 March 2019 (10 marks)
b) Partner’s capital accounts (2 marks)
c) Partners current accounts (3 marks)
d) Balance sheet as at 31 March 2019 (5 marks)

QUESTION THREE (20 MARKS)

The following trial balance was extracted from the books of literacy and philosophical
society as at 30 September 2020

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 Sh. Sh.
Balance at bank current account 724,800
Accumulated fund 1 October 2019 5,771,200
Land and building at cost 3,700,000
Debtors for subscription 62,000
Furniture and fittings 1,874,000
Provision for depreciation of furniture and 284,000
fittings 1,450,800
Subscriptions 920,000
Lecturers’ fees 358,000
Lecturers’ travel and accommodation expenses 108,000
Donations 17,000
Camera and projector repairs 190,400
Projectors, cameras and audio equipment 54,400
Depreciation of equipment 277,000
Rates and water 367,200
Lighting and heating 495,000
Rental of rooms 880,000
Wages-caretaker 1,600,000
Restaurant 800,000
Bar staff 1,565,800
Purchase of food 473,600
Stock-bar 1 October 2019 4,032,000
Bar receipts 2,842,000
Bar purchases 3,642,000
Restaurant receipts 1,600,000
Loan 1,000,000
Deposit account-bank 36,000
Interest payable and receivable 178,400
Creditors for bar and food 17,651,800 17,651,800

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 Additional information:
i. The bar stock was valued at sh.642.800 as at 30 September 2020
ii. The interest account is net. The loan is at a concessional rate of 4% while 10%
has been earned on the deposit account. No changes have taken place all year in
the principal sums involved
iii. Depreciation for the year is to be provided as follows
Furniture and fittings sh.194.000
Projectors. Cameras etc sh.19.000
Required:
a) Bar and restaurant trading account for the year ended 30 September 2020
(6 marks)
b) An income and expenditure account for the year ended 30 September 2020
(8 marks)

QUESTION FOUR (20 MARKS)

a) The following trial balance has been extracted from the books of Kaburu Murithi
Manufacturer of metal boxes as at 31st December 2018
Kaburu Murithi
Trial Balance
As at 31st December 2018
Dr Cr
Stock of raw materials 1.1.2018 2100
Stock of finished goods 1.1.2018 3890
Work in progress 1350
Wages (direct shs 1800, factory indirect sh 14500) 32500
Royalties 700
Carriage inwards (on raw materials) 350
Purchase of raw materials 37000
Productive machinery (cost shs 28000) 23000
Accounting machinery (cost shs 2000) 1200
General factory expenses 3100
Lighting 750

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 Factory power 1370
Administrative salaries 440
Salesmen salaries 3000
Commission on sales 1150
Rent 1200
Insurance 420
General administrative expenses 1340
Bank charges 230
Discount allowed 480
Carriage outwards 590
Sales 100000
Debtors and creditors 14230 12500
Bank 5680
Cash 150
Drawings 2000
Capital as at 1/1/2018 29680

142180 142180

Notes :
1. Stock of raw materials shs 2400, stock of finished goods shs 4000, work in
progress shs 1500
2. Lighting and rent and insurance are to be apportioned
Factory 5/6
Administration 1/6
3. Depreciation on productive and accounting machinery at 10 per cent per annum on
cost
Required:
b) Manufacturing, trading and profit and loss account for the year ending 31December
2018 (15 marks)

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