MERU UNIVERSITY OF SCIENCE AND TECHNOLOGY

FINANCIAL ACCOUNTING 1
Hpr 3152

Supplementary exam
INSTRUCTIONS
Answer question ONE and any other TWO Questions

QUESTION 1 (30 MARKS)

Mr. Macharia has been trading for some years as a hardware merchant. The following
list of balances has been extracted from his ledger as at 30 April 2015.

Shs.

Capital 83,887

Sales 259,870

Trade Creditors 19,840

Returns Out 13,407

Provision for doubtful debts 512

Discount allowed 2,306

Discount received 1,750

Purchases 135,680

Returns inwards 5,624

Carriage outwards 4,562

Drawings 18,440

Carriage inwards 11,830

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Rent, rates and insurance 25,973

Heating and Lighting 11,010

Postage, stationery and telephone 2,410

Advertising 5,980

Salaries and wages 38,521

Bad debts 2,008

Cash in hand 534

Cash at Bank 4,440

Stock as at 1 May 2014 15,654

Trade debtors 24,500

Fixtures and fittings – at cost 120,740

Provision for depreciation and fixtures and

Fittings as at 30 April 2015 63,020

Depreciation- Fixtures and fittings 12,074

The following additional information as at 30 April 2015 is available:

i. Stock at the close of business was valued at Shs. 17,750.

ii. Insurances have been prepaid by shs. 1.120
iii. Heating and lighting is accrued by shs. 1, 360
iv. Rates have been prepaid by shs. 5,435.
v. The provision for doubtful debts is to be adjusted so that it is 3% of trade
debtors.

Required:

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 • Prepare the trial balance for the year ended 30th april 2015 10 marks

• Prepare Mr. Macharia’s trading and profit and loss account for the year ended
30 April 2015. (12 marks)

• Prepare Mr. Macharia’s balance sheet as at 30 April 2015. (8 Marks)

QUESTION 2 ( 20 MARKS )

(a) J J cash book bank column for the month of December 2015 was as follows:
Date CHEQUE Details Amount Date CHEQUE Details Amount
No.
NO.

1/12 Balance b/d 50,000 3/12 121 Furniture 15,000

4/12 020 Musa 15,000 5/12 122 Salaries 16,000

6/12 039 Kimani 13,000 8/12 123 KKK 15,000

12/12 026 Otieno 16,000 26/12 124 Jogoo 12,000

18/12 186 Juma 20,000 20/12 125 Okumu 10,000

31/12 Balance C/d 46,000

Totals 114,000 Totals 114,000

His bank statement was as follows:

Date Details Debit Credit Balance

1/12 Balance 50,000 50,000

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 3/12 121 15,000 35,000

4/12 020 - 15,000 50,000

5/12 122 16,000 34,000

6/12 Ledger fees 1,000 33,000

6/12 039 - 13,000 46,000

7/12 Interest - 3,000 49,000

15/12 Telcom 2,000 47,000

25/12 Communication 1,000 46,000

31/12 Balance 46,000

Required:

(i) The adjusted cash book 12 MARKS

(ii) A bank reconciliation statement. (8 MARKS )

QUESTION 3 ( 20 MARKS )

On 1st January 2014 Kioko had the following assets and liabilities.

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 Shs.

Cash at bank 1,400,000

Stock 4,000,000

Debtors: Wario 1,500,000

Randu 960,000

Creditors: Jamein 1,300,000

Matoke 850,000

Office equipment 420,000

Motor van 3,200,000

His transactions during the month of January 2014 where as follows

• 2nd withdraw sh. 200,000 from the bank for office use
• 2nd purchased goods from Jamein sh. 250,000 on credit
• 4th Bought office stationery sh. 36,000 for cash
• 7th received cheque sh. 940,000 from randu in full settlement less sh. 20,000 cash
discount.
• 12th sold goods to Wario sh. 1,400,000 on credit
• 14th paid salaries sh. 80,000 in cash
• 15th paid Matoke sh. 600,000 by cheque on account
• 16th returned goods worth sh. 30,000 to jamein and received a credit note.
• 20th bought office equipment sh. 145,000 on credit from patel brothers
• 23rd sold all goods on hand receiving sh. 1,250,000 cash and sh. 5,000,000 in cheque
• 27th paid patel brothers sh. 130,000 in cash
• 28th withdraw sh. 370,000 from the bank for personal use
• 29th paid rent sh. 160,000 in cash and salaries in sh 180,000 by cheque.

Required

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 • Determine Kombo’s capital as at 1st January 2014.
(4mks)

• Post the above transactions to the relevant ledger accounts. Close all the
ledger accounts. (including the three column cash book) and bring down the
(12mks)
st
balances as at 1 February 2014.

• Extract a trial balance. 4 marks

QUESTION 4 (20 MARKS)

a) Explain FOUR methods calculating depreciation. (8marks)

b) Write short notes on:

i. Provision for bad debts 3 Marks
ii. Prepayment 3 Marks
iii. Errors not affecting the trial balance 3 marks
iv) Book keeping procedures. 3 marks

QUESTION FIVE ( 20 MARKS )

i)Discuss the books of prime entry and explain their significance to accounting (10 marks)

ii)Differentiate the following terms;

a) Capital and revenue expenditure

b) Depletion and depreciation
c) Personal and impersonal accounts
d) Control and suspense accounts
e) Double entry and duality concept (10 marks )

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