BAF1101 FINANCIAL ACCOUNTING CAT
QUESTION ONE
The trial balance of Nam Oyiech Ltd. as at 3I December 1999 was as follows:
Sh.
Sh.
Share capital (10,000 Sh.20 Ordinary shares)
200,000
Purchases and Sales
1,220,000
2,000,000
Debtors and Creditors
400,000
140,000
Profit and loss 1 January 1999
380,000
Sales returns
40,000
Buildings at cost
800,000
Plant at cost
1,000,000
Provision for depreciation:
Plant
400,000
Buildings
40,000
Purchases returns
80,000
Selling expenses
140,000
Bank
160,000
10% Debentures
600,000
Stock 1 January 1999
300,000
Provision for bad debts
20,000
Operating expenses
180,000
Administrative expenses
140,000
Suspense account
_______
200,000
4,220,000
4,220,000
Additional information:
i) Stock at 31 December 1999 was Sh.360,000.
ii) Sales returns of Sh.20,000 have been entered in the sales day book as if they were sales.
When this error was discovered, the debtors account had been corrected but the sales
figure was not rectified.
iii) 5000 new shares were issued during the year at Sh.32. The proceeds have been
credited to the suspense account.
iv) A fully depreciated plant which cost Sh.200,000 was sold during the year. No other entries
except bank have been made. The remaining balance on the suspense account after (2
and 3) above represents the sale proceeds.
v) A debtor of Sh.20,000 has been declared bankrupt. A general provision is required at 5%
of debtors.
vi) Rates of Sh.30,000 paid in December covering half year to 31 March 2000 have not
been entered in the books.
vii) Debenture interest has not been paid.
viii)
Depreciation on plant is at 10% on cost and buildings at 2% on cost.
ix) The directors propose to pay a dividend of Sh.2 per share and transfer Sh.20,000 to the
general reserve.
x) Corporation tax at a rate of 32'/ 2% on profits is estimated to be Sh.90,000.
Required:
a) Suspense account for the year ended 3I December 1999.
(6 Marks)
b) Trading, profit and loss account for the year ended 31December1999.
(14 Marks)
c) Balance sheet as at 3 1 December 1999.
QUESTION TWO
a) Differentiate between:
i) Accruals and Prepayments
ii) Working Capital and Capital Employed
iii) Revenue and Capital Expenditure
iv) Materiality and Historical Cost Concept
v) Carriage inwards and Carriage outwards
(10 Marks)
(10 Marks)
b) On July 31, 2021, the cash book showed a balance at hand of 52. The bank statement showed
a CR balance of 134.On comparing the two, the following were discovered
i) Cheques drawn by the Blyth during the month of July amounting to 356, 1732 & 196
had been entered in the cash book but not presented at the bank at the end of the
month
ii) Blyth had forgotten to enter in the cash book a standing order of 50 relating to trade
subscriptions
iii) The bank had incorrectly credited Blyth’s A/c with a dividend receipt of 25 relating to
another customer
iv) The bank charges of 105 shown on the bank shown on the bank statement had not
been entered in the cashbook
v) Cheques received from customers amounting 1211 were entered in the cashbook on
31 July but but not credited in the bank statement on 3rd July.
vi) There were direct Cr of 180 and 31
vii) The payment side of the cashbook for the month of July had been under cast by 1000
viii) The bank statement showed an item, returned cheques 72. This had not been
accounted in the cashbook
Required:
Prepare a bank reconciliation statement for the month of July 2021.
(10 Marks)
(Total: 20 marks)
QUESTION THREE
a) Accounting is a process that begins at a point and ends at another. Explain the statement
using a diagram.
(8 Marks)
b) Explain the term errors and the errors that affect a trial balance.
(7 Marks)
c) State five importance’s of generally accepted accounting principles (GAAPS).
(5 Marks)
(Total: 20 marks)