KENYA METHODIST UNIVERSITY
DEPARTMENT
COURSE CODE
COURSE TITLE
:
:
:
ACCOUNTING AND FINANCE AND ECONOMICS
ACCT 430
ADVANCED FINANCIAL ACCOUNTING I
DLM ASSIGNMENT – JAN/APR 2016 eric.matu@kemu.ac.ke
DUE DATE: 5TH MARCH 2016
1.
Juma, Koko and Limo were in partnership, sharing profits and losses, Juma 60%, Koko 30% and Limo 10%.
The partnership deed provided the following:
(i)
Interest at the rate of 10% per annum shall be allowed on fixed capital accounts balances. Interest
will not be allowed on current accounts but 8% per annum is to be charged on any debit balance
at the start of the year.
(ii)
Goodwill is to be valued at the average annual profits of the three years immediately preceding the
balance sheet date.
The following are particulars of partners' accounts:
"Fixed" Capital
At 31 Dec 1985
Shs
Juma
Koko
Limo
180,000
90,000
30,000
Balances on
Current account
at 31 Dec 1985
Shs
50,000 Cr.
10,000 Cr
12,000 Cr
The partners agreed to take Namu, a son of Juma, into partnership as on 1 January 1986 and on
that day he introduced Shs.35,000 in cash which included his "fixed" capital of Shs.30,000. He is to
receive a salary of Shs.15,000 per annum in addition to his share of the profit. Juma personally
guaranteed that the aggregate of Namu's salary and share of profit shall be not less than Shs.30,000
per annum.
Profit sharing ratios are to be Juma 30%, Koko 30%, Limo 30% and Namu 10%. Agreed profits
for goodwill purpose for the past four years are as follows:
1985
DLM assignment
Shs
163,370
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1984
1983
1982
102,550
107,580
141,640
No account for goodwill is to be maintained in the books, adjusting entries for transactions
between the partners being made in their current accounts. The draft accounts for the year ended
31 December 1986, before taking into account Namu's salary or interest on partners' accounts,
show a profit of Shs.176,400. Partners' drawings during the year are Juma Shs.63,000, Koko
Shs.49,000, Limo Shs.49,000 and Namu (including salary) Shs.21,930.
Required:
(a)
(b)
A statement showing the sharing of profit for the year ended 31 December 1986.
The partners' current accounts for the year ended 31 December 1986, recording therein the entries
necessary upon admission of Namu as a partner.
(20 marks)
2.
D Limited has a head office in Nairobi and a branch in Bungoma. The following information has been
extracted from the head office books of account as at 31st March 20X6.
Information relating to the branch
Balances
Branch bank account (positive balance)
Branch debtors
Branch stock (at transfer price)
Transactions during the year
Bad debts written off
Branch general expenses (paid from bank branch account)
Cash received from credit customers and banked
Cash sale banked
Cash transferred from branch to head office bank account
Credit sales
Discounts allowed to credit customers
Goods returned by credit customers
Goods returned from branch (at transfer price from head office)
Goods sent to branch (at transfer price from head office)
Opening
Shs’000
30
660
750
Shs’000
150
420
3,900
1,200
4,590
4,370
90
80
300
6,000
Closing
Shs’000
120
810
900
INFORMATION RELATING TO HEAD OFFICE
Balances
Stock
DLM assignment
Opening
Shs’000
1,800
Closing
Shs’000
2,200
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Transaction during the year
Bad debts written off
Cash sales
Credit sales
Discounts allowed to credit customer
General expenses
Goods returned by credit customers
Purchases
Shs’000
240
15,000
20,000
290
4,100
400
27,800
Additional information:
1. Most of the accounting records relating to the branch are kept by the head office in its own books of
account.
2. All purchases are made by the head office, and goods are invoiced to the branch at selling price, that
is, at cost plus 50%.
Required:
a.
Write up the following ledger accounts for the year to 31st March 20X6, being careful to bring down
any balances as at that date:
1.
2.
3.
4.
5.
Branch stock account;
Goods sent to branch account;
Branch stock adjustment account;
Branch debtors account; and
Branch bank account.
(30 marks)
b. Compile D Limited’s Trading and Profit and Loss Account for the year to 31st March 20X6 showing
the turnover, gross profit and net profit for the head office, the branch and the enterprise as a whole.
(20 marks)
3.
New Steel Ltd obtained a lease from Old Coal Ltd for a coal mine on 1st January, 1989 on the following terms
and conditions:
(1)
(2)
(3)
(4)
Royalty at £1 per tonne raised
Minimum rent £24,000 per annum.
Recoupment of shortworkings of each year during three following subject to a maximum of £5,000 p.a.
In the event of strike, the minimum rent would be taken pro rata on the basis of actual working days but
in the event of lockout, the lessee would enjoy a concession in respect of minimum rent for 50% of the
period of lockout.
Besides the above, New Steel Ltd have been granted a cash subsidy equal to 25% of the un-recoupable
shortworkings by the Central Government up to the first five years of the lease.
Workings up to first six years are as follows:
£
1989 Actual Royalty
14,000
1990 Actual Royalty
20,400
1991 Actual Royalty
32,200
1992 Actual Royalty
27,200
1993 Actual Royalty
21,600 (strike 2 months)
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1994 Actual Royalty
19,400 (Lockout for 4 months)
Show the ledger accounts in the books of New Steel Ltd (i.e. the Royalty a/c, short-workings a/c and
Landlord a/c)
(25 marks)
4.
The Trial Balance of Trust Life Assurance Company extracted on 31st December 1990 gave the following
balances.
Shs'000
Shs'000
Net premium income
350,000
Claims paid
Death
26,000
Maturities
34,000
Surrenders
48,500
Bonuses
5,650
Commissions
29,700
Expenses of management
54,600
Other expenses
16,500
Life fund
1,150,000
Share capital
30,000
Profit and loss account
97,600
Land and buildings (cost)
260,000
Depreciation
14,850
Motor vehicles - cost
13,535
Depreciation
6,640
Computer equipment - cost
35,000
Depreciation
11,260
Furniture, fixture fitting and office
equipment - cost
24,000
Depreciation
10,310
Investments
1,250,000
Cash and bank balance
2,350
Sundry debtors
5,165
Short term Investments
15,000
Sundry creditors
4,340
Investment income
145,000
1,820,000
1,820,000
Additional information
(a)
(b)
(c)
(d)
An actuarial valuation was carried out as at 31st December 1990. The actuary recommends that
Shs.25,150,000 be transferred to the profit and loss account.
Outstanding claim are Shs 215,000 in respect of death claims and Shs.750,000 in respect of maturities.
Expenses of management include Shs. 1,600,000 paid as director's fees.
Depreciation is provided using the straight-line method at the following rates.
Building 2% - the cost of buildings is Shs 200,000,000
Motor vehicles 20%
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(e)
(f)
Computer equipment 15%
Furniture fixtures and fittings 5%
Transfer from retained earnings Shs 30,000,000. This amount together with the retained earnings for
the year are paid out in full as dividends.
Provisions should be made for actuary fees Shs.3,000,000 auditor's fees Shs.2,250,000, taxation Shs.
8,500,000.
REQUIRED
Prepare the Life Revenue Account and the Profit and Loss Account as at 31st December 1990.
(25 marks)
5.
Swastik Ltd forward on 1 January 1998, 100 bicycles to Alfred & Co. of Nairobi to be sold on behalf of
Swastik Ltd. The cost of 1 bicycle was Sh2,500 but the invoice price was Sh3,000. Swastik Ltd incurred
Sh10,000 on freight and insurance, and received Sh100,000 as advance from Alfred & co.
Alfred & Co paid Sh5,000 for carriage inwards, Sh4,000 as rent and Sh3,000 as insurance; and by 30 th June
1998 had disposed of 80 bicycles for Sh250,000. Alfred and Co is entitled to a commission on sales at 5% of
pro forma invoice price and 25% of any surplus price realised. Alfred and Co remitted the balance due from
them by bank draft.
Required:
Write up the ledger accounts in the books of both parties.
DLM assignment
(20 marks)
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KENYA METHODIST UNIVERSITY
Programme: BACHELOR OF BUSINESS ADMINISTRATION
Department: Accounting, Finance and Investment
Course :ACCT 430: Advanced ACCOUNTING 1
Course Purpose
This course is designed to provide students with adequate knowledge with regard to specialised
skills in accounting for the various types of business and non-business organisations, including
public sector accounting.
Course Objectives
At the end of this course, the students should be able to:




prepare institutional Accounts
prepare specialized accounts
prepare and interpret public sector accounts
prepare statements for Banks and Insurance companies.
DLM assignment
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Week
Topics
Content
1-2
Partnerships
 Accounting for partnerships
 Goodwill and Revaluations
 dissolution
 amalgamation
 conversion to a limited company
Meaning of joint venture
Joint venture and partnership
Accounting records
 Drawer’s account
 Acceptor’s account
Time
(Hours)
3
3
Accounting for Joint
ventures
4
Bills Of Exchange
5
Containers & Packages
6
Consignment accounts
7
Accounting for Royalties
8
9
CAT
Hire purchases, lease, and Concept of hire purchase
installment
purchase Legal provision
system
Hire purchase contract
Lease accounting
Hire purchase system and installment
systems
3
10-11
Branch accounting
6
12
Public Accounts
DLM assignment
3
3
Accounts and returned containers
Accounts for retained containers
Introduction
Meaning of consignment
Features of consignment
Books of consignor
Valuation of unsold stock
Loss of stock
Books of consignee
Important terms
Account for Royalties
Short workings
3
3
3
Types of branches
Independent branches
Foreign branch
Accounting standards
Income and expenditure accounts;
Statement of assets and liabilities,
3
3
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General Accounts of Vote (GAV)
The exchequer account
Paymaster General Account (PMG)
13
Banks
&
Accounts
Insurances Accounting of insurance companies
Building societies accounting
Accounting provision of the bank act
Accounting for banks
End of trimester exams
14
3
Recommended Reading:
METHODOLOGY
The course objectives will be achieved through lectures, class discussion presentation, and
assignments.
ASSESSMENT
CAT & Assignment ……………………………………………………………30
Find exam………………………………………………………………………...70
Total…………………………………………………………………………….100
Required Text and Materials
Students will receive all course materials including the textbooks in their course package.

Hilton, Murray, and Darrell Herauf. Modern Advanced Accounting in Canada. Fifth edition. Toronto, ON:
McGraw-Hill Ryerson, 2008. ISBN:-13: 978-0-07-097111-0.

Financial Accounting: Consolidations & Advanced Issues. FA4 CD-ROM. Vancouver, BC: CGA- Canada,
2010.

Ethics Readings Handbook. Third edition. ERH CD-ROM. Vancouver, BC: CGA-Canada, 2009
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