6 marks total 20 marks financial accounting 1 304

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(6 marks)(Total: 20 marks)FINANCIALACCOUNTING1
304Comprehensive Mock ExaminationsQUESTION FOURMutiso Mwema started his business in Gikomba as a carpenter on 1January1990 and he has not kept proper books of account. He engagesyou to examine his records and prepare appropriate accounts. From yourexamination of the records and from interviews with Mr. Mwema youascertain the following information:i)On starting the business on 1 January 1990, he put Sh.120,000 into abusiness bank account. On the same day, Mr. Mwema brought intothe firm his pickup and reckoned that it was worth Sh. 66,000 then.He estimated that it will have another useful life of three years.ii)To increase his working capital he borrowed Sh.40,000 at 15%interest per annum on 1 April 1990 from his sister but no interest hasyet been paid.iii)On 1 January 1990 Miss Wambua was employed as a typist/clerk at asalary of Sh.72,000 per annum.iv)Drawings were Sh.1,800 per week from the business account forprivate use during the year.v)He purchased timber worth Sh.196,000 out of which Sh.15,800 left inthe workshop on 31 December 1990. He had also spentSh.96,000 onsome equipment at the commencement of the business which heestimates will last him five years.vi)Electricity bills received up to 31 October 1990 came to Sh.24,000.Motor vehicle expenses were Sh.18, 200 while general expensesamounted to Sh.27,000 for the year. The insurance premium for theyear 31 March 1991 was Sh.16,000.All these expenses have beenpaid by cheque.vii) Rates for the year to 31 March 1991 came to Sh.3,600 but they hadnot yet been paid.viii)Miss Wambua sent out invoices to customers for Sh. 617,800 but onlySh.508,000 had been received by 31 December 1990. DebtstotalingSh.1,700 were abandoned during the year as bad. Other customersfor jobs too small to invoice have paid Sh.72,600 in cash for workdone of which Sh.56,000 was banked.Mr. Mwema used Sh. 7,500 ofthe difference to pay for his family's food stuff, bought Kenya CharitySweepstake tickets worth Sh.2,400 and Miss Wambua used the rest ofgeneral expenses, except for Sh.3,010 which was left over in thedrawer in the office on 31 December 1990.ix)You agree with Mr. Mwema that he will pay you Sh. 5,500 foraccountancy fee.STRATHMOREUNIVERSITYREVISIONKIT
Questions – Mocks305Required:Prepare Profit and Loss Account for the year ended 31 December 1990andaBalanceSheetasatthatdate.(Total: 20 marks)QUESTION FIVEComparability is a characteristic which adds to the usefulness of financialstatements.I.)Required:(a)Explain what is meant by the term ‘comparability’ in financialstatements, referring to two types of comparison that users offinancial statements may make.(5 marks)(b)Explain two ways in which the IAS (International AccountingStandards) aids the comparability of financial information.(5 marks)II.)Explain four ways in which the use of historical cost accountingmay cause users of financial statements to be misled when pricesare rising.(10 marks)(Total: 20 marks)FINANCIALACCOUNTING1
306Comprehensive Mock ExaminationsMOCK PAPER 4QUESTION ONEa)Define the term bank reconciliation statement and indicate its three

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Term
Spring
Professor
MANZIGWE
Tags
Balance Sheet, STRATHMORE UNIVERSITY

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