DIPLOMA COURSE IN MANAGEMENT SECTION I

MARCH 2024 EXAMINATION

SUBJECT NAME: FINANCIAL ACCOUNTING

SUBJECT CODE: DBM 611

DATE: 18TH MARCH, 2024

TIME: 3 HOURS

INSTRUCTIONS:
1. Write your Admission number in the space provided in the answer booklet.
2. Answer Any Five questions.
3. All questions carry equal marks.
4. Candidates should show their calculations clearly.
5. NO writing should be done on this question paper.
6. NO candidate is allowed to leave the exam room with a question paper.
7. Candidates who commit exam malpractice will be DISQUALIFIED.
8. Only blue or black pen should be used on the booklet, pencil may be used for
drawing purposes.

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1. a) Ali and Amina are in partnership called AA partnership sharing profits and losses at the ratio
1:2 after correcting themselves with a 6% p.a. interest on capita; and salary of sh. 25,000 and
sh. 20,000 per month respectively, their trial balance for the year enclosed 31/12/2022 is as
follows
DR. (sh.) CR. (sh.)
Plant and machinery at cost 12,000,000
Furniture at cost 8,000,000
Motor vehicle at cost 4,000,000
Sales 38,000,000
purchases 30,000,000
Stock 1/1/2022 1,200,000
Discounts 800,000 1,500,000
Provision for bad doubtful debts 1,000,000
Debtors/ creditors 3,500,000 2,000,000
Cash at bank 1,8000,000
Rent $ rates 700,000
Electricity and water 400,000
Provision for depreciation on 1/1/2022
- motor vehicle 1,300,000
- plant & machinery 3,700,000
- furniture 3,500,000
Bad debts 300,000
Returns 600,000 800,000
Salaries and wages 850,000
Drawings- Ali 1,150,000
-Amina 600,000
Capita acc. – Ali 8,600,000
-Amina 5,500,000
Current Acc. – Ali 650,000
-Amina 250,000
Insurance 900,000
66,800,000 66,800,000
Additional information
i. Stock as at 31/12/2022 amount to sh. 1,300,000
ii. Salaries & wages in arrears amounts to sh. 160,000, rent and rates prepaid is sh. 120,000
iii. Depreciation is charged as follows:

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  Plant & machinery 10% p.a. using the reducing balance method
 Motor vehicle 15% p.a. on cost
 Furniture 20% p.a. on cost
iv. Provision for bad and doubtful debts is to be maintained at 7% of the current debtors
Required: Prepare
a) Partners income and appropriation account (10 marks)
b) Partners current account (4 marks)
c) Partners statement of financial position as at 31/12/2022 (6 marks)

2. a) Explain the following items as used in accounting

i. Source documents (2 marks)
ii. Journal (2 marks)
iii. Ledger (2 marks)
b) Outline two types of accounting errors. (4 marks)
st
c) The following balances were extracted from the ledger of Onyango on 31 March 2022

Salaries 36320
Sales 173500
Plant and machinery 34300
Commission paid 1880
Stock on 1/4/2021 11100
Repairs 1670
sundry expenses 460
Return inwards 1000
Discount allowed 1150
Rent & rates 3220
Purchases 144670
Sundry debtors 1430
Transport expenses 2630
Carriage inwards 240
Sundry creditors 14260
Capital 1/4/21 62500
Drawings 3500
Cash at bank 1090
Return outwards 400
Investments 6000
Required: Prepare a trial balance for the year ending 31/3/2022 (10 marks)

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3. A) Distinguish between revenue expenditure and capital expenditure and give examples for
each (6 marks)
b) Wam started a business on 1stJanuary 2022 with cash sh. 50,000.the following transactions
took place
Jan 1: opened a bank account with KCB eth sh. 45000
Jan 2: Bought goods foe cash sh. 1000
Jan 3: bought furniture and paid by cheque
Jan 5: bought goods for sh. 5000 and paid by cheque
Jan 7: Sold goods for cash sh. 2000
Jan 10: Paid expenses sh. 500 in cash
Jan 15: sold goods and received a cheque for sh. 2500
Jan 16: paid cash into the bank sh. 2000
Jan 17: Bought goods for cash sh. 1500
Jan 20: paid wages to an assistant sh. 1000
Jan 22: cashed cheque for office sh. 1500
Jan 30: paid expenses sh. 800 in cash

Required:
Record the above transactions into a ledger account and balance it off (14 marks)

4. On 31st December 2022 the balance in the bank as per the cashbook was sh. 25,370, while the
bank statement showed a credit balance of sh. 25,670. On comparison the following were noted
i. cheque totaling to sh. 12340 were not presented to the bank
ii. cheque paid into bank but not credited by the bank sh. 12160
iii. Items shown in the bank statement but not entered in the cashbook
Sh.
Bank charges 240
Standby order 460
Dividend collected by bank 820
Required: Prepare
a) Adjusted cashbook (7marks)
b) Bank reconciliation statement (5 mark)
c) Explain four causes why cash and bank balance may differ (8 marks)

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5. a) The following information was extracted from the books of Mazoni as at 31/12/2022
DR. (sh.) CR (Sh.)
Sales & purchases 33640 51200
Carriage outwards 1280
Carriage inwards 1660
Discounts 550 2460
Salaries & wages 3930
Rent 1600
Advertising expenses 1080
Electricity & water 900
Insurance 460
Repairs 1200
Land and building at cost 6080
Motor vehicle at cost 2440
Provision for depreciation at 1/1/22
- Land and building 2010
- Motor vehicle 1670
Interim dividend paid 800
Share capital (sh. 10 per value) 700
Share premium account 1700
Stock 1/1/22 8100
Debtors/ creditors 9300 5200
Bad debts 2000
Profit and loss account 1/1/2022 2140
Balance at bank 640
Revenue reserve 1000
75020 75020

Additional information
i. Stock as at 31/12/2022 was valued at sh. 7100
ii. Depreciation is to be provided for as follows
 land & building 15% p.a. using straight line method
 motor vehicle 15% using the reducing balance method
iii. A final dividend of sh. 0.6 per share is proposed
iv. Transfer of revenue reserve sh.130
v. Corporation tax to be charged at 30% on the reported profit for the year
vi. Provision for bad and doubtful debts is to be made at 5% the current debtors

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 vii. Prepaid salaries and wages amount to sh. 50
viii. Unpaid creditors remuneration amount to sh. 250
Required: Prepare
a) Income statement for the year ended 31/12/22 (12 marks)
b) Statement of financial position as at 30/12/22 (8 marks)

6. a) Explain four items that are neither included in the sole proprietorship nor in the partnership
final accounts, but included in the limited company final accounts (8 marks)
b) Highlight four desirable characteristics of accounting reports (4 marks)
c) Outline four objectives of financial accounting (8 marks)

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