Please write all your answers in blue or black ink in the answer book provided. There are 3 questions to attempt.

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Desk Number. University Card Number FOUNDATION Mid Term Assessment Group November 2016 Accounting 1.5 hours Instructions Please write all your answers in blue or black ink in the answer book provided.

1 Desk Number. University Card Number FOUNDATION Mid Term Assessment Group November 2016 Accounting 1.5 hours Instructions Please write all your answers in blue or black ink in the answer book provided. There are 3 questions to attempt. The answer booklet contains stationary for Q1) T-accounts, Trial Balance, Q2) Income Statement, Balance Sheet, Q3) Lined paper for written answers. Standard scientific calculators are permitted. Candidates are reminded of the need for good English and orderly presentation of their answers. Answer ALL questions. The mark allocation per question is as follows: Q1) 25 marks Q2) 35 marks Q3) 15 marks Total 75 marks

2 Question 1 (25 marks) Enter up the Ledger of Mr A. Ferguson from the following details for the month of June Then balance off the accounts where it is necessary and extract a Trial Balance as at 30 June 2016: June 1 Started business with 8,000 put in the bank June 2 Bought goods on credit from the following persons: D Chen 76; M Richard 27; B Braham 56 June 3 Cash sales 250 June 4 Paid wages in cash 14 June 6 Sold goods on credit to: H John 35; L Lane 42; J Carlton 72 June 8 Bought goods for cash 46 June 10 Bought goods on credit from: M Richard 57; T Barbara 98 June 11 Paid salaries in cash 50 June 12 Sold goods on credit to: L Lane 32; J Carlton 23. June 14 Bought shop fixtures on credit from Gamma Ltd for 50 June 15 Paid M Richard by cheque 84 June 17 We returned goods to T Barbara 20 June 18 Paid Gamma Ltd 50 by cheque June 19 We gave J Carlton a discount of 15 and he paid us a cheque for 80. June 25 We returned goods to D Chen 24 June 29 J King lent us 60 in cash June 30 Owner took 400 from business bank account for personal use. Ledger Trial Balance 5 marks 20 marks

3 Question 2 R Waters: Trial Balance as at 31 December 2016 Dr Cr Sales 125,000 Purchases 34,000 Returns 2,300 4,600 Rent 2,500 Inventory 12,500 Building 350,000 Accumulated Depreciation: Buildings 9,800 Machinery 55,000 Accumulated Depreciation: Machinery 1,700 Accounts Receivable 4,600 Carriage Outwards 4,500 Carriage Inwards 800 Accounts Payable 3,500 Drawings 900 Salaries 35,000 Bad Debts 1,250 Cash 5,600 Capital 365,150 Allowance for Doubtful Debts 1,500 Insurance 2, , ,250 End of Year Adjustments Inventory as on 31st December ,600 Allowance ro Doubtful Debts to be calculated at 40% of debtors Depreciation on Buildings is calculated on 2% (straight line method) Depreciation on Machinery is calculated at 5% (reducing balance) Mark Scheme: Income Statement 15 marks Balance Sheet 15 marks Presentation 5 Marks TOTAL: 35 marks

4 Question 3 (15 Marks) a). Explain the accounting concept of Prudence and give an example of its use in financial statements. (3 marks) b). What is the Business Entity Concept? (3 marks) c). Why is Capital a liability? (4 marks) d). Define depreciation and give 3 causes of it. (5 marks) TOTAL 15 marks

5 0 Capital 8000 Ctrl z 8000 bal c/d bal b/d Bank bal c/d bal b/d Purchases bal c/d bal b/d 360

6 24 Chen bal c/d bal b/d Richard Brabham bal c/d bal b/d 56

7 310 Cash bal c/d bal b/d Sales bal c/d bal b/d Wages 0 14 bal c/d bal b/d 14

8 35 John 0 35 bal c/d bal b/d Lane bal c/d bal b/d Carlton

9 20 Barbara bal c/d bal b/d Salaries 0 50 bal c/d bal b/d Fixtures 0 50 bal c/d bal b/d 50

10 50 Gamma Returns Out bal c/d bal b/d Discount Allowed 0 15 bal c/d bal b/d 15

11 0 King bal c/d bal b/d Drawings bal c/d bal b/d

12 Trial Balance Dr Cr 1 correct title for business. Capital Bank Purchases Chen 52 1 Richard Brabham 56 1 Cash Sales Wages 14 1 John 35 1 Lane 74 1 Carlton Barbara 78 1 Salaries 50 1 Fixtures 50 1 Gamma Returns Out 44 1 Discount Allowed 15 1 King 60 1 Drawings mark for each correct entry and 1 mark for each total 1 mark for correct title 20 5 marks for T accounts 1 for correct descriptions and dates 1 for balances correctly written 1 for totals in t accounts 2 for overall neatness and format Q1 Total 25 marks

13 1 INCOME STATEMENT Sales Less Returns In Less cost of goods sold Opening Inventory Add Purchases Add Carriage In 800 Less Closing Inventory 9600 Less Returns Out Gross Profit Add Revenues Allowance for D/Debts Decrease 0 Commissions 0 Rent Received 0 \ 0 \ 0 \ 0 0 Less Expenses Carriage Out Bad Debts Allowance for D/Debts Increase Salaries Insurance 2300 Commission Payable 0 Water Rates 0 1 Rent 2500 Insurance 0 Motor Expenses 0 General 0 Sundry Depreciation Building Machinery 2665 Equipment 0 Vehicles 0 Computers Net Profit

14 1 BALANCE SHEET FIXED ASSETS Building Less Accumulated Depreciation Machinery Less Accumulated Depreciation CURRENT ASSETS Equipment 0 Less Accumulated Depreciation 0 0 Vehicles 0 Less Accumulated Depreciation 0 0 Computers 0 Less Accumulated Depreciation Closing Inventory Accounts Receivable less doubtful debts provision Bank (if debit balance) 0 1 Cash 5600 \ ,960 1 TOTAL ASSETS 401,795 CURRENT LIABILITIES 1 Accounts Payable 3500 FIXED LIABILITIES Bank (if credit balance) 0 \ 0 Loan 0 Mortgage 0 \ 0 \ 0 \ NET ASSETS 398,295 CAPITAL Capital Add net profit Less drawings

15 Section C (15 Marks) a). Explain the accounting concept of Prudence and give an example of its use in financial statements. (3 marks) b). What is the Business Entity Concept? (3 marks) c). Why is Capital a liability? (4 marks)

16 d). Define depreciation and give 3 causes of it. (5 marks) TOTAL 15 marks

B Swift Dr Trading and Profit and Loss Account for the year ended the X6 Cr Opening Stock 300 Sales 6,700 4,260 Closing Stock 550 4,560 Gross Pr

B Swift Dr Trading and Profit and Loss Account for the year ended the X6 Cr Opening Stock 300 Sales 6,700 4,260 Closing Stock 550 4,560 Gross Pr Recording depreciation Depreciation within the double-entry system Fixed assets accounts are always kept for showing assets at cost price. This adheres to the Historic Cost accounting concept. As a result,