Foundation Access Course for Undergraduate Programmes Cohort: FACUP/09/FT Examinations for 2009 2010 / Semester 1 MODULE: FOUNDATION IN ACCOUNTING I MODULE CODE: ACCF Duration: 2 1 2 Hours Reading time: 15 Minutes Instructions to Candidates: 1. Section A is compulsory and answer any two questions in section B. 2. Always start a new question on a fresh page. 3. Total Marks 100 This question paper contains 4 questions and 9 pages. Page 1 of 9
QUESTION 1: (50 MARKS) SECTION A: COMPULSORY The following trial balance has been extracted from the nominal ledger of Kako Smith on 30 November 2009. Trial Balance of Kako Smith at 30 November 2009 Sales 125, 658 Returns 6, 341 1, 902 Debtors and creditors 11, 257 7, 983 Office equipment - cost 10, 000 - depreciation at 1 December 2008 1, 550 Vehicles - cost 3, 500 - depreciation at 1 December 2008 700 Purchases 64, 726 Stock at 1 December 2008 5, 000 Carriage inwards 908 Carriage outwards 272 Vehicles expenses 1, 349 Electricity 1, 803 Wages and salaries 11, 550 Rates and business rates 8, 800 Stationery and postages 2, 681 Bank deposit account 10, 000 Bank 4, 797 Discount allowed and received 5, 652 3, 765 VAT creditor 1, 325 PAYE creditor 453 Capital at 1 December 2008 4, 300 Drawings 15, 000 Loan 16, 000 163,636 163, 636 Page 2 of 9
THE ADJUSTMENTS: Following the extraction of the above trial balance from the ledgers and an examination of the accounting records, the following additional information was obtained: 1. The value of the stock on hand at 30 November 2009 was 5, 700. 2. The bank deposit was made on 1 June 2009. This account earns interest at 8 per cent per annum. The balance shown in the ledgers is the only deposit made into this account. Interest is credited on 31 December annually. 3. Bank charges accrued to 30 November 2009 are estimated to be 60. 4. Vehicle expenses include road tax of 125 per annum for a vehicle, which expires on 31 December 2009, and vehicle insurance of 360 per annum which was paid on 1 July 2009. 5. There is one employee whose gross wage is 1, 050 per month. The wage for November 2009 has not yet been entered in the ledgers. 6. The balance of the rent and rates account includes a payment of rent for the three months to 31 December 2009 to 1, 200 and a payment of rates for the six months to 31 March 2009 of 4, 000. 7. Following a review of debtors at the year end, it is decided that a bad debt of 1, 207 should be written off, and a provision for doubtful debts made, of 2 per cent of debtors. 8. Office equipment is to be depreciated at 10 per cent per annum on cost, and motor vehicles are to be depreciated at 20 per cent per annum on cost. 9. Loan interest of 10 per cent per annum is to be accrued. Required (a) A trading and Profit and Loss Account for the year ended 30 November 2009. (25 marks) (b) A Balance Sheet as at 30 November 2009. (25 marks) Page 3 of 9
SECTION B: ANSWER ANY TWO QUESTIONS QUESTION 2: (25 MARKS) The following extract from the cash book of Popo Limited for the month of June shows the company s bank transactions: Balance b/f 9, 167 Purchase ledger 1, 392 Sales ledger 4, 023 PAYE 2, 613 Cash Sales 2, 194 VAT creditor 981 Sales ledger 7, 249 Cheques cashed 3, 290 Balance c/f 14, 357 22, 633 22, 633 The company s bank statement for the same period is as follows: Debit Credit Balance Opening balance 7, 645 Lodgement 000212 2, 491 10, 136 Cheque 000148 948 9, 167 Insurance D/D 2, 413 6, 754 Lodgement 000213 4, 023 10, 777 Cheque 000149 1, 392 9, 385 Cheque 000150 2, 613 6, 772 Cheque 000152 3, 290 3, 482 Lodgement 000214 2, 194 5, 676 Bank charges 563 5, 113 Page 4 of 9
You are required to: (a) prepare a corrected cash book. (7 marks) (b) prepare a Bank Reconciliation statement to reconcile the balances shown in the cash book and bank statement. (8 marks) (c) Explain the purpose of control accounts. Describe the contents of a sales ledger control account and state the source of the main items of information contained therein. (10 marks) Page 5 of 9
QUESTION 3: (25 MARKS) Rooksale is a manufacturer of spare parts and the following balances were some of those appearing in his books at 31 December 2004. Capital 56, 932 Stocks at 1 January 2004 Raw materials 11, 000 Work in progress 16, 000 Finished goods 20, 090 Stocks at 31 December 2004 Raw materials 17, 000 Work in progress 18, 000 Finished goods 18, 040 Wages Direct manufacturing 203, 080 Factory supervisors 13, 325 General office 10, 200 Warehouse 19, 300 Direct factory power 95, 000 Heating and lighting 9, 000 Purchase of raw materials 256, 000 Carriage outwards 986 Plant and machinery 80, 000 Premises 120, 000 Returns inwards 420 Office equipment 15, 000 Rates 6, 000 Administrative expenses 1, 800 Debtors 14, 000 Creditors 12, 000 Cash in hand 3, 662 Sales 800, 290 Page 6 of 9
Bank overdraft 25, 641 The costs of heating and lighting, and rates, are to be apportioned as follows: factory ½; warehouse 1 / 3 ; offices 1 / 6. For the year ended 31 December 2004, you are required to prepare: (a) The manufacturing account of Rooksale. (b) The trading account of Rooksale (13 marks) (7 marks) (c) Name four types of stocks that are normally shown in the Balance Sheet of a company. (5 marks) Page 7 of 9
QUESTION 4 Part One: (15 MARKS) The following balances were taken from the books of Fernando Torres on 23 September 2006: Rent received Steeven Gerrard 7,360 Cr 180 Dr The following transactions took place during the week ended 30 September 2006: 27 September Steeven Gerrard left the country and Fernando decided to write off the balance on Steeven s account as a bad debt. 29 September A tenant paid 980 by cheque to cover his outstanding rent for September and one month s advance rent, 480, for October. Fernando Torres prepared his final accounts on 30 September 2006. REQUIRED Prepare the following ledger accounts. Make any necessary transfers to the Profit and Loss Account and, where necessary, bring down the final balances. (a) Rent Received account (b) Steeven Gerrard account (C) Bad Debts account (4 marks) (2 marks) (3 marks) (d) (i) Explain why Fernando Torres wrote off the balance on Steeven Gerrard s account as a bad debt on 27 September 2006. State which accounting concept he applied. (3 marks) (ii) Explain why Fernando Torres did not include all the rent received on 29 September in his Profit and Loss Account for the year ended 30 September 2006. State which accounting concept he applied. (3 marks) Page 8 of 9
QUESTION 2 Part Two: (10 MARKS) LFC Ltd is a company with the following capital structure: Authorised Issued share share capital capital Ordinary shares of 25c each 400 000 200 000 10 % Preference shares of 50c each 100 000 100 000 8 % Preference shares of Rs1 each 80 000 80 000 The balance of the Profit and Loss Account brought forward on 1 October 2005 was 65,700. No shares were issued or redeemed during the year. During the year ended 30 September 2006, the company made net profit of 45,000. On 30 September 2006 the directors decided on the following: 1 To transfer 50,000 to General Reserve. 2 To pay the preference share dividends. 3 To pay a dividend of 2c per share on the ordinary shares. An interim dividend of 1c per share on the ordinary shares was paid during the year. REQUIRED Prepare the Profit and Loss Appropriation Account of LFC Ltd for the year ended 30 September 2006. (10 Marks) ***END OF QUESTION PAPER*** Page 9 of 9