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UNIVERSITY EXAMINATIONS 2008/2009 SECOND SEMESTER EXAMINATION FOR THE DEGREE OF BACHELOR OF COMMERCE BAC 100: FOUNDAMENTALS OF ACCOUNTING I
TIME:
What is accounting?
Outline the users of accounting information and clearly show how they benefit from this information. [6marks] [2marks] [6marks]
c) d)
What are GAAPS? Explain i) historical cost convention and ii) substance over form.
2.
The balances extracted from the ledger of Kamau, a sole trader, are as shown here below as at 31 st December 2008. Dr (shs) Plant and machinery Depreciation on plant and machinery Repairs to plant Wages Salaries Cash Land and building 16,000 280,000 40,000 25,000 745,000 Overdraft Salary outstanding Bills payable Provision for Bad debts Purchase discounts 38,000 20,000 30,000 60,000 40,000 180,000 20,000 Kamau capital Sales Cr (shs) 500,000 2,490,000
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Depreciation
on building
Accounts payable
233,000
3,411,000
Write off shs 30,000 bad debts and maintain a provision of 5% on account receivable. Shs 12,000 worth of rent was debited to landlord account and included in the list of account receivable.
REQUIRED (a) (b) 3. The income statement for Kamau for period ended December 31, 2008 A balance sheet as at that date [10 marks] [10 marks]
A trial balance of the ledger of Yasin Car cleaners as at 31 st December 2008 is shown here below: Yasin Car cleaners Trial Balance As at December 31 2008
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(Shs) Bank Account Receivable Prepaid Insurance 74,550 15,050 92,400 57,050 21,000 182,700 Cleaning Equipment 1,159,200 Depreciation: motor vehicles
(Shs)
79,800
267,400 45,150 28000 822,150 1081500 2,422,700 870,800 56,000 54,950 3,665,200 3,665,200
Accounts payable Unearned cleaning Revenue Mohammed Mohammed Yasin Capital Yasin Drawing
Cleaning Revenue Earned Wages expense Rent expense Motor Vehicle Running Expenses
Additional (a)
(b)
An inventory cleaning supplies showed shs. 87750 on hand The cleaning services rents a garage and equipment storage space. At the
(c)
beginning of the year, three months rent was prepaid on the first day of each month and debited to the rent expense account. as the trial balance date. The December rent was unpaid
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(d)
Estimated depreciation on cleaning equipment shs. 25,550 and on motor vehicles shs. 151900.
(e)
On November 15, the company entered into contract and began cleaning vehicles for Citi Hopa for shs. 14,000 a month. Citi Hopa paid for two months services in advance and the amount was credited to unearned cleaning revenue account to clean vehicles for Emba Sacco. By end of month of December, shs. 84,00 had been earned on this contract but had not been recorded.
REQUIRED:
(a) (b)
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