Unit: Financial accounting
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Login to Access| Sh.“000” | Sh.“000” | |
| Sales | 600,000 | |
| Ordinary share capital | 300,000 | |
| 10% preference shares | 80,000 | |
| 7% debentures | 200,000 | |
| General reserve | 105,000 | |
| Land and building at cost (Land cost Sh.120 million) | 222,000 | |
| Plant and machinery | 764,000 | |
| Revenue reserve (1 September 2024) | 112,000 | |
| Share premium | 40,000 | |
| Inventory (1 September 2024) | 70,000 | |
| Discounts allowed and discounts received | 6,400 | 9,200 |
| Trade receivables and trade payables | 104,000 | 54,000 |
| Accumulated depreciation on plant and machinery | 120,000 | |
| Accumulated depreciation on building | 32,000 | |
| Bank | 13,000 | |
| Cash | 1,000 | |
| Carriage inwards | 2,200 | |
| Purchases | 330,000 | |
| Rental income | 2,800 | |
| Salaries and wages | 64,200 | |
| Lighting and heating | 5,800 | |
| Debenture interest | 7,000 | |
| Directors’ fees | 25,600 | |
| Interim dividends: | ||
| Ordinary shares | 15,000 | |
| Preference shareholders | 4,000 | |
| Allowance for credit loss | 3,000 | |
| General expenses | 23,800 | |
| 1,658,000 | 1,658,000 |
| 1. | Physical stock count indicated that inventory as at 31 August 2025 was valued at Sh.54,226,000. It is estimated that these goods can be sold for Sh.57,450,000 after incurring Sh.4,500,000 to market them. |
| 2. | During the year ended 31 August 2025, the following petty cash expenses had not been accounted for in the books: |
| 2. | Sh. | |
| Electricity expenses | 200,000 | |
| General expenses | 150,000 | |
| Casual wages | 650,000 |
| 3. | An entry for disposal of a machinery had been omitted from the records. This machine cost Sh.12,000,000 and had accumulated depreciation amounting to Sh.10,500,000 at the time of disposal. The proceeds from this sale was Sh.2,400,000. |
| 4. | During the year ended 31 August 2025, land was revalued upwards by Sh.15,000,000. This had not been accounted for. |
| 5. | As at 31 August 2025, salaries and wages accrued amounted to Sh.780,000 and accrued directors’ fees amounted to Sh.1,500,000. |
| 6. | Depreciation is to be provided for on reducing balance at the following rates: |
| 5. | Rate per annum | |
| Building | 5% | |
| Plant and machinery | 10% |
| 7. | The allowance for credit loss is to be charged at the rate of 2.5% on the balance of trade receivables as at 31 August 2025. |
| 8. | Directors proposed to pay final dividends to preference shareholders. |
| 9. | Allowance for corporate tax is Sh.12,670,000. |
Required: | |
| (a) | Statement of profit or loss for the year ended 31 August 2025. |
| (b) | Statement of financial position as at 31 August 2025. |
| Mercy Ltd. Appropriation account for the year ended 30 September 2025: | |||
| Sh.“000” | Sh.“000” | ||
| Profit before tax | 21,600 | ||
| Corporation tax | (8,100) | ||
| Profit after tax | 13,500 | ||
| Dividends: | Interim | 1,350 | |
| Proposed | 4,050 | 5,400 | |
| Mercy Ltd. Statement of financial position as at 30 September 2025: | ||
| 2025 | 2024 | |
| Non-current assets: | Sh.“000” | Sh.“000” |
| Freehold land and buildings | 151,200 | 108,000 |
| Plant and machinery | 52,740 | 57,150 |
| Investments | 32,400 | 33,750 |
| Goodwill | 25,200 | 26,100 |
| 261,540 | 225,000 | |
| Current assets: | ||
| Inventories | 90,450 | 78,300 |
| Trade receivables | 55,260 | 70,200 |
| Short term investments | 15,390 | 7,560 |
| Cash and bank balance | 1,800 | 3,870 |
| 162,900 | 159,930 | |
| 424,440 | 384,930 | |
| Equity and liabilities: | ||
| Ordinary share capital | 162,000 | 135,000 |
| Share premium | 13,500 | 6,750 |
| Revaluation reserve | 40,500 | - |
| Revenue reserve | 55,350 | 47,250 |
| Total equity | 271,350 | 189,000 |
| Non-current liabilities: | ||
| 15% debentures | 67,500 | 81,000 |
| Current liabilities: | ||
| Trade payables | 52,650 | 47,250 |
| Bank overdraft | 21,510 | 58,860 |
| Proposed dividends | 4,050 | 3,420 |
| Taxation | 7,380 | 5,400 |
| 85,590 | 114,930 | |
| 424,440 | 384,930 | |
| 30 June | ||
| 2025 | 2024 | |
| Non-current assets: | Sh.“000” | Sh.“000” |
| Property, plant and equipment | 10,000 | 8,125 |
| Intangible assets | 5,750 | 4,500 |
| Investments | - | 625 |
| Total Non-current assets: | 15,750 | 13,250 |
| Current assets: | ||
| Inventory | 3,000 | 2,600 |
| Accounts receivable | 10,000 | 7,375 |
| Cash in hand | 250 | 100 |
| 90-day treasury bill | 1,250 | - |
| Total Current assets: | 14,500 | 10,075 |
| Total assets | 30,250 | 23,325 |
| Equity and liabilities: | ||
| Ordinary share capital at Sh.50 per share | 5,000 | 3,750 |
| Share premium | 4,000 | 3,750 |
| Revaluation reserve | 2,500 | 2,250 |
| Retained earnings | 3,500 | 2,000 |
| Total Equity | 15,000 | 11,750 |
| Non-current liabilities: | ||
| Bank loan | 2,500 | - |
| 8% debenture | 2,000 | 1,500 |
| Total Non-current liabilities: | 4,500 | 1,500 |
| Current liabilities: | ||
| Accounts payable | 3,050 | 2,700 |
| Bank overdraft | 4,700 | 4,625 |
| Tax payable | 3,000 | 2,750 |
| Total Current liabilities: | 10,750 | 10,075 |
| Total equity and liabilities | 30,250 | 23,325 |
| 1. | The property, plant and equipment as at 30 June was as follows: | ||
| 2025 | 2024 | ||
| Sh.“000” | Sh.“000” | ||
| Cost | 18,500 | 15,375 | |
| Accumulated depreciation | (8,500) | (7,250) | |
| 10,000 | 8,125 | ||
| 2. | During the year ended 30 June 2025, plant with an original cost of Sh.2,250,000 and a net book value (NBV)0 of Sh.1,250,000 was sold for Sh.925,000. |
| 3. | Dividends amounting to Sh.2,000,000 were paid during the year ended 30 June 2025. |
| 4. | Tax paid during the year ended 30 June 2025 amounted to Sh.2,750,000. |
| 5. | The proceeds on sale of investment was Sh.750,000. |
| 6. | Interest of Sh.1,875,000 was paid and interest of Sh.625,000 was received during the year ended 30 June 2025. |
| Roka Ltd. Statement of profit or loss for the year ended 31 August 2024: | ||
| Sh. | Sh. | |
| Sales | 14,963,130 | |
| Cost of sales | (7,707,050) | |
| 7,256,080 | ||
| Investment income | 29,484 | |
| 7,285,564 | ||
| Expenses: | ||
| Distribution cost | 2,552,784 | |
| Administration cost | 1,772,576 | (4,325,360) |
| Net profit before tax and finance cost | 2,960,204 | |
| Finance cost | (410,800) | |
| Net profit before tax | 2,549,404 | |
| Corporation tax | (820,924) | |
| Net profit for the year | 1,728,480 | |
| Retained earnings brought forward | 8,658,000 | |
| Retained earnings carried forward | 10,386,480 | |
| Roka Ltd Statement of financial position as at 31 August: | ||
| 2024 Sh. | 2023 Sh. | |
| Non-current assets | 33,930,702 | 27,833,208 |
| Accumulated depreciation | (7,695,142) | (6,607,874) |
| 26,235,560 | 21,225,334 | |
| Current assets: | ||
| Inventory | 8,582,288 | 7,573,696 |
| Trade receivables | 3,231,150 | 4,504,864 |
| Bank | 309,192 | 278,408 |
| 12,122,630 | 12,356,968 | |
| Total assets | 38,358,190 | 33,582,302 |
| Capital and liabilities: | ||
| Ordinary share capital | 10,920,000 | 7,800,000 |
| Share premium | 4,103,840 | 4,038,814 |
| Revaluation reserve | 3,876,080 | 2,127,840 |
| Retained earnings | 10,386,480 | 8,658,000 |
| 29,286,400 | 22,624,654 | |
| Non-current liabilities: | ||
| 12% debentures | 3,501,680 | 4,589,000 |
| Current liabilities: | ||
| Trade payables | 4,942,860 | 5,694,624 |
| Corporation tax | 627,250 | 674,024 |
| 5,570,110 | 6,368,648 | |
| Total capital and liabilities | 38,358,190 | 33,582,302 |
| Sh.“000” | Sh.“000” | |
| Ordinary share capital of Sh.100 each | 78,000 | |
| 12% preference share capital of Sh.100 each | 13,000 | |
| Share premium | 10,400 | |
| 10% debentures | 13,000 | |
| Accounts payable | 19,240 | |
| Accounts receivable | 42,900 | |
| Sales | 724,000 | |
| Purchases | 548,600 | |
| Discounts allowed | 650 | |
| Discounts received | 1,690 | |
| Freehold buildings | 165,000 | |
| Furniture and fittings | 83,200 | |
| Accumulated depreciation: | ||
| 6,500 | |
| 33,280 | |
| Inventory (1 July 2023) | 54,600 | |
| Returns outward | 10,400 | |
| Rent expenses | 16,900 | |
| Selling and distribution expenses | 21,710 | |
| Bad debts written off | 520 | |
| Allowance for doubtful debts | 2,340 | |
| Administrative expenses | 7,280 | |
| Retained earnings (1 July 2023) | 47,060 | |
| Goodwill | 20,800 | |
| Bank overdraft | 3,250 | |
| 962,160 | 962,160 |
| 1. | Depreciation on non-current assets is provided on a straight line basis at the following rates: |
| 1. | Asset | Rate per annum (%) |
| Freehold buildings | 20 | |
| Furniture and fittings | 12.5 |
| 2. | As at 30 June 2023, accounts receivables included Sh.130,000 due from Johnson Wetu who has now been declared bankrupt. It has been decided to write off this debt as a bad debt. |
| 3. | The allowance for doubtful debt as at 30 June 2024 is to be adjusted to 10% of accounts receivable. |
| 4. | Rent expenses prepaid as at 30 June 2024 amounted to Sh.52,000. |
| 5. | Administrative expenses accrued as at 30 June 2024 amounted to Sh.95,000. |
| 6. | The company paid the interest on debentures for the year ended 30 June 2024 on 31 July 2024. |
| 7. | As at 30 June 2024, inventory was valued at Sh.7,280,000. |
| 8. | The company directors propose that the preference shares dividend be paid and a dividend of 10% of the ordinary shares be paid. |
| 9. | Corporation tax is charged at the rate of 30% of the net profit. |
Required: | |
| (i) | Statement of profit or loss for the year ended 30 June 2024. |
| (ii) | Statement of financial position as at 30 June 2024. |
| Sh.“000” | Sh.“000” | ||
| Ordinary share capital (Sh.10 par value) | 15,000 | ||
| 10% preference share capital (Sh.10 par value) | 2,500 | ||
| Share premium | 2,000 | ||
| 8% debentures | 2,500 | ||
| Accounts payable | 3,325 | ||
| Accounts receivable | 8,250 | ||
| Sales | 120,000 | ||
| Purchases | 105,500 | ||
| Bank overdraft | 1,000 | ||
| Discounts received | 325 | ||
| Discounts allowed | 125 | ||
| Building (cost) | 22,500 | ||
| Fixtures and fittings (cost) | 6,000 | ||
| Accumulated depreciation (1 April 2022): | Building | 6,250 | |
| Fixtures and fittings | 1,400 | ||
| Inventory (1 April 2022) | 10,500 | ||
| Returns outward | 2,000 | ||
| Directors’ fees | 1,000 | ||
| Administrative expenses | 3,650 | ||
| Selling and distribution expenses | 4,175 | ||
| Bad debt written off | 100 | ||
| Allowance for doubtful debts (1 April 2022) | 450 | ||
| Retained profit (1 April 2022) | 9,050 | ||
| Investments at fair value | 4,000 | ||
| 165,800 | 165,800 |
| 1. | The company maintains a gross profit margin of 20%. |
| 2. | As at 31 March 2023, accounts receivable balance included Sh.250,000 due from a customer who has been declared bankrupt. |
| 3. | The allowance for doubtful debts is to be adjusted to 5% of the accounts receivable as at 31 March 2023. |
| 4. | As at 31 March 2023, administrative expenses accrued amounted to Sh.175,000 while prepaid selling and distribution expenses amounted to Sh.75,000. |
| 5. | The company paid interest on the debentures for the year ended 31 March 2023 on 5 April 2023. |
| 6. | Depreciation is to be provided as follows:
|
| 7. | The company’s directors propose that:
|
Required: | |
| (a) | The value of inventory as at 31 March 2023. |
| (b) | Statement of profit or loss for the year ended 31 March 2023. |
| (c) | Statement of financial position as at 31 March 2023. |
| Sh.“000” | Sh.“000” | |
| Ordinary shares fully paid (1 July 2021) | 6,000 | |
| 6% preference shares | 5,000 | |
| Share premium | 500 | |
| Revaluation reserve | 2,200 | |
| General reserve | 500 | |
| Retained earnings (1 July 2021) | 2,500 | |
| Land at cost | 20,000 | |
| Building at cost | 8,000 | |
| Machinery at cost | 10,000 | |
| Motor vehicles at cost | 8,000 | |
| Accumulated depreciation (1 July 2021): | ||
| Building | 600 | |
| Machinery | 1,500 | |
| Motor vehicles | 3,200 | |
| Accounts receivable and accounts payable | 1,400 | 600 |
| Distribution expenses | 3,800 | |
| Administrative expenses | 1,800 | |
| 12% bank loan | 6,000 | |
| Bank and cash balances | 2,100 | |
| Dividend paid - Preference (interim) | 150 | |
| - Ordinary (interim) | 600 | |
| Suspense account | 750 | |
| Gross profit | 30,740 | |
| Bank loan interest paid | 240 | |
| Inventory (30 June 2022) | 4,000 | |
| 60,090 | 60,090 |
| 1. | The suspense account relates to 50,000 new ordinary shares which were issued at a premium of 50% each on 31 January 2022. |
| 2. | On 30 November 2021, the directors made a bonus issue of one share for every five shares held at par fully paid from the revenue reserves. |
| 3. | Depreciation is provided per annum on straight line basis as follows: | |
| Asset | Rate per annum (%) | |
| Building | 2½ | |
| Machinery | 10 | |
| Motor vehicle | 20 | |
| 4. | Corporate tax expenses for the year amounted to Sh.3,100,000. |
| 5. | The directors proposed the following:
|
| 6. | Land was revalued upwards to Sh.22 million on 1 July 2021. |
Required: | |
| (a) | Statement of profit or loss for the year ended 30 June 2022. |
| (b) | Statement of financial position as at 30 June 2022. |