Unit: Financial accounting
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Login to Access| 1. | The value of inventory as at 31 December 2024 was Sh.1,592,500. No inventory take was done on 31 December 2023, but a uniform rate of gross profit is assumed. |
| 2. | Goods were taken from inventory for private consumption. The estimated cost being Sh.65,000 in the year ended 31 December 2023 and Sh.98,000 in the year ended 31 December 2024. |
| 3. | All expenses of the business had been paid by cheque. An analysis of the bank statement showed the following payments in the two years 2023 and 2024: |
| 3. | Sh.“000” | |
| Purchases (of which Sh.4,810,000 relate to the year ended 31 December 2023) | 11,655 | |
| Rent and rates | 663 | |
| Salaries | 1,430 | |
| Advertising | 182 | |
| Other expenses (including insurance) | 375 |
| 4. | Liabilities outstanding as at 31 December 2024 were: | |
| Sh.“000” | ||
| Purchases | 975 | |
| Advertising | 65 | |
| Other expenses | 221 | |
| 5. | Amounts paid in advance as at 31 December 2024 were: | |
| Sh.“000” | ||
| Rates | 13 | |
| Insurance | 65 | |
| 6. | Private drawings amounted to Sh.860,000 and were paid out of cash receipt and the balance banked. |
| 7. | Hesbon Mwatate earned private income of Sh.293,000 which was paid into the bank. |
| 8. | All business expenses arose equally in the two years. |
| 9. | Depreciation on furniture and fittings is provided on straight line basis over 10 years. |
Required: | |
| (a) | Statement of profit or loss for the year ended 31 December 2023 and 31 December 2024. |
| (b) | Statement of financial position as at 31 December 2024. |
| Sh. | Sh. | |
| Capital (1 October 2023) | 4,748,430 | |
| Purchases | 1,385,400 | |
| Sales | 2,952,240 | |
| Returns outward | 8,400 | |
| Returns inward | 24,240 | |
| Discount allowed | 27,300 | |
| Discount received | 21,120 | |
| Wages and salaries | 933,000 | |
| Rates | 73,500 | |
| Insurance | 53,400 | |
| General expenses | 121,800 | |
| Trade receivables | 552,000 | |
| Trade payables | 483,600 | |
| Bank overdraft | 120,600 | |
| Inventory (1 October 2023) | 183,000 | |
| Land and buildings | 2,550,000 | |
| Plant and machinery | 1,600,000 | |
| Motor vehicles | 843,000 | |
| Drawings | 312,300 | |
| Furniture and fittings | 245,000 | |
| Cash | 60,300 | |
| Accumulated depreciation: | ||
| Plant and machinery | 447,010 | |
| Motor vehicles | 168,600 | |
| Furniture and fittings | 14,240 | |
| 8,964,240 | 8,964,240 |
| 1. | As at 30 September 2024, inventory was valued at Sh.222,600. |
| 2. | As at 30 September 2024, rates paid in advanced amounted to Sh.10,500. |
| 3. | As at 30 September 2024, outstanding electricity expenses amounted to Sh.5,370. This is included in general expenses. |
| 4. | Trade receivables include an irrecoverable amount of Sh.8,400. |
| 5. | A 5% allowance for doubtful debt is to be made on the remaining trade receivables. |
| 6. | Depreciation is provided at the following annual rates using the straight line method:
|
| 7. | Included in wages and salaries is an amount of Sh.93,000 paid to the domestic workers of Bella Omari. |
| 8. | As at 30 September 2024, outstanding wages and salaries amounted to Sh.37,200. |
Required: | |
| (a) | Statement of profit or loss for the year ended 30 September 2024. |
| (b) | Statement of financial position as at 30 September 2024. |
| 1. | Brought in her personal pick-up van valued at Sh.6,000,000 to be used in the business. The van was estimated to have an economic useful life of 4 years as at 1 July 2023. |
| 2. | On 31 December 2023, she took a bank loan of Sh.4,000,000 at an interest rate of 15% per annum. At the end of the year the loan interest was in arrears. |
| 3. | During the year ended 30 June 2024, Angela purchased goods amounting to Sh.79,000,000 on credit and Sh.6,000,000 on cash paid through the bank. As at 30 June 2024, Sh.3,000,000 accounts payable to suppliers was still outstanding. |
| 4. | Credit sales during the year amounted to Sh.125,000,000 while cash sales amounted to Sh.6,500,000. A customer who owed Sh.1,500,000 was declared bankrupt and the debt had to be written off. By 30 June 2024, accounts receivable stood at Sh.5,500,000. |
| 5. | During the year, Angela Riziki spent Sh.2,500,000 of the cash sales received for her personal use and Sh.1,200,000 to pay for telephone and water bills. The balance was banked. |
| 6. | Discount received and discount allowed during the year ended 30 June 2024 amounted to Sh.1,800,000 and 1,100,000 respectively. |
| 7. | As at 30 June 2024, inventory was valued at Sh.7,200,000. |
| 8. | Credit suppliers and credit customers are paid and pay through the bank respectively. |
| 9. | The following payments were made through the bank during the year: |
| 9. | Expenses | Sh.“000” |
| Rent expenses | 3,600 | |
| Purchase of furniture (1 July 2023) | 8,000 | |
| Salaries and wages | 11,000 | |
| Transport | 4,200 | |
| Insurance | 2,800 | |
| Advertisement | 2,100 | |
| Repair of motor vehicle (van) | 850 | |
| Electricity and internet | 2,200 | |
| Carriage inwards | 2,500 |
| 10. | Furniture was to be depreciated at the rate of 15% per annum on a straight line basis. |
| 11. | As at 30 June 2024, electricity bills unpaid amounted to Sh.450,000, while insurance prepaid was Sh.1,200,000. |
| Sh. | |
| Bank loan | 450,000 |
| Equipment (Net book value) | 5,580,000 |
| Cash balance | 830,700 |
| Inventory | 1,750,500 |
| Building (Net book value) | 15,000,000 |
| Bank loan interest payable | 22,500 |
| Trade receivables | 2,635,200 |
| Prepaid insurance | 85,500 |
| Interest due on customers’ accounts | 40,500 |
| Other payables | 153,000 |
| Trade payables | 2,137,500 |
| Cash book |
| Sh. | Sh. | ||
| Balance brought forward | 830,700 | Payment in respect of trade payables | 6,769,500 |
| Receipts from trade receivables | 5,720,700 | Bank loan (including interest of Sh.100,000) | 234,000 |
| Bank loan | 800,000 | Transport for purchases | 194,000 |
| Cash sales | 2,619,000 | Withdrawals for personal use | 200,000 |
| Interest on overdue accounts | 23,850 | Insurance premium | 14,700 |
| Rent from building | 540,000 | Purchase of equipment | 500,000 |
| Operating expenses | 714,150 | ||
| Other payables | 60,000 | ||
| Balance carried forward | 1,847,900 | ||
| 10,534,250 | 10,534,250 |
| 1. | Inventory as at 31 March 2023 was valued at Sh.3,500,000. |
| 2. | Returns inwards and returns outwards from credit transactions were Sh.100,000 and Sh.80,000 respectively. |
| 3. | Discounts allowed amounted to Sh.75,000 while discounts received were Sh.112,000. |
| 4. | Depreciation was to be provided as follows: | |
| Asset | Rate per annum | |
| Building | 5% on the reducing balance | |
| Equipment | 25% on the reducing balance | |
| 5. | Trade payables balance as at 31 March 2023 amounted to Sh.850,000 while trade receivables at the same date amounted to Sh.1,100,000 excluding interest on overdue accounts. All purchases were on credit. |
| 6. | Trade receivables of Sh.42,000 had been written off during the accounting period. Sh.43,400 of the trade receivables as at 31 March 2023 may be uncollectible and an allowance for this is required. |
| 7. | Prepaid insurance as at 31 March 2023 amounted to Sh.25,000. |
Required: | |
| (a) | Statement of profit or loss for the year ended 31 March 2023. |
| (b) | Statement of financial position as at 31 March 2023. |
| Sh.“000” | |
| Debit balances: (1 July 2023) Sales ledger | 1,428,000 |
| (1 July 2023) Purchases ledger | 10,500 |
| Credit balances: (1 July 2023) Sales ledger | 40,500 |
| (1 July 2023) Purchases ledger | 553,800 |
| Discounts received | 142,500 |
| Discounts allowed | 209,700 |
| Purchases (including cash purchases of Sh.152,000) | 1,334,000 |
| Cash sales | 618,000 |
| Credit sales | 2,068,200 |
| Credit notes issued to customers | 75,000 |
| Contra settlements | 36,900 |
| Payments to trade payables | 1,159,200 |
| Interest charged by trade payables on overdue accounts | 69,000 |
| Receipts from trade receivables | 1,578,000 |
| Bad debts written off | 37,200 |
| Customer’s dishonoured cheques | 26,100 |
| Interest charged on customers’ overdue accounts | 96,100 |
| Debt collection expenses charged to trade receivables | 10,800 |
| Credit notes received from trade payables | 26,700 |
| Balances as at 31 July 2023: | |
| 14,400 |
| 50,700 |
| Assets: | Sh.“000” | Sh.“000” |
| Non-current assets: | ||
| Building | 4,650 | |
| Equipment | 2,150 | |
| Motor vehicles | 1,540 | |
| 8,340 | ||
| Current assets: | ||
| Inventory | 1,260 | |
| Accounts receivable | 885 | |
| Cash in hand | 73 | |
| Cash at bank | 387 | 2,605 |
| Total assets | 10,945 | |
| Capital and liabilities: | ||
| Capital | 6,015 | |
| Long-term liability: | ||
| Bank loan | 1,500 | |
| Current liabilities: | ||
| Accounts payable | 1,480 | |
| Short-term loan from Paul Sila | 600 | |
| Accrued general expenses | 1,350 | 3,430 |
| Total capital and liabilities | 10,945 |
| 1. | During the year ended 31 December 2022, Riziki Ali only maintained the cash book, whose summary is as follows: |
| Cash summary |
| Sh. “000” | Sh. “000” | |||
| Balance brought forward | 460 | Bank loan repayment | 1,000 | |
| Receipts from debtors | 8,950 | Sila’s loan repayment | 500 | |
| Additional capital | 4,800 | Payments to creditors | 6,750 | |
| Cash sales | 4,250 | Payment for general expenses | 3,000 | |
| Rent income | 220 | Drawings | 1,700 | |
| Rates | 160 | |||
| Wages | 1,190 |
| 2. | Accounts receivable and accounts payable as at 31 December 2022 were Sh.1,320,000 and Sh.1,820,000 respectively. |
| 3. | During the year ended 31 December 2022, proceeds from cash sales amounting to Sh.1,650,000 were not recorded, but the amount was used as follows: |
| 3. | Sh.“000” | |
| Purchase of goods for sale | 1,000 | |
| Loan repayment – Paul Sila | 100 | |
| Office stationery | 150 | |
| Family use | 400 | |
| 1,650 |
| 4. | Accrued general expenses as at 31 December 2022 amounted to Sh.400,000. |
| 5. | Inventory as at 31 December 2022 was valued at Sh.1,480,000. |
| 6. | Depreciation is to be provided on book values as follows: • Buildings – 10% per annum • Equipment – 15% per annum • Motor vehicles – 20% per annum |
| 7. | House furniture valued at Sh.250,000 was converted to business use. Depreciation on the furniture was to be provided at 12½% per annum on this amount. |
| 31 December 2020 | 31 December 2021 | |
| Sh. “000” | Sh. “000” | |
| Factory building (at cost) | 425,000 | 425,000 |
| Motor vehicles (at cost) | 93,000 | ? |
| Furniture and fittings (at cost) | 13,500 | 13,500 |
| Inventories | 13,700 | 14,930 |
| Accounts receivable | 11,450 | 11,570 |
| Accounts payable | 15,460 | 16,800 |
| Loan | 19,500 | ? |
| Salaries and wages due | 8,420 | 8,250 |
| Prepaid rates | 7,750 | 7,860 |
| Rent received in advance | 7,900 | 8,180 |
| Capital | 502,320 | ? |
| Accumulated depreciation: | ||
| • Factory building | 8,500 | 17,000 |
| • Motor vehicles | 2,580 | 5,422 |
| • Furniture and fittings | 1,600 | 3,200 |
| 1. | Grace Solo’s cash summary is provided as follows: |
| Cash summary |
| Sh. “000” | Sh. “000” | ||
| Balance brought forward | 1,880 | Accounts payable | 57,760 |
| Accounts receivable | 9,810 | Cash purchases | 15,640 |
| Cash sales | 28,860 | Salaries and wages | 15,820 |
| Rent | 13,700 | Rates | 9,140 |
| Capital | 72,250 | Motor vehicle expenses | 10,320 |
| Bank charges | 7,650 | ||
| General expenses | 4,770 | ||
| Loan interest | 800 | ||
| Loan repayment | 17,500 | ||
| Motor vehicle | 10,500 | ||
| Drawings | 11,100 | ||
| Balance carried forward | 54,500 | ||
| 215,500 | 215,500 |
| 2. | During the year ended 31 December 2021, discounts allowed amounted to Sh.873,000 while discounts received amounted to Sh.886,000. |
| 3. | During the year ended 31 December 2021, Grace Solo took goods valued at Sh.800,000 for her personal use. |
| Sh "000" | |
| Accounts payable | 200 |
| Cleaning income | 35,288 |
| Cash balance | 70 |
| Own salary | 21,200 |
| Equipment | 1,500 |
| Repair to customers' cars due to damage | 460 |
| Miscellaneous expenses | 220 |
| Owed by customers | 440 |
| Insurance | 700 |
| License fees paid | 1,050 |
| Stationery | 100 |
| Bank balance | 4,690 |
| Cleaning materials inventory (30 September 2021) | 6800 |
| Opening capital balance | 1,332 |