Unit: Financial accounting
8 Questions| Allan Abedi Receipts and payments for the year ended 30 September 2025: |
| Sh.“000” | Sh.“000” | ||
| Balance brought forward | 9,600 | Wages and salaries | 177,600 |
| Receipt from trade receivables | 836,400 | Trade payables | 584,400 |
| Insurance | 18,000 | ||
| Lighting and heating | 7,200 | ||
| Printing and stationery | 2,400 | ||
| Mobile phone expenses | 1,200 | ||
| General expenses | 2,400 | ||
| Office equipment | 12,000 | ||
| Drawings | 18,000 | ||
| Balance carried forward | 22,800 | ||
| 846,000 | 846,000 |
| 1. | The following balances were available for the year ended 30 September: | ||
| 2025 Sh.“000” | 2024 Sh.“000” | ||
| Motor vehicles (Book value) | 25,200 | 33,600 | |
| Office equipment (Book value) | 71,400 | 72,000 | |
| Trade receivables | 74,400 | 67,200 | |
| Trade payables | 36,000 | 32,400 | |
| Inventories | 73,200 | 75,600 | |
| Lighting and heating owing | 3,000 | 2,400 | |
| Prepaid insurance | 2,400 | 1,200 | |
| 2. | Allowance for credit loss is provided at the rate of 5% on outstanding trade receivables. | ||
| 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 | |
| Receipts and payments account |
| Sh.“000” | Sh.“000” | ||
| Balance brought forward | 2,900 | Competition prizes | 2,800 |
| Subscriptions received | 70,800 | Salaries and wages | 14,000 |
| Competition receipts | 12,000 | Dinner dance expenses | 6,800 |
| Dinner dance ticket sales | 13,000 | Insurance | 9,200 |
| Donations | 1,000 | Purchase of equipment | 40,000 |
| Sale of equipment | 25,000 | General expenses | 30,100 |
| Electricity | 1,400 | ||
| Balance carried forward | 20,400 | ||
| 124,700 | 124,700 |
| 1. | The following further details of the club’s assets and liabilities have been availed: | ||
| 1 November 2024 | 31 October 2025 | ||
| Sh.“000” | Sh.“000” | ||
| Clubhouse | 130,000 | 130,000 | |
| Equipment | 140,000 | 120,000 | |
| Electricity expenses owing | 400 | 200 | |
| Subscriptions due | 2,500 | 2,900 | |
| Subscriptions paid in advance | 6,200 | 4,100 | |
| Stock of competition prizes | 600 | 200 | |
| 2. | During the year ended 31 October 2025, equipment with a book value of Sh.30 million was sold for Sh.25 million. |
| 3. | Of the subscriptions due on 1 November 2024, Sh.220,000 remained unpaid at the year end. The management resolved to treat this amount as an irrecoverable debt. |
Required: | |
| (i) | The income and expenditure account for the year ended 31 October 2025. |
| (ii) | Statement of financial position as at 31 October 2025. |
| 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. |
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