BCOM/BBAM 110
KISII UNIVERSITY
UNIVERSITY EXAMINATIONS
FIRST YEAR EXAMINATION FOR THE AWARD OF THE
DEGREE OF BACHELLOR OF COMMERCE/BUSINESS ADMINISTRATION
MANAGEMENT
FIRST SEMESTER 2023/2024
[AUGUST-DECEMBER, 2023]
BCOM/BBAM 110: INTRODUCTION TO FINANCIAL ACCOUNTING I
STREAM: Y1 S1 TIME: 2 HOURS
DAY: FRIDAY, 3.00 – 5.00 P.M. DATE: 01/12/2023
INSTRUCTIONS
1. Do not write anything on this question paper.
2. Answer Questions ONE and any other THREE Questions
QUESTION ONE :(25MARKS )
a) The following data represents the trial balance extracted from the books
of XYZ ltd based in KISUMU as at 31st December 2021 .The books are
well maintained and there is no reason to doubt accuracy of the entries .
DR(SHS) CR(SHS)
Sales 430,000
Purchases 293,500
Carriage inwards 2,100
Drawings 31,000
Rent 5,200
Business rates 2,600
Insurance 550
Postage 250
Stationary D 986
Advertising 250
Wages 10,500
Bad debts 400
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Provision for doubtful debts 400
Debtors/creditors 5,120 3,600
Cash in hand 120
Cash at bank 3,257
Stock 6,520
Equipment at cost 150,000
Accumulated depreciation–equipment 35,000
Capital 43,353
TOTAL 512,353 512,353
Following a discussion with XYZ Ltd, the following details have come into light:
a) Accruals include rent (shs 150 ), business rates (shs200), and
stationery (shs 16).
b) Insurance has been prepaid by shs150, advertising by shs50.
c) Stock at the end of the year is shs7,000.
d) Depreciation is to be charged on the equipment at a rate of 10% on cost.
e) The doubtful debts provision is to be increased to 10% of the year
end balance of debtors.
Required:
i. Prepare a trading profit and loss account for the period ended
31stDecember 2021. [8marks]
ii. Prepare a balance sheet as at that date. [7 marks ]
b) Define the following concepts and for each explain the implications in
the preparation of financial statements.
i. Going concern concept. [3marks ]
ii. Consistency concept. [2 marks]
iii. The business entity concept. [3 marks]
iv. Materiality concept. [2 marks ]
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QUESTION TWO.(15MARKS )
a) Write a two-column cashbook from the following details, and balance off
as at the end of the month: [12marks]
YR2022
May 1 Started business with capital in cash Sh.1,000.
“ 2 Paid rent bycashSh.100.
“ 3 Flake lent us Sh.5,000, paid by cheque.
“ 4 We paid B McKenzie by cheque Sh.650.
“ 5 Cash sales Sh.980.
“ 7 N Miller paid us by chequeSh.620.
“ 9 We paid B Burton in cash Sh.220.
“ 11 Cash sales paid direct into the bank Sh.530.
“ 15 G Moores paid using cash Sh.650.
“ 16 We took Sh.500 out of the cash till and paid it into the bank
account.
“ 19 Were paid FLakeSh.1,000 by cheque.
“ 22 Cash sales paid direct into the bank Sh.660.
“ 26 Paid motor expenses by cheque Sh.120.
“ 30 Withdrew Sh.1,000 cash from the bank for business use.
“ 31 Paid wages in cash Sh.970.
b) State and explain the three branches of Accounting. [3marks]
QUESTION THREE.(15MARKS )
a) Information contained in the financial statements will affect the decision-
making process. Clearly identify any five users of these financial
statements and the reasons why they demand them. [5marks]
b) You are to enter the following transactions, completing the double entry
in the books for the month of May 2019 and prepare a trial balance from
it . [10marks]
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2019
May 1 Started business with shs 2,000 in the bank.
“ 2 Purchased goods shs175 on credit from M Rooks.
“ 3 Bought furniture and fittings shs150 paying by
“ 5 Sold good for cash shs 275
6 Bought goods on credit shs 114 from P Scot.
“ 10 Paid rent by cash shs15.
“ 12 Bought stationery shs27,paying in cash.
“ 18 Goods returned to MRooksshs23.
“ 21 Let off part of the premises receiving rent by cheque
shs5.
“ 23 Sold good son credit to U Foot for shs77.
“ 24 Bought a motor van paying by cheque shs300.
“ 30 Paid the month’s wages by cash shs117.
“ 31 The proprietor took cash for himself shs44.
QUESTION FOUR.(15MARKS)
a) Accounting is an important aspect in a business but at the same time
it has its own limitations. Discuss any four limitations of accounting.
[4marks]
b) The following information belongs to JK Ltd.
i) Discount received from a supplier of shs8,200 had been posted to
the wrong side of purchase ledger control
ii) A credit note from supplier [Link] is shs 15,000 had been omitted
from the books of account.
Required: Journalize the entries to correct the above errors. [5marks]
c) Briefly discuss on the following accounting errors not revealed by the
trial balance.
i) Errors of omission [2marks]
ii) Errors of commission [2marks]
iii) Compensating errors [2marks]
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QUESTION FIVE.(15MARKS)
a) Explain any four contents of a partnership agreement. [6marks ]
b) The following accounts belong to MN partnership. their first financial
year ended on 31/11/2018. the following balances were taken from their
books on that date
SHS SHS
Capital A:90,000 B:120,000
Partnership salaries A:12,000 B:18,000
Drawings A:18,000 B:13,000
The firm’s net profit for the year was shs40,000. Interest on capital to be allowed
at 10% per year. Profits are to be shared equally.
From the information above prepare the firm’s appropriation account and the
partner’s current account. [9marks]
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