BACHELOR OF BUSINESS INFORMATION TECHNOLOGY

BBT 1103: FUNDAMENTALS OF ACCOUNTING

The accounting equation
1. Complete the gaps in the following table:
Asset Liabiliti Capital
es
Sh Sh. Sh.
a) 55000 16900 ?
b) ? 17200 34400
c) 36100 ? 28500

2. Classify the following items into assets and liabilities:

motor vehicles owing to bank

Premises cash in hand
creditors for goods loan from Mosho
inventory of goods machinery
receivables

3. Which of the following are shown under the wrong heading?

Assets Liabilities
Cash at bank Loan from Mosho
Fixtures Machinery
Payables Motor vehicles
Building Receivables
Inventory (Stock of goods) Capital

4. Ochieng sets up a new business. Before he actually sells anything,

he has bought motor vehicles sh2m, premises sh5m, inventory sh1m.
He did not pay in full for the inventory and still owes sh0.4m in
respect of them. He had borrowed sh3m from Rachier. After the
events just described, and before trading starts he has cash in hand
of sh0.1m and sh0.7m cash at bank. You are required to calculate
the amount of capital
5. Tobiko starts a new business. Before he actually starts to sell
anything, he bought fixtures sh 2m, motor vehicles sh5m and
inventory sh3.5m. Although he paid in full for the fixtures and motor
vehicles, he still owes sh1.4 million in respect of the goods.

1
 Kaimenyi had lent him sh3m. Tobiko , after the above has sh2.8m
in the business bank account and sh0.1m cash in hand. You are
required to calculate his capital.
6. Draw up Francis’s statement of financial position from the following
as at 31 Dec 2013
Shs 000
Capital 23750
Receivables 4950
Motor vehicles 5700
Payables 2450
Fixtures 5500
Inventory 8800
Cash at bank 1250

7. Draw up Kenneth’s statement of financial position as at 30 June

2013 from the following items
Shs 000
Capital 13000
Receivables 275
Office machinery 9000
Payables 900
Loan from C Smith 2000
Inventory 1550
Cash at bank 5075

8. Manolo has the following items in his statement of financial position

as on 30 April 2013
Capital sh 18.9m, Loan from Stanchart sh2m, payables 1.6m,
fixtures 3.5m, motor vehicle 4.2m, inventory 4.95m, receivables
3.28m, cash at bank 6.45m, cash in hand 0.12m. During the first
week of May 20-4, Manolo:
1. Bought extra stock of goods sh 0.77m on credit
2. One of the receivables paid us sh 0.28m cash
3. Bought extra fixtures by cheque sh 1m
Prepare a statement of financial position after each transaction

9. Antony has the following assets and liabilities as on 30

November 2013:
Payables sh3.95m, equipment sh11.5m, motor vehicle sh6.29m,
inventory sh6.15m, receivables sh5.77m, cash at bank sh7.28m,

2
 cash hand sh0.04m. You are to deduce the capital as at that date.
During the first week of December 20-1
1. Bought extra equipment on credit for sh 1.38m
2. Bought extra stock by cheque sh 0.57m
3. Paid creditors by cheque sh 0.79m
4. Receivables paid us 0.84m by cheque and sh 0.6m by cash
5. Devkin lent Antony sh 0.25m cash
Draw up a statement of financial position initially and after
each transaction
[Link] the columns to show the effect of the following
transactions:
Effect upon
Assets Liabilities Capital
a) Bought a van on credit sh. 870000
b) Repaid by cash amount owed to
Duff sh.100000
c) Bought goods for sh.140000 paying
by cheque
d) The owner puts a further sh.400000
cash into the
Business
e) A receivable returns to us
sh.15000goods. we agree to make an
allowance for them
f) Bought goods on credit sh.76000
g) The owner takes out sh.20000 cash
for his personal use
h) We pay a creditor sh.115000 by
cheque

Double entry and ledger accounts

1. Write up the asset and liability and capital accounts to in the books of
C Burkinshaw record the following transactions.

20X1
January 1 Started business with £6,000 in the bank
January 3 Purchased office equipment for £2,000 paying by cheque
January 6 Withdrew £500 from bank for use in the cash till
January 10 Bought office furniture on credit from A Powell for £700
January 13 Purchased motor car on credit from Mick’s Motors for £900
January 20 Paid cheque to A Powell for £350

3
 January 21 Returned £350 of furniture to A Powell due to its
unsuitability
January 24 Sent cheque to Mick’s Motors for £900
January 31 Bought office fixtures for £100 cash

2. Write up the asset, capital and liability account in the books of K

Atkinson to record the following transactions:

20X3
February 1 Started firm with £5,000 cash
February 5 Paid £3,500 of cash into business bank account
February 7 Obtained loan of £500 from I Sharp – money paid directly
into bank account
February Purchased fixtures and fittings on credit from P Yarrow for
11 £280
February Bought delivery van for £1,800 paid for by cheque
14
February Returned half of the fixtures to Yarrow due to a fault
17
February Paid outstanding balance in cash to Yarrow
20
February Purchased equipment for £2,000 paying by cheque
24

3. Complete the following table:

Account Account
to be to be
debited credited
(a) Bought equipment on credit from J Forbes
(b) M Stanhope, a debtor, pays us by cheque
(c) Proprietor takes cash out from the bank
account
(d) Owner’s motor car brought into business
use
(e) S Gardner, a creditor paid in cash
(f) Returned machinery to B King
(g) Borrowed £400 cash from M Fulford

4
4. Enter each transaction in the double-entry accounts for the month of
September 20X7.

Sep 1 Started business with £10,000 cash.

Sep 2 Transferred £5,000 into business bank account.
Sep 4 Purchased equipment for £2,000 paying by cheque.
Sep 6 Purchased machinery from Johnston Ltd on credit for
£1,200.
Sep 7 Returned machinery worth £350 to Johnston Ltd.
Sep 12 Sent cheque to Johnston Ltd to settle account.

Double entry with the asset ‘Inventory’

1. Copy out and complete the following table:

Account to be Account to be
debited credited
(a) Goods bought on credit from P Batongo
(b) Purchases of inventory made for cash
(c) Goods returned by us to S Brugenyo
(d) Goods sold on credit to I Blira
(e) Goods sold to S Efodi for cash
(f) Equipment purchased on credit from E Gilo
(g) Goods sold returned to us by E Gumbaro
(h) Faulty fixtures returned to supplier R Watene

2. Copy out and complete the following table:

Account to Account to
be debited be credited
(a) Goods bought on credit from R Hamadi
(b) Inventory returned by us to the supplier R Pato
(c) Motor van bought payment made by cheque
(d) Sales of goods on credit to R Mogaka
(e) Office furniture purchased for cash
(f) Goods returned to us by B Too
(g) Sale of goods on credit to W Tonje
(h) Borrowed sh500 cash from A Donatus

3. Enter the following transactions in the books of A Hombe, balance off the accounts
and extract a trial balance as at 31 March:

20X3
March 1 Started firm with sh4,000 cash
March 3 Deposited sh2,000 cash into bank account
March 6 Bought stock on credit for sh560 from I McNulty
March 11 Bought office equipment for sh1,500 paying by cheque

5
 March 13 Retuned stock worth sh300 to I McNulty
March 17 Sold goods on credit to S Brown for sh400
March 22 Purchased office fixtures on credit from Westley Supplies for sh500
March 28 S Brown returned goods to us worth sh200
March 31 We settled our account with McNulty by sending cheque for sh260

4. Enter the following transactions in the books of J Hunt balance off the accounts
and extract a trial balance as at 30 June:

20X4
June 1 Started firm with sh3,000 deposited into bank account
June 4 Bought office equipment for sh2,200 paying by cheque
June 11 Purchased goods on credit from S Kemp for sh460
June 16 Purchased goods on credit from J Phillips for sh300
June 18 Sold goods on credit to K Haynes for sh600
June 20 Returned goods to Phillips worth sh80
June 24 Paid amount owing to Kemp in full by cheque
June 25 Sold goods for sh350 cash
June 30 Haynes retuned goods worth sh120

5. Enter each transaction in the double-entry accounts for the month of May 20X9
balance off the accounts and extract a trial balance as at May 31:

May 1 Started business with sh8,000 cash.

May 2 Purchased sh500 of goods for resale on credit from H Clews
May 5 Returned sh200 of the goods to Clews
May 7 Sold goods on credit to E Riches for sh650
May 10 Purchased fixtures worth sh5000 paying by cash
May 15 Purchased goods for sh90 cash
May 18 Riches returned sh75 of the goods

6. Enter each transaction in the double-entry accounts for the month of June 20X8
balance off the accounts and extract a trial balance as at June 30:

June 1 Purchased goods from C Archer on credit for sh47

June 5 Purchased goods from T Tucker on credit for sh58
June 7 Returned goods to Tucker worth sh24
June 10 Sold goods for sh187 cash
June 12 Paid Archer the amount owing in cash
June 14 Sold goods on credit to G Peacock for sh82
June 15 Peacock returned goods worth sh32

6
Double entry with income and expenses
1. Write the following transactions in the books of L Howard (amounts in sh ‘000’)

20X9
July 1 Started business with sh5,500 in bank
July 2 Bought stock for resale on credit for sh540 from C Barongo
July 5 Sold goods on credit for sh450 to N Kabaa
July 6 Paid rent on office premises by cheque for sh450
July 10 Withdrew sh800 from bank for use in cash till
July 14 Sold goods for sh180 cash
July 22 Paid insurance in cash sh45
July 23 Goods retuned to us by Kabaa for sh180
July 27 Bought delivery van on credit from Kenya Autos Ltd for sh2,500
July 31 Paid sundry expenses sh67 cash

2. Write up the following transactions in the books of G Robinson: (amounts in sh

‘000’

20X1
August 1 Started business with sh4,500 in bank
August 3 Paid the following expenses by cheque: rent sh500, office sundries
sh120
August 4 Bought stock on credit from L Parker for sh250
August 8 Sold stock on credit to W Yik for sh440
August 14 Received sh50 cash for commission earned
August 16 Transferred sh700 from bank to cash till
August 20 Bought stock for sh80 cash
August 21 Yik returned sh110 of the stock we had sold to him
August 27 Took sh25 out of the cash till for personal use
August 31 Received cheque form Yik for sh330

3. Write up the following transactions in the books of K Crummy: (amounts in sh

‘000’

20X6
March 1 Started business with sh3,500 cash
March 2 Paid sh2,500 in business bank account
March 4 Bought stock on credit for sh560 from L Hill and sh240 from M Miller
March 9 Returned goods to M Miller worth sh100
March 13 Bought motor vehicle for sh1,200 paying by cheque
March 19 Paid the following expenses by cash: Wages sh85 and Advertising sh28
March 23 Bought office equipment on credit from Supplies Warehouse for
sh2,500
March 26 Sold stock on credit to R Rollo for sh345
March 28 Sent cheque to L Hill for sh560
March 30 Received sh250 cash from R Rollo
March 31 Took office equipment worth sh500 for personal use

7
4. Enter each transaction in the double-entry accounts for the month of June
20X4(amounts in sh ‘000’

June 1 Started business with sh2,000 deposited into the business bank account
June 3 Bought goods for resale on credit for sh210 from J Carter
June 6 Paid wages by cheque sh450
June 10 Sold goods for sh99 cash
June 12 Proprietor withdrew sh500 from bank account for own use
June 23 Sold goods on credit to D Jackson for sh320