BAC 100

Contact Hours: 45

Prerequisite: None

Course Purpose
To enable the students acquire and apply the principles of book keeping in recording
financial information and in the preparation of basic financial statements.

Learning Outcomes

By the end of this course, students should be able to:

i. Explain the nature and Purpose of accounting
ii. Distinguish between the books of original entry
iii. Apply the double entry concept in the preparation of ledger accounts
iv. Prepare basic final accounts of sole traders of merchandising business

Course Description
Accounting and its concepts: Nature, Purpose and scope of accounting, accounting
information, accounting principles, recording business transaction, accounting cycle, source
documents, use of journals, use of accounts, adjusting accounts and preparing financial
statements, accounting for merchandising operations of Sole proprietorship. Accounting
systems; accounting for cash, inventories, receivables, payables, fixed assets. Correction of
errors. Control Accounts.
Teaching Methodology
Lectures, group discussions, class assignments and presentations and tutorials.

Instructional Materials
Lecture notes, encyclopedias, textbooks, journals.

Course Evaluation
Continuous Assessment 30%
Examination 70%
100 %

Recommended Text
1. Wood F. and Sangster A. (2008), ‘Business Accounting 1’. Prentice Hall
2. Weygantd, Kieso, Kimmel, Trenholm, (2002). ‘ Accounting Principles’ ,John
Wiley and Sons Canada,
3. Edmonds T. et al (2011) Fundamental Financial Accounting Concepts’,Mc
Graw- Hill/Irwin

4. Favell A.J. (1990) Practical Bookkeeping and Accounts(Hardrecommended)

5. Hongren, C T,Sundem, G L., Elliott, J A (2002) ‘Introduction to Financial
Accounting’. Prentice Hall

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 JOURNAL AND LEDGER ENTRIES
Question One
Write up the following transactions in the books of Pwana for March 2015
March 1 Started in business with cash Shs.80,500.
2 Bought goods on credit from YongoShs.4,200.
3 Paid rent by cash Shs.1,200,
4 Cash sales Shs.810
5 Paid Shs.60,000 of the cash of the business into a bank account.
6 Sold goods on credit to DambaShs.1,920.
7 Bought stationery Shs.250 paying by cheque.
11 Goods returned by us to Yongo Shs.540.
17 Sold goods on credit to HapaShs.2,120.
22 Damba returned goods to us Shs.220.
27 Paid Yongo by cheque Shs.3,660.
28 Bought a van paying by cheque Shs.38,500.
30 Paid motor expenses in cash [Link] purchases Shs.4,700.
31 Bought fixtures Shs.8,400 on credit from B Coal.

Question Two
Kamel Traders started business on 1 January 2015 by depositing Ksh 500,000 into a bank
account. During the month, the following transactions took place.

January Withdrew Ksh 150,000 from the bank for office use.
3 Bought stationery for Ksh 5,000 in cash.
4 Bought office furniture for Ksh 7,800 from Mbao Traders on credit.
5 Bought goods for Ksh 25,000 and paid by cheque.
9 Made cash sales for Ksh 45,000.
15 Purchased goods for Ksh 240,000 and paid by cheque.
17 Cash sales amounted to Ksh 450,000
18 Deposited Ksh 25,000 of the office cash into bank account.
25 Settled the amount due to Mbao Traders in cash.
28 Paid electricity expenses of Ksh 12,500 by cheque.
31 Paid salaries of Ksh 45,000 in cash.

Prepare ledger accounts to record the transactions above.

Question Three
Enter the following transactions of an antiques shop in the accounts and extract a trial
balance as at 31 March 2008.
2008
March 1 Started in business with £8,000 in the bank.
2 Bought goods on credit from the following persons: Frank Shs.550; Byers
Shs.290; Lee;Shs. 610.
5 Cash sales Shs.510.

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 6 Paid wages in cash Shs.110.
7 Sold goods on credit to: Snow Shs.295; Park Shs.360; Tyler Shs.205.
9 Bought goods for cash Shs.120.
10 Bought goods on credit from: Byers Shs.410; Lee Shs.1,240.
12 Paid wages in cash Shs.110.
13 Sold goods on credit to: Park Shs.610; Tyler Shs.205.
15 Bought shop fixtures on credit from Stop Ltd Shs.740.
17 Paid Byers by cheque shs700.
18 We returned goods to Lee shs 83.
21 Paid Stop Ltd a cheque for shs740.
24 Tyler paid us his account by cheque shs 845.
27 We returned goods to Frank shs 18.
30 Prince lent us shs 1,000 by cash.
31 Bought a van paying by cheque shs 6,250

CASH BOOK
Question one
On 2 September 2014, Ngaka Traders had Ksh 70,000 in cash and Ksh 200,000 at
[Link] the month, the following transaction took place:
Sep 3 Bought office furniture for Ksh 55,000 and paid by cheque
4 Cash sales amounted to Ksh 450,000
5 Bought stationery for Ksh 5,880 in cash.
12 Ali traders paid their account of Ksh 75000 by cheque less 2%
cash discount.
16 Deposited Ksh 200,000 of the office cash into the bank.
18 Cash sales banked amounted to Ksh 350,000.
19 Paid Ksh 240,000 for salaries by cheque.
20 Paid Mambo Ksh 228,000 in cash after deducting Ksh 12,000
cash discount.
21 Received Ksh 115,200 in cash from Kele Traders in full
settlement of their account after deducting a 4% cash discount.
23 Cash sales amounted to Ksh 175,500.
28 Paid an assurance expense of Ksh 7,520 in cash.
30 Paid Ksh 376,000 by cheque to Onjoka after deducting a 6%
cash discount.
30 Deposited all the office cash into the bank except for Ksh
69,300.

Prepare a three column cash book duly balanced and post to the ledger to complete double
entry for the month ended 30 September, 2014.

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Question Two
On 1 May 2012 Tura Traders had Ksh 300,000 cash at bank and Ksh 170,000 cash in hand.
During the month, the following transactions took place.

3 Cash sales amounted to Ksh 520,400 while cash purchases were Ksh 344,400.
4 Paid Mutiso his account Ksh 180,000 by cheque less 5% cash discount
14 Received Ksh. 263,200 in cash from Ali after having allowed 6% cash discount
16 Deposited Ksh 50,000 into the bank from the cash till.
17 Paid wage Ksh 48,000 in cash.
18 Paid Wanja Ksh 340000 in cash in full settlement after deducting 15% cash
discount.
22 Received a cheque for Ksh 190,000 from Anyango after allowing her 5% cash
discount.
25 Withdraw Ksh 150,000 from bank for office use.
28 Paid Ksh 12,000 for electricity in cash.
30 Paid wages Ksh 48,000 in cash.
31 Deposited all the cash into bank except Ksh 120,000.

PETTY CASH BOOK

Question One
Prepare a Three-column cash book duly balanced.
The following is a summary of the petty cash transactions of Jockfield Ltd for May 2008.
May 1 Received from Cashier 300 as petty cash float £
2 Postage 18
3 Travelling 12
4 Cleaning 15
7 Petrol for delivery van 22
8 Travelling 25
9 Stationery 17
11 Cleaning 18
14 Postage 5
15 Travelling 8
18 Stationery 9
18 Cleaning 23
20 Postage 13
24 Delivery van 5,000 mile service 43
26 Petrol 18

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 27 Cleaning 21
29 Postage 5
30 Petrol 14
You are required to:
a. Rule up a suitable petty cash book with analysis columns for expenditure on cleaning,
motor expenses, postage, stationery, travelling.

ADDITIONAL QUESTIONS

Question One
S.M. Otieno started business as a fishmonger on 1 st July 2015. His transactions during the
month of July 2015 were as follows:

July 2 Opened Bank Account and deposited shs. 40,000 and cash in hand was sh
10,000
3 Paid in cash rent shs 3,500
4 Purchased on credit fish valued shs. 36,000 from Kisumu Co-operative
Society
6 Sold fish sh. 58,000 and received cash
7 Purchased new office desk sh 2,700 and paid by cheque
9 Lodged shs 25,000 in bank
10 Purchased fish sh. 20,000 from Kolwa Fisheries Association and paid half
of the amount involved by cheque
11 Sold fish sh 15,000 on credit to Matunda Exporters
12 Hired a driver and paid him shs 2,000 cash
13 Messrs Matunda Exporters returned some fish and received a credit note for
shs. 2,000
16 Received cheque sh 7,000 from Matunda Exporters on account.
18 Purchased fish shs. 8,900 on credit from Agoro Sare union
19 Sold fish shs. 5,300 on credit to Samaki Restaurant.
20 Paid Kisumu Co-Operative Society shs 16,000 by cheque on account
22 Withdrew shs. 5,000 from Bank for personal use.
24 Bought fish shs. 8,300 and paid by cheque
26 Sold fish sh. 5,600 to Uthiru City Lodge and received their cheque for sh.
1,200 in part payment.
28 Paid Kolwa Fisheries Association by cheque the full amount due to them
less 5% cash discount.
29 Paid Salaries shs. 4,700 in cash and water bills shs. 500 by cheque.

NOTE: All cheques were deposited in the bank on the day they were received.
You are required to:
(a) Enter the above transactions through the books of original entry (including three
column cash book), into the ledger.

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 (b) Balance the accounts and extract a Trial Balance as at 31st July, 2015.

Question Two
You are to open the books of F Polk, a trader, via the journal to record the assets and
liabilities, and are then to record the daily transactions for the month of May. A trail balance
is to be extracted as on 31 May 2009.
2009
May 1 Assets: Premises £34,000; Van £5,125; Fixtures £810; Inventory
6,390; Accounts receivable: P Mullen £140, F Lane £310; Cash at bank
£6,240; Cash in hand £560. Liabilities: Accounts payable: S Hood £215, J
Brown £460.
1 Paid storage costs by cheque £40.
2 Goods bought on credit from: S Hood £145; D Main £206;
3 Goods sold on credit to: J Wilson £112; T Cole £164
4 Paid for motor expenses in cash £47.
7 Cash drawings by proprietor £150.
9 Goods sold on credit to: T Cole £68; J Fox £131.
11 Goods returned to Polk by J Wilson £32
14 Bought another van on credit from Abel Motors Ltd £4,850.
16 The following paid Polk their accounts by cheque less 5 per cent cash
discount: P Mullen; F Lane; J Wilson;
19 Goods returned by Polk toD Main £6.
24 The following accounts were settled by Polk by cheque less 5 per cent cash
discount: S Hood; J Brown; R Foot.
27 Salaries paid by cheque £480.
30 Paid business rates by cheque £132.
31 Paid Abel Motors Ltd a cheque for £4,850.

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Question Three

On 1 January 2002, S. Kanja had the following assets and liabilities:

Sh.
Cash at bank 1,400,000
Stock 4,000,000
Debtors: W. Kamau 1,500,000
R. Nundu 960,000
Creditors: J. Polo 1,300,000
S. Matoke 850,000
Office equipment 420,000
Motor van 3,200,000

His transactions during the month of January 2002 were as follows:

January 2: Withdrew Sh. 200,000 from the bank for office use.
2: Purchased goods from J. Polo – Sh. 250,000 on credit.
4: Bought office stationery – Sh. 36,000 for cash.
7: Received cheque – Sh. 940,000 from R. Nundu in full settlement less Sh. 20,000
cash discount.
12: Sold goods to W. Kamau – Sh. 1,400,000 on credit.
14: Paid Salaries – Sh. 80,000 in cash.
15: Paid S. Matoke – Sh. 600,000 by cheque on account.
18: Returned goods worth Sh. 30,000 to J. Polo and received a credit note.
20: Bought office equipment – Sh. 145,000 on credit from Patel Brothers.
23: Sold all goods on hand receiving Sh. 1,250,000 cash and Sh. 5,000,000 in cheque.
27: Paid Patel Brothers Sh. 130,000 in cash.
28: Withdrew Sh. 370,000 from the bank for personal use.
30: Paid rent – Sh. 160,000 in cash and salaries – Sh. 180,000 by cheque.

Required:
(a) S. Kanja’s capital as at 1 January 2002. [4 marks]

(b) Post the above transactions to the relevant ledger accounts (including the three-column
cash book). Close all the ledger accounts (including the three-column cash book) and
extract a trial balance as at 1 February 2002.

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 Question Four
The following relate to Shoki Traders for the month of June 2012.
2012
Purchased
June
goods4 o credit purchases for Ksh 320,000 from Abdi Traders
6 Sold goods on credit for Ksh 2,500,000 to Oma Traders
8 Purchase goods on credit for Ksh 450,000 from Kari Traders
1 Purchased goods on credit for Ksh 720,000 from Alu Traders
1
1 Returned goods worth Ksh 65,000 to Abdi Traders
2
1 Sold goods on credit to Maka Traders for Ksh 1,933,500
5
2 Returned goods worth Ksh 75,250 to Kari Traders
0
2 Purchased goods on credit for Ksh 1,200,000 from Gambi traders
2
2 Oma Traders returned goods for Ksh 144,800
5
2 Maka Traders returned goods for Ksh 30,000
8
2 Purchased good for Ksh 1,500,000 from Ala Traders
9
2 Sold goods on credit for Ksh 950,000 to Nyango Traders
9

Prepare each of the following books of original entry:

(i) Purchases Journal
(ii) Purchases Return Journal
(iii) Sales Journal
(iv) Sales Returns Journal [8 marks]

Question Five

The following books relate to Jimbi Ltd for the month ended June, 2007.

Purchases Journal

Date Particulars Amount

Sh
June 4 Bakari 4,000
June 15 Liwali 7,000
11,000

Sales Journal

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 Date Particulars Amount
Sh
June 15 Lijodi 6,000
June 20 Mogaka 9,000
15,000

Returns outwards Journal

Date Particulars Amount

Sh
June 12 Bakari 800

Returns inwards Journal

Date Particulars Amount

Sh
June 25 Mogaka 1,000

FINAL ACCOUNTS
Question One
This question also relates to extended trial balances (see Exhibit 28.2). From the following
trial balance of John Brown, store owner, prepare an income statement for the year ending 31
December 2007, and a balance sheet as at that date, taking into consideration the adjustments
shown below:

This Balance as at 31 December 2007

Dr Cr
£ £
Sales 400,000
Purchases 350,000
Sales returns 5,000
Purchases returns 6,200
Carriage inwards 1,000
Carriage outwards 3,000
Opening inventory at 1 January 2007 100,000
Allowance for doubtful debts 800
Wages and salaries 26,000
Rates 6,000
Rent received 10,000
Telephone 1,000
Shop fittings at cost 40,000
Van at cost 30,000
Provision for depreciation on shop fittings 9,000
Provision for depreciation on Van 20,000

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Accounts receivable and accounts payable 9,800 7,000
Bad debts 200
Capital 140,000
Bank balance 3,000
Drawings 18,000
593,000 593,000

i. Closing inventory at 31 December 2007 £120,000.

ii. Accrued wages £5,000.
iii. Rates prepaid £500.
iv. Rent receivable accrued Sh. 18,000
v. The allowance for doubtful debts to be increased to 10 per cent of accounts
receivable.
vi. Telephone account outstanding £220.
vii. Depreciate shop fittings at 10 per cent per annum, and van at 20 per cent per annum,
on cost.

Question Two

The following trial balance was extracted from the books of June Akinyi as at 31st
December, 2015.
Sh. Sh.
Cash in hand 10,000
Office equipment at cost 40,000
Purchases and sales 500,000 1,206,000
Wages and salaries 60,000
Rent received 105,000
Postage and stationery 72,000
Discounts allowed and received 12,000 16,000
Insurance 45,000
Cash at bank 200,000
Trade debtors and creditors 96,000 65,000
Returns inwards and outwards 6,000 10,000
Allowances for doubtful debts 4,000
Inventory on 1 January 2015 70,000
Buildings at cost 800,000
Provision for depreciation on buildings 80,000
Carriage inwards 16,000
Carriage outwards 20,000
15% loan from Woma Bank 100,000
Capital 451, 000

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 Bad debts 42,000
Drawings 48,000
2,037,000 2,037,000

Additional information as on 31 December 2015.

I. Closing inventory was valued at sh. 76,000
II. Rent received in advance was sh. 45,000
III. Insurance prepaid was sh. 5,000
IV. Salaries sh. 10,000 was outstanding
V. June Akinyi took goods worth sh. 20,000 for personal use
VI. Maintain allowances for doubtful debts at 5% of trade debtors
VII. Depreciation is to be provided on cost as follows:
- Office equipment at 20% p.a
- Buildings at 15% p.a
Required:
Income statement for the year ended 31 December, 2015
Statement of financial position as att 31 December, 2015

Question Three
The following is the Trial Balance extracted from the books of a sole trade, A.K. David at
31st December 2015

DR CR
Shs. Shs.
Stock 1st January 2015 50,000
Freehold premises 240,000
Purchases 280,000
Salaries & Wages 35,000
Sales 520,000
Fixtures & Fittings 25,000
Discount allowed 4,500
Plant & Machinery 140,000
Rates 5,600
Advertising 10,400
Insurance 3,800
General expenses 7,200
Provision for bad debts 1,800
Sundry debtors 90,000
Sundry creditors 58,000
Cash in hand 2,400
Bank overdraft 18,600
Drawings 6,000
Capital Account ______ 300,000
902,900 902,900

The following additional information is provided:

(a) Provide for depreciation of plant & machinery at 10% per annum and fixtures &
fittings at 15% per annum.

11
 (b) Increase the provision for Bad debts to an amount equal to 4% of sundry debtors.
(c) Prepaid Insurance amounts to shs. 500
(d) Rates accrued shs. 400
(e) Closing stock was shs. 60000
(f) During the year MR. A.K. David took goods worth shs. 2000 for his personal use.

Required:
Prepare in vertical form the Trading Account and Profit and Loss Account for the year
ending 31st December, 2015 and a balance sheet at that date.

Question Four
The following trial balance has been extracted from the ledger of Mr. Yousef, a sole trader as
at 31 May 2006
Dr Cr
£ £
Purchases and Sales 82,350138,078
Carriage 5,144
Drawings 7,800
Rent, rates and insurance 6,622
Postage and stationery 3,001
Advertising 1,330
Salaries and wages 26,420
Bad debts 877
Allowance for doubtful debts 130
Accounts receivable 12,120
Accounts payable 6,471
Cash in hand 177
Cash at bank 1,002
Inventory as at 1 June 2005 11,927
Equipment at cost 58,000
accumulated depreciation 19,000
Capital 53,091
216,770 216,770
The following additional information as at 31 May 2006 is available:

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 a. Rent is accrued by £210 and Rates have been prepaid by £880.
b. £2,211 of carriage represent carriage inwards on purchases.
c. Equipment is to be depreciated at 15% per annum using the straight line method.
d. The allowance for doubtful debts to be increased by £40.
e. Inventory at the close of business has been valued at £13,551.
Required:Prepare an income statement for the year ending 31 May 2006 and a balance sheet
as at that date.

BANK RECONCILIATION STATEMENTS

Question One
The following are extracts from the cash book and the bank statement of F Perry.
You are required to:
a. Write the cash book up to date, and state the new balance as on 31 December 2009,
and
b. Draw up a bank reconciliation statement as on 31 December 2009.
Cash Book
2009 Dr £ 2009 Dec £
Dec 1 Balance b/d 3,419 Dec 8 B Young 462
7 F Lamb 101 15 F Gray 21
22 G Brock 44 28 T Errant 209
31 W Terry 319 31 Balance c/d 3,437
31 S Miller 246 _____
4,129 4,129
Bank Statement
2009 Dr Cr Balance
£ £ £
Dec 1 Balance b/d 3,419
7 Cheque 101 3,520
11 B Young 462 3,058
20 F Gray 21 3,037
22 Cheque 44 3,081
31 Credit transfer: T Morris 93 3,174
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 31 Bank charges 47 3,127

Question Two
The back columns in the cash book for June 2007 and the bank statement for that month for
D Hogan are as follows:
Cash Book
2007Dr £ 2007Cr£
Jun 1 Balance b/d 1,410 Jun 5 L Holmes 180
7 H May 62 12 J Rebus 519
16 T Wilson 75 16 T Silver 41
28 F Slack 224 29 Blister Disco22
30 G Baker 582 30 Balance c/d1,591
2,353 2,353
Bank Statement
2007 Dr Cr Balance
£ £ £
Jun 1 Balance b/d 1,410
7 Cheque 62 1,472
8 F Lane 180 1,292
16 Cheque 75 1,367
17 J Rebus 519 848
18 T Silver 41 807
28 Cheque 224 1,031
29 SLM standing order 52 979
30 Flynn: trader’s credit 64 1,043
30 Bank charges 43 1,000

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You are required to:
a. Write the cash book up to date to take the above into account, and then
b. Draw up a bank reconciliation statement as on 30 June 2007.

Question Three
Read the following and answer the questions below.
On 31 December 2008 the bank column of C Tech’s cash book showed a debit balance of
£1,500. The monthly bank statement written up to 31 December 2008 showed a credit
balance of £2,950.
On checking the cash book with the bank statement it was discovered that the following
transactions had not been entered in the cash book:
Dividends of £240 had been paid directly to the bank.
A credit transfer – HM Revenue & Customs VAT refund of £260 – had been collected by the
bank.
Bank charges £30.
A direct debit of £70 for the RAC subscription had been paid by the bank.
A standing order of £200 for C Tech’s loan repayment had been paid by the bank.
C Tech’s deposit account balance of £1,400 was transferred into his bank current account.

A further check revealed the following items:

Two cheques drawn in favour of T Cod £250 and F Haddock £290 had been entered in the
cash book but had not been presented for payment.
Cash and cheques amounting to £690 had been paid into the bank on 31 December 2008 but
were not credited by the bank until 2 January 2009.
a. Starting with the debit balance of £1,500, bring the cash book (bank columns) up to
date and then balance the bank account.
b. Prepare a bank reconciliation statement as at 31 December 2008.

15
Question Four
The cash book of Rwa Traders had a bank balance of Ksh 256,500 on 31 December, 2014.
On the same date, their bank statement had a credit balance of Ksh 56,360. On comparing the
two documents, the following discrepancies were revealed:

(i) A loan repayment by standing order for Ksh 20,000 had not been recorded in
the cash book.
(ii) A cheque received from Mbalu for Ksh 75,000 and deposited into bank
account, had not been credited.
(iii) A cheque for Ksh 25,650 issued to a creditor had been recorded as Ksh
25,560, and had not been presented for payment.
(iv) A dividend of Ksh 43,900 had been credited to the bank account.
(v) The bank had paid Ksh 4,500 from the bank account in error.
(vi) A cheque for Ksh 115,800 paid by the bank did not appear in the cash book.
(vii) Cheques paid into the bank account but not appearing in the bank statement
were as follows:
Raha Ksh 18,500
Ainabu Ksh 24,600

Prepare:
i. An updated cash book.
A bank reconciliation statement.

ERRORS AND SUSPENSE ACCOUNTS

Question One
You have extracted a trial balance and drawn up accounts for the year ended 31 December
2007. There was a shortage of £78 on the credit side of the trail balance, a suspense account
being opened for that amount.
During 2008 the following errors made in 2007 were found:
i. £125 received from sales of old office equipment has been entered in the sales account.
ii. Purchases day book had been overcast by £10.
iii. A private purchase of £140 had been included in the business purchases.
iv. Bank charges £22 entered in the cash book have not been posted to the bank charges
account.
v. A sale of goods to K Lamb £230 was correctly entered in the sales book but entered in
the personal account as £320.

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Required:
a. Show the requisite journal entries to correct the errors.
b. Write up the suspense account showing the correction of the errors.
c. The net profit originally calculated for 2007 was £28,400. Show your calculation of the
correct figure.

Question Two
The trial balance as at 30 April 2007 of Timber Products Limited was balanced by the
inclusion of the following debit balance:
Difference on trial balance suspense account £2,513.
Subsequent investigations revealed the following errors:
i. Discounts received of £324 in January 2007 have been posted to the debit of the
discounts allowed account.
ii. Wages of £2,963 paid in February 2007 have not been posted from the cash book.
iii. A remittance of £940 received from K Mitcham in November 2006 has been posted to
the credit of B Mansell Limited.
iv. In December 2006, the company took advantage of an opportunity to purchase a large
quantity of stationery at a bargain price of £2,000. No adjustments have been made in
the accounts for the fact that three-quarters, in value, of this stationery was in the
inventory on 30 April 2007.
v. A payment of £341 to J Winters in January 2007 has been posted in the personal
account as £143.
vi. A remittance of £3,000 received from D North, a credit customer, in April has been
credited to sales.

The draft accounts for the year ended 30 April 2007 of Timber Products Limited show a
net profit of £24,760.
Timber Products Limited has very few personal accounts and therefore does not maintain
either a purchase ledger control account or a sales ledger control account.

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Required:
a. Prepare the difference on trial balance suspense account showing, where appropriate, the
entries necessary to correct the accounting errors.
b. Prepare a computation of the corrected net profit for the year ended 30 April 2007
following corrections for the above accounting errors.
c. Outline the principal uses of trial balances.
(Association of Accounting Technicians)

Question Three
Chi Knitwear Ltd is an old-fashioned business with a handwritten set of books. A trial
balance is extracted at the end of each month, and an income statement and a balance sheet
are computed. This month, however, the trial balance will not balance, the credits exceeding
debits by £1,536. You are asked to help and after inspection of the ledgers discover the
following errors.
i. A balance of £87 on a debtor’s account has been omitted from the schedule of
debtors, the total of which was entered as accounts receivable in the trial balance.
ii. A small piece of machinery purchased for £1,200 had been written off to repairs.
iii. The receipts side of the cash book had been undercast by £720.
iv. The total of one page of the sales day book had been carried forward as £8,154,
whereas the correct amount was £8,514.
v. A credit note for £179 received from a supplier had been posted to the wrong side of
his account.
vi. An electricity bill in the sum of £152, not yet accrued for, is discovered in a filing
tray.
vii. Mr Smith, whose past debts to the company had been the subject of a provision, at
last paid £731 to clear his account. His personal account has been credited but the
cheque has not yet passed through the cash book.

Required:
a. Write up the suspense account to clear the difference, and
b. State the effect on the accounts of correcting each error.
A Trial Balance extracted from the books of Bill Kamande had the following totals:-
18
Debit side total shs. 938,400
Credit side total shs. 932,300

Question Four
Kamande opened a Suspense Account and placed the difference in trial balance there to. He
discovered the following errors and omissions:
(a) A credit note for shs. 2,300 received from Shah Wholesalers had not been recorded
anywhere in the books.
(b) A credit note for shs. 1,400 issued to Patel Retailers had been entered correctly in the
appropriate subsidiary book but had not been posted to their personal account.
(c) A cheque for shs. 7,400 received from Dave Kuria was entered as shs. 4,700 in the
Cash Book and posted to the ledger accordingly.
(d) Discounts allowed shs. 2,350, were credited to Discounts Received Account in the
ledger.
(e) Rent received. Shs. 2,200, has been credited to Premises Account.
(f) Sales book was undercast by shs. 9,400.

Required:-
(a) Journal entries to rectify above errors and omissions.
(b) Suspense Account, duly balanced.

CONTROL ACCOUNTS

Question One
The following figures were extracted from the records of D & W Ltd for the year ended 31 st
December 2016.
Shs.
Opening balances on 1 January 2016 – Sales ledger Dr. 142,800
Purchase Ledger Dr. 1,050
Sales Ledger Cr. 4,050
Purchases Ledger Cr. 55,380
Sales ledger debit balances offset against purchases ledger 3,690
Discounts – allowed 20,970
received 14,250
Purchases (including cash purchase of shs. 2000) 120,200
Cash sales 61,800
Credit sales 206,820
Credit notes issued to customers for goods returned 7,500
Cash purchases 13,200
Payment creditors 115,920
Interest charged by creditors on overdue accounts 6,900
Receipts from customers 157,800
Bad debts written off 3,720
Customers unpaid cheques 2,610
Interest charged to customers 9,600
Debt collection expenses charged to debtors 1,080

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 Credit notes received for goods returned to suppliers 2,670
Balances on 31st December 2016: PurchasesLedger Dr. 1,440
Sales Ledger Cr. 5,070

Prepare the Purchases and Sales Ledger control accounts for the year ended 31 st December
2016.
Question Two

The following information was extracted from the records of Jomalka Traders for the month
of September 2003.

Sh.
Trade debtor: 1 September 2003 239,280
Trade creditors: 1 September 2003 134,408
Credit sales 193,000
Cash sales 84,000
Provision for doubtful debts 12,000
Cash purchases 76,400
Contra settlements 19,680
Bad debts written off 7,240
Credit purchases 132,480
Payments to trade creditors 149,000
Receipts from trade debtors 220,000
Discounts received 8,500
Returns inwards 8,010
Discounts allowed 7,600
Bills payable 25,200
Returns outwards 20,000
Bills receivable 36,000
Interest charged on customers overdue accounts 920

For the month of September 2003, prepare:

i. Sales ledger control account
ii. Purchase ledger account.

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