PAN AFRICA CHRISTIAN UNIVERSITY

BACHELOR OF COMMERCE

BACHELOR OF BUSINESS LEADERSHIP

BACHELOR OF BUSINESS INFORMATION TECHNOLOGY

DIPLOMA IN PURCHASING AND SUPPLIES MANAGEMENT

END OF TERM EXAMINATION (SEPTEMBER-DECEMBER 2016)

CAMPUS: VALLEY ROAD

DEPARTMENT: BUSINESS

COURSE CODE: BIT103|BUS2143|BCM103|DSM100

COURSE TITLE: Financial Accounting I

EXAM DATE: WEDNESDAY 7th, DECEMBER 2016

TIME: 5.30PM-8.30PM

INSTRUCTIONS
 Read all questions carefully before attempting.
 Write your student number on the answer booklet provided.
 Answers question ONE and ANY other four Questions.
QUESTION ONE
a. Explain four (4) users of accounting information and their need for accounting
information (8 Marks)

b. Explain the meaning of the following.

i. Error of principle (2 marks
ii. Error of complete reversal of entries (2 marks)
iii. Compensating errors (2 marks)
iv. Error of Omission (2 Marks)

c. Discuss any four functions of Financial accounting (8 Marks)

d. The following transactions relates to Jane a sole trader in Kiambu County for the month
of May 2014.
May 1 Started in business with Kshs.250,000 in bank
“3 Bought machinery worth Kshs.750,000 on credit from XYZ ltd.
“5 Bought a motor van paying by cheque Kshs.600, 000
“8 Paid the amount owing to XYZ Ltd by cheque
“ 15 Purchased stock from Unga Ltd. on credit Kshs.200,000
“ 17 Sold goods on credit to Stima Club Kshs.100,000
“ 18 Returned goods to Unga Ltd worth Kshs.10,000
“ 23 Stima Club returned goods to us worth Kshs.15,000
“ 25 Paid the amount owing to Unga Ltd. by cheque
“ 30 Bought more machinery by cheque Kshs.28,000
Required
i. Record the following transactions in Jane’s Journal (5 Marks)
ii. Open ledger accounts for each transaction and balance them off (7 Marks)
iii. Prepare a trial balance (4 Marks)

QUESTION TWO
a. Record the following transactions in a three column cash book of XYZ Ltd for the month
of June 2015
June 1 Balance Balance brought forward cash in shs625, cash at bank shs9,847
June 4 paid transport in cash shs200
June 8 issued a cheque to Mabura, setting an invoice for shs7,500 less 2% cash discount
June 15 Sold goods for cash shs3,000 less 1.5cash discount
June 21 deposited cash with bank shs1,500
June 21 received a cheque from Jones shs2,940 after deducting 2% cash discount
June 23 paid wages in cash shs 175
June 24 Paid telephone bill in cash shs 594
June 24 withdrew cash from bank for office use shs 750
June 24 Issued a cheque for shs1,000 to K-rep as part payment of a loan
June 28 received a cheque for shs4,950 (after deduction of 1% cash discount from puma)
 June 28 Paid a cheque to Mabura shs2,600 less 2% cash discount
June 28 issued a cheque for salaries shs6,114
June 29 Sold goods for cash shs900 less 2% cash discount
June 30 Paid wages in cash shs 488 (15 Marks)
QUESTION THREE
Isaac maintains a petty cash book on the imprest system, the imprest being sh. 30,000. The
following transactions took place in April 2014.

April
1 Received imprest from the cashier of sh. 30,000
3 Bought postage stamps of sh. 2,000
6 Paid sh. 4,000 for Peters account in purchases ledger
7 Bought stationery sh. 5,000
8 Paid traveling allowance to S. Otieno an employee sh 4,000
10 Paid window cleaning expenses sh 6,000
12 Paid Lenana’s account in the purchases ledger sh. 5,000
14 Paid subscription for trade association sh 2,000
17 Paid Office cleaning expenses shs. 2,000
18 Received sh. 30,000 from the cashier
20 Paid S. Otieno for traveling expenses sh. 10,000
22 Bought electric light bulbs sh. 2,000
25 Paid Lenana’s account in the purchases ledger sh 2,500
28 Paid traveling expenses sh 1,000
30 Paid for sugar, tea and milk sh. 3,000
Required
a. Enter the transactions into the petty cashbook and balance the cashbook showing the
reimbursement required to restore the imprest on 1 May 2014 (12 Marks)

b. Highlight the advantages of a petty cashbook (3 Marks)

QUESTION FOUR
a. Explain each of the following accounts concepts:

i. Going concern (2 Marks)

ii. Matching concept (2 Marks)
iii. Duality (2 Marks)
b. Explain the double entry of each of the following terms.
i. Discount allowed to XYZ Ltd. (3 Marks)
ii. Discount received from Kiwanda elecricals.(3 Marks)
iii. Goods returned by XYZ Ltd .(3 Marks)
QUESTION FIVE
The trial balance of Finis, a sole trader, as at 31st December 2014, was as follows:

Dr. Cr.
Shs. Shs.
Sales 130,000,000
Return Inwards 250,000
Stock – 1, Jan 2014 15,000,000
Return Outwards 150,000
Purchases 80,000,000
Capital 27,600.000
Cash at Bank 3,100,000
Debtors 15,400,000
Creditors 5,000,000
Premises 8,000,000
Wages 17,300,000
Discount received 300,000
Rent & Rates 3,000,000
Delivery costs 2,750,000
Drawings 12,000,000
Heat and Light 3,500,000
Sundry expenses 2,750,000

163,050,000 163,050,000

The value of stock at 31st December 2014 was shs.17,750,000.

Required:
a. Prepare Trading, profit and loss account for the year ended 31st Dec 2014 (9 Marks)

b. Prepare the Balance sheet as at 31st Dec 2014 (6 Marks)

QUESTION SIX
The following trial balance was extracted from the books of Owino a business, a sole
trader in Mombasa.
Trial Balance
As at 31st December 2015

Dr. Cr.
Sales 427,726
Purchases 302,419
Carriage Inwards 476
Carriage outwards 829
Wages & Salaries 64,210
Rates & Rent 12,466
Heat & Lighting 4,757
Stock at 1/1/2015 15,310
Drawings 21,600
Equipment at cost 103,000
Motor van at cost 43,270
Provision for depreciation
(a) Equipment 22,250
(b) Motor van 5,920
Debtors and Creditors 50,633 41,792
Bank 3,295
Sundry expenses 8,426
Cash 477
Capital 122,890

626,873 626,873
The following information was also provided:
(i) KSh.350 is accrued for heat & light.
(ii) KSh.620 has been prepaid for rent and rates.
(iii) Depreciation is to be provided for the year as follows.
Equipment - 10% on cost

Motor vehicle - 20% on cost

(iv) Closing stock was valued KSh.16,480.
Required
(i) Prepare the Income Statement for the year ended 31st December 2015. (10 marks)
(ii) Prepare a Balance Sheet as at 31st December 2015. (5 Marks)