UNIVERSITY OF DAR ES SALAAM

FACULTY OF COMMERCE AND MANAGEMENT

DEPARTMENT OF ACCOUNTING
P.O. Box 35046, Dar es Salaam
TANZANIA

SUGGESTED SOLUTIONS AND MARKING SCHEME FOR

FIRST SEMESTER UNIVERSITY EXAMINATION
FOR AWARD OF THE DEGREE OF BACHELOR OF
COMMERCE, BACHELOR OF ARTS [ECONOMICS], BACHELOR
OF EDUCATION [COMMERCE] AND BACHELOR OF SCIENCE
[WILDLIFE]

ACADEMIC YEAR 2006/2007

Course Code: AC 100

Course Title: Principles of Accounting I
Date: Wednesday, 6th December 2006
Time: 12:30 - 15:00 [This is not a three-hour examination!]

General Instructions:

1) There are four questions in this paper; you are required to attempt all questions.
2) Show your workings clearly.

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Question 1 (25 marks)

A. Multiple Choice Question [10 marks].

Write on the answer book the letter that corresponds to the most accurate answer to the
following five multiple choice questions.

i.] Star Furniture Corp. purchases a new office computer for the factory for TAS. 50,000. TAS.
10,000 is paid when the computer is purchased and the remainder is put on account. What is
the effect of this transaction on the equipment (i.e. computer) account?

A. The equipment account increases by TAS. 50,000.

B. The equipment account increases by TAS. 40,000.
C. The equipment account increases by TAS. 10,000.
D. The balance in the equipment account does not change as a result of this transaction.

2]Which of the following is a function of the financial accountant in a business, which employs
several accounting staff?
A. Preparing budgets.
B. Costing products.
C. Setting selling prices.
D. Summarising historical accounting data.

3]What is a balance sheet? (Assume historic accounting is being used.)

A. A list of all the assets and liabilities of a business.
B. A statement of the net worth of a business.
C. A statement which shows how the net assets of the business have changed over time.
D. A statement of the assets and liabilities of a business at a point in time in financial
terms.

4]Which of the fundamental accounting concepts are being applied when a provision for bad
debts is created?
A. Accruals and going concern.
B. Accruals and consistency.
C. Accruals and prudence.
D. Going concern and prudence.

5]What is the function of a suspense account?

A. A device used to enable the production of the financial statements, when required,
despite the presence of errors.
B. A method of ensuring the trial balance will agree.
C. A way of focusing attention upon the corrective action required to ensure the trial
balance does agree and the integrity of the accounting system is maintained.
D. A way of recording transactions when the ultimate accounting treatment required is
unclear.

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B. Question 1 [B] Solution to the Spreadsheet question.

  A B C D
1   INPUT AREA    
2   Current sales [TAS.]   10,000,000
3   Growth rate as a percentage of sales   12%
Cost of goods sold as a percentage of
4     60%
sales
5   Operating expenses [TAS.]   100,000
6      
7      
8   OUTPUT AREA    
Projected Income Statement for 2007
9      
and 2008
10   2007 2008
11   TAS. TAS.
12   Sales =D2 =D2*(1+$D$3)
13   Cost of goods sold =C12*$D$4 =D12*$D$4
14   Gross profit =C12-C13 =D12-D13
15   Operating expenses =D5 =D5
16   Net profit =C14-C15 =D14-D15

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Question 2 (25 marks)

i. Preparation of an adjusted cash book.

30 June 30 June
2006 Balance 370,000 2006 Bank Charges 4,000
Transposition error 90,000 Standing Orders 38,000
Dishonored
Undercast error 500,000 cheque 120,000
Balance c/f 798,000
960,000 162,000

ii. Preparation of a bank reconciliation statement as at the end of June 2006.

Bank Reconciliation Statement 30th June 2006

Balance as per Cash Book [adjusted] 798,000

add:
Outstanding cheques 261,000
1,059,00
0
less:
Deposits in transit 265,000
Error by the Bankers 44,000
Balance as per Bank Statement 750,000

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Question 3 (25 marks)

The General Journal Entries [Narrations and folio references are not required]

Date Details Debit Credit

October
16 D. Evani 163,000
P. Evani 163,000
October
16 Machinery 1,290,000
Creditors Control 1,290,000
Dalili Engineering [in subsidiary ledger] 1,290,000
October
17 Equipment 475,000
Debtors Control 475,000
J. Salala [in subsidiary ledger] 475,000
October
17 Drawings 60,000
Purchases 60,000
October
17 Bad Debts Expense 102,000
Debtors Control 102,000
D. Sonda [subsidiary ledger] 102,000
October
18 Motor Vehicles Repair and Maintenance 124,000
Motor Vehicles 124,000
October
18 Creditors Control 40,000
A. Baraza [subsidiary ledger] 40,000
Bank 40,000
October
19 Debtors Control 9,000
N. Kaniki [subsidiary ledger] 9,000
Sales Returns 9,000
October
19 Creditors Control 610,000
Bona Supplies [subsidiary ledger] 610,000
Equipment 610,000
October
20 Purchases 425,000
Creditors Control 425,000
EFI Ltd [subsidiary ledger] 425,000

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Question 4 (25 marks)

Mr. Yussuf’s Income Statement for the year ended 30 June 2006

Sales 13,807,800
Opening Stock 1,192,700
Purchases 8,456,100
Goods Available for Sale 9,648,800
less: Closing Stock 1,355,100
Cost of Goods Sold 8,293,700
Gross Profit 5,514,100
Operating Expenses:
Carriage Outwards 293,300
Rent, rates and insurance 595,200
Postage and stationery 300,100
Advertising 133,000
Salaries and wages 2,642,000
Bad Debts 87,700
Depreciation expenses 870,000
Provision for doubtful debts 4,000
Total Operating Expenses 4,925,300
Net Profit for the Year   588,800

Mr. Yussuf’s Balance Sheet as at 30 June 2006

Assets
Non Current Assets:
Equipment 5,800,000
less: Accumulated Depreciation 2,770,000
Net Book Value 3,030,000

Current Assets:
Stocks 1,355,100
Debtors 1,212,000
less: Provision for Doubtful Debts 17,000
1,195,000
Prepayments 88,000
Bank 100,200
Cash 17,700
Total Assets   5,786,000

Liabilities and Owners' Equity

Creditors 647,100
Accued Expenses 21,000

Owner's Equity at start 5,309,100

add: Net Profit for the year 588,800
Drawings 780,000
Owner's Equity at the end 5,117,900
Total Liabilities and Owners' Equity   5,786,000

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