W1-2-60-1-6

JOMO KENYATTA UNIVERSITY OF AGRICULTURE AND TECHNOLOGY

UNIVERSITY EXAMINATIONS 2016/2017
SECOND YEAR FIRST SEMESTER EXAMINATION FOR THE DEGREE
BCOM / BPCM / BSCM

HPS 2201/HBC 2202: FINANCIAL ACCOUNTING II / INTRODUCTION TO

ACCOUNT II
DATE: APRIL, 2017 TIME: 2 HOURS

INSTRUCTIONS: ANSWER QUESTION ONE (COMPULSORY) AND ANY

OTHER TWO QUESTIONS

QUESTION ONE: 30 MARKS

Omari and Osman are in partnership sharing profits and losses equally. The
following is their trial balance as at 30th June 2015

DR (shs) CR (shs)
Buildings (costs shs 160,000) 110,000
Fixtures (cost shs. 32,000) 15,400
Debtors 42,486
Creditors 32,300
Cash at bank 11,354
Stock at 30th June 2014 93,958
Sales 257,300
Purchases 180,832
Carriage outwards 12,576
Discounts allowed 10,230

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 DR (shs) CR (shs)
Loan from Bakari 258,200
Office expenses 14,832
Salaries 47,834
Bad debts 11,006
Provision for bad debts 10,800
Loan interest – Bakari 18,000
Capital – Omari 90,000
Capital – Osman 79,000
Current account – Omari 26,212
Current account – Osman 18,596
Drawings by Omari 24,800
Drawings by Osman 17,300
772,408 772,408

Additional Information:-

a. Stock at 30th June 2015 was shs. 122,682

b. office expenses and salaries of shs, 5,192 and shs. 11,434 are for next year
respectively.

c. Depreciation is to be charges at 10% on reducing balance method on

fixtures and shs. 1,500 on buildings.

d. Provision for bad debts is to be reduced to shs. 8,000

e. Omari sis to receive a salary of shs. 2,000

f. Interest on drawings:- Omari shs. 10,360

Osman shs. 10,240

g. Interest on capital account balances sis at 10%

h. Land was purchased at shs 161.800 through a cheque. The cheque was paid
but no other entry was made.
Required to prepare:
i. A statement of financial performance for the year. (8 marks)

ii. A statement of profit and loss appropriation account for the year.
(8 marks)
iii. Partner’s current account. (4 marks)

iv. A statement of financial position as at 30th June 2015. (10 marks)

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QUESTION TWO:

a. List five categories of classification of financial ratios, and to each indicate

the various parties that may be interested in analyzing those financial
statement. (2 marks each, 10 marks)

b. The following information was extracted from the financial statements of

Bidii and Jamii Ltd in respect of the year ended 30th September 2016

INCOME EXTRACTS
FOR THE YEAR ENDED 30TH SEPT. 2016

Bidii Jamii
(shs ‘000s) (shs 000)
Sales 497,000 371,000
Cost of sales 258,000 153,000
Operating profit 138,000 79,000
Interest expenses 19,000 -

FINANCIAL EXTRACTS
AS AT 30TH SEPT. 2016

Bidii Jamii
(‘shs’ 000’s) (‘shs’ 000’s
Non current assets
Current assets

Inventory 100,000 87,000

Debtors 46,000 42,000
Cash at bank 40,000 44,000
Current liabilities 98,000 108,000
Loan term loan 33,000 -
Shareholder’s funds 197,000 157,000

Required to for each company to compute the following rations:

i. Acid test ratio. (2 marks)

ii. Current ratio. (2 marks)

iii. Inventory turnover. (2 marks)

iv. Debt equity ratio. (2 marks)

v. Gross profit margin. (2 marks)

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QUESTION THREE:

Shameless Football Club has provided the following information for the year
ended 31st Dec. 2016

RECEIPTS (SHS) PAYNMENTS (SHS)

Bal b/d 1.1.2016 7,336 Bar supplies 540,680

Subscription in arrears Barman
(2015) 19600 wages 120,736

Subscription received Gardener and assistant 279,146

during the year 200,950 Secretary’s salary 25,606

Subscriptions in Bar expenses 3,276

advance (2017) 16,800 Field repairs 10,360
857,920 Staff wages (others) 33,880
Bar sales Transport allowances
Donations received 11,200 Bank bal. c/d 86,940
1,113,756 1,113,756

Additional information:-

1. 31:12:2015 31:12:2016
Shs. Shs.
Bar inventory at cost 62,944 77,812
Owing for bar supplies 46,116 60,760
Bar expenses owing 3,150 4,704
Transport allowances owing - 3,710

2. Assers on 31st Dec. 2015 were valued at:-

i. Land shs 560,000

ii. Field structures at shs. 280,000

These are to be depreciated at 10% per annum.

iii. Equipment at cost shs. 35,000. The equipment is to be depreciated at

20% per annum.

iv. The subscription owing by members amounting to shs. 19,600 on 31st

December 2015, and to shs. 245,000 on 31st December 2016.

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Required:

To draw up the following accounts

i. Statement of affairs as at 31st Dec. 2015. (5 marks)

ii. Bar trading account for the year ended 31st December 2016. (4 marks)

iii. The income and expenditure account for the year ended 31 st December
2016. (11 marks)

QUESTION FOUR:

a. What do you understand by:-

i. Issued share capital. (2 marks)

ii. Share premium. (2 marks)

iii. Calls in arrears. (2 marks)

b. Makupa Traders Ltd issued 1000 shares to the public at shs. 20 each
payable as at sh. 5 on application, shs. 10 on allotment and shs. 5 on first
and final call. They received application for 2000 shares of which they
returned one half and then proceeded to allot the rest.

Required:-

To show the journal entries to record the issue. (2 marks each, total, 14 marks)

QUESTION FIVE:

a. Define a revaluation account. (2 marks)

b. Clearly explain what is debited and credited into a revaluation account and
what happens to the closing balance of the account. (8 marks)

c. List five (5) contents of a partnership agreement. (5 marks)

d. List five (5) assumptions that may be taken into account if there is no
document of a partnership agreement. (5 marks)