UNIVERSITY EXAMINATIONS: 2019/2020

EXAMINATION FOR THE BACHELOR OF SCIENCE DEGREES IN

INFORMATION TECHNOLOGY/ APPLIED COMPUTING
BIT 1309/ BAC 2206/ BISF 2206: FINANCIAL MANAGEMENT FOR IT
FULLTIME/ PART TIME/ DISTANCE LEARNING
ORDINARY EXAMINATIONS
DATE: AUGUST, 2020 TIME: 6 HOURS

INSTRUCTIONS: Answer ALL Questions

QUESTION ONE (20 MARKS)

The following trial balance has been extracted from the ledger of Mr. Peter, a sole trader.
Trial Balance as at 31 May 2020
Dr Cr
Kshs. Kshs.
Sales 138,078
Purchases 82,350
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 2019 11,927

Equipment at cost 58,000

Accumulated depreciation 19,000
Capital 53,091
216770 216,770
The following additional information as at 31 May 2020 is available:
(a) Rent is accrued by Kshs.210.
(b) Rates have been prepaid by Kshs.880.
(c) Kshs. 2,211 of carriage represents carriage inwards on purchases.
(d) Equipment is to be depreciated at 15% per annum using the straight line method.
(e) The allowance for doubtful debts to be increased by Kshs.40.
(f) Inventory at the close of business has been valued at Kshs.13,551.

Required:
Prepare: A statement of profit or loss for the year ending 31 May 2020 (12 Marks)
A statement of financial position as at that date. (8 Marks)

QUESTION TWO (20 MARKS)

Mary began professional practice as a system analyst on July 1. She plans to prepare a
monthly financial statement. During July, the owner completed these transactions.

July 1. Owner invested Kshs. 700,000 cash along with computer equipment that had a market
value of Kshs. 120,000.
July 2. Paid Kshs. 15,000 cash for the rent of office space for the month.
July 4. Purchased Kshs. 12,000 of additional equipment on credit from XYZ ltd.
July 8. Completed a work for a client and immediately collected Kshs. 32,000 cash.
July 10. Completed work for a client and sent a bill for Kshs. 27,000 to be paid within 30
days.
July 12. Purchased additional equipment for Kshs. 8,000 in cash.
July 15. Paid an assistant Kshs. 6,200 cash as wages for 15 days.
July 18. Collected Kshs. 15,000 on the amount owed by the client.
July 25. Paid Kshs. 12,000 cash to settle the liability on the equipment purchased.
July 28. Owner withdrew Kshs. 2,500 cash for personal use.
July 30. Completed work for another client who paid only Kshs. 40,000 for 50% of the
system design.
July 31. Paid salary of assistant Kshs. 11,000.

Required:
Prepare ledger accounts and trial balance for this business (20 Marks).

QUESTION THREE (10 MARKS)

Identify and explain 5 users of accounting information including their needs for such
information (10 Marks)