MAF 5101 FINANCIAL ACCOUNTING

ANSWER ALL THE QUESTION

Question one
a) Benjamin buys a building priced at Sh. 75,000. He paids Sh. 50,000 of his own cash and
borrows the balance of Sh. 25,000 from a bank. Further he increased the business’s assets
by purchasing furniture on credit for Sh. 5,000.
Required:
Give accounting equation for the above transactions of Benjamin for the year ended 31st
December 2018 (7 marks)
b) Give the main content of International Accounting Standard one (IAS-1) (6 marks)
Question two
Mosses & Bros started their business on 1st January 2015 with Sh. 50,000 as their capital. The
following were the transactions for one month:
2015 Sh.
January 1 paid into bank 20,000
January 2 purchased furniture from modern furniture Ltd. on credit 3,000
January 6 sold goods on credit to Sylvia 3,500
January 8 paid to modern furniture Ltd. cash 2,000
January 11 purchased goods from Mandere 8,800
January 15 Paid wages in cash 200
January 20 received from Sylvia 1,500
January 21 paid into bank 1,500
January 23 cash sales 3,500
January 25 cash purchases 1,800
January 27 goods withdrawn for personal use 500
January 28 cash withdrawn for personal use 750
January 29 paid for stationary 100
January 30 paid salaries by cheque 1,000
Required:
Give journal entries. (7 marks)
Question three
Jane Anne has a business in the Central Business District Nairobi. The following trial balance
was extracted from the books of Jane Anne.
Dr. Cr.
Ksh. Ksh.
Cash at bank 2,610
Book debts 11,070
Salaries 4,950
Discount 150
Carriage inwards 1,450
Carriage outwards 1,590
Bad debts 1,310
Office expenses 5,100
Purchases 67,350
Return inwards 1,590
Creditors 4,700
Creditors for expenses 400
Returns outwards 2,520
Furniture and fixtures 1,500
Stock 14,360
Insurance 3,300
Sales 80,410
Capital 40,000
Depreciation on property 1,200
Freehold property 10,800
128,180 128,180
Additional information:
1. Make provision for doubtful debts at 5%
2. Calculate discount on creditors @2%
3. Office expenses include stationary purchased Sh. 800
4. Carriages inwards includes carriage paid on purchase of furniture Sh. 50
5. Outstanding salaries Sh 150
6. Prepaid insurance Sh. 300
7. Stock on hand sh. 10,700 (including stationary stock Sh. 200)
Required:
a) Prepare trading profit and loss account (income statement) and balance sheet (statement
of financial position) as at 31st December 2018 (20 marks)