GREAT ZIMBABWE UNIVERSITY

FACULTY OF COMMERCE

DEPARTMENT OF ACCOUNTING AND INFORMATION SYSTEMS

EXAMINATION
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BACHELOR OF COMMERCE DEGREE PART 1 SEMESTER 1

ACCOUNTING CONCEPTS & PRINCIPLES AC108

DATE MAY/JUNE 2017

DURATION 3 HOURS

INSTRUCTIONS TO CANDIDATES

1. ANSWER ALL QUESTIONS

2. START EACH ANSWER ON A FRESH PAGE

3. SHOW ALL WORKINGS, WHERE APPLICABLE

QUESTION 1

Enter the following transactions in the ledger of M. Machikichori and prepare a trial
balance at 31 March 2017.

March 1 Started in business with $1 500 in the bank and $500 cash
2 Purchased goods to the value of $1 750 from Sidhi, agreeing credit
terms of 60 days
3 Bought fixtures and fittings for the bakery from Sidhi for $150, paying
by cheque
6 Bought goods on credit from Ifanhasi for $115
10 Paid rent of $300 to Mufumi paying by cash
12 Bought stationery – cash book and invoices – for $75 – paying by
cash
14 Sold goods on credit , value $125, to G Haremi
20 Bought an old van for deliveries for $2 000 on credit from Lumbart
30 Paid wages of $450 by cheque
31 Summarised cash sales for the month and found them to be $2 500.
Took a cheque for $500 as own wages for the month. Banked $2 000
out of the cash sales over the month.
31 Closing inventory was $500

[Total 25 marks]

QUESTION 2

Mr Chai has been trading hardware for some years. The following list of balances
has been extracted from his ledger as at 31 March 2017, the end of his most recent
financial year.

Capital 83 887
Sales 259 870
Trade account payable 19 840
Returns out 13 407
Allowance for doubtful debts 512
Discount allowed 2 306
Discount received 1 750
Purchases 135 680
Returns inwards 5 624
Carriage outwards 4 562
Drawings 18 440
Carriage inwards 11 830
Rent, rates and insurance 25 973
Heating and lighting 11 010
Postage, stationary and telephone 2 410
Advertising 5 980
Salaries and wages 38 521
Bad debts 2 008
 Cash in hand 534
Cash at bank 4 440
Inventory as at 1April 2016 15 654
Trade accounts receivable 24 500
Fixtures and fittings at cost 120 740
Provision for depreciation on fixtures and fittings as at 31 March 2017 63 020
Depreciation 12 074

The following additional information as at 31 March 2017 is available:

(a) Inventory at the close of business was valued at $17 750

(b) Insurance has been prepaid by $1 120
(c) Heating and lighting is accrued by $1 360
(d) Rates have been prepaid by $5 435
(e) The allowance for doubtful debts is to be adjusted so that it is 3% of trade
accounts receivable.

Required:

Prepare Mr Chai’s income statement for the year ending 31 March 2017 and a
statement of financial position as at that date.

[Total 25 marks]

QUESTION 3

The following is the cash book (bank columns) of Robert for April 2017

2017 Dr US$ 2017 Cr US$

April April
6 P. Percy 230 1 Balance b/d 1 900
20 C. Hood 265 10 J.Laiza 304
30 W.Britain 325 19 P Watson 261
30 Balance c/d 1 682 28 K Couz 37
2 502 2 502

The bank statement for the month is

2017: April Dr Cr Balance

1 Balance 1 900 O/D
6 Cheque 230 1670 O/D
 13 J.Laiza 304 1974 O/D
20 Cheque 265 1709 O/D
22 P.Watson 261 1970 O/D
29 Taff: Standing order 94 2064 O/D
30 F.Richard: trader’s credit 102 1 962 O/D
30 Bank charges 72 2 034O/D

Required

(a) Draw up a bank reconciliation statement as on 30 April 2017. (10 marks)

(b) Discuss the fundamental and enhancing characteristics of financial
statements. (5 marks)
(c) Define the following accounting terms:
i. Discount allowed (1mark)
ii. Discount received (1mark)
iii. Dishonoured cheque (1mark)
iv. Non-current asset (1mark)
v. Current liability (1mark)
vi. Accounting equation (1mark)
vii. Drawings (1 mark)
viii. State any 2 reasons why goods can be returned by customers
(1marks)
ix. Give 3 reasons why depreciation of a non-current asset may occur
(2marks)

[Total 25 marks]

QUESTION 4

The following is a statement of financial position of Mrs Tadha’s restaurant at the

GZU Mashava campus as at 30 April 2016.

Fixed assets Cost Depreciation Net book value

$ $ $
Fixtures 1 000 400 600
Shop equipment 600 300 300
1 600 700 900
 Current assets
Stocks 4 000
Receivables 200
4 200
Less Current Liabilities
Payables 2 200
Overdraft 1 800
4 000
Net current assets 200
1 100

Capital 1 100

During the year to 30 April 2017, sales were $67 000, of which $500 was still
outstanding at the year end. Purchases during the year were $49 000 including
$1,900 due to Trade payables (creditors) at the year end. Stocks were maintained at
$4,000.

During the year the shop assistant’s wages of $2,080 were paid in cash, as were all
of the shop’s running expenses of $4,400, and Mrs Tadha’s drawings of $10,000.

Depreciation of fixed assets is at 10% by the straight-line method.

Required:

(a) Mrs Tadha’s cashbook to show the balance at 30 April 2017 (8 marks)
(b) The income statement of Mrs Tadha for the year ending 30 April 2017 (8
marks)
(c) The statement of financial position of Mrs Tadha as at 30 April 2017 (9 marks)
[Total 25 marks]

END OF EXAMINATION