THE COPPERBELT UNIVERSITY

SCHOOL OF BUSINESS

DEPARTMENT OF ACCOUNTING AND FINANCE

PRINCIPLES OF ACCOUNTING

BF/BEC/BS/HRM 120 - YEAR 1

DATE: Wednesday 11th May, 2022

TIME: 09:00 TO 10:50 HOURS

DURATION: 1 HOUR SO MINUTES

INSTRUCTIONS TO CANDIDATES
1. There are THREE (3) questions

2. ANSWER ALL

3. Marks are shown against each question

4. ALL queries should be directed to the

invigilator

5. Present legible and tidy work

DO NOT OPEN THIS EXAM PAPER UNTIL THE INVIGILATOR TELLS

YOU TOo.

1
QUESTION ONE
Fountain Restaurant had the follow ing balances on 1/1/2021

Cash at bank K245,000

Cash at hand K 148,000
Inventory K700,000

Trade Receivables John K150,000

Ben K250,000
Dennis K 100,000

T rade Payables Peter K80,000

Inonge K75,000

Iand and Buildings K450,000

oan K178,000

The tollowing transactions took placc during the month:

4/1/21 Sold goods for cash K165,000,the goods cost K152,000

5/1/21 Purchased goods on credit from Peter and Inonge for K15.000 and K25.00
respectively.
6/1/21 Withdrew cash amounting to K2,000 from the bank for personal use.
7/1/21 We returned to Peter K200 worth of goods purchased on 5/1/21 for poor quality
9/1/21 Withdrew K2,500 from the bank for business use
1/21
11/1/21
We paid Peter in full by cheque after allowing us a discount
We purchased goods paying by cash K45,000
of 2.5%
12/1/21: Bought Land from EW farms on credit for K75.000
13/1/2 Keceivcd a cheque irom John and Ben it full after allow ing them a discount of 10..
15/1/21: Dennis returned goods worth K7.000
17/1/21:
18/1/
Dennis settled hisaccount in full by cash after allow ing him
Paid FW Farms 60%% of the amount owed by cheque.
a discount of 2°%

22/1/21: K100,000 was paid towards the loan by cheque

27/1/21: Paid the follow ing by cheque: Electricity KI.000, Rates K7.800 and Wages K1.450,
28/1/2 Paid the following by cash: Stationery K300 and Travel expense K780 V
29/1/21: Sold goods on credit to Samson lor K54.000. I1 pay ment is received w ithin 10 day s
a cash discount of 1.5% will be given. v
30/1/21 Samson scttled his account in ful by
cheque.
31/1/21: J Mwanza lent us K200,000. The amount Was deposited directly into our account

Required to enter the above accounts in their respective lcdger accounts ( balance ofl the
lcdger accounts) ( 24 marks)

21
UESTION TWO ( 26 marks)

At the year end of Wangu and ons Ind,the trial halance did not balance,the redits execdcd
debits by K358,700. As an accounting student you have been sent to Wangu and onb.lnilia
investigations revealed 1he following crrors
) Tractor parts, prevIOusly vold on credit for K930,000 had heen rcturned to Wangu and

the eredit
sOs. These returns had becn incorrectly entered as K30,000 on

cquipment account and K390,009 on the debit of purchases

2) A discOunt allowed of K71,009 has not becn reorded in the per sonal account o

Hamududu limited
entered the
3) Purchase of motor vchicle by cheque amounting to K7,000 was in

Purchases account and was recorded in the hank account.

sides
4) Elcctricity amounting to K6,000 paid by cash was wrongly posted to the wrong
of both accounts
the account 89,009
posted customer s as
) An Invoice to a customer for K98,000 was to

but the other account was correct.

6) Payiments from a business bank account for repairs to business premises K250,00
and insurance of private dwelling K120,000 werc entered correctly in the bank
account but respectively credited to premises account and credited to insurance

COunt
7) The balance of K38,000 on the telephone expense account had been omitted from the

trial balance
8) Several credit purchases invoices totalling K55,500 for the month of June had been

ound in the accounting managers tray, no entries had yet been made
9) Discount allowed amounting to K200 was correctly entered in the customer's account
but wrongly entered in the discount received account as K2,000

10) Petty cash balance of K500 was not included in the trial balance.

Required:
a) Prepare Journal entries to correct cach of the above errors (Narratives are not required)

(14 marks)
b) Open a suspense account and show the corrections to be made (12 marks)

31
 Question three (multiple choice questions) ( 10 marks)

1.Revenue and costs sheould be recognizcd in the financial statements when earncd
and not incurred but not when cash is received or paid. This is the definition of

Gong concern concept

B. Accrual concept
C. Materiality concept
D. Realization concept
2. Provision for doubtful debts is an example of...
A. Consisteney concept
B. Materiality Concept
C. Money measurement concept
D. Prudence concept
line method and
3. The company has a policy of charging depreciation using straight
this method used for the past five years. The poliey has been changed to diminishingB

balance. This is an example of . .

A. Consistency concept
B. Going concept
C. Business entity concept
D. Prudence
4. The company had the following assets and liabilities al the beginning of the year:

Inventory K2500
Plant and machiney K3000
Cash and hand K3600
Fistures and fixtures K2000

Loan K3670
Trade pay ables K3 100p
Trade receivables K I100

The capital at the start ot business IS.

A. K5.4300

BC. K8.530
K6.330
D K4,670
of
at start of business Ki5,000 and at the year end the conmpany made
Ifcapital
Was

the K4,000. The capital at year end will

profit of K500 and drawings by owner was

be...
A. KI5.500
B. KI1.50o
C. KI1,000
D. K12.500

4|
 6. An invoice amounting to K5,000 was completely omitted from the records. his

error is known as
A. Complete reversal ol entry
B. Errors of principle
C. Error of commission
D. Error of omission
7. Salaries paid by chequc amounting to K700 by paid was debited to the bank account and

credited
to the salaries account. This is an
error of..
A. Complete Reversal of Iransaction
B. Eror of principle
C. Eror of commission
D. Compensating error

8. Which of the following is an internal stakeholder to the financial statements?

A. Customer
B. Supplier
C. Management

D. Government
9. Transactions for small items such as purchase of stationery like pens and pencils are
best recorded in :
A. Bank account
B. Cash Account
C. Journal
D. Petty cash
10. . . s an example of external stakeholder to the financial statements
A. Customer
B. Management
C. Employees such as directors
D. Employees such as internal auditors

END