THE ICT UNIVERSITY

FACULTY OF BUSINESS MANAGEMENT AND EDUCATION

Continuous Assessment

COURSE TITLE Advance Accounting Analysis

COURSE CODE
INSTRUCTOR Dr. PENN EMMANUEL M.
TIME ALLOWED 2 HOURS
Instructions: Answer all questions

Section A: MCQ (1 mark each)

1) Gablewoods Apartments Inc received six months’ rent in advance on December 1, 2009. Under
the accrual basis of accounting the income should be recognized

(A) on December 31, 2009 (B) on December 1, 2009 (C) proportionately each month
(D) at the end of the six-month period
2) RXM Ltd. invested $600 000 in marketable securities in 2009. During 2010 the market value of
these securities fluctuated between $300 000 and $600 000. The market value at the end of 2010
was $650 000. RXM Ltd. should record its marketable securities at December 31, 2010 as

(A) $ 50 000 (B) $ 300 000 (C) $ 600 000 (D) $ 650 000
3) Which of the following would NOT be considered an intangible asset?

(A) Leasehold (B) Trademark (C) Franchise (D) Receivables

4) Which of the following is correct?
A) Profit does not alter capital

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 B) Profit reduces capital
C) Capital can only come from profit
D) Profit increase capital
5) What is the balance on the following account on 31/12/2009?
Shey Ivo Ngum

Dr Cr
2009 Amount 2009 Amount
Dec 1 sales 205, 000 Dec 17 cash 300 000
Dec 14 sales 360 000 Dec 28 returns 50 000
Dec 30 sales 180 000

A) A credit balance of 395000frsC) A debit balance of 395000frs

B) Adebit balance of 380000frs D) there is no nil balance on the account
6) What would have been the balance on the account of Shey Ivo Ngum above on 19/12/2009?
A) A debit balance of 265000frs C) a credit balance of 445000frs
B) A credit balance of 95000frs D) a credit balance of 265000frs
7) Gross profit is;
A) Excess of sales over cost of goods sold C) cost of goods sold + opening stock
B) Sales less purchases D) net profit less expenses of the profit
8) Net profit is calculated in the;
A) Trading account C) trial balance
B) Profit and loss account D) balance shee t
9) To find the value of closing stock at the end of the period we;
A) Do that by stock taking C) deduct opening stock from cost of goods sold
B) Look in the stock account D) deduct cost of goods sold from sales
10) The credit entry for net profit is credit side of;
A) The trading account C) the drawing accounting
B) The profit and loss account D) the capital account

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SECTION B: PRACTICAL QUESTIONS (15 marks)

QUESTION

The Edward Company uses a double column cash book to record its cash and bank related transactions.
It engaged in the following transactions during the month of March 2018:

 March 02: Paid Mark & Co. by cheque 120,000 frs

 March 04: Received from John & Co. a cheque amounting to 2,400,000 frs
 March 08: Purchased stationary for cash, 25,000 frs
 March 12: Purchased goods for cash, 52,000 frs.
 March 13: Sold goods for cash, 1,800,000 frs
 March 15: Cash deposited into bank, 950,000 frs
 March 17: Withdrew from bank b proprietor for personal expenses, 40,000 frs
 March 19: Issued a cheque for goods purchased, 630,000 frs
 March 20: Drew from bank for office use, 150,000 frs
 March 22: Received a cheque from Peter & Co. and deposited the same into bank immediately,
880,000 frs
 March 25: Paid a check to Daniel Inc. for 270,000 frs
 March 26: Bought furniture for cash for office use, 17,000 frs.
 March 28: Paid office rent by cheque, 120,000 frs
 March 29: Cash sales, 650,000 frs
 March 30: Withdrew from bank for office use, 145,000 frs
 March 31: Paid salary to employees by cheque, 300,000 frs

Required: For each of the transactions above, state the accounts affected and state if the accounts
belong to i) Asset, ii) liability, iii) Expense, iv) Revenue or v) capital. And if the account is increasing
or decreasing

For example,

Date Accounts concern Account category Increases or decreases Debit or credit

March 2 Suppliers (Creditor) Liability Decreasing Debit
Bank Asset Increasing Credit

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QUESTION 2

i) what kind of ratio analysis will you do to determine is a business if improving

ii) Differentiate between liquidity and profitability
iii) Why will a business keep financial statements?