Accounting

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BSc (Hons) Actuarial Science

Cohort: BAS/10B/FT, BAS/10A/FT & BAS/09/FT

Examinations for 2010 2011 / Semester 1

Resit Examinations for 2010 / Semester 1

Resit Examinations for 2009 - 2010 / Semester 1

MODULE: ACCOUNTING

MODULE CODE: ACCF 1101C

Duration: 2 Hours Reading time: 15 Minutes

Instructions to Candidates: 1. Number of questions Four (4)

2. Section A is compulsory and carries 40 marks.

3. Section B: Three questions, each carries 30 marks.

Attempt any two (2) questions

4. All workings must be shown

5. Always start a new question on a fresh page

6. Total Marks:100

This question paper contains 4 questions and 8 pages.

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SECTION A: COMPULSORY

QUESTION 1: (40 MARKS)

The following ledger balances have been extracted from the ledger books of

Moorfoot, a limited company, as at 31 December 2009

Dr Cr

Ordinary share capital 1,000,000

Other reserves 1,400,000

Leasehold Land and Building at cost 1,310,000

Motor Vehicles at cost 213,000

Plant and Machinery at cost 1,088,000

Trade Payables 788,000

Cash and cash equivalent 1,968,200

Inventory at 01 January 2009 212,800

Sales 5,610,400

Purchases 3,650,600

Salaries and wages 389,120

Selling Expenses 328,560

Administrative expenses 447,840

Accumulated profit at 01 January 2009 584,920

Trade Receivables 1,135,000

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Interim Dividend paid 50,000

Provision for Depreciation:

Leasehold Land and Building 655,000

Motor Vehicles 128,400

Plant and Machinery 605,800

Provision for bad debts 20,600

10,793,120 10,793,120

The following information is relevant.

1. Inventory at 31 December 2009 amounted to Rs 229,000.

2. Provision for bad debts is to be adjusted to 2% of the outstanding receivables as

on 31 December 2009.

3. Provision is to be made for:

- Audit fees Rs 20,000

- Depreciation on leasehold land and building at 5% on cost, plant and

machinery 10 % on cost and motor vehicles at 20% on cost.

4. Administrative expenses include insurance payments of Rs 40,000 which cover

a 15 months period to 31 March 2010.

Required:

(a) Prepare the following statements for the year ended 31 December 2009 in accordance

with the functional format of the IAS 1 (International Accounting Standards 1)

Presentation of Financial Statements.

(i) The Statement of financial position (16 Marks)

(ii) The Statement of comprehensive income. (18 Marks)

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(b) Briefly explain any three of the following accounting concepts:

(i) Going concern

(ii) Accruals/Matching

(iii) Materiality and aggregation

(iv) Consistency of presentation

(v) Offsetting

(6 Marks)

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SECTION B: ANSWER ANY TWO QUESTIONS

QUESTION 2: (30 MARKS) Extracts of the financial statements of Renada, a limited company, at 31 October 2008

and 2009 are given below:

31 October 2008 31 October 2009 Rs Rs

Credit sales 1,050,000 1,100,000

Cost of sales

Opening inventory 2,500 2,000

Purchases 650,000 850,000

652,500 852,000

Closing inventory (1,500) (4,000)

651,000 848,000

Gross profit 399,000 252,000

Expenses 85,000 95,000

Trade receivables 50,000 75,000

Trade payables 75,000 150,000

Interest payable 10,000 15,000

Equity 785,000 1,060,000

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Required:

(a) Calculate the following ratios for the last two years:

(i) Gross profit margin

(ii) Inventory turnover ratio

(iii) Accounts receivable collection period

(iv) Accounts payable payment period

(v) Return on equity (15 marks)

(b) What is the purpose in using each of the following ratios: (10 marks)

(i) Current ratio

(ii) Interest cover

(iii) Asset turnover

(c) State three limitations of ratio analysis as a method of evaluating

performances of a company. (5 marks)

QUESTION 3: (30 MARKS)

PART A

The following information relates to the business of Mr N.Morris. The opening cash

balance on 01 January was expected to be Rs 30,000. The sales were budgeted as

follows:

Rs

November 80,000

December 90,000

January 75,000

February 75,000

March 80,000

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Analysis of records shows that debtors settle their accounts according to the following

pattern: 60% within the month of sale, 25% the next month and 15% the month

following.

Extracts from the purchases budget were as follows:

Rs

December 60,000

January 55,000

February 45,000

March 55,000

All purchases are on credit and past experience shows that 90% are settled in the

month of purchase and the balance settled the month after.

Wages are Rs 15,000 per month and overheads of Rs 20,000 per month (including Rs

5,000 Depreciation) are settled monthly.

Taxation of Rs 8,000 has to be settled in February and the company will receive

settlement of an insurance claim of Rs 25,000 in March.

Required:

(a) Prepare a cash budget for January, February and March. (15 marks)

(b) What is the objective of a cash budget? (3 marks)

(c) Briefly explain what you understand by Incremental budgeting (3 marks)

PART B

(a) What is the distinction between fixed, variable and semi-variable costs? (5 marks)

(b) List and explain three of the attributes of good accounting information. (4 marks)

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QUESTION 4: (30 MARKS) PART A

The following transactions, for March 2009, are shown in the records of C.William. You

are required to write up ledger accounts to record the following transactions:

2009

March 01 Started business with cash Rs15,000

March 02 Bought goods on credit from A. Hanson Rs 2960

March 03 Paid rent by cash Rs 2800

March 04 Paid Rs5,000 of the cash of the firm into a bank account.

March 05 Sold goods on credit to E. Linton Rs 5400

March07 Bought stationery Rs1500 paying by cheque

March 11 Cash sales Rs 4900

March 14 Goods returned by us to A.Hanson Rs1700

Effects upo Assets Liabilities Capit (16 marks) PART B

(a) Differentiate between capital expenditure and revenue expenditure, giving one

example for each of them. (7 marks)

(b) Briefly elaborate on the users of financial statements stating why they might be

interested in using the information contained in the financial statements.

(7 marks)

***END OF QUESTION PAPER***

Accounting

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