~ MIDLANDS STATE UNIVERSITY FACULTY OF BUSINESS SCIENCES DEPARTMENT OF ACCOUNTING SCIENCES FINANCIAL ACCOUNTING FOR BUSINESS 1A: ACC135 SESSIONAL EXAMINATION AUGUST / SEPTEMBER 2021 DURATION: 3 HOURS 100 MARKS EXAM REQUIREMENTS CALCULATOR INSTRUCTIONS ANSWER SECTION A AND ANY THREE (3) QUESTIONS FROM SECTION B. BEGIN ANY ANSWER TO A NEW QUESTION ON A NEW PAGE. 1. IN ORDER TO EARN MARKS, SHOW ALL YOUR WORKINGS. YOU SHOULD HIGHLIGHT ANY ASSUMPTIONS MADE IN ANSWERING ANY OF THE QUESTIONS IN THE QUESTION PAPER. ALL YOUR ANSWERS SHOULD BE WRITTEN IN THE ANSWER BOOKLET AWNSECTION A - COMPULSORY Question 1 [TOTAL: 40 MARKS] recent financial year. (a) Mr. Moyo has been trading for some years as a wine merchant, The following list of balances has been extracted from his ledger as at 31 December 2020, the end of his most 3 Capital 33,887 Sales 259,870 Trade accounis payable 19,840 Retums out 13,407 ‘Allowance for doubtful debts 312 Discount allowed 2,306 Discounts received 1,750 Purchases 135,680 Retums inwards 5604 Carriage outwards 4,562 Drawings 18.440 Carriage inwards 11,830 | Rent, rates and insurance 2973 Heating and lighting T1010 Postage, stationery and telephone 2410 Advertising 5,980, Salaries and wages 38,521 Bad debis 2,008 Cash in hand 334 ‘Cash at bank 4440 inventory as at I May 3019 15,654 Trade accounts receivable 24,500 Fixtures and fitting — at cost 120,740, rovision for depreciation on fixtures and fitings as at 30 April 3020 63.020 Deoreciation 12.074The following additional information as at 31 December 2020 is available: (a) Inventory at the close of business was valued at $17,750 (b) Insurances have been prepaid by $ 1,120 (©) Heating and lighting is accrued by $1,360 (d) Rates have been prepaid by $5,435 (©) The allowance for doubtful debts is to be adjusted so that it is 3% of trade accounts receivable. Required: Prepare: (1) Mr Moyo's statement of profit or loss for the year ending 30 April 2020 (18 marks) (ii) Statement of financial position as at 30 April 2020, (12 marks) (b) The following costs were incurred by Rex Ltd during the financial year ended 30 June 2020: i, Interest on loan to purchase network Cost of software for use with the network Cost of customising the software for use in Rex Ltd’s business Cost of paper used by the printer v. Wages of network manager vi. Cost of toner used by the printer vii. Cost of adding extra memory to the network viii, Cost of backup storage during the year ix. Costs of adding a manufacturer's upgrade to the network X. Cost of upgrading the electrical supply to the room where the network server was located, Required: lassify each of the above as capital expenditure or revenue expenditure (10 marks)SECTION B - ANSWER ANY THREE (3) QUESTIONS) ‘Question 2 ITOTAL: 20 MARKS] (a) State and explain three types of business entity (6 marks) (b) Identify any four users of accounting information and explain their interests on this information, (8 marks) (0) State and explain use of any three source documents used in accounting (6 marks) Question 3 ITOTAL: 20 MARKS] (@) Identify the account to be debited and the account to be credited from the following transactions for F. Chigo a sole trader. (i) Started a domestic machines business putting $25,000 into a business bank account (2 marks) i) Bought Equipment on credit from House Supplies $12,000 (2 marks) (ii) Withdrew $150 cash from the bank and placed it in the cash box (2 marks) (iv) Returned some of the equipment costing $2,300 to House Supplies (2 marks) (v) J. Rose pays the firm the amount owing $1,100 by cheque (2 marks) (b) State which error the following statements identifi (A transaction occurs but is not captured in any book. (2 marks) (ii) Where correct amounts are entered in wrong person’s account. (2 marks) (iii) (iv) Capital introduced debited in capital account and credited in bank account. (2 marks) (v) Amount of $210 recorded as $120 in the books of accounts. (2 marks) Motor vehicles expenses recorded as purchases of motor vehicle. (2 marks) Question 4 [TOTAL: 20 MARKS] business has just completed its first financial year and is about to value inventory at cost Price. It has dealt in only one item. A record of the transactions is shown below.Bought Sold 2020 $ 2020 $ January | 10 | at $30 each 300°‘ | May 8 | For$S0cach | 400 April 10 | At$34 each 340 [November [24 |For $60each | 1440 October | 20 | At $40 each 800 40 1440 BR 1840 A quick check by the storeman showed that there were still eight units in inventory at 31 December 2020, which confirms what the records show above. From the above figures calculate the closing inventory-in-trade that would be shown using: (i) FIFO (Fi on a perpetual basis. (20 marks) -in First-out), (ii) LIFO (Last-in Last-out), (iii) AVCO (Average cost) methods Question 5 [TOTAL: 20 MARKS] Jones has the following credit purchases and credit sales for May: May 1 | Sold to J. Swift: brass goods $72, bronze items $108. All less 20% trade discount. Sold to D. Brown: tin goods $80, lead items $560. All less 30% trade discount. Bought from L. Syme: tin goods $300 less 40% trade discount. 16 | Bought from J. Wood: copper goods $460 less 70% trade discount 23 | Sold to M. Peat: tin goods $50, brass items $70, lead figures $170. All less 10% trade discount 1 | Bought from R. Gold: brass figure $345 less 33,33% trade discount. Required: (a) Write up sales and purchases day books (8 marks) (b) Post the items to the personal accounts (6 marks) (©) Post the totals of the day books to the sales and purchases account (2 marks) (@) What are the books of prime entry within a business and why are they so called? Mlustrate your answer with suitable examples. (4 marks) END OF EXAMINATION