Professional Documents
Culture Documents
CHAPTER ONE
ADJUSTMENTS FOR FINAL ACCOUNT
Adjustment:
Is an arrangement of entries conveniently and correctly for the period concern before the preparation of the
Trading, Profit and Loss account and the Balance sheet. Or Adjustments are certain items which should be
taken into account when preparing the books of final account. The aim is to show true and fair view of Net
profit or Net loss and financial position of the business.
Some of the year end adjustments are:
i) Accruals
ii) Prepayment
iii) Bad debts
iv) Provision for bad debts and doubtful debts
v) Depreciation.
1. Accruals: These are the amount which are either not received or not paid at the end of a trading period
other names are Due, owing, outstanding, Expired ,Arrears ,Expected and unpaid
Accounting Treatment
{i}:Expenses : Add and show it in the balance sheet as current liabilities .
{ii}:Income : Add and show it in the balance sheet as current assets
2. Prepayment: These are the amount which are received or paid for next accounting period. Other names
are Advance, unexpired , carry forward
Accounting Treatment
{i}:Expenses :Less and show it in the balance sheet as current assets
{ii}:Income : Less and show it in the balance sheet as current liabilities
Example 1:
The Trial balance of JR . Ltd as at 31st .12.1990 show the following balances
Narration DR CR
Stock 1.1.1990 4000
Purchases 9000
Sales 15000
Returns 800 300
Carriage inward 400
Wages 1500
Insurance 600
Commission 1000
Rent 700
Premises 20000
Bank 12000
Drawing 21000
Loan from NBC 8000
Capital
69,300 69,300
Answer JR LTD
DR. T RADING, PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31st DEC 1990 CR
Detail Amount Detail Amount
Opening stock 4000 Sales 15000
Add: Purchases 9000 Less : Returns inward 800 14200
Add: Carriage inward 400
9400
Less: Return outward 300 9100
Cost of Goods available for sale 13,100
Less: Closing stock 6,000
Cost of Goods sold 7,100
Gross profit c/d 7100 14200
14,200 Gross profit b/d 7100
Wages 2300 Commission 1500
Insurance 450 Rent 520
Net profit 6370
9120 9120
WORKINGS:
DR WAGES ACCOUNT CR
Balance b/d 1,500 Profit and loss 2300
Balance c/d{outstanding} 800 2300
2300 Balance c/d{outstanding} 800
DR INSURANCE ACCOUNT CR
Balance b/d 600 Profit and loss 450
600 Balance c/d {prepaid} 150
600
Balance b/d {prepaid} 150
DR COMMISSION ACCOUNT CR
Balance b/d 1000
Profit and loss 1,500 Balance c/d{outstanding} 500
1,500 1,500
Balance b/d {outstanding} 500
Page 2
Understanding book-keeping Book Three
DR RENT ACCOUNT CR
Profit and loss 520 Balance b/d 700
Balance c/d {prepaid} 700
700 Balance b/d {prepaid} 180
Bad debts, Provision for Bad and Doubtful Debts and Provision for Discounts
Most businesses sell goods on credit with the hope that the buyers (debtors) would pay within the credit
period. In practice, however, not all debtors pay as expected and some do not pay at all. Those who do not
pay are referred to as bad debtors and the debt is called bad debt. The debtors who have turned bad should
be removed from the books immediately.
3. Bad Debts: Is a business expense which occurs when a debtor fails to pay back the debts due.
Accounting Treatment
DR: Bad debts A/C
CR: Debtors A/C
At the End of the year
DR: Profit and Loss account of the year
CR: Bad debts A/C
Example 1:
Shamsa is owed by Mwamgongo Ltd company a sum of Tsh 3000 on 1.1.1996 but during the
year on 12.10.1996 Shamsa managed to pay Tsh 2500 and the remaining balance is written off
as bad debts (she declared that she is unable to pay debts)
DR DEBTORS ACCOUNT CR
Balance b/d 3000 12.10. 1996 cash 2,500
Bad debts 500
3000 3000
Example 2:
On 1st January 1998 Kikwale Trader sold goods on credit to Islam Moshi worth shs 25000. On 31st
May 1998 it was realized that Islam Moshi would not pay and the debts was therefore written off as
bad.
The effect of the above transaction would be as follows:
Page 3
Understanding book-keeping Book Three
25000 25000
Example 3
Ustadhi Athuman Trader had debtor balance of shs 70000 on 1st January 1992. Credit sales were
made and bad debts written off as follows:
Jan 10: Sales shs 15000
Jan 30: Sales shs 20000
Feb 15: Bad debts shs 11000
March 20: Sales shs 35000
March 31: Bad debts shs 22000
Required: Open debtor and bad debts accounts
DR DEBTORS ACCOUNT CR
1.1.1992 Balance b/d 70000 Feb 15. Bad debts 11000
Jan 10.Sales 15000 March 31.Bad debts 22000
Jan 30.Sales 20000 March 31.Balance c/d 107000
March 20.Sales 35000
140000 140000
Page 4
Understanding book-keeping Book Three
Example 4
On 1st March 1995 Aziza Sadick Kasaku Trader sold goods on credit to Zamda Sadick Kasaku for shs
36500.On 30th July 1995 Zamda paid shs 34000 and the balance was declared bad debt on 5th August
1995.However the debts was recovered on 25th September 1995.
Required: Prepare the necessary account to record the above information
DR ZAMDA ACCOUNT CR
March 1. Sales 36500 July 30. Cash 34000
Sept 25.Bad debts recovered 2500 August 5.Bad debts 2500
Sep 25. Cash 2500
39000 39000
2500 2500
Page 5
Understanding book-keeping Book Three
Accounting Treatment
i/ If the provision for bad debts is inside the trial balance shoes it in balance sheet as deducted
from debtors
Example 1 Given the following Trial balance as at on 31st Dec 1987 found in the books of Islam
Company
Trial balance as at 31st Dec 1987
NARRATIO N DR CR
Debtors 5000
Provision fo r bad debts 600
Required: show how to record the above transaction.
Answer.
This transaction will be shown in the balance sheet only.
ISLAM COMPANY
BALANCE SHEET AS AT 31st DEC 1987
Debtors 5000
Less: Provision of bad debts 600 4400
ii/ If the provision for bad debts is outside the trial balance, calculate new provision and enter
it in profit and loss Account then show it in the balance sheet deducted from debtor
Example 2 Given the following trial balance as at on 31st Sept 1980 found in the books of Aziza
company.
Trial balance as at 31st September 1980
NARRATION DR CR
Debtor 5000
Additional information
(a) Provision for bad debts is 5% on debts
Answer.
Debtor = 5000
New provision = 5000 x 5/100 = 250
This new provision for bad debts will be transferred to Profit & loss account, then to balance
sheet to be deducted on debtor.
AZIZA COMPANY
DR PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31st SEPT 1980 CR
Provision for bad debts 250
Page 6
Understanding book-keeping Book Three
AZIZA COMPANY
BALANCE SHEET AS AT 31st SEPTEMBER 1980
Debtor 5000
Less :Provision for bad debts 250
4750
iii/ If the provision for bad debts is inside and outside the trial balance enter the difference in profit and
loss account and new provision should be deducted from debtor.
Example 3 Given the following trial balance as at on 31st June 1992 found in the books of Moshi company
Trial balance as at 31st September 1992
DR CR
Debtor 5000
Provision for bad debts 600
Additional notes
{i}Provision for bad debts is 10% on debtors
or
{ii}Increase provision for bad debts to 800
or
{iii}Increase provision for bad debts by 500
Answer.
i) The first step is to open provision for bad debt account.
DR PROVISION FOR BAD DEBTS ACCOUNT CR
Profit and loss 100 Balance b/d 600
Balance c/d 500
600 600
Debtor = 5000
Provision = 5000 x 10/100 = 500 MOSHI COMPANY
DR PROFIT &LOSS ACCOUNT FOR THE YEAR ENDED 31st JUNE 1992 CR
Profit and loss 100
NOTE. If Provision for bad debts decreases, Credit it to profit & loss account
ii} Check for increase to
600- 800 = 200 Enter this difference to profit and loss in Dr Side.
MOSHI COMPANY
DR PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31st JUNE 1992 CR
Provision for bad debts 200
Page 7
Understanding book-keeping Book Three
MOSHI COMPANY
BALANCE SHEET AS AT 31st JUNE 1992
Debtors 5000
Less :Provision for bad debts 800
4200
MOSHI COMPANY
BALANCE SHEET AS AT 31st JUNE 1992
Debtors 5000
Less :Provision for bad debts (600+500)1100 3900
Example 5 A businesses of Shamsi J Kikwale makes provision for bad and doubtful debts of 5% and for
discounts at 4%. The following were the debtors balance at the end of each year:
1991 shs 20000
1992 shs 60000
Required: Prepare the necessary account to record the above transaction
Answer
DR PROVISION FOR BAD AND DOUBTFUL DEBT ACCOUNT CR
31 Dec 1991. Balance c/d 1000 31 Dec 1991. Profit & Loss 1000
31 Dec 1992 Balance c/d 3000 1 Jan 1992.Balance b/d 1000
31 Dec 1992 Profit & Loss 2000
3000 3000
1 Jan 1993 Balance b/d 3000
Page 8
Understanding book-keeping Book Three
SHAMSI J KIKWALE
BALANCE SHEET (EXTRACT) AS AT 31.12.1991
Debtors 20000
Less: Provision & doubtful debts 1000
Provision for discount 760 1760
18240
SHAMSI J KIKWALE
BALANCE SHEET (EXTRACT) AS AT 31.12.1992
Debtors 60000
Less: Provision & doubtful debts 3000
Provision for discount 2280 5280
54720
❖ Discount Received
Some time, a trader may make a provision for discount he/she espect to receive from creditors. Such
provision is called Provision for discount received. This provision is recorded by:
DR. Provision for discount received account
CR. Profit and Loss account.
Example 6
0n 31st April 1996 Vikundi Rashid Kikwale Trader’s creditor’s balance stood at shs 250000. She made a
provision of 3% for discount received.
Required: Show the records of the above transaction.
DR PROVISION FOR DISCOUNT RECEIVED ACCOUNT CR
st
31 April Profit and loss 7500 st
31 April Balance c/d 7500
7500 7500
Page 9
Understanding book-keeping Book Three
Page 10
Understanding book-keeping Book Three
Answer MR.AHMED
DRTRADING, PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31.12.2011 CR
Details Amount Details Amount
Opening stock 5000 Sales 17500
Add :Purchases 12,000 Less :Return inward 550 16950
Less drawings (goods) 240
11,760
Less :Return outwards 640 11120
Cost of goods available for sale 16120
Less: Closing stock 2100
Cost of goods sold 14020
Gross Profit c/d 2930
16950 16950
Wages 1800 Gross profit b/d 2930
Bad debts 300 Discount 200
Insurance 160 Commission 470
Rent 480
Expenses 220
Provision for bad debts 240
Depreciation plant and machinery 120
Net profit 280
3600 3600
MR.AHMED’S
BALANCE SHEET AS AT 31st DEC 2011
Liabilities Amount Assets Amount
Capital 8300 NON-CURRENT ASSET
Less: Net profit 280 Plant and machinery 2400
8580 Less :Depreciation plant 120 2280
Less :Drawing (goods) 240 8340 Furniture & Fittings 750
CURRENT ASSETS
CURRENT LIABILITIES Stock 2100
Creditors 630 Debtors 1370
Less : Provision 310 1060
Cash 2740
Commission outstanding 40 5940
8970 8970
WORKINGS
a) Depreciation: Plant and machinery 2400 𝑥 5/100 = 120
b) Commission outstanding 430 +40 = 470
c) Provision increased by 240, Take it and enters in P & L A/C Dr side
d) Drawings of goods, 240 Take it and enter in Trading A/C Dr side to be deducted from Purchases
Page 11
Understanding book-keeping Book Three
Example 3
The following is the Trial balance of Ilham company ltd extracted from the books as at 31.12.1990
DR CR
Purchases and sales 92800 157165
Cash at bank 4100
Cash in hand 324
Capital 11400
Drawings 17100
Office furniture 2900
Rent 3400
Wages and salaries 31400
Discounts 820 160
Account receivable and Account payable 12316 5245
Inventory at start 4120
Allowance at start 405
Allowance to doubtful debts 3750
Delivery van 615
Van running cost 730
Bad debts 730
174375 174375
Additional information:
i. Inventory at close 31st Dec 1990 Tsh 2400.
ii. Wages and salaries owing Tsh 340
iii. Rent carried forward Tsh 230
iv. Van running cost expired Tsh 72
v. Increase allowance for doubtful debts by Tsh 91
vi. Depreciation: furniture Tsh 380
Delivery van Tsh 1250
Required: Draw up income statement and the balance sheet as at 31.12.1990
Page 12
Understanding book-keeping Book Three
23894 23894
Page 13
Understanding book-keeping Book Three
WORKING
DR RENT ACCOUNT CR
Balance b/d 3400 Profit and loss 3170
Balance c/d {Carry forward} 230
3400 3400
Balance b/d 230
Example 4
Given the following Trial balance of Mr. Jumanne Kikwale ltd as on 31st August.1995
Narration DR CR
Drawing and capital 4000 51900
Motor van 30000
purchase and sales 60000 80000
Inventory at start 5000
Returns 6000 3000
Carriage inward 2000
Carriage outwards 1000
Wages and salaries 8000
Commission 7000
Discount 5000 9000
Provision for bad debts 600
Premises 40000
Bad debts 800
Insurance 4000
Rent 2500
Provision for depreciation motor van 2000
Debtors and creditor 10000 9000
Bank 12000
Petty cash 1200
177000 177000
Additional information
i. Inventory at close shs 6000
ii. Accrual amount wages shs 1500 and commission shs 1200
iii. Prepayment insurance shs 700 and Rent shs 900
Page 14
Understanding book-keeping Book Three
iv. Goods taken by the owner for own use Tsh 400
v. Provision for bad debts in 5% on debtor
vi. Depreciate motor van & premises by 10% p.a respectively
Required: From the above transaction found in the books of Jumanne Kikwale ltd prepare final Account
for the year ended 31st August 1995.
WORKINGS:
DR WAGES AND SALARIES ACOUNTING CR
Balance b/d 8,000
Balance c/d {Accrual} 1500 Profit and loss 9500
9,500 9500
Balance c/d 1500
DR COMMMISION ACCOUNT CR
Profit and loss 8,200 Balance b/d 7,000
Balance c/d {Accrual} 1,200
8200 8,200
Balance b/d 1,200
DR INSURANC E ACCOUNT CR
Balance b/d 4,000 Profit and loss 3,300
Balance c/d {Prepayment} 700
4,000 4,000
Balance b/d 700
DR RENT ACCOUNT CR
Profit and loss 1,600 Balance b/d 2500
Balance c/d {Prepayment} 900
2,500 2500
Balance b/d 900
Page 16
Understanding book-keeping Book Three
Example 5
Sikuyaomba R.Kikwale ltd a sole trader extracted the following Trial balance from her books when
closing up the business on 31 marches 2009
DR CR
Tsh Tsh
Purchase and sales 61420 127245
st
Inventory 1 April 2008 7940
Capital 1st April 2008 25200
Bank overdraft 2490
Cash 140
Discounts 2480 62
Return inward 3486
Return outward 1356
Carriage outward 3210
Rent and insurance 8870
Allowance for doubtful 630
Fixture and fitting 1900
Van 5600
Account receivable and payable 12418 11400
Drawing 21400
Wages and salaries 39200
General office expenses 319
168,383 168,383
Additional notes:
a. Inventory 31 march 2009 Tsh 6,805
b. Wages and salaries accrued at 31 March 2009 Tsh 3500 ,
Office expenses owing Tsh 16.
c. Rent prepaid 31 March 2009 Tsh 600
d. Increase the allowance for doubtful debts by Tsh 110 to 740.
e. Provide for depreciation as follows : Fixture and fittings Tsh 1900
Van Tsh 1400
Required :Prepare the income statement for the year ended 31 March 2009 together with the
balance sheet as at that date .
Page 17
Understanding book-keeping Book Three
Page 18
Understanding book-keeping Book Three
Example 6
The following Trial balance of Mr. Naswiru company ltd was extracted from the books at the
end of the 30th April 2000
TRANSACTION DR CR
Purchases and sales 11,000,000 19,500,000
Cash at bank 1,400,000
Drawings 2500,000
Cash in hand 600,000
Capital 9,600,000
Furniture 1,500,000
Rent 1,200,000
Wages and salaries 2,000,000
Discount 600,000 300,000
Debtors and creditors 4,900,000 2,500,000
Stock at 1st 2000 2,900,000
Provision for bad debts 300,000
Delivery van expenses 2,400,000
Van running 400,000
Bad debts written off 800,000
3,2200,000 3,2200,000
Additional information
a. Stock at close 2000 Tsh 3,500,000
b. Wages and salaries accrued at Tsh 90,000
c. Rent prepaid Tsh 140,000
d. Motor van running expenses owing Tsh 60,000
e. Increase the provision for bad debts by Tsh 100,000 and provision for discount
allowed at rate of 10% debtors
Required: Prepare Trading, Profit & Loss account as well as financial position of the business for the
year ended 30th April 2000.
Page 19
Understanding book-keeping Book Three
WORKINGS:
Discount allowed 10% of debtors’ Total debtor (Balance sheet)
Provision for bad debts increased provision Debtors - provision for bad debtors + increase
for provision +provision for discount
300000 + 100000
Debtors = 4900000 – 400000 4900000 + (300000 + 100000 +450000)
4500000 x 10 4900000 – 850000
100 = 4050000
Discount allowed = 450000
Page 20
Understanding book-keeping Book Three
MR.NASWIRU COMPAN
BALANCE SHEET AS AT 30TH APRIL2000
Liabilities Amount Assets Amount
NON-CURRENT ASSETS
Capital 9600000 Furniture 1500000
Add: Net profit 1440000 CURRENT ASSETS
11040000 Stock at close 3500000
Less :Drawings 2,500,000 8540000 Cash at bank 1400000
CURRENT LIABILITES Cash in hand 600000
Creditors 2500000 Debtors 4900000
Wages and salaries accrued 90000 Less:Pv for bad debts 850000 4050000
Van running expenses 60000 650000 Rent prepaid 140000
11190000
11190000
Example 7
The following is the Trial balance of Mwimbe Juma Kikwale a sole trader of Kigoma region as on
31st March 1991 .You are requested to prepare the Trading ,Profit and Loss account for the year ended
31st Dec 1991 and Balance sheet as on that date after making the necessary adjustment
DR CR
Sundry debtor 500000
Sundry creditors 200000
Outstanding liabilities 55000
Wages 100000
Carriage outwards 110000
Carriage inwards 50000
General expenses 70000
Cash discount 20000
Bad debts 10000
Motor car 240000
Printing and stationery 15000
Furniture and fitting 110000
Advertisement 85000
Insurance 45000
Sales men’s commission 87500
Postage and telephone 57500
Salaries 160000
Rates and taxes 25000
Drawing 20000
Capital account 1443000
Purchases 1550000
Sales 1987500
Stock on 1.4.90 250000
Cash at Bank 60000
Cash in hand 10500
3630500 3630500
Page 21
Understanding book-keeping Book Three
Provision for doubtful debts (475000 x 5/100) 23750 Gross Profit b/d 862500
Provision for depreciation: Furniture (110000 + 50000 x 10/100) 1600 Unearned profit 25000
Motor car (240000 x 20/100) 48,000 (75000-50000)
Wages 100000
Net
loss
65,25
0
Understanding book-keeping Book Three
952,750 952,750
WORKINGS
DR DEBTORS ACCOUNTCR
Balance b/d 500,000 Bad debts 250,00
Balance c/d 475,000
500,000 500,000
Balance b/d 475,000
❖ Depreciation:
Future & Fittings = 10/100 x 160000 = 16000
EXERCISE 1.1
1. Prepare a Trading and Profit and Loss account for the year ended 31st Dec 2005 and balance sheet as at that
date from the following Trial Balance of Jasmin Trader
DR. CR
Capital 150,000
Drawings 31,400
Stock 1 Jan 2004 43,400
Purchases/Sales 228200 373300
Returns inward/outwards 9900 16400
Discounts allowed/Received 5400 9000
Provisions for Bad debts 700
Wages and Salaries 43400
Rates and Insurance 41,800
Carriage inwards 11,600
Carriage inwards 17,500
Debtors/Creditors 36000 28100
Bad debts written off 500
Cash at Bank 19100
Furniture $ fitting, at cost 28,800
Motor Vehicles, at cost 38,500
Office machines 65,200
Cash in hand 17,500
Provision for Depreciation of Furniture 12500
Provision for Depreciation on motor Vehicles 10,000
600,000 600,000
Addition information
a. Stock on 31st Dec. 19.1, Shs. 59,600
b. Provide 20% depreciation on furniture using the balance method.
c. Adjust provision for bad debts 2 ½ of debtors.
d. Office machines are revalued at Shs. 12, 300.
e. Motor Vehicles will be used for 5 years and traded-in for a new one at Shs. 10,200
2. On 31st March 1993, Amal J Kikwale Trader had debtors amounting to shs 620500.Bad debts written off
during the year were shs 12400. Amal J Kikwale Traders makes a provision for bad and doubtful debts of 2%.
Required: Show the relevant account to record the above transaction
3. On 31st March 1993, Ada J Kikwale Traders had debtors amounting to shs 880000.Bad debts written off
during the year were shs 60000. Ada J Kikwale Traders makes a provision for bad and doubtful debts of 2%.
During the year she also made a provision for discount allowed of 5%.
Required: Show the relevant account to record the above transaction
4. Abdul Karim Nzogera Traders make a provision for bad and doubtful debts at a rate of 4% on debtors and
a provision for discount allowed of 3%. On 1st January 1994 Provision for bad and doubtful debts stood at shs
4800 and for discounts allowed at 3200. The following are the debtor’s balances
31st December 1994 shs 340000
st
31 December 1995 shs 450000
Page 24
Understanding book-keeping Book Three
5. The following Trial balance relates to Sikuyaomba Rashid Traders for the year ended 31st December
1990
DR. CR
Sales 305000
Provision for bad debts 12300
Stock 52000
Purchases 163000
Returns inward/outwards 4300 1200
Discounts 2000 6000
Provisions for discounts 3400
Wages and Salaries 248000
General expenses 180000
Debtors/Creditors 700000 850000
Cash at Bank 70000
Furniture $ fitting, at cost 1300000
Buildings 2790000
Light and heat 8500
Machinery 4250000
Cash in hand 25000
Commission received 60000
Capital 8554900
9792800 9792800
Addition information
a. Stock on 31st Dec.1990, Shs. 85000
b. Provide 7% and 12% depreciation on Machinery and Furniture respectively
c. Adjust provision for bad debts 3% of debtors.
Required: Prepare Trading, Profit & Loss account for the year ended 31st Dec 1990 and The Balance sheet
as at to date.
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Understanding book-keeping Book Three
6. The Trial balance given below was extracted from the books of Adili Jumanne Traders on 31st December
1993.
The Trial balance as at 31st Dec 1993
Particulars DR CR
Capital 132995
Stock 1.1.1991 8400
Purchase 76500
Sales 102350
Motor vehicle 65200
Carriage inward 6165
Wages and salaries 4780
Electricity and Telephone 9000
Commission 2500
Discounts allowed and received 2000 3000
Cash 15000
Bank 7600
Drawing 30000
Furniture 18300
Debtor and Creditor
254945 254945
The following Addition information was available
i) Carriage in ward and salaries outstanding were shs 500 and 400 respectively
ii) Commission due amounted to shs 360
iii) Furniture was to be depreciated by 10%
iv) 4% of debtors were doubtful
v) Stock on 31st Dec 1991 amounted to shs 10500.
Required: Prepare Trading, Profit & Loss account for the year ended 31st Dec 1990 and The Balance sheet
as at to date.
7. The Trial balance given below was extracted from the books of Khadija Mkuyu Kasage Traders on 31st
December 1991. Trial balance as at 31st Dec 1991
Narration DR CR
Opening stock 38400
Purchase / Sales 150000 295000
Returns 6000 4500
Debtors / Creditors 45000 52000
Wages and salaries 12000
Insurance 4000
Rent received 8000
Discounts 3000 2500
Cash in hands 15600
Cash at Bank 22000
Drawing 40000
Furniture and Fittings 46000
Land and Building 140000
Capital 160000
522000 522000
The following Addition information was available
i) Closing stock shs 20000
ii) Shs 2600 for Insurance is prepaid
Page 26
Understanding book-keeping Book Three
8. The following Trial balance relates to Matatizo Juma Tabu Traders for the year ended 31st September
2014
DR CR
Capital 32200
Stock at start 18000
Purchases / Sales 85000 160000
Returns inward/outwards 4000 6000
Discounts 7000 9000
Provisions for bad debts 390
Insurance 5100
Bad debts 200
Debtors 34000
Carriage in ward 12000
Furniture $ fitting, 28000
Motor vehicles 96000
Provision for depreciation on:
Motor vehicle 23000
Furniture 5000
Cash in hand 15000
Bank overdraft 31000
306300 306300
Addition information
(i) Stock on 31st September.2014, Shs. 25000
(ii) Rent shs 300 is arrears while shs 1000 for insurance is unexpired
(iii) Adjust provision for bad debts 5% of debtors.
(iv) Depreciation is to be provided on motor vehicle at 10% on cost and on furniture at 20% on book
value
Required: Prepare Income statement for the year ended 31st September 2014 and The Balance sheet as at to
date.
Page 27
Understanding book-keeping Book Three
9. The following Trial balance relates to Magogwa Juma Tabu Traders for the year ended 31st June 2015
DR CR
Drawings 30000
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Understanding book-keeping Book Three
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Understanding book-keeping Book Three
ABC Ltd company on 1st January 1995 purchased a machinery costing Tsh 10,000 and the machinery is
estimated a useful life of 10 year leaving a scrap value of Tsh 1000.The company charge depreciation using
a straight line bases.
Required: Prepare the following account in the books of ABC Ltd Company.
i) Machinery account for three years.
ii) Provision for depreciation
iii) Profit and loss account
iv) Balance sheet
DR MACHINERY ACCOUNT CR
1.1 .1995 Cash 10,000 31.12.1995 Balance c/ 10,000
1.1. 1996 Balance b/d10,000 31.12.1996 Balance c/ 10,000
1.1. 1997 Balance b/10,000 31.12.1997 Balance c/d1,0000
1.1. Balance b/d 10,000
DR PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31st DEC 1997 CR
1995 Provision for depreciation900
1996 Provision for depreciation900
1997 Provision for depreciation900
Page 30
Understanding book-keeping Book Three
i) Machinery account for three year
Page 31
Understanding book-keeping Book Three
DR MACHINERY ACCOUNT CR
1.1.2000 cash 20000 31.12.2000 Balance c/d 20000
1.1.2001 Balance b/d 20000 31.12.2001 Balance c/d 20000
1.1.2002 Balance b/d 20000 31.12.2002 Balance c/d 20000
1.1.2003 Balance b/d 20000
DEPRECIATION TABLE
Date of purchase Type of machine Cost Year 2000 Year 2001 Year 2002
1.1.2000 M1 20000 2000 2000 2000
Total 2000 2000 2000
1.1.2000 31.12.2000
Depr = 20000 X 10 = 2000
100
1.1.2001 31.12.2001
Depr = 20000 X 10 = 2000
100
1.1.2002 31.12.2002
Depr = 20000 X 10 = 2000
100
DR PROVISION FOR DEPRECIATION ACCOUNT CR
31.12 .2000 Balance c/d 2000 31.12 .2000 profit and loss2000
31.12 .2001 Balance c/d 4000 1.1.2001 Balance b/d 2000
31.12.2001 profit and loss 2000
4000 4000
31.12.2002 Balance c/d 6000 1.1. 2002 Balance b/d 4000
31.12.2002 profit and loss2000
6000 6000
1.1.1998 Balance b/d 6000
DR PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31st DEC 2002 CR
2000 depreciation 2000
2001 depreciation 2000
2002 depreciation 2000
Page 32
Understanding book-keeping Book Three
Example 3:
NKAMBA Ltd Company is dealing with purchasing and selling of used cars from Japan, on 1st January
1998 bought a motor van costing Tsh 80000 it is the company policy to charge depreciation at the rate of 5
% p.a .Using straight line method the company also close up the books at 31st Dec each year
Required: Open the following account in the books of Nkamba Ltd Company
i) Motor van account for your years
ii) Depreciation account
iii) Profit and loss account
iv) Balance sheet extract
DEPRECIATION TABLE
Date of Type of Cost Year 1998 Year1999 Year2000 Year
purchase machine 2001
1.1.1998 M1 80,000 4000 4000 4000 4000
Total 4000 4000 4000 4000
1.1998 31.12.1998
Depr = 80000 X 5 = 4000
100
1.1.1999 31.12.1999
Depr = 80000 X 5 = 4000
100
1.1.2000 31.12.2000
Depr = 80000 X 5 = 4000
100
1.1.2001 31.12.2001
Depr = 80000 X 5 = 4000
1
Page 33
Understanding book-keeping Book Three
DR PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31st DEC 2001 CR
1998 depreciation 4000
1999 depreciation 4000
2000 depreciation 4000
2001 depreciation 4000
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Understanding book-keeping Book Three
Example 1
A plant is ought on 1st July for sh 72000/= which is to be depreciated at the rate of 10% on book value based
on monthly basis ownership.
Required:
i) Calculate the amount of depreciation to be charged against profit for three years ended 31st
December
ii) Plant account
DR PLANT ACCOUNT CR
1.1. 1989 cash 72,000 31.12.1989 Balance c/d 72,000
1.1. 1990 Balance b/d 72,000 31.12. 1990 Balance c/d 72,000
1.1. 1991 Balance b/d 72,000 31.12. 1991 Balance c/d 72,000
1.1. 1992 Balanced b/d 72,000
DEPRECIATION TABLE
Date of Type of plant Cost Year 1989 Year Year1991
purchase 1990
1.1.1989 Plant 72000 3600 6840 6156
1.1.1989 31.12.1989
Depreciation = 72000 X 10 X 6 = 7200 = 3600
100 12 2
1.1.1990 31.12.1990
Depreciation = ( 72000 – 3600) = 68400 X 10 = 6840
100
1.1.1991 31.12.1991
Depreciation = (72000 – 3600 - 6840) = 61560 X 10 = 6156
100
DR PROVISION FOR DEPRECIATION ACCOUNT CR
31.12 .1989 Balance c/d 3600 31.12 .1989 profit and lo 36000
1.1. 1990 Balance b/d 3600
31.12 .1990 Balance c/d 10440 31.12. 1990 profit and los 6840
10440 10440
1.1. 1991 Balance b/d 10440
31.12.1991 Balance c/d 16596 31.12.1991 profit and los6156
16596 6156
1.1.1991 Balance b/d 16596
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Understanding book-keeping Book Three
Example: A motor car cost shs 10000 has an expected life of four years and estimated residual value of sh
256.
Required: Calculate the rate of depreciation
4 256
=1- √
100
=( 1-0.4)
=0.6 x 100
=60%
3. Sum of the year digit method
This method gives depreciation for each year based on the proportion of the remained year of charging
depreciation to the sum of all years of useful life of assets
Or
Is the method of changing depreciation where by the amount of depreciation will initial greater and
eventually will start to decrease.
Example 1
Boniphace Ltd Company purchased machinery on 1st Jan 1998 for Tsh 30000 the company policy is to
charge depreciation by using sum of the year digit.
The company policy is to charge depreciation by using sum of the year digit method and the assets is
estimated to live for 4 years leaving a scrap value of shs 5000.
Required:
i. Prepare machinery Account
ii. Provision for depreciation Account
DR MACHINERY ACCOUNT CR
1.1.1998 cash 30,000 31.12.1998 Balance c/d 30,000
1.1. 1999 Balance b/d 30,000 31.12. 1999 Balance c/d 30,000
1.1.2000 Balance b/d 30,000 31.12.2000 Balance c/d 30,000
1.1.2001 Balance b/d 30,000 31.12.2001 Balanced c/d 30,000
1.1.2002 Balance b/d 30,000
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Understanding book-keeping Book Three
WORKINGS
Find the summation of the years
4 + 3 + 2 + 1 = 10 or
n (n + 1)
2
4(4 + 1) = 4 (5) = 20 = 10
2 2 2
DEPRECIATION
1998 = 4 X 30000 = 12000
10
1999 = 3 X 30000 = 9000
10
2000 =2 X 30000 = 6000
10
2001 = 1 X 30000 = 3000
10
DR PROVISION FOR DEPRECIATION ACCOUNT CR
31.12 .1998 Balance c/d 12000 31.12 .1998 profit and loss1200
1.1. 1999 Balance b/d 1200
31.12 .1999 Balance c/d 21000 31.12. 1999 profit and loss9000
21000 21000
1.1. 2000 Balance b/d 21000
31.12.2000 Balance c/d 27000
27000 31.12.2000 profit and loss6000
27000
3.2.2001 Balance c/d 30000 1.1.2001 Balance b/d 27000
30000 1.1.2001 Profit and loss 3000
30000
1.1.2002 Balance b/d 30000
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Understanding book-keeping Book Three
DR MACHINERY ACCOUNT CR
1.1 .2011 Cash 10,000 31.12 .2011 Balanced 10,000
1.1 .2012 Balance b/d 10,000
1.1.2012 cash 12,000 31.12. Balanced c/d 22000
22,000 22000
1.1.2013 Balance b/d 22,000 30.6. 2013 Disposal b/d 10000
31.12.2013 Balanced c/d 12000
22000 22000
1.1.2014 Balance b/d 12000
DEPRECIATION TABLE
DEPRECIATION
Date of Type of plant Cost Year 2011 Year Year2013
purchase 2012
1.1.2011 M1 10000 1000 1000 -
1.1.2012 M2 12000 - 1200 1200
Total 1000 2200 1200
DR MACHINERY ACCOUNT CR
30.6.2013 Machinery 10000 30.6.2013 provision for de2000
Cash 7200
Loss on disposal (p&l) 800
10000 10000
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Understanding book-keeping Book Three
Example 2
Ester Iman MachuzaLtd Company a business woman dealing with purchased a used from Japan and sell
in Tanzania, she purchased to motor van No l. 1st January 1996 for Tshs 8000 and another No 2.On 24 October
1997 for shs 4000 the company policy is to charge the depreciation of 2% using diminishing add motor van
No .3 for 6000 on 30th since 1991.The company finished year end on 31st each year
Required: Prepare the following account in the books of Ester Iman Ltd Company
i. Motor van account
ii. Provision for depreciation
iii. Motor van disposal account
DEPRECIATION TABLE
DEPRECIATION
Date of Type of Cost 1996 1997 1998 1999
purchase machine
1.1.1996 Machine no 1. 8000 800 720 648 583
1.1.1997 Machine no 2. 4000 - 100 390 351
30.6.1998 Machine no 3. 6000 - 300 570
Total 800 820 1338 1504
❖ Calculation of depreciation
1996. Depreciation No.1
8000 x 10
100 = 800
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Understanding book-keeping Book Three
1997: Depreciation No 1.
8000 – 800
7200 x 10
100 = 720
Depreciation No 2
4000 x 10
100 = 100
1998: Depreciation No 1= 8000 – (800 + 720)
8000 - 1520
6480 x 10
100 = 648
No 2.
4000- 100
3900 x 10
100 = 390.
Depreciation No 3 = 6000 x 10 x 61 = 300
100122
1999: No 1 = 8000 – (800 + 720 +648) = 5832 x 10/100 = 583
No 2= 4000 – (100 + 390) = 3510 x 10/100=351
No 3 = (6000 – 300) = 5700 x 10/100 = 570
Page 40
Understanding book-keeping Book Three
EXERCISE
1. Define depreciation .Discuss the purpose of making a provision for depreciation
2. a) why do you think it is necessary to provide for depreciation .State the advantages and
disadvantages of each method
b) Describe clearly three methods of providing for depreciation .State the advantages and
disadvantage
4. Describe the treatment of depreciation in profit and loss account and balance sheet
5. A machine which costs shs 200,000 it to be depreciated at the rate of 20% p.a on the straight
line method .Assuming this machine was purchased on 1st January 1999 ,show the entries to record
this as at 31st December ,1999,2000 and 2001 by applying two alternative methods
6. A motor vehicle was purchased for shs 400,000on 1st January 1996 depreciation was to be provided
at the rate of 25% per annum on diminishing balance method. Show the entries as at 31st
December,1998 ,1999 and 2000 in the following account
a) Motor vehicle account
b) Provision for depreciation on motor vehicle Account
c) Profit & Loss account (extract)
d) Balance sheet (extract)
7. Best view Hotel crockery valued at shs 65000 on 1st January 1989 During 1989 they purchased
some more crockery for shs 5000 on 31st December 1989,it was valued at Shs 100,000 calculate
depreciation charge of crockery the year ending 31st December 1889 and show the entries in the
relevant account
8. Kilimanjaro Company Limited acquired the following fixed assets during 1989.
a) Furniture and fitting for shs 10,000 .These are expected to depreciate at 20% per
st
annum .Date of purchase: 1 January ,1989
b) Premises on a 99 year lease for shs 198,000 .Date of acquisition 1st July ,1989
c) Motor Van for Shs 485000.It is expected to have a useful life of 7 years and leave a
scarp value of shs 3000.Date of purchase :1st September 1989
The company has no other fixed assets. It maintains a provision for depreciation account for each fixed
asset.
You are required to calculate the following;-
a) The balance on Motor Van Account on 31st December ,1990
b) The balance of provision for depreciation on furniture and fit ting Account o 31st
December ,1990
c) The book value of premises on 31 December ,1990
d) The amount of depreciation charged to profit and loss account on all fixed assets at the
end of 1990.
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Understanding book-keeping Book Three
2. REVENUE EEXPENDITURE.
Is an expenditure which is not for increasing the value of fixed Assets but for running business
on day to day basis
Example
- Repair, maintenance expense
-Replacing its tires
-Ordinary repairs
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Understanding book-keeping Book Three
EXERCISE
1. State the meaning of capital expenditure distinguish between the two
3. Why is the distinction between capital and revenue so import in accounting? Give five
examples illustrating how a certain expenditure can be both as capital expenditure and also
revenue expenditure under different circumstance
4. State briefly the consideration which would guide you in determining whether any
particularly items should be regarded as “capital” or of a “revenue” nature
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Understanding book-keeping Book Three
CHAPTER TWO
CONTROL ACCOUNTS
A control Account: Are total accounts for debtors, creditors, stores, etc, maintained on the double entry
account recording. Control account also serve for posting contras from the daily books using totals only, and
so completing the double entry. For example, we debit debtors’ control account and credit sales account;
debit cash accounts and credit debtor’s control account; debit returns in wards account, and credit debtor’s
control account; debit bad debts expense account, and credit debtors control account, etc. Effectively, the
control accounts convert the individual ledger accounts (debtors, creditor, stores, etc) to a memorandum
basis. Control accounts are also known self balancing ledgers.
The accountant uses the totals from the day books, cash book, independently of the individual ledger
account records to construct running balances for control purposes. It leads to the preparation of final
accounts and in speedily, economically and effectively. This is an effective alternative way of preparing
final account. The adjustment account or general ledger adjustment account and the control accounts are
opposite and equal to each other.
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Understanding book-keeping Book Three
1. Sales ledger control account. This account checks the account of debtor or customer in total.
2.Purchases / Bought / Creditor ledger control account. This account checks the account of suppliers or
creditor in total.
Example 1
From the list of balances from the month Jan 2005 prepare purchases and sales ledger control Account.
1st Jan purchases ledger balance 11874
Purchases of the journal 154562
Sales for the journal 199662
Return outward journal 2648
Return inward journal 4556
Cheque paid to supplies 146100
Petty cash paid to supplier 78
Cash received from customer 185980
Discount allowed 5830
Discount received 2134
Bad debts written off 396
Customer cheque dishonored 30
Balance sales ledger set off against purchases ledgers by 1036
Page 45
Understanding book-keeping Book Three
Answer
Example 2
From the following figure complete account receivable ledger Account and Account payable
ledgerAccount for the year ended 31st Dec 2010.
1st Jan 2010
Account payable /creditor ledger Dr 46462
Cr 245
Account payable / creditor ledger Cr 1472
Dr 25465
Transaction for the month
Purchases Journal 76474
Sales journal 126024
Account receivable set off 455
Bad debts written off 1253
Discount to customer 746
Cash receivable from customer 120464
Cash paid to supplier 10476
Cash discount received 1942
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Understanding book-keeping Book Three
Answer
DR SALES LEDGER CONTROL ACCOUNT CR
DETAIL AMOUNT DETAIL AMOUNT
Example 3
From the following figure complete account receivable ledger Account and Account payable
ledgerAccount for the year ended 31st Dec 1997.
Balance on sales ledger debit 224640
Balance on sales ledger credit 2940
Balance on purchases ledger debit 2360
Balance on purchases ledger credit 146560
Transaction up 31st Dec 1997
Sales to customer on credit 216900
Cash sales 40000
Purchases on credit from suppliers 126500
Cash purchases 60000
Allowance paid to customer 3740
Goods return to supplier 2460
Cash received from customer 192900
Bad debts written off 1700
Discount allowed to customer 9920
Discount received from suppliers 240
Cash paid to suppliers 122840
Cash repaid to customer 500
Transfer from sales ledger to purchases ledger 11960
Transfer from purchases ledger to sales ledger 4280
Expenses charged to customer 700
Balance on sales ledger credit 2200
Balance on purchases ledger debit 1780
Page 47
Understanding book-keeping Book Three
Answer
DR SALES LEDGER CONTROL ACCOUNT CR
DETAIL AMOUNT DETAIL AMOUNT
Balance b/d 224640 Balance b/d 2940
Sales on credit 216900 Sales returns 2460
Over payment 500 Cash received 192900
Dishonored cheque 3740 Bad debts 1700
Discount allowed 9920
Cash received 500
Off se t purchases 11960
Offset purchases 4280
Balance c/d 2200
45350 45350
Balance b/d 2200
Example 4
The Trial balance of Adil J.A trader taken out on 30th September 2002, fail to agree. To help locate the
errors, he prepared sales and purchases control accounts from the following information:
Tshs.
Sales ledger debit balances 1.10.2001. 227200
Sales ledger credit balances 1.10.2001 420
Purchases ledger debit balances 1.10.2001 1270
Purchases ledger credit balances 1.10.2001 147200
Balances for the year to 30th September 2002:
Credit sales 402120
Credit purchases 160560
Sales return 2120
Purchases returns 4500
Cash payment to creditor 222700
Bad debts written off 4700
Cash received from debtor 411000
Dishonoured cheque 9000
Carriage charged to customers 3600
Discount allowed 20110
Discount allowed on dishonoured cheque 450
Debit balances in sales ledger transferred to purchases ledger 2000
Page 48
Understanding book-keeping Book Three
The lists of balances extracted from the personal ledger were as follows;
Debtors; Debit balances 206160
Credit balances 540
Creditor; Credit balances 83115
Debit balances 825
Required; a) Prepare control accounts
b) State the amount of errors and in which ledger it occurred.
(a)
Answer.
DR SALES LEDGER CONTROL ACCOUNT CR
DETAIL AMOUNT DETAIL AMOUNT
Balance b/d 227200 Balance b/d 420
Sales on credit 402120 Sales returns 2120
Carriage to customer 3600 Cash from debtor 411000
Dishonored cheque 9000 Bad debts 4700
Discount allowed on dishonored(cancelled) Discount allowed 20110
Contra 2000
450 Balance c/d 202560
Balance c/d 540
642910
642910 Balance b/d 540
Balance b/d 202560
308585
Balance b/d 825 308585
Balance b/d 78115
(b)The errors are (i) 3600 (206160 - 202560) Committed in the debtors ledger and
(ii)5000 (83115 – 78115) Committed in the creditor ledger.
Note. Provision for bad debts recovered should not appear in the control accounts.
Page 49
Understanding book-keeping Book Three
EXERCISE
1. The following figures were extracted from the books of Kabiliko Adam Rusaganya Ltd for the month of
April 1989.
Page 50
Understanding book-keeping Book Three
3. The Trial balance of Ma-awah Jumanne Rashid Kikwale Ltd extracted from her books for the
year ended 31st May 1436 Failed to agree and Control accounts were prepared to trace the errors.
Balances: 1st May 1436. Tsh.
DR, Balances in sales ledger 219990
CR, Balances in sales ledger 1290
DR, Balances in purchases ledger 1830
CR, Balances in purchases ledger 127530
Sales during the year 784650
Purchases during the year 310860
Sales return during the year 7110
Purchases returns during the year 5440
Cash payment to creditor 40190
Bad debts written off 5310
Cash received from debtor 525600
Dishonoured cheque 8940
Carriage charged to customers 1590
Discount allowed 8550
Interest on overdue account 720
Debit balances in sales ledger transferred to purchases ledger 2775
The lists of balances extracted from the personal ledger were as follows;
Debtors; Debit balances 412320
Credit balances 1080
Creditor; Credit balances 166230
Debit balances 1650
Required; a) Prepare control accounts
b) Which ledger contained an errors and by how much?
4. The Moshi’s Ltd keeps control accounts in its books. The accountant has supplied the following
information for the month ended 30th Nov 2006
Balance as at 1st Nov 2006 Tshs
Sales ledger --- Debit balances 356000
--- Credit balances 78000
Purchases ledger ---Credit balances 42400
--- Debit balances 86000
Transaction during the year:
Credit sales 9548000
Credit purchases 8472000
Return in ward 245000
Returns out ward 349000
Cheque received from customer 7242000
Bad debts written off 8000
Cheque paid to suppliers 6940000
Cash received from customer 104000
Cash paid to supplier 94000
Discount allowed to customer 69000
Discount received from supplier 76000
Credit purchases off-set against credit sales 254000
Balances as at 30th Nov 2006
Sales ledger CR 89000
Purchases DR 92000
Required; Prepare respective accounts from the above information for the month ended 30th Nov 2006.
Page 51
Understanding book-keeping Book Three
CHAPTER THREE
ACCOUNTS FOR SINGLE ENTRY AND INCOMPLETE RECORDS
Single Entry Is defined as an accounting system where by a record of a business transaction does exist but
not as in double entry system. In other words, single entry system may consist of double entry in respect of
certain transaction such as cash received from debtors, cash paid to creditors etc. also in respect of certain
transaction such as cash purchases, cash sales, expenses made fixed assets purchases and no entry in respect
of certain transaction such as depreciation, bad debts. Therefore a business is said to be single entry if it is
not following completely the principle of double entry system of book-keeping.
i. For small shopkeeper, market stall, internet café and other small business is not easy to keep
books using double entry system.
ii. Large number of owner they don’t know how to write up double entry records even if they
wanted to, they will enter detail of transaction at once only.
iii. Many small firms, especially retail shops, can have all the information they want by merely
keeping a cash book and having some form of record, not necessarily in double entry form of
their Debtors and Creditors. Under single Entry some Account are missing calling difficult in
calculating profit or loss. Profit or loss calculated under this system depends skills and memory
of the proprietor.
i. Arithmetical accuracy cannot be checked; In case of single entry system it is not easy to
prepare Trial balance because every transaction is recorded at once. Hence the arithmetical
accuracy of the books of accounts cannot be checked. This increases the possibility of more
frauds and misappropriations as compared to Double Entry System of Book-keeping.
ii. True profit or loss cannot be known. In the absence of complete information for sales,
purchases and other expenses, it is not possible to draw the profit and loss account. Hence the
true profit or loss made or suffered by the business cannot be known.
iii. Financial position of the business cannot be judged; In the absence of true figures of profit or
loss and correct information about the assets and liabilities of the business, the Balance sheet
cannot be drawn up to give a correct picture of the financial position of the business on a
particular date.
iv. Makes planning and decision making difficult; The system does not provide accurate figures
about the performance of the business and its financial position.
i) Maintenance of personal account; usually under this system personal accounts are maintained
while real and nominal accounts are avoided.
ii) Maintenance of cash book; A cash book is maintained which usually mixes up both the personal
transaction and the business transactions.
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Understanding book-keeping Book Three
iii) Depreciation of original vouchers; In order to collect the necessary information one has to depend
on original vouchers. For example the figure of credit purchases may not be readily available; it may
have to be found out on the basis of original invoices for the suppliers.
iv) No uniformity; The system may differ from firm to firm as per their individual requirements and
conveniences.
v) Suitability; The system is suitable in case of small, proprietors or partnership concerns. Limited
companies cannot adopt this system on account of legal requirements.
i. Compare the opening capital with the closing capital. If the closing capital is greater there is
apparent profit and if is smaller there is apparent loss.
ii. Take into Account of the adjustment which may make during the year. These adjustments are to
be added or subtracted with the apparent profit or loss. The adjustment which is added is
drawings and adjustments to be subtracted are Additional capital, bad debts, depreciation,
purchases of fixed assets, provision for depreciation.
NB: if the question does not give either opening capital or closing capital you will open the
statement affairs to find the missing capital.
Example 1
Capital at start 1.1.1990 shs 60000
Capital at close 31.12.1990 shs 65000
Drawings during the year shs 6000
Additional capital during the year sha 7000
Required: calculate the net profit or loss during the year.
Answer
STATEMENT OF PROFIT OR LOSS ACCOUNT FOR THE YEAR ENDED 31.12. 1990.
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Understanding book-keeping Book Three
Example 2:
Example 3
Boby ray’s capital account as on 1.1.1998 was shs 12800 and his assets and liabilities were as
follows.
Sundry debtors shs 2000
Sundry creditors shs 4000
Wages owning shs 500
Rent received in advance shs 400
Premises shs 12000
Furniture and fitting shs 1200
Stock shs 1000
Subscription due shs 950
Insurance prepaid shs 700 Cash
in hand shs 320
Bob ray drew shs 50 per month in anticipating of profit and loss and his private car for shs 1500
and paid the proceeds into his business bank account.
Required: find the Net profit or loss during the year.
Page 54
Understanding book-keeping Book Three
Answer
STATEMENT OF AFFAIRS AS 31.12.1998.
Liabilities Amount Assets Amount
Sundry debtor 2000
Capital 13270 Premises 12000
Creditor 4000 Furniture & fitting 1200
Wages owing 500 Stock 1000
Rent received advance 400 Subscription due 950
Insurance prepaid 700
Cash 320
18170 18170
STATEMENT OF NET PROFIT OR LOSS FOR THE YEAR ENDED 31st 12, 1998.
Capital 12800
Capital 13270
Apparent profit 470
Add: drawing ( 50 x 12) 600
1070
Less: Additional capital (1500)
Net loss (430)
NOTE: 1: INCOME
i. Owing = Assets
ii. Prepaid = liabilities
Page 55
Understanding book-keeping Book Three
Example 4 .The following is the balance sheet of Rehema Bunyonyi club as at 31.12.1996
On 31st Dec 1997 the amount due to creditor was Tshs 8160 and Debtor. And stock T.shs 9180 and 8540
respectively. The following also should be taken into Account.
a. Depreciation of machinery 10% p.a
b. Provision for doubtful debts 1500
c. Goods T.sh 400 taken by owner for own uses.
Required: Prepare Trading profit and loss Account and Balance sheet as at 31st Dec 1997.
Page 56
Understanding book-keeping Book Three
Answer
REHEMA BUNYONYI CLUB
DR TRADING, PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31.1.1994 CR
Details Amount Detail Amount
Opening stock 87600 Sales 60750
Add: Purchases 40490
Less: Drawings (Goods) 400 40090
Cost of Goods available for sale 48850
Less: Closing stock 8540
Cost of Goods sold 40310
Gross profit c/d 20440
60750 60750
Gross profit b/d 20440
Wages 7430
General expenses 6270
Depreciation of machinery 580
Provision for bad debts 1500
Net profit 4660
20440 20440
40560 40560
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Understanding book-keeping Book Three
WORKINGS:
i) To find the missing sales and Purchases
DR SALES ACCOUNT CR
Sales to (Trading a/c) 60750 Cash 18630
Sales on credit from debtor 42120
60750
60750
NB. There are two alternative ways of recording sales amount to be transferred to Trading
Account ;
i) You can open sales account in order to combine cash sales given in receipt and
payment account and the sales on credit obtained from Debtor control account,
then you transfer the amount in trading account.
ii) You can enter cash sales given in receipt and payment account and you add also
credit sales obtained from Debtor control account together in trading account.
DRMACHINERY ACCOUNT CR
Balance b/d 4200 Balance c/d 5800
Cash 1600
5800 5800
Balance b/d 5800
Page 58
Understanding book-keeping Book Three
Example 5:
Dack had the following Assets and liabilities on the date shown.
1.4.1993 31.3.1994
Premises 35000 35000
Furniture 6000 5300
Motorcar 1800 -
Stock in trade 6280 7430
Trade debtor 3950 4070
Trade creditor 7960 9300
Loan from industry 12000 -
Wages in salary due 920 750
Prepaid rates 250 360
Rent received in advance 400 680
He did not maintain his account records on double Entry system however kept cash book with discount
column and file of invoice issued and received the summary of his cash transaction during the year ended
31st march 1994 is given below.
DR CASH SUMMARY CR
Balance b/d 4380 Trade creditor 50260
Trade debtor 61310 Cash purchases 8140
Cash sales 21360 Wages and salaries 8320
Rent 6200 Rates and insurance 1640
Capital 5000 Transport 2820
Bank change 150
General change 7270
Loan interest 600
Loan repayment 10000
New motorcar 3000
Drawings 3600
Balance c/d 2450
98250 98250
Balance c/d 2450
Additional information
i. Discount allowed sh 1230 and discount received 1360
ii. Dack took goods from the business sh 500 for personal use.
iii. Motorcar is to be subjected to the depreciation of 20% on book value.
Required: Prepare Trading, profit and loss Account and Balance sheet for the year ended 31st March
1994.
Page 59
Understanding book-keeping Book Three
Answer DACK
DR TRADING, PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31.3.1994 CR
Detail Amount Detail Amount
Opening stock 6280 sales 84020
Add: Purchases 61100
Less: Drawings ( goods) 500 60600
Cost of goods available for sale 66880
Less: Closing stock 7430
Cost of goods sold 59450
Gross profit c/d 24570
84020 84020
Wages and salaries 8150 Gross profit b/d 24570
Rates and Insurance 1530 Discount received 1360
Transport 2820 Rent received 5920
General expenses 7270
Discount allowed 1230
Bank charge 150
Loan interest 600
Depreciation: Motor car 960
Furniture 700
Net profit
31850 31850
DACK
BALANCE SHEET AS AT 31.3.1994
Liabilities Amount Assets Amount
Capital 36380 NON-CURRENT ASSETS
Add: Additional capital 5000 Premises 35000
41380 Furniture6000
Add: Net profit 8440 Less: Depreciation 700 5300
49820 Motor car 4800
Less: Drawings (3600+500) 45720 Less: Depreciation 960 3840
4100 CURRENT ASSETS
LONG TERM LIABILITIES 2000 Stock 7430
Loan from T.I.B Debtor 4070
CURRENT LIABITIES 9300 Cash 2450
Creditor 750 Rates prepaid 360 14310
Wages & Salaries due 680
Rent received in advance 58450 58450
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Understanding book-keeping Book Three
WORKINGS:
DR PURCHASES CONTROL ACCOUNT CR
Cash 50260 Balance b/d 7960
discount received 1360 Purchases on credit 52960
Balance c/d 9300
60920 60920
DR PURCHASES ACCOUNT CR
Credit purchases 52960 Purchases ( Trading a/c) 61100
Cash purchases 8140
61100 61100
DR SALES ACCOUNT CR
Sales (Trading a/c) 84020 Credit sales 62,660
Cash sales 21,360
84,020 84,020
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Understanding book-keeping Book Three
DR LOAN ACCOUNT CR
Loan repayment 10000 Balance b/d 12000
Balance c/d 2000
12000 12000
Balance b/d 2000
1890 1890
6600 6600
NB. This statement below is prepared in order to determine Capital, to be transferred to Balance sheet.
57660 57660
Page 62
Understanding book-keeping Book Three
EXERCISE
1. Juma Rashid Ltd is a dealer who has not kept proper books of account At 31 August 1997
state of affairs was as follows all amount are in Tshs.
Cash 1100
Bank balance 2,209
Fixture 4,000
Stock 16,740
Debtor 11,890
Creditor 9,052
Motor van (at valuation ) 3,000
During the year to 31 August 1997 his drawing amounted to Tsh7560.,Winning from a football
,Pool Tsh 2800 were put into the business .Extra fixtures were bought for Tsh 2000 at 31 August
1997 his assets and liabilities were cash Tsh 226;Fixture to depreciated Tsh 600;Motor van to be
valued at Tsh 2500
debtor Tsh 15,821 ;Prepaid expenses Tsh 72
Required: Draw up a statement showing the profit and loss made by Juma Rashid Ltd for the year
ended 31st August 1997.
2. Following is a summary of Aziza’s bank account for the year ended 31 December 1998
Tsh Tsh
Balance 1.1.1998 405 payment to creditors for goods 29,487
Receipts from debtors 37,936 Rent 1,650
Balance 31.12.1998 602 Rates 890
Sundry expense 375
Drawing 6,541
38,943 38,943
All of the business taking have been paid into the bank with the exception of Tsh 9,630.Out of this
,Kelly has paid wages of Tsh 5,472 ,drawing of Tsh 1,164 and purchase of goods Tsh 2,994. The
following additional information is available:
1.12.1997 31.12.1998
Stock 13,862 15,144
Creditors for goods 5624 7,389
Debtors for goods 9,031 8,624
Rates prepaid 210 225
Rent owing 150 -
Fixture at valuation 2,500
2,250
Required: You are to draw up a set of final accounts for the year ended 31 December 1998, Show
all of your working
Page 63
Understanding book-keeping Book Three
3. Aziza’s Ltd company has kept records of his business transaction in a single entry from ,but he
did not realize that he had to record cash drawing .Her bank account for the year 2000 is as follows
Tsh Tsh
Balance b/d 1,890 Cash withdrawn from bank 5,400
Receipt from debtor 44,656 Trade creditors 31,695
Loan from T Hughes 2,000 Rates 2,750
Drawings 1,316
Sundry Expenses 1,642
Balance 31.12.2000 2,648
48,546 48,546
Records of cash paid were Sundry Expenses Tsh 122;Trade creditors Tsh 642 .Cash sales amounted to
Tsh 698.
The following information is also available;
31.12.1999 31.12.2000
Tsh Tsh
Cash in hand 48 93
Trade creditor 4,896 5,091
Debtor 6,013 7,132
Rent - 250
Rates owing 282 312
Motor van (at valuation) 2800 2,400
Stock 11,163 13,021
Required: You are to draw up a trading and profit and loss account for the year ended for the year ended
31december 2000, and a balance sheet as at that date .Show all of your workings.
4. On 1 May 1988 Rey-han ,who is a retailer ,had the following balance in her books Premises Tsh
70,000 ,;Equipment Tsh 8,200; Vehicles Tsh 5,100; stock Tsh 9,500; trade debtors Tsh 150
Reyhan does not keep proper books of account, but bank statements covering the 12 months from
1st May1988 to 30th April 1989 were obtained from the bank and summarized as follows:
Money paid into bank. Tsh
Extra capital 8000
Shop taking 96500
Received from debtors 1400
Payment made by cheque
Paid for stock purchased 70500
Purchases of delivery van 6200
Vehicle running expenses 1020
Lighting and heating 940
Sales assistants wages 5260
Miscellaneous expenses 962
It has been discovered that, in the year ending 30 April 1989, the owner had paid into bank all shop
takings apart from cash used to pay (i) Tsh 408 miscellaneous expenses and (ii) Tsh 500 per month
drawings. At 30 April 1989
Tsh 7600 was owing to suppliers for stock bought on credit on credit .
Page 64
Understanding book-keeping Book Three
The amount owed by trade debtors is to be treated as a bad debts .Assume that there had been no
stock was valued at Tsh 13,620.
Depreciation for the year was calculated at Tsh 720 (equipment) and Tsh 1,000 (vehicle)
Required: You are asked to prepare trading and profit and loss account for the year ended
30April 1989.
(Show all necessary workings separately)
5. Mama Moshi runs as second - hand furniture business from a shop which she rents. He does
not keep complete accounting records, but is able to provide you with the following information
about his financial position at 1 April 1978: Stock of furniture Tsh 3,210; trade debtor Tsh
2,643;Trade creditor s
Tsh 1,598; Motor vehicle Tsh 5,100; shop fitting Tsh 4,200; Motor vehicle expenses owing Tsh 432
He has also provided the following summary of his bank account for the year ended 31 March
1979
Tsh Tsh
st
Balance at 1 April 2,420 payments of trade creditors 22,177
Cheque received from trade debtors 44,846 Electricity 1090
Cash sales 3,921 telephone 360
Rent 2000
Advertising 1430
Shop fitting 2550
Insurance 946
Motor vehicle 2116
Drawings 16743
st
Balance at 31 March 1979 1775
51,187 51,187
All cash and cheque received were paid into the bank account immediately.
You find that the following must also be taken into;
• Depreciation is to be written of the motor vehicle at 20% and off the shop fitting at 10%
calculated on the book values at 1 April 1978 plus during the year
• At 31 March 1979 motor vehicle expenses owing were Tsh 291 and insurance paid in
advance was Tsh 177.
• Included in the amount paid for shop fitting were :
A table bought for Tsh 300,which Mama Moshi used in building an extension to his house.
Other balance at 31 March 1979 were
Tsh
Trade debtor 4,012
Trade creditors 2,445
Stock of furniture 4063
Required:
(a) For the year 31 March 1979
i) Calculate Smithson’s sales and purchases
ii) Prepare her trading and profit and loss account
(b) Prepare Mama Moshi’s balance sheet as at 31st March 1979
Page 65
Understanding book-keeping Book Three
6. Although Vikundi R. Kikwale has run a small business for many years, she has
never kept adequate accounting records. However ,a needed to obtain a bank loan for the expansion
of the business has necessitated the preparation of ‘Final’ accounts for the year ended 31August
1959 As a result, the following information has been obtained after much careful research :
iv) It has been established that a gross profit of 331/3 % on cost has been obtained on all goods
sold.
v) Despite her apparent lack of precise accounting records, Vikundi Kikwale is able to
confirm that she has taken out of the business during the year under review goods for her
own costing Tsh600.
Required:
a) Prepare a computation of total purchase for the year ended 31 August 1959.
b) Prepare the trading and profit and loss account for the year ended 31Agust 1959
and a balance sheet as at that date ,both in much details as possible
c) Explain why it is necessary to introduce accruals and payments in to accounting
Page 66
Understanding book-keeping Book Three
CHAPTER FOUR
ACCOUNTS OF NON PROFIT MAKING ORGANIZATIONS
Non trading organizations are bodies which render services example are charity organization and
professional bodies like education institutions, clubs and Hospital. The Non-trading organization/ institution
are different from the trading organizations/ institutions in several aspects: They don’t purchase and sell
goods, accept or receive bills of exchange nor do they have too many credit transactions. Most of their
transactions are cash transaction and therefore they don’t need to maintain many books of accounts as
trading concerns have to maintain. However they do maintain a cash book and minimum number of such
other books which may be required for their purposes. Example, a Register of members, a minute book are
maintained in case of club or a society, a student fees register is maintained in case of school or colleges and
a summary record of outstanding fees may be kept by an advocate.
Receipts and payment account: Is merely a summary of the cash transactions under proper heads which
have taken place during the accounting period. It is prepared at the end of accounting period from the cash
book. The cash book contains a record of cash receipts and payments in chronological order while Receipt
and payment account is a summary of total cash receipts and total cash payment received and made under
different heads during a particular period. Example if club receive subscription from its members on
different dates of the accounting year, they will be recorded on these date separately in the cash book.
However, Receipt and payment account will contain the total subscription received during the accounting
year.
Page 67
Understanding book-keeping Book Three
The relationship between the books prepared by Non- trading organization and those of the trading
organization
i. The receipts and payment account resemble with the cash account of trading organization
ii. Income and expenditure account resemble with the profit and loss account of the trading
organization
iii. Balance sheet is the same as the trading balance sheet of the trading organization
Example 1
Given the following receipts and payment of Simba sports clubs for the year ended 31s
Dec 1996
Receipts Payments
Balance b/d 236 Ground man wages 128
Subscription 1148 Equipment 600
Donation 100 Up keep stadium 296
Rent 16 Committee expenses 58
Printing and stationery 33
Balance c/d 385
1500 1500
st
Required; Prepare income and expenditure account for Simba sports club for the year ended 31 Dec 1996.
Page 69
Understanding book-keeping Book Three
Example 2
The following receipt account for Table Tennis club for the year ended 31.12.1997 was issued to the
members by the secretary
TABLE TENIS CLUB
RECEIPT AND PAYMENT ACCOUNT
Receipts Payments
1.1.1997 Balance b/d 1200 Wages 10000
Entrance fees 200 Stationery 2000
Subscriptions 16600 Printing and postage 1500
Locker rent 400 New equipment 1000
Loss on refreshment 600
31.12.1997 Balance c/d 3300
18400 18400
1.1.1998 Balance b/d 3300
Adjustments
Subscription shs 1000/= were in arrears and unpaid and that locker rent has 100/= were due but not
paid . No reference was made to the fact that the club owned its premises valued at shs 50000/= and
that shs 200/= were owing for printing charges and that the club equipment was worth shs 12500/=
Required: Prepare Income and Expenditure account for the year ended 31st .Dec 1997 and the balance
sheet as at that date
Page 70
Understanding book-keeping Book Three
WORKINGS:
DR PRINTING AND POSTAGE ACCOUNT CR
Cash 1500 Income and expenditure 1700
Balance c/d (Owing) 200
17000 1700
Balance b/d 200
DR SUBSCRIPTION ACCOUNT CR
Income and Expenditure 16600 Cash 16600
Balance c/d (Arrears) 1000
17600 17600
Balance b/d 1000
NOTE: Statement of affair is prepared in order to obtain Accumulated fund of which will be transferred to
balance sheet. Accumulated fund is obtained by taking all fixed assets and current assets minus long term
liabilities and current liabilities at the beginning of the year only.
Page 71
Understanding book-keeping Book Three
Example 3
The following is a summary of the Receipt and Payment of the Titanic sport club for the year ended
31.12.2013, the amount in this Receipt and Payments are in Tsh,
RECEIPT AND PAYMENT
‘000’ ‘000’
Cash and bank 1.1.2013 210 Secretary expenses 163
Sales of liquor tickets 437 Rent 1402
Subscriptions 1987 Visiting expenses 1275
Donations 177 Donations to charities 35
Refund of rent 500 Liquor expenses 270
Balance c/d 13 Stationery 179
3324 3324
Page 72
Understanding book-keeping Book Three
WORKINGS
LIQUOR
DR. T RADING, PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31st DEC 2013CR
Detail Amount Detail Amount
Opening stock 38000 Sales 437000
Add: Purchases 10000
Cost of Goods available for sal e48000
Less: Closing stock 46000
Cost of Goods sold 2000
Gross profit c/d 435000
437000
Liquor expenses 270000 437000
Gross profit b/d 435000
Net profit 165000
435000
435000
NOTE. The Net profit obtained from liquor Trading, profit and loss account are transferred to Income and
Expenditure account, it regarded as an income to the club which is resulted from the business transaction
which has been done by club.
DR CREDITOR CONTROL ACCOUNT CR
Balance c/d 68000 Balance b/d 58000
Purchases to Trading a/c 10000
68000
68000 Balance b/d 68000
DR SUBSCRPTION ACCOUNT CR
Balance b/d 65,000 Balance b/d 10000
Income & expenditure 1,980,000 Cash 1987000
Balance c/d (Advance) 37,000 Balance c/d 85000
2,082,000 2,082,000
Balance b/d (Arrears ) 85,000 Balance b/d (Advance) 37000
Page 73
Understanding book-keeping Book Three
NOTE: Statement of affair is prepared in order to obtain Accumulated fund of which will be transferred to
balance sheet. Accumulated fund is obtained by taking all fixed assets and current assets minus long term
liabilities and current liabilities at the beginning of the year only.
Example 4
Sikuyaomba Social club had the following Assets and Liabilities on the date shown below.
31.12.2001 31.12.2000
Bar stock 7800 6500
Bar debtor 4400 3200
Subscription due 3600 2800
Rates owing 900 700
Prepaid insurance 800 1400
The insurance prepared be following summary of the cash bank transaction during the year 2001.
RECEIPTS AND PAYMENT ACCOUNT
RECEIPTS
Cash balance 580
Subscription for Year 2000 2500
Year 2001 43400
Year 2002 3000
Bar receipts 79300
Equipment sold 3000
PAYMENTS
Bar purchases 58200
Bar wages 7200
The unpaid amount for year 2000 on subscription were written off as bad debts
Required:
a. Prepare subscription Account
b. Prepare income and expenditure Account for the year ended 31.1.12001
c. Prepare bar trading profit and loss Account
Page 74
Understanding book-keeping Book Three
Answer
DR SUBSCRIPTION ACCOUNT CR
Balance b/d 28,000 Cash 2000 2500
Income and expenditure 47,000 Cash 2001 43400
Balance c/d (Prepaid) 3000 Cash 2002 3000
Bad debts 300
Balance c/d (Due) 3600
52,800 52,800
Balance b/d 3600 Balance b/d 3000
NOTE. The Cash Tsh 3000 in 2002 has been credited then debited in subscription account because has been
received but for next year that is why we debit in subscription account, in order to carry it forward for next
and will be shown as current liabilities.
DR BAD DEBTS ACCCOUNT CR
Subscription 300 Income and expenditure 300
BAR
DR TRADING, PROFIT AND LOSS ACOUNT FOR THE YEAR ENDED 31st DEC 2001 CR
Detail Amount Detail Amount
Opening stock 6500 Sales 80500
Add : purchases 58200
Cost of Goods available for sale 64700
Less: closing stock 7800
Cost of Goods sold 56900
Gross profit c/d 23600
80500 80500
Wages 7200
Net profit Gross profit b/d 23600
23600 23600
Page 75
Understanding book-keeping Book Three
SIKUYAOMBA
INCOME AND EXPENDITURE ACCOUNT FOR THE YEAR ENDED 31st DEC.2001
Expenditure Income
Bad debts 300 Bar Net Profit 16400
Rates 200 Subscription 470
Insurance 600
Surplus 62300
63400 63400
DR RATES ACCOUNT CR
Balance b/d 700
Balance c/d (Owing) 900 Income and expenditure 200
900 900
Balance b/d 900
DR INSURANCE ACCOUNT CR
Balance b/d 1400 Income and expenditure 600
Balance c/d (Prepaid) 800
1400 1400
Balance b/d 800
Example 5
The following is the Receipt and Payment account of Kigoma big power service club, all amount are in
Tsh.
RECEIPT AND PAYMENT
Cash and bank 1.1.1996 524 Shop supplier 3962
Shop sales 5628 Wages ground man 939
Subscriptions for: 1995 55 Shop advertisement 624
1996 1236 Shop expenses 234
1997 40 Repair to premises 119
Donations received 120 Ground upkeep 229
Secretary expenses 138
Coach hire 305
Balance c/d 1053
7603 7603
Page 76
Understanding book-keeping Book Three
Additional information:
31.12.1995 31.12.1996
i) Stock in shop 496 558
Owing for shop supplier 294 340
Shop expenses arrears 26 36
Coach hire unpaid - 65
ii) Land and Premises was valued at 31.12.1995 at Tshs 4000 and Tshs 2000 respectively.
iii) Land and Premises are to be depreciated at the rate of 10% per annum.
iv) The Equipment at 31st Dec 1995 was valued at Tsh 550 and is to be depreciated at the rate of 20%
per annum.
v) Subscription outstanding by member Tsh 55 on 31st Dec 1995 and Tsh 66 on 31st Dec1996.
Required: Prepare Income and Expenditure Account and the Balance sheet as on 31st Dec 1996.
Answer
KIGOMA BIG POWER
INCOME AND EXPENDITURE ACCOUNT FOR THE YEAR ENDED 31st DEC.1996
Expenditure Income
Wages ground man 939 Shop net profit 813
Ground upkeep 229 Subscription 1302
Repair to premises 119 Donation 120
Secretary expense 138 Deficit 270
Coach hire 370
Depreciation; Land 400
Premises 200
Equipment 110
2235 2235
Page 77
Understanding book-keeping Book Three
WORKINGS:
SHOP
DR TRADING, PROFIT AND LOSS ACOUNT FOR THE YEAR ENDED 31st DEC 1996 CR
Detail Amount Detail Amount
Opening stock 496 Sales 5628
Add : purchases (3962 +340 - 294) 4008
Cost of Goods available for sale 4504
Less: closing stock 558
Cost of Goods sold 3946
Gross profit c/d 1682
NOTE 1 The Net profit obtained from Shop5628 5628 and
Trading, profit and loss account are transferred to Income
Shop man expenses 624
Expenditure account, it regarded as an income which is resulted from the business transaction which has
Shop advertising 245 Gross profit b/d 1682
been done Institution.
Net profit
DR SUBSCRIPTION
23600 ACCOUNT CR
23600
Balance b/d 55 Cash 1995 55
Income and expenditure 1302 Cash 1996 1236
Balance c/d (Advance) 40 Cash 1997 40
Balance c/d (Outstanding) 66
1397 1397
Balance b/d 66 Balance b/d 40
NOTE 2 The Cash Tsh 40 in 1997 has been credited then debited in subscription account because has been
received but for next year that is why we debit in subscription account, in order to carry it forward for next
and will be shown as current liabilities.
NOTE 3: Statement of affair is prepared in order to obtain Accumulated fund of which will be transferred
to balance sheet. Accumulated fund is obtained by taking all fixed assets and current assets minus long term
liabilities and current liabilities at the beginning of the year only
Page 78
Understanding book-keeping Book Three
EXERCISE
1. Draw up a subscription account from the following information
Shs
Subscription received during 1991 39,900
Subscription received in advance ,1st January 1,410
Subscription received in advance .31st December 1290
Accrued subscription 1st, January 2,180
Accrued subscriptions 31st, December 1,930
4. Mama Sikuyaomba social club had the following assets and liabilities on the date shown
1/4/1995 31/3/1996
Canteen stock 13600 17400
Canteen debtors 21000 24000
Loan from Treasurer 2500 -
Subscription advance 9000 6800
Subscription arrears 14000 12000
Premises 180000 180000
Prepaid insurance - 5000
Sports equipment 70000 ?
Accumulated fund 321000 ?
Page 79
Understanding book-keeping Book Three
The following is the receipt and payment account during the year
Shs Shs
Balance b/d 15900 Insurance 20000
Canteen takings 102000 Match expenses 17000
Subscriptions 140000 Travelling expenses 10000
Gate collection 50000 Treasurers loan 2500
Sales of old nets 16000 Sports equipment 31000
Canteen suppliers 68000
Stationery 1500
Canteen wages 5600
Light & heating 2400
Balance c/d 165900
323900 323900
Additional information
a) Old nets sold during the year had a book value of shs 16500
b) Of the subscription received shs 13000 relate to the previous year.
c) Subscription arrears and not received in the current year is written off.
d) Closing balance of sports equipment is to be depreciated by 15%
Required: Prepare income and expenditure account for the year ended 31st March 1996 and the balance
sheet as that date
5. Moshi social club started on 1st January 1995. The treasurer of the club presented to the members the
following Receipts and Payments account for the period ended 31st December 1995.
Receipts Shs Payments Shs
Subscription 40000 Prizes 70000
Competition fee 160000 Refreshments 32000
Sales of refreshments 54000 Rent 3100
Donation 85000 Insurance 2700
Light & heating 1800
Sports equipment 130000
Secretary honoraria 6000
Balance c/d 93400
323900 323900
Additional information
a) Donation is a capital income
b) Shs 500 for Rent is outstanding while Insurance paid in advance amounted to Shs 200
c) Unused stock of refreshments were valued at shs 5000
d) Sports equipment is to be depreciated by 15%
Required: Prepare income and expenditure account for the year ended 31st December 1995 and the balance
sheet as that date.
Page 80
Understanding book-keeping Book Three
6. The treasurer of J.Kikwale members club presented the following assets and liabilities on the dates
shown
1st January, 1999 31st December 1999
Life membership reserve 60000 -
Bar stock 30000 24600
Subscription arrears 13200 2700
Premises 180000 180000
Music equipment 65000 -
The following Cash book summary was also available.
Shs Shs
Balance b/d 4000 Dance expenses 11800
Bar sales 100000 Entertainment 12000
Life membership 14000 Bar supplies 74000
Subscription 98000 Wages 3600
Dance tickets 21000 Delivery van 150000
Bank loan 47500 Balance c/d 33100
284500 284500
Additional information
a) Music equipment and delivery van are to be depreciated by 15% and 12% respectively.
b) Life membership fee is shs.2000. The fee is credited to the life membership reserve account
and transferred to Income and Expenditure account when the member attains the age of 45
years. During the year two members attained the age of 45 years.
c) Half of the wages were paid to Bar attendant.
Required: Prepare the following account
(a) Bar Trading, Profit and Loss Account
(b) Income and expenditure account for the year ended 31st March 1996 and the balance sheet as
that date.
7. On 1st July ,1997,the treasurer of TIP TOP Tennis club ,represented to members the following
summary of receipts and payments at the end of the first year ;-
Shs Shs
Subscription 48000 Net and other equipment 40000
Competition fees 6000 Tennis balls 13000
A footnote show that there was a stock for used tennis balls worth’s shs 1000 and that
subscription for 1999 in arrears amounted to shs 2000.
Page 81
Understanding book-keeping Book Three
Required: Prepare income and expenditure account of Tip Top Tennis club for the year ended 30th
June 1998
8. The following receipts and payments Account was prepared by the TFF Treasure to a sports
club for the year 1957.
shs
Receipts: subscriptions 21980
Sale of old sports kit 5600
Donations 6320
Payments: overdraft b/f 1240
New sports equipment 12000
Refreshments 3110
Travelling 4720
Office expenses 2290
Tournament fees 1500
Electricity, telephone and postage 2850
New furniture 6000
The following additional information is available
a) Subscription due on 1st January, shs 4800, on 31st Dec, shs 56000.
b) Subscription in advance on 1st January 3500, on 31st December shs 6100
c) Book value of sports kit sold was shs 56000.
d) Value of sports kit and equipment on 1st January shs 256000
e) Deprecation on this asset is provided at 30%
f) Unused refreshment items on 31st December, shs 1500
Required: Draw up the Clubs necessary account for the year ended 31st Dec 1957
9. On 1st January 1964 the Tanzania sports Club’s assets and liabilities were as follows; Shs
Equipment (cost shs 50,000) 3500
Club house - leasehold (cost shs 50,000) 30000
Subscription in arrear 400
Subscription in advance 2000
Cash at Bank 4000
Amount owing for 1963 annual dance expenses 2500
Bar stock 2400
Refreshment stock 250
Page 82
Understanding book-keeping Book Three
During the year to 31st December 1964 the club received and paid the amounts listed below ;-
Shs Shs
Subscription 18200 Dance and social evening expenses 6000
Dance and social evening 9950 Bond and music groups 2500
Sale of refreshment 3000 Refreshment supplies 2200
Bar takings 20000 Secretary honorarium 520
Bar supplies 12000
Club house - repairs 13500
The undernoted items were to be considered 31st December, 1964
i. Bar stock shs 3000 refreshment stock shs 50
ii. Subscription in arrear shs 500 in advance shs 750
iii. The club amortize the leasehold by shs 5000 each year
iv. Depreciation of 10% per annum on cost value it to be written off the equipments
You are required to prepare
a) The position statement at 31st December ,1963
b) Income and expenditure account for the year ended 31st December 1964 and a balance
sheet at that date
10. The following balance sheet at 30th June ,1998 ,relates to the Extra Musical and dramatic
society ;-
Shs Shs
Accumulated fund 17,000 Stage equipment 8000
Creditor for printing 250 Musical equipment 9050
Cash at bank 200
17250 17250
Summary of Receipts and Payments for the year ended 30th June 1999 is as follow:
Shs Shs
Balance at Bank 1st July 1998 200 Rent of hall for practice 1200
Receipts from sale of tickets for 41000 Hire of theatre 24600
performance 4200 Hire of costumes 6400
Subscription from members 1200 Royalties on works performance 1800
Donation Purchase of musical instrument 4900
Cost of additional stage equipment 3100
Printing and stationery 720
Sundry expenses 1420
Balance at bank 30th June 1999 2420
46600 46600
You are required to prepare income and expenditure account for the year ended 30th June 1999.
And balance sheet at that date taking the following points in to consideration;-
a) Donations are to be treated as revenue receipts.
b) Provide for shs. 1950 depreciation on musical equipment ,and shs 3200 on stage
equipment
c) Subscription in arrear for 1999 amount to shs 80 ,and subscription in advance for
1999 amount to shs 100
d) The stock of stationary was valued at shs 50
Page 83
Understanding book-keeping Book Three
11. In additional to any which may be ascertained for the information supplied ,the Thaqaafa
sports club had the following assets and liabilities on 32st December of the year shown
1986 1987
Shs Shs
Accumulated fund 50000 48000
Outstanding bill owing by club 700 Nil
Refreshment bill owing by club Nil 400
Sports ground furniture 25000 ?
Furniture 1300 ?
Sports kit (a fixed assets) at valuation 12000 10000
Uniforms ( a fixed asset) 6500 ?
Subscription due form members 500 300
CASH SUMMARY
Shs. Shs.
Balance b/f 5400 Salaries 6200
Subscription 23000 Travelling 7800
Donations 2100 Stationery & postage 600
Gate Money 6500 Electricity & Telephone 500
Sale of old sports kit 1000 Refreshments 5200
Purchase of new uniforms 3800
Purchase of new sports kit 4000
Repairs to sports kit 700
Maintenance of sports ground 3400
Balance c/f 5800
38,000 38,000
Additional information;-
a) Sports ground was acquired several years ago on a 100 years lease for shs 50,000
b) The old sport kit sold during the year had a book value of shs 1500.
c) Write down furniture by shs 300 and uniforms by shs 3500.
Required:
i. Club’s income and Expenditure Account for 1987
ii. Its balance sheet as at 31st December ,1987
Page 84
Understanding book-keeping Book Three
12. Kikwale Club had the following assets and liabilities on the dates shown ;-
1st Jan 1974 31st Dec 1974
shs shs
Club premises 75000 75000
Furniture and fittings 6000 ?
Sports equipment 8400 ?
Life membership 45000 ?
Subscription due 8200 4100
Subscription received in advance 1100 1300
Wages due 1200 1600
Unused sports supplies 5500 6700
The Club’s treasure prepared the following summary of receipts and payments for the year
1974:
RECEIPTS AND PAYMENT ACCOUNT (1974)
Shs Shs
Cash at bank b/f 3000 Wages 27,900
Cash in hand b/f 800 Sports supplies 23100
Subscription : -- 1973 5000 Repairs and renewals 12800
1974 60400 New sports equipments 8600
1975 1300 Office expenses 7100
Life membership fees 4000 Rates and insurance 4500
Donations 25000 Refreshments 6800
General expenses 3600
Cash at bank c/f 2100
Cash in hand c/f 500
97,000 97,000
He also provided the following additional information:
a) The life membership fee is shs 1000. Four new members were enrolled in 1974 ,while six
life members died in the same year .The life membership fee is credited to a life
membership reserve and is transferred to the income and expenditure Account of the year
in which a life member dies.
b) Any portion of subscription due for 1973 not received in 19.4 is to be written off
c) Sports equipment should be written down by 30% .Sports supplies are considered a revenue
expense.
d) A member donated a sofa set valued at Shs. 1,500 to the club .All furniture and fittings items
should be depreciated by 10%
Required
a) Club’s Balance sheet on 1st January, 1974.
b) Income and Expenditure account for 1974
c) Balance sheet on 31st December,1974
Page 85
Understanding book-keeping Book Three
13. The following statements were presented to members of the Cineatlas society by their treasure
:
INCOME AND EXPENDITURE ACCOUNT FOR THE YEAR ENDED 30TH SEPTEMBER 1949
Shs. Shs.
Subscription 1250 Purchase of new projector 1400
Performance receipts from non – members 320 Hire of Hall 300
Quarterly competition receipts 230 Payment for hire of films 170
Sale of refreshment 700 Expenses of guest speaker 210
Balance transferred to balance sheet 120 Purchase of competition prizes 190
Purchase of refreshment 650
2,920 2,920
Shs. Shs.
Fund at 1st October 2,310 Balance transferred from income
Bank overdraft 4,80 And expenditure account 420
Balance - surplus for the year Equipment 1,600
Being increase in assets 420 Add: new equipment 1400
3000
Less: depreciation 300
2700
Owing for subscription 1949 50
Cash in hand 40
3210 3210
The treasure explained that shs 50 for the hire of a film shown on 10th September, 1949 ,
had not yet been paid , and that subscriptions received included shs 60 from the previous
year. You ascertain that cash in hand was shs 20 and cash at bank shs 510 on 1st October .
Assuming that the figure are in themselves accurate (except for fund at 1st October ,1948,
which requires adjustment )prepare in correct form ;-
a) Balance sheet at 30th September ,1948
b) Income and expenditure account for the year ended 30th September, 1949.
c) Balance sheet at 30th September 1949
Page 86
Understanding book-keeping Book Three
14. The Moshi’s. Society organizes seminars and lectures for its members. The following
statement is a summary of the Society’s receipts and payments for 19.4 as prepared by the
Treasure
RECEIPTS PAYMENT
Shs Shs
Bank Balance 1/1/1934 14,500 Rent of office and halls 9000
Annual subscriptions: Salaries 28,100
1933 750 Office equipment 2,000
1934 47,400 Postage and stationery 3,200
1935 3,41 Telephone 420
Investment income 51,560 Lecture fee and expenses 7,050
Sundry expenses 5,060
Bank balance 31/12/19.4 18,550
73,380 73,380
The following information is made available:
i. Salaries accrued : at 31/ 12/1934 shs 2,700
At 31/ 12/ 1933 Shs 2,400
ii. At 31/2/1933 Shs 2,850 had been received in respect of annual subscription for 1934
iii. Details of the society’s fixed assets at 31/12/1933 were :
Office equipment, at cost shs 20,000
Office equipment, depreciation shs 4, 00
Investments, at cost shs 189,000
iv. The bank balance at 1/1/1934 represents shs 10,000 on deposit account and shs 4500
on current account .All receipts and payment shown in the above statement were
transacted through the current account .Bank deposit interest of shs 900 for 1934 has
been credited by the bank ,bt is not reflected in the above statement .During 1933.
The sum of shs 1500 was transferred from current account to deposit account.
v. Depreciation on office equipment is agree at shs 2200 in respect of 1934
vi. It is the society’s practice not to accrue for subscription in arrears at the end of any
year ,but to recognize these as revenue in the year the subscription are received
Required
a) Income and expenditure account for the year ending 31st December 19.4 and
b) Balance sheet as at the above date
Page 87
Understanding book-keeping Book Three
15. The treasure of the Buseke Social Club has prepared the following Receipts and payment
Account for the year ended 31st Mach 1925
RECEIPTS PAYMENT
Shs
Cash in hand 1st April 1924 1900 Shs
Balance in hand current account of 1st April 9600 Organizer’s salary 18000
1924 25100 Repair to property 8400
Transferred from Bank deposit account 7920 Transfer to bank deposit account 27000
Members subscription 40800 Purchase of mini-bus 30,000
Donations 20400 Sundry expenses 6000
Social events Insurance 1200
Outgoing relating to social events 10800
Cash in hand 31st Mach 1925 1320
105,720 bank current account 31st March 1925 3000
105720
You are given the following additional informational;-
i) The leasehold premises had cost Shs 192,000 an the equipment Shs 66,000 and they
stood in the books on 31st March ,1924 at shs 144,000 an shs 48,000 respectively
ii) At 31st ,March 1924 the bank deposit account t balance was shs 48,720.During the year
the balance in the account earned Shs. 1,800 interest but this has not been included by
the treasurer in his receipts
iii) Other assets and liabilities were as follows;-
31st March, 1924 31st March 1925
Creditor for property repairs 1200 -
Expenses creditor 900 2080
Subscription due but not received 2400 2640
Insurance paid in advance 300 360
iv) Leasehold property is to be depreciated Shs 6000.No provision for depreciation is to be made
in respect of the mini- bus
v) Among the donations was one for Shs 15,000 given on the understanding that it be used to
purchase equipment that would help disabled persons to swim.So far no equipment of this
kind has been purchased
You are required to prepare;-
a) A statement showing the accumulated fund of the Club as 31st ,March 1924
b) The income and expenditure account for the year ended 31st March 1925
c) The balance sheet as on that date
Page 88
Understanding book-keeping Book Three
CHAPTER FIVE
REVISION EXERCISE
REVISION EXERCISE 1. ADJUSTMENT FOR FINAL ACCOUNT
1. Mr. Rashid started her provision whole sales business on 1st Jul ,1998 .The following balance
were extracted from her books on 30th June ,1999
Title of Account Shs
Sales 2980000
Purchase 2650000
Motor vehicle running expenses 32700
Mr. Rashid capital 630000
Shop rent 19500
Commission received 21660
Cash in hand 10200
Motor vehicle 300000
Salaries and wages 10800
Entertainment 1310
Electricity 1440
Telephone and postage 1980
Creditor 75600
Fixture and fitting 165000
Debtor 98000
Bank balance e 207830
Drawing 208500
Total 3707260
Mr0Rashid provide the following information:
Mr. Rashid would further like to have the following provisions made in the accounts
Provision for depreciation:
i. Motor vehicle at 20% and
ii. Fixture and fitting at 10% provision for doubt full debts 5% of debtors
Required: Prepare Trading and profit and loss Account for the year ended 30th June 1999 and A Balance
sheet as at that date
Page 89
Understanding book-keeping Book Three
2. The following trial balance was extracted from the books of Mr. Othman ,a sole trader ,as at
31st December 1979
Dr Cr
Shs Shs
Capital 20, 5000
Purchases 465,000
Sales 609,000
Repairs to building 8,480
Motor car 9,500
Furniture 14,600
Car expenses 3,180
Freehold land and building 100,000
Bank balance 5,400
Salaries and wages 86,060
Discount allowed and received 10,610 8140
Drawing 24,000
Rates insurance 2,480
Bad debts 3,590
Provision for bad debts 1st January 1979 1,400
Trade debtor 52,130
Trade creditor 40,350
General expenses 15,860
Opening stock 1stJanuary 1979 63,000
869,890 869,890
The following additional informational is available:
i. Stock in trade at 31st December ,1979 shs 88000
ii. Salaries and wages outstanding shs 3180
iii. Rates and insurance paid in advance shs 450
iv. Mr. Othman withdrew goods valued at shs 2000 for his own use ,but this has not been
recorded in the books
v. The provision for bad debts is to be shs 1000
vi. Included in repairs to buildings is an expenditure of shs 6600 in respect of alteration and
improvement to the buildings
vii. One half of the car expenses is to be charged to Mr. Othman for his private motoring as
distinct from business purpose
viii. Make a provision for discount of 10% on trade creditors and debtor
ix. Depreciate motor car and furniture and fitting at 10% per annum.
You are Required to prepare a Trading and Profit and Loss Account for the year ended 31st December
1979 and a Balance sheet as at that date.
Page 90
Understanding book-keeping Book Three
3. Titanic Company limited was formed as accompany on 1st February , 1986 for the purpose of
providing management service s for client firms on Oct 31st October,1986 (nine months letter)
,when the company closed its accounts for the first time ,the following Trial balance was
prepared:
Tsh Tsh
Cash 6500
Service fees receivable 4700
Prepaid machine Rental 1200
Office supplies on hand 610
Office equipment 4400
Accounts payable 2200
Notes payable 2400
Unearned service fees 4700
Stock capita 6000
Service fees revenue 14400
Salaries Expenses 9200
Maintenance expenses 390
Advertising Expense 900
Rent expense 1800
Additional data:
(a) The accrued interest on notes payable was shs 40 as of 31st October
(b) Two months officer rent was paid in advance on 1st February 1986. It was agreed that it
would apply to October and November of 1986 when the monthly rent of shs 2250 would
not be paid
(c) Supplies on hand were determined to be shs 170 on 31st October
(d) Salaries earned but not paid amounted to shs 200 on 31st October
(e) The office equipment was purchased on 3rd February ,1986 and its usefully life was
estimated to be ten years
(f) Machine rental was paid for one year in advance on 1st February ,1986 when a lease
agreement was signed
(g) A few clients made advance payment during the first nine months of the firm’s operation
Titanic company. was obligated to render future service for these advance payments .The
value of the service already render future service for these advance payment was shs
3,600 as of 31st October ,Service completed but remained un billed as of 31st October
amounted to shs 900
You are Required to prepare a Trading and Profit and Loss Account for the year ended 31st October 1986
and a Balance sheet as at that date.
Page 91
Understanding book-keeping Book Three
4. The Trial balance of Matatizo Juma Tabu as on 30th September, 1968 was as follows.
Shs Shs
Purchases and sales 162,505 252, 400
Provision for Bad debts 1st October, 1967 5,200
Page 92
Understanding book-keeping Book Three
5. The following balances remained in the books of Hamidu Maulid Shomali after he had prepared his
trading and profit and Loss accounts for the year ended 31st December, 1959:
Shs
Cash hand 2,300
Cash with Kenya Commercial Bank 11,960
TIB Loan (10 years) 25,000
Interest due on the above loan 1,250
Profit and Loss Account (Net Profit) 14,550
Drawings 500
Bills payable 1,000
Fixtures and fittings (costs) 18,000
Sundry creditors 10,000
Provision for Depreciation on Fixtures and fittings 1,600
Hamidu Maulid Shomali’s Capital 20,000
Sundry Debtors 8,500
Provision for Bad and Doubtful Debts 400
Stock-in-trade 12,500
Advance salary paid to staff 2,500
Post Office Premium Bonds (Short-term investment) 7,000
Rates and Taxes unexpired 540
Required
a. Prepared Hamidu’s Balance Sheet as at 31st December 1959 showing clearly the following totals
with the Balance Sheet:
i. Fixed Assets; iv. Owned Capital;
ii. Current Assets; v. Capital Employed
iii.Current liabilities;
b. Calculate the working Capital and capital employed of Hamidu on the date of the balance sheet
6. Mrs. Hamza Hamisi Shomali runs a secretarial college on a commercial basis. The following trial
balance was taken from her lodger 31st December, 2011
Shs Shs
Tuitions fees received 121,300
Premises 100,000
Furniture and fittings (cost shs 60,000) 41,000
Textbooks 10,200
Wages and salaries 32,000
Premises maintenance expenses 6,450
Office expenses 3950
Stationery and postage 12100
Electricity and telephone 4,400
General expenses 6,500
Rates and insurance 3200
Capital 150000
Cash in hand 1450
Cash at bank 14050
Drawings 36000
Typewriters (cost shs. 50,000) 35000
Page 93
Understanding book-keeping Book Three
306,300 306,300
Required: Prepare statement of financial position of the business for the year ended 31st Dec 2011.
7. Habiba Jamali is a retailer .the following trail balance has been extracted from his books of
account at 30th June ,2003
Shs shs
Purchase 138,750 218, 2250
Stock at 1st July, 2003 11,250
H Jamal capital 85,000
H Kato drawings 17,625
Land and buildings at cost 75,000
Motor vehicles at cost 55,000
Provision for depreciation at 1st July, 2003 55,000
Land and building 7500
Motor Vehicle 12,500
Motor Vehicle Expenses 3875
Wages and salaries 19500
Postage and telephone 2000
Insurance 5,000
Miscellaneous expenses 1,325 15,125
Debtors and creditors 10,250 1,200
Bank overdraft 1200
339,575 339,575
Prepare an income statement for the year ended 30th June, 2003 and balance sheet as at that date after
taking into account the following adjustments.
a. Wages accrued shs. 875
b. Insurance shs, 2,000
c. A provision for doubtful debts of 5% is to be created on debtors.
d. Depreciate mot vehicles at 20% on cost and land and buildings at 5% on written down value.
e. Miscellaneous expenses include shs. 300 paid for school fees of Habiba’s son.
f. A cheque for shs. 750 received from a debtor has not been recorded at the time of extracting the trial
balance.
g. Stock at 30the June 2003 was valued at shs 10,000
Page 94
Understanding book-keeping Book Three
8. The Trial balance extracted from the books of Shaban Jumanne Shomali, a trader at 31st December,
1995 was follows:
Shs Shs
Shaban’s J Capital 336,570
Furniture and equipment (cost shs 63,300) 49,200
Motor vans (cost shs 51,000) 33,600
Purchases and Sales 1,088,730 1,368,660
Rent and rates 24,000
Salaries 119,070
Bad debts 8,430
General expenses 31,860
Balance at bank 9,240
st
Provision for doubtful debts, 1 January, 1995 8,070
Stock-in-trade 1st January, 1995 261,780
Debtors and creditors 128,670 94,920
Drawing 53,640
1,808,220 1,808,220
Page 95
Understanding book-keeping Book Three
9. The following balances appeared in the books of Vikundi Rashid Kikwale Ltd 31st December 2000.
Shs Shs
Capital (1st January 80,000
Net profit for the year to 31/12/2000 34,500
Rent paid in advance 10,000
Drawings 20,000
Machinery (cost) 70,000
Furniture and fittings (cost) 14,500
Accumulated Depreciation-machinery 25,000
Accumulated Depreciation-furniture and fitting 12,000
Stock-in-trade 47,000
Trade debtors 38,000
Provision for bad debts 1,820
Sundry creditors: trade 32,400
Expenses 880 33280
NBC Loan (20 years) 10,000
Cash in hand 500
Bank overdraft 3,400
200,000 200,000
From the information given above, draw up a balance sheet in such a way as to show within the balance
sheet.
a. The total fixed assets.
b. The total of current assets
c. The total of current liabilities.
d. The working capital
e. The value of net assets.
f. The owner’s Equity
g. The capital employed.
Page 96
Understanding book-keeping Book Three
10. The following trial balance is extract from the books Taqwa trading at 31st December 1991
Shs shs
Sundry debtors 30,500 Capital 290,000
Drawings 7,600 Sales 157,000
Purchases 89,000 Purchases returns 4,500
Sales returns 2,800 /commission received 13,500
Stock 1st January 12,000/ sundry creditors 12,000
Wages 8,000
Buildings 190,000
Furniture 29,500
Carriage on purchases 10,000
Trade expenses 12,000
Advertising 7,400
Insurance premium 16,500
Bad debts 7,000
Cash in hand 30,000
Cash at bank 20,000
Salaries 20700
477,000 477,000
The following adjustments are necessary at the year – end
a. The unsold of goods was valued at shs 15,000
b. Salaries unpaid shs 2,000
c. Insurance premium prepaid Shs 6,500
d. Furniture is to be depreciated at 5% per annum.
Required Prepared an income statement and a balance sheet relevant to the year in question
11. The following trial balance is extract from the books Magreth J trading at 31st December 1992
DR. CR
Premises 150,000
Purchases/Sales 393,800 560,500
Debtors/Creditors 56,000 49,100
Bad Debts Written off 700
Salaries 2,500
Motor vehicle 78,000
Provision for Depreciation on motor vehicle 20,000
Drawing/Capital 42,200 300,000
Furniture 50000
Provision for Depreciation on Furniture 11,000
Return Inward/Outward 11,500 17,000
Provision for Doubtful Debts 300
Rates & Insurance 16,800
Stock, 1 January 1992 44,400
General Expenses 29,400
Advertising 16,400
0ffice machine 7,400
Carriage Inward 38,000
Cash at Bank 11,100
Cash in Hand 3,300
Light & Telephone 9,800
Page 97
Understanding book-keeping Book Three
Additional information
i) Stock on 31 December 19.1,Shs. 90,800
ii) Accrued expenses:
Salaries
Telephone Shs.4, 700
iii) Prepaid expenses: Insurance Shs.1,200
iv) Accrued commission income, Shs 1,900
v) Rent received in advance, Shs 4,40
vi) Revalue office machine at Shs.5, 000 and adjust provision for bad debts to 2% of debtors.
vii) Provide 20% depreciation on motor vehicle and furniture’s, using reducing installment method.
You are required to prepare Magreth’s J Profit and Loss Account for the year ended 31st December, 1992
and a Balance sheet as at that date in the vertical form.
12. Prepare a profit Loss for 1993, and a Balance Sheet on 31 December 1993 from the Trial Balance and
additional information given below:
DR. CR.
Capital 150,000
Gross Profit 112,400
Drawings 48,200
6%Deposit with Bank 50,000
Cash at Bank & in hand 1,750
Stock,31 December 1993 31,140
Debtors/Creditors 32,000 45,800
Discounts 4,200 6,100
Postage & Telephone 4,160
Salaries 24,700
Light & Heat 3,850
Insurance 2,520
Stationery 1,050
General Expenses 16,400 4,600
Rent Income 60,000 1,100
Premises 48,000
Interest on Bank Deposit
Motor vehicles Provision for Depression on motor vehicles 2,030
Additional information
1. Accrued expenses, Electricity Shs. 350, Salaries Shs. 3,400.
2. One third of insurance relates to 1993
3. Unused stationery stock on 31 December 1993, Shs 210.
4. Rent received in advance, Shs. 450.
Page 98
Understanding book-keeping Book Three
13. Prepare Profit & loss account for the year ended 31st December 1994 from the Trial Balance and
additional information appended below: where by closing stock is shs 2500
Shahidu Haruna Rashid Kikwale
Trial Balance on 31December 1994
DR CR
Drawing/Capital 20,900 100,000
Gross Profi 38,200
6%Loan from TI 50,000
Cash in Hand/Bank 6,700
Stock 28,200
Debtors/Creditors 31,000 38,000
Discounts 3,800 5,500
Wages & Salaries 26,700
Advertising 5,900
Insurance & Rates 6,200
Stationery 2,300
Bad Debt written off 700
Premises 120,000 13,200
Rent 21,800
Bank Interest 10,000
Commission 6,400 2,800
Furniture 80000
Transport Expenses 4500
Provision for Bad Debts 5000
Provision for Depreciation on furniture 270, 00
14. Prepare a trading and Profit and Loss Account for 1981 and balance sheet at 31 December 1981 from
the Trial Balance and additional information given bellow.
Sadick Haruna Rashid Kikwale
Trial Balance at 31 December 1981
DR CR
Purchase/sales 843, 800 1,394,200
Return in and out 22,200 33,300
Discounts allowed and received 4,400 5,500
Debtors and creditors 66,000 77,000
Drawing and Capital 136, 700 410,000
Stock 1 January 19.1 55,500
Carriage on Sales 21,000
Carriage on purchases 34,500
Wages and salaries 7 8,900
Rates and insurance 12,300
Telephone and Postage 11,100
Electricity and water 6,500
Furniture and fittings 48,000
Page 99
Understanding book-keeping Book Three
15. Prepared a Trading and profit and Loss Account and a Balance sheet from the Trial Balance and
additional information given below as on 31st Dec 2009.
DR. CR
Capital 25,000
Drawings 92, 800
Cost of Goods sold 619,200
Carriage on Sales 39,800
Sales 993,900
Sales Returns 11400
Office Returns 12300
Machinery 78200
Stock on 31 December 2008 92,100
Furniture 22,000
Premises 200,000
Motor vehicle 35,000
Discounts 12,400 13,100
Wages & salaries 141,700
Debtors and creditors 98,100 74,500
Provision for Bad Debts 1,000
Light & Heat 32,450
Insurance 6,500
Rent 36,000
Rates 4,300
Cash in Hand 850
Cash at Bank 31,900
Provision for Depreciation on machinery 28,200
Provision for Depreciation on furniture 5,800
Provision for Depreciation on motor vehicle 16,000
Page 100
Understanding book-keeping Book Three
Page 101
Understanding book-keeping Book Three
16. On 1 January 1988 Kahawa transporters Ltd. purchase three motor vehicles costing Shs 108000 each
,The useful life of these vehicles was estimated to be five with a disposal value of shs 8000 for each
vehicle. The company’s normal practice is to use straight line method of depression.
One of the vehicles was damaged in an accident and was sold on 1 January 1990 for shs 45,000
Required:
Prepare the following accounts for the three years ended 31st December 1988, 1989, and 1990
a) Moto – vehicles account
b) Motor – vehicles disposal account
c) Provision for depreciation on Moto – vehicle account
17. On 1st January ,1988 A.B.C Transporters owned three lorries purchased at different dates as follow
Lorry Year of Purchase Cost
Shs
st
DDC 457 1 January 1984 640,000
st
XYZ 248 1 January 1986 800,000
st
TGS 426 1 January 1987 960,000
The company which prepares its account on 31st December each year, charges depreciation at 20
percent on cost on a straight line basis .The depreciation charge is credited to a provision for
Depreciation of lorries Account while the Motor Lorries is maintained at cost. There were no
acquisition or disposal of lorries during the year 1988,but in January 1989 Lorry No.XYZ 248
developed mechanical problems and was sold for Shs 440,000 in cash. A new lorry No.CQW
649 was purchased at the same time for Shs 956,000 .You are required to write up ;-
a) Motor Lorries Account for the years 1988 and 1989
b) Provision for depreciation of motor Lorries Account for the same period and
c) To calculate the profit or loss on sale of lorry XYZ 248
18. The following transactions relate to BMT Limited in respect of plant and machinery;-
a) On 1st March 1988 machine M.8 purchased for Shs 120,000 the estimated useful life being
five years, and having a residual value of 20,000
b) On 1st January 1989 machine M.9 purchased for shs.180,000 the estimated useful life being
seven years, and having a residual value of Shs 40,000
c) On 1st September 1990 machine M.8 was given in part exchange for machine M.10 the
allowance being Shs 40,000,machine M.10 costs Shs 200,000 with an estimated useful life
of ten years and having a residual value of Shs 60,000
Assume full depreciation expenses in the year of purchase, and ignore depreciation expense in the year
of sale
Required
Plant and machinery account, and the related depreciation and disposal account in respect of the three years
ending 31st December 1990.
Page 102
Understanding book-keeping Book Three
1. Explain with reasons whether the under mentioned items appearing in the books of a
manufacturing concern are capital or revenue expenditure.
(a) Legal expenses incurred in raising a debenture loans
(b) Legal expenses incurred in an action for infringement of its Trade Marks
(c) Profit realized on the sale of investment
(d) Labour welfare expenses
(e) Subsidy received from government
2. You are required to state, giving reasons ,whether each of the following items
represents capital Expenditure or Revenue Expenditure:
(a) Insurance premium on existing canteen building
(b) Repairs to existing machinery
(c) Purchase of a motor van
(d) Purchase of bricks for the extension of the building
(e) Account’s fees for auditing books ad accounts
(f) Purchase of new machinery
(g) Wages paid to men erecting new machinery
(h) Legal charges in connection with new lease
(i) Petrol and oil for running the van
(j) Purchase of electric motor
(k) Electricity for running the motor
(l) Wages paid to men operating the motor
(m) Rent of premises
(n) Acquiring a new lease
(o) Expansion in the space of the display shelves
3. Mwamgongo services their factory to more suitable premises and incurred the following
expenses :
i. A sum of shs 475,000 was expended on dismantling, removing and re- installing
plant, Machinery and Fixtures.
ii. Plant and Machinery which stood in the books at shs 750,000 included a
machine at a book value of shs 170000.This being absolute was sold off at
shs 450,000 and was replaced by a new machine costing shs 275,000
iii. The freight and carriage on the new machine amounted to shs 150000 and
erection charges cost shs 27,500
iv. A sum of shs 110,000 was spent on painting the new factory
State which item of expenditure would be charged to capital and which to revenue Justify.
Page 103
Understanding book-keeping Book Three
CONTROL ACCOUNT
REVISION EXERCISE 3
1. What are the advantages of using self – balancing ledgers in book – keeping?
2. Why do we prepare control accounts “State what the balances of the control accounts represent?
3. On 1st January 1990, the balances in the sales ledger of Mary were Shs. 67457.00. During the same month
the following transactions took place.
Shs 85512.00
Credit sales for the month Shs 82201.00
Cash received form debtors Shs 3573.00
Discount allowed Shs 294.00
Dishonored cheques Shs 99.00
Bad debts Shs 2692.00
Sales returns for the month
Required: Prepare the sales ledger control account for the month
4. Kanduru keeps a control account in his creditors’ ledger. Prepare the bought ledger control account from
the following figures: 1989 March;
1 Amount owed to creditors Shs 5613.00
31 Purchases for the month Shs 5205.00
31 Payments to creditors Shs 6351.00
5.Rafiki keeps several sales ledgers and a purchaser’s ledger. Form the following details write up Rafiki
sales control account and the purchases ledger control account from the month of November 1990.
1990 November
1 Balance of sales ledger control account Shs 26700.00
1 Balance of purchases ledger control account Shs 414000.00
30 Sales for the month Shs 28900.00
30 Purchases for the month Shs 39600.00
30 Receipts from debtors Shs 24050.00
30 Payments to creditors Shs 39200.00
30 Discounts allowed Shs 1250.00
30 Discount received Shs 1950.00
30 Sales return Shs 650.00
30 Purchases returns Shs 450.00
30 Transfer of a debt balance from the Purchases ledger to sales ledger Shs 1200.00
30
Page 104
Understanding book-keeping Book Three
6. The following information was extracted from the books of ABC supermarket Ltd.
1st March 1989
Dr. balances in sales ledger Shs. 162400.00
Dr balance in purchases ledger Shs 14100.00
Cr balances in sales ledger Shs 9600.00
Cr balances in purchases ledger Shs 212700.00
During March 1989
Credit purchases Shs 124000.00
Cash purchases Shs 10000.00
Credit sales Shs 153200.00
Cash sales Shs 83300.00
Returns by debtors Shs 18600.00
Returns to suppliers Shs 12500.00
Bills of exchange drawn and accepted by customers
Bills of exchange drawn by suppliers and accepted by ABC Shs 28500.00
Debtors bills discounted Shs 13800.00
ABC bills hundred on maturity Shs 16700.00
Bills dishonored by debtors Shs 6000.00
Bad debts written off Shs 1100.00
Carriage charged to customers Shs 4400.00
Carriage charged to ABC suppliers Shs 2500.00
Cash and cheques received from debtors Shs 123800.00
Cheques issued to suppliers Shs 91000.00
Discounts allowed to debtors Shs 1200.00
Discounts received from creditors Shs 1200.00
Sales ledger debits transferred to purchases ledger
Choose appropriate items from the above list and draw up a sales ledger
control account and a purchases ledger control account.
7. From the following particulars prepare the relevant control accounts as at 31st December;
December 1 Debtors’ balances Shs 15250.00
30 cash received from debtors Shs 21560.00
Discounts allowed to debtors Shs 1750.00
Bills received from debtors Shs 5520.00
Bills dishonored Shs 1640.00
Sales to debtors Shs 31120.00
Goods returned by debtors Shs 1350.00
Bad debts written off Shs 2030.00
Cash refunded to debtors for over – payments made by them Shs 1050.00
Creditor’s balances Shs 16090.00
Purchases Shs 21640.00
Cash paid to creditors Shs 18830.00
Discounts received Shs 2020.00
Acceptances given Shs 6000.00
Purchases returned Shs 2960.00
Cash received from creditor Shs 1050.00
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Understanding book-keeping Book Three
8. Usambara Traders Ltd. Maintain self – balancing ledgers in their books of accounts. Construct the
control accounts in respect of purchases and sales ledgers for the year ended.
31st December 1990 from the following information
Purchases Shs 15327.00
Bad debts written off Shs 220.00
Bills payable honored Shs 2170.00
Bills receivable drawn Shs 5020.00
Interest charged to customers Shs 7.00
Purchases returns Shs 89.00
Payment to creditors Shs 12538.00
Receipts from debtors Shs 14308.00
Bills receivable dishonored Shs 575.00
Discounts allowed Shs 526.00
Discounts received Shs 327.00
Sales returns Shs 301.00
Cash repaid to debtors Shs 75.0
Cheques from debtors returned unpaid Shs 25.00
Sales and purchases ledgers contras Shs 1017.00
Bills receivable discounted Shs 4785.00
Bills payable retired for payment Shs 150.00
Sales Shs 20051.00
Bad debts recovered (included in cash from debtors) Shs 8.00
Creditors 1st January 1990 Shs 5762.0 (Cr)
1st January 1990 Shs 10.00 (Dr)
31st December 1990 Shs 5095.00 (Cr)
31st December 1990 Shs 9.00 (Dr)
Debtors 1st January 1990 Shs 7521.00 (Dr)
1st January 1990 Shs 50.00 (Cr)
31st December 1990 Shs 6892.00 (Dr)
31st December 1990 Shs 73.00 (Cr)
9. The following totals are taken from the books of Collette and Jane.
1st Jan. 1989 – Credit balances in purchases
Credit balances in sales ledger Shs 5926.00
Debit balances in sales ledger Shs 134.00
Debit balances in purchases ledger Shs 56.00
Debit balances in sales ledger Shs 10268.00
31st December 1989 – Sales Shs 71504.00
Purchases Shs 47713.00
Cash received from customers Shs 69872.00
Cash paid to creditors Shs 47028.00
Sales ledger balances written off as bad debts Shs 96.00
Sales retuns and allowances purchases returns and allowances Shs 358.00
Discounts allowed Shs 202.00
Discounts received Shs 1435.00
Purchase ledger credit transferred to sales ledger Shs 867.00
Legal expenses charged to customers Shs 75.00
Credit balances in sales ledger Shs 28.00
Debit balances in purchased ledger Shs 101.00
Shs 67.00
Required:
Prepare the purchases ledger control and the sales ledger control accounts. As they would appear in the general ledger of the firm,
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Understanding book-keeping Book Three
showing the balances carried to the following year.
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Understanding book-keeping Book Three
REVISION EXERCISE 4
1. Shechombo started a business on July 1st 1980. His financial position on the date was as follows:
Bank balance Shs 35000.00
Sundry debtors Shs 12000.00
Furniture & Fixtures Shs 60000.00
Stock (1/7/80) Shs 30000.00
Transport expenses owing Shs 7500.0
He closed his books at the end of every three months (quarterly). On 30th September, 1980, his assets and
liabilities were:
There were pre – payment of Shs 2000.00 on account of insurance premiums. During the quarter, no fresh
capital was paid in. he has made drawings to the extent of shs 10,400.00
You are required to work out the profit or loss made by Shechambo showing clearly the method you adopt
to obtain your result.
2. Majaliwa is in business as a dealer in electrical equipment and has not kept proper books of account. His
state of affairs on 31st March, 1980 was as follows:
Cash in hand Shs . 450.0
Cash at bank 6150.00
Furniture & fittings Shs 3020.00
Sundry debtors Shs 7780.00
Sundry creditors Shs 14330.00
During the year ended 31st March, 1981 his drawings were Shs . 9000.00 and he had also introduced fresh
capital amounting to Shs 6000.00.
At the end of the year his assets and liabilities were:
Cash in hand Shs 320.00
Cash at bank Shs 7680.00
Stock in trade Shs 14700.00
Furniture & fittings Shs 3020.00
Motor van Shs 6000.00
Sundry debtors Shs 8630.00
Sundry creditors Shs 12780.00
Sundry creditors Shs 12780.00
Required:
Prepare a statement setting out the profit or loss made by Majaliwa for the year ending 31st March, 1981
after depreciation motor vans by 25% and creating provision for bad debtors of Shs 430.00
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Understanding book-keeping Book Three
3. The following statements show the assets of O. Zakayo at the beginning and end of 1983.
On January 1st 1983, sundry liabilities amounted to Shs, 12035.00, but by December 31st they had dropped
to Shs 4725.00 during the year Zakayo withdrew Shs. 8160.00 for his personal use.
It was decided to write off depreciation on Land and buildings at 10% p.a. and furniture and fittings at 1%
p.a. Required: Prepare statement of profit or loss for the year. and A balance sheet as at December 31st,
1983
4. The balance sheet and cash book of P. Maganda on 31st December, 1982 were as follows.
From the above information and the information given below, prepare P. Maganda’s final accounts for the
year ended 31st December, 1982.
Stock Shs. 30000.00
Machinery & plant Shs 140000.00
Motor lorry Shs 80000.00
Furniture Shs 30000.00
Debtors Shs 20000.00
Creditors Shs 55000.00
Cash at bank Shs 84200.00
Note:
Depreciation on plant and machinery 10% p.a. motor lorry 10% p.a. and furniture 5% p.a
5.Abasi Vituka had the following assets and liabilities on the dates shown.
31st December 31st December
1989 1990
Shs Cts Shs Cts
Premises 14500.00 14500.00
Motor Cars 2800.00 1800.00
Furniture 3500.00 3200.00
Stock – in trade 11200.00 13100.00
Trade debtors 10900.00 11400.00
Trade creditors 14600.00 17200.00
Cash at bank 1330.00 3980.00
Pre – paid expenses 670.00 1120.00
Accrued expenses 1300.00 600.00
During 1990 he withdrew Shs 300.00 per month from the business bank account for his personal use. On 4th
July, 1990 he sold his personal car for Shs 42000.00 and paid the proceeds into the business bank account.
Required: Calculate the net profit or loss made by A basil in 1990.
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Understanding book-keeping Book Three
6. S. Majinji is a very outstanding businessman in his district. However Majiji does not know enough book –
keeping. For the year ended December 31st 1983, the following particulars were recorded in his cash book.
CASH BOOK
Shs Cts Shs. Cts
Balance b/d 13280.00 Payment to creditors 69900.00
Receipts from debtors 118200.00 Expenses 34670.00
Sale of old Motor car 15000.00 Purchases of new van 30000.00
Cash sales 28500.00 Investments 20000.00
Additional capital 10000.00 Drawings 12500.00
Cash purchases 11000.00
Balance c/d 6910.00
184,980.00 184,980.00
Require:
Use the details provided above to determine the following:
a) Capital at beginning, January 1st, 193.
b) Credit purchases for the year ended 31st December 1983.
c) Net purchases for the year ended 31st December. 1983
d) Credit Sales for the year ended 31st December 1983
e) Total sales for the year ended 31st December 1983.
f) Total expenses for the year ended December, 31st 1983.
g) (i) Depreciation of furniture
(ii) Depreciation f new motor van
(iii) Proceeds from sale of old motor van
(iv) Drawings for the year
(v) Interest earned on investments.
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Understanding book-keeping Book Three
7. Bakampenja keeps a retail shop. He buys on credit and allows monthly credit to his cash book when cash
changes hands. Bakampenja has kept a careful record of cash received from customers, and cash paid for
stock. He has also a record of cash and gods taken for private use. He has not kept nay careful accounts of
money paid out of shop takings for a variety of expense items. You are given the following information which
is not entirely correct.
Statement of Affairs
As at 1st June, 1983
Shs Cts Shs. Cts
Capital 15000.00 Premises 10000.00
Stock cash in hand and at bank 3000.00
15000.00 15000.00
Statement of Affairs
The following information is also provided:
1st June, 1983 – Creditors Shs. 950.00
Debtors Shs 210.00
31st May, 1984 – Creditors Shs 1000.00
Debtors Shs 570.00
Drawing during the year : Cash Shs 3000.00
Stock Shs 900.00
Received from customers Shs 12000.00
Paid to suppliers Shs 9000.00
A legacy of Shs 2000.00 had been paid direct into the business bank account.
A debt of Shs 90.00 included in the Shs 210.00 owing on 1s June, 1983 was still unpaid on 31st May, 1984.
a) Prepare a statement showing the profit or loss of Bakampenja’s business for the year ended 31st May,
1984.
b) Prepare a trading and profit and loss account for the year ended 31st May, 1984 showing a
computation of his unrecorded expenses.
8. The following information was extracted from the records of Tatu seif a sole trader.
Bank Account
Date Particulars FOL Amount date Particulars FOL Amount
1/1/82 Balance b/d Cts Cts Sh
customers c/d 1800.00 31/12/82 Suppliers 36200.00
31/12/82 Balance 48000.00 Salaries 3800.00
2200.00 Rent & rates 1600.00
Light & heat 400.00
General
Expenses 3400.00
Drawings 6600.00
Outstanding Balances: 52000.00 52000.00
31st December 31st December
1981 1982
Shs. Cts Shs. Cts
Stocks 4000.00 5400
Trade debtors 6000.00 6600.00
Trade creditors 4000.00 200.00
Creditors for expenses (light & heat) 500.00 150.00
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Understanding book-keeping Book Three
9. Salum Mwinyimkuu is a small grocer. He sells only for cash. He lives with his family in a flat over the
shop. From the following information, prepare a statement showing his profit or loss for the year ended 31st
December 198.
1st January 31st December
1980 1980
Shs Cts Shs Cts
Shop premises 9000.00 9000.00
Stock 2000.00 2100.00
Bank 1300.00 1200.00
Cash 50.00 45.00
Rates in advance 70.00 80.00
Creditors 120.00 170.00
The following payments have been made from the business bank account during the year.
10th April, 1980 – rates Shs 1650.00
16th October, 1980 – rates Shs 160.00
Two fifth of the rates apply to the private flat
28th March, 1980 – electricity Shs 70.00
20th June, 1980 – electricity Shs 50.00
19th September 1980 – electricity Shs 45.00
31th December, 1980 – electricity Shs 75.00
The thirds of the electricity had been used for domestic purposes
Salum had taken stock valued at Shs 500.00 and cash to the amount Shs 1000.00 during the year. Out of the
cash, how ever, Shs 70.00 had been paid for petrol and oil when using a private car for business purposes.
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Understanding book-keeping Book Three
10. Kibula runs a grocery business and does not keep his books on a double entry basis. The following
particulars have been extracted from his books:-
1st July, 1983 30th June, 1984
Plant & machinery 3600.00 3600.00
Stock 1600 1400.00
Sundry debtors 400.00 600.00
Sundry creditors 1000.00 800.00
Cash in hand 32.00 24.00
Cash at bank 900.00 1500.00
The following transactions took place during the year ended 30th June, 1984.
Shs
Wages 1200.00
Sundry expenses 500.00
Printing, Stationery & advertising 224.00
Rent and rates 500.00
Heating and lighting 156.00
Cash received from customers 17000.00
Cash paid for purchases 12868.00
Cash withdrawn from business for own use 624.00
Carriage 336.00
Purchases returns 200.00
During the year Kabula had taken gods from his business for his own consumption which amounted to Shs
13.00 per week, and had not paid any money into the business for them.
Required:
Prepare a balance sheet as at 1st July, 1983 and a trading and profit and loss account for the year ended 30th
June, 1984 and balance sheet as at that date.
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Understanding book-keeping Book Three
On 31st July 1993 the following information was obtained from the club’s books.
(a) Ten new members joined and paid their subscriptions five
Members resigned. Two had paid the July 19 subscription. All the rest paid their
subscriptions three of whom had paid for August 19 ----- as well.
(b) A show organized during the month cost shs 1234.00 and
Proceeds were shs 9759.00
(c) Refreshments for the month cost shs 246.00 and receipts totaled
shs 322.00
(d) A party for the boxers was held at the cost of shs 144.00
(e) Dances held during the month cost shs 346.00 receipts to tilled
shs 1555.00.
(f) A boxing contest was held at a cost of shs 942.00 and proceeds
Amounted to sh 10200.00.
(g) A new equipment was purchased for shs 150.00 and the old
Equipment was to be depreciated at 10%.
(h) Shillings 834.00 was paid for rent. Out of that amount shs 556.00
Refers to the next two months
(i) Wages, printing, postage and other sundry expenses amounted to
shs 610.00
Required Prepare:
i) A Receipts and payments account for the month.
ii) The income and expenditure account for the month.
iii) A Balance sheet as at 31st July 1993
3. From the following cash book summary, you are required to prepare an Income and Expenditure account
for the year ended 31st December 19 and a Balance Sheet as at that date.
Cash Book
Receipts Amount Payments Amount
Shs Cts Shs Cts
Balance 40000.00 Rent 3000.00
Subscriptions 24000.00 Equipment 22000.00
Sales of refreshments 10000.00 Prizes 11000.00
Gate collections 15000.00 Rates 6000.00
Competition fees 20000.00 Printing & Stationery 12000.00
Sundry expenses 8000.00
Wages 2000.00
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Understanding book-keeping Book Three
Refreshment 5000.00
4. The following is a summary of transactions for Msimbazi Sports Club as on 1st Jan 1998
Receipts Subscriptions Shs 55250.00
Interest on deposit Shs 2500.00
Gate fees Shs 40000.00
5. The assets and liabilities of Nyanza Sports Club on January 1st 1996 were; Cash at bank sh 13000.00; cash
in hand sh 12000.00 furniture and fittings sh 15000.00 bar stocks sh 10000.00 subscriptions due for previous
year sh16000.00.
On 31st December 1996 the cash book records showed the following:
Receipts subscriptions sh 30000.00
Sales from bar sh 35000.00
Entry tickets sh 22000.00
Notes (a) Of the subscriptions received shs 2000.00 was in advance and sh 1000.00 in arrears.
Bara stocks on December 31st 19 --- were valued at sh 4000.00.
Insurance for sh 500.00 was prepaid
It was decided that depreciation of 10% per annum should be charged on furniture and fittings.
Required:
Prepare a receipts and payments Account. Income and Expenditure Account and the Balance sheet as at
December 31st, 1996
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Understanding book-keeping Book Three
6. Chose the from the items shown below those necessary for the preparation of the Income and Expenditure
Account of the Lukasa’s Young Climbers’ club for the period ended October 31st , 1992 A Balance Sheet is
not required.
7. The treasurer of the Tandamuti Sports Club provided the following analysis of his receipts and payments
during the year ended 31st December 19—from it and the notes given below, draw up the club’s Income and
Expenditure Account as it should have been presented to the members on 31st December.
Receipts
Subscriptions for current year Sh 2720.00
Subscription for previous year Sh 120.00
Profit from refreshments Sh 350.00
Competition fees Sh 180.00
Payments
New games equipment Sh 240.00
Printing, postages and stationery Sh 130.00
Periodicals Sh 180.00
Competition prizes Sh 120.00
Sundry expenses Sh 200.00
Wages Sh 780.00
Rent Sh 1200.00
Rates Sh 490.00
Notes
a) Subscriptions due but unpaid for current year amounted to sh 180.00
b) The club furniture and games equipment at the beginning of the year was valued at sh 800.00. It is to
be written down ignoring additions during the year by 20%.
c) On January 1st rates paid in advance amounted to sh 120.00 and of the rates paid during the year sh
130.00 was in respect of the following year.
After uses the term “net profit” What is the comparable term used by the treasurer of a non – profit making
club?
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Understanding book-keeping Book Three
8. Gombe stream Club has 1,000 members, each liable for an annual subscription of shs 100.
On 31st December
140 members had not paid their subscription for 1944
60 members had paid their subscription for 1945 advance.
The club’s fixed assets were valued at shs 75,000
The club had cash in hand Shs 6,500 during 1945:
a) 920 members paid their subscription for 1945 ,100 members paid for 1944 and 50
members paid for 1946
b) A fixed asset that had a book value of Shs 6,200 was sold cash at a loss of Shs 2,800
c) The following payment payments were made in cash:
Wages and salaries Shs 34,200
Purchase of new fixed assets Shs 8,500
Rates and insurance Shs 2600
Entertainment expenses Shs 2900
Travelling expenses Shs 4300
Light heat water and telephone Shs 2900
Sports supplies (a revenue expense) Shs 18,100.
On 31st December, 1945
a) Wages and salaries outstanding amounted to shs 2400
b) Insurance prepaid amounted to shs 300.
The following additional information is available:
• The club has no source of income other that subscription
• Any subscription due for 1944 not received in 1945 is to be written off.
• 10% depreciation should be charges on all fixed assets.
You are required to prepare the Club’s:
• Receipts and payment Account for 1945
• Income and expenditure account for the same period
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Understanding book-keeping Book Three
9. The receipts and payment of the XYZ Social Club during the year ended 31st December, 1983 were.
RECEIPT PAYMENT
Shs
Shs. Account transferred to charities
Bank Balance at 1st Jan 1983 4500 Fund 1000
Annual subscriptions 6000 Bank deposit account 4500
Bar receipts 30300 2 new frit machine 800
Guest fees 1800 Fruit machine repair 25000
Fruit machine receipts 4450 Bar purchases 7300
Legacy 2000 Stewards wages & expenses 1000
Bank deposit interest from Rates 550
Charities und account 900 Light and heat 950
Sundry expenses 700
Donation to charities 8150
Bank balance at 31st December , 49,950
49,950 1983
56250
(ii) The charities Fund was represented by ;
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Understanding book-keeping Book Three
(viii) The shs 1,000 payment to the Charities Fund bank was done to meet the wishes of the
Legator who had stipulated that half of the bequest was to be held by the charities
Fund and the other half used for the general benefit of the club .
From the foreground prepare -;-
a) Income and expenditure account for the year ended 31st December ,1983
b) Balance, sheet as at 31st December, 1983 for the XYZ Social Club.
10. Inside Tusaidiane Club had the following assets and liabilities on the dates show
1.1.1991 31.12.1992
Shs. Shs
Club premises 60,000 56, 000
Furniture & Fittings 11,500 110,000
Club Van 60,000 110,000
Bar stock 11,750 16,200
Bar debtor 17,000 16,400
Bar creditor 31,400 29,800
Prepaid insurance 2,700 3,100
Accrued wages 2600 1,900
Subscription Received in advance 1,100 1,300
Subscription Due 6,600 7300
Subscription due 700 500
The following summary of Club’s cash transactions was prepaid by its treasurer.
RECEIPTS & PAYMENTS ACCOUNT
Shs Shs
Balance b/f 7,100 Purchases of
Bar receipts 369,400 -new van 120,000
Subscriptions 101,200 -new furniture 3,500
Sale of Old van 72,000 Printing & stationery 16,100
Donations 50,000 Wages & salaries 103,200
Power & water 3,900
Insurance 13,400
Transport 73,000
Bar creditor 203,100
General expenses 28,700
Balance c/f 34,600
599,700 599,700
Addition information:
a) The old van was sold and a new van bought in the year.
b) 40% of the wages relate to the bar
c) 20% of the transport expenses relate to bar purchases (carriage inward)
11. What do you mean by non-profit making organizations? Discuss the need for their accounts
12. Distinguish between Receipts and Payment Account and Income and Expenditure Account.
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Understanding book-keeping Book Three
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Understanding book-keeping Book Three
15. From the following information extracted from the books of Khalfan J. Social Club on 31st March
1990, prepared:-
(i) Receipt and payments account and
(ii) Income and expenditure account for the year 31st match.
Amounts received Shs
Members subscriptions 4,000
Loan from credit society 7,500
Sales of dance tickets 10,775
Donations 2,425
Amount paid out
Electricity 1,700
Manager’s wages 5,200
Repairs wages 1,900
Rent paid 3,125
Purchase of furniture 7,750
Dance expense 3,750
Incidental expenses 1,175
You are also given the following information
(i) On 1st April 1989 the club had cash amounting to Shs 1,65
(ii) Rent is paid at the rate of Shs.625 for every three months and has been paid to 30th
June 1990
(iii) Electricity includes Shs 475 paid previous year and Shs 550 accrued for current year
(iv) Incidental expenses included Shs. 75 relating to previous year
(v) Subscriptions amounting to Shs. 500 had been received during the previous year and
Shs. 375 received during the currently year refer to the year to 31st March 1991.
(vi) The club owned some equipment which was to be depreciated by Shs. 1,000
Understanding book-keeping Book Three
16. Bubango social Club had the following assets and liabilities on the dates shows.
31.12.1989 31.12.1990
Shs Shs
Clubs premises at cost 50,000 50,000
Furniture, net of depreciation 15,000 18,000
Sports equipments, net of Deprecation 17,000 ?
Bar stock 6, 5000 7,800
Bar debtors 3,200 4,400
Subscriptions Due 2,800 3,600
Rates Due 700 900
Prepaid insurance 400 800
Accumulated fund 100,000 ?
Their treasures prepared the following summary of their cash and bank transaction during 1990
153,300 153,000
The following additional information is also available
(a) The cost of clib van bought during the year is Shs 40,000. The balance is still owed to the
supplier, 15% depreciation should be provided on this vehicle,
(b) The book value of sports equipment sold during the year was Shs. 7,000.20% depreciation
should be provided on this asset
(c) Any subscription due for 1989 not recovered during 1990 should be written off as bad debts
Show the clubs:-
(a) Bar trading Account for year ended 31.12.1990
(b) Income and expenditure Account for the same period
(c) Balance sheet as at 31st December 1990
Understanding book-keeping Book Three
17. The following trial balance has been extracted from the books of Jericho members club as at 30
September 1990
Shs Shs
Cash register 300
Refreshment stock 1.10.89 650
Stock taker’s fees 60
Purchases of refreshments 13,150
Gas and electricity 810
Telephone 230
Games accessories 90
Papers and periodicals 100
Printing and stationery 100
Refreshment creditors 2,950
Bank loan 17,300
Refreshment takings 18,010
Subscription 770
Playing fees 310
Rents received 140
Cash at bank 3,210
Kitchen utensils 900
Secretary honorarium 500
Furniture 950
Catering wages 2,000
General wages 760
Freehold premises 24,200
Glasses, cups and cutlery 1,020
Sundry receipts 30
Sundry expenses 210
Accumulated fund 210 9,890
49,400 49400
The following additional information is provided:-
(i) Subscriptions receivable but unpaid as at 30 September 1990 amounted to Shs.150
(ii) At 30 September 1990 stock of refreshment was valued at Shs 2,180.
(iii) Electricity bill amounting to Shs.190 has not been paid
(iv) Stock of unused stationery was valued at Shs.80
(v) Depreciation is to be provided for as follow:
Shs
Cash register 70
Furniture 150
Kitchen utensils 100
Glasses, cups and cutlery were valued at 800
Required
(a) Refreshment Trading Account for the year ended 30 September 1990
(b) Income and expenditure Account for the same period & Balance sheet as on
30/9/1990.
Understanding book-keeping Book Three
18. Nyanza social club has 1,000 members each liable for an annual subscription of Shs: 100 on 31st
December, 1989.
a. 140 members had not paid their subscription for 1989
b. 60 members had paid their subscription for 1989.
c. Club’s foxed assets were valued at Shs. 75,000
d. Club had cash in hand of Shs 6,500
During 1990:
(920 members paid their subscription for 1990, 100 members paid for 1989 and 50 members
paid for 1991
A fixed asset that had a book value of Shs. 500 was sold for cash at a loss of Shs. 4,000
The following payments were made in cash:
Wages and salaries Shs. 34, 200
Purchases of new fixed assets Shs 8,500
Rates and Insurance Shs. 2,600
Entertainment expenses Shs. 29,400
Travelling expenses, Shs. 4,300
Light, Heat and Water Shs. 2, 900
Sports suppliers, Shs. 18,000
On 31st December, 1990
(a) Wages and salaries outstanding amounted to Shs 2,400
(b) Insurance prepaid amounted to Shs. 300
The following additional information is also available:
(a) The club had no source of income other than subscriptions
(b) Any subscriptions due to for 1989 not received in 1990 are to be written off
(c) Sports supplies are considered a revenue expense
(d) 10% depreciation should be provided for an all fixed assets.
You are required to show the club’s
(i) Receipts and payments Account and
(ii) Income and expenditure Account both for the year ended 31sh December 1990.
Note: Club’s Balance sheets on 1st January, 1990 and 31st December 1990 are NOT required
Understanding book-keeping Book Three
19. A literary society provides social facilities for its members and publishers a quarterly magazine.
At 31st December 1980 it possessed the following assets:
Shs
Premises 20,000
Furniture, etc 8,800
Investment 24,000
Cash 5,500
Subscriptions owing 360
Advertising owing 600
Liabilities on the same day were:
Subscription 1990 500
The summarized Cash Book for the year 31 December 1990 was:-
Receipts Shs Payment Shs
Balance in hand at 1.1.90 Rates,
5,500 and teleph one 5,680
20. Umbwe social club organizes seminars and lectures for its members. The following statement is a
summary of the society receipts and payments for 1990 as prepared by the Treasure.
RECEIPTS PAYMENTS
Shs Shs
Bank balance 1.1.1990 145,000 Rent 90,000
Salaries 281,000
Subscriptions Office Equipment 20,000
Postage and stationery 32,000
Telephone 4,200
Lecture fees 70,500
Sundry expenses 50,600
1989 7,500 Bal. c/d 185,500
1990 474,000
1991 34,100
Investment income 73, 200
733800 733800
1. The following trial balance was extracted from the books of Rafiki, a trader, as at 30th June 2000.
DR CR
Capital 330,000
Freehold land and buildings 204,400
Furniture and fittings 12,000
Purchases and sales 710,000 820,000
Debtors and creditors 124,000 95,350
Insurance 2,400
General expenses 3,400
Wages and salaries 9,850
Drawings 40,850
Bad debts 600
Balance at bank 24,800
Provision for doubtful debts 1st July 1999 2,750
Discounts allowed and received 11,000 8,200
Stock in trade 1st July 1999 104,000
Rates 9,000
1,256,300 1,256,300
(v) Private shs. 1,400 for depreciation of furniture and fittings and allow for depreciation on
motor van at 20% per annum on cost.
Required;
Prepare a trading and profit and loss account for the year ending 30th June, 2000 and a balance sheet
as at 30th June, 2000.
2. Amoni and Amosi are in partnership with capital shs. 60,000 and shs. 40,000 respectively. The
partnership agreement provides that.
i) Amoni and Amosi share profits and losses in the ratio of 2:1 respectively.
ii) Partiners receive interest on capital at 10% p.a.
iii) Balance on partners current accounts: Amoni shs. 10,000 (CR) and Amosi shs 5,000 (CR)
iv) Both partiners receive a commission of shs 2,000 each current
v) Partners are also to pay interest on drawings at 20% p.a.
vi) The partners agree to transfer shs. 10,000 to a general reserve.
vii) Amoni receive a special allowance of 10% of the net profit after allowing salary to Amosi.
viii) Amosi receive a salary of shs 5,000.
ix) Their net profit was shs 85,000.
Required:
Draw up the profit and loss appropriation account and partners current accounts, given that
drawings for partners were; Amoni shs. 20,000 and Amosi shs. 10,000 drawn on 30th June and
December 31st
Required:
Show in the books for the first three year.
i) Provision for depreciation on buses.
ii) Buses disposal account
4. On January 1st, 1998, Anna sold goods to Bakari for shs. 50,000 and on the same day drew upon
him a bill for the amount at three months. Bakari accepted the bill and returned to Anna, who on
January 4th 1998 discounted it for shs 49,000 with her banker. On due date, the bill was dishonored
and the noting charges amounted to shs 100.
Required:
Record the above transactions in the Journal of Anna (ignore narrations)
Upon the ledger accounts in the books of Anna
1. For each of the items (i) – (x) choose the correct answer from among the given alternatives and
write its letter beside the item number.
(i) One to who a debt is owed is known as:
A. Debtor
B. Creditors
C. Owner
D. Payee
(iii) Which of the following should not be charged to profit and loss account?
A. Carriage on sales
B. Commission received
C. Carriage on purchases.
D. Discount allowed
(ix) When debit side of income and expenditure is greater than credit side the difference is
termed as:
A. Surplus income over expenditure
B. Net profit
C. Net loss
D. Deficit of income over expenditure
(x) A book used for proper control of expenditures of public fund by all warrant holders is
called:
A. A warrant
B. Cash book
C. Vote book
D. Vote receipt
LIST A
2. Match the items in List A with the responses in List B by writing the letter of the correct response
beside the item number
(i) Is the capital of non trading organizations
(ii) Are also known as fictitious Assets.
(iii) An officer to whom a warrant of fund has been issued.
(iv) A ratio comparing current assets with current liabilities
(v) A special payment an agent of my business
(vi) Are those accounts which are concerned with revenue and expenditures
(vii) The person to whom a cheque has been addressed to.
(viii) The automatic and continuous doing a follow up and inspect work of other
employees.
(ix) The ceiling of government expenditures
(x) The top most body in the country which passed ministries budgets.
LIST B
A. N.A
B. Payee
C. Current ratio
D. Internal check
E. Ambit of vote
F. Accumulated fund
G. Drawee
H. Warrant holder
I. Intangible assets
J. Nominal accounts
K. Del – credere commission
L. P.M.G
Understanding book-keeping Book Three
6. Masasila and Mazula business partners rented an office building on Jan. 1st 2005 at an annual rent
of shs. 1,700/= On August 1st, they found that one of the rooms was not being used and so they sub
– leted the room at an annual rent of shs. 300/=
During the year that ended December 31st 2005, the financial statements are being prepared and the
following payments have been recorded in respect of rent;-
25th March 425/= 24th June 125/=, 29th Sept. 425/= and the following amount had been received
from the sub – tenant; 2nd August 75/=, 1st November 75/=.
You are required to:-
(i) Write up separate accounts for rent payable and rent Receivable and Balance them at the
end, of the financial year, showing the appropriate transfers to profit and loss account.
(ii) Write a short description telling what each Balance represents.
7. The following details are extracted from the books of Utalijua Jiji Factory; You are requested
toprepare A Manufacturing, Trading and Profit and loss Account for the year ended.31st Dec. 2005.
Stocks 1.1. 2005
Raw materials 2,100/=
Finished goods 3,800/=
Work in progress 1,350/=
Wages amounted to 32,500/=
Carriage inward (raw material) 350/=
Purchases of Raw Material) 37,100/=
Factory Machinery (cost 28,000/=) 23,000/=
Lighting and heating (1/5 factory) 750/=
Insurance (2/3 factory 420/=
Administration salaries 4,400/=
Commission on sales 1,150/=
Rent and Rates (3/5 Factory) 1,500/=
Provision for Bad debtors 1.1.2005 150/=
Sales 10,000/=
1. For each of the items (i) – (x) choose the correct answer from among the given alternatives and
write its letter beside the item number.
(i) Credit purchases are first entered in a :
A. Purchases ledger
B. Purchases account
C. Purchases journal
D. Purchases returns journal
E. Sales journal
(ii) Determine the amount of capital from the following Assets: Premises 2000, Loan to
Amri 1700, Stock 3500 Liabilities Loan from Salaam 2200, creditors 500
A. 5050
B. 5400
C. 4800
D. 4550
E. 4500
(vi) Cash float of 2560 is desired if 2000 is spent if the period now much will be reimbursed
at the end of the period?
A. 560
B. 4000
C. 2000
D. 2560
E. 4560
Understanding book-keeping Book Three
(viii) When a customer returns goods previously sold to him, the shop keeper will use a
document called:-
A. Invoice
B. Credit Note
C. Pay-in slip
D. Order not
E. Debit note
(x) If opening capital was 16500, closing capital 11350 and drawings 3300;
A. The loss of the year was 1850
B. The profit for the year was 1850
C. The loss for the year was 8400
D. The profit for the year was 8400
E. The profit for the year was 11,350
2. Match the items in the List A with the response in List B by writing the letter of the correct
response beside the item number.
LIST A
(i) Refers to things bought for resale
(ii) Credited in Trading Account at the end of the accounting period
(iii) Paid for services which have not yet been received.
(iv) The Government bank account that is operated by the paymaster general and kept by
the bank of Tanzania.
(v) Created after ascertaining the net profit.
(vi) Is paid when a bill is dishonored.
(vii) Is calculated in the manufacturing account
(viii) A person who owes money to a business for goods or services supplied to him.
(ix) The automatic and continuous checking of work of other employee’s cash or goods
brought into the business by the owner.
Understanding book-keeping Book Three
LIST B
A. Advance
B. Debtors
C. Internal check
D. Capital
E. Stock
F. Cost of goods produced
G. Exchequer
H. Noting charges
I. Profit and los appropriation account
J. Sales.
3. Maneno and Bakari are in partnership sharing profit and loss in proportion to their capitals which
are 750,000 and 250,000 respectively, they agree to admit Asha as partner on condition that she
pays into the firm 450,000 of which 150,000 is to be Asha’s capital contribution and 300,000 the
premium for her admission. The cash is paid into the firm’s banking account, and the premium is
paid out to Maneno and Bakari. The new share of profits and losses are as follows. Maneno and
Bakari 3/8 and Asha 1/4
Required: Record Asha’s admission to the firm and payment out of premum and capital accounts
4. The existing provision for bad debit in the books of Khadija is 6500 on 31st December 2000 and
total debtor 89,000.
Required:
Give journal entries and ledger accounts:-
(a) Provision for bad debit maintained is 5%
(b) Create provision for discount of 2 ½ % on debtors and show the items sundry debtors and
provisions as they would appear in the balance sheet.
6. Manyama is a businessman who did not keep proper records, his Balance sheet prepared by his
account at 31st December 1968:-
Capital 40,000 Fixed Assets 65,000
Loan 40,000 Current Assets
Creditors: Stock 25,000
Goods 70,000 Debtors 30,000
Expenses 20,000 Un expired Insurance 15,000
Cash at Bank 35,000
170,000 170,000
He pays all his transactions by cheque and all his takings are banked daily. His statement at 31st
December 1968 is as follows:-
Receipts from Debtors 185,000 Payments to creditors 90,000
Sundry receipts 25,000 Payment for expenses 45,000
Delivery Van 30,000
Water 4,000
Debtors for goods were 80,000 Goods unsold in the store was valued at 35,000, shs. 25,000 were in
respect of Insurance of which 9,000 was unexpired. Creditors for goods amounted to 55,000; the
delivery van bought on 1st Jan 1968 is to be depreciated at 10% on cost.
Required: Prepare trading and Profit and Loss account for the year ended 31st December and Balance
sheet.
Understanding book-keeping Book Three
1. For each of the following questions write in the box, the letter which represents the correct
answer.
(i) With fluctuating capital accounts, interest on drawings must be:
A. Credited to partner’s current accounts
B. Debited to partners capital accounts
C. Credited to partner’s capital accounts
D. Debited to partners’ current accounts
(ii) A debit balance of shs 425 on P Ross account in the books of B Harris means that:-
A. P. Ross owes B Harris shs 425
B. Harris owes P. Ross shs 425
C. P. Ross has paid B. Harris shs 425.
D. B. Harris has paid P. Ross shs 425
(iii) A trader operates a free delivery service to customers. The cost of this service is recorded in
his account as:-
A. Carriage in, debited to the P & L a/c
B. Carriage out, debited to the P & l a/c
C. Carriage in, debited to the trading
D. Carriage out, debited to the trading.
(v) A typewriter costs shs 250 excluding VAT. If VAT is at a rate of 10 per cent, the price
including:-
A. Shs 265
B. Shs 285
C. Shs 225
D. Shs 275
(viii) If stock at the year end is undervalued, gross profit will be:-
A. Understated
B. Only affected next year
C. Over stated
D. Not affected
(ix) A purchases account is overcastted shs 100,while wages account is under casted by shs 100.This
A. An error of omission
B. An error of commission
C. An error of principle
D. A compensating error
(x) A machine which originally cost shs 5,000 is sold for shs 750. The provision for depreciation
account relevant to this machine shows a credit balance of shs 4,350. This means that there is :-
A. A loss on sale shs 100
B. A profit on sale shs 100
C. A profit on sale shs 750
D. A profit on sale shs 4,370.
2. Complete the following sentences by filling in the blank spaces with the correct word / term.
(i) When preparing a control account the total of credit sales for the month should be entered on
the ……………………………………….. Side of ......................................................... Ledger
control account.
(ii) In a club balance sheet, subscriptions paid in advance are recorded as
………………………….. And subscriptions in arrears as
……………………………………………………
(iii) In the Trial balance, the balance on the provision for depreciation account is shown as a
……………………………………………….
(iv) A cheque given to you by customer and banked by you, but for which he has proved not to
have enough fund to meet it, it is known as ………………………………………….
(v) In a commercial firm an “Accumulated fund” would be known as
…………………………………….
(vi) In a manufacturing firm, royalties are included under the heading of
……………………………….
(vii) All the money standing to be credit side of the exchequer account
constitutes……………………
(viii) ………………………………………..means all public revenue and other moneys e.g. vote
receipts, suspense receipts etc.
SECTON B: (2MARKS)
Required:
(a) Write up journal entries to correct these errors (without narrative)
(b) Open a suspense account.
(c) Prepare a statement of corrected net profit
Understanding book-keeping Book Three
6. YEGO MAJURA has two departments (A and B. Some items of income and expenditure are
allocated directly to the two departments. The remaining expense are to be allocated to each
department in the ration
A: Two – fifths
B: Three – fifths
Items recorded separately for each department.
A B
Shs Shs
Opening stock 8,000 12,000
Purchases 16,000 20,000
Closing stock 9,000 4,000
Sales 38,000 52,000
Wages 10,000 15,000
Salaries 5,000 8,000
Expenses to be allocated between departments are:
Draw up a Trading and Profit and Loss account for the firm in columnar form so as to sow the
gross and net profit for each department and a balance sheet for the firm as a whole.
7. On 1st November 1993 Ally sells goods for shs 8,000 to Willy and accepts a bill at four months in
settlement. Defective goods value shs 400 are returned by Will on 30th November 1993, credit
being given for this amount. The bill is discounted with the bank at 5 per cent after one month, but
on maturity is dishonored. Ally induces Willy on 31st March 1994 to accept another bill at one
month for the outstanding account for a consideration of shs 5. This is duly met. Noting charges
amounted to shs 1 show the ledger accounts in:-
(i) Ally’s books (including cash book)
(ii) Willy’s books
Understanding book-keeping Book Three
(iii) An account where revenue collected by government are deposited before allocating to Accounting
officers is known as:
A. Bank account
B. Real account
C. Government account
D. Exchequer account
(v) A day book which records the details of any transaction hat cannot be recorded in any other
subsidiary books is called:-
A. Purchases Journal
B. Journal proper
C. Cash book
D. Sales Journal
(x) Determine the amount of capital from the following; Assets; Premises Shs 20000/= Loan to Shamir,
Shs. 1 7,000/= stock shs 35,000/= liabilities; creditors shs 5,000/= loan from Kagose shs 22,000/=
A. Shs. 45,000/=
B. Shs 45,000/=
C. Shs 54,000/=
D. Shs 48,000/=
2. Match the items in List A with the responses in List B by writing the letter of the correct response
beside the item number:-
LIST A
(i) Is a limit given to all accounting officers which the public money can be expended upon.
(ii) Is an account that involves cheque payment.
(iii) Is the over all fund of the United Republic to which all pubic money receipts are paid and from
which all expenditure funds for the purpose of meeting payments of government activities are
drawn.
(iv) Is used for small cash payments.
(v) Is the act of cashing a bill with the bank before maturity date.
(vi) Is the ledger whereby all debtors to a business are recorded.
(vii) Equal to cost of foods available for sale less cost of goods sold.
(viii) Is paid when a bill is dishonoured.
(ix) A special commission payable by the consignor t the agent in consideration of the liabilities of
a business.
3. Paulo sold goods to Peter worth shs 500,000/= on 1/7/2001 and drew a 3 months bill which was a
accepted by Peter. On maturity date the Bill was honored.
Required: Record the transactions in the books of the drawer.
4. A motor van is bought on 1st January , 1995 for Tshs. 100,000/= and another one on 31st October,
1996 for Tshs. 120,000/=
The first motor van was sold on 1st June 1997, for Tshs 72,000/=. The firm’s financial year ends on
31st December. The motor van is depreciated at 10% using the straight line method, ignore item
sold during the year.
Required:-
A. Motor vans account
B. Provision for depreciation on motor van
C. Disposal account
D. An extract of profit and loss A/C and balance sheet.
5. The following trial balance was extracted from the books of J. Hairwa, a trader on December 31st
1991.
Trial balance Dr Cr
Capital 25,000/=
Freehold land and buildings 9,000/= -
Furniture and fittings 1,340/= -
Stock in trade (1.1.91) 11,400/= -
Electricity 178/= -
Drawings 5,800/= -
Purchases 78,600/= -
Sales - 105,200/=
General expenses 3,602/= -
Balance at bank 824/= -
Discount received - 1,764/=
Discount allowed 2,228/= -
Trade debtors 9,500/= -
Trade creditors - 7,650/=
Rates and insurance 192/= -
Wages & salaries (P&C A/C) 14,970/= -
Equipments 1,200/= -
Bad debts 860/= -
Provision for bad debts - 320/=
Motor van 240/= -
139,934/= 134,934/=
The following matters are to be taken in to account;
(a) Stock in trade December 31st 1991 shs 15,800/=
(b) Rates and insurance paid in advanced December 31st 1991 shs 50/=
(c) The motor van shown in the trial balance was sold on December 31st 1991, for shs 80/= cash,
which Hairwa retained for private use. No entry for this transaction had been made in the books.
(d) Equipment is to be depreciated by shs 300/=
Understanding book-keeping Book Three
(e) Electricity bill outstanding on December 31st 1991 was shs 28/=
(f) The provision for doubtful debts is to be increased to shs 460/=
(g) Provision for depreciation of furniture and fittings, shs. 134/=
Required
A trading, profit and loss account for year 1991 and a balance sheet as on December 31st 1991
(25marks)
6. At 30th September 1992 the Cash Book of Mr. Mbelale Sekulin showed a balance at the bank of
shs. 328,775/= On checking with the pass book he found the following differences:
(i) There were two cheques paid into the bank on 30th September, 1992 which were not
credited until 2nd October, 1992; T. Mbosoli shs. 5,715/= and A. Nkubile shs 255/=
(ii) The following cheques had been draw on 29th and 30th September, 1992; T. Mussa shs
7,115/= K, Mlimanazi shs. 8,224/=; Mbinga shs. 1,609/=; C. Mrema Shs 222/=; K.
Koandolo shs. 807/= P. Pondo shs. 1992/=; and Wages shs. 2,757/=; of these cheques only
wages cheque was met before the end of the month.
(iii) The pass book showed a charge for services performed by the bank, shs. 924/= and cheque
book shs. 42/=. The book also showed a dividend received direct from National Bank of
commerce shs 2,400/= .
Required:
A. Redraft and adjust the Cash Book.
B. Prepare the Bank Reconciliation statement as on 30 September, 1992.
7. Mura and Ngosha enter into joint venture to buy a lot of damaged cars and to re –sale them after
repairs. The agreed to share profits and losses equally after allowing 10% commission on sales
made by them individually and an allowance of shs 25,000/= each for services rendered. The
following is a summary of their transactions:-
Mura Ngosha
Damage cars bought 104,000/= 96,000/=
Touring charges 11,000/= -
Spare parts bought 38,000/= 45,000/=
Mechanics wages paid 93,000/= 62,000/=
Advertising charges paid - 2,000/=
Other expenses paid 21,000/= 33,000/=
Proceeds of sales (2 cars cash) 320,000/= 340,000/=
Mura took over one car at an agreed value of shs 80,000/= and Ngosha took over some spare parts
at an agreed value of shs 6,000/=. Each member keeps his own books on the venture transactions.
Required
Show the necessary venture accounts including the entries to wind up the venture.
Understanding book-keeping Book Three
1. For each of item (i) – (x) choose the correct answer among the given alternatives and write its
letter beside the item number.
(i) Credit purchases are first entered in a:-
A. Purchases ledger
B. Purchases account
C. Purchases journal
D. Purchases return journal
E. Sales journal
(ii) When the final accounts are prepared, the bad debit account is closed by transferring to the:-
A. Provision for bad debit account
B. Trading account
C. Profit and los account
D. Balance sheet
E. Debtors account
(iii) The descending order in which current assets should be shown I the balance sheet is:-
A. Debtors, store, bank, cash
B. Cash debtors, bank stock
C. Cash, bank, debtors, stock
D. Stock, debtors, bank, cash
(vii) A firm bought a machine for 50,000 which had a scrap value of 5,000 and useful life of 5 year.
What would be the depreciation expenses if straight line method is used.
A. Shs 10,000
B. Shs 11,000
C. Shs 9,000
D. Shs 5,000
E. Shs 11,500
2. Match the items in List A with List B by writing the letter of the corresponding response beside
the item number.
(i) An officer to whom a warrant of funds has been issued
(ii) Accounts in which properties of all kinds are recorded
(iii) Is considered as a part of purchases in a business.
(iv) Is paid when a bill is dishonored
(v) Equals cost of goods available for sale less cost of goods sold.
(vi) An official acknowledgement of receipt is of all public money
(vii) Is when the bill is paid before due date
(viii) Is calculated in the manufacturing account.
(ix) A special amount payable by the costing or to his agent.
(x) Is where accounts of our suppliers are maintained.
Understanding book-keeping Book Three
LIST B
A. Purchases ledger
B. Warrant holder
C. Prime cost
D. Exchequer receipt
E. Gross profit
F. Noting charges
G. Commission
H. Closing stock
I. Discounting
J. Real accounts
SECTION B (20 marks)
3. Write short notes on:-
(i) Consolidated fund
(ii) Bill of exchange
(iii) Partnership
(iv) Cheque
(v) Negotiable instrument.
4. On 1st January Omolo sold gods to Messina Tshs. 75,000/= on 5th Omolo drew a bill of exchange
of three months that was accepted. Omolo discounted the bill for 72,800.
Required: Prepare a proper journal only
5. Mayaya of Mwanza Tanzania on 1st October consigned 100 bales of cotton to Mangasutu of Cape
town South Africa with proforma Invoice showing 20,000/= per bale , the expenses paid by the
consignor were: Freight charges 8,600/=, Insurance 11,500/=, Loading charges 9,800/=, On 31st
October Mangasutu sent an interim Account sales showing that 80 bales has been sold for 30,000/=
per bale and expenses deducted were: Custom duty 4,000/= sales expenses 4,600/= warehousing
charges 9,400/= commission 10% del-credere 5%.
Required:
(i) Account sales
(ii) Consignor’s accounts
(iii) Personal account of Mangasutu.
Understanding book-keeping Book Three
6. The assets and liabilities of Mwanza club Jan 2002 were as follows:
Cash in hand 3,800/= Bar stock 8,100, subscription for previous year 4,000/= insurance prepaid
130/=, Furniture 4,300/=, creditor for Bar suppliers 8,000, subscription advance 3,500/= from
the following summary of receipts and payments and the notes appended prepare income and
Expenditure Account for the year ended 31.12.2002 and balance sheet as on that date
Receipts Payments
7. Onyango and Masanja wee dealers of selling bicycles in joint business they agreed that one part
will deal with purchases and one will undertake sales, they also arranged that 10% will be allowed
to any part who will sell goods the following transactions took place.
1.9 Omolo bought bicycles for 150,000/= and at once Masanja paid 80,000/= to Omolo.
4.9 Masanja paid transport charges 3,960/=
6.9 Omolo bought bicycles for 40,000/=
7.9 Omolo paid rent cash 15,000/=
20.9 Masanja sold goods for 286,000/=
They also agreed that profits and losses are shared equally.
Required:
(i) Prepared parties accounts
(ii) Memorandum joint venture
Understanding book-keeping Book Three
1. The following is the adjusted trial balance for Jemakaata and company certified public accounts
as at 31st December 2007.
Jemakaata and company certified public accountants adjusted trial balance as at 31st
December 2007.
DETAILS DR CR
Cash 1,250,000
Accounts receivable 695,000
Supplies stock 110,000
Office equipment 960,000
Accumulated depreciation office equipment 360,000
Office furniture 1,100,000
Accumulated depreciation office furniture 360,000
Accounts payable 380,000
Salaries payable 200,000
Jemakaatu’s capital 1,109,000
Jemakaatu’s drawings 400,000
Service revenue 4,109,000
Salaries expenses 1,750,000
Supplies expenses 210,000
Utilities expenses 440,000
Advertising expenses 134,000
Depreciation expense office equipment 120,000
Depreciation expense – office furniture 110,000
7,279,000 7,279,000
st
From the above information, prepare a balance sheet as at 31 December, 2007.
2. (a) Define the term accounting
(c) Discuss the benefits of accounting to the society.
3. E.Chewa commenced business on 1st January 2003, and makes his account to 31st December
each year.
For the year which ended 31st December 2003, bad debts written off amounted to shs 120,000.
It was also found necessary to create a provision for doubtful debts of shs 200,000/=.
In year 2004, debts amounting to shs 160,000/= proved bad and were written off. Mrs. Malamo
whose debt of shs 35,000/= was written off as bad in 2003 settled her amount in full on 30th
November 2004. At 31st December, 2004, total debts amounted to shs 5,600,000/=. It was
decided to bring the provision to 5% of the debtors on that date. In 2005, Shs 235,000/= debts
were written off as bad and another recovery of shs 15,000 was made in respect to the debts
written off in 2003. At 31st December 2005, total debts outstanding were shs 4,200,000/=. The
provision for doubtful debts was to be maintained at 5% of the debts.
You are required to show for the year 2003, 2004 and 2005 the following accounts.
(a) Bad debts
(b) Bad debts recovered
(c) Provision for debts
(d) Extract from the profit and loss.
Understanding book-keeping Book Three
4. (a) The following information is provided to you by Hon. Treasurer of Total African Sports
Club regarding subscriptions
(iii) The credit entry for Net profit is on the credit side of
A. The Trading Account
B. The profit loss Account
C. The drawing account
D. The capital Account
(iv) When banking money into your current Account you should always use
A. A cheque Book
B. A paying in slip
C. A cash Book
D. A General Ledger
(v) When white makes out a cheque for 7000 shs and sends it to small then white known is
A. The payee
B. The banker
C. The drawer
D. The creditor
(vi) If you want to make sure that your money will be safe it cheques sent are lost in the post you
should.
A. Not use the postal services in future
B. Always pay by cash
C. Always take the money in person
D. Cross your cheques Account Payee only, Not Negotiable
2. Match the items in the List A with the response in List B by writing the letter of the correct
response beside the item number.
LIST A
(x) Refers to things bought for resale
(xi) Credited in Trading Account at the end of the accounting period
(xii) Paid for services which have not yet been received.
(xiii) The Government bank account that is operated by the paymaster general and kept by
the bank of Tanzania.
(xiv) Created after ascertaining the net profit.
(xv) Is paid when a bill is dishonored.
(xvi) Is calculated in the manufacturing account
(xvii) A person who owes money to a business for goods or services supplied to him.
(xviii) The automatic and continuous checking of work of other employee’s cash or goods
brought into the business by the owner.
LIST B
K. Advance
L. Debtors
M. Internal check
N. Capital
O. Stock
P. Cost of goods produced
Q. Exchequer
R. Noting charges
S. Profit and loss appropriation account
T. Sales.
Understanding book-keeping Book Three
3. On 1st January Omolo sold gods to Messina Tshs. 75,000/= on 5th Omolo drew a bill of exchange of
three months that was accepted. Omolo discounted the bill for 72,800.
Required: Prepare a proper journal only
SECTION C (60 MARKS)
4. UPATU owns a store. His records are incomplete and you have been called in to prepare his
accounts.
You ascertain the following:
At January 1, 2002 Stock 2100/=
Debtors 1300/=
Creditors 960/=
Motor Vans 1200/=
Rates Prepaid 80/=
Cash at Bank 900/=
Drawings during the year were shs 120/= per week and a Legacy of shs 400/= received on march
2002 had been paid into the bank.
5. Leila and Lily entered into joint venture to buy a lot of damaged cars and to resell them after repairs.
They agreed to share profits and losses equally after allowing 10% commission on sales made by them
individually and an allowance of 25,000 each for services rendered.
The following is a summary of their transactions.
LEILA LILY
Demerged cars bought 104,000 96,000
Touring charges 11,000
Spare parts bought 38,000 45,000
Mechanics wages paid 93,000 62,000
Advertising charges paid - 2,000
Other Expenses paid 21,000 33,000
Proceeds of sales (two cars each). 320,000 340,000
Leila took over one car at an agreed value of shs. 80,000 and Lily took
over some spare parts at an agreed value of shs 6,000.
Each member keeps his own books on the venture transactions.
6. Moshi R. is a businessman who did not keep proper records, his Balance sheet prepared by his
account at 31st December 1968:-
Capital 40,000 Fixed Assets 65,000
Loan 40,000 Current Assets
Creditors: Stock 25,000
Gods 70,000 Debtors 30,000
Expenses 20,000 Un expired Insurance 15,000
Cash at Bank 35,000
170,000 170,000
He pays all his transactions by cheque and all his takings are banked daily. His statement at 31st
December 1968 is as follows:-
Receipts from Debtors 185,000 Payments to creditors 90,000
Sundry receipts 25,000 Payment for expenses 45,000
Delivery Van 30,000
Water 4,000
Debtors for goods were 80,000 Goods unsold in the store was valued at 35,000, shs. 25,000 were in
respect of Insurance of which 9,000 was unexpired. Creditors for goods amounted to 55,000; the
delivery van bought on 1st Jan 1968 is to be depreciated at 10% on cost.
Required: Prepare trading and Profit and Loss account for the year ended 31st December and Balance
sheet.
Understanding book-keeping Book Three
(iii) Which of the following should not be charged to profit and loss account?
A. Carriage on sales
B. Commission received
C. Carriage on purchases
D. Discount allowed
(v) This is an allowance generally given on catalogue or list price of the article, at the timeof selling.
A. Cash discount
B. Trade discount
C. Discount received
D. Discount allowed.
(ix) When debit side of income and expenditure is greater than credit side the difference is termed as:-
A. Surplus income over expenditure
B. Net profit
C. Net loss
D. Deficit of income over expenditure
(x) A book used for proper control of expenditures of public fund by all warrant holders is called;
A. A warrant
B. Cash book
C. Vote book
D. Vote receipt
2. Match the items in List A with the responses in List B by writing the letter of the correct response
beside the item number.
LIST A
(i) Is the capital of non trading organizations
(ii) Are also known as fictitious Assets.
(iii) An officer to whom a warrant of fund has been issued.
(iv) A ratio comparing current assets with current liabilities
(v) A special payment to an agent of any business
(vi) Are those accounts which are concerned with revenue and expenditures?
(vii) The person to whom a cheque has been addressed to .
(viii) The automatic and continuous ding a follow up and inspect work of other employees.
(ix) The ceiling of government expenditures.
(x) The top most body in the country which passes ministries budgets.
LIST B
A. N.A.
B. Payee
C. Current ratio
D. Internal check
E. Ambit of vote
F. Accumulated fund
G. Drawee
H. Warrant holder
I. Intangible assets
J. Nominal accounts
K. Del- credere commission
L. P.M.G
Understanding book-keeping Book Three
SECTION B: (20Marks)
Answer all questions in this section.
3. Write short notes on the following
(a) P.M.G
(b) C.& A.G
(c) Auditing
(d) Critical work
(e) Provision
4. On January 2001 Soma Ufaulu Purchased two motor vans costing 20,000/= each. The policy of the
company s to charge the depreciation at the rate of 20% on reducing balance method. A full year’s
depreciation is charged in a year of acquisition but none in the year of disposal. One motor van was
sold on 15 October 2003 for 10,000/=.
You are required to show entries in the year 2001, 2002, 2003 in the
(a) Assets account
(b) Provision for depreciation account
(c) Disposal account
(d) Profit and loss account (Extract) (All working should be clearly shown)
Electricity due
Interest on P.O paid 6% P.a to his account
Clothing balance is now estimated at 700/=
Furniture balance is now estimated 600/=
You are required to;-
(a) Prepared Income and expenditure account
(b) Prepare Balance sheet.
6. Masasila and Mazula business partners rented an office building on Jan. 1st 2005 at an annual rent
of shs. 1,700/= On August 1st, they found that one of the rooms was not being used and so they sub
– leted the room at an annual rent of shs 300/=.During the year that ended December 31st 2005, the
financial statements are being prepared and the following payments have been recorded in respect
of rent. 25th March 425/=, 24th June 125/= 29th Sept. 425/= and the following amount had been
received from the sub tenant; 2nd August 75/=, 1st November 75/=.
You are required to;-
(i) Write up separate accounts for rent payable and rent Receivable and Balance them at the end, of
the financial year, showing the appropriate transfers to profit and loss account.
(ii) Write a short description telling what each Balance represents.
7. The following details are extracted from the books of Utalijua Jiji Factory, you are requested to
prepare a Manufacturing, Trading and Profit and loss Account for the year ended 31st Dec 2005.
Stocks 1.1. 2005
Raw materials 2,1000/=
Finished goods 3,800/=
Work in progress 1,350/=
Wages amounted to 32,500/=
Carriage inwards (raw material) 350/=
Purchases of Raw Materials 37,100/=
Factory Machinery (cost 28,000/=) 23,000/=
Lighting and heating (1/5 factory) 750/=
Insurance (2/3 factory) 420/=
Administration salaries 4,400/=
Commission on sales 1,150/=
Rent and Rates (3/5 Factory) 1,500/=
Provision for Bad debtors 1.1.2005 150/=
Sales 10,000/=
1. Choose the correct answer from among the given alternatives and write its letter beside the item
number
(i) Which of the following is a liability
A. Premises,
B. We owe for goods
C. Loan to Hamis
D. Depreciation
(ii) An invoice shown a total of shs 3200/= less 2.5% cash discount. If this was paid in time, the
amount of the cheque paid would be for;-
A. Tshs 2960,
B. Tshs 3040
C. Tshs 3120
D. Tshs 2800
(iv) A record maintained by each accounting officer and warrant holder for proper control of
expenditure of public fund is called;-
A. Cash book
B. Special fund
C. Vote book
D. Vote receipt
(vi) When banking money in to your current account you should always use;-
A. A cheque book,
B. A paying in slip,
C. A cash book,
D. A general ledger.
Understanding book-keeping Book Three
(vii) Tshs 500/= cash taken from the cash till and banked is entered;
A. Debit cash column 50sh, credit bank column 50sh,
B. Debit bank column 50sh, credit cash column 50 sh,
C. Debit cash column 50sh, credit cash column 50sh,
D. Debit bank column 50sh, credit bank.
(ix) In the trial balance, the balance on the provision for Depreciation Account is;-
A. Shown as a credit item,
B. Not shown,
C. Shown as a debit item,
D. Sometimes debit, sometimes credit.
(x) When the final account is prepared, the Bad debts Account is closed b a transfer to the;-
A. Balance sheet,
B. Profit and Loss Account,
C. Trading
D. Provision for doubtful Debts Account.
2. Match the items in LIST A with the responses in LIST B by writing the letter of the
corresponding response beside the number.
(i) .......................................................................a list of account titles and their balance in the
books, on a specific date shown in debit and credit column.
(ii) ........................................................................An officer to whom a warrant funds has been
issued.
(iii) ....................................................A system where a refund is made of the total paid out in a
period.
(iv) .................................................A special commission payable by the consignor to the agent in
consideration of the liability of the business.
(v) .....................................................Sending goods with irregularities back to original supplies.
(vi) .....................................................Paid for services, which have not yet received.
(vii) ............................................Are those accounts which are concerned with revenue and
expenses?
(viii) ............................................................................The government bank account that is operated
by the paymaster and kept by the Bank of Tanzania.
(ix) The profit expressed as a fraction of percentage of selling price.
(x) ........................................................Current assets minus current liabilities.
Understanding book-keeping Book Three
LIST B
A. Return outward
B. Carriage outward
C. Government account
D. Exchequer account
E. Working capital
F. Current ratio
G. Mark up
H. Margin
I. Loan
J. Advance
K. Nominal account
L. Real account
M. Trial balance
N. Balance sheet
O. Warrant holder
P. Warrant clerk
Q. Imp rest system
R. Single entry system
S. Del- crede commission
T. Profit margin.
SECTION B (20 MARKS)
3. Write short notes on the following
(a) Controller ad Audit in general
(b) Depreciation
(c) Working papers
(d) Suspense account
(e) Financial year
4. Read carefully the following balance sheet of Utajiju food supplies limited;
Assets Liabilities
Plant & 100,000 Capital 160,000
machinery 150,000 General reserve 100,000
Premises 90,000 Long term loan 50,000
Land & building 30,000 Creditors 40,000
Stock Bank over draft 50,000
Debtors 20,000 19,000
Less provision 1,000 11,000
Cash in hand
400,000 400,000
Required deduce
(a) Current ratio
(b) Quick ratio
(c) Working capital
(d) Still the liquidity position of Utajiju food supplies limited.
Understanding book-keeping Book Three
6. Mazula and Shija are in partnership. They share profit and losses on the ratio of 6:4 the following
Trial Balance was extracted as at 31/03/2004.
Particulars Folio DR CR
Office equipment (at cost) 6,500
Motor vehicles (at ost 9,200
Provision for Depreciation
At 31/03/2003
• Motor vehicles 3,680
• Office equipment 1,950
Stock 31 March 1993 24,970
Debtors and Creditors 20,960 16,275
Cash at Bank 615
Cash in Hand 140
Purchases and sales 71,630 90,370
Salaries 8,417
Office expenses 1,370
Discount Allowed 563
Current Account at 3/3/2003
Mazula 1,379
Shija 1,211
Capital Mazula 27,000
Shija 12,000
Drawings Mazula
Shija 5,500
4,000
153,865 153,865
The following notes are applicable at 31/03/2004
(i) Stock 31 March 2004 shs. 27,340
(ii) Office expenses owing shs 110/=
(iii) Provide for depreciation motor vehicles 20% per cent of cost and equipment 10% (percent) on
cost.
(iv) Charge interest on capital at 10% (percent)
(v) Charge interest on drawings Mazula shs 180, Shija shs 210.
Required: prepare
(a) Trading and profit and loss account for the year ended 31 March 2004.
(b) Appropriation account.
(c) Capital and current accounts.
(d) A balance sheet as at that date.
Understanding book-keeping Book Three
7. The Twiga press Ltd. Sent consignment of 4000 Ujamaa book to Uganda on 20th September 1992.
The Twiga press paid freight charges shs 2,000/= and insurance shs 5,000/=. The cost of the books
was 400,000 and was invoiced on the proforma at 520,000. On 1 November 1992 the Twiga
expressed received account sales from Uganda. Sowing proceeds of sales shs 600,000 and paid
landing charges 10,000/=, storage charges 15,000/=, custom duty 20,000/. Commission 5% and del-
crede2% was deducted from the proceed of sales. Banker draft o net proceeds were received by
Twiga Press with the account sales.
You are required to show the entries in the books of the consignor.
(ii) Determine the amount of capital from the following; Assets; Premises shs 20,000; Loan to Shamir
shs 17,000 stock shs. 35,000. Liabilities; creditors shs. 5,000; Loan from Kagose shs 22,000.
A. Shs 50,500
B. Shs 54,000
C. Shs 48,000
D. Shs 45,500
E. Shs 45,000
(viii) The descending order in which current assets should be shown in the balance sheet is
A. Debtors, Stock, Bank, cash
B. Cash, debtors, bank, stock
C. Cash, bank, debtors, stock
D. Debtors, stock, cash, bank
E. Stock, debtors, bank, cash.
(x) A firm bought a machine for shs 50,000 which had a scrap value of shs 5,000 and useful life of 5
years. What would be the depreciation expense it straight line method is used?
A. Shs 10,000
B. Shs 11,000
C. Shs 9,000
D. Shs 5,000
E. Shs 11,500
Understanding book-keeping Book Three
2. Match the items in List A with the responses in List B by writing the letter of the correct response
beside the item number.
LIST A
(i) Is paid when a bill is dishonoured
(ii) Equals cost of goods available for sale less cost of goods sold.
(iii) Is where accounts of our suppliers are maintained
(iv) Is considered as part of purchases in a business.
(v) Is calculated in the manufacturing account.
(vi) A person who owes money to a business for goods or services supplied to him.
(vii) The total amount of expenditure approved for the year by the Government.
(viii) Obtain evidence of the existence, ownership of assets and confirmation of the liabilities of a
business.
(ix) A special commission payable by the consignor to the agent in consideration of the
liabilities of the business.
(x) The automatic and continuous checking of work of other employees .
LIST B
A. Purchases ledger
B. Gross profit
C. Carriage outwards
D. Cost of goods produced
E. Discounting charges
F. Sales ledger
G. Carriage inward
H. Noting charges
I. Closing stock
J. Depreciation expense
K. Verification
L. Cash book
M. Debtor
N. Trial balance
O. Del – credere commission
P. Commission
Q. Liquid assets
R. Ambit of vote
S. Internal check
T. Internal control
Understanding book-keeping Book Three
Required
Give the journal and ledger entries required to
(a) Reduce the bad debts provision to shs 4,900
(b) Create a provision of 2 ½ per cent for discounts on debtors and show the items sundry debtors
and provisions as they would appear in the Balance sheet.
4. Cheupe and Cheusi are in partnership, sharing profits and losses in proportion to their capitals, which are
shs 300,000 and shs 200,000 respectively. They agree to admit Chekundu as a partner on condition that
he pays into the firm shs 250,000 of which shs 150,000 is to be Chekundu’s capital contribution, and shs.
100,000 the premium for his admission. The cash is paid into the firm’s banking account and the premium
is paid out to Cheupe and Cheusi. The profits are to be share in future as follows; Cheupe and Cheusi ¾
each, Chekundu ¼.
Required;
Record Chekundu’s admission to the firm and the payment out of premium.
5. The following is the Bank Statement of Masawe for the month of December, 2000
Bank Statement
DATE PARTICULARS DR CR BALANCE
01.12.00 Balance b/f 4,000
05.12.00 Muna and Co. 1,000 5,000
10.12.00 Cheque 2,200 2,800
15.12.00 Pesambili 2,500 5,300
18.12.00 Bank Charges 1,300 6,600
20.12.00 Dividends 1,500 5,100
25.12.00 Standing Orders 500 5,600
30.12.00 Credit transfer 3,000 2,600
31.12.00 Cheques 600 2,000
Additional Information;-
(i) Cash book opening balance 1st December 2000 was shs. 4,000 (credit balance).
(ii) Deposits in transit at 31st December 2000 – Mashaka shs. 1,200
(iii) Outstanding cheques – Matata shs 3,500.
Required
From the above details,
(a) Draw unadjusted cash book
(b) Draw adjusted cash book
(c) Prepare a bank reconciliation, starting with the adjusted cash book balance.
Page 167
Understanding book-keeping Book Three
6. On 31. 12. 200 Mx Limited’s accountant’s office was destroyed by fire. Most of the accounting records
were destroyed, but the following records were recovered:
Tshs
Long term liabilities 65,000
Capital as at 01.01.2000 135,000
Stock as at 31. 12. 2000 20,000
Accumulated Depr. (31.12.2000) 25,000
Total assets (at cost) 250,000
Debtors 30,000
Drawings 11,000
A copy of the previous year’s final accounts results provided the following ratios which are assumed to
represent the general trend of the business.
Current ratio is 3:1
Quick ratio is 2:1
Debtors to sales ratio with 360 days in a year is 54 days
Gross margin is 20%.
Stock turnover rate is 10 times
Operating expenses are 60% of gross profit.
Required:
Calculate the figures required to complete the final accounts in the format provided below.
Complete the final accounts.
(a) Mx Limited
Trading, profit and loss for the year ended 31.12.2000
Sales ?
Less: cost of sales ?
Gross profit ?
Less: operating expenses ?
Net profit ?
(b) Mx Limited
Balance sheet as at 31. 12. 2000
Fixed assets ?
Less accumulated depreciation ?
Current assets ?
Less: current liabilities ?
Working capital ?
?
Financed by
Capital ?
Add Net Profit ?
?
Less: drawing ?
Long term liabilities ?
?
Page 168
Understanding book-keeping Book Three
7. You are required to record the following transactions into the books of original entry (General journal,
Sales journal, Purchases journal, Returns journal and the Cash book) Ledger entries are not required.
January 1st 2000
Assets: Building shs 40,000; motor vehicles shs 9,000 motor vehicles shs 9,000 fixtures shs.
12,000; stock shs 25,780; cash at bank shs. 25,080 cash in hand shs 900 and loan – J. James
shs 55,000.
January 1 Paid rent by cheque shs 300
January 2 Goods bought on credit from Mashamba shs 400; C Chacha shs. 1,120; H. Komba
shs 760; N. Nyaturu shs 1,380.
January 3 Goods sold on credit to Buberwa shs 1,800; Benjamin shs 1,120; Bupe shs 1,560;
Nyoni shs 2,360
January 9 Paid motor expenses in cash shs 260
January 11 Cash drawings for personal use shs 400.
January 12 Goods sold on credit to Benjamin shs 2,000; Ole Sobhai shs. 1,800
January 13 Goods returned to the business by Buberwa shs 320 and Ole Sobhai shs 360.
January 14 Bought another motor van on credit from Mtimbira shs 6,000
January 16 The following paid the firm their accounts by cheque less 10% cash discount:
Buberwa; Nyoni; Ole Sobhai.
January 19 Goods returned by the firm to N. Nyaturu shs 180.
January 22 Goods bought on credit from Mwimbe shs. 1,780; Sikujua shs 1,440.
January 24 The following accounts were paid by the firm by cheque less 10% cash discount;
Mashamba; C. Chacha; H. Komba.
January 27 Salaries paid by cheque shs. 1,120.
January 30 Paid electricity by cheque shs. 1,320.
Page 169
Understanding book-keeping Book Three
(ii) “True and Fair view” state of affairs is a conclusive word in audit report. According to the auditor, its
meaning includes the following;
A. Financial statements are true and accurate
B. Financial statements are fairly prepared
C. Financial statements are prepared following the double entry system.
D. Financial statements belong to a True and Fair view of a firm.
E. Financial statements are accurately prepared.
(iv) Cash float f shs 256 is desired. If shs 200 is spent in the period, how much will be reimbursed at the end
of the period?
A. Shs 56
B. Shs 400
C. Shs 200
D. Shs 256
E. Shs 456
(vi) If the opening capital was shs 16,500, closing capital shs. 11,350 and drawings were shs. 3,300
A. The loss for the year was shs 1,850
B. The profit for the year was shs 1,850
C. The loss for the year was 8,450
D. The profit for the year was shs. 8,450
E. The profit for the year was 11,350.
Page 170
Understanding book-keeping Book Three
(ix) When a customer returns goods previously sold to him, the shopkeeper will use a document called.
A. Invoice
B. Credit note
C. Pay-in-slip
D. Order note
E. Debit note.
2. Match the items in List A with the responses in List B by writing the letter of the correct response beside
the item number.
LIST A
(i) Refers to things bought for resale
(ii) Credited in Trading Account at the end of the accounting period
(iii) Paid for services which have not yet been received.
(iv) Is where expense, revenue and capital are recorded .
(v) The Government bank account that is operated b the paymaster general and kept by the Bank of
Tanzania.
(vi) Assumption that a business is to continue for a long time.
(vii) Cash or goods brought into the business b the owner.
(viii) Created after ascertaining the net profit.
(ix) Involves the transfer of money or money worth between parties.
(x) All income and changes relating to the financial period to which the accounts relate should be taken
into account without regard to the date of receipt or payment.
LIST B G. Cash concept N. Real Account
A. Realization concept H. Liability O. Nominal account
B. Cheque I. Government Account P. Prepayments
C. Reserves J. Expense Q. Opening stock
D. Business Transaction K. Accrual concept R. Closing stock
E. Capital L. Stock
F. Provisions M. Going concern concept
Page 171
Understanding book-keeping Book Three
During the year ended 31st December 2001 the information related to these two accounts was as follows:
(a) Stock of oil for lighting on 31st December 2001 was shs 55,200
(b) An electricity bill of shs 49,800 for December 2001 was unpaid as on 31st December 2001.
(c) An Insurance rebate of shs. 33,000 were received on 30th June 2001.
(d) Fire Insurance shs. 576,000 covering the year ended 30th April 2002 was paid
(e) Oil bills of shs. 756 were paid
(f) Electricity bills of shs. 524,400 were paid
(g) General Insurance shs. 378,000 covering the year ended 31st August 2002 was paid.
You are required to write up the accounts for lighting and cooling and for insurance, for the yar to
31st December 2001, carry forward necessary balances to 2002.
Page 172
Understanding book-keeping Book Three
6. Show how each of the following errors would affect trial balance agreements.
(a) Purchase of buildings was debited to purchases account by shs 21,600
(b) Discounts received shs. 51,000 was credited to discounts allowed A/C
(c) Closing stock is overstated by shs 60,000
(d) Shs. 22,500 commission received was debited to the sales account
(e) Drawings shs 9,150 credited to capital account
(f) Cheque paying shs 5,100 to Habiba entered in cash book but not in personal account.
(g) Cheque shs. 7,440 from Katoma credited to Kasoma.
(h) A payment of shs. 2,250 made to a creditor had not been posted from the cash book into the
purchases ledger.
(i) A page of the sales day book was correctly totaled as shs 56,400 but carried forward as shs. 45,600
(j) Repairs to a machine amounting to shs. 11,700 had been charged to machinery account.
The format of your presentation should be as follows:-
Item If no effects state ‘NO’ Debit side exceeds credit by Credit side exceeds debit
amount shown side by amount shown
(a)
(b)
(c)
(d)
(e)
(f)
(g)
(h)
(i)
(j)
7. Ikamaja Department store has three departments which are: Electrical, Furniture and Leisure Goods.
Form the details given below; you are required to draw up the trading account for the year ended 31st
December 2001 for each department and in total.
(a) Stocks:
Electrical 01.01.2001 31.12.2001
Furniture 72,960 95,040
Leisure 207,576 193,800
172,440 268,740
(b) Sales for the year
Electrical 358,080
Furniture 876,720
Leisure 565,200
(e) Other expenses are to be distributed to other departments on the basis of sales.
Page 173
Understanding book-keeping Book Three
GLOSSARY
Business entity concept: Assumption that only transactions that affect the firm, and not the owner’s private
transactions, will be recorded.
Capital: the total of resources invested and left in a business by its owner.
Capital expenditure; when a business spends money to buy or add value in a non –current asset.
Capital reserve: An account that can be used by sale traders and partnerships to place the amount by which
the total purchase price paid for a business is less than the valuation of the net assets acquired. Limited
companies cannot use a capital reserve for this purpose. Sole traders and partnerships can instead, if they wish,
record the shortfall as negative goodwill.
Carriage inwards: Cost of transport of goods into a business.
Carriage outwards: Cost of transport of goods out to the customers of a business.
Cash: Cash balances and bank balance, plus funds invested in ‘cash equivalents’.
Cash book: A payment card that requires the cardholder to settle the account in full at the end of a specified
period, e.g. American Express and Diners cards. Holders have to pay an annual fee for the card. (Compare
this to a credit card.)
Indirect manufacturing costs: Costs relating to manufacture that cannot be economically traced to the item
being manufactured (also known as “indirect costs’ and, some time, as ‘factory overhead expenses’).
Input tax: VAT added to the net price of inputs (ie. Purchases)
Joint ventures: Business agreements under which two businesses join together for a set of activities of
activities and agree to share the profits.
Journal: A book of original entry for all items not contained in the other books of original entry.
Liabilities: Total of funds owed for assets supplied to a business or expenses incurred not yet paid.
Limited Company: An organization owned by its share holders, whose liability is limited to their share
capital.
Limited partner: A partner whose liability is limited to the capital he or she has put into the firm.
Liquidity ratios: Those ratios that relate to the cash position in an organization and hence its ability to pay
liabilities when due.
Local area network (LAN) ; A group of workstations linked together locally through wires.
Loan note: Loan made to a company for which a formal certificate has been issued to the leader by the
company.
Columnar purchases day book: A purchases day book used to record all items obtained on credit. It has
analysis columns so that the various types of expenditure can be grouped together in a column. Also called a
purchases analysis book
Columnar sales day book: A sales day book used to show the sales for a period organized in analysis columns
according to how the information recorded is to be analyzed also called a sales analysis book.
Compensating error; where two errors of equal amounts, but on opposite sides of the accounts, cancel each
other out.
Contra: A contra, for cash book items, is where both the debit and the credit entries are shown in the cash
book, such as when cash is paid into the bank.
Contribution: The surplus of revenue over direct costs allocated to a section of a business.
Control account: An account which checks the arithmetical accuracy of a ledger.
Credit: The right hand side of the accounts in double entry
Inputs: Purchases of goods and services.
Intangible asset: An asset, such as goodwill, that has so physical existence.
Interest on capital: An amount at an agreed rate of interest which is credited to a partner based on the amount
of capital contributed by him/her.
Interest on drawings: An amount at an agreed rate of interest, based on the drawings taken out, which is
debited to the partners.
Intranet: A network based on Internet technologies where data and information private to the business is
made available to employees of the business.
Page 174
Understanding book-keeping Book Three
Inventory: Goods in which the business normally deals that are held with the intention of resale. They may
be finished goods, partly finished gods or raw materials awaiting conversion into finished goods which will
then be sold.
Inventory turnover; the number of times inventory is sold in an accounting period. (Also known as stock
turn’)
Chart of accounts: The list of account codes used in a computerized accounting system.
Cheque book: Book containing forms (cheque) used to pay money out of a current account.
Clearing; the process by which amounts paid by cheque form an account in one bank are transferred to the
bank account of the payee.
Close off the account: To totaling and ruling off an account on which there is no outstanding balance.
.Credit card: A card enabling the holder to make purchases and to draw cash up a prearranged limit. The
credit granted in a period can be settled in full or in part by the end of a specified period. Many credit cards
carry no annual fee. (Compare this to a charge card.)
Credit note: A document sent to a customer showing allowance given by a supplier in respect of unsatisfactory
goods.
Final accounts (or accounts): This is a term previously used to refer to statements produced at the end of
accounting periods, such as the income statement and the balance sheet. Nowadays, the term financial
statements are more commonly used.
Financial modeling: Manipulating accounting data to generate forecasts and perform sensitivity analysis.
Financial statements: Manipulating accounting data to generate forecasts and perform sensitivity analysis.
Financial statements: the more common term used to refer to statements produced at the end of accounting
periods, such as the income statement and the balance sheet (sometimes referred to as ‘final accounts’ or
simply ‘the accounts’).
Fixed capital accounts: Capital accounts which consists only of the amounts of capital actually paid into
the partnership.
Fixed cost: Expenses which remain constant whether activity rises or falls, within a given range of activity
Float: The amount at which the petty cash starts each period.
Fluctuating capital accounts; Capital accounts the balances of which change from one period to the next.
Folio columns: Columns used for entering reference number
Forecasting: Taking present data and expected future trends, such as growth of a market and anticipated
changes in price levels and demand, in order to arrive at a view of what the likely economic position of a
business will be a some future date.
Creditor (or Accounts Payable): A person to whom money is used to goods services.
Current account: A bank account used for regular payments in and out of the bank.
Current assets: Assets consisting of cash, goods for resale or items having a short life.
Current liabilities: Liabilities to be paid for within a year of the balance sheet date.
Current ratio: A ratio comparing current assets with current liabilities.
Day books: Books in which credit sales, purchases, and returns in wards and out wards of goods are first
recorded. The details are then posted from the day books to the edger accounts.
Debit: The left –hand side of the accounts in double entry.
Debit card: A card linked to a bank or building society account and used to pay for gods and services by
debiting the holder’s account. Debit cards are usually combined with other facilities such as ATM and cheque
guarantee functions.
Debit note: A document sent to a supplier showing allowance to be given for unsatisfactory.
Debtor (or Accounts Receivable): A person who owes money to a business for goods or services supplied to
him.
Depletion: The wasting away or an asset as it is used up.
Deposit account: A bank account for money to be kept for a long time.
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Depreciation: The part of the cost of a non-current asset consumed during its period of use by the firm. It
represents an estimate of how much of the overall economic use fullness of a non-current asset has been used
up in each accounting period. It is charged as a debit to profit and loss and a credit against non-current asset
accounts in the general ledger.
Equity: Another name for the capital of the owner.
Error of commission: Where a correct amount is entered, but in the wrong persons account.
Error of omission: Where a transaction is completely omitted from the books.
Error of original entry: Where an item is entered, but both the debit and credit entries are of the same
incorrect amount.
Error of principle: Where an item is entered in the wrong type of account, e.g. a fixed asset in an expense
account.
Estimation techniques: The methods adopted in order to arrive at estimated monetary amounts for items that
appear in the financial statements.
Exception reporting: A process of issuing a warning message to decision – makers when something
unexpected in happening: for example, when expenditure against a budget is higher than it should be.
Exempted businesses: Businesses which do not have to add VAT to the price of goods and services supplied
to them. They cannot obtain a refund of VAT paid on goods and services purchased by them.
Expenses: The value of all the assets that have been used up to obtain revenues.
Extranet: A network based on Internet technologies where date and information private to the business is
made available to a specific group of outsiders, such as suppliers.
Factoring: Selling the rights to the amounts owing by debtors to a finance company for an agreed amount
(which is less than the figure at which they agree recorded in the accounting books because the finance
company needs to be paid for providing the service).
Garner v Murray rule: If one partner is unable to make god a deficit on his/her capital account, the remaining
partners will share the loss in proportion to their last agreed capitals, not in the profit / loss sharing ratio.
Gearing: The ratio of long – term loans and preference shares shown as a percentage of total share holders’
funds,long – term loans, and preference shares
General ledger: A ledger for all accounts other than those for customers and suppliers.
Goodwill: An amount representing the added value to a business of such factors as customer loyalty,
reputation, market penetration and expertise.
Gross loss: Where the cost of goods sold exceeds the sales revenue.
Gross profit: Where the sales revenue exceeds the cost of gods sold.
Impersonal accounts: Assets are normally shown at cost price.
Impersonal accounts: All accounts other than debtors’ and creditors account.
Imprest system: A system where a refund is made of the total paid out in a period in order to restore the
float to its agreed level.
Income and expenditure account: An account for a non-profit –oriented organization to find the surplus or
loss made during a period.
Income statement: The financial statement in which the calculations of gross profit and then net profit are
presented.
Loss: The result of sealing goods for less than they cost.
Manufacturing account: An account in which production cost is calculated.
Margin: Profit shown as a percentage or fraction of selling price.
Marginal costing: An approach to costing that takes account of the variable cost of product rather than the
full production cost, It is particularly useful when considering utilization of spare capacity.
Mark-up: Profit shown as a percentage or fraction of cost price.
Measurement basis: The monetary aspects of the items in the financial statements, such as the basis of the
inventory valuation, say FIFO or LIFO.
Account payable; A person to whom money in owed for goods or services.
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Account receivable: A person who owes money to a business for goods or services supplied.
Accounting: The process of identifying, measuring and communication economic information to permit
informed judgments and decisions by users of the information.
Accounting cycle: The sequence in which data is recorded and processed until it becomes part of the financial
statements at the end of the period.
Direct costs: Costs that can be traced to the item being manufactured.
Direct debit: A medium used to enable payments to be made automatically into a bank account for whatever
amount the recipient request.
Directors: Officials appointed by shareholders to manage the company for them.
Discounts allowed: A deduction from the amount due given t a business by a supplier when their account is
paid before the time allowed has elapsed. It appears as income in the profit and loss part of the trading and
profit and loss account.
Dishonored cheque: A cheque which the writer’s bank has refused to make payment upon
Dissolution: When a partnership firm ceases operations and its assets are disposed of.
Dividends: The amount given to shareholders as their share of the profits of the company.
Double entry bookkeeping (or Double entry): A system where each transaction is entered twice, once on
the debit side and once on the credit side.
Drawer: the person making out a cheque and using it for payment.
Drawings: Funds or goods taken out of a business by the owners for their private use.
Endorsement: A means by which someone may pass the right to collect money due on a cheque.
Memorandum joint venture account: A memorandum account outside the double entry system where the
information continued in all the joint venture profit is calculated and the share of profit of each party is
recorded in order to close off the account.
Narrative: A description and explanation of the transaction recorded in the journal.
Negative goodwill: The name given to the amount by which the total purchase price for a business a limited
company has taken over is less than the valuation of the assets at that time. The amount is entered at the top
of the non-current assets in the balance sheet as a negative amount. (Sole traders and partnerships can use this
approach instead of a capital reserve.)
Net current assets: Current assets minus current liabilities. The figure represents the amount of resources the
business has in a form that is readily convertible into cash. Same as working capital..
Net loss: Where the cost of goods sold plus expenses is greater than the revenue.
Net profit: Where sales revenue plus other income, such as rent received, exceeds the sum of cost of goods
sold plus other expenses.
Account: Part of double entry records, containing details of transactions for a specific item.
Account codes ;The computerized equivalent of the folio references used in a manual accounting system,
where by each ledger account is given an unique number.
Accounts (or final accounts): This is a term previously used to refer to statements produced at the end of
accounting periods, such as the income statement and the balance sheet. Nowadays, the term ‘financial
statements are more commonly used.
Assets: Resources owned by a business
Bad debt: A debt that a business will not be able to collect.
Balance brought down: The difference between both sides of an account that is entered above the totals and
makes that total of both sides equal each other. (This is normally abbreviated to ‘balance c/d’).
Balance sheet: A statement showing the assets, liabilities and capital of a business.
Balance –off the account: Insert the difference (called a balance) between the two sides of an account and
then total and rule off the account. This is normally done at the end of a period (usually a month, a quarter or
a year).
Bank loan: An amount of money advanced by a bank that has a fixed rate of interest that is charged on the
full amount and is repayable on a specified future date.
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Bank reconciliation statement: A calculation comparing the cash book balance with the bank statement
balance.
Bank statement: A copy issued by a bank to a customer showing the customer’s current account maintained
at the bank.
Book-keeping: The process of recording data relating to accounting transactions in the accounting books.
Books of original entry: Books where the first entry recording a transaction is made. (These are sometimes
referred to as ‘books of prime entry).
Bought ledger : A variant of a purchases ledger where the individual accounts of the creditors, whether they
be for goods or for expenses such as stationery or motor expenses, can be kept together in a single ledger.
Trial balance: A list of account titles and their balances in the ledgers, on a specific date, shown in debit
and credit columns.
True and fair view: The expression that is used by auditors to indicate whether, in their opinion, the
financial statements fairly represent the state of affairs and financial performance of a company.
Unpresented cheque: A cheque which has been given to a creditor but which has not yet been received and
processed by the writers’ bank.
Unregistered business: A business that ignores VAT and treats it as part of the cost of purchases. It does
.Zero – rated business: A business that only supplies zero – rated goods and services. It does not charge
VAT to its customers but it receives a refund of VAT on goods and services it purchases.
Accounts payable / purchases ratio: A ratio assessing how long a business takes to pay creditors.
Accounts receivable / sales ratio: A ratio assessing how long it takes debtors to pay chair debts
Accrued expense: An expense for which the benefit has been received but which has not been paid for by
the end of the period. It is included in the balance sheet under current liabilities as ‘accruals’.
Accrued income : Income (normally) from as source other than the main source of business income, such as
rent receivable on an unused office in the company headquarters, that was due to be received by the end of the
period but which has not been received by that date. It is added to accounts receivable in the balance sheet.
Accumulated depreciation account: The account where depreciation is accumulated for balance sheet
purposes. It is used in order to leave the cost (or valuation) figure as the balance in the non –current asset
account. (It is sometimes confusingly referred to as the ‘provision for depreciation account’).
Accumulated fund: A form of capital account for a non – profit one
Acid test ratio: A ratio comparing current assets less inventory with
Allowance for doubtful debts: An account representing expected amount o debts at the balance sheet date
which may not paid.
Amortization: A term used instead of depreciation’ when assets are used up simply because of the passing of
time
Value Added Tax: A tax charged on the supply of most goods and services.
Variable costs: Expenses which change in response to changes in the level of activity
Website (of a business): A location on the Internet where businesses place information for the use of anyone
who happens to want to look at it. In many cases, a business website contains copies of the latest financial
statements of the business and a part of the website is devoted to promoting and selling goods and services.
Working capital: Current assets minus current liabilities. The figure represents the amount of resources the
business has in a form that is readily convertible into cash. Same as net current assets.
Work-in-progress: Items not completed at the end of a period.
Workstation: A dumb terminal or a PC that is used to access data held in a database on a central computer.
Zero rate (of VAT): The VAT rate (of zero) that applies to supply of certain goods and services
Personal identification Number or PIN: A secret number issued by a bank to a customer so that the customer
may use a debit card in an ATM.
Petty cash book: A cash book for small payments.
Posting: The act of transferring information into ledger accounts from books of original entry
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Preference shares: Shares that are entitled to an agreed rate of dividend before the ordinary shareholders
receive anything.
Preliminary expenses: All the costs that are incurred when a company is formed.
Prepaid expense: An expense which has been paid in advance, the benefits from which will be received in
the next period. It is included in the balance sheet under current assets as ‘prepayments’
Prime cost: Direct materials plus direct labour plus direct expenses.
Private company: A limited company that must issue its shares privately.
Private ledger: A ledger for capital and drawings accounts.
Process costing: A costing system that is applied when goods or services are produced in a continuous
flow.
Production cost: Prime cost plus indirect manufacturing costs.
Profit: The result of selling goods or services for more than they cost.
Profit and loss account: An account in which net profit is calculated and included in a separate edition of
the income statement.
Public company: A company that can issue its shares publicly, and for which there is no maximum number
of shareholders.
Purchased goodwill: Te difference between the amount paid to acquire a part of the whole of a business as
a going concern and the value of the net assets owned by the business
Purchases: Goods bought by the business for the prime purpose of selling them again.
Purchases day book: Book of original entry for credit purchases. Also called the purchases journal
Purchases invoice: A document received by a purchaser showing details of goods bought and their prices.
Purchases ledger: A ledger for suppliers’ personal accounts.
Real accounts: Accounts in which property of all kinds is recorded.
Realization concept: Only profits and gain to be realized at the balance sheet date should be included in the
income statement. For a gain to be realized, it must be possible to be reasonably certain that it exists and that
it an be measured with sufficient reliability.
Receipts and payments account: A summary of the cash book of a non – profit oriented organization.
Reduced rate (of VAT) : A lower VAT rate applicable to certain goods and services.
Reducing balance method: A method of calculating depreciation based on the principle that you calculate
annual depreciation as a percentage of the net of depreciation to date balance brought forward at the start of
the period on a non current asset.
Registered business: A business that has registered for VAT, It must account for VAT and submit a VAT
Return at the end of every VAT tax period.
Reserves: Account to which profits are transferred for use in future years.
Residual value: The net amount receivable when a non – current asset is put out of use by the business.
Returns inwards: Goods returned by customers (Also known as purchases returns)
Returns outwards day book: Book of original entry for goods returned to suppliers. Also called the returns
outwards journal or the purchases returns book
Revaluation account: An account used to record gains and losses when assets are revalued.
Revenue: The financial value of goods and services sold to customers.
Revenue expenditure: Expenses needed for the day to day running of the business.
Sale or return: Goods passed to a customer on the understanding that a sale will not occur until they are paid
for. As a result, these goods continue to belong to the seller.
Sales: Goods sold by the business in which it normally deals which were bought with the prime intention of
resale.
Sales day book: Book of original entry for credit sales. Also called the sales journa
Sales invoice: A document showing details of goods sold and the prices of those goods.
Sales ledger: A ledger for customers’ personal accounts.
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Sensitivity analysis: Altering volumes and amounts so as to see what would be likely to happen if they were
changed. For example, a company may wish to know the financial effects of cutting its selling price by 1 a
unit. Also called ‘what if’ analysis
Separate determination concept: The amount of each asset or liability should be determined separately.
Shareholders: Individuals or entities holding are or more share in a company.
Shares: The division of the capital of a limited company into parts.
Stokeholds: Those groups, entities and individuals who base decisions upon financial statements and other
information relating to the entity of which they are stakeholders.
Standard cost; what you would expect something to cost.
Standard rate (of VAT): A business that charges VAT at the standard rate on its sales.
Standing order: A medium used to enable payments to be made automatically at given dates into a bank
account for an amount agreed by the payer.
Statement: A copy of a customer’s personal account taken from the supplier’s books.
Statement of affairs: A statement from which the capital of the owner can be found by estimating assets and
liabilities. Then Capital = Assets – Liabilities. It is the equivalent of the balance sheet.
Stocktaking: The process of physically identifying the inventory on hand at a given point in time.
Straight line method: A method of calculating depreciation that involves deducting the same amount every
accounting period from the original cost of a non – current asset.
Subjectivity: Using a method that other people may not agree to , derived from one’s own personal
preferences.
Substance over form: Where real substance takes precedence over legal form.
Super profit: Net profit less the opportunity costs of alternative earnings and alternative returns on capital
invested that have been foregone.
Suspense account: An account in which you can enter the amount equal to the difference in the trial balance
while you try to find the cause of the error (s) that resulted in the failure of the trial balance to balance.
Non- current liabilities: Liabilities that do not have to be paid within twelve months of the balance sheet date.
Objectivity: Using a method that everyone can agree to based on some clear and indisputable fact.
Obsolescence: Becoming out of date.
Ordinary shares: Shares entitled to dividends after the preference share holders have been paid their
dividends.
Output tax: VAT added to the net price of outputs (i.e. sales).
Outputs: Sales of goods and services
Overdraft: A facility granted by a bank that allows a customer holding a current account with the bank to
spend more than the funds in the account. Interest is charged daily on the amount of the overdraft on that date
and the overdraft is repayable at any time upon request from the bank.
Partnership: A business in which two or more people are working together as owners with a view to making
profits.
Partnership salaries: Agreed amounts payable to partners in respect of duties undertaken by them.
PAYE (pay As you earn): The system whereby income tax is deducted from wages and salaries by
employees and sent to HM Customs and Revenue.
Payee: The person to whom a cheque is paid.
Pay-in-slip: A form used for paying money into a bank account with the same bank.
Personal accounts: Accounts for creditors and debtors.
Personal allowances: Amounts each person may subtract from income in order to arrive at taxable income.
The value of each allowance is set by Parliament following the Budget each year.
T – Account: The layout of accounts in the accounting books.
Tax code: The number found by adding up an individual’s personal allowances which is used to calculate
that individual’s tax liability.
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