ACC 281: BASIC ACCOUNTING AND FINANCIAL MANAGEMENT

SEMINAR QUESTIONS
1. State the general objective of preparing financial statements.
2. The Accounting Framework identifies fundamental qualitative characteristics of
financial statements.
Required: Explain in detail each of the fundamental qualitative characteristics.
3. Discuss four (4) limitations of accounting and financial reporting
4. Do the following classify as an asset or liability within the definitions given by the
Framework? Give reasons.
a. Maandazi Ltd has purchased machinery for Tshs100 million. It also purchased
a patent for Tshs10 million. The patent will give the company exclusive use of a
particular manufacturing process which will save Tshs9 million a year for the
next four years.
b. Adams Car Sales intends to purchase four imported cars, in the coming
international car show to be held in London.
c. Poolwhirl Co provides a warranty with every refrigerator sold.
5. Explain five elements of financial statements as identified in the Framework for the
Preparation and Presentation of Financial Statements
6. Discuss the enhancing qualitative characteristics of financial statements as
identified in the accounting Framework.
7. Outline benefits that financial statements provide to users of financial statements.
8. Indicate which of the following items could appear as an asset on the statement of
financial position of a business. Explain your reasoning in each case.
a) TZS 1,000 owed to the business by a customer who is unable to pay.
b) A patent, bought from an inventor that gives the business the right to produce
a new product. Production of the new product is expected to increase profits
over the period during which the patent is held.
c) A new marketing director, whom the business had recently hired, who is
confidently expected to increase profits by over 30 per cent during the next
three years.
d) A recently purchased machine that will save the business TZS 10,000 each
year. It is already being used by the business but it has been acquired on credit
and is not yet paid for.
9. The funds needed under the productive capacity model to achieve physical
productive capacity of Mars Inc. at the beginning and at the end of the year were
Tshs43,000 and Tshs50,000 respectively. The owners had introduced funds
amounting to Tshs10,000 during the year. Required: What is the profit or loss
made by Mars Inc.?
10. Which of the following items is not an asset?
a) Plant and equipment
b) Bank loan
c) Computer software and hardware
d) Land and buildings

11. Which of the following items represents income?

a) Interest received
b) Share capital
c) Cash received from sale of a non-current asset
d) Salaries and wages to employees

12. From the following information calculate the cost of goods sold and the sales.

Gross profit is 20% on sales.

13. Define the elements of financial statements as per IAS 1.

14. Below is the information for Matrix & Co for the year ended 31 December 2019:

Required:
Prepare the statement of profit or loss and other comprehensive income for the
year to 31 December 2019.
 15. The following is the information given by Manufax, a manufacturing company.
Calculate the cost of goods sold.

16. From the following information calculate the cost of goods sold and the sales.
Tshs
Opening Inventory 16,400
Purchases 87,200
Closing Inventory 14,560

Gross profit is 20% on sales.

 17. Lucilla, a sole trader provided you with the following trial balance, as at 31st May
2022- the end of his financial year.
Lucilla
Trial balance as at May 2022
Debit Tsh ‘000’ Credit Tsh ‘000’
Sales 241,320
Purchases 150,000
Discount allowed 10,800
Discount received 2,880
Provision for depreciation on property (as at 1st June 12,000
2021)
Provision for depreciation on equipment (as at 1st June 22,800
2021)
Inventory as at 1st June 2021 30,000
st
Capital as at 1 June 2021 72,780
17% long-term loan 18,000
Irrecoverable debts 2,760
Returns outwards 9,000
Wages and salaries 35,280
Drawings 14,400
Loan interest 3,060
Other operating expenses 10,620
Accounts payables 21,600
Accounts receivables 22,800
Cash in hand 180
Bank 780
Property, at cost 72,000
Equipment, at cost 48,000
Allowance for receivables 300
400,680 400,680

Lucilla provided you with the following additional information as at 31 May 2022:
(a) Inventory as at 31 May 2022 has been valued at cost at Tshs25,200,000 million.
(b) Accruals required for wages and salaries are Tshs480,000
(c) Other operating expenses are pre-paid by Tshs180,000
(d) The allowance for receivables is required to be maintained at 2% of accounts
receivables.
(e) Depreciation for the year ended 31 May 2022 has still to be provided for as follows.
i) Property: 1080 and
ii) Equipment: 6300
Required: Prepare Lucilla’s Statement of profit or loss and other comprehensive
income for the year ended 31 May 2022.
18. The owner of Chemidrum Traders gives you the following information:
Inventory Tshs.
1st January 2019 15,700
31st December 2019 12,300

Transactions during 2019 are as follows:

Required:
Prepare a statement of profit or loss for the year to 31 December 2019
19. Flora, a florist, gives you the following information:
 Sales during the year:
 Cash sales Tshs9,800
 Credit sales Tshs3,200
 Total purchases during the year are Tshs10,500 of which Tshs2,400 are still
outstanding. Salary paid to an assistant Tshs400.
 She hired a shop for Tshs120 per month. 2 months’ rent has not yet been paid
by Flora.
 She rented a part of the shop for Tshs50 per month.
 The cost of travelling between her home and the shop is Tshs900 for the year.
 Other shop expenses: Tshs85
 Being of perishable nature, she purchases flowers only according to demand,
therefore there is no opening or closing inventory.
Required: From the above information prepare the statement of profit or loss for
the year to 31 December 2017.

20. The following information relates to the activities of BFB Retailers for the year
ended 30 April 2020:
TZS ‘000’
Motor vehicle running expenses 1,200
Closing inventories 3,000
Rent and rates payable 5,000
Motor vans 6,300
Annual depreciation – motor vans 1,500
Heat and light expenses 900
Telephone and postage expenses 450
Sales revenue 97,400
Goods purchased 68,350
Insurance expenses 750
Loan interest 620
Balance at bank 4,780
Salaries and wages 10,400
Opening inventories 4,000
Required: Prepare an income statement for the year ended 30 April 2020 from
relevant financial information.
21. The following information provided by Shambani Ltd.
TZS
Building 90,000
Accumulated depreciation on building 12000
Computers 17250
Accumulated depreciation on computer 7500
Vehicle 15000
Depreciation on vehicle 3900
Furniture and fixtures 14200
Depreciation on furniture and fixtures 5800
Inventory 12450
Trade receivable 3165
Cash in hand 1200
Advance given to employees 5000
Capital as at 1 April 2020 73640
Loan from bank 45000
Profit for the year 13800
Drawings during the year 9000
Trade payable 1725
Tax payable 3525
Prepaid insurance 645
Electricity expenses payable 1020

Required:
Prepare the Statement of Financial Position as at 31 March 2021
22. The following is information provided by Pearl Beauty Salon. You are required to
prepare an SOFP as at 31 March 2017.

23. Categorise the following into current assets, non-current assets, current liabilities
and non-current liabilities:
a. Purchase of vehicle by a transport company.
b. Prepaid insurance Tshs520.
c. A loan that has a 5 year repayment period, of which only 5 monthly instalments
are pending.
d. Income tax payable
e. Bank overdraft
f. Purchase of plot by a property dealer.
g. Purchase of machinery by a manufacturing company
h. Purchase of a computer and Microsoft office by a clothing shop
i. Equity shares
j. Inventory held for more than 12 months.
k. A deposit made of Tshs500,000 for 11 months.
l. Another deposit made of Tshs50,000 for 13 months
m. A car held by a car trader for the purpose of reselling.
n. Purchase of a computer by a professional.