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2006 EXAMINATIONS
PAPER TC 1: ACCOUNTING/1
INSTRUCTIONS
This question paper must not be removed from the examination hall.
1
1. You are given the following table of Ngongole Traders, who have been in tailoring
business for 10 years. The following statements give the cumulative effects of
individual transactions.
Transaction 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Assets (K million)
Land & buildings 4.250 4.250 4.310 4.310 4.310 4.310 4.310 4.310 4.310 4.310
Motor vehicles 1.000 1.000 1.000 1.000 1.000 1.000 1.000 0.800 0.800 0.800
Plant & equipment 2.750 2.800 2.800 2.600 2.400 2.400 2.400 2.400 2.200 2.200
Stock 1.660 1.660 1.660 1.660 1.620 1.610 1.610 1.610 1.610 1.610
Debtors 0.539 0.539 0.539 0.539 0.539 0.539 0.539 0.539 0.539 0.539
Bank balance 1.311 1.311 1.311 1.311 1.880 1.880 1.770 1.830 1.830 1.830
Cash on hand 0.490 0.490 0.490 0.490 0.490 0.490 0.490 0.490 0.490 -__
Liabilities 12.000 12.050 12.110 11.910 12.239 12.229 12.119 11.979 11.779 11.289
Capital 7.000 7.000 7.000 7.200 7.200 7.150 7.120 7.090 7.070 7.070
Loan 1.510 1.510 1.570 1.570 1.570 1.570 1.570 1.570 1.570 2.570
Trade creditors 3.050 3.050 3.050 3.050 3.050 3.050 3.050 3.050 3.050 1.560
Accrued expenses 0.490 0.490 0.490 0.090 0.419 0.459 0.379 0.259 0.089 0.089
12.000 12.050 12.110 11.910 12.239 12.229 12.119 12.979 11.779 11.289
Required:
Prepare journal entries, with narratives, to record the transactions that took place in each
of the 9 years to 2005. (Assume that the values of non-current assets are net of
depreciation)
(TOTAL : 20 MARKS)
Continued/……
2
2. (a) The following is the income statement for Zifukwa Limited for the year ended 31
May 2006:
K’000
Sales 600
Cost of goods sold (400)
Gross profit 200
Expenses (100)
Net profit for the year 100
Retained profit brought forward 650
Net profit carried forward 750
Represented by:
Ordinary shares of K1 each 1,000
Profit and loss account 750
1,750
Required:
Calculate the following accounting ratios for the business:
(i) return on capital employed; 1½ Marks
(ii) return on assets; 1½ Marks
(iii) working capital ratio; 1½ Marks
(iv) quick ratio; 1½ Marks
(v) stock turnover in days (use year end stock); 1½ Marks
(vi) debtors turnover in days (state assumption). 1½ Marks
3
(c) You are given the following Income Statement (amounts in K million) that were
extracted from trial balances of Katapila Enterprises:
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Stock 1 Jan 3.0 - - 2.8 - - - - - 3.1
Purchases 2.0 - - 1.7 - - - - - 2.2
Gross profit 0.5 0.6 - - - - - 0.7
Required:
Estimate the value of closing stocks for years 1996, 1999 and 2005, if sales for the first
3 years were K4m per year and then stepped up to K5m per year until the year 2005.
6 Marks
(TOTAL : 20 MARKS)
4
Continued/……
3. Magic Pencils Trading is a company that buys and sells lead pencils. On 1 June 2006 it
had 200 unused pencils in stock each valued at K800. In the month of June 2006, the
company received deliveries, as follows:
9 100 K900
18 200 K1,000
22 100 K1,100
13 200
19 250
27 100
Required:
(a) Calculate the value of closing stock using the following methods:
(b) Apart from LIFO and FIFO methods of stock valuation, name another common
method of stock valuation. 1 Mark
(c) Describe how FIFO and LIFO affect the cost of goods sold and the valuation of
stock:
(d) State the prudence concept as it relates to the valuation of stocks. 1 Mark
(TOTAL : 20 MARKS)
Continued/……
5
4. (a) Company A has provided to you the following information for the month of
September 2006:
Purchases Ledger K
Balance at 1 September (Cr) 8,900
Cheques paid to suppliers in the month 20,000
Purchases on credit from suppliers in the month 16,850
Sales Ledger
Balance at 1 September (Dr) 11,680
Credit sales in the month 30,980
Cash received from customers in the month 15,740
Required:
Complete the Sales Ledger Control Accounts and the Purchases Ledger Control
Accounts for the month of September 2006, carrying down the balance at the end
of the month. 6 Marks
(b) (i) Company B has recorded the following entries into the creditors
control account, for October 2006.
K
Bank 103,100
Credit purchases 114,690
Discounts received 14,060
Balances c/d at 31 October 2006 36,420
Continued/……
6
(ii) Company C has recorded the following entries into the debtors control
account, for October 2006:
K
Opening balance 179,600
Sales 318,600
Discount allowed 1,500
Returns inwards from debtors 11,480
Bad debts 7,320
Closing balance 141,280
Required:
Compute how much cash has been received from the debtors in October
2006. 4 Marks
(c) How does a company’s authorized share capital differ from the issued share
capital? 4 Marks
Required:
Continued/……
5. (a) The following trial balance has been drawn incorrectly by Bamusi, a part time
accountant for Tisamale Zedi Launders:
Required:
(b) Prepare an income statement and balance sheet for Tisamale Zedi
Launders for the year ended 30 April 2006. 8 Marks
Continued/……
6. (a) Province, Region and Zone are in a partnership called PrEz. They share profits
and losses in the ratio 3:2:1 respectively.
For the year ended 31 July 2006, their capital accounts remained fixed at the
following amounts:
K
Province 800,000
Region 600,000
Zone 400,000
The partnership provides for 15% interest per annum on outstanding capital
amounts. In addition, Region and Zone receive annual salaries of K500,000 and
K300,000 respectively. The net profit of the partnership for the year ended 31
July 2006, before taking any of the above into account, was K3 million.
Required:
Draw up the Partnership Appropriation Account for PrEz for year ended 31 July
2006. 7 Marks
(b) On 1 August 2006, Province, Region and Zone agreed that goods worth K120,000
should be brought into the business records. On the same date, Tayanjana was
admitted into the partnership after contributing K400,000 cash as capital.
Required:
(i) Using the T accounts format, draw up the combined PrEz partners’ capital
accounts after the admission of Tayanjana. 7 Marks
(ii) Explain how you are getting the capital accounts figures that have been
carried forward. 2 Marks
(c) Mention any four rights and/or duties of partners in the absence of a partnership
agreement. 4 Marks
(TOTAL : 20 MARKS)
7. Explain, giving an example where appropriate, the meanings of the following terms:
(a) Units of output depreciation method. 4 Marks
(b) Bad debts provision. 4 Marks
(c) Bank current accounts. 4 Marks
(d) Debenture. 4 Marks
(e) Capital expenditure. 4 Marks
9
(TOTAL : 20 MARKS)
END