Instructions: Photocopy this handout and carry it in all

financial accounting
Classes.
QUESTION ONE
The chief accountant of melissa Limited has extracted the
following trial balance as at April 2013:
Dr “Frw” Cr “Frw”
Land and buildings at cost 355,000
Plant and machinery at 558,000
cost
Provision for depreciation 158,000
Motor vehicles at cost 685,000
Provision for depreciation 125,000
Furniture and equipment at 188,000
cost
Provision for depreciation 78,000
st
Stocks as at 1 May 2012 320,000
Trade receivable and trade 430,000 333,000
payable
Cash at bank 168,000
Purchases and sales 1,840,000 2,980,000
Salaries and wages 420,000
Rent and rates 125,000
Office expenses 84,000
Bank charges 12,600
Telephone and postage 16,350
Vehicles running expenses 230,000
Repairs and maintenance 6,850
Issued share capital 800,000
st
Profit and loss bal b/f 1 814,800
May 2012
Share premium 150,000
5,438,80 5,438,80
0 0
Additional notes:
1. The closing stocks was valued at Frw 432,600
 2. Goods sold at Frw 1,500 were returned on 30 April 2012 but the
transaction was not recorded in the books. Their cost was Frw
1,200 the goods were received after stock taking was completed.
3. Accrued wages and telephone bills amounted to Frw 2,500 and
Frw 6,250 respectively
4. Depreciation of the fixed assets is calculated on reducing balance
at the following rates:
Plant and 20% per
machinery annum
Motor vehicles 25% per
annum
Furniture and 15 % per
fittings annum
5. Prepaid rates amounted to 2,000
6. The directors have proposed a dividend of 10% on the issued
capital and a transfer of Frw 200,000 to General reserve
7. The corporation tax was assessed to be 30% of net profit before
tax.
Required: (for internal use)
(a) Income statement for the year ended 30th April 2013.
(18Marks)
(b) Statement of change in Equity (6Marks)
th
(c) Statement of Financial position as at 30 April 2013.
(16Marks)
(Total 40Marks)

QUESTION TWO
(a) Explain the importance of ratio analysis to a business enterprise.
(2 Marks)
(b) Identify users of financial information who may be interested in
each of the following ratios specifying the user’s needs:
(i) Current Ratio
(2 Marks)
(ii) Net Profit Margin
(2 Marks)
(iii) Stock Turnover
(2 Marks)
(c) Citing suitable examples, explain the following terms:
(i) Accounting concepts
(2 Marks)
(ii) Accounting policies
(2 Marks)
(iii) Accounting standards
(2 Marks)
(d) Explain the appropriate accounting treatment in the following
transactions relating to the accounts of Trump Ltd. for the year
ended 31 December 2012:
(i) A debtor who owed the company Frw 200,000 was declared
bankrupt on 1st February 2013. 25% of the debt had been
recovered when the accounts were approved by the directors on
15th March 2013. (2 Marks)
(ii) Some items of inventory purchased for Frw 300,000 were
damaged in the warehouse during the year. These items were
repaired at Frw 50,000 and sold to a customer on 2 nd February
2013 at 75% of the normal selling price of Frw 400,000.
(2 Marks)
(iii) On 10th December 2012, the company secured an order worth Frw
1,200,000 from a foreign based company. The goods were
shipped on 10th January 2013 and included in sales for December
2012. (2 Marks)

(Total: 20 Marks)
QUESTION THREE
The following are extracts from the financial statements of
Thomas and Sons Ltd
Statement of Financial Position as at 31 December: 2011: 2012
Assets 2011 2012
Frw Frw
Non Current Assets “000” “000”
2,4
Land 2,000 00
6,7
Plant and equipment 3,400 00
Fixtures and fittings 2,5
2,000
 00
11,6
Total non-current assets 7,400 00
Current assets
1,1
Inventory 1,000 60
7
Trade receivables 460 20

Cash 360 15
1,8
Total current assets 1,820 95
13,4
Total Assets 9,220 95
Equity & Liabilities
Share Capital & reserves
9,0
Ordinary share capital 6,740 00
6
Share premium 300 00
4
Land Revaluation - 00
2,1
Retained profit 940 04
12,1
Total Equity 7,980 04
Non Current liabilities

10% Debentures 200 -

Current Liabilities
9
Trade payables 730 00
1
Bank overdraft 20 31
3
Corporation tax 290 60
 1,
Total Liability 1,040 391
13,4
Total Equity & liabilities 9,220 95
Extract of Statement of Comprehensive Income for the
year ended 31 December 2 012.
Frw
“000”
Net profit before tax 2,064
Taxation (360)
Net profit after tax 1,704
The following additional information is provided in relation to the
year ended 31 December 2012:
i) Plant and machinery with a book value of Frw 400,000 was sold
for Frw 360,000.
ii) Depreciation provided on fixtures and fittings amounted to Frw
500,000 and on plant and equipment amounted to Frw 900,000.
iii) The debentures were redeemed on 31 December 2012.
iv) In August the company paid an interim dividend of Frw 540,000.
v) No land or fixtures and fittings were disposed of during the
period.
Required:
(a) In relation to IAS 7 explain what is meant by the term “cash
equivalents”. (3 Marks)
(b) Prepare for Thomas and Sons, a Statement of Cash-Flows for
the year ended 31 December 2012, in accordance with the
requirements of IAS 7. (17 Marks)
(Total: 20 Marks)
QUESTION FOUR
(a) In relation to IAS 10 ‘ Events after the Reporting Period”
explain the following terms:
(i) Events after the reporting period.
(2 Marks)
(ii) Adjusting events.
(2 Marks)
(iii) Non-adjusting events
(2 Marks)

(b) In relation to IAS 37 ‘Provisions, Contingent Liabilities and

Contingent Assets’ define the following terms:
(i) Provision. (1
Mark)
(ii) Contingent liability. (1
Mark)
iii) Contingent asset.
(1 Mark)
iv) Obligating event. (1
Mark)
(c) A meeting of the Directors of Remera Investment Company
(RIC) Ltd is scheduled for 30 April 2013 to discuss the following
matters with a view to finalising the accounts for the year ending
31 March 2013:

(i) A fire occurred in one of the warehouses of RIC Ltd on 15 April

2013, destroying inventory which had a cost price of Frw
100,000,000 and a net realisable value of Frw 150,000,000.

(ii) In August 2012, RIC Ltd received information that one of their
largest customers had gone bankrupt and its properties seized by
the Commercial court. At 31 March 2013, this customer owed RIC
Ltd Frw 235,000,000. It is anticipated that RIC Ltd will now only
receive 0.10 Frw for every Frw 1 they were owed.

(iii) In July 2012, RIC Ltd sold inventory which had been in one of
their warehouses for the past two years, for Frw 75,000,000. This
had been included in the financial statements, for the year ended
31 March 2012, as its cost price of Frw 105,000,000.

(iv) On 30 June 2012, an employee of RIC Ltd fell and injured his
back at work. This employee has commenced legal action. The
Solicitor for RIC Ltd informed the company on 10 January 2013,
that it is probable they will be found liable and have to pay this
employee Frw 33,000,000. The employee has worked for RIC Ltd
for the past 4 years.
 Required:
Advise the board on the accounting treatment of these issues.
Your answer should give a detailed reason for the accounting
treatment that you have chosen. (10 Marks)
(Total: 20 Marks)
QUESTION FIVE
a) Differentiate between tax revenue and non tax revenue for
government of Rwanda sources of revenue and give an example
of each. (4 Marks)
b) Differentiate between reserves, provision and allowance for
doubtful debt. (3 Marks)
c) Logas provided the following information about its account
receivables for the year ended 30 September 2013
Frw
Receivables opening debit balances 2,500,000
Receivables opening credit balances 420,000
Allowance for doubtful debt opening 188,000
balance
Sales (90% on credit and the rest 19,310,00
cash sales) 0
Discount allowed 60,000
Returns out 210,000
Receipts (Cash and cheques) from 14,600,00
receivables 0
Bad debt written off 55,000
Refunds in cash to customers with 130,000
credit balances
Receivables closing credit balances 260,000
Additional information:
1. A sales invoice of Frw 100,000 during the year was discovered
unrecorded
2. Additional bad debts to be written off Frw 12,000
3. Allowance for receivables is determined at the end of the year at
Frw 210,000
4. A contra settlement of Frw120,000 was agreed with a customer
who is also a supplier
5. The bank statement showed a dishonoured cheque of Frw 45,000
from a customer
 6. A cheque received from a customer Frw150, 000 already credited
in the control account but was not appearing in the bank
statement because it was lost while in transit to the bank. No
replacement yet received from the customer.
Required:
(a) Bad debt expense account
(2 Marks)
(b) Allowance for doubtful debt account
(2 Marks)
QUESTION SIX

a) The users of financial statements include customers; suppliers;

investors and lenders.

Required:

For any three of the above users, state the need of that user for
reviewing financial statements.
(3 marks)
b) Explain the historical cost concept and money measurement
concept.
(4 marks)
c) If capital expenditure is incorrectly treated as revenue
expenditure, what is the effect on:
(i) Profit and net assets in the year in which the error is made.
(2 marks)
(ii) Profit in the following year.
(1 mark)
d) The account balances extracted from the books of Lizzy as at 31
October 2012 are as follows:
Frw
Capital 842,000
Buildings (net book
value) 850,000
Furniture (net book
value) 240,000
Equipment (net book
value) 83,000
Long term investment 65,000
 Discount received 3,500
Discount allowed 4,600
Opening inventory 52,200
Cash 4,500
Accounts receivable 85,000
Bank overdraft 14,500
Loan (repayable in
2008) 300,000
Purchases 560,000
Sales 1,050,000
Accounts payable 70,000
Loan (repayable on 30
December 2006) 68,000
Salaries and Wages 95,000
Drawings 25,000
Interest income 1,500
Rent income 14,000
Carriage outwards 3,500
Carriage inwards 1,600
Electricity and water 4,500
Insurance 44,000
Returns inwards 7,000
Returns outwards 4,000
Interest expense 36,800
Rent expense 29,800
General expenses 176,000

Additional information for the year:

1. Closing inventory at 31 October 2012 was Frw 60,600.

2. Interest income accrued Frw 5,500 while Rent income received in
advance Frw 2,000.
3. Electricity prepaid Frw 1,400 and water accrued Frw 4,300.
4. Insurance premium paid of Frw 44,000 was for 10 months to 31
January 2013.
5. Depreciation was to be provided on reducing balance basis for the
year as follows:
Building 5%
 Furniture 10%
Equipment 15%
6. The long term investment were in shares of Beekey and had a fair
value of Frw 71,000 at year end of which the change in fair value
to be recognized in the income statement
7. Good returned by a customer (included in receivables) of Frw
7,000 had not been recorded

Required:

(i) Income statement for the year ended 31 October 2012.

(17 marks)
(ii) Balance sheeu7t as at 31 October 2012.
(13 marks)
(Total 40 marks)
 QUESTION SEVEN

Muammar Harafi had completed his financial statements for the

year ended 31 March 2012, which showed a profit of Frw 81,208,
when he realized that no bank reconciliation statement had been
prepared at that date. When checking the cashbook against the
bank statement and carrying out other checks, he found the
following:

1. A cheque for Frw 1,000 had been entered in the cashbook but had
not yet been presented.
2. Cheques from customers totaling Frw 2,890 entered in the
cashbook on 31 March 2012 were credited by the bank on 1 April
2012.
3. Bank charges of Frw 320 appear in the bank statement on 30
March 2012 but have not been recorded by Muammar Harafi.
4. A cheque for Frw 12,900 drawn by Muammar Harafi to pay for a
new item of plant had been mistakenly entered in the cash book
and the plant account as Frw 2,900. Depreciation of Frw 290 had
been charged in the profit and loss account for this plant.
5. A cheque for Frw 980 from a credit customer paid in on 26 March
was dishonoured after 31 March and Muammar Harafi decided
that the debt would have to be written off as the customer was
now untraceable.
6. A cheque for Frw 2,400 in payment for some motor repairs had
mistakenly been entered in the cash book as a debit and posted
to the credit of motor vehicles account. Depreciation at 25% per
annum (straight line) is charged on motor vehicles, with a full
year’s charge calculated on the balance at the end of each year.
7. The total of the payments side of the cash book had been
understated by Frw 1,000. On further investigation it was found
that the debit side of the purchases account had also been
understated by Frw 1,000.
8. Muammar Harafi had instructed his bank to credit the interest of
Frw 160 on the deposit account maintained for surplus business
funds to the current account. This the bank had done on 28
March. Muammar had made an entry on the payments side of the
 cashbook for this Frw 160 and had posted it to the debit of
interest payable account.
9. Muammar Harafi had mistakenly paid an account for Frw 870 for
repairs to his house with a cheque drawn on the business
account. The entry in the cashbook had been debited to repairs
to premises account.
10. Muammar Harafi had also mistakenly paid Frw 540 to Paul, a
trade supplier, to clear his account in the purchases ledger, using
a cheque drawn on Muammar Harafi’s personal bank account. No
entries have yet been made for this transaction.
11. The cashbook showed a debit balance of Frw 4,890 before any
correcting entries had been made. The balance in the bank
statement is to be derived in your answer.

Required:

a) Prepare an adjusted cash book showing the revised balance which

should appear in Muammar Harafi’s balance sheet at 31 March
2012.
(6 marks)
b) Prepare a bank reconciliation statement as at 31 March 2012.
(2 marks)
c) Draw up a statement for Muammar Harafi showing the effect on
his profit of the adjustments necessary to correct the errors
found.
(8 marks)
d) Prepare journal entries to correct items (9) and (10). Narratives
are required.
(4 marks)
(Total 20marks)
QUESTION EIGHT

a) Describe any two errors that are not revealed by the trial
balance.
(2 marks)
b) Uwamwiza had extracted the list of account balances which did
not agree by a figure of Frw 31,000, credit totals exceeding debit
totals. She went ahead and prepared the income statement for
 the year ended 30 September 2012 which showed a profit of Frw
1,030,000.

After reviewing the accounts, she discovered the following errors:

1. The discount allowed total for the month of June 2012 of Frw
47,500 was credited in the discount received account, otherwise
the specific entries in the accounts receivable was right.
2. A credit note issued by the entity to Mujenzi of Frw 60,700 was
debited in Mujenzi’s account and credited in the returns in
account.
3. Purchases of Frw 33,000 by cheque was debited in the equipment
account.
4. Rent expense of Frw 77,000 was debited in the insurance
expense account.
5. Payment by cheque of Frw 39,000 for advertisement was debited
in both accounts.
6. The returns in daybook was overcast by Frw 44,000.

Required:

(i) Prepare the journal entries to correct these errors.

(12 marks)
(ii) Prepare the suspense account.
(3 marks)
(iii) Prepare a statement of corrected profit or loss for the
period.
(3 marks)
(Total 20 marks)
 QUESTION NINE
a) State and explain briefly the main features and limitations of
receipts and payments account.
(5marks)
b) Kipevu Social Club was formed on 1 January 2011. The following
are the transactions for the year ended 31 December 2011:
Frw
Subscriptions received for the current year 3,062,50
0
Cash paid for catering supplies 4,663,00
0
Cash takings for sale of food and drinks 5,662,00
0
Unpaid accounts for catering supplies 39,000
Stock of food at cost on 31 December 2011 52,000
Rates paid for the year 375,000
Insurance premiums for the year 125,000
Purchases of furniture at cost 1,500,000 of which 750,000
one half is paid
Payment of wages to catering staff 1,000,00
0
Sale of club ties and bungles 462,000
Expenses of making club ties and bungles 225,000
Subscriptions in arrears 31 December 2011 75,000
Sale of gate tickets 75,000
Raffle prices 30,000

Required:
i) Receipt and payment account for the year ended 31 December
2011.
 (9 marks)
ii) Income and expenditure account for the year ended 31 December
2011.
(6 marks)
(Total 20marks)
 QUESTION TEN

a) Explain the advantages of maintaining control accounts.

(6 marks)
b) The following balances were extracted from the books of Giporoso
Wholesalers for the month of April 2012:
Rwf.’000
Debit balances (1 April 2012):
Sales ledger 1,428,00
0
Purchases ledger 10,500
Credit balances (1 April 2012):
Sales ledger 40,500
Purchases ledger 553,800
Discounts received 142,500
Discounts allowed 209,700
Purchase 1,334,00
0
Cash sales 618,000
Credit sales 2,068,20
0
Credit notes issued to customers for returned 75,000
goods
Sales ledger debit balances off-set against 36,900
purchases ledger
Payment to creditors 1,159,20
0
Interest charged by creditors on overdue 69,000
accounts
Receipt from customers 1,578,00
0
Bad debts written off 37,200
Customer’s unpaid cheques 26,100
Interest charged to customers on overdue 96,100
accounts
Debt collection expenses charged to debtors 10,800
Credit notes received from suppliers 26,700
Balances as at 30 April 2012:
 Purchases ledger (debit balance) 14,400
Sales ledger (credit balance) 50,700

Required:

(i) Sales ledger control account for the month ended 30 April 2012.
(7 marks)
(ii) Purchases ledger control account for the month ended 30 April
2012.
(7 marks)
(Total: 20 marks)
QUESTION ELEVEN

a) Explain the purpose of the following financial statements:

i) Statement of financial position (2 marks)
ii) Income statement (2 marks)
b) Indicate what a debit entry represents in:
i) An expense account; (1
mark) ii) A liability account;
(1 mark)
iii) An asset account; (1 mark)
iv) An income account; (1 mark)
v) In October 2012 Diana issued a credit note for Frw 95,000 to a
customer, but this was omitted from her accounting records. The
credit note had the reference CN251. Show the general journal
entry to record this transaction (2 marks)

c) The following account balances were extracted from the books of

Linett at the end of her financial year 30 September 2012:
Frw Frw
Sales 5,400,00
0
Purchases 2,826,00
0
Shop fittings cost 2,340,00
0
Accumulated depreciation – shop 240,000
fittings
Capital 3,060,00
 0
Opening inventory 846,000
Bank as per cashbook 90,000
Cash 18,000
Shop wages 792,000
Accounts receivable 456,000
Drawings 630,000
Accounts payable 90,000
Carriage in 36,000
Carriage out 27,000
Maintenance and repair 135,000
Commission income 180,000
Electricity and water 144,000
Rent income 126,000
Insurance 810,000
Allowance for doubtful debt 54,000
9,150,0 9,150,0
00 00

While preparing the financial statements, the following should be

accounted for:
1. The closing inventory cost and net realizable amount was Frw
910,000 and Frw 890,000 respectively.
2. Bank interest income accrued Frw 80,000 was only shown in the
bank statement.
3. Electricity prepaid and water unpaid amounted Frw 20,000 and
Frw 13,000 respectively.
4. Rent income received in advance for the month of October 2012
amounted to Frw 16,000
5. An account receivable with a balance of Frw 71,000 included in
the figure above had died before year end and the relatives had
promised to only pay Frw 45,000 and no more.
6. Due to the possibility of some receivables becoming bad, the
allowance for doubtful debt was to be adjusted to Frw 50,000
7. Depreciation on shop fitting is to be at 10% straight line basis

Required:
(i) Income statement for the year ended 30 September 2012
(17 marks)
(ii) Balance sheet as at 30 September 2012 (13
marks)
(Total: 40 marks)
 QUESTION TWELVE
a) “The bank balance as shown by the cash book of the business is
rarely the same as the balance as shown by the bank statement”.
State and explain the four causes of difference between the two
balances that need to be dealt with in the bank reconciliation
statement (not adjusted cashbook).
(4 marks)
b) The cash book of John (who sales airtime cards in Remera)
showed credit balance of Frw 30,850 on 30 September 2012
whereas the bank statement showed credit balance of Frw 28,250
on the same date. After comparing the cash book and the bank
statement, it was discovered that:
1. Cheque No.251, for Frw 4,000 was paid to a supplier on 28
September 2012. This cheque was not presented to bank till 10
October 2012.
2. The cashier in totaling the cash book pages, undercasted the
debit totals of the cash book by Frw 3,000
3. A cheque received on 30 September 2012 amounting to Frw
2,500 was credited by the bank on 1 October 2012.
4. The bank had debited Frw 2,000 interest on overdraft and Frw
600 for bank charges. These were not recorded in the cash book.
5. The credit side of the cash book was undercast by Frw100 during
the month of September 2012.
6. Cheque No.329 for Frw 2,000 drawn for office expenses were
presented on 2nd October 2012
7. A cheque for Frw 1,000 was issued to a supplier Socobico on 27
September 2012 and was omitted to be entered in the cash book.
It was however, presented to bank by 30 September 2012.
8. Dividends amounting to Frw 500 had been paid direct to the bank
and not entered in the cash book
9. A cheque of Frw 800 issued by James, another bank client, was
wrongly debited by the bank in John’s account.
10. A cheque received of Frw 800 and deposited into the bank
on 20 September 2012 was shown in the bank statement as
dishonored on 30 September 2012.
11. A cheque of Frw 1,200 deposited in the bank was credited
as Frw 2,100 in the bank statement
Required:
(i) Adjusted cashbook (bank column) (10
marks)

(ii) Bank reconciliation statement (6

marks)
(Total: 20 marks)
QUESTION THIRTEEN
The following list of balances as at 30 September 2012 has been
extracted from the books of Ocampo and Hague, trading
partnership, sharing the balance of profits and losses in the
proportions 3:2 respectively.
Frw
Printing, stationery and postage 3,500
Sales 322,10
0
Stock in hand at 1 October 2011 23,00
0
Purchases 208,20
0
Rent and rates 10,30
0
Staff salaries 36,100
Telephone charges 2,900
Motor vehicle running costs 5,620
Discounts allowable 950
Discount receivable 370
Sales returns 2,10
0
Purchases returns 6,100
Carriage inwards 1,70
0
Carriage outwards 2,400
Fixtures and fittings: at cost 26,000
Provision for depreciation 11,20
0
Motor vehicles: at cost 46,000
Provision for depreciation 25,00
0
Provision for doubtful debts 300
Drawings: Ocampo 24,00
0
Hague 11,00
0
Current account balances At 1 October
 2011:
Ocampo 3,600 Credit
Hague 2,40 Credit
0
Capital account balances
At 1 October 2011:
Ocampo 33,000
33,000
Hague 17,000
17,000
Debtors 9,300
Creditors 8,400
Balance at bank 7,700
7,700

Additional information
1. Frw 10,000 is to be transferred from Ocampo’s capital account to
a newly opened Ocampo Loan Account on 1 July 2012.
2. Interest at 10 per cent per annum on the loan is to be credited to
Ocampo.
3. Hague is to be credited with a salary at the rate of Frw 12,000 per
annum from 1 April 2012.
4. Stock in hand at 30 September 2012 has been valued at cost at
Frw 32,000.
5. Telephone charges accrued due at 30 September 2012 amounted
to Frw 400 and rent of Frw 600 prepaid at that date.
6. During the year ended 30 September 2012 Hague has taken
goods costing Frw 1,000 for his own use.
7. Depreciation is to be provided at the following annual rates on the
straight line basis:
Fixtures and fittings 10
%
Motor vehicles 20
%

Required:
(a) Prepare an Income Statement for the year ended 30
September 2012. (12 marks)
(b) Prepare Statement of Financial position as at 30 September 2012
which should include summaries of the partners’ capital and
current accounts for the year ended on that date.
(8 marks)
(Total 20marks)

QUESTION FOURTEEN
The balance sheet of Joab Utaka, a sole trader, as at 31 March
2012 was as follows:
Frw Frw Frw Frw
‘000’ ‘00 ‘000 ‘000’
0’ ’
Capital 1 April 1,8 Land and 1,650
2011 90 buildings
Profit for year 450 Machinery (at 1,20
2012 cost) 0
Deduct: 150 300 Deduct: 750 450
drawings depreciation
Creditors 630 Stock at cost 570
Bank overdraft 270 Debtors 420 990
3,0 3,09
90 0
Further investigation reveals the following information:
1. The closing stock includes damaged goods which, although they
had cost Frw. 10,000 have an estimated sale value of Frw 7, 500.
2. Debtors include Frw. 20,000 in respect of a customer who has
gone bankrupt. A provision for doubtful debts of 2 ½% is also
required on the balance of the debtors.
3. The machinery was acquired five years ago and is being
depreciated to its scrap value on a straight-line basis over eight
years. A more realistic estimate indicates that the life span will
be 10 years.
4. Wages owing at 31st March 2012 amounted to Frw. 9,500 but this
has not been reflected in the accounts.
5. Charges for the bank overdraft, amounting Frw 8,000 have not
been reflected in the accounts.
6. In arriving at the profit for the period, a drawing of Frw 100,000
paid to [Link] Utaka had been deducted as an expense.
7. Frw 20,000 rent owing to Mr. Joab Utaka for the letting of part of
his business premises to external party had not been received
and no entry had been made in the books in respect of this item.

Required:
a) Journal entries to correct errors and omissions.
(12 marks)

b) A revised balance sheet as at 31 March 2012.

(8 marks)
(Total: 20 marks)
QUESTION FIFTEEN
The following balances were extracted from the books of Ejide
Kalisa a business man at Nyabugogo Bus Park, as at 1 st January
2011.
Frw.
Fixed assets 1,750,00
0
Stock in trade 294,000
Trade debtors 420,000
Trade creditors 315,000
Balances at bank 252,000
Cash balance 84,000
Bank loan 840,000
Accrued sundry expenses 70,000
a) The following transactions took place in the month of January
2010
Jan
3 The business made credit sales of Frw.5, 950,000 and
cash sales of Frw.840, 000.
7 The business purchased goods on credit worth Frw.4,
410,000. Further purchases of goods worth of Frw.560,
000 were made and paid for by cheque.
10 Debtors paid Rwf.5, 600,000 less a discount of 2%.
14 Fixed assets were purchased for Frw. 1, 050,000 and
paid for by cheque.
16 The proprietor withdrew Rwf.280, 000 from the bank
and Frw.140,000 from the cash box personal use.
21 Trade creditors were paid Frw.4, 200,000 by cheque
 less 3% discount.
23 Salaries and wages amounting to Frw.336, 000 were
paid by cheque.
24 Bank loan repayment of Frw.140, 000 was made by
cheque. In addition, interest on loan amounting to
Frw.21, 000 was paid also by cheque.
27 Sundry expenses for the month of January 2011
amounted to Frw.175, 000. A sum of Frw.196, 000 was
paid for sundry expenses in the month of January 2011
by cheque.
30 A cash deposit of Frw.700, 000 was made in the bank
from the cash account.
Required
1) Calculate the Capital on 1 January 2011 (4
Marks)
2) Enter the above transactions in the ledger accounts and a three
column cash book, and balance them off.
(12 Marks)
3) Draft a trial balance at 31 January 2011.
( 3 Marks)
(Total 20marks)
Question sixteen

Hakuna Mchezo Co. Ltd is a publicly listed company. Its financial

statements for the year ended 31 March 2016 including
comparatives are shown below:

Statements of profit or loss and other comprehensive

income for the year ended:

31 March 2016 31
March 2015

Shs.’000’ Shs.’000’

Revenue 31,000 25,000

Cost of sales (21,800) (18,600)

 ––––––– –––––––

Gross profit 9,200 6,400

Distribution costs (3,600) (2,400)

Administrative expenses (note (ii)) (2,200) (1,600)

Finance costs – loan interest (150) (250)

– lease interest (note (i)) (250) (100)

––––––– –––––––

Profit before tax 3,000 2,050

Income tax expense (1,000) (750)

––––––– –––––––

Profit for the year 2,000 1,300

Other comprehensive income (note (i)) 1,350 0

––––––– –––––––

3,350 1,300

––––––– –––––––
Statements of financial position as at:

31 March 2016 31 March 2015

Shs.’00 Shs.’00 Shs.’00 Shs.’00

0’ 0’ 0’ 0’

Assets

Non-current assets

Property, plant and 14,000 10,700

equipment (note
(i))

Deferred 1,000 0
development
expenditure (note
(ii))

15,000 10,700

Current Assets

Inventory 3,300 3,800

Trade receivables 2,950 2,200

Bank 50 6,300 1,300 7,300

Total assets 21,300 18,000

Equity and
liabilities
Equity

Equity shares of 8,000 8,000

Shs.1 each

Revaluation 1,350 0
reserve (note (ii))

Retained earnings 3,200 1,750

12,550 9,750

Non-current
liabilities

8% loan notes 1,400 3,125

Deferred tax (note 1,500 800

(ii))

Finance lease 1,200 4,100 900 4,825

obligation (note
(ii))

Current
liabilities

Finance lease 750 600

obligation (note
(ii))

Trade payables 2,650 2,100

Current tax 1,250 4,650 725 3,425

payable

Total equity and 21,300 18,000

liabilities

Notes:

(i) On 1 July 2015, Hakuna Mchezo Co. Ltd acquired additional

plant under a finance lease that had a fair value of Shs.1·5
million. On this date it also revalued its property upwards by
Shs.2 million and transferred Shs.650,000 of the resulting
revaluation reserve this created to deferred tax. There were no
disposals of non-current assets during the period.

(ii) Depreciation of property, plant and equipment was

Shs.900,000 and amortization of the deferred development
expenditure was Shs.200,000 for the year ended 31 March 2016.

Required:

a) Compute the following ratios for the two years:-

a. Gross profit margin
b. Operating profit margin
c. Return on capital employed
d. Net Asset Turnover
e. Gearing
(5 marks)

b) You are the Company’s Financial Analyst, write a brief report

to the Directors of the company in which you should
evaluate the comparative performance of Hakuna Mchezo
 Co. Ltd in terms of its return on capital employed, profit
margins, asset utilization and gearing.
(10 marks)

c) Prepare a statement of cash flows for Hakuna Mchezo Co.

Ltd for the year ended 31 March 2016, in accordance with
IAS 7 Statement of Cash Flows, using the indirect method.
(15 marks)

[Total: 30 marks]