ZCAS University

BAC 2101 FINANCIAL ACCOUNTING

ASSIGNMENT

INSTRUCTIONS:

• ALL QUESTIONS are Compulsory and MUST attempted.

• Clearly Type all your work in WORD showing clearly all necessary
workings in order to score maximum marks.

• Evidence of plagiarism (Copying) will result in zero marks.

• Due date (Deadline) for submission 19th March 2024.

• PLEASE strictly observe submission dates to avoid losing marks.

• SUBMIT YOUR WORK THROUGH THE SUBMISSION LINK ON

THE PORTAL

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QUESTION ONE
Baruch Enterprises Limited is a Book-seller dealing in books and stationery from various
suppliers. One of their big customers are government schools where deliveries are done by
the company. The following trial balance at 31 May 2021 was prepared by an inexperienced
Accounting Student on industrial attachment.

Debit Credit
K K
Ordinary share capital 60,000
General Reserves 30,000
Motor Vehicles - at cost 54,000
Accumulated depreciation as at 1 June 2022 18,000
Fixtures and Fittings - at Cost 66,000
Accumulated depreciation as at 1 June 2022 33,000
Inventory at 1 June 2021 42,700
Cash at bank 4,100
Trade receivables 48,400
Trade payables 18,900
Discount received 5,200
Discount allowed 2,400
Sales 220,000
Purchases 141,000
12% Debentures 48,000
Interest on loan 7,200
Salaries and wages 34,000
Rent expenses 19,500
Electricity 7,600
Purchases returns 2,500
Sales returns 2,200
Selling and distribution expenses 9,500
Dividends paid 3,000
Retained earnings 6.000
421,800 461,400

The following additional information was provided:

(i) The directors proposed to transfer K15, 000 of the profits to the general reserve. Closing
inventory at 31 May 2022 was K35, 000.

(ii) Salaries amounting to K8, 500 were outstanding at the end of the period.

(iii) Rent was prepaid by K3, 900 for the first three months of 2020.

(iv) Straight line depreciation for the year is to be provided as follows:

Motor vehicles 33 ⅓%
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 Fixtures and fittings 10%

(v) Taxation is to be ignored.

Required:

(a) Prepare a corrected trial balance as at 31 May, 2022

(8 Marks)
(b) Prepare a Statement of Profit and Loss for the year ended 31 May 2022, for internal
purposes.
(16 Marks)
(c) Prepare a Statement of Financial Position as at 31 May 2022.
(16 Marks)

(TOTAL: 40 MARKS)

QUESTION TWO
Inventory is one of the most important assets in a company’s Statement of financial position.
To this effect, IASB issued IAS 2 dealing with the valuation and presentation of inventory in
the accounting books and financial statements.

Required:

(a) Explain how the accrual principle applies in the way inventory is treated in the Income
Statement. (2 marks)
(b) You operate a hardware shop. You are given the following information regarding
movement of cement stocks during the year ended 31 May 2017.

Unit Price (K)

1 June 2016 Opening Inventory 200 Units K55
14 June 2016 Purchases 500 Units K58
7 August 2016 Sales 300 Units 67
10 October 2016 Sales 300 Units 72
12 December 2016 Purchases 200 Units K63
06 January 2017 Purchases 300 Units K66
04 April 2017 Sales 200 Units 70
22 May 2017 Sales 200 Units 72

Required:

Calculate the closing inventory, sales value, cost of sales and the gross profit, using:

(i) FIFO (9 marks)

(ii) AVCO (9 marks)
(Total: 20 Marks)

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QUESTION THREE
You have been given the following balances from the books of Shawama General Dealers for
the year ended 31 May 2017.

K’000
Sales 260
Purchases 185
Cash received from customers 180
Cash paid to suppliers 150

Discount received 12
Discount allowed 18
Returns outward 3
Returns inward 7
Irrecoverable Debt 4
Customer’s cheque dishonored 3.5
Cash refund to customer 1.5
Cash in respect of debit balances in payables ledger 5.5

On 1 June 2016, the receivables ledger balances were K14,800 debit and K2,600 credit, and
the payables ledger balances on the same date were K27,000 credit and K5,900debit.

On 31 May 2017, there were no credit balances in the receivables ledger except those
outstanding on 1 June 2016 and no debit balances on the payables ledger.

Required:

(a) Explain THREE purposes of control accounts. (3 marks)

(b) Write up the receivables Control Account and the payables Control Account, bringing
down the balances on 1 June 2017. (13 marks)

(c) Explain the difference between

(i) Accrued expenses and prepaid expenses (2 Marks)

(ii) Dishonoured cheque and irrecoverable debts (2 Marks)

(TOTAL: 20 MARKS)

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QUESTION FOUR
On 31st May 2017, the bank column of Katota’s Cash Book showed a debit balance of
K4, 400. The Bank Statement on the same date showed a balance of K8, 785 credit. You have
been recently recruited to help with bank reconciliation. You compare the Bank Statement
and Cash Book and establish the following:

(i) A standing order to Pang’ no Building Society for K600 had been paid by the bank.

(ii) A direct credit amounting to K720 had not been entered in the Cash Book.

(iii) The Bank Statement showed bank charges of K155 not recorded in the business’s books.

(iv) Katota earned interest of K380 on her bank account. This has not been entered in the
account.

(v) Katota’s fixed deposit account had matured; K4,200 had been transferred into her current
account.

(vi) An error was discovered in the cash book where a cheque received from a customer,
B. Banja, was credited to the cash book of K640.

(vii) The bank statement showed an entry for a dishonoured cheque of K210 returned from
Nyati, a customer.

(viii) Two cheques issued in May 2017 had not been presented for payment, payable to
K.Kalati for K700 and another to B. Bweupe for K800.

(ix) Katota also received cheques amounting to K2, 090 which were deposited by 31st
May 2017, but were only credited to her bank account on 4 June, 2017.

Required:

(a) Update the Cash Book balance as at 31st May, 2017. (6 Marks)

(c) Draw up a bank reconciliation statement as at 31 st May 2017, starting with the Bank
Statement balance. (5 Marks)

(c) Give THREE reasons why it is important to prepare a bank reconciliation. (3 Marks)

(d) Explain the difference between

(i) Standing order and direct credit

(ii) Fixed deposit account and current account
(iii) Outstanding deposits and un-presented cheques (6 Marks)

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 (Total: 20 marks)

QUESTION FIVE
The International Accounting Standard’s Board (IASB) has published the Framework for the
Preparation and Presentation of Financial Statements which guides the preparation of
financial statements.

Required:

(a) Describe the objectives of the International Accounting Standards Board (IASB).
(3 marks)
(b) Explain the two main underlying assumptions outlined in the IASB’s Framework for the
Preparation and presentation of financial statements.
(4 marks)
(c) Explain what is meant by reliability as outlined in the framework and stating the
characteristics of reliable information
(5 marks)
(d) Outline the arguments for and against having agreed global accounting standards for the
accounting profession as a basis for the preparation of financial statements.

(8 marks)

(TOTAL: 20 MARKS)

END OF ASSIGNMENT